The Federal Court in Julian Chong Sook Keong & Anor v Lee Kim Noor & Anor [2024] MLJU 869 dealt with two questions relating to limitation periods, and held as follows: 

BRIEF FACTS
 
The husband and wife appellants in this case sued their lawyers for professional negligence and negligent misstatement relating to preparation of a sales and purchase agreement. The case was brought against the 1^st respondent Mr Lee Kim Noor, who is a partner of the 2^nd respondent firm of solicitors, Tetuan KN Lee and Associates.
 
The appellants had purchased property from a housing developer, Reka Mesra Sdn Bhd. The respondents had been engaged by the appellants and they subsequently prepared the sales and purchase agreement that was signed on 22 April 2004 (“SPA”).
 
After Reka Mesra Sdn Bhd was wound up in 2011, the appellants received a letter from Pejabat Tanah & Galian (PTG) informing them that landowners who do not have a letter of disclaimer would be required to pay a redemption sum to the chargee, Bank Islam.
 
At around this time, the appellants, who had started to worry about the possibility that their land was subject to a charge, queried the respondents on this issue, and asked for a copy of the search done at the Land Office at the time the SPA was prepared. The respondents replied that they were unable to find the documents, and suggested that the search must have yielded a negative result.
 
It transpired that the respondents’ reply was untrue. The respondents had not conducted any land search at the time of preparation of the SPA, and simply left the particulars of Bank Islam as the existing chargee in the relevant schedule to the SPA blank.
 
In 2014, following a complaint by the appellants, the Disciplinary Committee found the 1^st respondent negligent in the preparation of the SPA. There was no appeal by the 1^st respondent to this finding.
 
On 2 September 2014, Bank Islam informed the appellants that they had to pay a redemption sum of RM900,000.00, failing which they would apply for the property to be auctioned off.
 
The appellants sued the respondents in 2015, alleging that the respondents were negligent in preparing the SPA and in not conducting the land search, for making negligent misstatements, and for deliberately covering up their negligence.
 
The respondents denied liability, claiming that they owed no duty of care, and that in any event the claim was time-barred under the Limitation Act 1953.
 
DECISIONS IN THE HIGH COURT AND COURT OF APPEAL
 
The claim was initially dismissed by the High Court, but the decision was reversed by the Court of Appeal who ordered a re-trial. The claim was subsequently allowed by the High Court after the re-trial.
 
At the High Court re-trial, the Court found the claim proved. The Court found that the respondents owed a duty of care to the appellants, that there was a breach of that duty, and that damage was suffered as a result. The High Court awarded compensation of RM1.5 million with interest and costs to the appellants.
 
On appeal, the decision was overturned by the Court of Appeal, who found that the learned Judge had erred in not addressing the defence of limitation. The Court of Appeal held that the claim was time-barred, finding that for an action founded in tort, the six-year period under section 6(1)(a) of the Limitation Act 1953 started to run from the date the SPA was prepared in 2004, and not from when the appellants discovered the damage in 2014 when Bank Islam exercised its right under the charge and demanded payment of the redemption sum.
 
FEDERAL COURT
 
The appellants appealed to the Federal Court, posing the following questions: 

The Federal Court stressed at the outset that the numerous findings of the High Court of negligence on the part of the respondents were undisturbed, and that the claim was dismissed by the Court of Appeal only because of the issue of limitation.
 
The Federal Court began its review by noting that limitation is procedural and does not affect accrued rights and interests, that “limitation does not extinguish rights, it merely bars access to remedies” [para 27]. Until limitation is pleaded as a defence, a plaintiff’s cause of action is not to be regarded as time-barred.
 
The apex court went on to note that in determining whether an action is time-barred under the statute, there needs to be balancing of rights between potential claimants and defendants, and that “(i)t is a judicial exercise involving interpretation and application of the law to the particular facts” [para 40]. The Federal Court later noted that the material facts will vary from case to case.
 
