IN THE HIGH COURT OF MALAYA AT JOHOR BAHRU
IN THE STATE OF JOHOR DARUL TA’ZIM
CIVIL SUIT NO. MT(5) 22-40-2007
_______________________________________________________
BETWEEN
Bank Islam Malaysia Berhad
[No. Syarikat: 98127-X]
AGAINST
1. UMW Zipper Manufacturing Sdn. Bhd
[No. Syarikat: 375764-W]
… Plaintiff
2. Md. Nurul Islam
[No. K/P: 521216-71-5337]
3. Janadiah Chan binti Abdullah
[No. K/P: 550928-04-5246] … Defendants
JUDGMENT
GUNALAN A/L MUNIANDY, J.C:
Facts
[1] The Plaintiff (P) is an Islamic banking institution while the
First Defendant (D1) is a privated limited company. This suit arises out of two facilities granted by P to D1 under Syariah banking principles, namely, Asset Financing and Equipment Leasing. D1 executed the Facility Agreement and Equipment Lease Agreement both dated 26.06.1996 through the other defendants as directors.

The Second and Third Defendants (D2 and D3) are guarantors who executed the Letter of Guarantee and Indemnity dated 26.061996.
[2] This suit for debt due and owing in the sum of RM736,
115.40 as at 10.01.2007 arises out of default in payment by D1 under the two agreements. Judgment in default was obtained against D1 on 22.06.2007. At the outset of the trial, D2 and D3, through their counsel, withdrew their counter-claim against P which was then struck-off with no order as to costs.
[3] The trial thus proceeded only on the main suit against D2 and D3.
[4] At the trial, the defence did not raise any challenge against the evidence of P’s only witness (PW1) pertaining to the letters of offer, agreements, notice of demand and statement of account showing the arrears outstanding and owing to P. The defence only sought confirmation from PW1 that the Notice of Demand relevant to the suit against D2 and D3 was as per Exhibit P9 dated 28.01.1997 and that there was no further notice of demand issued against them in respect of this claim. Save for this, none of the other matters raised in the statement of defence were put to PW1. D2 (DW1), defen dants’ only witness, too did not testify on these other matters.
He merely confirmed that the only notice of demand that he had received pertaining to this case was Exhibit P9 and that the Writ of
Summons served on him was the one in the Bundle of Pleadings dated and sealed 25.01.2007. His evidence that there was no further transaction or dealings between the parties after 28.01.1997 (date of
P9) was unchallenged. He also testified on behalf of D3, his wife.
Issues At Trial
[5] The only issues for determination arising from the evidence adduced are whether the suit against D2 and D3 was time-barred
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under section 6(1) (a) of the Limitation Act, 1953 or whether the suit was valid under s. 21(1) of the same Act?
Analysis Of Issues
[6] The relevant facts concerning the above issues are simple and straight forward. It was undisputed that the Notice of Demand was dated 28.01.1997 and the writ was filed a few days short of 10 years later. Further, that the default occurred sometime before
28.01.1997.
[7] It is trite law that for claims based on breach of contract, as in the instant suit against D2 and D3, the cause of action accrues from the earliest date on which the creditor is able to bring the action, which is after the notice of demand has been issued to the debtor.
The principle is explained in the Court of Appeal case of Nik Che Koh
@ Nik Soo Kok v. Public Bank Bhd [2001] 2 AMR 620 where it was held:
“For all intents and purposes, the notice dated April 2, 1986 was a notice of demand under the letter of guarantee. The failure to heed the notice of demand gave the respondent a cause of action against the company as well as against the guarantors. Although the notice did not specify the precise amont owing, there is no general rule that such a notice must specifically mention the precise amount owing. On the facts and circumstances of the case, the liability of the company as well as that of the guarantors arose from the first notice of demand dated April 2, 1986. [see p 1624 lines
33 – 41]
For the purpose of limitation, time began to run from the earliest date on which the creditor could have brought an action. In this case, the earliest time the respondent could have commenced a suit was soon after issuing the notice of demand of April 2, 1986. Therefore, since the suit was filed
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more than six years after the cause of action accrued, the suit was statute-barred pursuant to s 6(1)(a) of the Limitation
Act 1953. [see p 1624 line 45 – p 1625 line 5]”.
[8] Similarly, on the facts and circumstances of the present case, the liability of D2 and D3 arose upon failure to heed the only notice of demand issued [Exhibit P9] and the operative date when time began to run was the date of Exhibit P9 – 28.01.1997.
