Aktas v Westpac Banking Corporation Ltd

[2007] NSWSC 1261

CITATION:	AKTAS & 1 ORS v WESTPAC BANKING CORPORATION LIMITED [2007] NSWSC 1261
HEARING DATE(S):	23 April-2 May 2007; 30 July-3 August 2007
JUDGMENT DATE :	7 November 2007
JUDGMENT OF:	Fullerton J
DECISION:	1. Verdict for the defendant in the defamation action brought by the first plaintiff.; 2. Verdict for the defendant in the defamation action brought by the second plaintiff.; 3. Verdict for the second plaintiff in the action for breach of contract brought by the second plaintiff.; 4. Damages for breach of contract are awarded in the amount of $84,500 plus interest.
CATCHWORDS:	DEFAMATION - Cheques dishonoured by bank - Refer to drawer - Defences - Common Law defence of qualified privilege - Imputations - Matter complained of - Damages - Reputation - Business reputation - Hurt to feelings - Causation - Failure to mitigate - Breach of contract
LEGISLATION CITED:	Cheques Act 1986 (Cth) Civil Liability Act 2002 Defamation Act 1974 Local Court (Civil Claims) Act 1970 Property, Stock and Business Agents Act 1941
CASES CITED:	Adam v Ward [1917] AC 309 Aktas & Anor v Westpac Banking Corporation [2004] NSWSC 218 Amalgamated Television Services Pty Ltd v Marsden (1998) 43 NSWLR 158 Ballin v Bank of Australasia (1895) 16 NSWLR 15 Baltic Shipping Co v Dillon (1993) 111 ALR 289 Bashford v Information Australia (Newsletters) Pty Limited (2004) 218 CLR 366 Bellino v Australian Broadcasting Corporation (1995-96) 185 CLR 183 Browne v Bank of Australasia [1881] 2 NSWLR 325 Carson v John Fairfax & Sons Limited (1993) 178 CLR 44 Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64 Coyne v Citizen Finance Limited (1990-91) 172 CLR 211 Davidson v Barclays Bank Ltd [1940] 1 All ER 316 Foaminol Laboratories Ltd v British Artid Plastics Ltd [1941] 2 All ER 393 Greek Herald Pty Ltd v Nikolopoulos and Others (2002) 54 NSWLR 165 Hadley v Baxendale (1854) 9 Exch 341 Harvey v John Fairfax Publications Pty Ltd [2005] NSWCA 255 Hebditch v MacIIwaine [1894] 2 QB 54 Herbert Clayton and Jack Waller Ltd v Oliver [1930] AC 209 Howe and McColough v Lees (1910) 11 CLR 361 Hughes v Mirror Newspapers Ltd (1985) 3 NSWLR 504 Hunt v Great Northern Railway Company [1891] 2 QB 189 Jamoo v Nationwide News Pty Ltd [2004] NSWSC 126 John Fairfax Publications Pty Ltd v O’Shane [2005] NSWCA 164 Justin v Associated Newspapers Limited (1966) 86 WN (Pt 1) (NSW) 117 Kpohraror v Woolwich Building Society [1996] 4 All ER 119 Levy v Union Bank of Australia Ltd (1896) 21 VLR 738 Lloyds Bank v Rogers (unreported, 20 December 1996, English Court of Appeal) March v E & MH Stramare Pty Limited and Another (1990-91) 171 CLR 506 M’Nickle v Bank of New South Wales [1881] 2 LR (NSW) 7 Morgan v John Fairfax & Sons Ltd (No 2) (1991) 23 NSWLR 374 New South Wales Aboriginal Land Council v Perkins (1998) 45 NSWLR 340 Palmer Bruyn & Parker Pty Limited v Parsons (2001) 208 CLR 388 Pyke v The Hibernian Bank Limited [1950] IR 195 Raafbye Corporation Pty Ltd & Ors v Westpac Banking Corporation Ltd (unreported, 21 October 1994) Roberts and Another v Bass (2002) 212 CLR 1 Robinson v Harman (1848) 1 Exch 850 at 855 Rose v Boxing New South Wales Inc and Anor [2007] NSWSC 20 Sattin v Nationwide News Pty Limited (1996) 39 NSWLR 32 Sims v Wran [1984] 1 NSWLR 317 Skalkos and Anor v Joseph Assaf and Anor [2002] NSWCA 14 Speight v Gosnay (1891) 60 LJQB 231 Stephens v West Australian Newspapers Ltd (1994) 182 CLR 211 Sullivan v Moody and Others (2001) 207 CLR 562 Toogood v Spyring (1834) 1 Cr M & R 181 Toomey v Mirror Newpapers Ltd (1985) 1 NSWLR 173 Uren v John Fairfax & Sons Pty Limited (1965-66) 117 CLR 118 Vacik Distributors Pty Limited & Anor v Australian Broadcasting Corporation & Anor No. 8 [2000] NSWSC 732 Watts v Rake (1960) 108 CLR 158 Wilson v United Counties Bank Ltd [1920] AC 102
PARTIES:	Paul Uysal Aktas (1st Plaintiff) Homewise Realty Pty Limited (2nd Plaintiff) Westpac Banking Corporation Limited (Defendant)
FILE NUMBER(S):	SC 2002/20552
COUNSEL:	T Hale SC/D Caspersonn (Plaintiffs) J Sackar QC/K Smark/R Hardcastle (Defendant)
SOLICITORS:	Penhall & Co (Plaintiffs) Mallesons Stephen Jaques (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
CIVIL LIST

FULLERTON J

7 NOVEMBER 2007

2002/20552 PAUL UYSAL AKTAS & 1 ORS v WESTPAC BANKING CORPORATION LIMITED

JUDGMENT

HER HONOUR:

1 The plaintiffs, respectively Paul Uysal Aktas and Homewise Realty Pty Ltd (“Homewise”) sue the defendant, Westpac Banking Corporation Ltd (“Westpac”) for damages following a section 7A hearing (Defamation Act 1974) where a jury found Westpac had published four defamatory imputations in respect of each plaintiff. Homewise also sues Westpac for damages for breach of contract and, in the alternative, in negligence.

2 The damages claimed in each of the three causes of action are based upon the admitted fact that on 1 December 1997 Westpac wrongly dishonoured 30 cheques drawn on a Homewise account maintained at it’s Auburn branch and, in so doing, wrongly nominated each of the cheques “Refer to Drawer”. It will be necessary, however, to deal with each of the three causes of action separately since different considerations apply in determining whether liability for damages in the particular cause are made out, whether the damages that are said to flow under various heads of damage relevant to each cause of action are established and, if so, in what amount. That said, the proceedings have been conducted on the basis that the action in defamation is the primary cause of action.

3 To meet the case Mr Aktas brings for damages to compensate for his hurt to feelings and harm to his reputation and to vindicate him for the falsity of the imputations (see Carson v John Fairfax & Sons Limited (1993) 178 CLR 44 at 60-61), and to meet the case Homewise brings for special damages it claims to have suffered from the publication of the defamatory material, Westpac raises the common law defence of qualified privilege. In the event that the defence of qualified privilege fails, Westpac contends that any award of damages should be heavily discounted by reason of Mr Aktas’s failure to mitigate such damage as might be found to have resulted from the publication of the defamatory material both on his own behalf and on behalf of Homewise.

