Period of limitation – Charge of land – Bank granted loan to borrower – Borrower charged land as security for loan – Borrower defaulted in repayment of loan – Bank issued and served notice of default in respect of charge – Borrower failed to remedy breach of charge – Bank sought order for sale of land by way of public auction – Whether foreclosure proceedings or order for sale time barred

CIMB Bank v Sivadevi Sivalingam
[2020] 2 CLJ 151, Federal Court

see the grounds of judgment here

Facts The appellant granted a loan to the respondent and the latter charged a piece of land to the appellant as a security for the said loan. When the respondent defaulted in the repayment of the loan, the appellant issued and served on the respondent the notice of default with respect to a charge, in Form 16D pursuant to section 254[1] of the National Land Code 1965 (NLC). The notice gave the respondent 30 days to remedy the breach of the NLC charge but she failed to remedy the same. The appellant then filed an originating summons (OS), at the High Court, for an order for sale of the land, by way of a public auction and it was allowed. Dissatisfied, the respondent appealed against the said decision at the Court of Appeal. The sole issue that arose at the Court of Appeal was whether the foreclosure proceedings or an order for sale, taken by the appellant was time-barred. Allowing the appeal, the Court of Appeal held that; (i) the event in default was the breach, which occurred on 12 May 2003 when the defendant failed to service the repayment, and the law of limitation set it on 12 May 2015; and (ii) since the OS seeking an order for sale was filed on 8 August 2016, the action was barred under section 21(1)[2] of the Limitation Act 1953 (the ‘Act’). Hence, the present appeal.

Issues The main issue was whether the application by the appellant in the OS for an order for sale was time barred by limitation under section 21(1) of the Act?

Held In allowing the appeal, the Federal Court held that at the expiry of the period to remedy the breach, the whole sum secured by the charge became due and payable to the plaintiff. On that date too ‘the right to receive the money accrued’. It is on this date that the right to enforce the charge on the land accrued, and the time for the purpose of s. 21(1) of the Act began to run. Thus, the application for an order for sale was not time barred.

ZUL RAFIQUE & partners
{14 February 2020}

[1] Service of default notice, and effect thereof.
[2] No action shall be brought to recover any principal sum of money secured by a mortgage or other charge on land or personal property or to enforce such mortgage or charge, or to recover proceeds of the sale of land or personal property after the expiration of twelve years from the date when the right to receive the money accrued.