Limitation to the forefront: A case analysis of the 23.05.2023 FC decision of Thameez v MABB
The Federal Court very recently (23.05.2023) released its Grounds of Judgment for Thameez Nisha Hasseem v Maybank Allied Bank Berhad [02(f)-73-09/2019(P)]. A 5-Judge panel clarified the law relating to limitation (and its applicability to charges) with welcome certainty.
Bee Fatima was the owner of a parcel of land. She granted a Power of Attorney to Charijah.
Charijah charged the land to Malayan Allied Bank Berhad (MABB) as security for a loan of RM240,000. Charijah defaulted. Form 16D (Notice of Default With Respect to a Charge) was issued by MABB to Charijah. She ignored it. An Order for Sale of the land was granted in 1991.
In 2010, the Order for Sale was set-aside.
Bee Fatima then passed away. Thameez was appointed as Administrator over her Estate.
Thameez wrote to MABB in 2015 to ask for the status of the proceedings. She received no reply.
Thameez then initiated an OS against Charijah with regard to the land. She sought an order that Charijah was to pay MABB for all sums outstanding to obtain a discharge of charge.
MABB got wind of the OS, intervened and was added as a party.
After MABB had been added as a party, Thameez also sought a declaration that MABB had ceased to have any interest in the land.
The HC and CA’s decisions
The HC held that Thameez had no claim against Charijah. The HC also held that Thameez could not obtain the land until the amounts outstanding had been satisfied in full.
The CA agreed with the HC.
The Federal Court’s decision
6 questions of law were posed to the FC. The nub of it was this:
Did S. 21 of the Limitation Act 1953 serve as a complete defence to Thameez, given that 12 years had lapsed since the default in repaying the loan and MABB obtaining an Order for Sale?
In construing S. 21 LA 1953, when did the event of default occur? Was it when Form 16D was issued by MABB to Charijah, or was it when Charijah first defaulted on the loan?
The FC’s decision
In an illuminating judgment, the FC carefully dissected the history and etymological roots of our statutory scheme. The FC went through Hansard and stated that Parliament’s desire was to “to sweep aside this vast compilation of various types of action leading to interminable argument and in many cases gross injustice by substituting it with a simple and uniform system which can be understood” by all and sundry” (paras. 30-34).
Limitation as a defence
The Federal Court also considered carefully the fact that limitation is a shield and not a sword (Sakapp Commodities). The Court held that on the peculiar facts here, MABB’s action of intervening into the OS and actively trying to assert its rights over the land led to limitation being a defence available to Thameez:
 In this case, Thameez did not sue MABB, she sued Charijah. It was MABB who intervened for the protection of its alleged registrable right and interest in the land concerned. Upon intervening, MABB was made the 2ndDefendant, following which, necessary amendments were made to the pleadings. Thereafter, Thameez sought for a declaration that the charge ceased to have any estate or interest in the land and that MABB’s rights to enforce the charge has extinguished by operation of law.
The FC concluded by saying that Thameez was perfectly entitled to utilise limitation as a defence to MABB’s claims:
 As MABB in its Application to Intervene had mentioned that it had an interest over the property, this has resulted in Thameez, having no choice, but to use limitation as a defence against MABB.
 Thus, in our view, in light of Order 15 Rule 6(2)(b) of the ROC, Thameez is entitled to contend in the said amended proceedings that the MABB’s rights and/or interest in the registered charge have been determined and/or extinguished by operation of section 21(1) of the LA 1953.
Does the 12-year limitation apply to charges?
The FC then went on to consider a litany of contradictory cases (paras. 52-61) to get at the thorny issue of whether the 12-year limitation period applies to charges.
The FC emphatically concluded at para. 83 as follows:
 Thus, we agree with Ahmad Maarop PCA in Sivadevi on the threecategories of action and the application of section 21(1) of the LA 1953 to charge actions.
When does the 12-year period begin accruing?
The FC undertook a further analysis of contradictory caselaw (paras. 106-109) and decided that the date of failure to repay the loan would be the crucial date:
 Based on the foregoing, we are of the considered view that the period of limitation in section 21(1) begins from the date of the failure to repay the debt and not from the failure to remedy the 16D Notice.
The FC’s decision is rooted in common-sense and is commercially sound. The FC took note of the fact that the chargee bank could sit on the issuance of Form 16D, thereby extending the limitation period.
For the purposes of computing the time period, it is now conclusively 12-years from the date the borrower fails to repay the loan.
The upshot and the effect of limitation
The FC then carefully dissected the law on indefeasibility of title and held that as a result of limitation being effectual, MABB’s charge would be legally unenforceable:
 Thus, while MABB may theoretically be entitled to claim under the agreement, based on the charge created, its alleged rights or interests are nevertheless legally unenforceable by the lapse of the statutory limitation period. That means, MABB can no longer bring an action in law to enforce or to claim what it regarded as the registrable rights or interests under the charge
 In effect, when a chargee fails to obtain an Order for Sale timeously or at all, or fail to file proceedings in court to obtain a valid and enforceable Order for Sale of the charged land within the limitation period as prescribed by section 21(1) of the LA 1953, a chargor is entitled to defeat the registered interest of the chargee pursuant to section 340(4)(b) of the NLC and consequently obtain the return of the land title pursuant to section 244(1) of the NLC read with Order 83 rule 1(1) of the ROC. We therefore answer the Main Question, Question 2 and Question 3 in the affirmative.
From the above, the following principles may be distilled:
The law on limitation has been made crystal clear and has been given rightful precedence;
If a chargee bank sleeps on its rights 12-years after a borrower fails to repay his/her loan, the charge is deemed legally unenforceable by virtue of limitation. It will then be subject to a declaration to have the same removed from the title. The land owner is then entitled to unencumbered title.
The FC unanimously allowed the appeal and proceeded to order MABB to discharge the third party charge. If MABB failed to comply, the FC ordered that the discharge of the third party charge would take effect by operation of law.
Note to practitioners
The FC decision has given welcome clarity in this thorny area of the law. One would be very well-placed to advise one’s client if a chargee bank should sleep on its rights.
Arguably, if the 12-year period has set-in, one would be entitled to move the Court for declaratory prayers to have the charges on land set-aside. This would not be using limitation as a sword as the charges placed on the land are null and void in law. Indefeasibility of one’s title would serve as the ultimate goal (see para. 122 of the FC’s Grounds).
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