Chang Min Tat FJ (delivering the judgment of the Court):

We allowed the appeal at the hearing and now give our reasons.

The appellant, while a customer of the respondent Bank, was given an unsecured overdraft accommodation. In the language of the banking world, it was a clean overdraft. Perhaps because of this, it was for a modest amount of $3,000. In August 1970 the appellant required substantially greater facilities and by creating a charge on lands belonging to him to secure the repayment on demand of "the fluctuating overdraft or otherwise up to a maximum extent of $90,000," managed to obtain an increase of the limit of the overdraft to this maximum.

All would have been well and the Bank would have been able to rely on the period of twelve years which it had for the repayment of the balance standing, in this overdraft account by foreclosing of the charge without being confronted with the defence of limitation if the overdraft had remained at the level of $90,000, since Art. 101 of the Schedule to the Limitation Ordinance (Cap. 49, Sarawak) provides:

101. To enforce payment of money charged upon immovable property ... the limitation period is 12 years when the money sued for becomes due.

But, for one reason or another, the principal sum due on 4 November 1974 had been allowed to mount up to $194,959.12. It would have been considerably more, by another third, but for the repayment of a sum of $65,000 made by the appellant on a partial discharge of the security charged to the Bank.

Thereafter the account lay dormant. The appellant did not make a single payment and the only activity since was the regular debiting of the account at the end of each month with the interest that had accrued in that month. The Bank was therefore unable to rely on the provisions of s. 20(1) of the Limitation Ordinance for a renewal of the period by any subsequent payment to run from the last payment.

Nevertheless, when it decided to take legal action in April 1978 to recover repayment, it sought the repayment of the whole of the sum owing on the overdraft. By an amendment applied for at the hearing which the Judge allowed over the objections of the appellant, the Bank claimed interest accrued on the principal sum owing to 4 November 1974 at $128,396.61 and further interest from that date to 31 March 1978 at $97,819.97. The Bank's claim was therefore for $421,173.70.

The defence was terse and raised directly the defence that the claim on the overdraft was statute barred. It was the only defence. The article relied on was Article 40 to the Schedule to the Limitation Ordinance. It reads

40. For money lent under an agreement that it shall be payable on demand ... the limitation period is three years when the loan was made.

This Court has in Bian Chiang Bank Bhd. v. Kwong Hing Cheong held expressly that a payment by a debtor revived the period of time and impliedly that in the case of an overdraft, no demand for payment was necessary to start time from running. In the absence of any stipulation for a demand for repayment on the overdraft, time ran from the date of the loan or from the date of the last payment of interest or part payment of capital, if paid before the expiration of the prescribed period, which was three years: s. 20(1) of the Limitation Ordinance. On the authority of that case, judgment should have been given for the appellant where similarly there was no requirement for the overdraft to be repaid only on demand and the claim of the Bank on the overdraft dismissed, since more than three years had elapsed between the last payment $65,000 on November 1974 which was clearly towards principal and April 1978 when the writ was taken out.

However, the Bank brought in aid of its contrary contention the existence of the charge which was not relied on in the pleadings or even referred to. It contended, successfully before the judge, that the "on demand" provision of the charge made a demand an absolute necessity for this claim on