Aktas v Westpac Banking Corporation Limited [2010] Hca 25

Case [2010] HCA 25

HIGH COURT OF AUSTRALIA

FRENCH CJ,
GUMMOW, HAYNE, HEYDON AND KIEFEL JJ

PAUL UYSAL AKTAS  APPELLANT

AND

WESTPAC BANKING CORPORATION LIMITED
& ANOR  RESPONDENTS

Aktas v Westpac Banking Corporation Limited [2010] HCA 25
4 August 2010
S3/2010

ORDER

1.        Appeal allowed.

2.Set aside Order 1 of the orders of the Court of Appeal of the Supreme Court of New South Wales made on 9 February 2009 and in its place order that:

(a)the appeal by Mr Aktas be allowed with costs;

(b)set aside Order 1 of the orders made by Fullerton J on 7 November 2007 and in its place enter verdict and judgment for Mr Aktas for damages in the sum of $50,000 with interest.

(c)set aside Order 2 of the orders made by Fullerton J on 29 November 2007 and in its place order that Westpac Banking Corporation Limited ("Westpac") pay the costs of the action by Mr Aktas.

3.Westpac to pay Mr Aktas's costs in this Court.

4.The parties are at liberty within 28 days to re-list the appeal for further orders if an agreement is reached respecting the interest to be added to the verdict of $50,000.  In the absence of agreement, the question of interest will be remitted for determination by a Judge of the Supreme Court of New South Wales.

On appeal from the Supreme Court of New South Wales

Representation

T S Hale SC with A T S Dawson for the appellant (instructed by Penhall & Co Lawyers)

J R Sackar QC with K P Smark SC and R J Hardcastle for the first respondent (instructed by Mallesons Stephen Jaques)

Submitting appearance for the second respondent

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Aktas v Westpac Banking Corporation Limited

Defamation – Defences – Qualified privilege – Common law – Respondent bank mistakenly dishonoured cheques of appellant and communicated dishonour to payees of cheques – Communication defamatory – Whether communication made on occasion of qualified privilege – Rationale for defence of qualified privilege – Whether reciprocity of interest between respondent bank and payees – Whether public interest in privilege attaching to occasion of such communication – Relevance of mistake leading to communication – Relevance of statutory obligations. 

Words and phrases – "community of interest", "malice", "occasion of qualified privilege", "reciprocity of interest", "refer to drawer". 

Cheques Act 1986 (Cth), ss 67, 69.
Defamation Act 1974 (NSW), s 11.
Property, Stock and Business Agents Act 1941 (NSW), s 36.

  1. FRENCH CJ, GUMMOW AND HAYNE JJ.   The appellant (Mr Aktas) was the sole shareholder and, from time to time, a director, of the second respondent ("Homewise").  Pursuant to franchising arrangements with Century 21 Australia Pty Ltd ("the franchisor"), Homewise carried on a real estate agency business under the name "Century 21 Homewise Realty" at Auburn in the State of New South Wales.  The first respondent ("Westpac") was the banker to Homewise, which maintained three accounts at the Auburn branch of…

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AGLC
Aktas v Westpac Banking Corporation Limited [2010] HCA 25 [2010] HCA 25
Case
[2010] HCA 25
Decision Date

CaseChat Overview and Summary

The High Court of Australia heard an appeal from the New South Wales Court of Appeal concerning a defamation claim brought by Mr Aktas against Westpac Banking Corporation Limited. Mr Aktas alleged that Westpac had defamed him by mistakenly dishonouring 30 cheques drawn on a trust account operated by his company, Homewise, and communicating this dishonour to the payees of the cheques by stamping them "Refer to Drawer" and, in some cases, sending letters to customers of Westpac. The dishonour occurred due to a mistaken belief by Westpac that a garnishee order applied to the trust account, despite sufficient funds being available and the account being protected from such orders by statute.

The central legal issue before the High Court was whether the communication of the dishonoured cheques by Westpac to the payees was made on an occasion of qualified privilege at common law. This required the court to consider the rationale for the defence of qualified privilege, particularly in the context of banking communications, and whether a reciprocity of interest existed between the bank and the payees, or a public interest that warranted such privilege, even when the communication arose from the bank's own mistake. The court also had to determine the relevance of the bank's statutory obligations and the nature of the error made.

The High Court, in allowing the appeal, ultimately found that the occasion of the communication was not one of qualified privilege. The court reasoned that while there is a public interest in the efficient communication of a bank's dealings with cheques, even in cases of error, the defence of qualified privilege is not intended to be a tool for achieving particular social goals. The court emphasised that the circumstances of the case, including the bank's error in failing to observe statutory requirements regarding trust accounts, did not establish the necessary reciprocity of interest or public interest to attract the defence. The court noted that mere carelessness or negligence does not amount to malice, but the error itself did not create a privileged occasion for the notice of dishonour.

