The acknowledgment of debt in a Debt Restructuring Agreement can reset the limitation period for claims, allowing actions that would otherwise be time-barred to proceed.

[1] When does a fresh accrual of action arise from an acknowledgment of debt? This is particularly interesting here as the agreement containing the said acknowledgment in the recital is said to be as if the agreement had not been entered into if the conditions precedent are not met. Does that mean that there has been no acknowledgment at all such that if the plaintiff seeks to bring its cause of action after the normal six years for contract, the action is time-barred?

Parties

[2] The plaintiff's claim against the defendant is for the outstanding monies due and owing by the defendant to the plaintiff in relation to banking facilities granted to the defendant by the plaintiff's predecessor-in-title, PhileoAllied Bank (Malaysia) Bhd ("PhileoAllied Bank"). The revolving credit facilities from PhileoAllied Bank and three other banks amounted to the principal sum of RM125 million. The facilities were secured by way of four separate debentures dated 10 July 1995 executed by the defendant charging all its assets, properties and undertaking in favour of the four lenders as security for its indebtedness. The loans from the other three banks were later novated to PhileoAllied Bank on 27 May 1997.

[3] Following an amended vesting order dated 2 March 2011 granted by the Kuala Lumpur High Court, all the business of PhileoAllied Bank including the indebtedness of the defendant were duly vested in the plaintiff.

Problem

[4] The defendant had defaulted in the repayment of its facilities and PhileoAllied Bank had by letters of demand dated 10 March 1998 and 24 March 1998 demanded payment of the entire facilities due and owing together with interest thereon.

[5] Attempts were made at restructuring the facilities. This finally led to the defendant entering into a Debt Restructuring Agreement ("DRA") dated 15 October 2004 involving the defendant and its subsidiary Plaza Rakyat Sdn Bhd ("PRSB") and their financiers and creditors including the plaintiff. The DRA is found at pp. 323-360 of Core Bundle 1.

[6] Both in recitals (B) and (C) to the DRA and the body of the DRA in cl 10.1 thereof, the defendant had acknowledged its indebtedness to its various financiers and creditors including the plaintiff. See pp. 324 and 345A of Core Bundle 1. The defendant expressly acknowledged that it was indebted to the plaintiff in the sum of RM180,927,332 as at 31 December 2001, comprising a principal of RM125 million and interest of RM55,927,332. There was also the letter from the defendant's auditors to the plaintiff and the plaintiff's reply on the amount outstanding at pp 461-470 of Core Bundle 2.

[7] The provisions of the DRA was never implemented and the DRA lapsed as the conditions precedent set out therein were never fulfilled by the cut off date of 31 December 2004.

[8] It was an express term of the DRA that after its termination, each of the financiers and creditors in question including the plaintiff would be at liberty to make demand on the defendant for immediate payment of the amounts due from the defendant and to institute legal actions to recover the amounts due.

[9] The defendant made a general announcement on the Bursa Malaysia website that the conditions precedent to the DRA had not been complied with before the cut off date of 31 December 2004 and unless the cut off date was extended (which was not) the DRA would lapse and cease to have effect from 1 January 2005 onwards and lenders may take action to recover the amounts owing to them at any time. These are found at pp. 474-476 of Core Bundle 2. The defendant also stated for the record, the amount owing to the plaintiff as at 31 December 2004 in the said announcement.

[10] The plaintiff through its solicitors Skrine made a demand by way of a letter of demand dated 22 December 2008