Reference can be made to para 1(i) of the Letter of Guarantee
[ Exhibit P5 ] that states in effect the their liability arises, jointly and severally, to pay moneys due to P on demand. This point was undisputed. Time continues to run until the summons is sealed whereupon it is deemed to be issued and the action is considered commenced. [ Boota Singh v. Isman bin Hj. Ali [1957] 23 MLJ 127.
[9] Actions founded on a contract or on tort, amongst others, are barred from being brought after the expiration of six years from the date on which the cause of action accrued [s. 6(1)(a), Limitation Act
1953]. From the Statement of Claim in this case, it is plain and obvious that D2 and D3 were being sued as guarantors under a
Guarantee Agreement dated 26.06.1996 [ See para 8 Statement of
Claim ] whereby they guaranteed to settle any amounts due from D1 to P under the housing loan granted to D1. Even though the documentary evidence would show that they were directors of D1 and signed the loan and charge/mortgage papers in this capacity, they were sued strictly as guarantors for the amount outstanding in their personal capacity. It is trite law that a limited company is a separate legal entity altogether, having a separate legal standing distinct from its directors. Hence, the claim against the directors personally based wholly on the guarantee agreement is separate and distinct from that against the principal borrower (D1) pursuant to a housing loan agreement secured by a charge on land entered into between P and
D1 only. These claims can ’t be merged into one cause of action as they relate to different agreements and different parties. The basis for commencing the suit against D1 is failing to heed the Form 16D,
National Land Code (‘NLC’) notice sent to them for breach of the
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legal charge while that against D2 and D3 is for failing to pay the outstanding debt due from D1 to P arising out of the loan agreement.
[10] The point to be noted from the above is that the claim against D2 and D3 is for failing to meet their obligations under the
Guarantee Agreement , which is purely a claim founded on breach of contract and nothing more. This is manifest from P’s averments in the Statement of Claim itself without the need to refer to the relevant agreements and charge documents. Suffice to say that they did not execute any of the charge documents in their personal capacities but as directors of D1’s company so that their liability in this case doesn’t accrue from the charge agreement but solely from the Guarantee
Agreement. A perusal of Exhibits P2, P3 and P7 would clearly reveal that the parties to the property sale, property purchase and equipment lease agreements, each secured by a charge/mortgage
[see Exhibit P4 and P8] were P and D1 only. D2 and D3 were merely listed as guarantors in the schedule and issued a Letter of Guarantee to the extent of a fixed sum ( Exhibit P5 ]. This, in law, did not make them parties to the said property financing and lease agreements and no cause of action could emanate against them personally solely upon these agreements.
[11] In arguing against the invocation of the time bar in s. 6(1)
(a), Limitation Act as pleaded by the defence, p laintiff’s councel submitted that this suit fell within s. 21(1) of the Limitation Act. He cited various authorities in support, inter-alia, the leading Federal
Court case of Tan Kong Min v. M.N.I. Sdn. Bhd. [2005] 3 CLJ 825, where it was held per Alauddin Mohd Sheriff, FCJ:
“On the facts, s. 6 could not apply in view of the express exclusion of ‘any action to recover money secured by any mortgage of or charge on land’ in s. 6(5) (b) of the Act. The action was thus not founded on a claim on contract under s.6. The applicable provision was s. 21. Section 21(1) specifically refers to an action to recover moneys secured by a charge which is an action in personam , whereas s. 21(2) specifically refers to a foreclosure in respect of mortgaged
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personal property which is an action in rem . The limitation period was therefore 12 years from the date when the right to receive the money accrued or 12 years from the date on which the right to foreclose accrued, respectively. There was thus no need to answer question (2). (p 834 f – g)
From a reading of cl. 7 it was obvious that prior to the auction, it would not be possible for the respondent to ascertain the exact amount that could be realized from the sale of the land and whether there would remain any excess amount due to the respondent. It followed therefore that the respondent could only enforce its right against the personal liability of the appellant under cl. 7 when the sale had been conducted and the excess amount due, if any, had been ascertained. (p 835 de)”.
[12] The argument of learned Plaintiff’s counsel was clearly misconceived as all the authorities referred to concern claims against the principal borrower who was also the chargee/mortgagee of land or other property. The claims were ad rem against the security and in personam against the borrowers. A claim of this nature obviously fell under s. 21(1) of the Act as it was o n “action … to recover any principal sum of money secured by a mortgage or other charge on land or personal property … ” D2 and D3 were neither the borrowers nor mortgagees/chargees of any property in favour of the Plaintiff.