The relationship between Homewise and Mr Aktas

4 From early 1992 Homewise conducted a real estate business known as Century 21 Homewise Realty (“Homewise Realty”) from commercial premises at 64 Auburn Road, Auburn. From that time until April 1998 the business was conducted pursuant to a franchise agreement with Century 21 Australia. From April 1998 until the present time Homewise has conducted its real estate business from the Auburn premises under the name of Australian Real Estate Auburn and/or Network Australian Real Estate Auburn. For all practical purposes it was a profitable business.

5 Mr Aktas is the sole shareholder in Homewise and from time to time was one of its directors. It was not in contest that Mr Aktas was well known as the alter ego and chief executive of Homewise. Mr Aktas was not a licensed real estate agent but for all material purposes was the principal of Homewise’s business and controlled its daily operations. In 1992, he executed the franchise agreement with Century 21 on behalf of Homewise and was the person with whom the franchisor dealt during the currency of that agreement. From the time that Homewise commenced operations from the Auburn premises, the licence to conduct the real estate business was held by a Mr Branley. Mr Branley left Homewise in April 1998 and, together with another employee, Mr George Kong, opened an office in Lidcombe a neighbouring suburb to Auburn under a franchise arrangement with Century 21. Since that time Ms Zohra Pirzad, the property manager, has taken on the responsibilities as licensee of Homewise.

6 As at 1 December 1997 Homewise employed a number of staff, each of whom had designated duties either in sales, property management or the general administration of the business. Mrs Aktas also assisted the administrative staff on a daily basis. Mr Aktas was actively engaged in the sales area and was a successful and accomplished salesman. It would appear that Mr Aktas did not draw a weekly wage. Those of Homewise’s employees who were engaged in sales were paid a wage and commission. The number of people employed in the business at any one time up to December 1997 varied depending upon the number of properties listed for sale and, to a lesser extent, upon the number of rental properties under management.

7 By June 1998, a number of employees had left Homewise. They included Mr Branley, Mr Kong, Mr Shi and Ms Wheat. The plaintiffs claim that the loss of staff was a direct result of the defendant’s conduct. The reason for, and the timing of, their departure was in issue in the proceedings. I propose to resolve that matter at the outset.

8 So far as Mr Branley, the licensee, and Mr Kong, a senior sales representative, are concerned I have already noted that their departure was in order to set up a Century 21 office in Lidcombe in the first quarter of 1998. I am not satisfied that the events of early December 1997 had any ultimate bearing on their decision to leave although I accept, having regard to the evidence of Mr Nagle, that in Mr Branley’s case the cheque dishonourings operated as something of a catalyst. It appears from such evidence as bears on the question, however, that there were a range of other reasons fortifying Mr Branley in his resolve to leave Homewise. In the result, and despite the evidence of Mr Nagle to the effect that Mr Branley reported that the dishonouring of the cheques was a source of professional embarrassment to him, I am not persuaded that the defendant’s conduct had any ultimate bearing upon his decision to take up a position as licensee with Mr Kong’s franchise with Century 21 in the neighbouring suburb. I am also satisfied in so far as Mr Kong is concerned, his decision to leave Homewise was a career choice. The fact that neither Mr Kong nor Mr Branley were called in the proceedings does not in my view ground an inference favouring either of the parties.

9 In addition, I am not able to be satisfied on the probabilities that the position of Mr Shi is of any materiality to the plaintiff’s case since, although he left in March 1998, the wages book shows that he returned and resumed duties for two periods in April and June 1998. I note that the only remaining sales person, Ms Wheat, left Homewise’s employ for entirely unrelated reasons.

The relationship between Mr Aktas and Westpac and Homewise and Westpac

10 At all relevant times Westpac was the banker to Homewise. As at December 1997, Homewise operated three bank accounts with Westpac from its Auburn Branch. They were, respectively, an account known as the “Homewise Rent Trust Account”, an account known as the “Homewise Sales Trust Account” and a “Homewise General Account”.

11 The Homewise Rent Trust Account was an account Homewise was legally obliged to maintain on behalf of those of its clients for whom rental properties were managed pursuant to the Property, Stock and Business Agents Act 1941. Both Mr Aktas and Mr Branley were signatories to this account. Mrs Aktas, Mr Aktas and Ms Zohra Pirzad, the property manager, were signatories to the General Account. This account was used for the purposes of the business.

12 Monies deposited to the Rent Trust Account comprised the rents collected by Homewise and held on behalf of landlords. It was an account operated in such a way that any management fees and/or any miscellaneous repairs or other costs associated with the management of a client’s rental property were deducted by Homewise from the rent monies received with the balance drawn by a cheque in the client’s favour and paid either on a fortnightly or monthly basis. An income and expenditure statement was also prepared for and mailed to each client. The rent cheques to which the statements were referable were drawn by Ms Pirzad as property manager and were then signed by the licensee, Mr Branley, and countersigned by Mr Aktas. Ms Pirzad would either deposit the cheques directly into the client’s designated account with a bank or other financial institution or mail the cheque to the client’s residential or business address as instructed. By far the greater number of Rent Trust Account cheques were directly deposited to the client’s nominated account. Some of these were with Westpac.

13 Consistent with this system, on 1 December 1997, Ms Pirzad drew 30 trust account cheques. They were countersigned by Mr Aktas and Mr Branley and either directly deposited or mailed to Homewise’s clients. None of these cheques were honoured on presentation. Some clients apparently came to learn of the dishonour when they attempted to draw on the funds they expected would be credited to their accounts and other clients when they received correspondence from their own bank or financial institution advising them that the trust account cheque was not met. Some correspondence from collecting banks was dated as late as 8 December 1997.

The relationship with Century 21 and the garnishee order

14 The relationship between Homewise as franchisee and Century 21 as franchisor deteriorated in 1997 as a result of persistent disputes in respect of certain payments Century 21 claimed were due under the franchise agreement. For their part, Homewise claimed that Century 21 had failed to give credit for commissions due to it as a result of the introduction of customers to St George Bank.

15 At some time between July 1997 and November 1997, Century 21 obtained default judgment against Homewise in respect of proceedings for a liquidated claim in the amount of $35,238.40 brought under the Local Court (Civil Claims) Act 1970 (since repealed). Section 47 of that Act relevantly provides:

“(2) A garnishee order shall take effect upon it being served on the garnishee, and upon its being so served:
(a) … shall operate to attach in the hands of the garnishee, to the extent of the amounts specified in the order, all debts which are due or accruing from the garnishee to the judgment debtor at the time of service of the order (whether or not they were so due or accruing at the time when the order was made),

…

(4) A garnishee order shall:
(a) specify the unpaid amount of the judgment debt owing to the judgment creditor, and
(b) require the garnishee to pay, in accordance with this Act and the rules, the debt, wage or salary attached or so much of it as may be sufficient to satisfy that unpaid amount after deducting such amount (if any) as may be notified in writing to the garnishee by the judgment creditor or the registrar as having been paid or credited to the judgment creditor on account of that unpaid amount otherwise than under the order.”

16 On 24 November 1997, a garnishee order was issued to Westpac by the Fairfield Local Court in which Homewise was identified as the judgment debtor. The relevant terms of the order are as follows:

“All debts due and accruing from the garnishee to the judgment debtor … other than any wage or salary, are attached to the extent of $35,238.40 to answer a judgment recovered in this action …

It is alleged that the garnishee is indebted to the judgment debtor in respect of: ANY MONIES DUE, OWING, ACCRUING AND NOT PAID IN RELATION TO AN ACCOUNT IN THE NAME OF THE JUDGMENT DEBTOR, NAMELY ACCOUNT NUMBER 032 070 105613 AND/OR ANY OTHER ACCOUNTS HELD IN THE NAME OF THE JUDGMENT DEBTOR.

