State Bank of New South Wales Ltd v Currabubula Holdings Pty Ltd & Anor

Reported Decision : (2001) 51 NSWLR 399 (2001) Aust Torts Reports 81-618

CITATION : State Bank of New South Wales Ltd v Currabubula Holdings Pty Ltd & Anor [2001] NSWCA 47 FILE NUMBER(S) : CA 40379/99 HEARING DATE(S) : 12, 13, 14 February 2001 JUDGMENT DATE : 15 March 2001

State Bank of New South Wales Ltd - Appellant/Cross-Respondent PARTIES : Currabubula Holdings Pty Ltd - First Respondent/Cross-Appellant Paola Holdings Pty Ltd - Second Respondent JUDGMENT OF : Giles JA at 1; Heydon JA at 144; Ipp AJA at 145

LOWER COURT JURISDICTION : Supreme Court - Commercial Division LOWER COURT 50268/95 FILE NUMBER(S) : LOWER COURT Einstein J JUDICIAL OFFICER :

COUNSEL : R B S Macfarlan QC & C M Harris - Appellant D E J Ryan SC & D A Mallon - Respondents SOLICITORS : Mallesons Stephen Jaques - Appellant Gadens - Respondents CATCHWORDS : BREACH OF CONTRACT - banker and customer - overdraft facility - concern about customer's solvency - bank "freezes" current accounts - no more drawings on current accounts - but arrangements for opening new accounts, for transfer of funds paid into current accounts to new accounts, and for operation on new accounts provided within overdraft limit - whether freezing in breach of implied term not to vary customary mode of dealing without reasonable notice - no implied term - customer's case at trial not founded on such a term. DEFAMATION - bank sends to customer bank statements with "in liq" at end of balance column - whether conveyed that customer in liquidation or that account in liquidation or reduction - bank statements received by fax at customer's office - customer a company - seen by management - also seen by some employees with no business to see them - to whom communicated by bank - whether publication to customer - whether publication to other employees. D BREACH OF CONTRACT - BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 AC 266; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; Liverpool City Council v Irwin (1977) 180 AC 239; Shirlaw v Southern Foundries (1926) Ltd (1939) 2 KB 206. DEFAMATION - Advantage Personnel Agency Inc v Hicks & Grayson Inc 447 So 2d 330 (1984) (Florida CA, Third District); Diplomat Electric Inc v Westinghouse Electric Supply Company 378 F 2d 377 (1968) (USCA, Fifth Circuit); Duke of Brunswick v Harmer (1849) 14 QB 185; Fausett v American Resources Management Corp 542 F Supp 1234 (1982) (Utah DC, Central Division); Huth v Huth (1915) 3 KB 32; Jones v Amalgamated Television Services Pty Ltd (1991) 23 NSWLR 364; CASES CITED: Jones v Brooks (1974) 45 DLR (3d) 413; Ontario Ltd v Canadian Uniform Ltd (Ont Ct, 12 June 1997; Pullman v Walter Hill & Co Ltd (1891) 1 QB 524; Riddick v Thames Board Mills Ltd (1977) 1 QB 881; Rudd v Cameron (1912) 4 DLR 567; Sims v Wran (1984) 1 NSWLR 317; Speight v Gosnay (1891) 60 LJQB 23; Theaker v Richardson (1962) 1 WLR 151; Toomey v Mirror Newspapers Ltd (1985) 1 NSWLR 171; Traztand Pty Ltd v Government Insurance Office of New South Wales (1984) 2 NSWLR 598; Tunstall v Steigmann (1962) 2 QB 593; Ward v Weeks (1830) 7 Bing 211; Weld-Blundell v Strephens (1920) AC 956. DECISION : (1) Appeal allowed; (2) Orders (1), (3) and (4) made on 5 May 1999 set aside; (3) Judgment for the defendant; (4) Respondents pay appellant's costs of the trial and of the appeal and have a certificate under the Suitors Fund Act if otherwise qualified.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40379/99 Comm D 50268/95

Thursday 15 March 2001 STATE BANK OF NEW SOUTH WALES LIMITED v CURRABUBULA HOLDINGS PTY LIMITED & ANOR JUDGMENT

1 GILES JA: Currabubula Holdings Pty Ltd ("Currabubula") and Paola Holdings Pty Ltd ("Paola") claimed from State Bank of New South Wales Ltd ("the Bank") damages quantified at over $30 million for breach of contract; in the same proceedings Currabubula claimed from the Bank damages for defamation. The Bank was ordered to pay $1,748,278.20 to Currabubula, being $834,000 damages for breach of contract, $899,278.20 interest on those damages, and $15,000 damages for defamation. The claim by Paola failed. The Bank was ordered to pay 90 per cent of Currabubula's costs and Paola was ordered to pay 20 per cent of the Bank's costs. 2 Currabubula and Paola were members of the Paola group of companies ("the Group"). The Group banked with the Bank and was substantially indebted to it. The Bank was found liable in contract for breach of an implied term requiring that it give reasonable notice in the event that it determined to vary its customary mode of providing banking services. It was held that the breach injured the reputation and goodwill of Northern Rural Services Pty Ltd ("NRS"), another member of the Group, whereby NRS's business was sold at an undervalue, and that Currabubula thereby suffered loss caused by the breach because it had to pay the Bank correspondingly more than it would otherwise have had to pay. 3 The Bank's grounds of appeal challenged (a) the implication of the term, both in substance and on pleading grounds; (b) breach of the implied term; (c) causation of injury to the reputation and goodwill of NRS; (d) proof of consequential undervalue on the sale of NRS's business; and (e) consequential suffering of loss by Currabubula. 4 The events at the material time included the Bank sending bank statements for Currabubula's account which included the notation "in liq" at the end of the balance column. It was held that the bank statements carried the imputations that Currabubula was insolvent and that a liquidator had been appointed to it, that they had been published so as to be defamatory of Currabubula, and that defences under s 13 (unlikelihood of suffering harm) and s 22 (reasonable publication to a person with an interest) of the Defamation Act 1974 were not available. Currabubula was not a trading company. Damages were awarded on the basis that it had not proved any specific loss of business but was entitled to recover for injury to its reputation. 5 The Bank's grounds of appeal challenged (a) the imputations; (b) publication of the "in liq" bank statements; (c) the rejection of the two defences; and (d) the award of damages other than nominal damages. 6 The Bank also challenged the orders for costs, as to the extent to which the Bank was ordered to pay Currabubula's costs and the extent to which Paola was ordered to pay the Bank's costs. 7 Currabubula did not by a notice of contention seek to uphold either award of damages on grounds other than those relied on by the trial judge. It cross-appealed to challenge as inadequate the damages awarded for defamation, but it did not otherwise cross-appeal. Paola did not appeal or cross-appeal.

The Group and its banking 8 Currububula and Paola were holding companies in the Group. Mr Tony Paola and his wife Mrs Lynette Paola each held one of the two issued shares in Currabubula. They and Currabubula each held one of the three issued shares in Paola. Currabubula and Paola, principally the latter, then had a number of subsidiaries and sub-subsidiaries acting as trading companies. 9 The Group had banked with the Bank since the early 1980's or before. From at least 1984 Currabubula and Paola had taken up finance facilities made available by the Bank. On 7 February 1990 most of the members of the Group accepted a letter dated 1 February 1990 from the Bank formally extending the existing finance facility. The agreement on the extended finance facility had been reached in mid-December 1989. 10 The borrowers under the extended finance facility ("the facility") were Currabubula, Paola and nine of the trading companies. The facility was a multi-option facility, as taken up providing for overdraft accommodation of $8,500,000 subject to reduction to $7,500,000 by 31 May 1990. As is customary, there was provision for review and for termination. 11 The provision for review was in the letter of 1 February 1990 - " Review All facilities are subject to a further review immediately financial accounts for the Borrower for the half year ended 31 December 1989 become available This review is to be completed by 31 March 1990. Immediate review is to be conducted in the event of a material adverse change in the financial condition or change in ownership of any of the companies comprising the Borrower."

12 The provision for termination was via the statement in the letter of 1 February 1990 that the terms and conditions in the Bank's earlier letters providing finance facilities were to continue to apply unless inconsistent with the letter of 1 February 1990. Those terms and conditions included (the infelicities of expression are in the original) - " Representation and Warranties: Borrowers represents and warrants to the Bank as of the date of this Letter of Offer. … · That there has been no material adverse change in the business, assets or condition of the Borrowers since the original application for facilities by the Borrowers; and … · The Borrowers further represents and warrants that all statements made and documents provided in, or in connection with, the application to the Bank for the Facilities specified in this Letter of Offer and all representations which the Borrowers have made or may (during the continuance of the Facilities as outlined in this Letter of Offer) make to the Bank as to its financial position are true and fair and without limiting the generality for the foregoing, that, other than as notified to the Bank in writing, no property held by it or in its possession is impressed with or subject to any trust and acknowledges that the Bank has relied upon the correctness of the above statements in entering into this Agreement and will continue to do so in dealing with the Borrowers and/or any person on the Borrowers behalf. … Events of default: Bank may by notice in writing to the Borrowers declare that the Facilities may be cancelled forthwith, and/or declare the Facilities immediately due and payable together with all interest accrued thereon and all other amounts payable hereunder if any of the following events shall have occurred and be continuing:- … (iii) Any representations or warranties contained herein shall prove to have been incorrect in a material particular when made or deemed to have been repeated hereunder or any such representations or warranties shall become incorrect in a material particular at any time during the term of the Facilities. … (vii) Any circumstances arising which give reasonable grounds in the opinion of the Bank that there has been a material adverse change in the financial condition of the Borrowers. … "

The Group is under financial strain 13 On 21 December 1989 Mr Duncan Plante, the company secretary of the members of the Group, wrote to the Bank informing it that Automated Business Equipment Pty Ltd, a sub-subsidiary of Paola via its subsidiary ABE Holdings Ltd, had been placed in liquidation. By the same letter he confirmed that on 10 November 1989 a receiver and manager had been appointed to ABE Fax Pty Ltd, a subsidiary of Paola, and said that the appointment might require other companies within the Group "to complete some of the commitments of ABE Fax eg lease guarantees". 14 On 5 January the directors of Paola noted a forecast group deficiency in shareholders' equity of $1,060,686 if a particular guarantee of a commitment of ABE Fax Pty Ltd were honoured. It was resolved that advice be taken on "pros and cons of the company appointing a liquidator versus an appointment as a result of the section 364 notice issued by Mitsubishi". 15 On 9 January 1990 Mr Paola noted in his diary a decision - "1. To extend payment to creditors by 30 days and avoid the need for additional bank facilities.

2. Repay supplies by returning saleable stock which was not moving.

3. Reduce ordering to replace stock items which were fast moving only."

16 This decision, which may only have been directed to NRS's business of a trader in rural supplies, was implemented. The manager of NRS, Mr Ross Taylor, resigned because of what he saw as a direction "that no creditors be paid". Suppliers to NRS were told that there would be delay in payment, not universally but as and when it was thought necessary to tell them. 17 At a meeting with officers of the Bank in mid-January 1990 Mr Paola said that all the Group's assets were on the market except his home property Currabubula Station, owned by Currabubula. A report from the receiver and manager of ABE Fax Pty Ltd to the Bank dated 15 January 1990 revealed a deficiency of $4,878,000. 18 On 31 January 1990 the group auditor reported to the directors of Paola an estimated deficiency in ABE Fax Pty Ltd of $5,600,000. He also said that, excluding ABE Fax Pty Ltd from the consolidated accounts, he considered that it might not be appropriate for the group accounts to be prepared on a going concern basis. He projected a group net loss of $1,044,000 for the year ended 30 June 1990 and estimated a group deficiency in net assets at 30 June 1990 of $140,000. 19 The auditor's letter included - "The cash flow results of the above projections would indicate a negative cash flow to the group of approximately $1,500,000 (items (ii) and (iii)) during the 1990 year which would require the support of shareholders or third party creditors. … In view of the above projections we have sought advice as to whether Currabubula Holdings Pty Limited would provide agreements of financial support to the Paola group of companies. We have been advised that such agreement of support will not be given. Accordingly it is necessary to review the financial state of affairs of the Paola Group as an independent group without the financial support of any other party. We have formed the view that on this basis the Paola Group may not be able to continue as a going concern. In view of this assessment we have prepared our audit report on the group accounts on this basis and attach a copy of the proposed report for your consideration." 20 By 12 February 1990 the facility was fully drawn, and the Bank began to dishonour cheques presented for payment from the accounts of some of the companies in the Group. 21 The group auditor's report was not provided to the Bank. ABE Holdings Pty Ltd was a subsidiary of Paola, with a number of sub-subsidiaries including Automated Business Equipment Pty Ltd and NRS. On 12 February 1990 Mr Paola and Mr Plante met officers of the Bank, told them that ABE Holdings Pty Ltd was insolvent, and asked the Bank to appoint a receiver to that company. It was said that the purpose of appointment of a receiver was to protect ABE Holdings Pty Ltd from claims by creditors and that it was intended that Currabubula would purchase its land, plant and equipment. Perhaps it is no wonder that one of the Bank officers expressed concern about the position of the unsecured creditors. Mr Paola said that if the Bank was unwilling to appoint a receiver Currabubula would continue to provide support to ABE Holdings Pty Ltd. The Bank said the request would be considered. 22 On 13 February 1990 Mr Plante wrote to the Bank formally advising that ABE Holdings Pty Ltd was insolvent and repeating the request that the Bank appoint a receiver. A letter from Ferrier Hodgson & Co was provided to the Bank confirming the insolvency and anticipating that ABE Holdings Pty Ltd would also be required to honour guarantees of leases entered into by ABE Fax Pty Ltd. 23 The figures provided by Ferrier Hodgson & Co disclosed an estimated deficiency in ABE Holdings Pty Ltd's assets of $874,000 as at 31 December 1989. Of particular significance, however, the figures indicated that loans to Paola totalling $4,454,000 had nil value; that loans to one of Paola's subsidiaries ABE Jet Charter Pty Ltd of $2,670,000 had nil value; and that ABE Holdings Pty Ltd's shares in related companies had an estimated realisable value of only $82,000.

