AKTAS & ANOR v WESTPAC BANKING CORPORATION

HOMEWISE REALTY PTY LTD (ACN 001 131 273) PARTIES : (Second plaintiff)

WESTPAC BANKING CORPORATION LIMITED (ARBN 007 457 141) (Defendant) FILE NUMBER(S) : SC 20552 OF 2002 J Garnsey QC / RA Campbell (Plaintiffs) COUNSEL : L McCallum (Defendant) Penhall & Co (Plaintiffs) SOLICITORS : Mallesons Stephen Jacques (Defendant)

[2004] NSWSC 218 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION DEFAMATION LIST

HOMEWISE REALTY PTY LTD (ACN 001 131 273) (Second plaintiff)

WESTPAC BANKING CORPORATION LIMITED (ARBN 007 457 141) (Defendant)

JUDGMENT (Imputations - capacity - form - true innuendos - "refer to drawer" ) 1 The plaintiffs seek leave to file an amended statement of claim (84 pages in length) in which they seek to plead causes of action in defamation arising from a series of cheques said to have been dishonoured by the defendant. 2 Paragraphs 4-7 exemplify the pleadings that are under challenge. They relate to causes of action in respect of both plaintiffs and they are as follows: 4. On or about 1 December 1997 the Defendant published in New South Wales of and concerning the First Plaintiff and the Second Plaintiff the following matter: REFER TO DRAWER together with a cheque drawn by the Second Plaintiff on the Defendant bearing the words and figures: Pay G. Jiang the sum of Four Hundred & Thirty Three dollars and Eighty Four cents only $433.84 HOMEWISE REALTY PTY LTD TRADING AS CENTURY 21 HOMEWISE REALTY ACN 001 131 273 RENT TRUST ACCOUNT. and bearing the signature of the First Plaintiff.

PARTICULARS OF PUBLICATION The words were endorsed or stamped on a cheque drawn by the Second Plaintiff on its trust account held with the Defendant Bank. The cheque was in the amount of $433.84 and payable to G Jiang and represented payment of moneys held by the Second Plaintiff in trust for its client. The publication was to the collecting bank for the client the identity of which is known to the Defendant. PARTICULARS OF IDENTIFICATION OF THE FIRST PLAINTIFF The First Plaintiff was known to be the alter ego of the Second Plaintiff and the business Century 21 Homewise Realty. His signature was on the cheque and he was so known to the payee. 5. On or about 2 December 1997 the Defendant republished the matter complained of in paragraph 4 hereof to G Jiang or that was the natural and probable consequence of the conduct complained of in paragraph 4 hereof. PARTICULARS OF REPUBLICATION The cheque marked refer to drawer was published by the collecting bank to its customer which was the natural and probable result of the dishonour of that cheque by the Defendant and the publication pleaded above. 6. The matter complained of in paragraph 4 in its natural and ordinary meaning bore the following imputations each of which was defamatory of the First or Second Plaintiff as the case may be: (a) The Second Plaintiff was unable to pay its debts as they fell due. (b) The Second Plaintiff was unable to meet its obligations to clients entitled to payment of moneys from its trust account. (c) The Second Plaintiff had defaulted in the payment to the clients of moneys from its trust account. (d) The Second Plaintiff failed in its obligations as an estate agent to maintain its trust account to such an extent that clients funds were missing from the account. (e) The Second Plaintiff had passed a valueless trust account cheque. (f) The First Plaintiff had caused the Second Plaintiff to pass a valueless trust account cheque. (g) The First Plaintiff had failed to ensure that the Second Plaintiff was able to meet its obligations to clients entitled to payment of moneys from its trust account. (h) The First Plaintiff had failed to ensure that the Second Plaintiff did not default in the payment to clients of moneys from its trust account. (i) The First Plaintiff had failed to ensure that the Second Plaintiff paid its debts as they became due. 7. Alternatively, the matter complained of in paragraph 4 bore each of the imputations set out in paragraph 6 above, each of which was defamatory of the First or Second Plaintiff as the case may be, by reason of the following facts and matters: (a) The First Plaintiff was the alter ego of the Second Plaintiff and its chief executive and controlled the day-to-day operations of the Second Plaintiff. (b) The First Plaintiff signed the cheques of the Second Plaintiff and his signature appeared on each cheque forming part of the matter complained of. (c) The Second Plaintiff conducted the business of a real estate agent and was obliged to establish, maintain and keep a trust account in accordance with the law. (d) The Second Plaintiff managed the rental property of the payee(s) of the cheque and held and was obliged to hold rent moneys on trust for and to pay them to the payee(s). 3 Paragraphs 80-83 exemplify causes of action in respect of the second plaintiff only and they are as follows: 80. Further, on or about 1 December 1997 the Defendant published in New South Wales of and concerning the Second Plaintiff the words: REFER TO DRAWER together with a cheque drawn by the Second Plaintiff on the Defendant bearing the words and figures: Pay Loc Tung Bai and Thi Diep Bui the sum of One Thousand and Twenty Two dollars and Forty Five cents only $1,022.45 HOMEWISE REALTY PTY LTD TRADING AS CENTURY 21 HOMEWISE REALTY ACN 001 131 273 RENT TRUST ACCOUNT. and bearing the signature of the First Plaintiff. PARTICULARS OF PUBLICATION The words were endorsed or stamped on a cheque drawn by the Second Plaintiff on its trust account held with the Defendant Bank. The cheque was in the amount of $1,022.45 and payable to Loc Tung Bai and Thi Diep Bui and represented payment of monies held by the Second Plaintiff in trust for its client. The publication was to the collecting bank for the client the identity of which is known to the Defendant. 81. On or about 2 December 1997 the Defendant republished the matter complained of in paragraph 80 hereof to Loc Tung Bai and Thi Diep Bui or that was the natural and probable consequence of the conduct complained of in paragraph 80 hereof. PARTICULARS OF REPUBLICATION The cheque marked present again was published by the collecting bank to its customer which was the natural and probable result of the dishonour of that cheque by the defendant and the publication pleaded above. 82. The matter complained of in paragraph 80 in its natural and ordinary meaning bore the following imputations each of which was defamatory of the Second Plaintiff: (a) The Second Plaintiff was unable to pay its debts as they fell due. (b) The Second Plaintiff was unable to meet its obligations to clients entitled to payment of moneys from its trust account. (c) The Second Plaintiff had defaulted in the payment to the clients of moneys from its trust account. (d) The Second Plaintiff failed in its obligations as an estate agent to maintain its trust account to such an extent that clients' funds were missing from the account. (e) The Second Plaintiff had passed a valueless trust account cheque. 83. Alternatively, the matter complained of in paragraph 80 bore each of the imputations set out in paragraph 82 above, each of which was defamatory of the Second Plaintiff, by reason of the following facts and matters: (a) The Second Plaintiff conducted the business of a real estate agent and was obliged to establish, maintain and keep a trust account in accordance with the law. (b) The Second Plaintiff managed the rental property of the payee(s) of the cheque collected and held and was obliged to hold rent moneys on trust for and to pay them to the payee(s).

