Foreign Limitation Periods Bill

6.15 pm

Order for Second Reading read.

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Mr K Shanmugam: Sir, I beg to move, "That the Bill be now read a Second time." This Bill enacts the Foreign Limitation Periods Act. It adopts the recommendations of the Singapore Academy of Law's Law Reform Committee's 2011 Report on Limitation Periods in Private International Law. The Report was prepared by Prof Yeo Tiong Min, Senior Counsel and Dean of the SMU Law School. Practitioners, arbitrators and academics contributed during our public consultation on this Bill. We thank all who have contributed.

Let me first outline the principles underlying the Bill. It deals with the application of limitation periods. In common law jurisdictions, limitation periods prevent actions from being brought after a specified period. That is the case under our Limitation Act.

Traditionally, the common law characterises time bars as procedural in nature. Therefore, according to the principle that a forum applies its own procedure, the forum would apply its own time bars, even if a foreign country's law is applicable to the issue at hand. So you could have a Singapore court applying Singapore time bars to an issue which is substantively governed by French law. The effect of the time bar, when it is applied, is to terminate the action in the forum.

To use the words of the Canadian Supreme Court in Tolofson v Jenson [1994], the time bar is "determinative of the rights of both parties". It is not part of the rules which "make the machinery of the court run smoothly." It is therefore incongruous to say, on the one hand, that an issue is governed by a foreign law and, on the other hand, to apply the forum's time bar to that issue.

The UK, Australia and Canada have introduced legislation to reform the common law position. The basic position is, if an issue is governed by a foreign law, that foreign law's limitation period will apply; and the forum's limitation period will not apply. Such an issue has not yet arisen in our courts. Nevertheless, we think it prudent to clarify the law in this area.

Clause 3 lays down the general rule that, when the law of a foreign country applies to a matter before the Singapore court, that country's law relating to limitation will apply, and Singapore's law relating to limitation will not apply.

Clause 3(2) in particular addresses the double actionability rule governing tort claims. The double actionability rule states that a claim in tort must be actionable under the law of the country where the tort is committed as well as the law of the forum. The rule exceptionally allows for the law of a more closely connected country to displace either or both laws if that is more appropriate. Clause 3(2) provides that, in both cases, the applicable limitation period is that of the applicable foreign law.

Clause 4 provides exceptions to the general rule. Clause 4(1) and (2) provide that clause 3 will not apply to the extent that it is against public policy. This includes situations where undue hardship will be caused. Clause 4(3) provides for any suspension or interruption of a limitation period on the ground of a party's absence from a jurisdiction to be disregarded. This would prevent forum shopping by plaintiffs, to deprive defendants of the benefit of limitation periods. This is similarly subject to a public policy exception in clause 4(4).

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Clause 5 provides that, when a foreign court disposes of a matter by reference to a limitation period, it is deemed to have disposed of the matter substantively. This will preclude further litigation on the matter.

Clause 6 defines the meaning of laws relating to limitation, and clause 7 provides for the Act to bind the Government.

Clause 8 provides for consequential amendments, in particular it provides for the Act to apply to the International Arbitration Act.

The choice of Singapore as an arbitral seat will no longer automatically require the adoption of Singapore limitation periods. That will help enhance Singapore's status as a neutral arbitral seat.

The Bill was strongly supported by the legal fraternity during consultation and during the Arbitration Dialogue 2011 that my Ministry held at Maxwell Chambers last November. Sir, I beg to move.

Question proposed.

6.20 pm

Mrs Lina Chiam: Mr Speaker, Sir, this Bill is a good move, in that we can give greater effect to foreign law without the complications of applying Singapore law for certain parts of claims that are otherwise governed by foreign law.

Mr Hri Kumar Nair: Mr Speaker, Sir, I support the Bill. The amendments mirror reforms that took place in the United Kingdom in 1985 and help clarify the law. The determination of whether foreign limitation is procedural or substantive leads to much uncertainty. The Bill provides for foreign limitation periods to apply as a general rule, without the need to determine whether it is substantive or procedural. This move by the British in 1985 simplified their law and we will reap the same benefits.

A foreign limitation period may extinguish a claim (as a matter of substance) or bar a remedy (as a matter of procedure). As noted in the seminal text, The Conflicts of Laws by Dicey, Morris & Collins, the complexity of the law forced individuals to navigate legal minefields.

If the statute of limitation of the foreign country is procedural, an action will fail if it is brought after the period of limitation of Singapore has expired even though that of the foreign country has not. But it will not fail if the period of limitation of Singapore has not yet expired although that of the foreign country has expired. This has been criticised for encouraging forum shopping – where litigants choose forums which have little connection to the dispute, but which afford more generous limitation periods. It also creates uncertainty for defendants – as they may labour under the impression that potential actions against them have become time barred, only for it to be brought in a different jurisdiction.

