The federal court reaffirms the Law of Limitation for actions founded on contract

The Great Eastern Life Assurance Co. Ltd. V. Indra Janardhana Menon [2005] 4 ClJ 717




Mr. N.V.J. Menon (“Menon”), now deceased, was an agent of the appellant insurance company (“Great Eastern”). Menon passed away on 26.11.2002 and his daughter, the respondent was substituted as a party in the proceedings. As an agent, Menon earned commissions from insurance policies he sold for the appellant as well as overriding commissions from policies sold by agents introduced by him to the appellant. One such agent was Indrani Subramaniam (“Indrani”). In 1986, Indrani procured a group insurance scheme for the appellant and it is in respect of the overriding commissions payable that Menon made a claim on the appellant, who denied liability.


Menon filed his claim on 8.4.1993 in the High Court which dismissed his claim on several grounds. One of those grounds was that part of Menon’s claim was time-barred. Menon took his case to the Court of Appeal.




The Court of Appeal allowed Menon’s appeal, reversing the decision of the High Court. In its decision, the Court of Appeal stated that although Menon’s claim arose more than six (6) years prior to the filing of his suit, it was not time-barred under sec. 6(1)(a) of the Limitation Act 1953 (“the Act”). Sec. 6(1)(a) of the Act provides as follows:-


“Save as hereinafter provided actions founded on a contract or on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued.”


Menon’s claim was not time-barred, according to the Court of Appeal, because the appellant’s obligation to pay overriding commissions which would accrue from time to time when an insurance agent’s subordinate agents sold insurance policies, is one continuous obligation that arose from the sale of such policies. Accordingly, time did not begin to run as and when each overriding commission payment became due to Menon upon the sale of insurance policies by his subordinate agents, but was postponed to some date in the future. The date identified by the Court of Appeal was 16.7.1990, when the appellant formally notified Menon that it would not be making any overriding commission payments to him in respect of group insurance schemes sold by Indrani. As such, when Menon filed his suit in April 1993, he was well within the six year limitation period.


In arriving at this conclusion, the Court of Appeal relied on the case of Loh Wai Lian v. S.E.A. Park Housing Corporation Sdn Bhd [1987], 2 MLJ, a Privy Council decision. That case dealt with a contract between a housing developer and purchaser under the Housing Developer (Control and Licensing) Rules 1970 (“those Rules”).


Those Rules provide that there should be specific dates for delivery of houses to purchasers and that developers should indemnify the purchasers for any losses suffered in the event that there has been a delay in delivery of the houses for occupation. The loss suffered shall be calculated at a specified rate from the date when possession ought to have been given, until the date when possession was actually given to the purchaser.


While the High Court and Federal Court held that the purchaser’s claim was time barred, the Privy Council stated that since the parties had agreed to a single aggregate sum which could not be calculated until the house was completed and handed over, time did not run until that date. This, the Privy Council held, amounted to a contractual modification or alteration of the general law relating to the computation of limitation in cases of simple contracts. By the agreement, the breach had been shifted from the date the house was to be completed to a date when the house was actually handed over.


Applying the rationale in Loh Wai Lian, the Court of Appeal held that Menon’s agency agreement with the appellant was modified so that the date of breach shifted from:-


i) the date when the appellant breached its obligation to pay overriding commission to Menon in respect of group insurance schemes sold by Indrani in 1986, which obligation would arise the moment the appellant received the cash premiums due on the sale of those schemes in 1986; to

ii) some date in the future, namely 16.7.1990, when the appellant wrote to Menon informing him that it would not be paying him the overriding commissions claimed.


The Court of Appeal also came to an alternative finding that so long as the parties remain in a contractual relationship no period of limitation exists. The appellant sought and obtained leave to appeal to the Federal Court.




Leave to appeal was granted by the Federal Court to pose the following two questions of law:-


a) whether disparate obligations to pay from time to time arising upon the occurrence/fulfillment of contingent events, can be construed as a single continuing obligation so as to displace the effect of sec.6(1)(a) of the Act; and

b) whether the provisions of the Act cease to apply to breach of contract, where the parties remain in contractual relationship.




The Federal Court answered both questions in the negative.


The Federal Court held that Menon’s cause of action arose only when the appellant breached its obligation to pay and that obligation arose when the appellant received the premiums from the group insurance schemes sold by Indrani in 1986. Calculating the six year time-bar from 1986 when Menon’s cause of action arose until 1993, when his suit was filed, clearly Menon’s claim had become time-barred.


Whilst the Federal Court recognised that it is open to parties to regulate or modify their rights in the event of breach in any way they think fit, the Federal Court could not find any provision in any of the contracts between Menon and the appellant to show that the parties had expressed any intention to modify or alter the contracts so as to shift the time of breach to some date in the future. In the absence of such modification or alteration, the general principle of law, that time begins to run from breach, applied.


The Federal Court went on to state that the appellant’s obligations to pay overriding commissions are disparate obligations that arise at different times and with each breach there arises a complete and distinct cause of action in itself, and time begins to run immediately upon every successive breach. Such breaches occurring at different times cannot be merged into one continuing obligation.


It is pertinent to note that Menon’s entitlement to overriding commissions is governed by a Circular forming part of his contract with the appellant which only came into effect on 1.1.1987. As no group schemes were procured by Indrani from 1.1.1987 onwards, the Federal Court found that Menon’s claim which relates to the sale of group insurance schemes by Indrani in 1986, was not maintainable as no such entitlement existed prior to 1.1.1987.




In reversing the Court of Appeal’s decision the Federal Court has essentially reaffirmed the established principles governing the law of limitation for actions founded on a contract.


The net effect of Court of Appeal’s decision was to throw open the question of when a cause of action accrues in a case based on contract because it was no longer a simple question of computing six years from the date of breach. Such a decision would appear to erode the general position so that the date of breach is no longer the definitive date. By holding that Menon’s claim was time-barred the Federal Court has effectively restored certainty to the law governing limitation of actions.



EZANE CHONG ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it


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