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Question:

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“Hello Lawyer Yeo, I would like to seek your advice regarding the limitation period for filing a lawsuit in Malaysia.”

“I recently took over my father’s workshop. While reviewing the financial records, I discovered that several customers have outstanding debts to his company. The amounts involved are quite substantial, and some of these debts have remained unpaid for more than seven years.”

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“I was told by my friends that in Malaysia, the limitation period to commence a legal action is only six years. Does this mean my father’s company can no longer recover these debts through legal proceedings? Under what circumstances can the limitation period be extended?”

“Greatly appreciate your legal opinion in this matter.”

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Answer:

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1.     A limitation period is the maximum time a person has to start legal proceedings after a legal claim has arisen. If a claim is not filed within this time, the Plaintiffs may lose the right to enforce their claim in court. These periods are designed to provide certainty and finality, preventing parties from “sleeping on their rights”.

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2.    Hence, before commencing any legal action, the very first step is to determine whether the Plaintiff’s claim is time-barred. If the limitation period has expired, the defendant may challenge the validity of the claim. Should the challenge succeed, the court will strike out the Plaintiff’s case without considering its merits.

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3.    Under the Malaysian Limitation Act 1953, the limitation period for actions based on contracts or tortious claims is six (6) years, calculated from the date the breach of contract or cause of action accrues.

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4.    For example, suppose party A purchased goods from party B, and according to B’s invoice, A was required to pay RM200,000 by 15 March 2015.

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5.     Pursuant to Section 6 of the Limitation Act 1953, if A failed to make the payment by 15 March 2015, B must commence legal proceedings no later than 16 March 2021. If B does not file the claim within this period, B will lose the right to pursue legal action to recover the debt.

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6.     However, it should be noted that not all legal actions are subject to a six-year limitation period. Under Section 9 of the Limitation Act 1953, where the matter involves land disputes, the limitation period is twelve (12) years from the date the cause of action accrues. This longer time frame is likely based on public policy considerations, as land is regarded as a valuable and significant asset that warrants additional protection.

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7.     In cases involving trust property, Section 22(1) of the Limitation Act 1953 provides that no limitation period applies if there is an element of fraudulent breach of trust. This means the trustee may be sued at any time, regardless of when the breach occurred.

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8.    This raises an important question: in debt recovery cases, if a debtor has owed money for more than six years, does it mean the creditor can no longer take legal action to recover the debt??

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9.    The answer is yes, but with an important exception. If the debtor subsequently acknowledges the debt in writing, the six-year limitation period will reset from the date of acknowledgment. Verbal acknowledgment, however, is not sufficient.

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10.    Under Section 26(2) of the Limitation Act 1953, a written acknowledgment of debt constitutes a fresh accrual of action, giving the creditor a new right to commence legal proceedings.

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11.     Therefore, in situations where a debt has been outstanding for more than six years, the creditor should attempt to obtain written acknowledgment from the debtor — for example, through text messages, emails, or other written communications to let him confirm the debt.

Illustrative Cases:

• Yam Kong Seng & Anor v Yee Weng Kai [2014] 4 MLJ 478
• Jamalulail Ismail v Universiti Tun Hussein Onn Malaysia [2022] 1 LNS 273

12.    Once the creditor obtains such a written acknowledgment, they can rely on it as evidence in court. If the debtor’s message or email expressly admits the actual/ exact amount owed, the likelihood of success in court will be higher.

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This wraps up our legal explanation on the limitation period to bring legal action in Malaysia. If you are looking for a litigation lawyer in Malaysia and would like legal assistance, feel free to reach out to us on WhatsApp: https://wa.link/q3kmv5

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