“Know Your Limitation” – Ensuring Timely Commencement of Legal Actions

1. What is a limitation period in legal proceedings?

A limitation period in legal proceedings refers to the time limit within which a party must commence legal action. After the lapse of this period, the claim may not be valid or enforceable. The significance of a limitation period is to prevent parties from sleeping on their rights and provides certainty and finality in legal affairs. In Malaysia, the limitation period is primarily governed by the Limitation Act 1953 (“the Act”).

2.  What are the general limitation periods for different types of civil claims?

Types of Action	Limitation Period
Actions founded on contract or tort	6 years from the date on which the cause of action accrued.
Actions to enforce an award
Actions to enforce a recognisance
Actions to recover any sum recoverable under any written law other than a penalty or forfeiture
Actions to enforce a judgment	12 years from when the judgment became enforceable; no arrears of interest on the judgment debt shall be recovered after the expiration of 6 years from the date on which the interest became due.
Action to recover arrears of rent or damages in respect thereof	6 years from the date on which the arrears became due.
Actions to recover land	12 years from the date on which the right of action accrued.

3. What does “cause of action” mean?

A “cause of action” is the entire set of facts that gives rise to an enforceable claim. The limitation period runs from the earliest time at which an enforceable claim can be brought.

4. When does the cause of action accrue?

• For contractual claims, the cause of action accrues from the earliest instance of a breach of contract.

• For tortious claims, the cause of action generally accrues when injury, harm or damage occurs, except for circumstances surrounding delayed discoverability of harm or latent defects.

5. What is “latent defect”, and how does it affect limitation?

“Latent defect” is a defect or issue which is hidden and not immediately discoverable or apparent through ordinary inspection or testing. In this instance, a cause of action may have accrued much earlier given the existence of the defect or issue, but the same was not discoverable at the relevant time. An example would be a defect in construction works which surfaces years after completion of construction or upon occupation of a building. 

Under the Act, a plaintiff has:

• 3 years from when he first had the necessary knowledge and right to bring the action to commence proceedings; and

• in any event, no action can be brought after 15 years from when the cause of action accrued.

6. Does acknowledgment of debt or part payment affect the limitation period?

Yes. Where any right of action has accrued to recover any debt and the person liable or accountable has acknowledged the claim in writing or makes any partial payment in respect of the debt, the right of action shall be deemed to have accrued on the date of the acknowledgement or the last payment.

7. How does fraud or mistake affect limitation periods?

Generally, where a claim is based on fraud or mistake, the limitation period only starts running when the fraud or mistake is discovered or could have been discovered with reasonable diligence. However, this postponement of the limitation period will not apply to enable any action brought to recover or enforce any charge against, or set aside any transaction affecting any property which has been purchased for valuable consideration by a person not party to the fraud and did not know or have reason to believe any fraud or mistake was committed. 

8. Can parties contract out of the Act?

Parties cannot contract out of the Act as the purpose of the Act would be undermined if liberty is granted to parties to form a consensus that the Act should never bind them.

9. Does the Act and limitation periods apply to Government?

Except where the Act states otherwise or where a period of limitation has been prescribed by any other written law, the Act does apply to actions involving the Government in the same way it applies to actions between private individuals. However, the Act does not apply to action by the Government to recover taxes, duties, or related interest, or to any forfeiture proceedings under any written law in force in Malaysia relating to customs duties or excise or any proceedings in relation to the forfeiture of a ship.

10. What are the best practices for businesses to manage limitation periods effectively?      

To avoid losing the right to legal recourse due to expired limitation periods, it is prudent for businesses to consider the following:

• Keep detailed records of contracts, transactions, and communications.

• Implement internal systems to track when a cause of action accrues and monitoring of correspondence.

• Ensure regular review of contractual compliance, especially where certain contracts may be for a protracted duration for party(ies)’ performance of obligations.

• Consider the existence of the dispute resolution provisions in agreements, as certain agreements may require compliance with alternative methods to resolve a dispute before a claim may be commenced which could potentially affect limitation periods.

• Ensure that settlement negotiations (if intended) are approached and handled in a timely manner.

• Seek legal advice in a timely manner to ensure claims are brought within prescribed limitation period.