Consequently, the High Court allowed Mr Aktas's appeal, setting aside the orders of the Court of Appeal and the trial judge. The court entered a verdict and judgment for Mr Aktas for damages in the sum of $50,000, with costs awarded to Mr Aktas in both the High Court and the lower courts. The parties were granted liberty to re-list the appeal for further orders regarding the addition of interest to the damages award.

Orders

Orders of the court

1. Appeal allowed.

2. Set aside Order 1 of the orders of the Court of Appeal of the Supreme Court of New South Wales made on 9 February 2009 and in its place order that:

(a) the appeal by Mr Aktas be allowed with costs;

(b) set aside Order 1 of the orders made by Fullerton J on 7 November 2007 and in its place enter verdict and judgment for Mr Aktas for damages in the sum of $50,000 with interest.

(c) set aside Order 2 of the orders made by Fullerton J on 29 November 2007 and in its place order that Westpac Banking Corporation Limited ("Westpac") pay the costs of the action by Mr Aktas.

3. Westpac to pay Mr Aktas's costs in this Court.

4. The parties are at liberty within 28 days to re-list the appeal for further orders if an agreement is reached respecting the interest to be added to the verdict of $50,000. In the absence of agreement, the question of interest will be remitted for determination by a Judge of the Supreme Court of New South Wales.

Background

Background to the litigation

The appeal should be dismissed with costs for the following reasons.The facts The relevant events took place as long ago as 1997. In that year the second respondent carried on the business of a suburban real estate agency under the name of "Century 21 Homewise Realty" as franchisee of Century 21 Australia Pty Ltd. The appellant was well-known as the alter ego and chief executive of the second respondent. The second respondent had three accounts with the first respondent. One of the accounts was a trust account named "Homewise Rent Trust Account". The second respondent managed, inter alia, rental properties for clients. The rent it collected on behalf of the clients went into that account, and the monies payable to the clients came out of that account. On 1 December 1997 the second respondent drew 30 cheques on the Homewise Rent Trust Account. They were either directly deposited to the clients' accounts or forwarded by mail. On that day the first respondent refused payment of the cheques. The first respondent returned cheques payable to those of the second respondent's clients who had accounts with the first respondent directly to them, and it returned cheques payable to clients who banked with another bank to the collecting bank. Each of these returned cheques was endorsed with the words "Refer to Drawer". Why did the first respondent do these things? In the previous months there had been financial disputes between Century 21 Australia Pty Ltd and the second respondent. As a result, Century 21 Australia Pty Ltd obtained a default judgment for $35,238.40 against the second respondent, and on 24 November 1997 a garnishee order was issued by the Fairfield Local Court to the first respondent attaching all debts due from the first respondent to the second respondent. In an attempt to comply with that order, at 5.17pm on 1 December 1997 officers of the first respondent changed the status of the Homewise Rent Trust Account from "normal" to "PCO" (ie, post credit only, signifying that only credits were allowed on the account, not customer-initiated debits). The change to PCO status rested on a mistake of law, since the Homewise Rent Trust Account was protected from garnishee orders by s 36(2) of the now repealed Property, Stock and Business Agents Act 1941 (NSW)[40].[40]See [2] n 1 above. There were at all times sufficient funds in the Homewise Rent Trust Account to meet the cheques. The first respondent's refusal to pay on the cheques drawn on the account was a breach of an implied term of the contract between the first and second respondents under which the first respondent was to exercise all due and reasonable skill, care and diligence in respect of the Homewise Rent Trust Account. The appellant alleged that he had been injured not only in his reputation but also in his feelings. Nearly five years later, he instituted the present proceedings against the first respondent for defamation, and four and a half years after that he had them brought on for the trial from which this appeal springs.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