On the issue of onus of proof, it cited with approval the case of Cartledge v E Jopling & Sons Ltd [1963] 1 All ER 341, that when the defendant raises the statute of limitation as defence, the initial onus is on the plaintiff to prove that his cause of action occurred within the statutory period. When, however, the plaintiff has proved accrual of damage within six years, the burden passes to the defendants to show that the cause of action accrued at an earlier date.
 
Section 6(1)(a) of the Limitation Act 1953 provides that the time limited for filing of an action founded in tort is six years “from the date on which the cause of action accrued”. The phrase “cause of action” is not defined in the Act, and the Federal Court went on to analyse and draw to light two principles from case law: (1) a cause of action accrues when damage is suffered; and (2) the cause of action is complete when there is a plaintiff who can sue and defendant who can be sued, and when the elements of duty, breach and damage are all satisfied. The cause of action therefore then becomes ‘possible’ or actionable.
 
The First Question
 
In dealing with the First Question, the Federal Court stated that in actions founded in tort, damage is an essential element, without which there is no actionable claim. The time to be considered therefore runs from when damage occurs, and not when the negligent act or omission occurred. There must be actual as opposed to only a prospective, contingent loss or damage.
 
Applying the principle to the present facts, the Federal Court stated that the respondents’ negligence in the preparation of the SPA only gave rise to a contingent loss, which became actual damage when Bank Islam decided to enforce its charge. It was the point at which this contingent loss became actual damage that was relevant in considering when the limitation period would run.
 
Therefore, in answer to the First Question, the Federal Court held that: “subject to the particular facts which may arise and the pleas made, the time-period for limitation of a tortious claim arising from a negligently prepared agreement, runs from the date of actual damage, and not some contingent damage. The threat of an infringement must be unequivocal and real” [para 68].
 
The Second Question
 
For the Second Question, the Federal Court noted that the issue raised is now substantially addressed by the new section 6A of the Limitation Act 1953 which, inter alia, extends the limitation period for actions in negligence not involving personal injury, for three years from the ‘starting date’ if such date falls outside the six-year limitation period in section 6(1)(a) of the said Act. The ‘starting date’ refers to the earliest date on which a claimant has both the knowledge (including knowledge of the material facts about the damage for which damages are claimed) required for bringing an action for damages and a right to bring such action.
 
However, as the circumstances of the present case occurred prior to section 6A coming into force on 1 September 2019, the Federal Court considered the question. It went on to answer the question in the negative, stating agreement with the approach in the cases of Sabarudin Othman & Anor v Malayan Banking Berhad & Ors and Ambank (M) Bhd v Kamariyah bt Hamdan & Anor.
 
The Federal Court noted that knowledge or discoverability of breach with reasonable diligence is essential to establish accrual of cause of action. On the facts of the present case, the appellants were in no position to know, and could not have with reasonable diligence known that the SPA contained errors, or that the respondents were negligent in its preparation. The Court commented that the appellants’ act of querying their solicitors about the land searches was entirely reasonable, and was all that could have been expected of anyone facing such a situation [para. 83].
 
CONCLUSION
 
The limitation period is statutorily defined with reference to the ‘cause of action’, and the Federal Court in this case defines the cause of action as arising only once there is actual damage or infringement of the claimant’s rights, and not just contingent or prospective loss. This approach brings the law in line with English caselaw, which insists that actual or actionable damage is required for a valid claim, and not mere possibility.
 
It is a decision that also emphasises that the loss or cause of action should be known or be reasonably discoverable to the claimant before the limitation period starts to run. Whilst section 6A of the Limitation Act 1953 is frequently analysed in terms of latent construction defects, it is clear that the potential application of that provision is wider than that.
 
Finally, the Federal Court was careful to note that the decision is subject to the particular facts and pleas made in each case. In this case, the respondent solicitors had not only acted negligently, they went on to deliberately conceal that fact from their clients. In the face of such egregious conduct, it is unsurprising that the Federal Court was swift to disable their reliance on statutory limitation.
 
Case Note by Louise Azmi (Partner) of the Fraud & Asset Recovery and Commercial Litigation & Arbitration Groups of Skrine.