Sri Lanka Lav/ Reports
(1978-79) 2 S. L. R.
Anuradhapura Preservation Board
COURT OF APPEAL.
SOZA, J. AND RODRIGO, J.
S. C. 205/74 (f)—D. C. ANURADHAPURA 8689/lVI.
OCTOBER 2, 1978.
Contract in writing to do construction work and clear jungle—Subsequent oral premise to make additional payment—Claim for balancedue of such, additional payment- -Period of prescription applicable—Prescription Ordinance (Cap, 68) sections 6, 7—Evidence Ordinance,section 92, proviso 4.
Kanapafhipiilai v. Anuradhapura Preservation Board
The plaintiff and defendant entered into a contract whereby the plaintiffagreed to do certain construction work and the clearing of jungle forthe defendant and the terms of this contract were embodied in a writtendocument produced at the trial marked PI. While the work was inprogress the Government devalued the rupee and the case for theplaintiff was that the defendant then promised to make a 20% extrapayment for work done after devaluation. The present claim was forthe balance due out of this extra amount thus calculated at 20%. Thedefendant contended that there was no binding agreement to pay theextra 20% and also that in any event such a claim was prescribed.
(X) That although the plaintiff would not have a legal right toany extra payment from the mere fact of devaluation, there had beena subsequent oral promise to pay 20% extra made by the defendant tothe plaintiff. Payments had also been made to the plaintiff on this basis.
(2) That the plaintiff’s claim was not prescribed. The promise topay 20% on account of devaluation could have no independent existenceoutside the main contract PI and is part of this written contract. Itwould accordingly bo prescribed only in 6 years in terms of Section 6of the Prescription Ordinance.
That in any event if the subsequent promise to pay 20% onaccount of devaluation is regarded as a separate unwritten promise andSection 7 of the Prescription Ordinance applied, yet the action wouldnot be prescribed because it had been brought within 3 years from thetime after the cause of action, namely, the refusal to pay, arose.
Cases referred to
The Baarn (No. 1), (1933) P. 251.
Treseder-Griffin v. Co-operative Insurance Society, (1956) 2 Q.B.127
(31 Arunasalam v. Ramasamy, (1914) 17 N.L.R. 156.
(41 Dawbarn v. Ryall, (1914) 17 N.L.R. 372.
Lamatena v. Rahaman Boole, (1924) 26 N.L.R. 406.
Goss v. Lord Nugent, 5 B & Ad. 58.
APPEAL from the District Court, Anuradhapura.
C. Ranganathan, Q.C., with A. P. Niles, for the plaintiff-appellant.N. Devendra, for the defendant-respondent.
Cur. adv. vult
November 16, 1978.
The plaintiff-appellant and the defendant-respondent who isthe Anuradhapura Preservation Board entered into an agreementon 28th October, 1967, whereby the plaintiff agreed to construct55 houses, 3 wells, 10 culverts with ancillary road work andjungle clearing on or before 6th July, 1968. For this work theplaintiff was to be paid a sum of Rs. 370, 191.15. The terms of thecontract are embodied in the written document marked PI. After
Sri Lanka Law Reports
(1978-79) 2 S. L. R.
the contract was signed and while the work was in progress theGovernment on 22.11.1967 devalued the rupee—see copy of theGazette Extraordinary No. 14,775/15 of 22.11.67 produced as P2.The case for the plaintiff-appellant is that the defendant-respon-dent promised to make a 20% extra payment for all wo’-ks doneafter the devaluation and in fact today the amount which theplaintiff seeks to recover from the defendant is the balance dueout of the extra amount calculated at 20% which the plaintiffsays the defendant promised to pay. The balance due isRs. 36,876.14 after giving credit for a final payment of Rs. 32,904made on 31.3.1969.
On behalf of the defendant Board it is contended that thedecision to pay 20% was made unilaterally by itself and notcommunicated to the plaintiff. The decision to pay 20% extrawas gratuitous and not intended to give rise to any legal rightsor obligations. He submits that there was no acknowledgementof any obligation to pay and there was no contract to pay andin any event the claim of the plaintiff is prescribed.
At the outset it should be observed that merely from the factof devaluation the plaintiff will not be entitled to claim anylegal right to an extra payment. As Scrutton L. J. said in the
case of The Baarn No. 1 (1).