If the garnishee does not comply with this order the garnishee may be summonsed to show cause why judgment should not be given against the garnishee for the amounts attached.”

17 The order was drawn in accordance with the operating provision of the Local Courts (Civil Claims) Act extracted above.

Westpac’s receipt of the garnishee order

18 On 1 December 1997, the garnishee order was forwarded to Ms Kim Lidgard, an officer within Westpac’s Account Verification Branch, under cover of a facsimile header in the form of a letter signed by Ms Helen Lawless, Assistant to the Manager of Westpac’s Legal branch. The subject matter of the correspondence was described as “Garnishee Order (Action Immediately)” with the judgment creditor identified as Century 21 Australia Pty Ltd and the judgment debtor identified as Homewise Realty Pty Ltd t/as Century 21 Homewise Realty. The letter does not in its terms nominate the accounts held by Homewise with Westpac as garnishee, neither does it discriminate in any way between accounts that may properly be the subject of attachment under the garnishee order and those that may not. In the body of the correspondence, however, Ms Lawless invited Ms Lidgard to contact Mr Morthorpe of NSW Policy and Advice on a nominated telephone number should she have any queries, presumably as to what action she should take pursuant to the garnishee order were she in any doubt.

19 A handwritten note on the facsimile header sheet records the following:

“Fax received 1.12.97. All 3 accounts PCO’d (needed to check with Policy & Advice as to whether funds were attachable)

Spoke to Paul Thompson on 2.12.97 – lifted PCO’s on trust accounts when advised unable to attach funds.”

20 I am satisfied that this note was made by Ms Lidgard and that she in fact made inquiries of a Westpac officer in the nominated department before ‘actioning’ the garnishee order and imposing PCO’s (“post credits only”) on the three Homewise accounts. In the result, all three accounts in the name of Homewise as the judgment debtor, being the “Homewise Rent Trust Account”, the “Homewise Sales Trust Account” and a “Homewise General Account”, were made subject to the garnishee order.

21 In the ordinary course of Westpac’s business, customer accounts are designated as “normal” which indicates there are no special circumstances affecting the account. In certain circumstances, however, Westpac’s internal protocols provide for a change in the designation of a customer’s account from “normal” to “PCO”. This has the effect that only credits would be allowed on the account and, relevantly, that customer-initiated debits will not be allowed. Of some significance, as will become clear later in this judgment, Westpac’s transaction processing and account maintenance computer systems both in 1997 and currently, are designed to deal differently with the situation where a cheque transaction on a given account is invalid for one of a variety of reasons and where there are insufficient funds in an account to satisfy a cheque being honoured on presentation. In short, in the former case, the transaction would not appear on the customer’s bank statement but would be recorded in an “unposted items report” sent from the central processing unit to the relevant branch. In the case of there being insufficient funds in the account, either because the account is in debit or would be placed in debit were the cheque to be met, the system records the fact of the cheque being dishonoured on presentation on the customer’s bank statement. A dishonour fee is also recorded on the customer’s statement in these circumstances. It is of some significance in this case is that since there were never insufficient funds in the Rent Trust Account, the Homewise statement did not record the fact that trust account cheques were dishonoured when presented on 1 December 1997.

Westpac dishonours the cheques

22 At 5:17 pm on 1 December 1997, the Rent Trust Account and the Homewise General Account were changed from “normal” to “PCO” by Ms Lidgard as reflected in her handwritten note extracted above. One minute later, at 5:18 pm, the Homewise Sales Trust Account was altered from “normal” to “PCO”. While it is only the Homewise Rent Trust Account that is of significance in these proceedings (since it was on this account that the 30 dishonoured cheques were drawn), it is clear that the Homewise Sales Trust Account was also made subject to the garnishee order although there were no cheques drawn on this account and therefore none dishonoured before the PCO was reversed. By its letter of 19 January 1998, Westpac responded to a query from the plaintiffs’ solicitors confirming that the garnishee order remained attached to Homewise’s General Account and that cheques drawn on that account were dishonoured. The evidence was silent as to how many cheques were dishonoured on this account. It would appear that the garnishee order was lifted some time in the first quarter of 1998 following resolution of the litigation involving Homewise and Century 21.

23 At 10:19 am on 2 December 1997, the Homewise Rent Trust Account was changed by Ms Lidgard from “PCO” back to “normal” and, one minute later, the PCO on the Homewise Sales Trust Account was also reversed. This is reflected in Ms Lidgard’s note as set out above.

24 The precise chain of circumstances which resulted in the imposition of the PCO’s on 1 December 1997 and their reversal the following day is not established by the direct evidence. While I am satisfied that Ms Lidgard made inquiries of an officer within Westpac’s Department of Advice and Policy before imposing the PCO’s, there is no evidence as to what advice Ms Lidgard sought, what advice she was given or the position of the person who provided the advice. Ms Lidgard was not called as a witness. Neither was Mr Paul Thompson, the person to whom she apparently spoke on 2 December 1997 before she converted the status of the two trust accounts back to “normal”. Plainly enough, the advice Ms Lidgard received on 1 December 1997 was wrong and was countermanded the following day.

25 Lifting the restriction on drawing funds from the Rent Trust Account the day after the cheques were presented may, in other circumstances, have operated to substantially ameliorate the impact of the defamatory publication. However, for reasons that are not explained by the evidence, that did not happen in this case. Rather, under cover of what is described as automatically generated correspondence dated 3 December 1997, Westpac returned the cheques with the endorsement “Refer to Drawer" stamped on the reverse side to its own customers and, for those cheques which were presented by a collecting bank, it returned the cheque stamped "Refer to Drawer" with an automatically generated slip of paper marked in the same way. Where the correspondence was to its own customers the letter provided as follows:

On 1 December 1997 you deposited a cheque for [stated amount].

The cheque [details supplied] has been returned unpaid with the answer "Refer to Drawer".

The cheque is enclosed and the amount has been reversed from account number [number specified]. A fee of $9.00 is applicable and has been charged to the account number [as specified].

If you would like to obtain information on this matter, please do not hesitate to call Westpac Telephone Banking on [number supplied].

26 Plainly enough, the reversal of the PCO’s was not notified to the Westpac’s Data Centre Department, the department identified as the sender of the automatically generated correspondence set out above. There was no evidence as to how or why this occurred. To compound the error, and again for reasons that are not explained by the evidence, when Mr Aktas personally attended the Auburn branch of Westpac on 2 and 3 December 1997 he was given a less than satisfactory explanation for what the bank must have known was an error and little confidence that the matter would be speedily resolved. The staff at the Auburn branch supplied Mr Aktas with telephone numbers so as to facilitate contact with agencies or departments of Westpac but he was given no satisfactory explanation as to why the trust account cheques were not honoured. I am satisfied that he also telephoned other agencies, including the banking ombudsman, in an effort to seek assistance. While it is clear that the PCO had been reversed by 2 December 1997, Mr Aktas was not told when it was imposed and why and when it was reversed. Neither was he told the reason it was imposed in the first place. In fact, it is not at all clear that it was generally known in the Auburn branch, or in any of the departments to which Mr Aktas was referred what the true situation was. Mr Aktas made clear in his letter to Westpac dated 4 December 1997 (a Saturday) that he learnt the previous day that a garnishee order had been imposed on the Rent Trust Account and that it had since been lifted, but that he was given no explanation as to why this had affected transactions on the Rent Trust Account.

