Narni Pty Ltd v National Australia Bank Limited [1998] VSC 146 Essay

Narni Pty Ltd v National Australia Bank Limited [1998] VSC 146 - Essay Example The conduct of National Australia Bank Limited clearly shown there was an agreement to exceed the overdraft Limit hence creating an implied term in the contract which barred the bank from terminating the extended overdraft limit without a notice. Narni suffered losses from the dishonor of the cheques hence had to sue the bank for damages. Implied term of arrangement and why significant for Narni and banker- customer relationships According to the agreement made between the bank and Narni, overdraft limit was $ 65,000 hence honoring $ 40,000 would exceed the approved limit. However, their October 1988 agreement provided for provision of finance for the renovations which were being carried out by Carrum Nursing Home and at the same time the bank would continue honouring the cheques notwithstanding the approved limit of $ 65,000. By the implied conduct of the two parties, the approved limit was varied to $ 100,000 hence creating an â€Å"overdraft extension†. At the end of 1988, all assets of Narni had been financed by loans to the total of $ 896,165 hence Narni was responsible for making $ 66, 718 per annum installments as payments for the loan. Majority of the income also came from Federal Department of Health and Community services (DCS) as advance payments at the beginning of each month. The total income of 1988 stood at $ 225 M where patient contributions were below $ 400, 000 with majority of the income being advance payments by DCS at the rate of $ 150,000 per month. From the account transactions history, the account always had a credit balance at the beginning of each month and a debit balance at the end of the month. DCS would pay between $ 90,000 to $ 124,000 as initial payment to the account and another final payment after two weeks which made that the balance would be above the extended overdraft limit of $ 100,000. However, withdrawals would occur evenly throughout the month with majority being wage payments which accounted for 62%of expenses w hich translates to $ 1.4 M which was paid after every two weeks. In some months, wages would amount to $ 120,000. The Branch manager would approve overdraft facilities depending on the account balances of the account. Below is a summary of the account balance for the six months from January to June 1988. Month Start Balance Zero Balance Date End Balance January 1988 $99,716.09 CR (5/1) 20 $24,669.34 DR (1/2) February 1988 $66,069.68 CR (2/2) 19 $47,512.02 DR (1/3) March 1988 $59,282.35 CR (2/3) 17 $69,168.08 DR (6/4) April 1988 $26,683.13 CR (7/4) 14 $94,162.28 DR (3/5) May 1988 $1,533.12 DR (4/5) 2 $87,897.80 DR (1/6) June 1988 $7,016.25 CR (2/6) 10 $71,675.53 DR (1/7) From the account balance figures, extended credit facility was provided in every month while payments in to the account from DCS delayed were delayed in some months meaning the account would still have a debit balance at the beginning of the month and an overdraft would still be approved. In July 1988, the same trend continued with automatic payments from DCS of $ 109, 608 leading to account credit balance of $ 29, 582. From the transactions of July 1988, the end of the month account balance was overdrawn. The account reflected a debit balance at the start of August 1988 but it was reduced by a deposit of $ 85, 671 to settle to a debit of only $ 1,375. In September, the account was overdrawn to a