Westpac ordered to pay defamation damages for bounced cheque in a lesson for SMEs

Westpac has been ordered by the High Court to pay more than $50,000 in damages for defamation after mistakenly bouncing 30 cheques from a Sydney real estate agency in 1997.

Experts say the case serves as a lesson that businesses can be defamed in a wide range of circumstances, and you should be keeping an eye out to make sure you’re not being defamed as well.

In 1997, Paul Aktas was operating under the name “Century 21 Homewise Realty”. About 30 cheques were sent to clients, mostly landlords, but an internal banking mistake meant these cheques were sent with the words “refer to drawer”, indicating the firm did not have enough money to fulfil them.

Aktas said he received a hostile reaction from the local community when the cheques were returned and he lost business.

He won a case in the New South Wales Supreme Court in 2007, but the judge at the time said Westpac did not have to pay defamatory damages because the bank was covered by qualified privilege protections.

Yesterday, the High Court overturned that decision, saying Westpac must pay $50,000 in damages, plus interest.

“For the payee, there is no need for any communication from the bank about the fate of the cheque, if it is met on presentation,” the court said.

“Further, to hold that giving a notice of dishonour is an occasion of qualified privilege is not conducive to maintaining accuracy in the decisions banks must make about paying cheques.”

Westpac was contacted for a statement, but no reply was received before publication.

Dun & Bradstreet director of corporate affairs Damian Karmelich says businesses must pay careful attention to where they are being talked about by other businesses, and ensure they are not being defamed by inaccurate information.

“What this case probably speaks to is that if you are in the credit market, information is being used and you should be in the business of making sure what’s being said is accurate.”

“Businesses should be paying attention to make sure the accurate statement about themselves is out there and that’s what people are seeing. There is a range of data sources people use to look up businesses, and all that needs to be accurate and up-to-date.”

One defamation law expert says businesses should pay attention to this case, as it serves as an example that defamation is not restricted to media cases only. When businesses sign documents or cheques, they are making a statement about another business and it needs to be accurate.

“There’s a stereotype that newspapers and television only get sued for defamation, but the reality is that a significant amount of cases don’t involve the media and are disputes between individuals and companies.”

“In a business, there are lots of fertile fields for defamation disputes. Whenever you put pen to paper or sign a cheque, you can possibly be defaming someone. And with so much social networking going on, there are so much more legal liabilities. It’s definitely something to watch out for.”