On the other hand, if the statute of limitation of the foreign country is substantive, the Singapore limitation period will apply if it is shorter than that of the foreign country because the case will be considered stale by the Singapore courts. But once the period of limitation of the foreign court has expired, no action can be maintained even though the Singapore limitation period has not expired. In short, there is more certainty and less legal manoeuvring.

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However, I have some queries regarding the exceptions to the general rule. The general rule will not apply where its application would conflict with public policy and the period of limitation of Singapore would apply. This would occur where the application would cause undue hardship to a person who is or might be made a party to the proceedings.

This provision of an exception is problematic for two reasons. First, if we are choosing to apply foreign limitation periods as a general rule, then we should embrace it completely. If the party to the dispute finds himself falling outside of the limitation period if his case was heard in the foreign country, why should he be given additional time simply because he chooses to sue in Singapore? The Limitation Act in Singapore does not recognise hardship as a reason to extend the limitation period and I wonder why we are borrowing a British concept of "hardship" that was in fact not supported by the majority of their Law Commission when it considered the issue in the 1980s.

I would ask the Minister whether it would be preferable that "hardship" should only be relevant if the foreign law on limitation recognises it as a ground to extend the limitation period. In short, if the exception does not apply in the foreign country, it should not matter in Singapore either. Allowing such exceptions only encourages satellite litigation, because all litigants who miss deadlines under foreign law will no doubt argue that their case is one of "hardship". It creates uncertainty and raises costs.

Secondly, this provision would be removing one area of uncertainty only to replace it with another. Limitation periods by definition create hardship as meritorious claims may be time barred in order to fulfil the idea of limitation itself, that is, the protection of defendants from stale claims and the encouragement of plaintiffs to proceed with expedition, the preservation of evidence and finality of closure of a specific period under potential liability incidents.

Could the Minister clarify in what scenarios where hardship would be considered such that the exception would apply to oust the foreign law on limitation? Laws, in particular, procedural laws, should be made simpler and clearer, so that individuals will know their rights and will be better able to enforce them. I support this Bill.

6.24 pm

Mr K Shanmugam: Sir, I thank Mr Kumar and Mrs Chiam for supporting the Bill. Mr Kumar has some concerns about the exceptions to the general rule which are based on public policy and undue hardship. It is a general principle of private international law, or the conflict of laws, that a forum will not apply a rule of foreign law which is contrary to the forum's public policy. That is a function of the forum's court's duty to uphold its own public policy. At the same time, of course, Mr Kumar will know, the courts do not take a parochial approach in defining public policy. For example, the Court of Appeal has recognised the case of Liao Eng Kiat v Burswood Nominees [2004] 4 SLR(R) 690 − Mr Kumar may want to look up who the counsel were − and this was a case decided before we had IRs in Singapore − that public policy operates with less vigour in the conflict of laws than in domestic law. Relevant policy must be "so important as to form part of the core of essential principles of justice and morality shared by all nations", quoting from the court, before it can be applied in the conflict of laws.

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Mr Kumar, I think, has a valid point in noting that the majority of the UK Law Commission which considered the same issue in the 1980s did not recommend a statutory exception for public policy. But that was not because public policy was not a legitimate reason for disapplying foreign limitation law but because the majority was of the view that the existing public policy defence at common law would suffice. That is the reason. Also, the UK statute ultimately provided for an exception based on public policy and undue hardship.

Our Academy of Law's Law Reform Committee considered the same issue in some detail and similarly concluded in favour of an undue hardship exception. Prof Yeo pointed out in the Law Reform Committee's Report that there is now a substantial body of case law in the UK on what would constitute undue hardship. And our courts can refer to this body of UK case law and apply the exception, of course, taking into account and applying it in the context of Singapore and Singapore's public policy.

I think we can state some general principles. One, the exceptions would not apply simply because the foreign limitation period is different from Singapore. Otherwise, we would encourage forum shopping. Two, it should also be emphasised that the exception is framed in terms of "undue hardship".

As Mr Kumar points out, all limitation periods necessarily cause some hardship to plaintiffs in that they impose a cut-off time for bringing in an action. But that hardship alone cannot be sufficient to trigger the exception. The plaintiff must go on to show that he would suffer greater hardship in a particular circumstance than would normally be the case. One example could be that the plaintiff was prevented from suing by war or civil unrest.

The court should also consider the policy reasons underlying the foreign limitation period. If the hardship complained of was already considered in formulating the foreign limitation period that would militate against applying the exception. In practice, exceptional circumstances would be required before the exception has been applied.

Mr Kumar makes a point as to whether it would be preferable for hardship to apply only if the foreign law on limitation recognises it as a ground to extend the limitation period. But that could lead to a situation where there is in effect no hardship exception because a foreign law exception to the foreign limitation period is already applicable as part of the general rule. Our view is that it is better for the court to have some discretion in cases considered exceptional where the foreign limitation period does not provide for an exception. I think we can rely on our courts to apply these public policy and undue hardship exceptions judiciously. Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [ Mr K Shanmugam ].

Bill considered in Committee; reported without amendment; read a Third time and passed.

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