“ A pound in England is a pound whatever its internationalvalue ”
So we may say a rupee in Sri Lanka is a rupee whatever itsinternational value. Lord Denning stated the same principle inTreseder Griffin v. Co-operative Insurance Society. (2).
“A man who stipulates for a pound must take a poundwhen payment is made, whatever the pound is worth atthat time. Sterling is the constant unit of value by which inthe eye of the law everything else is measured. Prices ofcommodities may go up or down, other currencies may goup and down, but sterling remains the same ”.
Lord Denning was here giving expression to the nominalisticprinciple which obtains in Great Britain, Sri Lanka and a greatmany other countries of the world. The extent of monetaryobligations cannot be determined otherwise than by the adop-tion of this principle of nominalism. The obligation to pay Rs. 10is discharged if the creditor receives Rs. 10 at the time of per-formance irrespective of the intrinsic, extrinsic or functionalvalue of Rs. 10 see Mann: The Legal Aspect of Money 3rd Ed.,1971, p. 76. Hence there should be no mistake about this that the
Kanapafhipillai v. Anuradhapura Preservation Board
plaintiff had no legal right to any extra payment by the mere factof devaluation in the absence of provision for this in the con-tract itself or a subsequent promise. If there was a subsequentoral promise we have to consider whether it could be treated asengrafted on to the main contract or whether it is an isolatedand independent contract.
The plaintiff’s case proceeds on the footing of a subsequentoral promise. Owing to the increase of costs resultant on devalua-tion there was an oral promise by the defendant Board to payan extra 20% for all work done after devaluation. Therefore thefirst question that arises is, ‘ was there a promise to pay ’ ? It isadmitted that the defendant Board decided to make an extrapayment of 20% for work done after devaluation. In fact thePlaintiff’s account P8 as worked out in the defendant’s accountbook is proof that there was such a decision. Was this decisioncommunicated to the plaintiff in the form of a promise to pay ?The letter P3 dated 21st November, 1968, on the subject ofdevaluation addressed by the defendant Board to the plaintiffis to the effect that the matter would be placed before the nextmeeting of the Board of Directors for a decision. The letter P4of 19th November, 1971, is on the subject of outstanding paymentsarising out of devaluation. By this letter the plaintiff is informedthat the matter is receiving attention and he will be informedas soon as a decision is made. P5 dated 23rd January, 1973, alsostates that the matter still awaits a decision. On 1st January,1973, the Chairman of the defendant Board wrote letter P6 tothe plaintiff requesting him to meet him at his office to discussthe outstanding moneys due to him on account of devaluation.On 28th March, 1973, the defendant Board wrote to the plaintiffthat its lawyers have advised against payment—see P7. Thoughthe correspondence P3 to P6 was non-commital in respect of thebalance due to the plaintiff, yet earlier on payments had beenmade on account of devaluation. In fact the position is that 75%of the claim on devaluation had been paid. Such a part paymentshould be interpreted as an acknowledgement. In the case ofArunasalam v. Ramasamy, (3) De Sampayo, A. J. considered theimplication of a part payment on account and said as follows atpage 157:
“A payment on account is necessarily an acknowledge-ment of the debt, and the law, in the absence of anythingto the contrary, implies from the acknowledgement of thedebt a promise to pay the balance, (Fordham v. Wallis (1852)
10 Hare 225).
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(1978-79) 2 S. L. R.
This implied promise creates a new obligationand takes the debt out of the operation of the statute, andthis is so even though at the date of payment the debt mayhave been already statute-barred. Of course, the implicationof a promise may be rebutted by any special circumstancesattending the payment, as where the payment is not onaccount but purports to be in satisfaction of the entiredemand (Taylor v. Hollard (1902) 1 K.B. 676), or where thedebtor says he will not pay the balance (Wainman v. Kyn-man (1847) 1 Ex. 118), or where the payment is compulsoryunder some legal proceedings (Morgan v. Rowlands (1872) 7
Q.B. 493) ”
In the instant case, the correspondence P4, P5 and P6 is headed“ oustanding payments arising out of devaluation ”, and in P6there is an invitation to the plaintiff to attend the office of theBoard the purpose of which is given as follows :
“ to discuss the outstanding monies (sic) due to you onaccount of devaluation ”.
