CA H atton N ational Bank Ltd. v. W hiffal Boustead Ltd.

257

Hatton N ational Bank Ltd.

v.
W h ittal Boustead Ltd.
COURT O F A PPE A L .
W IM A L A R A T N E , P . AND ABDTJL CADER, J .
S.C . (C .A .) 2 0 / 7 8 I N T Y — D.C. COLOMBO 1 /1 0 3 0 /M ,
JU N E 12, 1979.

Pleadings—Amendment of plaint—Principles governing exercise of

discretion by trial judge—Action for breach of contract and defamation
based on dishonour of cheques—Amendment seeking to plead endorse­
ment of bank on the cheques and the person's to whom . there was •
publication—Whether amendment necessary for raising real ■question
between parties—Whether it will work an injustice to the other side—
Civil Procedure Code, section 93.
The plain tiff-company sued the defendant-bank for the recovery of
an aggregate amount of Us. 6,500,000 arising out of a transaction
relating to the dishonour of certain cheques drawn by the plaintiff
company on the defendant bank. The plaint averred that the
defendant acted in breach of its agreement with the plaintiff to pay
on the said cheques ; and further averred that the dishonour was also ,
wrongful, unlawful and malicious and that the plaintiff had been
defamed by injuring its credit and business reputation. The plaintiff
alleged in its second cause of action that a letter addressed by the
Manager of the defendant-bank to the Additional Secretary of the'
Ministry of Plantation Industry contained imputations that were falser
malicious and defamatory of it. The defendant filed answer setting-
out in detail circumstances leading to the return of certain cheques --
drawn by the plaintiff and presented for payment and pleaded various
defences. Thereafter the plaintiff moved to amend its plaint by
pleading publication of the words “ cheque irregular” to the payees
o f the said cheques, who were set out in a schedule X and the several
banks set out in schedule Y and to members and officials of the;
Colombo Clearing House. In the said proposed amendment the plain­
tiff also pleaded what it relied on as the meaning and imputation of
the said endorsement on the cheques and that the aforesaid publications-
w ere defamatory.
The defendant objected to the proposed amendment of the plaint on
the grounds that this sought to convert the action from one based on-'
dishonour of the cheques to one based on publication; and -secondly?
that it was not in conformity with section 40 (d) of the Civil Procedure
Code in that each publication constituted a separate cause of action.
The learned trial Juage after inquiry allowed the amendment and the
defendant appealed.

Held
(1) Section 93 of the Civil Procedure Code which deals with the.,
amendment of pleadings confers a wide discretionary power on the
Court which power should be exercised judicially. In deciding -
whether there was good reason to interfere with the exercise of th is ;
discretion by a trial judge the appellate Court would consider the two.,
questions “ is the amendment necessary for the purpose of raising the real;
question between the parties ? "; and “ will the amendment if allowed-
work an injustice to the other sid e”
( 2 ) An examination of the amendments sought to be made in the present,
case showed that the plaintiff sought (a) to specify “ the answer on ■
the ch eq u es” dishonoured as being “ cheque irregular” ; and (b) to--
enlarge the category of persons to whom such answer has been ,
published. The amendment therefore did not alter the scope of the
action nor did it introduce a new cause of action .
2—A 58596 (81/08)
258 Sri Lanka Law Reports (1978 -7 9 ) 2 S. L. R.

(3) The causes of action relied on by the plaintiff based on the

dishonour of the cheques were in contract and in tort ; the action
for dishonour of a cheque being a pure action for breach of contract
to which the “ answer on the cheque ” is not strictly relevant, while
the cause of action in tort was for defamation. The amendment sought
merely to clarify by including details of the words which constituted
the defamation and the persons to whom the words were published.
The amendment appeared to be necessary for the purpose of raising
the real issue between the parties ; nor did the amendment prejudice
the defendant from raising the plea of prescription.
(4) Although there were as many causes of action as there were
cheques dishonoured the learned trial Judge had correctly held that
the plaintiff is not obliged to set out separately a statement of the
circumstances constituting each cause of action.

Cases referred to
(1) Daryanani v. Eastern Silk Emporium Ltd., (1963) 64 N.L.R. 529 ;
63 C.L.W. 73.
(2) Wijewardene v. Lenora, (1958) 60 N.L.R. 457; 56 C.L.W. L
(3) Sharp v. Wakefield, (1891) A.C. 173 ; 64 L.T. 180 ; 7 T.L.R. 189.
(4) Lebbe v. Sandanam, (1963) 64 N.L.R. 461 ; 63 C.L.W. 15
(5) Flach v. London and South Western Bank Ltd., (1915) 31 T L.R. 334.

