Too Little, Too Late?

Ooi Chih-wen discusses the proposed new section 6A of the Limitation Act 1953.

On 4 April 2018, the Limitation (Amendment) Act 2018 (“Act”) was passed by the Malaysian Parliament. The Act was subsequently granted Royal Assent by the Yang di-Pertuan Agong and gazetted on 27 April 2018 and 4 May 2018 respectively, and will come into force on a date to be appointed by the Minister.
 
The objectives of the Act are to:
 
(1)     postpone the commencement of the limitation period when a person is under a disability at the time the cause of action accrued; and
 
(2)     extend the limitation period in cases of negligence not involving personal injury and the damage was not discoverable prior to the expiry of the statutory limitation period.
 
This article focuses on section 6A of the Act which addresses the latter.
 
As Sarawak and Sabah have their own legislation on limitation, the legislatures of those States will have to consider whether there is a need to amend their laws to be consistent with section 6A.
 
THE LIMITATIONS OF THE LIMITATION ACT 1953
 
Section 6(1)(a) of the Limitation Act 1953 (“Limitation Act”) provides that any action must be brought within six years from when a cause of action accrued. In tortious claims, the limitation period starts when a plaintiff suffers damage. The 6-year limitation period applies regardless of when the plaintiff discovers such damage. This position has been affirmed by the Court of Appeal in AmBank (M) Bhd v Abdul Aziz Hassan & Ors [2010] 3 MLJ 784. When presented with the argument of postponing or extending the statutory limitation period for negligence claims based on the discovery of the damage, the Court of Appeal held that section 6(1)(a) of the Limitation Act should be interpreted in a literal manner. Further, the Court of Appeal ruled that the notion of postponing or extending limitation to include the element of discovery is not provided for in the Limitation Act or in any other Malaysian law.
 
The approach in Abdul Aziz may seem unfair, particularly in cases of latent defects. In relation to construction works, latent defects are defects that are not immediately apparent upon inspection; sometimes such defects are only discovered after six years. This is amply illustrated in the English case of Pirelli General Cable Works Ltd v Oscar Faber & Partners (A Firm) [1983] 2 AC 1, wherein the defendant engineers designed a chimney for the plaintiff’s factory, the construction of which was completed in July 1969. Although cracks started appearing on the top of the chimney by April 1970, the plaintiff only became aware of the defect in November 1977 which was at that point two years after the 6-year limitation period. The House of Lords dismissed the plaintiff’s claim for damages, holding that the claim was time barred. The injustice caused in Pirelli led to the passing of the Latent Damage Act 1986 in the United Kingdom, a statute recognising latent defects and allowing for the extension of the limitation period in such cases.
 
The Malaysian Courts have since come to acknowledge the deficiency of Abdul Aziz. Harmindar Singh Dhaliwal J (as he then was) commented in Sharikat Ying Mui Sdn Bhd v Hoh Kiang Po [2015] MLJU 621, that:
 
“Despite the evident injustice that would arise in cases of latent damage, our law in the form of s. 29 of the Limitation Act 1953, only recognizes postponement of the limitation period in cases of fraud, concealment or mistake. There are of course other provisions but none of which concern situations where a plaintiff may not have known or with reasonable diligence had discovered that he has a cause of action. This deficiency is in my view a matter for Parliament and the time is perhaps overdue for a review of the limitation laws in keeping with the developments in other common law jurisdictions.”
 
SAVED BY THE ACT
 
Perhaps it is long overdue, but the Act arguably redresses the perceived injustice of Abdul Aziz by the introduction of section 6A.
 
It must first be noted that the 6-year limitation period remains the starting point. Section 6A only applies to actions brought after the expiration of the said six years, and where the claim is for damages for negligence not involving personal injury. Further, such action must be brought within three years from the “starting date” and is subject to a longstop of 15 years. In this respect, the Act is similar to the corresponding legislation in the United Kingdom and Singapore.
 
The expression “starting date”, as defined in section 6A(4)(a), means “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 … and a right to bring such action.
 
Accordingly, the commencement of the limitation period hinges on when a person first had knowledge. Section 6A(4)(b) provides that a person is deemed to have the requisite knowledge when he knows 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.
 
A plaintiff is deemed to have knowledge of facts which he, or any person in whom the cause of action was vested before him, might be reasonably expected to have acquired from facts observable or ascertainable by him, or with the help of appropriate expert advice which is reasonable for him to seek.
 
MORE OR LESS THAN IT SEEMS?
 
Read on its own, section 6A of the Act appears to be wide enough to cover all instances of negligence. However, is that necessarily the case?
 
The explanatory statement in the Bill initially 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, it then goes on to explain that the provision “considers negligence cases involving latent damage in construction cases, where the damage was not discoverable through general inspection ...” (emphasis added).
 