This correspondence therefore far from negativing the inferenceof acknowledgment of the debt recognises the fact that moneysare outstanding and due to the plaintiff on account of devaluationbut the question of payment was under consideration. In thesecircumstances it is safe to conclude that earlier there was anoral promise made by the defendant Board to the plaintiff topay 20% extra for works done after devaluation. But later theBoard had second thoughts and by letter P7 on 28th March, 1973,sought to resile from its earlier promise. The decision of thedefendant Board not to pay came too late in the day and certainlycannot nullify the earlier promise. In fact at the trial only oneissue was raised, namely whether the claim of the plaintiff wasprescribed, and to this question I will now address myself.
Firstly I would like to consider whether the promise to pay20% on account of devaluation can be treated as being engraftedon the main contract. In this connection it would be useful toconsider the case law on the point. In the full bench case ofD&iobarn v. Ryll (4), Lascelles, C. J. put the test as follows : With-out the written contract would the new obligation exist ? HisLordship went on to hold that a claim for compensation by thevendee for loss of possession of a land sold to him is based on thewritten contract of sale, and would be prescribed only in six years.
In the case of Lamatena v. Rahaman Doole (5), Jayawardene, A.
J.was called upon to consider whether an action to recover thebalance consideration on a deed of sale is prescribed in three orsix years. His Lordship stated as follows at page 407 :
Kanapathipiliai v. Anuradhapura Preservation Board
“ By a deed of sale the vendor transfers the land, and thevendee agrees to pay the price. The action to recover theunpaid balance of the price grows directly out of the deedof sale, it is dependant on it, and derives its vital force fromit. It is, therefore, a claim arising from an agreement inwriting ".
In the case of Goss v. Len d. Nugent (6), His Lordship Denman,C. J. stated as follows :
“ By the general rules of the common law, if there be acontract which has been reduced into writing, verbal evi-dence is not allowed to be given of what passed betweenthe parties, either before the written instrument was made,or during the time that it was in a state of preparation, so asto add to or subtract from, or in any manner to vary orqualify the written contract; but after the agreement hasbeen reduced into writing, it is competent to the parties, atany time before breach of it, by a new contract not inwriting, either altogether to waive, dissolve, or annul theformer agreement, or in any manner to add to, or substractfrom, or vary or qualify the terms of it, and thus to make anew contract; which is to be proved, partly by the writtenagreement, and partly by the subsequent verbal termsengrafted upon what will be thus left of the written agree-ment ”,
In our Evidence Ordinance the proviso 4 to section 92 providesthat a written contract may be rescinded or modified by a subse-quent oral agreement.
In the instant case there is nothing to show that the earlierpromise to pay 20% on account of devaluation was subject toto any qualifications. The promise to pay 20% on account ofdevaluation can have no independent existence outside the con-tract PI. It depends on PI for its viability. Therefore I am ofthe view that this subsequent promise to pay 20% is part of thewritten contract PI and is prescribed only in six years in termsof section 6 of the Prescription Ordinance.
This action was instituted on 5th September, 1973, well withinsix years from the date of the breach of the written promise.Even if the subsequent promise to pay 20% is regarded as aseparate unwritten promise and section 7 is applicable, still theaction is not prescribed because it has been brought within threeyears from the time after the cause of action arose. The causeof action arose only on the refusal to pay i.e., on 28th March, 1973.The learned District Judge was in error to count the period ofthree years from the date of the last payment, namely 31.3.19(19.
Sri Lanka Law Reports
(1978-79) 2 S. L. R.
What section 7 of the Prescription Ordinance says is that anaction on an unwritten promise should be commenced withinthree years of the time after the cause of action shall havearisen. The cause of action arose not on the date of the lastpayment but on the date of the refusal to pay. Here the refusalto pay was on 28th March, 1973. Hence the action is clearly notprescribed.
The plaintiff has claimed interest at 8% on the amount due.This I think is a very reasonable rate of interest.
Therefore I set aside the judgment and decree appealed fromand enter judgment for the plaintiff as prayed for with costsboth here and in the District Court. Let decree be enteredaccordingly.
KODRIGO, J.—I agree.
Kanapathipillai v. Anuradhapura Preservation Board