and the person liable or accountable for the claim acknowledges the claim or makes any payment in respect of it the right shall be treated as having accrued on and not before the date of the acknowledgement or payment.”
In considering the question of acknowledgment, the adviser needs to review all documents that have passed between the parties since the last payment under the mortgage until the issue of proceedings, as one of those letters may amount to an acknowledgment of the indebtedness. It is for this reason that a borrower’s representative must be especially careful in responding to a letter before action if time has not yet expired. It is unnecessary to consider documents served after issue, such as a defence, because, if the claim was time-barred before issue, the debt cannot be revived by any subsequent acknowledgement of it: s 29(7) LA 1980.
The basic requirements of an acknowledgment are that it must be in writing and signed by the debtor or his agent: s 30(1), LA 1980. In this context ‘signed’ means in manuscript and not typed (see Firstpost Homes Limited v Johnson  1 WLR 1567) and naturally, the admission of liability needs to have been communicated to the creditor or his agent.
Where there are joint debtors, the adviser should consider not only correspondence written by his own client, but also any communications between the co-debtor and the bank. Although one joint debtor is not automatically bound by an acknowledgment of the other, in the case of married borrowers, one spouse may be treated as acting as the agent of the other.
The vital characteristic of an acknowledgement is that it must amount to an unequivocal admission that the debt remains due: Surrendra Overseas Ltd v Government of Sri Lanka  1 WLR 565. The court must construe the alleged acknowledgment as a whole – the bank will not be allowed to pick and choose those parts of a document which suits it, while ignoring others: Surrendra. It is further arguable that not only must an individual letter be construed as a whole, but that it must be looked at in the context of the whole of the correspondence passing between the parties. A consequence of the importance of context is that words that have previously been found to amount to an acknowledgment are of only limited guidance.
An acknowledgment need not quantify the debt due, it is sufficient that the amount owed may be ascertained by extrinsic evidence: Dungate v Dungate  1 WLR 1477. However, a document which admits all the facts necessary to give rise to liability, but in which the debtor denies that he is in fact liable, will not amount to an effective acknowledgement: Re Flynn  2 Ch 403. To be effective, the denial must amount to a denial of liability for all times and all purposes: Bank of Baroda v Mahomed  Lloyds Rep Bank 14. A statement by the debtor that he is unable to pay the debt “at the moment” will constitute an acknowledgement because it amounts to an admission that the liability exists: Dungate.
Where the borrower has asserted a set-off or cross-claim against the lender, e.g., a failure to obtain the “best price reasonably obtainable” on sale of the mortgaged property, the proportion of the debt taken to have been acknowledged will be reduced, or extinguished entirely, by the amount of that set-off or cross-claim. The debtor is treated as acknowledging only the balance of the debt. This is the case no matter how unmeritorious the set-off or cross-claim is. However, note, the Court of Appeal in Bank of Baroda left open the question whether or not all cross-claims have this effect.
‘Without prejudice’ correspondence
[Author's Update: see Bradford & Bingley Plc v Rashid  1 W.L.R. 2066]
The next step is to consider the nature of the correspondence relied on by the bank. Even where the borrower has acknowledged the debt, the document may have been written ‘without prejudice’ and so be inadmissible in court. The recent case of Bradford & Bingley plc v Rashid  EWCA Civ 1080 vividly demonstrates how this can assist a borrower.
Mr Rashid fell into arrears on his mortgage and, following the sale, his property in 1991, there remained a shortfall of £15,583. The bank issued more than 12 years after the last payment, but sought to rely on correspondence during the 12-year period as restarting the limitation. In 2001, Mr Rashid had consulted an advice centre that sent two letters to the bank on his behalf. These letters offered to pay £500 “towards the indebtedness”. Neither letter was marked without prejudice. However, it was held that these letters were written without prejudice and could not be relied on in evidence by the bank. The bank’s claim was time-barred.