SAMPATH BANK PLC

Vs.

PALITHA

SUPREME COURT
ALUWIHARE, J.
DEHIDENIYA, J.
FERNANDO, J.
SC/APPEAL/196/2011
SC/HC/CA/LA/453/2011
CP/HCCA/KANDY/157/2009
DC KANDY/362/2004/MR
MAY3, 2018

Prescription Ordinance, sections 7, 12-Prescriptive period for an unwritten contract-Temporary overdraft facility-Conditional acknowledgment of debt

The plaintiff instituted action before the District Court seeking a specified sum of money together with interest on an overdraft facility granted by

the plaintiff to the defendant. In the answer, the defendant acknowledged obtaining the overdraft facility but took the position that the claim was prescribed. The District Court entered judgment in favour of the plaintiff. On appeal, the High Court entered judgment in favour of the defendant on the ground that firstly, in the absence of a contract with the condition that the overdraft is payable on demand, the trial Judge erred in holding that prescription begins to run from the date of the demand, and secondly, that the letter considered by the trial Judge to be an acknowledgement of the debt cannot be treated as an unqualified acknowledgement. The plaintiff appealed to the Supreme Court.

Held:

1 . The law stated in section 12 of the Prescription Ordinance is very clear. lf an acknowledgement is made or contained in writing signed by the party chargeable, it shall be deemed evidence of a new or continuing contract which takes the case out of the prescriptive period. Section 12 makes no reference to whether the acknowledgement should be unqualified or unconditional. Thus, prescription commences to run from the date of acknowledgement of the debt.

2. The court should look at the whole of the evidence led and the sequence of correspondence between the parties in ascertaining whether a promise to pay can be inferred.

3. The letter of the respondent (P5) is clear and precise and indicates an acknowledgment of the debt and a willingness to pay. It is therefore within the provisions of section 12 and the plaintiff's action is not prescribed.

4. Where there is no formal documentation and no verbal understanding of an overdraft having been given, prescription begins to run from the last drawn date, subject to an acknowledgment of the debt which would extend the prescriptive period.

Cases referred to:

1. Gunawardena and others v. Indian Overseas Bank [2001] 2 Sri LR 113
2. Hatton National Bank Ltd v. Helenluc Garments ltd and others [1999] 2 Sri LR 365
3. Hoare and Co v. Rajaratnam 34 NLR 219

4. Perera v. Wickremaratne 43 NLR 141
5. Rampala and others v. Moosajees Ltd and another [1983] 2 Sri LR441
6. People's Bank v. Lokuge International Garments Ltd [2010] BLR 261
7. Saparamadu and another v. People's Bank [2002] 2 Sri LR 15
8. Indian Overseas Bank v. Ramdas and others [2000] 3 Sri LR 322
9. Parrs Banking Company Ltd v. Yates (1898) 2 QB 460
10. Wright v. New Zealand Farmer's Co-operative Association of Canterbury Ltd [1939] 2 AER 701
11. Seylan Bank Ltd v. lntertrade Garments (Pvt) Ltd 2004 BALR 41
12. Joachimson v. Swiss Banking Corporation (1921) 3 KB 110 at 129
13. Bank of Ceylon v. Aswedduma Tea Manufactures (Pvt) Ltd (SC/ LA/APPEAL/175/2015, SC Minutes of 27.10.2017)
14. Peter Royston Voller v. Lloyds Bank PLC No B 3/99/1177 dated 19-10-2000
15. Barclays Bank Ltd v. W J Simms Son and Cooke (Southern) Ltd and another [1979] 3 AER 522

APPEAL from the Judgment of the Civil Appellate High Court of Kandy.

Chandaka Jayasundera, P.C., with Vishmi Fernando for the Plaintiff-Respondent-Appellant.

Rohan Sahabandu, P.C., with Hasitha Amarasinghe for the Defendant-Appellant-Respondent.

cur. adv. vult.

September 9, 2019

M.N.B. FERNANDO, J.

The Plaintiff-Respondent-Appellant (the plaintiff-appellant) came before this Court being aggrieved by the judgement of the Civil Appellate High Court of Kandy dated 04-10-2011 setting aside the judgement of the District Court of Kandy dated 14-09-2009 wherein the relief claimed by the p