Limitation & Acknowledgement of Debt

Section 6 of the Limitation Act 1953 ("LA 1953") provides, amongst others, that actions founded on contract or tort shall not be brought after the expiration of six years from the date on which the cause of action accrued.[1]

In the case of an unpaid debt, the cause of action arising from it is time barred e.g. upon the expiry of 6 years from the date of the last repayment and therefore cannot be acted upon.

One of the exceptions to Section 6(1) of the LA 1953 can be found in Section 26 of the LA 1953 wherein there is acknowledgement of the debt or part payment. 

The following are some important judicial development in the area of limitation vis-a-vis acknowledgement of debt:

Federal Court

i) SMS-es can satisfy the requirements of ‘being in writing’ and ‘signed by the person making the acknowledgment’ found in Section 27 of the Limitation Act 1953.[2]

ii) The acknowledgement should either be pleaded in the Statement of Claim or in the Reply to the Defence.[3]

iii) The debtor must acknowledge that he/she is indebted to the creditor and it must be quantified in figures or capable of ascertainment by calculation or by extrinsic evidence without further agreement of the parties.[4]

However, the SMS in Yam Kong Seng read “‘Eddy sorry hear ur father death, regarding the loan repayment sorting soon not 2 wory now Im in uk, London next week.’” The Federal Court was of the opinion that, “The SMS though short, reflected the intention of the parties clearly and unambiguously. There was no difficulty in putting into effect what they had bargained for on reading the words of the SMS”[5]

It could, however, be argued that the Federal Court in Yam Kong Seng was more willing to construe the contents of the SMS as amounting to an unequivocal acknowledgement due to the debtor’s judicial admission of the debt owed.[6]

Court of Appeal

i) It is a requirement to plead the fact of the acknowledgement of a debt in order to revive the cause of action.[7]

ii) Communications, meetings and discussions do not constitute sufficient acknowledgment of debt under section 26 of the LA 1953.[8]

iii) The acknowledgement need not be explicit. It can be implicit. Implicit admissions are allowed but the admission must be unequivocal.[9]

High Court

i) The acknowledgement of debt need not be in any prescribed format so long as the debt is clearly identified and the acknowledgment of indebtedness is clear and unequivocal.[10]

ii) An acknowledgement after the expiry of the limitation period is ineffective.[11]

[1] https://www.agc.gov.my/agcportal/uploads/files/Publications/LOM/EN/Act%20254.pdf

[2] Yam Kong Seng & Anor v Yee Weng Kai [2014] 4 MLJ 478 (FC), at paragraphs 26-27: “In a word a message from an SMS, with all the attributes of s 8 being present viz accessibility, intelligible and extractable for subsequent reference, such an electronic message is as good as in writing … It follows to reason that a party alleging that a communication eg a forwarded message was sourced from, say, an electronic storage, transmission, or any other method of recording information or fixing information in a form capable of being preserved, then such communication must be construed as in writing. By similar deduction the acknowledgment here therefore was in writing.”

Yam Kong Seng & Anor v Yee Weng Kai [2014] 4 MLJ 478 (FC), at paragraph 35: “From the above mundane approach of alluding to authoritative books and cases it has been satisfactorily established that signatures need not be written. Suffice if there be any mark, written or not, which identifies the act of the party, perhaps in the form of mark or by some distinguishing feature peculiar only to that person, then the acknowledgment has been signed. Analogically we hold the view that the conventional paper is substituted by the mobile phone, which holds features that can preserve information or transmissions in the like of the SMS, with the telephone number representing the caller or the sender of some message. In fact it is the norm nowadays to substitute the number of an identified person with his name to assist instant recognition. The fact that the respondent admitted sending the SMS sealed his liability.”

[3] K.E.P. Mohamed Ali v K.E.P. Mohamed Ismail [1981] 2 MLJ 10 (FC), at page 11: “… it is a matter of indifference to the court whether the plea of acknowledgement is pleaded in the statement of claim or in the reply. If it is raised in the statement of claim, it would make a reply unnecessary and so reduce costs. A further advantage of pleading an acknowledgement in the statement of claim is that the defendant may thereby be led to refrain from raising the issue of limitation in the defence, thus narrowing the area of discovery and reducing costs: see Bullen & Leake (12th edition) at page 638. Since the material facts and circumstances were not pleaded in the statement of claim, it should have been pleaded in the reply.”

