Section 6(1)(a) of Limitation Act 1953 (“LA 1953”) sets a time limit within which creditors must take legal action to recover debts. For most debts, creditors have six (6) years from the due date of payment to initiate a lawsuit. If this period expires, the creditor may lose the right to enforce the debt.
Nuances of the Limitation Period
While the general limitation period is six (6) years, there are important exceptions to this rule:
1. Acknowledgment of Debt: If the debtor acknowledges the debt in writing or verbally, the six-year period restarts from the date of acknowledgment.
2. Partial Payment: If the debtor makes a partial payment, the limitation period resets from the date of payment.
3. Disability: The limitation time would not begin to run when a person was under 18 years old or have a mental condition that effects their ability to make decisions.
4. Fraud, Concealment or Mistake: If the debt was concealed by fraud, the limitation period may start from when the creditor discovered the fraud.
5. Specific Contracts: Certain types of agreements (like contracts under seal) may have different limitation periods.
Scenarios where limitation period is extended
1. Acknowledgement of debt
The case Yam Kong Seng & Anor v Yee Weng Kai [2014] 4 MLJ involves a dispute over an outstanding debt of RM589,055.61 related to the construction of a factory. The plaintiffs (Yam Kong Seng & Anor) engaged the services of the defendants (Yee Weng Kai and his company) to build the factory. Despite the completion of the project and the defendants acknowledging the debt through a Short Messaging Service (SMS), the defendants failed to refund the outstanding amount.
The Federal Court held that the intention of the second defendant in the defendants’ SMS was clear in that there was an acknowledgment of a debt which fell within the meaning of s 27(1) of the Act.
2. Disability
Under Section 2(2) of the Limitation Act, a person is considered “under a disability” if they are under 18 years old or have a mental condition that affects their ability to make decisions.
In the case of Zainon Suppian Suppiah v UM [2008] 7 CLJ 408, Suppian Suppiah worked as a bus driver but was diagnosed with paranoid schizophrenia in 1982 and was dismissed from his job in 1983. Due to his mental illness, he couldn’t take legal action right away. After recovering in 1997—over 10 years later—he decided to sue for wrongful dismissal. Sadly, he passed away in 1998, and his daughter continued the lawsuit.
The court ruled that the time limit for filing the lawsuit (limitation period) didn’t apply to Suppian while he was mentally unwell. This means the law allows extra time to sue if someone couldn’t act because of a serious mental condition.
3. Fraud, Concealment & Mistake
Section 29 of the Limitation Act 1953 protects people who couldn’t take legal action on time because of fraud or mistakes. This section says that the countdown for that time limit doesn’t start until the person (plaintiff) discovers the fraud or mistake—or should have discovered it with reasonable effort.
Here’s a breakdown of the three scenarios in s.29 LA 1953:
1. Fraud: If someone is suing because the other party (defendant) tricked them or lied to them, the time limit for filing the lawsuit doesn’t start until the victim discovers the fraud. For example, if someone steals money from you by lying about a deal, you can only start the lawsuit once you realize you were tricked.
2. Concealment: If the defendant’s actions hide the fact that you have a right to sue, the time limit doesn’t start until you discover this. For example, if someone caused you harm (like negligence) but covered it up with lies, you wouldn’t know you can sue until you uncover the truth.
3. Mistake: If you want to sue because of a mistake (for example, you were misled into signing something without knowing it was wrong), the time limit for suing doesn’t start until you discover the mistake. This gives you time to file a claim once you realize something went wrong.
These are just a few examples, and the application of the Limitation Act can be complex depending on the circumstances. It’s important to seek legal advice to understand how the limitation period applies to your specific case.