Julian Chong Sook Keok & Anor v Lee Kim Noor & Anor [2024] MLJU 869

Federal Court (Putrajaya)

Negligence – Compensation – Time Barred – Limitation Period – Reasonable Diligence

1. The Appellants (husband and wife) purchased a property in 2004 and engaged the Respondents (their solicitors) to prepare the sale and purchase agreement (SPA) and construction agreement. Both agreements were dated 22 April 2004.
2. The Respondents had failed to conduct the requisite land search and had, instead, left Item 3 of the First Schedule to the SPA pertaining to the name of the bank or financier blank, thereby implying that the property was free from encumbrances.
3. In 2011, after the developer was wound up, the Appellants discovered that their land was encumbered by a charge to Bank Islam.
4. The Appellants only discovered in 2012 that no land search had been conducted.
5. In 2014, Bank Islam demanded RM900,000 in redemption or threatened foreclosure. The Appellants filed a claim against the Respondents in 2015 for professional negligence and negligent misstatement.
6. The High Court initially dismissed the claim. On appeal, the Court of Appeal set aside that decision and ordered a retrial. Following the retrial, the High Court allowed the claim and awarded the Appellants RM1.5 million in damages.
7. The Court of Appeal later reversed this decision, holding the claim was time-barred under the Limitation Act 1953.

1. Whether in a tortious claim arising from a negligently prepared agreement, does the limitation period begin to run from the date of the agreement or from the date of actual infringement of the claimant’s right?
2. Whether the decision in AmBank (M) Bhd v Abdul Aziz Hassan & Ors remains [2010] 3 MLJ 784 good law in light of more recent Court of Appeal decisions in Sabarudin Othman [2018] 1 LNS 357 and Ambank v Kamariyah [2013] 5 MLJ 448?

(a) The Federal Court answered this question in the affirmative, that the limitation period runs from the date of actual damage. The Federal Court held –

“The time-period for limitation for a tortious claim arising from a negligently prepared agreement, runs from the date of actual damage, and not some contingent damage.” (para [68])

(b) The Federal Court held that damage is an essential element in claims founded in tort. Accordingly, a cause of action only accrues when actual and measurable damage is suffered. The Court stated that –

“The threat of an infringement must be unequivocal and real.” (para [68])

(c)  The Federal Court explained that a prospective or contingent loss does not trigger limitation. The damage must not only be foreseeable, it must have occurred in fact. In the case at hand, although the solicitor’s negligence occurred in 2004, the actual loss arose only in 2014 when Bank Islam exercised its rights under the charge

“From the facts, it is evident that the appellants did not suffer loss or damage until Bank Islam exercised its right under the charge and a formal notice to foreclose or proceed for an order of sale was issued on 2.9.2014.” (para [70])

(d) Thus, the Federal Court held that the limitation period did not begin from the date of the SPA in 2004, but rather from the point at which the real and actionable damage occurred.

(e)  The Federal Court emphasized that requiring a claim to be filed before such real loss materializes would be unjust:

“It would be unjust and unreasonable to require the appellants to institute a claim before the contingency, that is, a claim by Bank Islam, was fulfilled.” (para [71])

(2)  Whether the decision in AmBank (M) Bhd v Abdul Aziz  Hassan & Ors remains [2010] 3 MLJ 784 good law in light of more recent Court of Appeal decisions in Sabarudin Othman [2018] 1 LNS 357 and Ambank v Kamariyah [2013] 5 MLJ 448?

(a) The Federal Court answered this question in the negative. The Federal Court held that –

“We agree with the approach taken in Sabarudin Othman and Ambank (M) Bhd v Kamariyah.” (para [75])

(b) The Federal Court preferred the more recent Court of Appeal decisions which adopt the discoverability principle, rejecting the rigid rule in AmBank (M) Bhd v Abdul Aziz Hassan that limitation runs from the negligent act, regardless of when the damage is discovered.

(c)  The Federal Court clarified that –

“The earliest that it could be said that the appellant should have suspected possible negligence in the preparation of the charge was when the appellant was served with the writ of summons … Only then could it be said that the appellant should have discovered that the charge was under challenge.” (para [77], citing Ambank v Kamariyah)

(d) The Federal Court agreed that –

“Until a claim was made against the Law Society, no loss or damage was sustained by the fund. Further, the mere possibility of an obligation to pay money in the future was not itself damage; it was only contingent until a claim was made.” (para [64], citing Law Society v Sephton)

(e)  The Court further explained that although section 6A of the Limitation Act 1953 now incorporates the principle of discoverability, it was not applicable to the present case –

“In respect of the second question, it is premised on the concepts of discoverability or knowledge of the negligence. This issue has been substantially addressed by the new section 6A of Act 254. However, this new provision does not apply to the appellants’ claim as it was filed before the section 6A came into force.” (para [73])

(f)   Thus, the Federal Court concluded that the discoverability rule, as affirmed in Sabarudin and Kamariyah, correctly reflects the law in Malaysia and should be followed over the outdated approach in Abdul Aziz Hassan.

1. The Federal Court unanimously allowed the appeal. It set aside the Court of Appeal’s decision and restored the High Court’s judgment which was found in favour of the Appellants. The claim was held not to be time-barred as the actual damage occurred only when Bank Islam enforced the charge.

1. In tortious claims for professional negligence, actual damage must occur for the limitation period to begin.
2. Contingent or potential loss does not suffice to trigger the running of time under the Limitation Act 1953.
3. The discoverability rule applies; the limitation begins when the damage is (or ought to be) discoverable with reasonable diligence.
4. AmBank (M) Bhd v Abdul Aziz Hassan is no longer good law on this issue.