27 On one view of the case the plaintiffs bring, I do not regard the absence of Mr Thompson, Ms Lidgard or an officer from Westpac’s Data Centre as material since it was ultimately conceded by the defendant that the PCO’s were imposed by Ms Lidgard in error. This was so because, irrespective of the terms of the order obliging Westpac to attach the debt to “AND/OR ANY OTHER ACCOUNTS HELD IN THE NAME OF THE JUDGMENT DEBTOR”, (words which may have been thought to justify or even compel the imposition of a PCO on the rent trust account held in Homewise’s name), by operation of s 36(2) of the Property, Stock and Business Agents Act 1941 the funds held in trust under the Act were not liable to attachment under the garnishee order. On the other hand, as I have noted, the evidence fails to make clear why Westpac’s was unable to rectify the situation so as to restore the account to its proper functioning on 2 December 1997 or to at least make it obvious to anyone accessing Westpac’s internal records that there had been an error on 1 December that had been reversed the following morning. I will have something further to say about this aspect of the case when considering the question of damages.

28 Section 36(2) of the Property, Stock and Business Agents Act 1941, reads as follows:

“(1) All moneys received for or on behalf of any person by any licensee shall be held by the licensee or, where the licensee is employed by a corporation, by the corporation, exclusively for such person, to be paid to such person, or to be disbursed as the person directs, and until so paid or disbursed the moneys shall be paid into a bank, building society or credit union operating in New South Wales to a trust account, whether general or separate, and retained therein. In any case where the licence is held by a corporation the trust account shall be in the name of the corporation and in any other case the trust account shall be in the name of the licensee or of the firm of licensees of which the licensee is a member. The words “Trust Account” shall appear in the name of the trust account and in the description of the trust account in the books and records of the licensee and also on all cheques drawn on the trust account.
(1A) When opening a trust account at a bank, building society or credit union for the purpose of complying with subsection (1), the licensee concerned must ensure that the bank, building society or credit union is notified in writing that the account is a trust account required by this Act.
(1B) …
(2 ) The moneys shall not be available for the payment of the debts of the licensee to any other creditor of the licensee, or be liable to be attached or taken in execution under the order or process of any court at the instance of any such other creditor . (emphasis added)
(3) Nothing in this section shall be construed to take away or affect any just claim or lien which any licensee may have against or upon any of the moneys.
(3A) A licensee must, within 14 days after closing a trust account, notify the Director-General in writing of the closure.
(3B) …
(4) Any licensee who neglects or fails to comply with any of the provisions of this section shall be guilty of an offence against this Act.
(4A) Where any licensee neglects or fails to comply with any of the provisions of this section by reason of the licensee’s neglect or failure to pay any moneys into a bank, building society or credit union operating in New South Wales to a trust account or to retain any such moneys therein, the offence shall continue until the said moneys are paid to the person for or on whose behalf they were received, or disbursed in such manner as may be directed by such person.
(5) (Repealed)
(6) …”

29 It is beyond question that Westpac made an error when it imposed a PCO on the Rent Trust Account, an error which in turn resulted in the defamatory publication of the words “Refer to Drawer” on 30 cheques drawn on that account. This is determinative of its liability in contract and of considerable significance on the question whether the defendant can avail itself of the defence of qualified privilege when the duty or interest it claims as grounding the occasion of qualified privilege was a result of its own error.

Homewise and Mr Aktas learn of the dishonoured cheques

30 It would appear that Mr Aktas first learnt of what was to become a total of 30 dishonoured trust account cheques on 2 December 1997 when he was informed by Mr Shi, an employee, that his own trust account cheque had bounced. Ms Pirzad gave evidence that Mr Shi first approached her about the matter on the morning of 2 December 1997. She immediately went to Westpac’s Auburn branch to collect the daily bank statement to satisfy herself that the relevant account was in credit. Mr Shi was informed of Ms Pirzad’s inquiries of Westpac. When the matter remained unresolved, and as further dishonoured cheques surfaced, Ms Pirzad made repeated inquires of the management at Westpac by telephone without receiving any satisfactory resolve or explanation. Mr Aktas also said that when he learnt of the situation (at this time limited to the fact that Mr Shi’s cheque had bounced) he also went to the Auburn branch and spoke with Mr David Lemon, a bank manager at that branch. Mr Aktas was also informed by Mr Lemon that there were sufficient funds and that there was no reason why the cheque would not be honoured. When Mr Aktas returned to the office of Homewise that morning he was informed that a trust account cheque of one of Mr Shi’s clients had also bounced. The fact that the Homewise Rent Trust Account statement showed the account in credit without any dishonour notations added to the confusion and, it seems, did nothing to dispel the suspicion that was gathering, and directed at Mr Aktas, as to why the funds were not able to be drawn upon.

31 Over the balance of 2 December 1997, and for some days thereafter, many disgruntled and irate clients attended the office of Homewise demanding to know why their respective trust account cheques had not been met on presentation. Mr Aktas dealt with some clients whilst Ms Pirzad spoke with others. Other clients were spoken to by telephone. Westpac does not put in issue that Mr Aktas was genuinely distraught, confused, frustrated and angry at the situation in which he found himself, a situation which could not in any sense be said to be of his own making. Whatever might be said of his failure to properly manage Homewise’s relationship with Century 21, or to deal responsibly with the threat of legal action being taken by them to recover the debt they claimed was due, and irrespective of the fact that that Mr Aktas was aware that proceedings had issued against Homewise in 1997 (even if he chose to ignore that fact and its consequences), he was entitled to proceed on the basis that clients’ funds would be immune from those consequences. His frustration and humiliation was no doubt compounded by the fact that Westpac’s error was neither readily acknowledged nor rectified with any efficiency.

32 In addition it would appear that because Westpac did not, or could not, supply Homewise with an accurate bank statement for the Rent Trust Account for some time (perhaps for some weeks with Christmas and New Year intervening), Mr Aktas was not in a position to know with any certainty which of the cheques issued on 1 December should be replaced. He gave evidence that this also did nothing to restore his relationship with his clients.

33 The extent to which Mr Aktas’s reactions at this time are compensable in damages for defamation was at issue in the proceedings. In so far as the action in contract is concerned, while breach is not in issue, the extent to which Homewise is entitled to recover damage to its trading or business reputation is also contentious. Another matter very much in dispute was whether Mr Aktas’s effective refusal in late January /early February 1998 to accept Westpac’s offer to publish acknowledgment of its error was so unreasonable as to constitute a failure to mitigate the damages Mr Aktas claims to have suffered and the special damages said to be suffered by Homewise.

The action in defamation brought by Mr Aktas and Homewise

34 I propose to deal with the action in defamation first since, as I noted earlier, in the way the case has been pleaded, and the way in which the proceedings before me have been conducted by the parties, it was the primary cause of action for which relief in damages were sought.

35 It was common ground between the parties that the publication of the defamatory matter occurred on multiple occasions on or about 1 December 1997 when the words “Refer to Drawer” were stamped or endorsed on 30 Homewise Rent Trust Account cheques by the defendant either after they were presented for payment by its own customers or when they were deposited to a collecting bank. Westpac also acknowledged its liability as re-publisher where the collecting bank published the fact that the cheque was marked “Refer to Drawer” to its customers. In each case, Mr Aktas was identified by the publication or republication by his signature appearing on the cheque and/or by reason of being the alter ego and chief executive of Homewise.