The freezing letter 24 On 15 February 1990 Mr Alan Booth of the Bank sent what came to be called "the freezing letter", the centrepiece of the breach of contract claim. It was addressed to "The Managing Director, Paola Group of Companies", and was sent by fax at about 5.30, presumably pm, to the Tamworth office of NRS with a cover sheet directing it to Mr Plante and stating, "Here is the letter as advised. Could you relay this to Tony for me." The Tamworth office was the office at which Mr Plante carried out his duties on behalf of the Group, and seems to have been the Group head office. 25 The freezing letter read - "As advised in our telephone conversation with Duncan all current accounts operated by companies of the Paola Group (see list attached) have been frozen. No further drawings are to occur on any of these accounts. The above action was necessary in order for the Bank to 'crystalize' [sic] present debt levels in view of the disclosure of 13/2/90 regarding the solvency of ABE Holdings Ltd. I should add that it has already been necessary to return certain cheques presented to the Bank on 14 and 15/2/90 in order to keep overall drawings of the Group within the $8.5 million limit. Your request that the Bank appoint a Receiver to ABE Holdings is presently being considered. In the meantime, in order to enable the Paola Group to continue to trade, it was recommended to Duncan that new accounts be opened and this is now being carried out in accordance with Duncan's faxed request. (Please note these accounts are to be operated on a credit basis only.) Discussions as to how the bank will respond to your request (to appoint a Receiver to ABE Holdings Ltd) and how the Bank will fund the Paola Group in the immediate future will be made following a further meeting with Ferrier Hodgson and Co which is presently planned to take place tomorrow. We will contact you as soon as possible after that meeting to relay our decisions." The attachment listed nine accounts, including a Currabubula account and accounts of NRS at Tamworth, Narrabri, Gunnedah, and Moree. It noted that the account for ABE Fax Pty Ltd "is already frozen", and that the account for ABE Travel Pty Ltd, one of Paola's subsidiaries, "is in credit funds and is therefore not included". Events surrounding the freezing letter 26 As appears from the freezing letter, there had been an earlier telephone conversation between Mr Booth and Mr Plante, and Mr Plante had faxed a request in relation to opening new accounts. From the cover sheet, Mr Booth must have told Mr Plante the contents or effect of a letter he would be sending. 27 There was scanty evidence as to the earlier telephone conversation. It seems that it was on 14 February 1990. Mr Plante recalled a conversation with Mr Booth on or about that date. He could not remember its terms, but believed it involved being advised that cheques drawn by companies in the Group had been dishonoured. He gave no other evidence about a conversation involving freezing of the current accounts, or about his faxed request to open new accounts. That the conversation recalled by Mr Plante was to do with the freezing of current accounts appears from the evidence of Mr Paola, who said he had a telephone conversation with Mr Swinburne of the Bank on 15 February 1990 in which he told Mr Swinburne that Mr Plante "rang me last night telling me that the Bank accounts had been frozen". Mr Booth gave no evidence about the earlier telephone conversation with Mr Plante. 28 Mr Paola's evidence of his conversation with Mr Swinburne included - "Mr Paola: Where are we going to bank the money that comes in to pay our suppliers? Mr Swinburne: Look you'd better get someone to come in and see us about setting up new accounts so you can bank your money so you can trade and pay your bills. Mr Paola: What's wrong with banking them in the old accounts and just using that limit as a base? Mr Swinburne: No you can only bank money into those accounts but you can't draw on them." 29 From other parts of the conversation, Mr Paola clearly thought that the facility had not been fully drawn. This is of some significance to the way in which the plaintiffs framed their breach of contract claim, see later in these reasons. It is not clear whether or not this conversation preceded Mr Plante's faxed request to open new accounts. 30 The request was sent at 2.44 pm on 15 February 1990. It was addressed to Mr Booth, and read - "Further to our telephone conversation earlier, would you please open the following new accounts;- ABE Jet Charter Pty Ltd (No 2 A/c) ABE Travel Service Pty Ltd (No 2 A/c) ABE Holdings Limited (No 2 A/c) Northern Rural Services Pty Ltd (No 2 A/c) (Tamworth only) Pyojit Pty Ltd (No 2 A/c) Currabubula Holdings Pty Ltd (No 2 A/c) The signatories for all accounts, except Pyojit, will be any 2 of:- A M Paola P J Middlebook L D Paola or D D Plante J A Middlebrook in conjunction with one of the first 3 signatories. Would you please arrange for the Macquarie Centre branch to prepare cheque books for Jet Charter and Travel Service and for Tamworth in respect of all other accounts. Could you ask the managers of both branches to call me this afternoon in order to discuss our cheque book requirements. Note that the NRS accounts in Moree, Narrabri, and Gunnedah will no longer be required. Could you also direct all branches to charge monthly direct debits to the new accounts."

31 At about 3pm on 15 February 1990 Mr Booth faxed the request to the managers of the relevant branches of the Bank. The cover sheet confirmed that "current accounts for the Paola Group of Companies are to be frozen forthwith", attaching a listing and excluding ABE Travel Pty Ltd. The request from Mr Plante was then attached and the branches were asked to arrange the new accounts. The cover sheet concluded - "Note 1) All further drawings on the existing current accounts are to be returned. 2) All the new No 2 accounts are to be operated on a credit basis only." 32 Other arrangements were made in conjunction with the opening of the new accounts. Money banked to the credit of an existing account after it was frozen was transferred, initially on request and later under a general arrangement, to the credit of the appropriate No 2 account, so as to be available to the account holder. It seems that two amounts of $50,033.32 banked to the current account of ABE Fax Pty Ltd on 15 and 16 February 1990 were not transferred over, but that account was already frozen because of the receivership - there was no complaint as to the earlier freezing. The Bank complied with requests made by Mr Plante to pay various cheques drawn on the current accounts prior to 16 February 1990 from the appropriate No 2 accounts, including payment of NRS cheques from the Tamworth No 2 account although drawn on the Gunnedah, Narrabri or Moree current accounts. Mr Plante's request for payment of direct debits from the No 2 accounts was implemented. Other money was banked to the credit of the No 2 accounts in the normal course. 33 In the result, the current accounts being at the limit of $8,500,000 so that the Bank was entitled to dishonour cheques drawn on them, the Group companies had the same practical benefit of the operation of accounts with the Bank as it would have had if the current accounts had not been frozen. If the current accounts had not been frozen they could not have drawn on the accounts unless money were first credited to them, but when money was credited to them they could have drawn on them to the extent of the money credited. Following the freezing letter they could not draw on the No 2 accounts unless money were first credited to them, but when money was credited to them they could draw on them to the extent of the money credited. The only difference was the mechanical difference of using newly opened accounts rather than the existing accounts, and by the arrangements described in the preceding paragraph any mechanical difficulty was obviated. 34 On what was for him an assumption that the current accounts were overdrawn, this was effectively acknowledged by Mr Paola - "Q. And if the accounts were overdrawn you would accept that your company wasn't entitled to draw any more on the account? A. If the accounts were overdrawn the bank was entitled to withhold payment on cheques, which would take the account over the limit, yes. They were entitled to do that. Q. And you understood by this letter that the Bank was saying that if you had any further funds coming in they could be put in fresh accounts and they could be drawn against? A. Yes, I understand that all debtors' payments coming in from that day were to be banked in different accounts, yes. Q. And you understood that they could be drawn against? A. Well, with credit funds it's not a matter of understanding, we could have banked those anywhere. Q. And there wasn't any particular problem you saw in that procedure that was proposed by the Bank was there? A. There was no problem with that procedure no." 35 As will appear more fully later in these reasons, the plaintiffs' breach of contract claim was initially on the basis that the facility had not been fully drawn as at 15 February 1990. It was ultimately accepted at the trial that it was then over the $8,500,000 limit, and that the Bank was entitled to dishonour cheques drawn on the current accounts as at that date and until 22 February 1990. As from 22 February 1990 there could have been honouring of cheques then drawn without the limit being exceeded. The falling of the total debit balance below $8,500,000 was due firstly to the untransferred amounts of $50,033.32 and secondly to reversals of the debit entries for cheques which had earlier been presented for payment, recorded as debit entries, but then dishonoured. Even then, the trial judge noted that the current accounts fell below $8,500,000 only by some $60,000 to $70,000. 36 Why did the Bank freeze the current accounts? Mr Swinburne said that he understood that it was necessary to freeze the current accounts once the Bank had notice of the insolvency of ABE Holdings Pty Ltd and possibly other companies in the Group, because any further drawings on the accounts might be unsecured and any payments into the accounts might be preferences or attributed to repayment of the secured debt. Mr Paul Stenhouse, a solicitor employed by the Bank since 1955, said that it was his practice on becoming aware that a customer was insolvent to advise that no further drawings should be allowed on existing accounts and that deposits should be to new accounts. We were referred to an article by Professor O'Donovan in (1987) 5 C&SLJ 50 discussing the decision in Kyra Nominees Pty Ltd v National Australia Bank Ltd (1986) 4 ACLC 400 in which payments reducing an overdraft were held to be preferences. The author was critical of the decision, but suggested that banks might be able to protect themselves against its impact by freezing the current account of a suspected insolvent corporate customer and requiring the customer to open a new account to be maintained in credit. We were not referred to precise evidence that the Bank's actions in mid-February 1990 were brought about by these considerations, but it can readily be inferred that they were. I express no view on the merits of Professor O'Donovan's suggestion.

The "in liq" bank statements 37 It seems that the Bank normally sent bank statements to the Group account holders weekly. Faxed transmission to the Tamworth office was the primary method of communication adopted by the Bank and the Group companies, and was routinely used - for example, the facility letter of 1 February 1990 was sent to the Tamworth office by fax. 38 For a time after 15 February 1990 bank statements included the "in liq" notation. The statements in evidence were -

Pyojit Pty Ltd (a sub-subsidiary of Paola) - 15 and 22 February 1990 NRS (Gunnedah) - 16 February 1990 NRS (Narrabri) - 16 and 23 February and 2 and 6 March 1990 NRS (Tamworth) - 16 February and 7, 14 and 21 March 1990 ABE Holdings Pty Ltd - 21 February 1990 Currabubula - 21, 23 and 28 February and 7, 14, 21 and 28 March 1990.

A copy of the Currabubula bank statement of 21 February 1990 is attachment 'A' to these reasons as an example. 39 The defamation claim was a claim only by Currabubula. It originally relied on an "in liq" bank statement said to have been published on 14 February 1990. On the final day of the hearing it was granted leave to rely on its seven "in liq" bank statements in evidence. The "in liq" bank statements of the other Group companies were relied on by Currabubula and Paola as a rather contentious element in the breach of contract claims, but as a matter of pleading and as recorded by the trial judge Currabubula relied on those bank statements for the defamation claim as well, in addition to its own "in liq" bank statements. Any pleading or substantive consequences of a large number of alleged publications of defamatory matter were not addressed.

