28 August 2019

The Limitation (Amendment) Act 2018 (“Amendment Act”), which was passed by the Malaysian Parliament on 4 April 2018, will finally come into force on 1 September 2019. Among others, it provides for the extension of limitation period in cases of negligence not involving personal injuries and the postponement of commencement of limitation period for persons under disability. The focus of this article is only on the former amendment under section 6A of the Amendment Act.

The table below shows a simple comparison in the legal position before and after the changes brought about by the Amendment Act:

Before 1 September 2019: Limitation Act 1953	From 1 September 2019: Limitation (Amendment) Act 2018
Section 6(1)(a) provides that a 6-year limitation period applies for actions brought in contract and tort, which will run from the date the cause of action is accrued. Example: A bought a house from B in 2000. Cracks started appearing in 2003, but A only discovered them in 2008. A will have 6 years from 2003 to bring an action against B until 2009.	Section 6A provides that for cases of negligence not involving personal injury, the time limit for bringing an action is 3 years from the date of the plaintiff’s knowledge. Example: A bought a house from B in 2000. Cracks started appearing in 2003, but A only discovered them in 2008. A will have 3 years from 2008 to bring an action against B until 2011.

ISSUES WITH THE 6-YEAR LIMITATION PERIOD

Section 6(1) of the Limitation Act 1953 (“LA 1953”) provides that actions founded on a contract or on tort shall not be brought after the expiration of 6 years from the date on which the cause of action accrued. The intention of the statute is clear that any action in contract or tort must be brought within 6 years from the date the cause of action accrued. His Lordship Hashim Yeop A Sani CJ (Malaya) in Credit Corporation (M) Bhd v Fong Tak Sin [1991] 1 CLJ stated that the rationale of imposing a limitation period for bringing an action is to discourage plaintiffs from sleeping on their rights and to ensure that there is a definite end to litigation. In the spirit of this rationale, section 6(1)(a) LA 1953 has been strictly interpreted and applied by the courts over time. The courts have consistently dismissed actions brought after the expiry of limitation period provided under this section. This has been the view adopted by the courts in a long line of authorities, such as Loh Wai Lian v S.E.A. Housing Corporation Sdn Bhd [1984] 2 MLJ 280; Kerajaan Malaysia & Ors v Lay Kee Tee & Ors [2009] 1 CLJ 663; Abdul Wahdi bin Zakaria (t/a Sykt Bengkel Setia) v Puspakom Sdn Bhd [2014] 5 MLJ 419; Machinchang Skyways Sdn Bhd & Anor v Lembaga Pembangunan Langkawi & Anor and another appeal [2015] 2 MLJ 373; Tetuan Mokhtar Ngah & Co (sued as a firm) v Kubu Pengkalan Sdn Bhd [2015] 3 MLJ 409; and Keruntum Sdn Bhd v The Director of Forests & Ors [2015] 4 MLJ 382. For actions based in tort, it is well established that the cause of action accrues when a plaintiff suffers damage (Goh Kiang Heng v Hj Mohd Ali bin Hj Abd Majid [1988] 1 MLJ 615; AmBank (M) Bhd v Abdul Aziz bin Hassan & Ors [2010] 3 MLJ 784; Goh Seng Chue & Ors v Pentadbir Tanah Hulu Selangor & Ors and another appeal [2018] MLJU 966). In Ambank (M) Berhad v Abdul Aziz Bin Hassan, the Court of Appeal held that in cases of tort, the cause of action accrues on the date the plaintiff suffers damage, regardless of when such damage was discovered. The court decided that the date of discovery of damage is only relevant under section 29 LA 1953 where the cause of action is based on fraud or there has been some fraudulent concealment by the defendant. Therefore, it follows that if the plaintiff fails to plead fraud, the date of discovery of damage would be irrelevant in the computation of the limitation period. The court stated that section 6(1)(a) LA 1953 had to be interpreted strictly even if doing so may lead to harsh results. It must be observed that not every damage is immediately noticeable or discoverable when it first occurs. Despite the non-discoverability of the damage, the limitation clock will still begin to run which more often than not will result in an unfair outcome towards the plaintiff. To take a common example in construction cases, where minor defects might start to appear as a result of the negligence of the architect or engineer, but the plaintiff remains unaware of the defects until they have become apparent and noticeable. By the time the plaintiff discovers the defects, the plaintiff may find that he is already time-barred since 6 years have passed from when the defect started occurring. Interpreting section 6(1)(a) LA 1953 in its strictest sense places plaintiffs in a disadvantageous position as it is impossible for them to bring a claim when they might not even be aware that they have one. This was precisely the issue in Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 1 All ER 65, where the defendant, a firm of consulting engineers, was negligent in the design of the chimney of the plaintiff. As a result, cracks started forming on the chimney which the judge found occurred not later than April 1970. The plaintiff only discovered the damage in November 1977 and brought an action against the defendant in October 1980. However, the House of Lords held that the plaintiff’s action was time-barred as the cause of action had accrued when the cracks first came into existence. Lord Fraser conceded that such a result may be unreasonable, but he opined that parliamentary intervention is required to alter the state of the law. Following the report produced by the Law Reform Committee¹, the UK Parliament then enacted the Latent Damage Act 1983 to address the issues of latent defects by inserting new provisions in the Limitation Act 1980. In proposing these amendments, the Committee had stated that: “Three principles are of critical importance in this branch of law. They are:

1. that plaintiffs must have a fair and sufficient opportunity of pursuing their remedy;
2. that defendants are entitled to be protected against stale claims;
3. that uncertainty in the law is to be avoided wherever possible.”

Section 14A Limitation Act 1980 dealt with the limitation period for actions in respect of latent damage not involving personal injuries, while section 14B introduced a longstop period of 15 years for bringing an action. The legal position on latent defects in Malaysia has remained the same, until the amendment comes into force on 1 September 2019.

THE DISCOVERABILITY RULE Years before the Malaysian Parliament considered the amendment in limitation period for latent damage, the Court of Appeal in Ambank (M) Bhd v Kamariyah Bt Hamdan & Anor [2013] 5 MLJ 448 had first devised their way around the strict interpretation of section 6 LA 1953 by applying the “rule of discoverability”. The Court of Appeal found support from the judgment of the Supreme Court of Canada in Central Trust Co v Rafuse [1986] 2 SCR 147 and after perusing the authorities, Jeffrey Tan JCA held that the cause of action for tort accrues when the damage is discovered. Despite being in direct contradiction with Abdul Aziz, the judgment in Kamariyah remains good law up until today. Kamariyah had subsequently been applied by the courts in a number of cases, such as Sabarudin bin Othman & Anor v Malayan Banking Bhd and another appeal [2018] MLJU 304; Export-Import Bank of Malaysia Bhd v Hisham Sobri & Kadir [2018] 6 CLJ 82; The Ara Joint Management Body v Mammoth Land & Development Sdn Bhd [2017] 1 LNS 599; and Peninsular Concord Sdn Bhd v Syarikat Bekalan Air Selangor [2015] 3 CLJ 682. NEW CHANGES UNDER THE AMENDMENT ACT The amendment is modeled upon the provisions in the UK Latent Damage Act 1980, with few differences in the wordings of the statutes. Section 6A of the Amendment Act is largely similar to section 14A of the UK Limitation Act 1980. Section 6A extends the limitation period in cases of negligence not involving personal injury. The limitation period remains 6 years as provided in section 6(1)(a) LA 1953, however in cases where the starting date commences later than the date on which the cause of action accrued, the time limit for bringing an action would be 3 years from the starting date. Section 6A(4) of the Amendment Act provides that the starting date shall be the earliest date on which the plaintiff or any person in whom the cause of action was vested before him first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such action. Section 6A(4)(b) of the Amendment Act defines the knowledge required for bringing an action as knowledge of:

1. the material facts about the damage for which damages are claimed; and
2. other facts relevant to the action, including: (i) that the damage is attributable in whole or in part to the alleged negligence; (ii) the identity of the defendant; and (iii) where it is alleged that the act or omission was by a third party, the identity of the third party and the additional facts supporting the action against the defendant.

other facts relevant to the action, including: (i) that the damage is attributable in whole or in part to the alleged negligence; (ii) the identity of the defendant; and (iii) where it is alleged that the act or omission was by a third party, the identity of the third party and the additional facts supporting the action against the defendant.