It appears from the above that Parliament intends for section 6A to apply only to latent damage in construction cases. There are two factors in support of this contention. Firstly, according to the Minister’s statement in the Hansard of 4 April 2018, section 6A “would permit a plaintiff to take action based on negligence involving latent damage in construction cases by extending the limitation period by three years …” Secondly, all four illustrations provided in section 6A to describe the operation of certain sub-sections are premised on construction cases.
 
However, the English courts have not restricted the application of section 14A of the UK’s Limitation Act 1980 (the equivalent of section 6A) to construction cases. In Haward and others v Fawcetts (a firm) [2006] 3 All ER 497, the House of Lords applied section 14A to a claim against an accounting firm for negligent investment advice but found that the plaintiff had discovered the damage before the statutory limitation period expired.
 
Similarly, in Blakemores LDP (in administration) v Scott and others [2015] EWCA Civ 999, the English Court of Appeal applied section 14A in a professional negligence claim against solicitors.
 
It remains to be seen whether the Malaysian courts will apply section 6A to negligence cases that do not involve latent defects in construction cases.
 
BEATEN TO THE PUNCH?
 
Prior to the introduction of the Act, the Court of Appeal in AmBank (M) Bhd v Kamariyah bt Hamdan & Anor [2013] 5 MLJ 448 attempted to remedy the injustice caused by the strict interpretation of section 6(1)(a) of the Limitation Act in Abdul Aziz by introducing the “discoverability rule”. Jeffrey Tan JCA (as he then was) considered the Canadian case of Central Trust Co v Rafuse [1986] 2 SCR 147 and observed:
 
“… the Supreme Court of Canada pronounced ‘that the judgment of the majority in Kamloops laid down a general rule that a cause of action arises for purposes of a limitation period when the material facts on which it is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence … There is no principled reason, in my opinion, for distinguishing in this regard between an action for injury to property and an action for the recovery of purely financial loss caused by professional negligence …’ … Likewise, in the instant case, the appellant … could not have discovered whatever negligence on the part of the respondent by the exercise of any reasonable diligence ...”
 
His Lordship ruled that limitation should run from the date damage was discovered or ought to have been discovered. When invited to consider Abdul Aziz, the learned judge held, “… we must respectfully decline to defer to the ruling that time would run regardless of whether damage was or could be discovered.”
 
An example of the “discoverability rule” being considered in a case involving latent defects would be The Ara Joint Management Body v Mammoth Land & Development Sdn Bhd [2017] MLJU 631. The case involved latent defects discovered in the buildings and compound of The Ara Bangsar development. Construction was completed in 2007 but the alleged defects were only discovered sometime in 2014. The plaintiff, the joint management body of the development, brought an action on behalf of the residents against the developer for latent defects in October 2016, some 9 years after the construction had been completed. The developer, relying on Abdul Aziz, applied to strike out the case on grounds that the claim was time-barred. The plaintiff, on the other hand, argued that the “discoverability rule” should be adopted. Lee Swee Seng J, in dismissing the developer’s striking-out application, opined that the issue as to whether the developer would be estopped from raising the defence of limitation would be fact-centric and was a matter to be determined at trial.
 
The principle enunciated in Kamariyah has been applied in several other cases, which include  negligence against a financial institution and its officer (CIMB Bank Bhd v Lee Kim Kee & Ors and another appeal [2018] 3 MLJ 72 (CA)), negligence of a solicitors’ firm (Export-Import Bank of Malaysia Bhd v Hisham Sobri & Kadir [2018] 6 CLJ 82 (HC) where the court applied the tests in both Abdul Aziz and Kamariyah), negligence of a civil and structural engineer (CB Land Sdn Bhd v Perunding Hashim & Neh Sdn Bhd [2016] 6 MLJ 320 (CA)) and the tort of conversion (Peninsular Concord Sdn Bhd v Syarikat Bekalan Air Selangor [2015] 3 CLJ 682 (HC)).
           
CONCLUSION
 
Given the introduction of section 6A, one must question whether Kamariyah and its wide-ranging effect should remain good law or should be overruled.
 
It should be noted that Central Trust Co v Rafuse is no longer good authority in Canada. The case was decided by the Supreme Court of Canada in 1986 and remained good law in the province of Nova Scotia until 2014 when the Limitation of Actions Act of Nova Scotia was passed. Section 8 of the said Act provides that any action, negligence or otherwise may not be brought two years after the date the action was discovered and fifteen years from the date the act or omission on which the action is based on occurred.
 
Upon section 6A coming into effect, there will be three tests to determine limitation for negligence not amounting to personal injury, namely Abdul Aziz, Kamariyah and section 6A. Will the new statutory provision override both Abdul Aziz and Kamariyah and apply to all claims for damages for negligence not involving personal injury, or will it only apply to construction cases involving latent damage and thereby subsist alongside section 6(1)(a) of the Act? If it is the latter, it remains to be seen whether Abdul Aziz or Kamariyah will ultimately prevail in the interpretation of section 6(1)(a).