APPEAL from the District Court, Colombo.

E. S. Amerasinghe, with H. L. de Silva and Mark Fernando, for the

defendant-appellant.
C. Ranganathan, Q.C .„ with R. A. Kannangara, N. S. A. Goonetilleke
and Ben Eliyathamby, for the plaintiff-respondent.
Cur. adv. vult.

July 13, 1979.

WIMALARATNE, P.
This is an appeal from an order of the District Judge of
Colombo allowing an amendment of the plaint in an action
where the plaintiff’s claim on two causes of action amounts to
Rs. 6,500,000.
The plaintiff-respondent is a company said to be doing
business as exporters, travel agents, printers, insurance agents
and managing agents of companies. It maintained three current
accounts with the defendant-bank at its city office bearing
numbers 18439, 18440 and 18441. The plaintiff enjoyed over­
draft facilities in respect of these accounts to a certain stipulated
aggregate maximum amount which varied from time to time.
The plaintiff averred that this amount was fixed at Rs. 1,244,140
as at 23.6.76. On 2.7.76 the defendant requested the plaintiff not
to issue any further cheques on the said accounts without making
prior arrangements for meeting them. The plaintiff averred that
several cheques drawn prior to 2.7.76 in the course of its daily
business and in reliance on and within the stipulated aggregate
 CA H alfon N ational Bank Ltd. v. W hittal Bousfead Ltd. 259
(W im alarafne, P.)

limits, which were presented for payment were wrongfully and

unlawfully dishonoured by the defendants. They are the
cheques itemised in schedule X to the plaint.

Paragraph 8 of the concise statement of facts avers that by

dishonouring the cheques the defendant acted wrongfully and
unlawfully and in breach of its agreement with the plaintiff to
pay cheques drawn by the plaintiff within the aggregate limit.

Paragraph 9 avers that the dishonouring of the said cheques

was wrongful and unlawful and malicious and that the
defendant had thereby maliciously defamed the plaintiff by
injuring its credit and business reputation. The damage
suffered on these causes of action was set down at Rs. 2,500,000.

The second cause of action on which the plaintiff claims

damages in a sum of Rs. 4,000,000 is based upon a letter dated
14.7.76 addressed by the Manager of the defendant-Bank to the
Additional Secretary, Ministry of Plantation Industry, the
relevant portion of which is reproduced in paragraph 14. The
plaintiff averred that the imputations in that letter are false,
malicious and defamatory of the plaintiff and calculated to
injure the business reputation of the plaintiff and to reflect
adversely on the financial stability and probity of the plaintiff
in that they were intended to mean that the plaintiff had
wrongfully and unlawfully issued cheques without funds or
overdraft facilities afforded by the defendant; conduct which
merited the intervention of the Central Bank of Ceylon.
In its answer the defendants set out in detail the circumstances
leading to the return of certain cheques presented for payment
on 5.7.7.76 and on subsequent dates, and averred that in so doing
it did not act wrongfully or unlawfully or maliciously or in
breach of any agreement with the plaintiff, and denied that it
defamed the plaintiff, as it acted in good faith, without any
intention to injure the plaintiff, and in the legitimate protection
of its interests. Further, the letter referred to in paragraph 14
of the plaint was made without animus injuriandi, on a
privileged occasion, and in the legitimate protection of its
interests.
The plaintiff moved on 17.8.77 to amend the plaint pleading
that the dishonouring of the cheques and the publication of the
letter were motivated by the express malice on the part of the
defendant. This amendment was allowed.
260 Sri Lanka Law Reports (1 9 7 8 -7 9 ) 2 S. L.R.