The implied term 40 In considering the Bank's challenge to the implication of the term it is necessary to investigate in more detail what implied term was found. A better understanding of the implied term as found will be gained by referring also to the breach and the effect on the business of NRS as found. As will appear, in my opinion the implied term as found was not within the plaintiffs' case in the summary of contentions in their summons. It is proper, however, to address its substance. 41 The trial judge noted that it was common ground that the express terms of the contract constituting what he described as the Facility Agreement were to be found in the letter of 1 February 1990 and the incorporated terms and conditions of the earlier letters. He said that "[t]he facility letters, properly construed in the light of the objective facts and surrounding circumstances known to both of the contracting parties contain the following terms … ", and set out the terms as found. 42 So far as immediately relevant, the express terms as found were - " The Content of the Financial Accommodation The Bank was to make available a Multi Option Facility with a limit of $8.5 million, effectively increasing the $6.8 million limit of an existing Multi Option Facility. The facility obliged the Bank to provide financial accommodation totalling not more than $8.5 million to such of the eleven Paola Group Companies identified as borrowers and in such amounts and in such form (whether commercial bill acceptance/discount or overdraft limit or fixed and floating term loans or documentary letters of credit) as was requested of it by the Paola Group Companies. Reduction in the Facility Limit The facility was reduced to $7.5 million by 31 May 1990. Review of the Facility The facility was subject to a review immediately financial accounts for the Paola Group Companies for the half year ended 31 December 1989 became available, such review to be completed by 31 March 1990. An immediate review of the facility was to be conducted in the event of a material adverse change in the financial condition of any of the Paola Group Companies. Cancellation of Facilities and/or Declaration that Facility Immediately Due and Payable The Bank was entitled by notice in writing to the Paola Group Companies to declare that the facilities may be cancelled forthwith and/or to declare the facilities immediately due and payable together with all interest accrued thereon and all other amounts payable thereunder if any of the eight events of default specified in the letter of 4 September 1987 occurred and were continuing (the last of which events was of any circumstances arising which give reasonable grounds in the opinion of the Bank that there has been a material adverse change in the financial condition of the Paola Group Companies). … Duration of Facility Subject to the reduction of the facility to $7.5 million by 31 May 1990, the facility was to continue: (a) Until cancelled by notice in writing given by the Bank to the borrowers upon the occurrence of one or more of the events of default specified in the 4 September 1987 Facility Letter.

(b) Until terminated by agreement between the parties.

(c) Until terminated by operation of law. Outside of cancellation by notice following the occurrence of an event of default, the facilities were neither repayable on demand nor repayable on reasonable notice." 43 His Honour rejected a submission that the words in the letter of 1 February 1990, "Immediate review is to be conducted in the event of a material adverse change in the financial condition or change in ownership of any of the companies comprising the borrower", gave the Bank an entitlement to withdraw the facility without notice on the happening of a material adverse change. He also rejected the possibility that following the immediate review the Bank might be entitled to seek to re-negotiate aspects of the facility and, if re-negotiation proved abortive, then to transform the facility into a facility with a defined term or to terminate the facility on reasonable notice. He said that the Bank's power to conduct an immediate review "is likely to have been seen by the parties as a simple precursor to the Bank's, having first satisfied itself on such review of its entitlement to do so, then exercising its said rights to declare the facilities cancelled or immediately due and payable". 44 To this point his Honour was addressing the express terms of the facility, albeit engaging in construction of the letters in considering when it could be cancelled or withdrawn or repayment demanded. He considered that the power of review did not extend to cancellation, withdrawal or demanding repayment. Just what action by the Bank, if any action at all, the power of review encompassed in the absence of an event of default was not stated, and it is not necessary to express a view in these reasons. Reasonable notice was no part of the express terms - indeed, demand for repayment on reasonable notice was denied. And the express terms were all to be found in the letters embodying the Facility Agreement. 45 After consideration of joint and several responsibility for events of default, but without other discussion of implied terms of the contract, his Honour went on to find the implied term for breach of which he awarded damages. I think it desirable to set out a fairly lengthy passage from his reasons - " Standard Incidents of the Banker-Customer Contract It is axiomatic that in the case of a current account, a 'bank is bound to pay a customer's cheque drawn on such current account in as much as the relation of banker and customer as also that of debtor and creditor exists'. [Cf Dixon v Bank of New South Wales (1896) 17 NSWLR 355 at 368.] The same position obtains where a facility agreement is in place which obliges the Bank to pay a customer's cheque drawn on a particular account up to the credit limit the subject of the facility agreement. The Bank was obliged by an implied term of its contract with the Paola Group to give reasonable notice in the event that it determined to vary its customary mode of providing general banking services, and in particular the finance facility, to the Group. This obligation extended to any variations to the accounts to be operated with the Bank. The obligation embraced any requirement that overdraft facilities in place in relation to current accounts would no longer be permitted to be drawn upon. The obligation embraced any requirement that current accounts previously used for the operation of overdraft facilities could only be operated in reduction. The obligation embraced any requirement that the Group open new accounts. In the case of a determination by the Bank to vary its customary mode of permitting operations on the finance facility, the obligation to give reasonable notice implicitly embraced a correlative obligation to be precise and accurate in communicating what the variation involved and the effect, if any, of the variation on the continued operations of the facility. Each of the five conditions necessary to ground the implication of a term summarised by the majority in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at page 26 as repeated by Mason J in Codelfa Construction Pty Ltd v State Rail Authority NSW (1982) 149 CLR 337 at page 347 were satisfied. In the case of a finance facility in place, it would be plain to a Bank that its customer's business relationships and other dealings could well be vitally affected by the Bank's tampering with the mechanics of the customer's usual operations on the facility. Hence the special significance of precision in the Bank's mode of communicating to the customer what a new regime would entail and whether it involved any suggestion of restricting or varying the facility or of holding the position while the Bank determined whether and if so, in what way, to restrict or vary the facility itself. Hence also the special significance of directing such communications to the customer [here a corporate group of inter-related companies] at a level within the customer's hierarchy commensurate with the significance of what the Bank had determined upon. The obligation to give reasonable notice may be viewed as part of a general contract which is basic to all transactions: 'The relationship of banker to customer is one of contract. It consists of a general contract, which is basic to all transactions, together with special contracts which arise only as they are brought into being in relation to specific transactions or banking services. The essential distinction is between obligations which come into existence upon the creation of the banker - customer relationship and obligations which are subsequently assumed by specific agreement; or, from the standpoint of the customer, between services which a bank is obliged to provide, if asked, and services which bankers habitually do, but are not bound to provide . . .' [Pagets Law of Banking 11th Edition, Butterworths 1996 edited by Mr Mark Hopgood at page 110]"

46 The implied term was, it seems, implied in the contract as a term arising from the relationship of banker and customer, and not dependent on the existence of the facility or implied in the contract constituting the Facility Agreement. On one view there were three implied terms. 47 One was the obligation to give reasonable notice in the event that the Bank determined to vary its customary mode of providing banking services, both generally and as to the facility, as taking effect in this case variously further expressed as an obligation to give reasonable notice in the event that the Bank determined to vary the accounts to be operated with it, no longer to permit operation on the overdraft accounts in place, to require that the current accounts be operated only in reduction, and to require that new accounts be opened. 48 Another was the obligation to be precise and accurate in communicating the determination, as taking effect in this case seen as involving communicating what the variation involved and its effect on the continued operations of the facility, or what the new regime would entail and "whether it involved any suggestion of restricting or varying the facility or of holding the position … ". 49 The third was the obligation to direct the communications "at a level within the customer's hierarchy commensurate with the significance of what the Bank had determined upon". 50 The second and third obligations are not self-evidently manifestations of the first. If they are within it, it must be because reasonable notice has to be reasonable not only as to time but also as to precision and level of communication. 51 Later in his reasons, when considering the Bank's submission to the effect that a bank was entitled to take reasonable steps to protect itself in the event of possible insolvency of its customer, his Honour said - "The question of the steps which a bank is contractually entitled to take in the event that it suspects that one of its corporate customers might be insolvent is by no means a simple one. The matter may be dealt with by an express term. No such express term was relied upon in the present proceedings. Certainly the occurrence of a material event of default as defined in a relevant contract between the bank and its customer, will often give the bank, as in the present case, the right by notice in writing to declare that the facilities are cancelled forthwith and/or to declare the facilities immediately due and payable. But absent the bank taking such action and in the absence of any express term dealing with such circumstances, the bank may only achieve a variation of its customary mode of providing general banking services or of providing a particular finance facility to a customer or group, either by obtaining the customer's consensus to the proposed variation, or by giving reasonable notice of the bank's determination to impose the variation, as for example by requiring the customer to open new current accounts. The latter entitlement is conferred by an implied term of the contract. To my mind, a justifiable suspicion by a bank of a customer's insolvency is simply only one of possibly many circumstances which may in fact motivate a bank to exercise its contractual entitlement, upon giving the customer reasonable notice of the requirement, to require the opening of new accounts. What period of time will or will not prove sufficient to satisfy the requirement to give reasonable notice must depend on the circumstances of the individual case." 52 It is clear enough that the implied term found by his Honour to have been breached was a term requiring reasonable notice of action by the Bank, as distinct from a term precluding the action even on reasonable notice. His Honour considered that the Bank was entitled to vary its customary mode of providing banking services, both generally and as to the facility, including by requiring the Group companies to open new current accounts. But it had to give reasonable notice of the variation. The Bank was found to be in breach of contract not because it denied to the plaintiffs the overdraft accommodation promised under the facility, but because what it did in mid-February 1990 was not done on reasonable notice. 53 So the finding of breach of the implied term was - "Here it is crucial to keep in mind the fact that the bank did not elect to regard any of the Paola companies or the Group as having committed any event of default. The Bank did not purport to cancel the facility. The Bank did not declare the facility immediately due and payable. In my judgment the Bank, without giving reasonable notice, determined to and in fact froze all current accounts and determined to prevent any further drawings on any of those accounts. It then communicated that decision to the Group. It did not obtain the Group's consensus to its actions. Faced with the Bank's pre-emptive actions, the Group had no alternative other than to open the new accounts in order to continue trading. The Bank clearly determined to alter its customary mode of providing the finance facility through existing accounts which, subject to the customer bringing the balance in the accounts under the $8.5million limit, would absent the Bank's directive, have entitled the customer to continue to draw on the account. That conduct of the Bank was in breach of the above described implied term. … " 54 The trial judge in fact held that there had been a number of events of default in mid-February 1990, but considered that the Bank did not act upon them. His finding of breach is in accordance with the relevant implied term being a term requiring reasonable notice of action by the Bank as distinct from a term precluding the action even on reasonable notice. 55 It does not seem at this point in his Honour's reasons that precision and level of communication played a part in the breach as found. When his Honour came to the effect on the business of NRS the ground may have moved a little. I go to the finding as to the effect on the business of NRS only to assist in understanding the implied term as found. The reasoning, in brief, was that the Bank's communications with the Group in mid-February 1990 were deficient not only as to the time but also as to precision and level of communication; that as a result Group staff, suppliers and customers of NRS and "the local community" came to see NRS and the Group as in serious financial difficulty; and that as a further result the subsequent sale of NRS's business was at an undervalue. The "in liq" bank statements came into this as contributing to the widely perceived financial difficulty and making it impossible for NRS to weather the storm (the contention earlier mentioned was over the plaintiffs' entitlement to rely on the "in liq" bank statements in this regard). The Bank addressed a number of criticisms to this reasoning and the factual steps along its path, as to which it is not necessary to express a view. 56 Sufficiently to assist in understanding the implied term as found, his Honour said - "In substance, the Bank's notifications to the Group at least involved the following parameters: (i) That the Bank had determined to prevent the Group from further drawings on its current accounts, which determination was in place.

(ii) That the Bank had determined to require that if the Group wished thereafter to operate cheque accounts, new Number Two accounts would have to be opened and operated on a credit basis only, and that this requirement was also in place.

