Aktas v Westpac Banking Corporation Limited [2010] HCA 25

Author: Jasmine Burrows, Progressive Legal

Facts

Paul Aktas served as the CEO of Homewise Realty Pty Limited, overseeing its real estate agency operations in New South Wales. Homewise Realty managed rent collection and landlord payments through a trust account held with Westpac Bank. 

A legal directive known as a garnishee order was directed at the bank, compelling it to settle all outstanding debts owed by Homewise Realty to the Court due to the enforcement of a judgment debt against the company.  

Responding to this order on December 1, 1997, the bank refused to honour 30 cheques drawn from Homewise Realty’s trust account. These cheques were marked with the phrase “refer to drawer” and were sent back accompanied by a standardised letter. 

Subsequently, it was realised that the cheques should not have been declined, as the garnishee order did not pertain to the trust account in question. 

Although Mr. Aktas was not the individual who had issued the cheques that were dishonoured, he was familiar to the recipients of the returned cheques, and they associated him with Homewise Realty. 

In November 2002, both Mr. Aktas and Homewise Realty initiated legal proceedings against the bank on charges of defamation and breach of contract. 

The bank relied on the common law defence of qualified privilege. Common law qualified privilege is a type of protection that can be used as a defence against a defamation lawsuit.  

It applies when someone has a good reason to share information that benefits society, and the person receiving the information has a valid reason to hear it.  

The defence cannot be invoked if the defendant’s actions were motivated by malice, signifying an inappropriate intention. 

Issues

Was Westpac liable for charges of defamation and breach of contract? 

Decision

The High Court rejected Westpac’s claim of qualified privilege. 

The Court ordered Westpac to pay $50,000 AUD in damages for defamation arising from its mistaken dishonouring of Mr. Aktas’ company cheques. 

Reasoning

The High Court acknowledged that the bank, Westpac, had an obligation to inform the affected parties about the failed payment within a reasonable period of time. This means that if a payment wasn’t successful, the bank should let the relevant people know about it in a timely manner.  

However, the primary reason why Mr. Aktas decided to take legal action against Westpac was not just because the bank didn’t notify him about the failed payment on time. Instead, it was the specific explanation or “reason” that Westpac provided for why the payment wasn’t successful that formed the basis of Mr. Aktas’ legal complaint against the bank. 

In this situation, there was always enough money available in the trust account to cover the cheques that were issued. However, despite having sufficient funds, Westpac refused to honour these cheques.  

This refusal goes against the agreement that was in place between Westpac and Homewise. The agreement between them stated that the bank should honour the customer’s cheques as long as there was enough money in the account to cover them.  

In this case, even though Westpac’s actions caused harm by not honouring the checks, there is no evidence to suggest that the bank acted with malicious intent. There was no deliberate intention to harm anyone’s reputation. Instead, the bank’s actions were a result of mistakes in its own internal processes or procedures. 

The Court stated that some people may believe that it doesn’t make sense that someone can be granted special legal protection for making a mistake about facts. This seems to go against the main idea of the qualified privilege concept, which is meant to allow open communication when both parties involved have some shared interest or responsibility. 

For example, if a bank and the person receiving a check have a mutual interest, like in a business relationship, their communication might be protected by qualified privilege. If the bank thought mistakenly that the recipient was involved in fraudulent activities related to checks, and the bank reported this to the authorities, they would be legally protected. So, why should it be any different if the bank informs the recipient about a bounced check due to a mistake? 

This is because there is a bigger issue here, which involves what’s best for the public as a whole. The Court considered whether it’s better to protect banks that make mistakes or customers who might be harmed by false information. They concluded that it’s more important to protect the customers.  

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