FRENCH CJ, GUMMOW AND HAYNE JJ HEYDON J KIEFEL J (dissent)
The appellant's submission here moves away from the traditional analysis employed in the authorities which have flowed from Parke B's formulation in Toogood v Spyring[75] to a theme repeatedly employed in the appellant's submissions which saw the case as turning on "a matter of public policy", a "policy question", a "question of public policy", a "public policy" or a "public policy question". It is true that Jordan CJ, Evatt J and Walsh J, for example, have used that language[76]. The appellant's words are in a sense correct – but not in the sense in which the appellant used them. Thus Jordan CJ was speaking in the context of analysing the reciprocal interests of the givers and receivers of defamatory information. Neither he nor the other judges were suggesting that the law of qualified privilege be used as a means of achieving the best possible social results. Nor were they suggesting that public policy criteria could be employed so as to prevent the defence of qualified privilege from existing in particular fields. The appellant's submission that the law of qualified privilege should be so fashioned as to bring about particular social goals in the manner he advocated is novel. The best should not here be treated as the enemy of the good. And the submission rests on an assumption that the shrinking of the defence which is advocated would actually have the effects desired on any significant scale. The truth of that assumption was neither demonstrated nor substantiated. [75](1834) 1 Cr M & R 181 at 193 [149 ER 1044 at 1049-1050].[76]Andreyevich v Kosovich (1947) 47 SR (NSW) 357 at 363-364. See also Telegraph Newspaper Co Ltd v Bedford (1934) 50 CLR 632 at 657; [1934] HCA 15; Justin v Associated Newspapers Ltd (1966) 86 WN (Pt 1) (NSW) 17 at 32-33; [1967] 1 NSWR 61 at 75.Conclusion The decisions of Fullerton J and the Court of Appeal upholding the first respondent's defence of qualified privilege were correct. The facts relevant to this appeal are set out in the reasons of French CJ, Gummow and Hayne JJ. One of the accounts which the second respondent ("Homewise") operated with the first respondent ("Westpac") was the Homewise Rent Trust Account. Mr Aktas was a director, sole shareholder and chief executive of Homewise. He was the counter-signatory to 30 cheques which were drawn on that account on 1 December 1997. The cheques were returned that day by Westpac stamped "Refer to Drawer". Where a cheque had been presented for payment by a customer of Westpac a letter was also sent containing the same advice. The cheques came to be stamped with the advice as a result of an error on the part of an employee of Westpac. That person had not realised that a garnishee order made by a Local Court, naming Homewise as the judgment debtor, could not be applied to the trust account. As a result of that mistake the status of the account was designated "PCO" ("post credits only"), which effectively prevented any cheques being paid from the account. The error was corrected the following day.

Ratio Decidendi

Legal Principle Established

Established by: FRENCH CJ, GUMMOW AND HAYNE JJ, HEYDON J,

However, mere carelessness or negligence is not indicative of malice[19]. The circumstances negated any ground for finding express malice which would destroy qualified privilege otherwise available to Westpac. But, as developed later in these reasons, it is significant that the error by Westpac in failing to observe the requirements of s 36(2) of the Business Agents Act itself did not supply a privileged occasion for the notice of dishonour.[19]Moore v Canadian Pacific Steamship Co [1945] 1 All ER 128 at 133.The rationale for the qualified privilege The relevant principles were said by Gleeson CJ, Hayne and Heydon JJ in Bashford v Information Australia (Newsletters) Pty Ltd[20] to be stated in the earlier authorities "at a very high level of abstraction and generality". Another member of the majority, Gummow J[21], spoke to the same effect. [20](2004) 218 CLR 366 at 373 [10]; [2004] HCA 5.[21](2004) 218 CLR 366 at 416‑417 [137]. In Justin v Associated Newspapers Ltd[22], Walsh JA said that the "broad principle" underlying qualified privilege is that occasions exist in which it is desirable as a matter of public policy that freedom of communication should be given priority over the right of the individual to protection against loss of reputation. It also has been said that the categories (if there be utility in a system of categories) of occasions of qualified privilege are not closed and cannot be rendered exact[23]. Cases of reciprocity, or as Griffith CJ put it, "community of interest"[24], supply a recognised category, which in turn has an indeterminate reference. The limits of that range of reference in a given case are to be placed by regard to the "broad principle" identified by Walsh JA and to the remarks of Dixon J in Guise v Kouvelis[25] as follows:"But the very width of the principles governing qualified privilege for defamation makes it more necessary, in deciding how they apply, to make a close scrutiny of the circumstances of the case, of the situation of the parties, of the relations of all concerned and of the events leading up to and surrounding the publication."[22](1966) 86 WN (Pt 1) (NSW) 17 at 32; [1967] 1 NSWR 61 at 75.[23]London Association for Protection of Trade v Greenlands Ltd [1916] 2 AC 15 at 22‑23.[24]Howe & McColough v Lees (1910) 11 CLR 361 at 369; [1910] HCA 67.[25](1947) 74 CLR 102 at 116; [1947] HCA 13.The reasons of the Court of Appeal The leading reasons were given by McClellan CJ at CL. After stressing "the importance of efficient and effective communication of a bank's dealing with a cheque, even if it has made an error", his Honour continued[26]:"In many cases the drawer's reputation may be injured from the erroneous refusal by the drawee bank to honour a cheque. However, unless communication is made, the payee will not only not receive the funds to which they are apparently entitled, but in the absence of any communication they would, at least for a time, be unable to address the problem. If a mistake has occurred and the payee does not receive the relevant funds the logical step for the payee is to raise the matter with the drawer. If a bank error is responsible for the communication it can be readily identified and remedied. Although the drawer's reputation may suffer, in most cases of error this will be transitory. Greater damage may be done, including damage to the payee, by a delay in the payee being made aware that the cheque has not been honoured. Even if occasioned by the bank's own mistake there are good reasons why the communication contemplated by the Cheques Act [1986 (Cth) ("the Cheques Act")] should be protected. To my mind those reasons are persuasive in the present circumstances."[26]Aktas v Westpac Banking Corporation Ltd [2009] NSWCA 9 at [70].