March 2022
Elizabeth Pai and Julian Lai
Article 197, Paragraph 1 of the Civil Code provides: “The right to assert a damages claim arising from a tortious act shall be extinguished if not exercised within two years from the date when the claimant becomes aware of the damage and the compensation obligator, and this shall also apply if over ten years have elapsed from the date when the wrongful act was committed.” As to the meaning of “awareness of the damage and compensation obligor,” this pertains to the subjective element of the commencement timing of the statute of limitations for the right to claim damages for tort liability. The 110-Tai-Shang-1414 Civil Decision rendered by the Supreme Court to specifically reaffirm the stable opinion in practice is a worthy reference. The facts and the court opinion contained in this decision are described below.
I. The facts in this case
On June 26, 2012, Wentai Water Filter Co., Ltd. (hereinafter, “Wentai Co.”) and Kinmen County Waterworks (hereinafter, “KCW”) entered into a contract for work under which Wentai Co. served as the contractor for KCW’s upgrade and maintenance of equipment for a total contract price of NT$14.2 million. On October 31, 2012, during a single machine test run conducted by Wentai Co., a high-pressure ball valve of KCW (hereinafter, the “High-pressure Ball Valve at Issue”) burst, causing damage to the high-pressure pump and energy recovery equipment purchased by Wentai Co. for the performance of this contract for work. Therefore, Wentai Co. filed a lawsuit to seek a compensation of NT$2,403,810 from KCW on January 12, 2015 in accordance with the forepart of Article 184, Paragraph 1 of the Civil Code (which stipulates that “a person that illegally infringes the rights of another person out of willfulness or negligence shall be liable for damages”).
II. The opinion of the Taiwan High Court (reversed by the Supreme Court)
The Taiwan High Court held that the so-called “awareness of damage” under Article 197 of the Civil Code refers to the awareness of the damage that has been incurred, and the awareness of the damage amount is not required. Therefore, the change of the subsequent damage amount has no bearing on the progression of the statute of limitations for the right of claim. In this case, the High-pressure Ball Valve at Issue burst during the single machine test run on October 31, 2012, causing damage to the high-pressure pump and energy recovery equipment of Wentai Co. Therefore, Wentai Co. became aware of the fact of damage and of the compensation obligor, which is KCW, at that time. Although the damage amount was yet to be determined, this had no bearing on the progression of the statute of limitations for the right of claim. Therefore, Wentai Co., which had not brought this action until January 12, 2015, exceeded the two-year statute of limitations under the forepart of Article 197, Paragraph 1 of the Civil Code. Since KCW asserted a statute of limitations defense, the claim of Wentai Co. for a compensation of NT$2,403,810 from KCW in accordance with the forepart of Article 184, Paragraph 1 of the Civil Code is groundless.
III. The opinion of the Supreme Court (the 110-Tai-Shang-1414 Civil Decision of the Supreme Court)
The Supreme Court held that the statute of limitations for the right to claim damages arising from a tortious act should commence when the claimant actually becomes aware of the damage and the compensation obligor. The so-called “awareness of damage” does not simply refer to the awareness of damage. The awareness should also cover the fact that the damaging “act of another person” is tortious. If the awareness only covers the damage and the actor instead of the fact that the act engaged by the actor is tortious (since the actor is intentional or negligent), a compensation may not be claimed based on the legal relationship of tort, and therefore the statute of limitations cannot commence. Therefore, a victim should be aware of not only the tortious act of another person but also the illegality of such an act in order to be deemed aware.
Had Wentai Co. become aware of the fact of damage and the compensation obligor, which is KCW, when the equipment of Wentai Co. was damaged due to the bursting of the High-pressure Ball Valve at Issue on October 31, 2012 (as the determination of the original trial court), why had Wentai Co. still issued a letter to KCW on December 13, 2012 to explain that the assistance of the original manufacturer had been requested with respect to the cause of the incident? In addition, regarding the application for an extension of the construction period due to such an unforeseeable incident, why did KCW issue a letter to agree that the period when the High-pressure Ball Value at Issue was damaged pending repair could be excluded from the period of test run since the incident was a force majeure event not attributable to Wentai Co.? If Wentai Co. was only aware that the equipment was damaged due to the bursting of the High-pressure Ball Valve at Issue on October 31, 2012, instead of the fact that the incident was caused by the fault of KCW because KCW had not used the High-pressure Ball Valve at Issue for a long time and had not timely replace the old and damaged gasket, the statute of limitations for the right of Wentai Co. to claim damages for the tortious act could not commence. Failure to look into this and investigate when Wentai Co. became aware that KCW’s negligence constitutes a tortious act or to explain why Wentai Co. became aware of KCW’s tortious act upon the occurrence of the incident, the original trial court was certainly erroneous for insufficiency of grounds when it jumped to the conclusion that KCW’s statute of limitations was justified and made a determination unfavorable to Wentai Co.
This Supreme Court decision specifically reaffirmed the stable opinion[1] in the judicial practice of Taiwan that the “awareness of damage” under Article 197, Paragraph 1 of the Civil Code is not limited to the victim’s mere awareness of the damage, and the awareness should also cover the fact that the damaging act of another person is a tortious act. If the victim is only aware of the damage and the actor without knowing that the act of another person is a tortious act, there is no way to indicate the intention to exercise the right of claim for damages for the tortious act. Therefore, the two-year statute of limitations cannot commence.
[1] See the 46-Tai-Shang 34 Civil Decision of the Supreme Court, the 85-Tai-Shang-1927 Civil Decision of the Supreme Court, and the 108-Tai-Shang-1863 Civil Decision of the Supreme Court for the same opinion.