(iii) That all further drawings on current accounts were to be returned. The Bank's conduct fell far short of compliance with its contractual obligations. No notice at all was given, let alone reasonable notice. Such information as was given was neither precise nor accurate. The Bank's communications did not affirm that the facility was to be continued. The communications in fact suggested the contrary. And as for the possibility that the Bank's tampering with the mechanics of the customer's usual operations on the facility could vitally affect the Group's business relationships and other dealings, this appears to have been ignored - the Bank on the evidence, apparently having in mind only the question of protecting itself against the possibility that it might be adversely affected by further drawings on existing accounts, being later held to amount to preferential payment. And as for the special significance of the Bank directing its relevant communications to the Group at an appropriate level, the flurry of activity particularly on 15th and also on 16th February which included the sending of the "in liq" bank statements, paid no regard to this parameter - and indeed became an immediate cause of the panic within the Group's and NRS's offices and a cause of the events and resignations which followed, which events are generally referred to in more detail below. It is not difficult to discern that a 'confidential' letter addressed to Mr Paola explaining the Bank's position in clear terms and giving him time to explain to Group employees what the position was, would have averted the panic and prevented the subsequent events. In my judgment, there is no doubt that by reason of the Bank's communications of mid February 1990, the impression gained by employees within the Group and by those dealing in business with the Group and by the local community was that the Bank had withdrawn support for NRS which was seen as no longer viable and as likely to fail. In my judgment, the impression gained by reason of the same communications, by employees within the Group and by those dealing in business with the Group and by the local community, went beyond NRS, and was that the Bank had withdrawn support for the entire Group which was likely to be no longer viable and may well fail." 57 Again this is in accordance with, and confirmatory of, the implied term found by his Honour to have been breached being what I will for short call a notice term. The movement in the ground may have been the findings of imprecision and inappropriate level of communication, at least as to the "in liq" bank statements and perhaps more widely. But the reasoning to effect on the business of NRS, and so in due course to loss to Currabubula for which the damages compensated, rested on the quality of the notice given to the account holders, not on any failure to honour cheques drawn on the current accounts or on denial to the plaintiffs of the overdraft accommodation promised under the facility. Indeed, the Bank was found to have breached the implied term in mid-February 1990, at a time when it was also found to have been entitled to dishonour cheques drawn on the current accounts. 58 One reason for this rather lengthy consideration of what implied term was found is that in his reasons the trial judge used language at times possibly reflective of denial to the plaintiffs of the overdraft accommodation promised. An example is the observation that, although the Bank was not obliged to honour cheques drawn beyond the facility limit, that was not to say that it was "entitled to unilaterally vary the contract by refusing to permit the Group to resume operations on its banking accounts once it had deposited sufficient funds to bring the credit facility back into place". The plaintiffs' submissions in the appeal seemed sometimes to rest upon such a denial, rather than on breach of a notice term, and there was discussion of whether the Group had in fact been denied the promised overdraft accommodation. Save arguably as to the $60,000 to $70,000 earlier mentioned, and I emphasise arguably, on any view it was not. The damages awarded by the trial judge could not be supported on such a minor breach of contract, if breach there was. It was not a breach on which the trial judge's award of damages rested, and towards the end of his reasons he found expressly, under a heading "The plaintiffs' claim that the Multi-Option Facility was not provided to the plaintiffs so that there was a denial of the facility", that the Bank did not call up the facility and that "The breaches of contract found do not include a calling up of the facility".

The implication of the term 59 The trial judge did not regard the implied term as a legal incident of a class of contract (see for example Liverpool City Council v Irwin (1977) AC 239). He regarded it as an implied term necessary to give business efficacy to a particular contract, and considered that it satisfied the conditions stated in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283 and adopted in Secured Income Real Estate v St Martin's Investments Limited (1979)144 CLR 596 and Codelfa Construction Pty Ltd v State Rail Authority of New South Wales, (1982) 149 CLR 337. Those conditions are - "(1) It must be reasonable and equitable; (2) It must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) It must be so obvious that 'it goes without saying'; (4) It must be capable of clear expression; (5) It must not contradict any express term of the contract."

60 As is stated by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales at 346, the courts are slow to imply a term. It is not enough that it is reasonable to imply a term. It must be necessary to do so in order to give business efficacy to the contract and the term must be so obvious that it goes without saying; "Further, there is the difficulty of identifying with any degree of certainty the terms which the parties would have settled upon had they considered the question". 61 The implied term as found is of remarkable width and generality. It extends to variation for all banking services, and to whatever may be meant by "the customary mode" of providing banking services. The combined concept of the customary mode of providing banking services is also uncertain. If the notice has to be reasonable not only as to time but also as to precision and level of communication, it is thrice uncertain in its application on any particular occasion. In particular, "the customary mode" of providing banking services could include matters of form or matters not affecting the customer's obligations for which reasonable notice of variation is not reasonable and equitable and neither necessary to give business efficacy nor so obvious that it goes without saying. Would it include a change to the deposit slips used by a bank? Would it include the assistant manager rather than the manager of a branch having the dealings with the customer? Would a bank have to give reasonable notice if, because of improved clearance procedures, it determined to permit funds to be drawn against cheques two days after their deposit instead of five days? No doubt questions such as these might be answered, but that they must be asked casts doubt on the implied term. 62 Further, a term of the width and generality of the implied term as found is likely to conflict with other rights and obligations between banker and customer. It is not uncommon for banking authorities to confer unilateral rights of action on the bank without notice. No doubt because the implied term as found was not within the plaintiff's case in their summary of contentions, this does not seem to have been addressed in the evidence in this case, and illustrations can not readily be extracted from the evidence. Specifically in relation to the facility, however, the Bank's rights of cancellation or calling in the facility were not conditioned on reasonable notice. The Bank could act immediately. As a more general example, reasonable notice is not required before a bank exercises the long-standing common law right to combine accounts, surely a variation to the customary mode of providing banking services of a nature akin to the Bank's action in mid-February 1990. An all-embracing implied term as found by the trial judge, arising simply from the relationship of banker and customer, can not be correct. 63 Again specifically in relation to the facility, the Bank agreed to provide an overdraft with a limit of $8,500,000, and it either provided that banking service or it did not. It may be taken that the customary mode of providing the banking service was by honouring cheques drawn on the Group companies' accounts so long as the total debit balance did not exceed $8,500,000, but so long as the overdraft accommodation to a limit of $8,500,000 was provided by the Bank honouring cheques drawn within the limit it did not matter what account or accounts were used to provide the banking service. The change in accounts did not matter so long as, subject to the overdraft limit, outstanding cheques drawn on the current accounts were paid from the new accounts. In the circumstances of the present case, there was no need for anything more than notification of the freezing of the current accounts plus the making of the arrangements earlier described; even putting aside the width and generality of the implied terms as found and with specific reference to the events of mid-February 199o, there was no necessity in order to give business efficacy for an over-arching requirement of reasonable notice. 64 Whether as part of the general banker/customer relationship or treating the implied term as focused on the facility, and particularly on varying the accounts by which the facility was provided, operated with the Bank, in my opinion business efficacy did not require the wide and uncertain term as to reasonable notice with the three aspects found by the trial judge. Nor, in my view, was it reasonable and equitable to inhibit the Bank from seeking immediately to act in a manner perceived to protect it from the insolvency or possible insolvency of at least some of the members of the Group; or put with reference to another of the conditions stated in BP Refinery (Westernport) Pty Ltd v Shire of Hastings, the requirement of reasonable notice was not so obvious that it went without saying. Adopting the officious by-stander test of MacKinnon LJ in Shirlaw v Southern Foundries (1926) Ltd (1939) 2 KB 206 at 227, if an express term to the effect of the implied term as found were suggested at either the commencement of the banker/customer relationship or at the time of arranging the facility, the response from the Bank, at the least, would not have been testy suppression with a common "Oh, of course". 65 In my opinion, therefore, the appeal must be upheld so far as damages were awarded for breach of contract, on the ground that the implied term on which the award rested should not have been found. It is unnecessary to consider the Bank's other challenges, save that I should explain why in any event the implied term as found was not within the plaintiffs' case in the summary of contentions in their summons.

The implied term and the plaintiffs' case 66 In para 3 of their summary of contentions the plaintiffs alleged a written Facility Agreement, to be found in the letter of 1 February 1990 including by the incorporation of not inconsistent provisions from the earlier letters. They alleged that the Facility Agreement contained ten terms set out in lettered sub-paragraphs. 67 None of the terms stated a customary mode of providing general banking services, or of providing the facility. The closest they came to a mode of providing the facility was the terms in sub-paras (b) and (c) of para 3 - "(b) the Defendant promised that it would provide the financial accommodation totalling not more than $8.5 million to such of the Paola Group Companies, in such amounts and in such forms (whether commercial bill acceptance/discount or overdraft limit or fixed and floating rate term loans or documentary letter of credit) as was requested of it by the Paola Group Companies.

(c) the Defendant promised that the $8.5 million multi-option facility would be available for as long as was desired by the Paola Group Companies subject only to the limitations set out in (d) - (g) below;"

68 Terms in following sub-paragraphs of para 3 dealt with review of the facility, being review immediately financial accounts for the Group companies for the half year ended 31 December 1999 became available (sub-para (e)) and an immediate review in the event of a material adverse change in the financial condition of any of the Group companies (sub-para (f)), and with entitlement by notice in writing to declare that the facility may be cancelled forthwith and/or to declare the facility immediately due and payable if any of eight events of default occurred and was continuing (sub-para (g)). 69 In para 4 the plaintiffs then alleged a number of implied terms in the Facility Agreement - "4. On the proper construction of the Facility Agreement, if circumstances arose entitling a review of the facility, in the carrying out of the review: (a) the Defendant was not entitled unilaterally to vary any of the terms of the Facility Agreement; and

(b) the Defendant was not entitled to declare that the facilities may be cancelled forthwith or declare the facilities immediately due and payable unless an event of default under the letter of 4 September 1987 was established; alternatively

(b)[sic] the Defendant was not entitled unilaterally to vary any of the terms of the Facility Agreement unless the variation was fair and reasonable between the parties; alternatively

(c) the Defendant was obliged to give the Paola Group Companies reasonable notice of any intention to vary any of the terms of the Facility Agreement. Particulars

The limitations are implied in one or more of the following ways: (a) as a matter of construction from the actual terms used in the Facility Agreement as referred to in paragraph 3 above;

(b) as a matter of ad hoc implication on the basis that it is necessary to give the Facility Agreement efficacy; or

(c) on the basis of implication of law, by reason of an imputed intention because the term is a legal incident of this class of contract."

70 It will be noted that the only implied term in relation to notice was first, conditioned upon circumstances arising entitling a review of the facility and the carrying out of the review, and secondly, in relation to notice of an intention to vary any of the terms of the Facility Agreement - apparently the terms in the ten lettered sub-paragraphs of para 3. 71 Succeeding paragraphs alleged matters under the headings "Performance of the Facility Agreement up to 13 February 1990" and "Facts Relevant to Breach by Defendant of Facility Agreement". The allegations under the latter heading were of the freezing letter and the dishonour of cheques drawn on the current accounts on and from 16 February 1990, and it was specifically alleged that if the cheques had been honoured the total accommodation provided by the Bank to the Group companies would have remained at less than $8,500,000. 72 Then under the heading "Breach by Defendant of Facility Agreement" came the allegations - "22. The Defendant's action on 16 February 1990 in dishonouring some or all of the cheques presented to it on 15 February 1990 was a breach of the Facility Agreement in that the Defendant did not allow the Paola Group Companies to exercise their overdraft rights up to the limit set by: (a) the overdraft at close of business on 12 February 1990; alternatively

(b) $8.5 million. 23. The defendant's actions between 17 February and 31 May 1990 in dishonouring cheques presented to it was a breach of the Facility Agreement in that the Defendant did not allow the Paola Group Companies to exercise their overdraft rights up to the limit set by: (a) the overdraft at close of business on 12 February 1990; alternatively (b) $8.5 million. 24. The Defendant's actions from 15 February 1990 to June 1992 so as to freeze all accounts of the Paola Group Companies and not allow any drawings thereon, even when the total accommodation to the Paola Group Companies did not exceed $8.5 million (or post 31 May 1990, $7.5 million), was a breach in [sic] the Facility Agreement in that:

(a) post 31 May 1990 the Paola Group Companies substantially complied with the term set out in paragraph 3(d) above;

(b) the Defendant did not purport to exercise a right of review pursuant to the term referred to in paragraph 3(e) above;