[4] Wee Tiang Teng v Ong Chong Hooi & Anor [1978] 2 MLJ 54 (FC), at page 56: “Lord Denning M.R. said at page 61 that the words "acknowledges the claim" in the English section 23(4) are not, perhaps, very happy. He continued:

"A person may acknowledge that a claim has been made against him without acknowledging any indebtedness. It is clear that what the Limitation Act, 1939, means is 'acknowledges the debtor other liquidated amount', … there must be an admission that there is a debt or other liquidated amount outstanding and unpaid. Even though the debtor says in the same writing that he will never pay it, nevertheless it is a good acknowledgment. In order to be an acknowledgment, however, the debt must be quantified in figures, or, at all events, it must be liquidated in this sense that it is capable of ascertainment by calculation, or by extrinsic evidence, without further agreement of the parties…

No doubt a promise in writing by a debtor to pay whatever sum is found due on taking an account is a good acknowledgment today … provided always that the amount is a mere matter of calculation from vouchers, or can be ascertained by extrinsic evidence, and is not dependent on the further agreement of the debtor."”

[5] Yam Kong Seng & Anor v Yee Weng Kai [2014] 4 MLJ 478 (FC), at paragraph 19

[6] Yam Kong Seng & Anor v Yee Weng Kai [2014] 4 MLJ 478 (FC), at paragraph 17: “Having perused the defence in particular para 8, we find that there is clear judicial admission of the debt owed.”

[7] Lay Hong Food Corp Sdn Bhd (previously known as Lay Hong Poultry Processing Sdn Bhd) v Tiong Nam Logistics Solutions Sdn Bhd [2018] 2 MLJ 66 (CA), at paragraph 27: “It is a requirement to plead the fact of the acknowledgement of a debt in order to revive the cause of action, as demonstrated by the Privy Council case of Manilal & Sons (M) Sdn Bhd v Mahadevan & Anor [1986] 1 MLJ 357 at p 361 …”

[8] Majlis Perbandaran Seremban v Era Baru Sdn Bhd and another appeal [2018] MLJU 706 (CA), at paragraph 44: “Indeed, as can be seen from the grounds of judgment of the learned JC, there was no finding of any acknowledgment or part payment by the defendant of the plaintiff’s claim. What was found by the learned JC and likewise, what was submitted before us by the plaintiff, was that there were ‘communications, meetings and discussions’. Communications, meetings and discussions do not constitute sufficient acknowledgment of debt under section 26 of the Limitation Act (see Yee Weng Kai v Yam Kong Seng & Anor [2013] 2 MLJ 575; Lay Hong Food Corporation Sdn Bhd & Anor v Tiong Nam Logistics Solutions Sdn Bhd [2017] MLRAU 1).”

[9] C-Ampy Construction Sdn Bhd v Andalas Jaya Sdn Bhd [2014] 6 MLJ 599 (CA), at paragraph 23: “In our judgment for the purposes of s 26 of the Limitation Act the acknowledgement need not be explicit. It can be implicit. See Good Challenger Navegante SA v Metal Export Import SA [2003] Lloyds Rep 471. In our judgment too, the implicit acknowledgment of the arbitration award in para 13 of the statement of claim was unequivocal. Learned counsel for the respondent has referred us to the case of Wee Tiang Teng v Ong Chong Hooi & Anor [1978] 2 MLJ 54 where the Federal Court held that for there to be a sufficient acknowledgment, the language of the debtor must amount to an unequivocal admission of a subsisting debt. Relying on what was said in the above case learned counsel for the respondent submitted that implicit acknowledgments have no application in our jurisdiction since the Federal Court in Wee Tiang Teng spoke of unequivocal admission. We do not agree. That is not what the Federal Court said in Wee Tiang Teng. What the Federal Court said was that the language must amount to an unequivocal admission. Therefore implicit admissions are allowed but the admission must be unequivocal. As we said a moment ago, the implicit acknowledgment found in para 13 was unequivocal.”

[10] Menta Construction Sdn Bhd v SPM Property & Management Sdn Bhd & Anor [2017] MLJU 526 (HC), at paragraph 54: “The fresh acknowledgement of debt need not be in any prescribed format. So long as the debt is clearly identified and the acknowledgment of indebtedness is clear and unequivocal, there is a fresh acknowledgment of debt from the date of that acknowledgment.”

[11] Lakshmi I/K Malayandy v EK Housing Developer Sdn Bhd & Ors [2014] MLJU 1895 (HC), at paragraph 41: “… the alleged acknowledgment allegedly made by the deceased on 1.9.2009 was given after the expiry of the limitation period. Here, the Plaintiff”s right of action or cause of action of 12 years begun to run from 9.2.1994 and had lapsed on 9.2.2006. Hence, the acknowledgement is deemed ineffective. The Singapore Court of Appeal in the case of Tan Hin Choon & Ors v Ban Hin Lee Bank Ltd [1972] 2 MLJ 211 in adopting the English courts” decision on acknowledgement made after the expiry of the limitation period, held this at page 216:

“Wright v Pepin [1954] 2 All ER 52 at pages 55,56 is authority for the proposition that the old rule stated in In re Alison and Sanders v Sanders (1881) 19 Ch D 373 that an acknowledgement after expiry of the limitation period is [ineffective] still applies,”