They were guarantors bound only by the terms of the Guarantee
Agreement which did not provide for any charge or mortgage to be executed on their part. Hence, the action against them cannot be considered as one to recover money as envisaged in s. 21(1) of the
Act. The available claim against them was in personam only governed by s. 6(1) (a) of the Act compared to the cause of action against D1 which was both in rem and in personam governed by s.
21(1) and (2) of the Act. This suit against the latter was to ‘recover the principal s um’ and thus, the applicable provision is s. 21(1) which stipulates a limitation period of 12 years as in Tan Kong Min v. M.N.I
Sdn. Bhd (supra). Neither s. 21(1) nor (2) had any application in the case of D2 and D3 as they had not personally executed any charge/mortgage but only a Letter of Guarantee [ Exhibit P5 ]
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which was in consideration of the financial facility granted and advances made to D1 by P. Moneys payable to P under P5 by D2 and D3 were certainly not secured by any charge or mortgage. This was to be found only in the two financing facility agreements where the contracting parties were P and D1 only. The situation envisaged in s. 21(1) is strictly confined to a suit by the chargee (P) against the chargor (D1) in personam for breach of contract arising out of the loan agreement.
[13] In Low Lee Lian v. Ban Hin Lee Bank Bhd [1997] 2 CLJ 37, the rights of a chargee to recover from the chargor in rem and in personam, which are the two situations set out in s. 21 of the Act were distinguished and explained. It was held, inter-alia:
“In the present context, it is important to distinguish between rights ad rem and rights in personam . An action brought to set aside a charge upon one or more of the grounds of defeasibility specified under s. 340 of the Code, is an action in rem . On the other hand, it is an action in personam when a charger, though not in a position to bring his case under s.
340 of the Code, is able to show that the charge is under a
Decision personal obligation that binds his conscience not to enforce the charge and proceeds to enforce that obligation against the charge.”.
[14] For the aforesaid reasons, I first found that the period of limitation began to run from 28.01.1997 as the right to sue or cause of action accrued on that day based on the chronology of events as adverted to and the unrebutted documentary evidence. The calculation of limitation had, thus, to begin from that date until institution of the suit on 25.01.2007 which was far in excess of 6 years. Secondly, that the applicable provision of law for the facts and circumstances of the claim against D2 and D3 was s. 6(1) (a) and not s. 21(1) of the Act. This was a claim wholly founded on contract and did not involve any charge or mortgage on land or personal property
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in so far as D2 and D3 were concerned personally. Hence, s. 21 (1) had no application to the present cause of action.
[15] The doctrine of limitation has to be strictly construed and enforced as the provision of law concerned serves a purpose to prevent the prejudicial affect and inconvenience caused to defendants as a result of filing suits after an unreasonable and inordinate delay from the time of accrual of the cause of action. In appropriate circumstances, there should be no hesitation to apply the doctrine irrespective of the value or nature of the action. As expressed by Hashim Yeop A. Sani, CJ (M), in Credit Corporation (M)
Sdn. Bhd v. Fong Tak Sim [1991] 1 MLJ 409 at p. 413 – 414, the principle and applicability of limitation are as follows:
“As stated earlier a cause of action is said to have accrued when there is in existence a person who can sue and another who can be sued, and when all the facts have happened which are material to be proved to entitle the plaintiff to succeed. …………………
The doctrine of limitation is said to be based on two broad considerations. Firstly there is a presumption that a right not exercised for a long time is non-existent. The other consideration is that it is necessary that matters of right in general should not be left too long in a state of uncertainty or doubt or suspense.
The limitation law is promulgated for the primary object of discouraging plaintiffs from sleeping on their actions and more importantly, to have a definite end to litigation. This is in accord with the maxim interest reipublicae ut sit finis litium that in the interest of the state there must be an end to litigation. The rationale of the limitation law should be appreciated and enforced by the courts.”.
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[16] Based on the above findings, I held that the suit against the second and third defendants was time barred under s. 6(1) of the
Limitation Act, 1953 for having been instituted after 6 years from the date on which the cause of action accrued. I accordingly dismissed this suit with costs.
Dated: 1 st November 2010.
( GUNALAN A/L MUNIANDY )
Judicial Commissioner
High Court of Malaya
Johor Bahru.
Mr. Zul Azam
Messrs Sabaruddin Ali & Co.
…………… for the Plaintiff
Advocates & Solicitors
Johor Bahru
Mr. Mohamed Najib Omar
Messrs Najib Omar & Co
Advocates & Solicitors
Johor Bahru.
..
…………. for the Defendants
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