Aktas v Westpac Banking Corporation Ltd

• Jurisdiction: Australia Federal only
• Judge: French CJ,Gummow,Hayne JJ.,Heydon J.,Kiefel J.
• Judgment Date: 04 August 2010
• Neutral Citation: [2010] HCA 25,2010-0804 HCA A
• Docket Number: S3/2010
• Date: 04 August 2010
• Court: High Court

[2010] HCA 25

HIGH COURT OF AUSTRALIA

French CJ, Gummow, Hayne, Heydon and Kiefel JJ

S3/2010

Paul Uysal Aktas

Appellant

and

Westpac Banking Corporation Limited & Anor

Respondents

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

Cheques Act 1986 (Cth), ss 67, 69.

Defamation Act 1974 (NSW), s 11.

Property, Stock and Business Agents Act 1941 (NSW), s 36.

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’.

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.

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 Westpac, including two trust accounts.

2 Homewise was obliged by the Property, Stock and Business Agents Act 1941 (NSW) (‘the Business Agents Act’), as a licensee thereunder, to maintain a trust account on behalf of clients whose rental properties it managed. Section 36(2) of the Business Agents Act 1 protected trust account moneys from any attachment at the instance of a creditor of the licensee 2. The significance of s 36(2) for this case will appear later in these reasons 3.

3 One of the most important conditions in the contract between a banker and a customer who conducts a current account is the obligation of the banker to honour the customer's cheques to the extent of the customer's credit 4. Part II of the Banking Act 1959 (Cth) regulates by a licensing system the carrying on of banking business in Australia. The conduct of an accurate and efficient banking system is a matter of what may be called ‘the common convenience and welfare of society’ 5.

4 On 1 December 1997 Homewise drew 30 cheques on one of the trust accounts. The appellant was one of the signatories on the cheques. The cheques were regular on their face and were either directly deposited to the nominated account of a client, or mailed to the client. Some of the nominated accounts were with Westpac itself, and others were with a collecting bank.

Cheques dishonoured

5 None of the 30 cheques was honoured by Westpac on presentation. It is critical to an understanding of the issues before this Court to appreciate that it was the reason given by Westpac for the notice of dishonour, not the mere fact of dishonour or the fate of the cheques in some general sense, which founded the action by Mr Aktas against Westpac and established the relevant relationship between Westpac and the recipients of the notice of dishonour.

6 Under cover of what was described in the evidence as ‘automatically generated correspondence’ dated 3 December 1997, Westpac returned the cheques to its own customers with the endorsement ‘Refer to Drawer’ stamped on the reverse side. In respect of cheques presented by a collecting bank, Westpac returned the cheques stamped ‘Refer to Drawer’ with an automatically generated slip of paper marked in the same way. The pro forma letter sent to Westpac's customers was 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].’

7 At no time were there insufficient funds in the trust account to meet the cheques. The failure to honour the cheques was in breach of the term in the contract of banker and customer between Westpac and Homewise that the customer's cheques be honoured to the extent of its credit. It is well accepted in Australia 6 that the circumstances attending wrongful dishonouring may also found a defamation action.

8 The expression ‘Refer to Drawer’, when used by a banker in the above circumstances, has long been widely understood in Australia to mean that there were insufficient funds to meet the cheque 7. In the present case there was evidence that, in the first week of December 1997 and beyond, various people in Auburn (particularly, but not only, in the local Turkish community in which Mr Aktas moved) reacted adversely and with some hostility to Mr Aktas after it became known that trust account cheques had ‘bounced’. When Mr Aktas attended the Auburn branch on 2 and 3 December 1997, he was given a less than satisfactory explanation of Westpac's error, and little confidence that the matter would be speedily resolved.

The litigation

9 The Defamation Act 1974 (NSW) (‘the 1974 Act’) was in force at the time of the events complained of, and despite its repeal by the Defamation Act 2005 (NSW), the 1974 Act continued to govern the litigation against Westpac instituted in the Supreme Court of New South Wales in 2002. Section 7A of the 1974 Act divided the functions of judge and jury in a fashion which differed from the procedures of the common law 8. A jury determined that Westpac had published defamatory imputations in respect of Mr Aktas and Homewise. It fell thereafter to Fullerton J 9 to determine any defences, assess damages and determine the claims on the other causes of action pleaded by Mr Aktas and Homewise against Westpac.

10 The outcome was that (a) as noted above, the jury found proved imputations including those that Homewise had passed valueless trust account cheques and that Mr Aktas had caused this to happen; (b) absent a good defence by Westpac to their defamation actions, Fullerton J would have awarded Mr Aktas $50,000 and Homewise $117,000; (c) Westpac, however, had

established before her Honour its defence of qualified privilege; (d) on its claim in contract, Homewise recovered $84,500, increased on its appeal to the Court of Appeal to $117,000; (e) the recovery by Homewise on its contract claim made it unnecessary for Fullerton J to determine its alternative claim in negligence

11 The claims by Homewise are not before this Court, and it has filed a submitting appearance as second respondent. The appeal is brought by Mr Aktas against the dismissal by the Court of Appeal (Ipp and Basten JJA and McClellan CJ at CL) 10 of his appeal against the entry of the verdict for Westpac in his defamation action.

12 For the reasons which follow, the defence of qualified privilege was not made out by Westpac, and the appeal by Mr Aktas should be allowed.

Qualified privilege

13 Section 8 of the 1974 Act provided that slander, in the same way and to the same extent as libel, was actionable without special damage. Part 3 (ss 10–45) dealt with defences in civil proceedings. Sections 20–22 contained special provisions with respect to qualified privilege, but are not relevant to this appeal.

14 The effect of s 11 of the 1974 Act was to preserve the common law defence of qualified privilege. As a general proposition, the common law protects the publication of defamatory matter made on an occasion where one person has a duty or interest to make the publication and the recipient has a corresponding duty or interest to receive it; but the privilege depends upon the absence of malice 11. The requirement of reciprocity of interest generally denies the common law privilege where the matter has been disseminated to the public at large 12.

Malice

15 Something should be said of the significance of malice for such a defence of qualified privilege. The generally accepted statement of principle by Parke B in Toogood v Spyring 13 uses the term in several senses. His Lordship said:

‘In general, an action lies for the malicious publication of statements which are false in fact, and injurious to the character of another (within the...