4 Paragraphs 124 and 125 purport to plead additional imputations in relation to 2 cheques by reason of further specified extrinsic facts. Those paragraphs are as follows: 124. Further, with respect to the Rent Trust Account cheque pleaded and particularised in paragraph 20, the Plaintiffs repeat paragraphs 20, 21, 22 and 23 above and say further that by reason of the facts and matters pleaded in paragraph 23 and the following matter, namely (e) The Property Stock and Business Agents Act 1941 created statutory offences related to the breach of the Act in the control and management of trust moneys received on behalf of clients including landlords (see section 36). the matter complained of bore the following additional imputations, namely (j) That the First Plaintiff as principal of the Second Plaintiff, the proprietor of a Real Estate Agency, had broken the law, and (k) That the Second Plaintiff as proprietor of a Real Estate Agency had broken the law. PARTICULARS Complaint by landlord and customer to Zorad Pirzad the rental manager of the Second Plaintiff: (a) Anna Coltman: I'll make a report to the Real Estate Council. 125. Further, with respect to the Rent Trust Account cheque pleaded and particularised in paragraph 44, the plaintiffs repeat paragraphs 44, 45, 46 and 47 above and say further that by reason of the facts and matters pleaded in paragraph 47 and the following additional matter, namely (e) The Property Stock and Business Agents Act 1941 created statutory offences related to the breach of the Act in the control and management of trust moneys received on behalf of clients including landlords (see section 36). the matter complained of bore the following additional imputations, namely (j) That the First Plaintiff as a principal of the Second Plaintiff, the proprietor of a Real Estate Agency, had broken the law, and (k) That the Second Plaintiff as proprietor of a Real Estate Agency had broken the law. PARTICULARS Complaint by landlord and customer to Zorad Pirzad the rental manager of the Second Plaintiff: (a) Frank Lavorato: I'll have to speak to the Real Estate Council. 5 It is to be observed that in this case the plaintiffs are relying upon the whole of the cheque and everything printed and written on it including the defendant bank's endorsement "refer to drawer" as the "matter complained of" i.e. the publication. 6 The defamatory nature of a publication containing the endorsement "refer to drawer" was considered by me in Raafbye Corporation Pty Ltd & Ors v Westpac Banking Corporation Ltd (unreported, 21 October 1994). To provide context for her submissions, Ms McCallum reminded me of what I said (at p 8): "The view I have formed is that the words "Refer to drawer" as published on the back of the cheque are capable of conveying the imputation that the relevantly identified plaintiff is insolvent in the sense of being unable to pay his/its debt constituted by the liability for the discharge of which the cheque was given as it fell due. I am not persuaded that no defamatory meaning can be conveyed by the words as was the first submission for the defendant but am persuaded that a meaning it is capable of conveying is that the plaintiff was insolvent". 7 Thus with respect to imputation 6(a) the defendant contends that conformably with what I said Raafbye, an imputation that the plaintiff was unable to pay its debts as they fell due in the general sense, that is, more than the one debt represented by the amount for which the cheque was issued and dishonoured, was not available. Secondly, and this was not argued in Raafbye, that imputation cannot arise because an inability to pay a debt involves an assumption that the cheque was handed over to pay a due debt, an assumption that is not available. 8 In response, Mr Garnsey QC argued that the ordinary reasonable reader could understand the document as carrying the meaning that a person cannot pay his or its debts as they fell due. In this context, if a person cannot pay a due debt, then that person cannot pay his, her or its due debts. That is a jury argument. Mr Garnsey did not deal in terms with the second component of Ms McCallum's submissions, however the wording of the cheque, being a trust account cheque, is sufficient, on a capacity question, to carry the implication that the cheque was issued to discharge a debt. Imputation 6(a) I hold to be capable of being carried by the matter complained of and capable of being defamatory. 