DE COSTA v. BANK OF CEYLON (1969) 72 N.L.R. 457, 464

FactsThe plaintiff, a shareholder of a Company, received a dividend warrant for a sum of Rs. 30,637.13. The warrant was crossed "Not Negotiable.The plaintiff made on the back of the warrant the endorsement "Credit my account only" and duly affixed her signature. She put the warrant in an envelope, addressed it to her Bank, viz., the City Office of the Bank of Ceylon, and gave it to a servant to be posted.

There was no proof of posting. The warrant got into a hands of a third party, one Loganathan, who was said to be the proprietor of "Movie & Co.". It was presented for payment at the Wellawatte Branch of the defendant bank and the money realized was credited to the account of "Movie & Co.".The plaintiff sued the defendant bank for the recovery of the amount of the dividend warrant on the basis that the Bank had wrongfully deprived the plaintiff of the proceeds of the warrant.

The position for the plaintiff at the trial was that the first basis of the claim against the defendant Bank was in delict, and that on this basis the plaintiff was entitled to recover as for a conversion if the English law applies. The position for the plaintiff also was that even if the Roman-Dutch Law be applicable the defendant Bank was yet liable in delict.

The learned District Judge over-ruled a submission for the defendant that the first cause of action was based on contractual liability and not on conversion.

Supreme Court agreed with this ruling of the District Judge, which was not challenged in appeal by defendant's Counsel.

The learned District Judge considered himself bound by a decision of Supreme Court that the Law of Ceylon on the subject of a Banker's liability is the same as in England. [Bank of Ceylon v. Kulatilake1[ 1 (1957) 59 N.L.R. 188.]

The District Judge also held that the Bank had established that it had acted in good faith and without negligence, and that accordingly the Bank was protected from liability by s. 82 (2) of the Bills of Exchange Ordinance (Cap. 82).Subsequent to above judgment of the District Judge, a Bench of three Judges of Supreme Court decided that the English doctrine of conversion is not applicable in Ceylon. [Daniel Silva v. Johannis Appuhamy 2[ 2(1965) 67 N. L. R. 457.] Also held that the case of Kulatilake v. Bank of Ceylon had been wrongly decided. To settle the conflict of opinion as to the Law of Ceylon governing a matter of commercial importance, the appeal was reserved for a decision of a Bench of five Judges.

According to the hon. H. N. G. FERNANDO, C.J.- The Proclamation of 1799 declared that the Administration of Justice shall be exercised by the Courts according to the Roman-Dutch Law, subject to deviations or alterations-in consequence of emergencies, or absolutely necessary and unavoidable, or evidently beneficial and desirable ;by the Court of Directors of the East India Company or the Secret Committee thereof or the Governor of Fort William ;by Proclamation of the Governor;by lawful authority ordained.But the Proclamation did not authorize any deviations or alterations to be made by the Courts of law.

There were several subsequent Proclamations passed by the Governor under the power reserved by the Proclamation of 1799.

But these became obsolete or inapplicable after a comprehensive Charter of Justice was enacted in 1833. Consequently, Ordinance No. 5 of 1835 was enacted by the Governor with the advice and consent of the Legislative Council.

This Ordinance repealed the Proclamation of 1799 and several other Proclamations, but the repeal of the Proclamation of 1799 was made subject to an exception in the following terms:

"except in so far as the same (i.e. the Proclamation of 1799) . should be exercised by all Courts of Judicature, Civil and Criminal, according to the laws and institutions that subsisted under the ancient Government of the United Provinces; which laws and institutions it is hereby declared still are and shall henceforth continue to be binding and administered through the said Maritime Provinces and their dependencies, subject nevertheless to such deviations and alterations as have been or shall hereafter be by lawful authority ordained.

Thus the Legislature of Ceylon declared in 1835 that the Roman-Dutch Law shall continue to apply in Ceylon by virtue of the Proclamation of 1799.

After the enactment of the Ordinance of 1835, deviations and alterations of the Roman-Dutch Law were not permitted to any of the authorities specified in the Preamble to the 1799 Proclamation, and were permitted only if they were ordained by lawful authority. From 1831 therefore, the power to make laws for Ceylon was committed to the Governor, acting with the advice and consent of the Council, subject to the Governor's special powers to act without such advice. The Proclamation of 1799 and the Ordinance of 1835 did not authorize the Courts to alter or deviate from the Roman-Dutch Law or to apply principles of English Law which conflict with the Roman Dutch Law. From 1835 at least, such deviations or alterations could be effected only by Ordinance.

Other two hon. judges, ALLES, J., and WEERAMANTRY, J. also agreed with hon. FERNANDO, C.J., that the English law doctrine of conversion is not part of the common law of Ceylon.

Per SIRIMANE, WEERAMANTRY and WIJAYATILAKE, J J.-The conversion of a cheque by a collecting banker is also a matter of banks and banking, and thus affords another basis for the application of English law.

Per SIRIMANE:, J.-The general law of conversion has been considered to be part of our law from very early times. But it is not necessary to decide it in the present case.

Per WEERAMANTRY, J.-The plaintiff is also entitled to succeed on the basis of the law relating to unjust enrichment.