The Court of Appeal in Shire v Thabiti Finance has given a decisive interpretation to the troubling issue of whether an acknowledgement or part payment can revive a statute-barred debt. In this week’s Hot From the Bench, LawAfrica’s Charles Kanjama casts a positive look at the law of Limitations. Cases are available to subscribers to LawAfrica Law Reports: www.lawafrica.com
In all areas of civil law, advocates have to be ever vigilant in asserting their client’s rights if not to walk into the cul-de-sac of limitation. To overcome what Waki, J in Khanji v Khanji called the “glaring behemoth of limitation”, there has been a growing reliance on section 23(3) of the Limitation of Actions Act. This section provides for fresh accrual of the right of action on acknowledgment or part payment:
“(3) Where a right of action has accrued to recover a debt or other liquidated pecuniary claim … and the person liable or accountable therefor acknowledges the claim or makes any payment in respect of it, the right accrues on and not before the date of the acknowledgement or the last payment,
Provided that a payment of a part of the rent or interest due at any time does not extend the period for claiming the remainder then due, but a payment of interest is treated as a payment in respect of the principal debt.”
Already in Transworld Safaris v Somak Travels Ltd (1997) the Court of Appeal considered in passing the question of revival of a statute-barred cause of action, and differentiated between extinction and bar by limitation of time. In an application seeking leave to file suit out-of-time against a tortfeasor, the Court observed, “Under the 1953 Carriage by Air Act the right to claim damages is extinguished (not time-barred)… Extending time under the Act can in our view apply to ordinary negligence... But once a cause of action is extinguished, it cannot be revived.”
In Industrial Development Bank v Aberdare Oil Millers (2000), the question of part-payment arose after the defendant pleaded limitation. The plaintiff had advanced certain monies to the 1st defendant against the guarantee of the 2nd defendant. The written demand was made in 1990 but the suit was not instituted until 1997. While the Reply to Defence had joined issue with the Defence, there was neither a plea of acknowledgment nor of part payment. The court observed that part payment should be specifically pleaded under Order VI rule 4(1) Civil Procedure Rules. It then stated: “Part payment, if proved, would make a plea of limitation not maintainable if the part payment occurred within the six years time frame and if it otherwise complied for example with section 24(2) Limitation of Actions Act.”
The fact that the part payment had to be within a six years time frame was taken for granted. Not so in Telkom v Kamconsult (2001) where Justice Ringera came face to face with the issue. The applicants brought a reference from an arbitral decision on jurisdiction. They claimed that under section 109 of the Kenya Posts and Telecommunications Act the relevant limitation period was one year. The respondents argued that by engaging in mutual correspondence after expiry of the limitation period the parties kept the claim alive, and when KPTC thereafter acknowledged their claims for professional fees and made some part payment, the claims were revived.
Justice Ringera conceded that he had not encountered any case law on the issue, neither had counsel cited any, but had relied solely on the smile of fortune to obtain a favourable interpretation. After considering the marginal note to the section, Ringera concluded, “The right which accrues afresh is the right to recover the debt or other pecuniary claim. The acknowledgment or part payment does not create a new or fresh cause of action. What it does is to extend the accrual of the right of action…” The court was fortified in its view by an analysis of the 1980 English Limitation Act which expressly denies the possibility of reviving a time-barred cause of action.
It is debatable whether a claim for professional fees according to scale in respect of a terminated contract is a claim for liquidated damages so as to be amenable to extension by acknowledgment or part payment. Justice Ringera subsequently considered this issue in Wanyoike v A.G. (2002). He held, “Special damages to be proved cannot in my opinion be a debt. Neither is the claim a liquidated pecuniary claim.”
In Patel & anor v Patel (2001), the plaintiffs had sold shares to the defendant in 1982 but had still not received part of the purchase price. They instituted a suit in 1991 and subsequently applied for summary judgment. The defendant raised the plea of limitation in his defence. The plaintiff produced evidence to show that there was part payment in 1989. The court held without further ado, “the [part payment] amounted to an acknowledgment of the debt which… not only postponed the period of limitation, but also revived the cause of action if at all it had been time-barred.”
The court did not consider whether acknowledgment had been or needed to be specifically pleaded. Neither did the court consider whether, on the facts of the case, acknowledgment amounted to joinder of issue to allow the case proceed to trial. The plaintiff was granted summary judgment as prayed in the plaint.
In the light of these cases, advocates must ponder whether the latest forays into the issue by the Court of Appeal have finally dispelled the ambiguities in this area of law. In KPTC v Ndarua (2001), it was argued that acknowledgment of a debt per se does not revive a cause of action which becomes extinguished at the close of the limitation period. In an application by KPTC for stay of execution pending appeal, the Court said, “The Corporation having raised statutory limitation as a defence, it is arguable whether the admission of part of the claim took away the defence….” Surprisingly, the court failed to consider the proviso to section 23(3) of the Limitation of Actions Act and also raised the issue of whether interest on the acknowledged principal sum would accrue from the date of the cause of action or the date of the acknowledgment.
The latest decision of the Court of Appeal in Shire v Thabiti Finance (2002) decisively answers some of the questions raised in the last two years as advocates continue to out-stare and out-fox the glaring behemoth of litigation. The plaintiff in this matter made a liquidated claim arising from a loan given in 1981 to the defendant. The defendant contested the loan while the plaintiff pleaded that the debt had been revived following an acknowledgment in 1990. Justices Kwach, Shah and Pall expressly disagreed with Justice Ringera’s views expressed in Telkom v Kamconsult.
Having inaccurately commented that the court in Telkom did not express itself on the marginal note on section 23 of the aforesaid Act, the court focussed on the words “fresh accrual of the right of action.” Section 23(1) also talks of the right accruing on and not before the date of acknowledgment. The court did not equivocate: “[These words] leave no doubt that the legislature intended that any acknowledgment or part payment not only extends the limitation period but also revives an otherwise statute-barred action falling within that provision.”
The court relied on the English decision in Bush v Stevens (1963) which interpreted the 1939 English Limitation Act, a statute in pari materia with ours. The judges of appeal quoted with approval: “in the specific circumstances of an acknowledgment or part payment the right shall be given a notional birthday and on that day, like the Phoenix of fable, it arises again in renewed youth.”
The question of whether an acknowledgment would revive a statute-barred claim had been answered robustly in the affirmative. The sub-questions of whether acknowledgment must be specifically pleaded, and when such a joinder of issue ought to proceed to trial were left for another day. It was at a later day, in Spielberg’s ‘Jurassic Park’ trilogy, that catastrophe followed the first efforts of science to resurrect the ice-cold genes of a pre-historic age. Today, we can only speculate whether at a later date this interpretation of our courts will come back to haunt us in the form of newly-audible shrieks of long forgotten claims.
Cases cited in this analysis are derived from LawAfrica Law Reports:-
1. Transworld Safaris v Somak Travel Ltd  LLR 481 (CAK)
2. Khanji v Khanji  LLR 597 (CCK)
3. IDB Ltd v Aberdare Oil Millers  LLR 82 (CCK)
4. Telkom v Kamconsult  2 EA 574
5. Patel & anor v Patel  LLR 1281 (CCK)
6. KPTC v Ndarua  LLR 1405 (CAK)
7. Wanyoike v A.G.  LLR 1387 (CCK)
8. Shire v Thabiti Finance  LLR 1455 (CAK) - reported in 2002 EA
9. Bush v Stevens  1 QB 1