The court regarded the parties as having conducted their business and arranged their affairs, at least from February 1989, on the footing that the approved overdraft of $65,000 was at best a nominal limit, and that the respondent would tolerate surges well in excess of it in each monthly cycle. The court found that the parties "operated and permitted the account to operate in a very flexible way" so that monthly surges far exceeded the authorised limit.
On the question of demand, the court found that it was correct that "the overdraft was payable on the demand but that any rights to demand repayment should be exercised so as to not unduly prejudice the borrower's interests" (Paget's Law of Banking, 1996). This prejudice would be overcome if reasonable notice was given of any proposed termination. Finally, the court concluded that there was a term of arrangement between the Bank and Narni that "the Bank would not refuse to honour cheques drawn on the ground that the balance of the account exceeded the approved overdraft limit of $65,000" (cited by Tadgell JA at para 11).
By not honouring the cheques, the court found that the Bank breached the arrangement that existed between it and Narni. The consequence of the proposed dishonour likely caused the collapse of the business. The relevant loss alleged was the loss of the income pontential of the business conducted by Narni at the Carrum Nursing Home. By dishonouring cheques for staff wages, there was a threat of strike if wages were not paid. The sisters were unable to give any assurance to the meetings that funds were available to ensure the viability of the two nursing homes.
Visa Credit had to step in to protect its security claimed over the business. On 17 August 1989, the business was sold to Bogear Pty Ltd for $1. 05m plus stock and valuation not to exceed $5,000. The proceeds of sale were applied in reduction of the Visa Credit debt. It was regard as significant for Narni and the appellant sought in the Court of Appeal to uphold the implication of a contractual term in the form expressed by the court. 3. Question 3: Raise of an estoppel claim.
Narni Pty Ltd relied on the estoppel claim to force a compensation to cover the loss incurred. The factual basis for the estoppel claim was essentially the same to the overdraft extension claim. Estoppel is essentially a rule of evidence whereby a person is barred from denying the truth of a fact that has already been settled. Where a court finds that a party has done something warranting a form of estoppel, that party is said to be "estopped" from making certain related arguments or claiming certain related rights.
There are many types of estoppel under the English, Australian and American law. The estoppel claim used by Narni was Estoppel by representation of fact (English law) which involves one party relying on something the other party has done or said (Wilken and Villiers, 2003). A representation can be made by words or conduct. Although the representation must be clear and unambiguous, a representation can be inferred from silence where there is a duty to speak or from negligence where a duty of care has arisen.
Narni relied upon the conduct of the Bank in continuously honouring the Narni cheques despite of the fact that those cheques were in deep excess of the approved limit of $65,000. The Bank was obviously aware of this fact but they continued to do so for a given period. This course of conduct led Narni to believe that the Bank would not dishonour any cheques presented by the company without first having given reasonable notice. Thus, believing the representation, Narni acted to its detriment in reliance on the representation.
It was said that Narni had conducted its business in reliance upon this pratice with the belief that the Bank would not be unconscionable to depart from the pratice. The argument used by Narni was that because of the Bak's conduct, Narni was misled that they were able to overdraw cheques in excess of the limit. However, at the time when the Bank ceased to do business with the company, Narni was in surprise as they were not informed clearly about the decision of account termination.
The conclusion by the court was that, these states of affairs were clear to both parties and the breach of the arrangement between the Bank and its customer estopps the Bank from denying the cheques repayment on the ground that the balance of the account exceeded the approved overdraft limit of $65,000. Conclusion It was apparent that the National Australia Bank breached the implied term of the arrangement between it and Narni Pty Ltd by dishonouring a numbers of cheques without having given reasonable notice. The conduct led to the failure of Narni's business and the business was forced to be liquidated by the debenture holder.
The case was brought by Narni for seeking adequate compensation from the defendant bank. However, it was held by the court that Narni, upon the receipt of the proceeds if the sale of the business, has suffered no further compensable loss, and the action by Narni was in truth seeking double compensation which was unsuccessful thereafter.
Bunbury Foods Pty Ltd v. National Bank of Australasia Limited (1984) 153 CLR 491 Cumming v. Shand (1860) 157 ER 1114 Cuthbert v. Robarts Lubbock & Co  2 Ch 226 Joachimson v Swiss Bank Corp  3 KB 110 Kpohraror v. Woolwich Building Society  4 All ER 119