(c) the Defendant did not purport to exercise a right of review pursuant to the term referred to in 3(f) above; and in any event, by reason of the matters alleged in paragraph 9(a), no right to review the facility arose under such term;

(d) further, the Defendant acted unilaterally in purporting to vary the Facility Agreement so as to freeze all accounts and not permit any further drawings thereon;

(e) further, such a variation to the Facility Agreement was not fair and reasonable between the parties;

(f) further, the defendant failed to give the Paola Group Companies any or reasonable notice of its intention so to vary the Facility Agreement;

(g) further, in the circumstances (including those set out in paragraph 9(b) above), there was no event of default under the letter of 4 September 1987;

(h) by reason of the matters set out in (d) - (g) above, and in the light of paragraph 4 above, if the Defendant conducted a review of the Facility Agreement (which is denied) and if the Defendant was entitled to conduct such a review (which is also denied), that review was ineffective to vary the terms of the Facility Agreement as set out in paragraph 3(b) and (c) above;

(i) further, by reason of the matters alleged in (g), the Defendant was not entitled (under the term referred to in 3(g) above) to declare that the facilities may be cancelled forthwith and/or to declare the facilities immediately due and payable;

(j) further the Defendant did not purport to declare that the facilities may be cancelled forthwith and/or to declare them immediately due or payable under the term referred to in 3(g) above;

(k) further the Defendant did not purport to cancel the facilities;

(l) by reason of the matters set out in (a) - (k), the Defendant breached the term of the Facility Agreement pleaded in paragraph 3(b) and (c) above. 25. In particular, the Defendant's refusal to allow Currabubula to take $390,000 from the proceeds of sale of Durhambone East in late 1990 was a breach of the terms pleaded in 3(b) and (c) above." 73 On one view the breach alleged was in the end breach of only the terms of the Facility Agreement set out in sub-paras (b) and (c) of para 3, but a number of the ways in which it was said the freezing of the accounts was a breach of the Facility Agreement suggests otherwise. Even on a more ample reading of the allegations of breach, however, the only allegation relevant to reasonable notice was that in sub-para (f) of para 24. It treated the freezing of the accounts as a variation of the Facility Agreement, and was apparently intended to pick up the implied term in sub-para (c) of para 4. Although not presently material, it may be noted that sending the "in liq" bank statements was not part of the allegations of breach. 74 It is evident from these allegations that the essence of the plaintiffs' case was that the drawings were within the limit of $8,500,000; that the Bank wrongly dishonoured cheques drawn within that limit and wrongly refused to permit drawings up to that limit; that this was a variation to the Facility Agreement which the Bank was not entitled to make unless there had been an event of default or, if it was entitled to make it, was entitled to make only on giving reasonable notice; that in any event the Bank had not exercised its right to cancel the facility or declare it repayable upon an event of default; and that the Bank had therefore failed to provide overdraft accommodation to the promised limit. The structure and language of the summary of contentions had some infelicities, but it was clearly enough framed on the basis that the Bank was not entitled to dishonour cheques because the limit was exceeded. The complaint was that the Bank had failed to pay cheques. It was not that the Bank had required change in the accounts from which cheques were paid. 75 As explained earlier in these reasons, the basis for the award of damages for breach of contract was not failure to provide the facility as promised, but rather breach of what I have called a notice term. Perhaps a plaintiff's summary of contentions is not to be construed with the strictness of a common law pleading of past years, but the defendant is entitled to find in it the claim he has to meet on a fair reading of the document. I do not think that the plaintiffs' summary of contentions extended to an allegation that the Bank was in breach of the implied term as found, whether in its full width and generality or focused on provision of the facility. 76 The only notice term alleged was conditioned upon circumstances arising entitling a review of the facility and the carrying out of the review. The implied term as found was not so conditioned, but was of much greater incidence. The only notice term alleged was in relation to notice of an intention to vary any of the terms of the Facility Agreement, apparently the terms in the ten lettered sub-paragraphs of para 3. The implied term as found was not related to an intention to vary those terms, but was of much wider application. And the allegation of breach by failure to give reasonable notice, on a proper understanding of the plaintiffs' case as framed in the summary of contentions, was of failure to give reasonable notice that the Bank would not provide overdraft accommodation up to the promised limit of $8,500,000. This is vastly different from the breach as found. 77 A plaintiff's pleaded or particularised case may be departed from in the conduct of the hearing without complaint by the defendant, and it may then be proper for the trial judge to decide the case on the issues as fought: see for example Dare v Pulham (1982) 148 CLR 658 esp at 664. If that occurs, however, appropriately amended pleadings should be required. Proceedings commenced by summons incorporating a statement of contentions in which the plaintiff's case is to be found are strictly not on pleadings, but the same principles are applicable. 78 But that did not occur in the present case. We were provided with extracts from documents provided to the trial judge in which the plaintiffs' case as presented may be seen. It is not clear that a transcript of oral submissions was available, but the plaintiffs said that they were content not to go beyond the extracts. 79 In the plaintiffs' outline of issues delivered prior to the hearing in accordance with Practice Note 100 nothing was said of breach by failure to give reasonable notice of the kind in the implied term as found. The summary of breaches of the facility agreement was relevantly confined to freezing the current accounts and failing to honour cheques drawn on those accounts, and it was repeated that as at 16 February 1990 the facility was drawn to less than $8,500,000 and honouring the cheques would not have led to it exceeding that amount. It was said - "11. The case therefore turns on whether or not the freezing of the accounts was a breach of contract by the Bank. The Plaintiffs' case is expounded upon in paragraph 24 of the summons. Critically, the plaintiffs assert that: 11.1 There was no exercise of the right of review and no such right had arisen in any event;

11.3 There had been no event of default as defined in the 4 September 1987 facility letter;

11.4 The Bank was not in a position where it could declare the facilities to be cancelled and/or declare them to be immediately repayable.

11.5 In any event, the Bank did not even purport to cancel the facilities."

80 In the exposition of their case in the outline of issues the plaintiffs asserted that the freezing of the current accounts was neither a cancellation of the facility nor a declaration that it was immediately due and payable, and said - Under the Facility Agreement the Group had a contractual right to borrow up to the facility limit. The action of the Bank in 'freezing the accounts' should be held to be a refusal to perform its contractual obligations."

The only reference to notice was in the assertions that the facility was "for an indefinite period" and that "there was an obligation on the Bank to give reasonable notice of any intention to cancel the facilities". 81 In the plaintiffs' written submissions at the conclusion of the hearing these positions were maintained. The effect of the relevant paragraphs was that the facility was available indefinitely so long as there was no event of default; that even if there were an event of default the Bank was only entitled to cancel the facility or declare it immediately due and payable, neither of which it did; and - "174. Under the facility agreement the Group had a contractual right to borrow up to the facility limit. On the Bank's own evidence the Group's balance fell below the $8.5m limit on 23 February 19909, and never exceeded it again.

175. The action of the Bank in 'freezing the accounts' should be held to be a breach of its contractual obligations."

82 There was a change in these closing submissions, in that the plaintiffs recognised that the facility limit was exceeded until 23 February 1990. That required an adjustment to the way in which the plaintiffs' case was put, but the adjustment seems to have been only to contend that freezing the accounts infringed the contractual right to borrow up to the facility limit from 23 February 1990. Still there was no assertion of, or reliance on breach of, an implied term to the effect of that found by the trial judge. Reasonable notice was mentioned in the submissions only in a contention that, if the facility were repayable on reasonable notice (which the plaintiffs denied), reasonable notice had not been given. As part of the same contention, it should be said, it was acknowledged that the Bank could call for repayment without giving reasonable notice if there were an event of default, which would appear to be inconsistent with the implied term as found. 83 The Bank's challenge to the implied term on pleading grounds is not a technicality. Extrinsic evidence may be received in relation to implication of a term - it is sufficient to refer to the well-known discussion in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales at 347-54. If, as the plaintiffs' summary of contentions suggested, the relevant contract was the Facility Agreement, the Bank (and the plaintiffs) had no occasion to consider extrinsic evidence relevant to the implied term as found. Still less did they have occasion to consider extrinsic evidence relevant to an implied term in the contract arising out of the general relationship of banker and customer. Other express terms of such a contract between the plaintiffs and the Bank, for example in account opening or operating authorities, might have been investigated and been relevant to the implication of the term as found. None of this arose. Submissions more to the point than the submissions to the trial judge, so far as they have been made known to us, could have been made. 84 On the evidence in fact called and the submissions on appeal I have concluded that his Honour was in error in finding the implied term, but in any event I consider that the Bank's challenge to the implication of the term on pleading grounds has force and that on that independent ground the appeal must be upheld so far as damages were awarded for breach of contract.

The defamatory imputations 85 I have earlier noted that Currububula relied on the "in liq" bank statements of the other Group companies for the defamation claim, as well as on its own "in liq" bank statements. The trial judge found that Currububula "was defamed only upon the publishing of the bank statements in respect of itself". In this he was clearly correct. Currububula did not assert special facts for or rely on imputations defamatory by innuendo. If the "in liq" bank statements of the other companies conveyed the defamatory imputations, they were defamatory of the respective other companies but not of Currububula. 86 Concentrating on Currabubula's in "in liq" bank statements, commencing with that of 21 February 1990, it was not in dispute that if the imputations alleged were conveyed, they were defamatory of Currabubula. 87 The trial judge said - "The Bank submits that the placing of the words 'in liq' underneath the balance of the account, as opposed to alongside the name of the company, makes plain that the natural and ordinary meaning of the words as here used, was that the loan, and not the company, was in liquidation. In short, the Bank submits that the material does not convey the imputations alleged and is not defamatory. On my finding, the words used convey each of the imputations complained of. The question is one for the Court's determination. An ordinary reasonable reader would come to the conclusion that both imputations were conveyed by the publications. Had this been a case with a jury, my finding would have been that it was clearly open to a jury to hold that reasonable persons would understand the words complained of in a defamatory sense. The bank statements were formal documents issued to the companies in question. In finding that the words used convey the imputations complained of, I rely upon the ordinary natural meaning of the words 'in liquidation' as used in relation to a company. As to the placement of the notation on the statements, I note that there is no natural tethering of the notation to the figures shown in the 'balance' column, nor necessarily to that column itself. The bank statements appear to have been prepared by a Bank employee instructed to include the words 'in liq' upon the bank statements, the instruction having been carried out by a prominent capitalised notation placed at the logical end of the five columns dealing with 'Date', 'Particulars', 'Debit', 'Credit' and 'Balance'." 88 In determining what the matter complained of conveys, its meaning to an ordinary reasonable person must be taken. The meaning is not limited to the literal meaning of the words, but includes any inference or implication which would reasonably be drawn: Jones v Skelton (1963) 63 SR 644 at 650; Amalgamated Television Services Pty Ltd v Marsden (1998) 43 NSWLR 158 at 165. In the lastmentioned case Hunt CJ at CL said (at 165) - "The ordinary reasonable reader (or listener or viewer) is a person of fair average intelligence ( Slatyer v Daily Telegraph Newspaper Co Ltd (1908) 6 CLR 1 at 7), who is neither perverse (ibid at 7), nor morbid or suspicious of mind ( Keogh v Incorporated Dental Hospital of Ireland [1910] 2 Ir R 577 at 586), nor avid for scandal: Lewis v Daily Telegraph Ltd (at 260). That person does not live in an ivory tower but can and does read between the lines in the light of that person's general knowledge and experience of worldly affairs: Lewis v Daily Telegraph (at 277); Morgan v Odhams Press Ltd [1971] 1 WLR 1239 at 1245; Lang v Australian Consolidated Press Ltd [1970] 2 NSWLR 408 AT 412; Middle East Airlines Airliban SAL v Sungravure Pty Ltd [1974] 1 NSWLR 323 at 340."

