Lloyd's Maritime and Commercial Law Quarterly
DISHONOURED CHEQUES AND QUALIFIED PRIVILEGE
Aktas v Westpac
It is a fundamental term implied in every banker-customer contract that a bank must obey its customers’ mandate.1 Accordingly, where a customer’s instruction takes the form of a cheque, the drawee bank’s failure to honour the instrument will ordinarily constitute a breach of its contract with the drawer. Additionally, the drawee bank may be tortiously liable to its customer when the words that it marks on a cheque’s face to justify dishonouring the instrument are in fact defamatory of the drawer and are published to the cheque payee or his collecting bank upon the instrument’s being returned to one or other of them. While such defamation liability is now well established,2 little judicial attention has to date been paid to the defences available to drawee banks in such circumstances.
Precisely this issue was addressed, however, in Aktas v Westpac Banking Corp Ltd,3 where the defendant bank dishonoured 30 cheques drawn upon trust accounts held in the name of Homewise and returned the dishonoured cheques, marked “refer to drawer”, in some cases directly to the relevant payee and in other cases to the payee’s collecting bank. Although the cheques were regularly drawn and covered by sufficient funds, the defendant bank considered itself obliged to dishonour those instruments as a result of its having been served with a garnishee order4 in respect of the relevant trust accounts. In this regard, however, the bank was mistaken, as the trust accounts in question were statutorily protected from such attachment. The bank was accordingly obliged to honour the cheques. At first instance,5 Fullerton J awarded Homewise damages for breach of the banker-customer contract, an award that was confirmed on appeal.6 By contrast, Homewise’s defamation claim, together with that of Mr Aktas (Homewise’s sole shareholder, chief executive and director), failed at both instances. On Aktas’ appeal against the rejection of his defamation claim, the High Court of Australia unanimously accepted the lower courts’ uncontroversial conclusion that “refer to drawer”, when marked upon a dishonoured
1. Joachimson v Swiss Bank Corp [1921] 3 KB 110, 127.
2. Miles v Commercial Banking Co of Sydney (1904) 1 CLR 470; Baker v ANZ Bank Ltd [1958] NZLR 907; Citibank Savings Ltd v Stergiou (12 May 1995), Unreported (ACTSC, Higgins J), [109].
3. [2010] HCA 25 (hereafter “Aktas”). For the subsequent proceedings concerning whether the High Court should vary its earlier order, see Aktas v Westpac Banking Corp Ltd (No 2) [2010] HCA 47; 273 ALR 118.
4. In the United Kingdom, the Civil Procedure Rules 1998, Part 72 replaced the garnishee order with the third-party debt order.
5. Aktas v Westpac Banking Corp Ltd [2007] NSWSC 1261.
6. Aktas v Westpac Banking Corp Ltd [2009] NSWCA 9.
LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY
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