On 28.6.16 the plaintiff moved to further amend the plaint by

the inclusion of the following paragraphs 9 (A ), (B) and (C) to
paragraph 9, and a further schedule Y.
“ 9 (A). The defendant returned all of the dishonoured
cheques with the endorsement “ cheque irregular ”,
The said words were published to the payees of the
cheques mentioned in Schedule ‘ X ’ annexed here­
to, to the several Banks mentioned in Schedule
‘ Y ’ annexed hereto, and to the members and
officials of the Colombo Clearing House.
S (B). The said endorsement meant and imputed and was
intended by the defendant to mean and impute
that the paintiff was insolvent and/or financially
unstable and unsound and/or dishonest and/or
guilty of bad faith in its dealing with the
defendant-bank.
9 (C). The plaintiff states that by reason of the said
publication the defendant wrongfully, unlawfully
and maliciously defamed the plaintiff and injured
■it in respect of its character, business reputation
and credit. ”

The defendant objected to this amendment, on the grounds

that the amendment—
(a) sought to convert the action from one based on
dishonour of the cheques to one based on 'publication;
and
( b) was not in conformity with section 40 ( d > of the Civil
Procedure Code in that each publication constituted
a separate cause of action.
The learned Judge made his order on 25.10.78 allowing the
amendment. He has taken the view that the purpose of the
amendment is “ to clarify the cause of action arising out of the
defam ation”, and that the scope of the action is not being
changed. He has also held that the plaintiff was not obliged
to set out separately a statement of the circumstances consti­
tuting each cause of action. The present appeal is from that
order.
Section 93 of the Civil Procedure Code deals with the subject
of amendments of pleadings. It reads thus: —
“ At any hearing of the action, or any time in the
presence of, or after reasonable notice to, all the parties to
the action before final judgment, the court shall have full
CA Hatton N ational Bank Ltd. v. W hittal Boustead Ltd. 261
(W im alaratne, P.)

power of amending in its discretion, and upon such terms

as to costs and postponement of day for filing answer or
replication, or for hearing of cause, or otherwise, as it may
think fit, all pleadings and processes in the action, by way
of addition, or of alteration, or of ommission. And the
amendments or additions shall be clearly written on the
face of the pleading or process affected by the ord er; or if
this cannot conveniently be done, a fair draft of the docu­
ment as altered shall be appended to the document intended
to be amended, and every such amendment or alteration
shall be initialled by the Judge."
This section confers a wide discretionary power on the Court,
when applications for amendment of pleadings are made. When
such a wide discretion is vested in a court of original jurisdic­
tion, the question does arise as to whether a higher court can
say anything more than that the Judge who has been given that
power should or should not have exercised it in the particular
case. There is no doubt that the court must exercise this power
judicially and is not vested with an absolute or arbitrary
power. There has arisen around section 93 a body of case law
which should be taken into consideration by the Judge when
he comes to exercise this power. As stated by Sansoni, J. in
Daryanani v. Eastern Silk Emporium Ltd. (1) “ they are well-
established rules of practice, and should not be treated as though
they were statutory rules or provisions of positive law of a rigid
and inflexible nature. The two main rules which have emerged
from the decided cases are :—
(i) the amendment should be allowed if it is necessary for
the purpose of raising the real question between rhe
parties ; and
fii) an amendment which works an injustice to the other
side should not be allowed ” at 531.
This indeed had been the view taken by Basnayake, C.J. in
Wijeioardene v. Lenora (2) at 463, when he said that “ It
(section 93) must be read subject to the limitation that an
amendment which has the effect of converting an action of one
character into an action of another or inconsistent character
cannot be made thereunder. Apart from that limitation the
discretion vested in the trial Judge by section 93 is unrestricted
and should not be fettered by judicial interpretation. Unres­
tricted though it be, it must be exercised according to the rules
of reason and justice, not according to private opinion ; accord­
ing to law, and not humour. Its exercise must be uninfluenced
by irrelevant considerations, must not be arbitrary, vague, and
262 Sri Lanka Law Reports (1 9 7 8 -7 9 ) 2 S L. R.

