Time-Barred? But I was Defrauded! - Commencing Action for Fraud Past Limitation

Say you entered into a sale and purchase agreement to buy a property. You then proceed to make payment towards the purchase price and thereafter wait for almost a decade for the property to be conveyed to you. You subsequently find out that the vendor has, in the interim, transferred the property to someone else without your knowledge.

Can you sue the vendor even though the action is past the 6 years limitation period when there is fraud?

1. Limitation Period

A potential litigant cannot sit on his rights to commence an action. Section 6 of the Limitation Act 1953 (the “Act”), provides, for example, that an action that is founded on a contract or on tort shall not be brought after the expiration of 6 years from the date of which the cause of action accrued.

But what if you were defrauded and didn’t even know that you have a cause of action to begin with?

2. Postponement of Limitation Due to a Fraudulent Concealment

Section 29(b) of the Act provides for a postponement of limitation period in cases involving fraud:

“Where, in the case of any action for which a period of limitation is prescribed by this Act, either -

…

(b) the right of action is concealed by the fraud of any such person as aforesaid; or

…

the period of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake, as the case may be, or could with reasonable diligence have discovered it…”

Section 29(b) of the Act was inserted to protect a plaintiff who was ignorant of his right due to the defendant’s fraudulent concealment, and to avoid the matter being barred by limitation at the point when the plaintiff finally discovers the fraud.[1]

It necessarily means that the plaintiff’s right to commence an action started upon the plaintiff’s discovery of the fraud. This is important, particularly in fraud cases where the defendants generally actively intend to blindside the plaintiff.

There are myriads of examples where a fraudulent concealment is deemed to have happened[2]:

• where an insolvent person deliberately omits to give information as to his property[3];
• where a person is deliberately brought up as the second legitimate son, whereas he is, in fact, the eldest[4];
• where a father, having made an advancement to his children, then proceeds to deal with the money representing the advancement as his own, without informing the children[5];
• where a person, having been entrusted with money belonging to another, pays it away wrongfully to a third person without informing the person to whom it belongs[6]; or
• where a person, when he is married to one woman, promises to marry, or goes through a form of marriage with, another woman without revealing the existence of his first marriage[7].

3. The Plaintiff’s Duty

However, notwithstanding the above, it does not give a plaintiff a free pass to purposely shut his eye to the fraud that is happening to him, especially when things were openly done[8]. The statute of limitation will begin to run when the plaintiff suspects or should have suspected that his injury was caused by wrongdoing or that someone had done something wrong to him, but does not choose to avail himself of the remedy of filing a suit[9].

In conclusion, the answer to the analogy in the first paragraph is a resounding yes. The exact scenario was deliberated in the case of Tenaga Nasional Bhd v Kesang Trading Sdn Bhd & Ors[10] where the Court allowed the plaintiff’s claim and held that the plaintiff’s action is not   time-barred due to Section 29(b) of the Act.