See also Mirror Newspapers Ltd v Harrison (1982) 149 CLR 293 at 301, referring to the understanding of the ordinary reasonable reader drawing on his own knowledge and experience of human affairs. 89 Defamation cases in this State are normally tried with a jury (see Supreme Court Act 1970 s 88(b)). The jury determines whether the matter complained of carries the imputation and, if it does, whether the imputation is defamatory: Defamation Act s 7A(3). In the present case an order pursuant to s 89(2)(b) of the Supreme Court Act was made by consent dispensing with a jury. 90 I do not find it easy to determine the ordinary reasonable meaning of the Currabubula "in liq" bank statements. Evidence before the trial judge admissible for another purpose or other purposes indicated that at least some persons took the "in liq" bank statements (not necessarily the Currabubula bank statements) to mean that the account holder was insolvent or in liquidation. But that must be put aside (see for example Hough v London Express Newspaper Ltd (1940) 2 KB 507 at 515), and in any event those persons may have been influenced by knowledge of Mr Paola's direction that stock be returned and payment of creditors delayed. Evidence called by the Bank included that "in liq" was added to bank statements in the relevant manner to indicate that the accounts were in liquidation in the sense of in reduction, and that the phrase "in reduction" was also used in the same manner. Probably that also must be put aside. The particular difficulty is that a judge who is by legal background and experience familiar with companies in liquidation and perhaps debts in liquidation may not approach the phrase "in liq" in the manner of the ordinary reasonable reader. Perhaps some ordinary reasonable readers would not be familiar with the phrase, and it would have no meaning to them. The understanding of others might vary according to their general knowledge and experience of worldly affairs, but a judge may be impeded in placing himself or herself in their position. 91 The Bank submitted that the trial judge erred in the view to which he came for three reasons. 92 One was that the bank statements were addressed to the company secretary of Currabubula, not to the liquidator of the company, and to the secretary at Currabubula Station rather than at a liquidator's office. This, it was suggested, showed that "in liq" did not mean that Currububula was in liquidation. This may attribute to the ordinary reasonable reader more general knowledge and experience of worldly affairs than is warranted. Critical analysis of the bank statements should not be assumed, and it is the broad impression which counts (Lewis v Daily Telegraph Ltd (1964) AC 234 at 285; John Fairfax & Sons Ltd v Foord (1988) 12 NSWLR 706 at 719-20; Crampton v Nugawela (1996) 41 NSWLR 176 at 184). 93 Another was that the trial judge was influenced by the evidence that some persons took the "in liq" bank statements to mean that the account holder was insolvent or in liquidation. I see no indication of that in his Honour's reasons for finding that the imputations alleged were conveyed. 94 The third was that the trial judge did not give sufficient weight to the fact that the phrase "in liq" was beneath the debit balance in the bank statement, rather than immediately after the name of the account holder or otherwise so as to indicate that the phrase referred to the status of the account holder as distinct from the status of the debt. It was submitted that an ordinary reasonable reader would have linked "in liq" with the balance, and assumed that the debt was in liquidation in the sense of in reduction. To my mind there is more in this argument. The close proximity of the debit balance and the phrase "in liq" strongly suggests that the phrase is connected with the status of the debt rather than the status of Currabubula, Currabubula being named elsewhere in the bank statement as the account holder and as the company to whose secretary the bank statement is addressed. Liquidation of a debt is a common enough expression, although referring to a debt as in liquidation may not be so common, and as a matter of broad impression there is a deal to be said against the defamatory imputations alleged. 95 I do not think it necessary to express a concluded view, because for the reasons which follow I consider that the trial judge's findings as to publication of the Currabubula "in liq" bank statements were in error.

Publication of the "in liq" bank statements 96 It is necessary to describe in some little detail the evidence going to publication of the "in liq" bank statements. I have earlier referred to the sending of bank statements to the Tamworth office. The evidence was in general terms, that bank statements were faxed to the Tamworth office. As will later appear, there was a passing reference to bank statements being sent by ordinary mail, but it can lead nowhere in the absence of more information. The evidence of employees seeing the faxed "in liq" bank statements was as to employees at the Tamworth office. The address of the account holder on some of the bank statements was not the Tamworth office - for example, the address on the first Currububula "in liq" bank statement was Currabubula Station - but the proceedings seem to have been conducted on the basis that the Bank did not send "in liq" bank statements anywhere but to the Tamworth office. 97 The evidence about persons seeing the "in liq" bank statements was not specific to the Currabubula "in liq" bank statements.

(a) Mr Paola, who was Group managing director, said that after a conversation with Mr Greg Giblet he "walked into the fax room and picked up from the fax machine faxed copies of bank statements from the State Bank which had at the bottom of the account balance the words 'in Liq'". He said that "[f]urther statements bearing the words 'in Liq' were received from about 16 February 1990", and that some were sent by fax, others by ordinary mail: this is the passing reference to bank statements being sent by ordinary mail.

(b) Mr Plante said that soon after 14 February 1990 bank statements were issued by the Bank and sent by fax with "in liq" on them. As earlier noted, Mr Plante was the company secretary of the companies in the Group, and he appears also to have had responsibilities as financial controller.

(c) Mr Peter Terrey said that he "saw a number of bank statements for various companies sitting beside the photocopier with the words 'in liq' on them". He was the financial accountant for the Group, although he rather enigmatically said that he effectively surrendered his position of financial controller to Mr Plante from the beginning of 1989 until approximately April 1990.

(d) Mr Taylor, whose resignation had not taken effect by mid-February 1990, said that he "received bank statements sent to NRS from the State Bank with the words 'in liq' printed on their face. The statements had been sent by facsimile to NRS".

(e) Ms Hamblin, who was the assistant to Mr Plante, said that in mid-February 1990 "we started to receive bank statements with the words 'in liq' on them by facsimile in the general area of the premises", and that the statements were "for a number of the companies in the Group not simply Northern & Rural Services or Currabubula Holdings Pty Ltd." She gave evidence of seeing Mr Taylor, Mr Steve Thornhill and Ms Natalie Sykes "looking at" the bank statements. Neither Mr Thornhill nor Ms Sykes gave evidence. Mr Thornhill was administration manager of NRS at Tamworth. The position of Ms Sykes was not disclosed.

(f) From Mr Paola's evidence of his conversation with Mr Giblet, Mr Giblet presumably saw at least some of the bank statements which Mr Paola then saw. Mr Giblet did not give evidence. He was an agronomist with NRS. Mr Paola told Mr Giblet that he "had no business looking at " the bank statements, and said in his evidence that Mr Giblet had no business going into the administrative section where the fax machine was. 98 All this evidence was imprecise as to time, but appeared to relate to mid-February 1990 when "in liq" bank statements were first faxed to the Tamworth office. "In liq" bank statements for Pyojit Pty Ltd and NRS had issued on 15 and 16 February 1990, and would presumably have been faxed to the Tamworth office on 16 and 17 February 1990. Three NRS "in liq" bank statements issued on 16 February 1990, and presumably were faxed to the Tamworth office on 17 February 1990. An ABE Holdings Pty Ltd "in liq" bank statement issued on the same day as the first Currabubula "in liq" bank statement, 21 February 1990, and presumably both would not have been faxed to the Tamworth office until 22 February 1990 at the earliest. 99 With the possible exception of the evidence of Ms Hamblin, there was no direct support for a finding that the Currabubula "in liq" bank statements, as distinct from "in liq" bank statements of other Group companies, were seen by anyone at the Tamworth office, let alone by employees other than those whose business it was to see them. Mr Taylor's evidence was expressly limited to NRS "in liq" bank statements. The evidence of Mr Paola, Mr Plante and Mr Terrey, and the evidence relating to Mr Giblet, was not specific as to the company or companies concerned. Even Ms Hamblin's evidence was rather back-handed as to receipt of Currububula "in liq" bank statements, and those she saw "looking at" the bank statements were not necessarily looking at Currububula "in liq" bank statements. Perhaps it should properly be inferred that persons such as Mr Paola, Mr Plante and Mr Terrey would have seen all the "in liq" bank statements, because it was their business to know the state of the companies' accounts. Any further inference is more doubtful. 100 The allegation of publication in the summary of contentions was - "39. From about 14 February 1990 and thereafter the Defendant sent by facsimile bank statements in the name of the [sic] Currububula and of, other Paola Group Companies marked "In Liq" to the respective companies where upon [sic] those statements were received and ready [sic] by employees of those companies." As confined to the Currububula "in liq" bank statements, it was said that they were sent by fax to Currububula and "received and read" by employees - whether employees of Currububula or employees generally is not clear. 101 The trial judge said that the Bank submitted that there was "no evidence of publication beyond the persons in the relevant Group offices", and that Currabubula submitted that the bank statements were "relevantly published to the staff of the companies who received the faxes, as there was no attempt … to mark the letters [sic] as being confidential or private to, for example, the Board". His Honour referred to and cited from Pullman v Walter Hill & Co Ltd (1891) 1 QB 524 and Theaker v Richardson (1962) 1 WLR 151, and said - "In the present case it was customary for the Bank to communicate with the subject Group by facsimile. I infer that the Bank would assume that the facsimile machine in the main office to which the bank statements were sent, would be manned by employees and not necessarily by the secretary or directors of the relevant company."

His Honour did not expressly so state, but his finding must have been that the Bank published the "in liq" bank statements by sending them by a means which left it open for company employees to see them. 102 His Honour went further, perhaps further than the submission of Currabubula to which he had referred. He said - "The Bank then submits that there is no evidence that there was any publication of the defamatory material beyond those persons and importantly that there is no evidence of publication or republication to creditors, suppliers or the community. I reject this submission. I have generally dealt with the factual issue above. The quotation set out in paragraph 812 above, is taken from Ley v Hamilton (1935) 153 LT 384 at page 386, a defamation case where Lord Atkin stated that "It is precisely because the 'real' damage cannot be ascertained and established that the damages are at large. It is impossible to track the scandal … '." 103 The earlier dealing with the factual issue appears to have been in the paragraphs of his Honour's reasons - "I reject the Bank's submission that there is no evidence that, or from which the Court can infer that, any person within the Group communicated the fact of the 'in liq' bank statements to any person in the commercial community and I reject the submission that on the evidence the Court must find that the information relating to the freezing letter and the 'in liq' statements was quarantined within the Group. Ms Hamblin, for example, recalled that within one or two weeks after receipt of the bank statements, she spoke to three or four companies including one which was in direct competition with NRS. The substance of what was said has been set out in paragraph 525 above, generally put in the following terms: 'They were interested to see that Northern Rural Services were going to, they would say go bust and it was just a general conversation about it going bust and Tony's or the Company's lack of ability to pay its bill'. Ms Hamblin also recalled having other conversations about Mr Paola's business with other persons including at least one whom she was able to name as a neighbouring farmer, Mr Ranclaud. He said to her words along the lines that Mr Paola had 'gone bust'. She could also recall the names of other persons she spoke to about Mr Paola and his business in that period, and although she said that there were others, she could not recall their names. The difficulties of proof in this area have of course long been recognized. Back in 1935 Lord Atkin adverted to the problem: 'It is impossible to track the scandal, to know what quarters the poison may reach . . .'. Ley v Hamilton [1935] 153 LT 384 page 386. 104 All this was said of the "in liq" bank statements generally, and was not confined to the Currububula "in liq" bank statements. 105 Publication in the law of defamation is communication of the defamatory matter to a person other than the person defamed. The publisher is liable for his original publication, and in some circumstances will be held to have published the defamatory matter when, although he did not so intend, it is seen by other persons than the persons to whom he communicated it. In Pullman v Walter Hill & Co Ltd a letter defamatory of two members of a partnership was sent by post in an envelope addressed to the firm. The letter was opened in the ordinary course of business by a clerk of the firm, and was read by two other clerks. Apart from whether it had been published when the defendant's director dictated the letter for typing, it was held that it had been published to the clerks. In Theaker v Richardson a letter defamatory of the plaintiff was delivered to her home, and was opened by her husband. It was held that it had been published when the husband read it. On the other hand, in Huth v Huth (1915) 3 KB 32 a letter was opened by the butler out of curiosity, and it was held that there had not been publication. Currububula particularly relied on Pullman v Walter Hill & Co Ltd in the appeal, and I will refer to it in more detail later in these reasons. 106 The publisher is normally not liable for a republication of the defamatory matter by the person to whom he communicated it, because the voluntary act of that person over whom the publisher has no control intervenes and is the cause of the harm to the person defamed (see Ward v Weeks (1830) 7 Bing 211 at 215; 131 ER 81 at 83; Weld-Blundell v Stephens (1920) AC 956 at 987). There will be liability for the republication, however, where the publisher authorised it, where he intended it, where the republication was the natural and probable consequence of the original publication, or where there was a duty on the recipient to republish (Speight v Gosnay (1891) 60 LJQB 23). The republication may be treated as a separate occasion of publication by the original publisher, or may be treated as going to the damages suffered in consequence of the original publication (see Sims v Wran (1984) 1 NSWLR 317 at 320; Toomey v Mirror Newspapers Ltd (1985) 1 NSWLR 171 at 181-2). Sometimes the distinction is not clearly made: the categories in Speight v Gosnay do not contribute to maintaining it. In Jones v Amalgamated Television Services Pty Ltd (1991) 23 NSWLR 364, where the plaintiff communicated to another person the reason for his dismissal given to him by the defendant, Hunt J pointed out that the concept of republication was "somewhat inappropriate" because there had not been an original publication. His Honour regarded the plaintiff's case as one of original publication for which the defendant was responsible, not one of republication. 107 No doubt the trial judge found that there was more than publication to Currububula, the person defamed. Whether he found publication of matter defamatory of Currububula to the other Group companies is obscured by his addressing all the "in liq" bank statements and not at this point in his reasons confining attention to the Currububula "in liq" bank statements. It seems that he did not, and it may be noted that publication in that manner was not alleged. His Honour found publication to employees other than the secretary or directors of the respective Group companies. He seems to have regarded this as original publication, not as republication for which the Bank was liable. He also found "publication or republication" to outsiders, but it seems simply because outsiders came to think that the Group was in financial difficulty. He did not more specifically address whether there was publication or republication, or when the Bank could be liable for republication. Nonetheless when assessing damages his Honour appears to have treated the Bank as liable for the "publication or republication" to outsiders. 108 One matter can be put to rest immediately. So far as his Honour found the Bank liable for publication or republication to outsiders - that is, to "creditors, suppliers and the community", I consider that he was in error. The evidence did not establish either publication or republication of "in liq" bank statements to outsiders. 109 We were not referred to direct evidence of anyone in the Tamworth office who had seen the "in liq" bank statements telling an outsider either what had been seen or that Currabubula was insolvent or in liquidation. So far as the trial judge inferred the publication or republication of any of the "in liq" bank statements to outsiders, from outsiders saying to Ms Hamblin that Mr Paola, NRS or any other Group company had "gone bust", the beliefs of the outsiders as to the Group's solvency were readily attributable to implementation of Mr Paola's direction that stock be returned and payment of creditors delayed - Ms Hamblin herself gave evidence - "McFARLAN: One thing you have described is creditors getting on the phone to you, haven't you? A. Yes. Q. And what they were talking about were dishonoured cheques? A. Yes. Q. And they didn't say anything about bank statements, did they? A. They wouldn't have been aware of the bank statements."