fanciful, but legal and regular. And it must be exercised

within the limit to which an honest man competent to discharge
his office ought to confine himself—Sharp v. Wakefield (3) at
179
But in the subsequent Divisional Bench judgment in Lebhe
v. Sandanam (4), Chief Justice Basnayake has taken the view
that the court’s power is limited to the correction of errors
in pleadings and laid down certain rules relating to the
circumstances under which the court has no power to allow
amendments.
Sansoni, J. and L. B. de Silva. J. in Daryanani’s case (supra)
took a different view, and were not prepared “ to subscribe to
an absolute and inflexible rule that in no circumstances may
a new cause of action be added ” at 536 ; and that “ the statement
of the learned Chief Justice laying down what may appear to be
rules for the exercise of the discretionary power of the Court
under section 93, are not rules of law binding on our Courts ”
at 539.
Are there, then good reasons for us to set aside the exercise
of the discretion by the learned trial Judge who has aliowed
the amendment ? To answer this question we ask ourselves
the questions “ is the amendment necessary for the purpose of
raising the real question between the parties ? ” and *■will the
amendment if allowed work an injustice to the other side ? ”
Paragraph 6 of the original plaint referred to schedule X
which contained particulars of the cheques drawn prior to
2.7.76 which when presented for payment were dishonoured by
the defendant; and paragraph 9 averred that the dishonouring
of the said cheques was wrongful and unlawful and malicious,
and that the defendant thereby maliciously defamed the
plaintiff, The defamation resulted from the dishonouring of
the cheques in schedule X. That schedule has four columns
giving the number of the cheques, date of the cheque, name of
payee , and the amount. When a cheque became dishonoured,
there could be little doubt that the fact of the dishonour was
communicated by the bank to the payee. The original plaint,
therefore, by disclosing the names of the payees, effectively
disclosed the names of the persons to whom the publication of
the fact of dishonour was made. To the original plaint was
attached a list of witnesses and documents. All the dishonoured
cheques have been included in the list of documents, and almost
all the payees on the dishonoured cheques have been included
in the list of witnesses. There could therefore be no doubt that
the plaintiff intended proving the fact of publication.
 CA Hatton N ational Bank Ltd. v. W hittal Boustead Ltd. 263
(W im alaratne, P.)

What does the second amendment seek to achieve. Paragraph

9A says that the cheques were dishonoured by reason of the
endorsement “ cheque irregular ”, which words were published
to the payees mentioned in schedule X as well as to the banks
mentioned in the new schedule Y, and to members and officials
of the Colombo Clearing House. Paragraph 9B says what the
endorsement meant and was intended by the defendant to
mean ; and 9C avers that the defamation arose as a result of sjuch
publication.
Whereas the original plaint implied the fact of publication
to the payees of the cheques, whose names were included in
schedule X, the amended plaint expressly states that the publi­
cation was to the same payees as well as to the banks mentioned
in schedule Y and the members of the Colombo Clearing House.
The amendment therefore seeks (a) to specify “ the answer on
the cheques ” dishonoured as being “ cheque irregular ” and
(b) to enlarge the category of persons to whom such answer
had been published. The amendment does not in my view alter
the scope of the action, nor does it introduce a new cause of
action. Paragraph 8 of the original plaint is based on a cause
of action for breach of contract whilst paragraph 9 is based
on a cause of action in tort—namely the tort of defamation by
maliciously dishonouring certain cheques. An action for dis­
honour of a cheques is a pure action for breach of contract to
which “ the answer on the cheque ” is not strictly relevant.
“ The answer on the cheque” (cheque irregular) is relevant
only in an action for defamation. The two claims can and
sometimes are contained in one action, the claim as to the answer
being framed in libel—Paget on Banking (6th Ed.) 255.
As to whether the answer on the cheques “ cheque irregular ”
amounts to defamation is a different question altogether. But
what is important to note for the present purpose is that if the
answer on a cheque is couched in words which may be defama­
tory, the cause of action arises because of communication of
such answer to the payee, and perhaps to other banks and the
clearing house. Reference may be made in this connection to
Flach v. London and South Western Bank Ltd. (6), where
Scrutton, J. said that the words ‘refer to draw er’ amounted
to a statement by the bank, “ we are not paying; go back to
the drawer and ask him to pay”. This statement can be
defamatory, but a cause of action arises because the statement
is made to the payee, and that is publication. In the absence
of publication there can be no cause of action in tort for the
dishonour of a cheque.
264 Sri Lanka Law Reports (1 9 7 8 -7 9 ) 2 S. L. R,

I am therefore of the view that the amendment does not

alter the scope of the original action, nor does it seek to add a
different cause of action. The causes of action based on the
dishonour of the cheques were in contract and in tort. The
cause of action in tort was for defamation, and the amendment
seeks merely to clarify by including details of the words which
constitute the defamation, and the persons to whom the words
were published. The amendment appears to be necessary for
the purpose of raising the real issue between the parties.
Besides, as the amendment does not prejudice the defendant
from raising the plea of prescription, as conceded by counsel,
the learned District Judge was right in allowing the amendment.
The learned District Judge has also correctly held that
although there are as many causes of action as there were
cheques dishonoured the plaintiff is, however, not obliged to
set out separately a statement of the circumstances constituting
each cause of action. For these reasons I would dismiss this
appeal with costs.
ABDUL CADER, J.—I agree.
Appeal dismissed.