36 The plaintiffs’ claims in defamation are governed by the Defamation Act 1974 (NSW) (“the Act”). In strict accordance with s 9 of the Act, the causes of action are comprised of the publication of defamatory imputations as distinct from the publication of the matter which conveyed those imputations. The imputations the plaintiffs elected to plead were the focus of the proceedings before the jury at the s 7A hearing since it was the jury who were charged with the task of determining, by reference to the imputations, how the twofold question posed by s 7A should be answered. That involved the jury considering whether the words “Refer to Drawer” as they appeared on each of the 30 cheques carried the imputations contended for by the plaintiffs and, if so, whether the imputations were defamatory. Under the Act these are matters for prior and conclusive determination by a jury. The jury considers only those imputations raised by the plaintiff and, in determining whether those imputations were conveyed in this case, the jury was directed to assess the position of the ordinary reasonable person, who is “neither perverse … nor morbid or suspicious of mind … nor avid for scandal”: Amalgamated Television Services Pty Ltd v Marsden (1998) 43 NSWLR 158 per Hunt CJ at CL at 165.

The imputations the jury found were conveyed by the words “Refer to Drawer”

37 In so far as concerns Homewise as the second plaintiff, the jury found the following defamatory imputations proved:

(a) That Homewise Realty Pty Limited was unable to pay its debts as they fell due.
(b) That Homewise Realty Pty Limited was unable to meet its obligations to clients entitled to payment of moneys from its trust account.
(c) That Homewise Realty Pty Limited had defaulted in the payment to the clients of moneys from its trust account.
(d) That Homewise Realty Pty Limited had passed a valueless trust account cheque.

38 In so far as concerns Mr Aktas as the first plaintiff, the jury found the following defamatory imputations proved:

(a) That Mr Paul Aktas had caused Homewise Realty Pty Limited to pass a valueless trust account cheque.
(b) That Mr Paul Aktas had failed to ensure that Homewise Realty Pty Limited was able to meet its obligations to clients entitled to payment of moneys from its trust account.
(c) That Mr Paul Aktas had failed to ensure that Homewise Realty Pty Limited did not default in the payment to clients of moneys from its trust account.
(d) That Mr Paul Aktas had failed to ensure that Homewise Realty Pty Limited paid its debts as they fell due.

39 The plaintiffs initially raised imputations which included that Mr Aktas knew that there would not be available funds when drawing the trust account cheques. This, in turn, gave rise to generalised imputations of dishonesty, although still falling short of imputations of criminality (see the original statement of claim filed 26 November 2002 containing imputations 6(a) (“the First plaintiff passed a cheque that he knew to be valueless”) and 6(b) (“the First plaintiff passed a trust account cheque that he knew would not be honoured on presentation at the bank”). The amended statement of claim filed on 16 April 2004 raised imputations substantially the same as those relied on by the plaintiffs before the jury but, importantly, without knowledge of an insufficiency of funds being attributed to Mr Aktas and without any imputations of insolvency, much less imputations of impropriety or dishonesty. The amendments were made pursuant to a grant of leave and after argument (see Aktas & Anor v Westpac Banking Corporation [2004] NSWSC 218 per Levine J). I note that no imputations identifying the plaintiffs as insolvent were ever pleaded, notwithstanding that in Raafbye Corporation Pty Ltd & Ors v Westpac Banking Corporation Ltd (unreported, 21 October 1994), Levine J held that the words “Refer to Drawer” in their ordinary and natural meaning are capable of conveying that imputation.

40 In Greek Herald Pty Ltd v Nikolopoulosand Others (2002) 54 NSWLR 165, both Mason P and Young CJ in Eq emphasised the importance of pleading the actionable imputations with reasonable precision in a s 7A hearing. In that case, the imputation in the defendant’s newspaper that was established to be defamatory was simply that the plaintiffs, as directors of the Canterbury-Marrickville Olympic Soccer Football Club Ltd, lied to members of the Club. While the publisher accepted that the newspaper article in its entirety was relevant to the jury deciding whether the imputation was conveyed, it submitted that the jury ought not have recourse to the entire article in deciding whether the imputation was defamatory. The Court of Appeal was concerned with whether it was open to the defendant to seek a direction in the s 7A hearing that a jury must confine itself to the terms of the imputation alone when deciding whether they were defamatory, without importing into the words any significance the reader may have gleaned from the newspaper article in which the imputations were published or of the subject matter of the article generally. The Court held that the direction was properly refused and that the imputations pleaded must be understood and construed in the context of the entire matter complained of. In the course of his judgment, Mason P said (at 172) as to the importance of pleadings:

“The pleader's task is to capture the essence of the specific matters imputed in relation to the plaintiff. Necessarily there will be questions of degree and “if a problem arises, the solution will usually be found in considerations of practical justice rather than philology” (per Gleeson CJ in Drummoyne Municipal Council v Australian Broadcasting Corporation (1990) 21 NSWLR 135 at 137). In this as in other areas, pleadings serve the ends of justice: they must not be permitted to assume an independent self-referential function. The pleaded imputation remains “the statement which, as the plaintiff alleges, the publication gives the reader or viewer to understand” (per Mahoney JA in Singleton v Ffrench (1986) 5 NSWLR 425 at 428). It is not a straitjacket, although the rules of procedural fairness place limits upon judge and jury's capacity to enlarge the issues.

A plaintiff's pleaded imputations set the scene for the contest which follows. The defendant's pleadings will respond to the asserted causes of action. The jury will have to decide whether the matter complained of carries the imputation and, if so, whether it is defamatory or the plaintiff. Defences as to truth, contextual truth and comment are also responsive to the pleaded imputations ( Defamation Act , s 15(2), s 16(2), New South Wales Aboriginal Land Council v Perkins (1998) 45 NSWLR 340). But even here, the plaintiff will be bound by the substance, as distinct from the precise words of the pleaded imputation (see Morosi v Mirror Newspapers Ltd [1977] 2 NSWLR 749 at 771).”

His Honour went on to say (at 173):
“The principle which I would uphold in this appeal must not become the passport to sloppy or ambiguous pleading of imputations. It is, however, incumbent on the parties to thrash out the true issues at the pre-trial stages. If a pleaded imputation lacks a sting or if the sting has multiple barbs, then the plaintiff should be challenged to clarify the pleaded imputation.”

41 On the importance of pleadings, Young CJ in Eq said (at 176):

“In Cinevest Ltd v Yirandi Productions Ltd (2001) Aust Torts Reports ¶81–610 (67,031) at 67,035 [21], Spigelman CJ, with whom Meagher JA and Handley JA agreed, said that the Defamation Act , s 7A(3), must be construed as if the words read “[t]he jury is to determine whether the matter complained of carries the imputation pleaded by the plaintiff and if it does, whether the imputation is defamatory of the plaintiff ” (emphasis added). Although I have quoted this out of context, it again focuses attention that in this Act one must look to the way in which the imputation is pleaded. In the present case the imputation was pleaded very generally and that I believe is the source of the problem.