110 Still less could there be an inference of publication or republication of the Currububula "in liq" bank statements to outsiders, as distinct from other "in liq" bank statements, from what the outsiders said, they being some only of the bank statements and sent after the rumours must have firmly taken hold. 111 The question then is whether the evidence established publication of the Currububula "in liq" bank statements by the Bank: that is, communication of those bank statements to a person other than Currububula. 112 Currabubula could only act by natural persons, and in principle sending the Currabubula "in liq" bank statements to persons such as its managing director, financial controller, or company secretary was not communication to someone other than Currububula. The natural persons relevantly were Currabubula, because it was their business to receive the bank statements. 113 At first sight to the contrary is the decision of Hunt J in Traztand Pty Ltd v Government Insurance Office of New South Wales (1984) 2 NSWLR 598. It was alleged that servants or agents of the defendant had made defamatory remarks to two employees of the plaintiff, a car body repairer, about the quality of repair work to some cars. The defendant contended that the relevant paragraphs did not allege a sufficient publication in law. 114 I should set out a lengthy passage from his Honour's reasons (at 599-600) - "The plaintiff says simply that the publication in each case was made to a recipient other than itself so that there has been a publication in law: Defamation Act 1974, s 9(2). The fact that in each case that recipient is a servant and agent of the plaintiff itself does not mean that there has not been a publication in law: Ward v Smith (1830) 6 Bing 749 at 752; 130 ER 1469 at 1470; Duke of Brunswick v Harmer (No 1) (1849) 14 QB 185 at 188, 189; 117 ER 75 at 76, 77; Pullman v Walter Hill & Co Ltd [1891] 1 QB 524 at 528, 529. The defendant, however, argues that the position is different where the plaintiff is a company. The defendant says - indeed, it is obvious - that a company can only act through its servants or agents (including its directors): Tesco Supermarkets Ltd v Nattrass [1972] AC 153 at 170, 171, 187. In particular, a company can receive information only through its servants and agents - its knowledge or state of mind is no more than the knowledge or state of mind of its servants or agents: cf H L Bolton (Engineering) Co Ltd v T J Graham & Sons Ltd [1957] 1 QB 159 at 172. See also Brain v Commonwealth Life Assurance Society Ltd (1934) 35 SR (NSW) 36 at 39, 40; 52 WN 7. A publication of and concerning a company made only to a servant or agent of the company, the defendant submits, is a publication only to the company itself and thus not to a recipient other than itself. The necessary consequence, it is said, is that there has been no sufficient publication in law. A company remains, nevertheless, an entity which is distinct from its members: Salomon v A Salomon and Co Ltd [1897] AC 22 at 30, 31, 42, 43, 51. The position cannot be any different in relation to its servants or agents. (No question arises here of a company's responsibility, civil or criminal, for the acts or omissions of those servants or agents as discussed in Tesco Supermarket Ltd v Nattrass .) Although the legislature has in some instances allowed the lifting of the corporate veil, there has as yet been no instance when either the legislature or the common law has identified a company with its servants or agents as the one person for the purposes of the law of defamation. There are, of course, various illustrations which can be given of how artificial this distinction is in some circumstances. A publication of and concerning a company to its managing director, where that person is regarded generally as its "alter ego" (see Tunstall v Steigmann [1962] 2 QB 593 at 604), is artificial in the extreme, and it is difficult to justify defamation proceedings based solely upon such a publication. But the proceedings would fail not because there has been no sufficient publication in law but because the defence of unlikelihood of harm (s 13) will succeed. … Another illustration should demonstrate how a publication to a servant or agent of a company (or corporation) may produce substantial damage. Let us imagine that there are employees of the Government Insurance Office itself who think highly of their employer. A statement made to such employees which was highly critical of that august body (not entirely an unknown circumstance in the past) could cause those employees to think the less of their employer. To suggest that there has not been a publication in law in such circumstances would make a mockery of the law of defamation. I am satisfied that a publication defamatory of and concerning a company made only to a servant or agent of that company constitutes a sufficient publication of that statement in law … " 115 It seems, however, that the employees in this case were not regarded as the company, as receiving the defamatory words on its behalf and acting for it in receiving them. The question presented was whether the fact that they were servants or agents of the company meant that there was no publication, and that question was answered in the negative. The illustration of the employees of the Government Insurance Office is instructive. Although the recipients of the critical statement were their employer's servants or agents, it was not suggested that they received it acting as such. A statement defamatory of a company communicated to a person who happens to be an employee of the company may be published to a person other than the company. But it does not follow that a statement defamatory of a company communicated to the company represented by its employee is published to a person other than the company. 116 It must nonetheless be accepted that Hunt J's illustration of a publication of and concerning a company to its managing director, where that person is regarded generally as the company's alter ego, suggests that his Honour considered that there would strictly be publication even in the circumstances last-mentioned. Tunstall v Steigmann (1962) 2 QB 593 upheld the distinction between a corporation and its sole controller in a tenancy case, and does not advance the present matter. With the utmost respect, may not an approach which is artificial in the extreme and makes defamation proceedings difficult to justify be flawed? 117 Publication when material defamatory of a company is sent to the company and thereby communicated to its employees appears not to have been otherwise considered in Australia. Some decisions in other jurisdictions have held that the communication to a managerial employee of a company is not publication. 118 In Fausett v American Resources Management Corp 542 F Supp 1234 (1982) (Utah DC, Central Division) it was alleged that statements defamatory of the company had been made to its president and vice-president, who were described as corporate management. It was held that publication had not been established. The court said (at 1241) - "This is a question of first impression for the Utah Courts. It also appears that no other jurisdiction has addressed this question. However, the answer is evident. There are recognized distinctions between the application of the principles of libel to individuals and their application to corporations, growing largely out of the differences between natural and artificial persons. One of those distinctions must be made in relation to publication of a business defamation. The alleged defamation of ARMCOR relates to actions of its management of which Messrs Christensen and Hebertson are the chief principals. The law of defamation protects against the impugning of one's reputation or causing his alienation from his peers. There simply exists no potential for ARMCOR's reputation to be reduced or for ARMCOR to be alienated from its managers, customers, shareholders, institutional lenders, etc., when the defamatory statements are made to its management. In essence the management is the corporation for purposes of communication. This was at least impliedly recognized by the Fifth Circuit in Diplomat Electric, Inc v Westinghouse Electric Supply Co , 378 F.2d 377, 384 (5th Cir. 1967)." 119 To the same effect was Advantage Personnel Agency Inc v Hicks & Grayson Inc 447 So 2d 330 (1984) (Florida CA, Third District). It was alleged that statements defamatory of the company had been made to its sales manager. The court said (at 330) - "Although there may be cases in which a slanderous statement directed against a corporation could be published, as urged, to a lower echelon employee of the slandered corporation, see Diplomat Electric, Inc v Westinghouse Electric Supply Co , 378 F.2d 377, 381 (5th Cir. 1967); W. Prosser, Law of Torts 113 at 767 (4th ed 1971), the rule must necessarily be different where, as here, the statements complained of are made to a corporate executive or managerial employee, such as a sales manager, at the conclusion of a business conference with the said employee. In such a case, the statements are, in effect, being made to the management of the corporation and thus to the corporation itself in the person of one of its executive or managerial employees. The corporation has no cause of action for slander under these circumstances as the essential element of publication to a third party is lacking. See Fausett v American Resources Management Corp , 542 F. Supp 1234 (C.D. Utah 1982)."