Once this amendment comes into force, the limitation period will only begin to run after the plaintiff discovers the damage. This will give more opportunity to the plaintiff who suffers from latent damage to bring an action against the defendant upon discovery of the damage, even if such discovery happens only after 6 years. This represents a fairer legal position for the plaintiff who was previously constrained by the restriction placed by section 6 LA 1953 and its strict interpretation by the courts. APPLICABLE IN CONSTRUCTION CASES ONLY? The wordings of the Amendment Act appear to cover all instances of negligence not involving personal injury. However, the illustration to section 6A only contains examples concerning latent damage in construction cases. This raises the question on whether the application of the Amendment Act will be restricted to construction cases. The explanatory statement in the Limitation (Amendment) Bill 2018 (“Amendment Bill”) states that the provision is intended “to enable a person to take action founded in negligence not involving personal injuries by allowing an extended limitation period of three years from the date of knowledge of the person having the cause of action.” However, subsequent explanation states that the provision “considers negligence cases involving latent damage in construction cases, where the damage was not discoverable through general inspection …“. A perusal of the Hansard would also reveal that during the second reading of the Amendment Bill in the Parliament, the Members of Parliament had only considered latent damage in construction cases when debating the Amendment Bill.²There was a lack of discussion or consideration on how this Amendment Bill would apply to other cases of negligence not involving personal injury, such as professional negligence. In the UK, the application of section 14A of the UK Limitation Act 1980, of which the provision the Amendment Act is modeled on, has never been restricted to construction cases solely. Section 14A had been applied to various types of negligence cases, involving negligence of architects in construction of buildings (New Islington and Hackney Housing Association Ltd v Pollard Thomas & Edwards Ltd [2001] BLR 74), negligent investment advice by a firm of accountants (Haward v Fawcetts (a firm) [2006] UKHL 9) and negligent legal advice by a firm of solicitors (3M United Kingdom plc v Linklaters & Paines [2006] EWCA Civ 530). Given that section 6A of the Amendment Act is in pari material with section 14A of the UK Limitation Act 1980, it logically follows that section 6A should apply to all instances of negligence not involving personal injury and should not be restricted only to construction cases. There is no justification as to why latent damage should be differentiated into construction and non-construction cases. However, this uncertainty could only be resolved by the courts as no other explanation is provided for by the statute itself. It is worth noting that section 6A of the Amendment Act will not apply to negligence cases involving personal injury. Therefore, once the cause of action accrues in personal injury cases, the time will begin to run against the plaintiff despite his lack of knowledge of certain material facts of the cause of action. An apt example is Credit Corporation v Fong Tak Sin, where the clock had begun to run despite the identity of the defendant remained unknown to the plaintiff. Section 11 UK Limitation Act 1980 is dedicated to limitation period for wrongs causing personal injuries or death, which provides for the postponement of the right to bring an action for 3 years within the date of knowledge of the person injured. Such a provision is absent in the Malaysian Limitation Act, thus limiting the time period for personal injury claims to strictly 6 years from the date of accrual of the cause of action. CONCLUSION The amendment will most definitely bring a positive change to the area of limitation period and hopefully lead to a fairer outcome for both the plaintiff and defendant. However, the extent of the changes to be effected by this Amendment Act would depend on how widely it will be interpreted by the courts. Once the amendment comes into force, it will remain to be seen if the tests in Abdul Aziz and Kamariyah will continue to be applied alongside section 6A of the Amendment Act, or if the tests would be rendered redundant upon the introduction of the amendment. In order for justice to be served, it is favourable for section 6A to be construed widely to include all cases of latent damage apart from construction cases. However, even if the courts restrict the application of the Amendment Act to only cover latent damage in construction cases, it is arguable that not all hope is lost for plaintiffs who suffer from other forms of latent damage as the courts may still apply the discoverability rule in Kamariyah in other negligence cases. If you have any queries or require more information, please feel free to get in touch with us.


Leonard Yeoh
Partner
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leonard.yeoh@taypartners.com.my


Cheah Soo Chuan
Partner
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Nurul Qarirah Md Kahar
Associate
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