9 Imputation 6(b), the defendant argued does not to differ in substance from imputation 6(a). I reject the submission made by Ms McCallum that the "assumption" to which she referred in relation to 6(a) is the more stark in relation to 6(b). Nor am I persuaded that 6(b) does not differ in substance from 6(a). Imputation 6(b) fastens on the obligations to pay moneys to clients from the trust account and from the document as a whole as I have described it, it is clearly capable of arising in its natural and ordinary meaning and is a more serious imputation. 10 As to imputations 6(c), (d) and (e), it is said in relation to the first two that they cannot arise from the natural and ordinary meaning: I think again the wording of the cheque and the nature of the cheque precludes my acceding to such a proposition on a capacity argument. The wording of the cheque provides the "implication" from which the ordinary reasonable reader might draw the inferences constituted by imputations (c) and (d). They are not instances of inference upon inference drawing, in my view. 11 However, I am persuaded that imputations (c) and (d), while each is capable of arising and capable of being defamatory, each does not differ in substance one from the other and the plaintiff will have to elect. 12 In relation to imputation (e), as indicated during the course of argument I am not persuaded that there is any want of clarity in the notion of "passing a valueless trust account cheque". Imputation 6(e) will go to the jury. 13 Imputations 6(f), (g) (h) and (i) are imputations of the first plaintiff, Mr Aktas. 14 It is to be noted that the particulars of identification are appended to the pleading of the initial publication to the collecting bank. The point was taken by Ms McCallum that the collecting bank's identity would be unknown and that one can assume that the plaintiffs did not intend to assert in pleading that the first plaintiff was known to that entity to be the alter ego of the second plaintiff (see Bargold Pty Ltd v Mirror Newspapers & Anor [1981] 1 NSWLR 9 at 10G-11E per Hunt J). The particulars of identification should be more appropriately located. 15 It is also argued that unless it is particularised as an extrinsic fact that the reader recognised the signature of the first plaintiff, there is nothing on the face of the cheque which says anything about the first plaintiff or his role in the second plaintiff passing that cheque. It needs to be pleaded as an extrinsic fact, together with the other extrinsic facts, to support the relevant imputations as true innuendos. Without it they cannot arise in its natural and ordinary meaning. With that proposition I agree and leave will be granted to the plaintiff to amend accordingly. I am not persuaded that the other arguments in relation to lack of difference in substance or a lack of clarity in meaning apply to this series of imputations. 16 It is to be noted that Mr Garnsey in his submissions in reply virtually conceded the requirement of the additional extrinsic fact for the true innuendos to survive. 17 The material pleaded in paragraphs 80-83, as I understood it, represents a concession by the plaintiff that that material can relate only to the second plaintiff. 18 In relation to the materials in paragraphs 124 and 125, the extrinsic facts, as was argued, are insufficient to tease out what the reader would need to know for the respective meanings there to be carried. This also has been agreed to by the plaintiffs and appropriate amendments will be made. 19 The defendant raised a legitimate grievance in relation to costs in the sense that from the file it can be seen that a statement of claim had been filed and there had been exchanged notices under Pt 67 r 12A. Very late notice of the proposed amended statement of claim and the new imputations was given and the defendant is entitled to its costs thrown away by reason of that late notification. Otherwise, considering the concessions made by the plaintiffs and the lack of success in the defendant I think it appropriate that each party pay its own costs. 20 Accordingly, the formal orders are:

1. Within 21 days the plaintiff is to file an amended statement of claim in accordance with these reasons.
2. The plaintiffs are to pay the defendant's costs thrown away by reason of late notification of the proposed form of amended statement of claim and imputations.
3. Otherwise each party is to pay his and its own costs of the proceedings on 27 and 29 October 2003.
4. I place the matter in the Registrar's 9am List on 16 April 2004.

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