120 In Diplomat Electric Inc v Westinghouse Electric Supply Company 378 F 2d 377 (1968) (USCA, Fifth Circuit), cited in both these cases but for rather different purposes, the defendant wrote to the plaintiff saying that the plaintiff had been delinquent in paying its account and that the defendant would not continue to supply it with electrical equipment. Copies of the letter were sent to the owner, the head contractor, and the project manager of the project in which the plaintiff was electrical subcontractor. These communications to third parties were undoubtedly publications, and the reasons did not consider publication by communication to the plaintiff itself. Prosser, Law of Torts, 4th ed (1971) at 767 does not support the proposition for which it was cited in Advantage Personnel Agency Inc v Hicks & Grayson Inc; in the next edition, Prosser and Keeton on the Law of Torts (1984, with 1988 supplement) neither of Fausett v American Resources Management Corp and Advantage Personnel Agency Inc v Hicks & Grayson Inc nor the principle applied in those cases is referred to. The two decisions must stand on the force of their own reasoning. 121 Advantage Personnel Agency Inc v Hicks & Grayson Inc was cited, via a text, in Ontario Ltd v Canadian Uniform Ltd (Ont Ct, 12 June 1997; I have used a Lexis print). The second defendant wrote a letter withdrawing the plaintiff's status as an approved supplier "due to questionable business practises [sic]", adding other comments about honesty and ethics. The letter was signed by Ms Hooper of the second defendant, was addressed to the plaintiff attention Mr Politis, and was faxed to the plaintiff. It went to Mr Politis, who was the plaintiff's sales manager, and he showed it to Mr Yannakouras, the plaintiffs' president. 122 The Court said - "The law is quite clear that to succeed, the plaintiff must prove publication to a person other than the plaintiff, a third party. A letter written to the plaintiff that is seen by no one but the plaintiff does not constitute the publication required to succeed in a libel action. There must be communication of the libel by the defendant to a person other than the person defamed. There is difficulty when the plaintiff and defendant are corporations. Corporations can only act through employees. The letter that formed the basis of the libel was sent by the defendant, Loeb. Obviously, someone at Loeb had to be involved in its making and sending. The old cases which state that a personal defendant, for example a lawyer, who dictates a libellous letter to a secretary, publishes the letter even though the plaintiff is the only person who received the letter, do not relate well where there is a corporate defendant because it's the corporate defendant who dictates, types and sends the letter. Karen Hooper is not a defendant. Likewise on the other end, someone employed by the corporate defendant has to receive the letter. The letter is addressed to the attention of George Politis, the sales manager of the plaintiff company. Although George Politis is not the plaintiff, surely it is not publication if he alone receives the letter. Someone at the company has to receive the letter. Mr Politis takes the letter to Mr Yannakouras and throws it at him. Is that re-publication? Is it publication, given that Mr Yannakouras is the president of the company? In respect to corporations, Professor Raymond Brown, in his text The Law of Defamation in Canada Second Edition at 7-34, points out that American courts have distinguished between lower and upper echelon employees and concluded that communications to the latter must be treated as a communication to the plaintiff corporation. He quotes from a Florida Appeal Court decision which states: 'Although there may be cases in which a slanderous statement directed against a corporation could be published to a lower echelon employee of the slandered corporation, the rule must necessarily be different where the statements complained of are made to a corporate executive or managerial employee such as a sales manager. In such a case the statements are in effect made to the management of the corporation and thus to the corporation itself. The corporation has no cause of action for slander under these circumstances, as the essential element of publication to a third party is lacking.' Ms Lovell submits that cases such as Pullman v Walter Hill [1891] 1 QB 525, Putterbaugh v The Gold Medal Furniture Manufacturing Co (1904) 70 LR 582 (CA) and Lawrence v Finch [1931] 1 DLR 689 (Ont. CA) are still the law of Ontario and there is publication even if the only persons who saw the letter were Mr Yannakouras and Mr Politis and the persons at Loeb. Ms Lovell further submits that Mr Yannakouras said his staff saw the letter. I believe that particular evidence related to the acceptance letter but if it related to the letter received October 1st, there is no evidence as to how this came about and it easily could have been by republication by Mr Yannakouras. In addition, Ms Lovell points out the letter was faxed and it should be presumed that someone other than Mr Politis or Mr Yannakouras received the fax. There is no evidence as to who first received the fax. If a low level employee saw the fax, surely he or she should be called because publication was always a live issue. It is trite law to say that the onus is on the plaintiff to prove publication and I do not believe it has met that burden." 123 The reasoning included that communication to Mr Politis and Mr Yannakouras was not publication because the communication to them was communication to the company, and this must have been seen as the difference from Pullman v Walter Hill & Co Ltd and other such cases. The correct reference to Brown, The Law of Defamation in Canada, 2nd ed, is to para 7.9 (pp370-1). In the body of the text the author states that the publication may be made to any third person, whether the recipient is (inter alia) "the agent or employee of the defamer, or an agent or employee of the person defamed, even if the latter is a company". The case cited in the footnote reference appended to the last words is Traztand Pty Ltd v Government Insurance Office of New South Wales, immediately followed in the footnote by a passage in terms very close to the terms of the passage set out in Ontario Ltd v Canadian Uniform Ltd. 124 These decisions have not received recognition . For example, Gatley on Libel and Slander, 9th ed at para 6.6 says there is publication where the defamatory matter is published to the plaintiff's agent "even if the plaintiff is a corporation, although this is artificial in the extreme where the recipient is the controller of a 'one man company'." The only case cited is Traztand Pty Ltd v Government Insurance Office of New South Wales, and the trans-Atlantic qualification is absent. 125 It is well established that communication to the agent or employee of the person defamed may be publication where that person is a natural person see for example Duke of Brunswick v Harmer (1849) 14 QB 185; Pullman v Walter Hill & Co Ltd; Rudd v Cameron (1912) 4 DLR 567; Jones v Brooks (1974) 45 DLR (3d) 413. But Currububula is a company, and I do not think the cases to this effect can automatically be transposed to where the person defamed is a company. For reasons apparent from the preceding discussion, in accordance with principle I consider that a general statement as in Gatley on Libel and Slander is incorrect. Communication to someone who happens to be the employee of a company can be publication, but communication to a company by its employee is not publication. 126 It is necessary to take account of the related area of intra-company communications. Communication by one employee of a company to another was held to be publication in Riddick v Thames Board Mills Ltd (1977) 1 QB 881. Two members of the court, Stephenson and Waller LLJ, rejected the argument that there was no more than communication by the company to itself. Lord Denning MR dissented on that matter. The majority was swayed by cases in which a company had been held liable for letters dictated by a director to a typist (eg Pullman v Walter Hill & Co Ltd in its other consideration of publication); Lord Denning considered that in none of those cases was the point of publication properly argued. The cases are accepted in Gatley on Libel and Slander, 9th ed, para 6.7, but with recognition of the argument that a report produced by one employee and read by another is not published because the acts of the employees "are acts of the company and there is no liability for publication to oneself". It is said that this view is taken in some, but not all, American jurisdictions, and that "the underlying rationale is that the company can only operate through its employees". 127 In Jones v Amalgamated Television Services Pty Ltd Hunt J said, with reference to Riddick v Thames Board Mills Ltd, that he was satisfied that there was publication in law by the company's sales manager when she sent to managerial and secretarial employees copies of a memorandum to the plaintiff critical of his performance of his duties, but that he considered it still arguable that the company was not vicariously responsible for the publication when the receiving employees were "in effect acting as the agent of the company itself for the purposes of receiving the information which the defamatory matter conveyed" (at 365-6). Brown, The Law of Defamation in Canada, 2nd ed at para 7.12(5) (pp 388-9) refers to a strong minority view in the United States that intra-corporate communications are not publications because they are "the legal equivalent of talking to one's self". 128 The divergence of views in America is illustrated by the recognition of a special position for intra-company communications in 50 Am Juris 2d, Libel and Slander, 247 et seq, but rejection (or more correctly non-recognition) of it in Restatement 2d, Torts, 577. 129 I prefer the view that intra-company communications do not necessarily constitute publication for the purposes of the law of defamation, but in any event they may be distinguished from communications to a company received by its employee. I consider it open to hold that a communication to a company which, because the company can only act by natural persons, is received by someone on behalf of the company in the ordinary course of business, is communication only to the company and does not constitute publication. This is not confined to receipt of the communication by the company's managing director and alter ego, but includes receipt by any employee receiving the communication on behalf of the company. In my opinion it should be so held. Notwithstanding the high respect to be afforded to what was said by Hunt J in Traztand Pty Ltd v Government Insurance Office of New South Wales, particularly as a decision in the field of defamation, to the extent to which his Honour held otherwise (and I am not sure that he did) I am unable to agree. 130 The submissions in the appeal did not challenge publication by communication of defamatory matter to the plaintiff's agent where the plaintiff is a natural person. If the plaintiff has authorised his agent to receive the defamatory matter on his behalf, why should the communication not be regarded as a communication to the plaintiff whether or not the plaintiff is a company? Possibly this will one day call for reconsideration. 131 I return to Pullman v Walter Hill & Co Ltd, on which (as I have said) Currububula particularly relied in the appeal. I have already outlined the facts and the decision. 132 Lord Esher MR said (at 528) - "The letter was not directed to the plaintiffs in their individual capacity; it was directed to a firm of which they were members. The senders of the letter no doubt believed that it would go to the plaintiffs; but it was directed to a firm. When the letter arrived it was opened by a clerk in the employment of the plaintiff's firm and was seen by three of the clerks in their office. If the letter had been directed to the plaintiffs in their private capacity, in all probability it would not have been opened by a clerk. But mercantile firms and large tradesmen generally depute some clerk to open business letters addressed to them. The sender of the letter had put it out of his own control, and he had directed it in such a manner that it might possibly be opened by a clerk of the firm to which it was addressed. I agree that under such circumstances there was a publication of the letter by the sender of it … ". 133 Lopes LJ said (at 529) - "The sender might have written 'Private' outside it, in order to prevent its being opened by a clerk. The defendants placed the letter out of their own control, and took no means to prevent its being opened by the plaintiff's clerks. In my opinion, therefore, there was a publication of the letter, not only to the type-writer, but also to the clerks of the plaintiffs' firm."

134 Important to the reasoning was that the defendant had addressed the letter to the firm, not to the plaintiffs in their individual capacities. He must have known that the firm would have a clerk to open letters addressed to the firm, and had so directed the letter that it might be opened by the clerk. Hence in Theaker v Richardson Harman LJ said of Pullman v Walter Hill & Co Ltd (at 235) that the plaintiffs' success depended on the facts that the libel was addressed to their place of business and that the defendant knew that a clerk employed there read his master's letters. 135 In reliance on this case, Currububula submitted that there was publication by communication to the employees at the Tamworth office, as distinct from communication to Currabubula, because there was no attempt to prevent the bank statements being seen by the employees. It also submitted that there was publication by communication to the employees because it was reasonable for the Bank to infer, as the trial judge inferred and was in fact the case, that the fax machine at the Tamworth office would not necessarily be manned by the managing director, financial controller or company secretary. It was necessary, in its submission, that the Bank take steps to prevent the disclosure of the bank statements to employees. 136 The reliance, however, was in my view misplaced. In Pullman v Walter Hill & Co Ltd the letter was not addressed to the plaintiffs, and the plaintiffs were not a company which could only act through natural persons. In essence, a letter defamatory of A was sent to B in circumstances in which it might be opened by C. Questions of steps to prevent communication to C arose. They can not arise, however, if, A being a company, the correct view is that a letter defamatory of A is sent to A and is opened by A acting by C. 137 It remains to apply the foregoing discussion to the facts as earlier set out. 138 The Currabubula "in liq" bank statements were addressed to the secretary of Currabubula, and were sent by fax to the Tamworth office in the same manner as previous bank statements. This means of communication must have been requested or at least accepted by Currabubula. (Would unilateral departure from it have been varying the customary mode of providing banking services, requiring reasonable notice?) Important correspondence such as the facility letter of 1 February 1990 had been sent in the same manner. In my opinion the sending of the Currabubula "in liq" bank statements by the Bank communicated them to Currabubula, not to (for example) Mr Paola, Mr Plante, or whoever else received them in the ordinary course of Currabubula's business. It is a stronger case than one in which something is said or written to a particular company employee, in that the communication was to the corporate entity by delivery by fax to its place of business of documents addressed only by the designation of an office-holder. 139 What then of other employees in the Tamworth office seeing the "in liq" bank statements? It is not question of republication, but of original publication by the Bank to the other employees. As I have indicated, I do not think Pullman v Walter Hill & Co Ltd assists Currububula. Currububula had to "open" the faxed bank statements by the natural persons whose business it was to receive them. There was no evidence that the Bank was aware that the fax machine was so positioned that persons with no business looking at the bank statements would be able to see them, or of complaint that communications had been inappropriately made by fax. In those circumstances, if it be relevant I do not think that the Bank should have sent the Bank statements otherwise than by fax, or taken steps by which they could not be seen by employees in the Tamworth office apart from persons such as the managing director, financial controller or company secretary. 140 If there was no publication by the Bank in sending the Currububula "in liq" bank statements by fax, I do not think there was publication by the Bank to the other employees because the physical and organisational arrangements at the Tamworth office were such that employees such as Mr Giblet, Mr Thornhill and Ms Sykes saw them. (If they did - I repeat that what I earlier said about scanty support for a finding that the Currububula "in liq" bank statements, as distinct from "in liq" bank statements of other Group companies, were seen by these employees.) To the extent to which the Speight v Gosnay categories of liability for republication be relevant, there is no reason to conclude that the Bank authorised the communication to the other employees or intended that it take place, nor in my view was communication to the other employees a natural or probable consequence of the publication. Equally, the fact the other employees saw the bank statements does not turn a communication by the Bank only to Currububula into a communication by the Bank to the employees. Bank statements would normally be treated as confidential by the account holder, in the case of a corporation available only to those whose business it was to look at them. When bank statements were sent by fax with the concurrence, at the least, of the account holder, it would be expected that the account holder had made suitable arrangements to prevent disclosure of the bank statements beyond those whose business it was to look at them. Those whose business it was to look at them would include the person or persons manning the fax machine. It was not to be expected that the account holder would have physical and organisational arrangements of its office permitting unauthorised access by other employees to documents received by fax. 141 In my opinion, therefore, the appeal must also be upheld so far as damages were awarded for defamation, on the ground that the defamatory matter was not published. It is again unnecessary to consider the Bank's other challenges.

Costs 142 It follows that, save as to the order whereby the costs of an interlocutory application and hearing were to be costs in the proceedings, the orders as to costs made by the trial judge can not stand. It is unnecessary to deal with the challenges to those orders.

Orders 143 I propose the following orders - 1. Appeal allowed. 2. Orders (1), (3) and (4) made on 5 May 1999 be set aside. 3. Judgment for the defendant. 4. The respondents pay the appellant's costs of the trial and of the appeal and have a certificate under the Suitors Fund Act if otherwise qualified. 144 HEYDON JA: I agree with Giles JA. 145 IPP AJA: I agree with Giles JA.

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