However, in Australian Broadcasting Corporation v McBride (2001) 53 NSWLR 430 at 439 [47], this Court, consisting of Beazley JA, Ipp A-JA and Fitzgerald A-JA, had to consider a pleading point in a defamation action. Ipp A-JA said (at 439 [47]): “A transcript of the … program in question is annexed to the statement of claim. The transcript forms part of the context in which the pleaded imputations are to be understood. It is relevant and admissible for the purposes of demonstrating the force and effect of the imputations pleaded and giving colour to and explaining the significance of them”. His Honour supported that statement by citing Dougherty v Nationwide News Pty Ltd (1968) 88 WN (Pt 1) (NSW) 146 at 149; Ron Hodgson (Trading) Pty Ltd v Belvedere Motors (Hurstville) Pty Ltd [1971] 1 NSWLR 472 at 477 and A B Parry & Sons Pty Ltd v K G Murray Publishing Co Pty Ltd (Hunt J, 10 April 1980, unreported).

At first blush this passage appears to support the respondents' point of view. However, when one looks at it a little more deeply one can see that the pleading in Australian Broadcasting Corporation v McBride actually set out the newspaper concerned. There is no doubt at all in the instant case that had the imputation been widely pleaded, the point would not have arisen. Mr Molomby's point is that the matter arises because of the imprecise way in which the imputation was pleaded.”

42 While Westpac accepted, as it must, that the jury found that the imputations contended for by both plaintiffs were conveyed by the words “Refer to Drawer” and that they were defamatory, it submitted that the case that the plaintiffs have sought to make out in the proceedings before me on the question of damages extended beyond the imputations pleaded. In particular, it is submitted, that to the extent that the harm to the reputation of the plaintiffs is in relation to imputations either not pleaded, or not substantially based on the imputations pleaded, the plaintiffs cannot recover damages. The defendant referred me to George Jamoo v Nationwide News Pty Ltd [2004] NSWSC 126 as authority for this proposition. The application of the statement of principle in that case to the facts of this case was initially the subject of debate in the course of the proceedings when objection was taken by Westpac to the admissibility of evidence the plaintiffs sought to lead from various witnesses who either themselves reacted in particularly hostile ways to the publication of the defamatory material, or who heard and/or understood others to react in similarly hostile ways at the expense of Mr Aktas’s reputation for honesty and integrity. I resolved at that time to receive the evidence of these witnesses provisionally, on the understanding that detailed argument on the issue would be reserved until final submissions. Before I turn to consider those submissions on what is essentially a causation question (a question that extends beyond the action in defamation and impacts upon the claim for damages in contract and in negligence), I propose to deal with the defence of qualified privilege.

The defence of qualified privilege

43 In its filed defence, Westpac pleaded that the matters complained of were published on an occasion of qualified privilege both at common law and pursuant to s 22 of the Defamation Act 1974. In either event, the test as to whether the occasion is a privileged one is objective with the defendant bearing the onus of proof on the balance of probabilities.

44 In final submissions the statutory defence of qualified privilege was not pressed. In relation to the statutory defence, the defendant’s particulars were drawn consistent with the requirement that it must prove that it was both reasonable to publish the matter complained of and that the extent of the publication was reasonable. In this case, that would necessarily have involved the defendant calling evidence to establish that proper inquiries were made by Ms Lidgard before she imposed PCO’s on each of the three Homewise accounts on 1 December 1997 (including the two trust accounts) and that the conclusion that the trust accounts should be changed from “normal” to “PCO” was fairly and reasonably based on that information (see Morgan v John Fairfax & Sons Ltd (No 2) (1991) 23 NSWLR 374 at 387-8). The defendant did not call evidence going to these matters. The tender of the handwritten note of Ms Lidgard on the facsimile header sheet did not establish any more than that she made an inquiry of a bank officer. It provided no basis upon which it was open to test the reasonableness of her conduct. She was not called as a witness and no other evidence was tendered by the defendant going to the issue of reasonableness.

45 In the result, only the common law defence of qualified privilege was relied upon. If the common law defence is made out the case each of the plaintiffs bring in defamation will be defeated, although, as I have noted, the case Homewise brings in contract and, in the alternative, the case it brings in negligence, remain to be considered.

Qualified privilege at Common Law

46 In Roberts and Another v Bass (2002) 212 CLR 1 at [62], Gaudron, McHugh and Gummow JJ said this about qualified privilege at common law:

“The common law protects a defamatory statement made on an occasion where one person has a duty or interest to make the statement and the recipient of the statement has a corresponding duty or interest to receive it [citing Adam v Ward [1917] AC 309 at 334 per Lord Atkinson]. Communications made on such occasions are privileged because their making promotes the welfare of society” [citation omitted].

47 The passage in Adam v Ward (at 334), referred to by the High Court in Roberts v Bass is as follows:

“It was not disputed, in this case on either side, that a privileged occasion is, in reference to qualified privilege, an occasion where the person who makes a communication has an interest or a duty, legal, social, or moral, to make it to the person to whom it is made, and the person to whom it is so made has a corresponding interest or duty to receive it. This reciprocity is essential.”

48 In Bashford v Information Australia (Newsletters) Pty Limited (2004) 218 CLR 366 at 373, Gleeson CJ, Hayne and Heydon JJ, extracted in full the seminal statement of principle from Toogood v Spyring (1834) 1 Cr M & R 181 which provides, in part, that where qualified privilege is pleaded, the material inquiry is whether the defamatory matter was published:

“…in the discharge of some public or private duty, whether legal or moral, or in the conduct of the publisher’s own affairs in matters where his interest is concerned.”

49 Their Honours then observed that while the principles to be applied in determining whether there was publication on an occasion of qualified privilege were well established (inclusive of the necessity to identify a reciprocity of a relevant duty or interest between the publisher and the recipients on the occasion of the publication) the principles are stated at a high level of abstraction and generality. Their Honours said (at 373):

“Concepts which are expressed as "public or private duty, whether legal or moral" and "the common convenience and welfare of society” are evidently difficult of application. When it is recognised, as it must be, that "the circumstances that constitute a privileged occasion can themselves never be catalogued and rendered exact”, it is clear that in order to apply the principles, a court must "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" (citations omitted).

50 In Bashford, McHugh J noted that after considering the circumstances of the particular case such as to enable the Court to make a judgment as to whether the publisher had a duty or interest that justified making the publication, and whether the recipients had a duty to receive or an interest in receiving it, questions of public policy usually arise, since the relevant interest must be a matter of substance and not a mere interest as a matter of ‘gossip or curiosity’ and to be sufficiently tangible for the public interest to require its protection (see Howe and McColough v Lees (1910) 11 CLR 361 at 377 and 398). It is not enough that that the publisher believed or might be taken to have believed that the recipient had a relevant interest, it must in fact have a corresponding interest (see Hebditch v MacIIwaine [1894] 2 QB 54 at 59). As to the significance of the public interest, McHugh J said in Bashford (at 386-387):

“In Toogood v Spyring , Parke B said that “[i]f fairly warranted by any reasonable occasion or exigency, and honestly made, such communications are protected for the common convenience and welfare of society”. Griffith CJ cited this passage with approval in Howe & McColough v Lees . There, Griffith CJ explained that the reference to the welfare of society did not mean that the person who made the communication was under an obligation to publish and was justified in publishing it to the public at large. Rather, according to his Honour, the phrase means that the interests of society in general require that a communication made under the particular circumstances to the particular person should be protected.
It is of the first importance to understand that references to concepts such as “the common convenience and welfare of society” and similar phrases record a result and explain why the communication and the relevant duty or interest gave rise to an occasion of qualified privilege. Such concepts are not the determinants of whether the occasion is privileged. They must be distinguished from the question whether society would recognise a duty or interest in the publisher making, and the recipient receiving, the communication in question.”

