When is a cheque dishonour defamatory?

The High Court of Australia has decided that (by a majority of 3 to 2) Westpac’s return of 30 cheques marked “Refer to Drawer” was defamatory of its customer’s principal. It awarded the plaintiff damages of $50,000 plus interest.

In Aktas v Westpac Banking Corporation Limited [2010] HCA 25 the High Court rejected Westpac’s claim of qualified privilege.

In earlier proceedings a jury found proved defamatory imputations including those that a rental agency (Homewise) had passed valueless trust account cheques and that Mr Aktas had caused this to happen.

The High Court decided that while notice of dishonour had to be given by the bank within a reasonable time it was the reason given by Westpac for the notice of dishonour which was the basis of the action by Mr Aktas against Westpac.

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 that the circumstances attending wrongful dishonouring may also support a defamation action.

There was no express malice on the part of Westpac. Westpac acted as it did by reason of the erroneous operation of its internal procedures.

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