51 In warning against posing the question of whether the communication is for the common convenience and welfare of society (the correct question being whether the interests of society require that the particular publication to the particular recipients be protected), his Honour emphasised (at 389) that the occasion of qualified privilege must be defined concretely and precisely with the primary focus to identify the particular publisher, the particular publication and the particular recipients, as it is only then that the issues of duty, occasion, relevance and malice are able to be determined.

52 The need for a close scrutiny of all relevant circumstances is of particular potency in this case due to the unusual interplay of factors said to give rise to the occasion of qualified privilege. The peculiar circumstances of this case have also served to underscore the importance of identifying what it is that the defence of qualified privilege at common law operates to protect. In that connection, after I had heard oral submissions at the conclusion of the proceedings, and even after I had received further submissions in writing bearing upon the significance of s 36 of the Property, Stock and Business Agents Act 1941, the parties were invited by me to address that specific question.

To what does the Common Law defence of qualified privilege refer

53 Put simply, and with particularity in the context of this case, the question I raised was whether the defence of qualified privilege at common law falls to be considered by reference to the matter complained of, that is, by the endorsement of the words “Refer to Drawer” on each of the 30 cheques, or alternatively, by reference to the imputations found by the jury to arise from that publication. I invited submissions on the question since I was satisfied that there was no clear statement of principle in the authorities to which the parties had referred me in the course of argument, and neither party had addressed the precise question in their extensive oral and written submissions. I was concerned that if I were to focus my inquiry on the defamatory imputations, and the approach was later found to be in error, a rehearing would be inevitable since the defendant accepted that it had no relevant interest or duty to publish the imputations suggestive of the fact that Mr Aktas was an incompetent manager or that Homewise had otherwise failed to discharge its obligation as trustee. On the other hand, if my focus should properly be on the matter complained of, that is the endorsement "Refer to Drawer", then that would leave the way clear to address the question as to whether, in the circumstances of this case, the defendant published those words on an occasion of qualified privilege as an answer to the plaintiffs’ case.

54 Although, in the result, I am satisfied that the common law defence of qualified privilege is referable to the publication of the matter complained of, in this case the endorsement “Refer to Drawer” on the 30 trust account cheques and not to the imputations that the publication gave rise to, given the detailed submissions I received on the question I propose to set out, in summary, the arguments advanced by the parties.

55 The parties took diametrically opposed positions. The plaintiffs submitted that having regard to the retention of the common law defence of qualified privilege in the Defamation Act and the fact that the Act and the statutory defences are referable to the defamatory imputations, the common law defence of qualified privilege should be pleaded to the publication of the imputations. The defendants submitted that it is the publication of the matter complained of which attracts the common law privilege since the doctrine speaks of whether the publication was on an occasion of qualified privilege not whether the imputations are themselves privileged. The defendant also submitted that there is only one common law of Australia and that the defence of common law qualified privilege is expressly preserved by s 11 of the Act. Accordingly, the common law defence must be the same in, for example, Victoria and New South Wales, with the result that the traditional formulations of the privilege, couched in terms of publication on an occasion of privilege, are applicable in New South Wales.

56 The parties took me to various authorities, although, as I noted above, none was definitive of the issue I raised. Westpac regarded this as supportive of its position. It submitted that those cases that concerned qualified privilege at common law and governed by the Act simply proceeded on the assumption that the matter complained of is the focus of consideration, and, because of the prevalence of this assumption, direct authority for the proposition that the defence focuses on the matter complained of rather than the imputations is not abundant. The defendant submitted that it is the absence of any authority to the contrary which shows the settled position.

57 In this connection, Westpac referred me to Harvey v John Fairfax PublicationsPty Ltd [2005] NSWCA 255, where Hunt AJA at [119], in the course of a review of the role of imputations under the 1974 Act generally, noted that the defence of statutory qualified privilege is not pleaded to the plaintiff’s imputations. His Honour did not however refer to common law qualified privilege, despite the apparently exhaustive nature of the list. In John Fairfax Publications Pty Ltd v O’Shane [2005] NSWCA 164, Giles JA specifically noted (at [21] and [36]) that the defence of comment was referable to the imputations rather than the matter complained of, but also made no such observation in relation to qualified privilege, referring instead to the defence relating to a “defamatory statement” (at [74]). The judgment of Young CJ in Eq at [171] and [213]-[221] was submitted by Westpac to similar effect. The same point was made by reference to the judgment of Mason P in Greek Herald Pty Ltd v Nikolopoulos and Others (2001) 54 NSWLR 165, at [19], where reference to the defence of qualified privilege was noticeably absent, when his Honour said:

“A plaintiff's pleaded imputations set the scene for the contest which follows. The defendant's pleadings will respond to the asserted causes of action. The jury will have to decide whether the matter complained of carries the imputation and, if so, whether it is defamatory or the plaintiff. Defences as to truth, contextual truth and comment are also responsive to the pleaded imputations ( Defamation Act , s 15(2), s 16(2), New South Wales Aboriginal Land Council v Perkins (1998) 45 NSWLR 340).”

58 In Sims v Wran [1984] 1 NSWLR 317, Hunt J reviewed the particulars that were by operation of Part 67 of the Supreme Court Rules (since repealed) required to be given for various defences to an action in defamation. At 326G-327B, his Honour dealt with common law qualified privilege and, at 327C-328B, with statutory qualified privilege. Westpac emphasised that no requirement for either defence to be directed to the imputations was specified.

59 In short, Westpac submitted that there was no authority in which the common law defence of qualified privilege was approached in the way contended for by the plaintiffs other than the obiter and general observation of Meagher JA in New South Wales Aboriginal Land Council v Perkins (1998) 45 NSWLR 340 where his Honour said (at pp 348-349):

“The Defamation Act 1974 was a revolutionary change in the laws of defamation in New South Wales. Before that Act a plaintiff merely stated that the publication of which he complained and sought damages for loss of reputation flowing therefrom. After the 1974 Act a plaintiff no longer sued on the publication, but on the imputations which he alleged arose from it. Each imputation was a cause of action. Consequently, one would have thought, any successful defence must be a defence to the imputation. Otherwise the defendant would be answering a cause of action which the plaintiff does not rely on (viz, the publication), and the cause of action on which he does rely (viz, the imputation) would go unanswered.”

60 Westpac also referred me to what Priestly J said (at p 343) in the same case, namely:

“Because of his view that the defamatory imputations had not been made by the published matter, it was not necessary for Glass JA to deal with the defendant’s comment grounds of appeal. However, at some length, he considered, amongst other questions relating to comment, the question raised in the present appeal, whether the defence of comment should be directed to the imputations relied on by the plaintiff or to the published matter by which they are made. The bare bones of Glass JA’s answer to the question were that: (a) s 9(2) of the Defamation Act made each defamatory imputation made by the published matter and relied on by the plaintiff an independent cause of action; and (b) the defence of comment must be pleaded as a defence to a cause of action, that is, to a defamatory imputation relied on by the plaintiff.”

138 In all the circumstances and in the event that my findings as to the defence of qualified privilege are set aside, I would have awarded Mr Aktas the sum of $50,000 in damages as a public vindication for the injury to his reputation and as a consolation to him for the wrong done and for his hurt to feelings. I would not have awarded aggravated damages. Not only am I satisfied that the award of $50,000 would adequately compensate Mr Aktas but, in any event, while Westpac’s conduct in dishonouring the cheques was in error and entirely unjustified, I am not satisfied that the error was reckless in the sense that the imposition of the “post credits only” on the Rent Trust Account was done without regard for the consequences to the account holder knowing that harm might be sustained if the restriction on drawings was in error.

139 In regard to the claim by Homewise I would have awarded the sum of $117,000.

The claim in contract

140 The claim brought for breach of contract is on the basis of the contractual relationship of banker to customer with Homewise, trading as a real estate agency as the customer, and the defendant its bank. In its ultimate submission Westpac does not dispute the existence of the contract or that an implied term was breached when it refused to pay on the cheques drawn on Homewise’s Rent Trust Account. The plaintiff also submitted that there was breach of a further implied term obliging Westpac to exercise all due and reasonable skill, care and diligence in respect of the trust account and, in particular, in relation to the payment of cheques drawn on that account. I am satisfied that Westpac was in breach of each of the implied terms. The multiplicity of breach however has no material bearing on the assessment of damages.

141 The plaintiffs’ claim for damages is to compensate it for economic loss calculated by reference to the downturn in Homewise’s business from the time of breach in December 1997 for a period up to and including June 2003. The duty to mitigate is properly invoked in the action on contract, however, I consider it as having a somewhat different application in the context of the defamation action to that of contract. When considering the question of mitigation in the defamation action I was satisfied that despite the fact that Mr Aktas had effectively refused to take up Westpac’s offer of a published acknowledgement of its error by the end of March 1998, I would appoint June 1998 as the date beyond which recovery of damages should not extend so as to account for the likely deleterious impact on Homewise’s business by reason of Westpac’s delay in making the offer and the consequent spread of the defamation over the 45 days up to that time. There is no basis for my extending the time to June 1998 in the case of the contractual breach which is confined to the damage fairly and reasonably arising naturally in the usual course of things from the breach of contract which must exclude the effects of the defamation simpliciter for reasons which I expand upon later in this judgment.

142 I approach the assessment of damages in this case mindful of the general principle governing the measure of damages for breach of contract authoritatively stated in Robinson v Harman (1848) 1 Exch 850 at 855 per Parke J:

“The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.”

143 This principle has been accepted and applied in Australia (see for example, The Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64, per Mason CJ and Dawson J at 80, per Brennan J at 98, per Toohey J at 134 and per McHugh J at 161). In this case Homewise is entitled to be awarded damages in an amount that will adequately compensate it for the losses it has incurred by reason of Westpac’s breach and in such a way as to enable it to be restored to a position in which it would have been had the cheques never been dishonoured.

144 The plaintiffs submitted that the measure of damages in the action on contract is the same as the special damages claim advanced on Homewise’s behalf in the defamation action, namely the loss of income that would otherwise be earned from commissions on sales and rentals. Although there is authority for the proposition that, subject to remoteness, general damages for loss of business reputation are recoverable for breach of contract (see Kpohraror v Woolwich Building Society [1996] 4 All ER 119), proof of pecuniary loss is essential in other than what are described as the “direct breach “ cases. In Baltic Shipping Co v Dillon (1993) 111 ALR 289 at 308, Brennan J observed that:

“…damages have been awarded without proof of pecuniary loss for damage caused in direct breach of a contractual promise where the damage consists in a general loss of reputation.”

145 His Honour characterised these cases as “direct breach” cases citing as examples Wilson v United Counties Bank Ltd [1920] AC 102 and Herbert Clayton and Jack Waller Ltd v Oliver [1930] AC 209. The former case involved a breach of contract that expressly required Westpac to take all reasonable steps to maintain the customer’s credit and reputation and the latter case involved breach of a contract designed to promote an actor’s publicity. In each case damages were awarded for failure to perform a specific contractual undertaking to protect or enhance the plaintiff’s reputation or, in other cases, to provide some other intangible benefit such as an amenity or source of enjoyment. Brennan J went on to say in Baltic, and in reliance on Foaminol Laboratories Ltd v British Artid Plastics Ltd [1941] 2 All ER 393, that “except in the “direct breach” cases, damages are not awarded for general loss of reputation without proof of pecuniary loss”. In a different but related context, Brereton J observed in Rose v Boxing New South Wales Inc and Anor [2007] NSWSC 20 that in the context of an assessment of damages in a wrongful dismissal case:

“Loss of reputation simpliciter is protected by the tort of defamation, the requirements of which cannot be sidestepped by a claim for breach of contract that would not succeed in defamation [ Lonrho plc v Fayed (No 5) [1993] 1 WLR 1489, 1496 (Dillon LJ); Malik , 40B (Lord Birkenhead)]. However, financial losses occasioned by a breach of contract do not cease to be recoverable because they might also be recoverable in an action for defamation [ Foaminol Laboratories Ltd v British Artid Plastics Ltd [1941] 2 All ER 393, 399-400 (Hallet J)], nor because no claim for defamation would lie [ Malik , 40D-H (Lord Birkenhead), 51-52 (Lord Steyn)].”

146 Homewise also correctly advanced the submission that the principle in Jamoo has no application in the contract case and that since the evidence establishes that were it not for the wrongful dishonour of the 30 trust account cheques Homewise’s business would not have suffered the dramatic downturn (or at least its profitability would have been maintained) the defendant is liable for that loss. Westpac, on the other hand, submitted that since the general rule is that damages are assessed at the time of breach then an assessment of the likely consequences of the breach or, to put it in terms of the first limb in Hadley v Baxendale (1854) 9 Exch 341, the damage fairly and reasonably arising naturally in the usual course of things from the breach, should also be made at that same time. I propose to approach the assessment of damages for breach in accordance with Westpac’s submission.

147 That said, contrary to Westpac’s further submission that the error in marking the cheques “Refer to Drawer" was not causative in the legal sense of any great harm to Homewise, I am satisfied that the breach did cause injury to Homewise’s business reputation and that, in accordance with the principle in Kpohraror v Woolwich Building Society, that injury has translated into a measurable pecuniary loss. The measure of the loss in the defamation action brought by Homewise is not distinguishable from the case it brings in contract (save for the fact that the failure to mitigate limits recovery only up to the end of March 1998) and accordingly Mr Lom’s assessment of loss at $130,000 has to be reduced by 25 per cent to take account of that point of difference. Westpac again points to differential causes for the downturn in Homewise’s business, principally the dispute with Century 21 and the attrition of sales staff, and invites me to factor down the plaintiffs’ claim for economic loss for these reasons. On the same basis as my approach in the defamation action this is productive of a further reduction by 10 per cent in the award of damages. In the result I assess damages for breach of contract at $84,500, being 35 per cent of Mr Lom’s assessment of $130,000 loss of profit for the year ended June 1998.

148 The claim in negligence for economic loss is pleaded in the alternative to the claim in contract. For that reason I do not need to resolve the dispute between the parties as to whether the claim in negligence is properly brought in these proceedings (see Sattin v Nationwide News Pty Limited (1996) 39 NSWLR 32 and Sullivan v Moody and Others (2001) 207 CLR 562).

Orders

149 The orders I make are as follows:

1. In the defamation action brought by the first plaintiff verdict for the defendant.

2. In the defamation action brought by the second plaintiff verdict for the defendant.

3. In the action for breach of contract brought by the second plaintiff verdict for the second plaintiff.

4. Damages for breach of contract are awarded in the amount of $84,500 plus interest.

I reserve the calculation of interest and the question of costs for further submissions.

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