BECK and ANOR v STATE BANK OF NEW SOUTH WALES LTD [1994] NSWCA 20

BECK and ANOR v STATE BANK OF NEW SOUTH WALES LTD

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

MAHONEY, HANDLEY and POWELL JJA 8 November 1993, 11 February 1994 [1994] NSWCA 20

APPEAL from Equity Division — Plaintiffs owed money to Bank — Claim that security for money was invalid — Ongoing disputes — Agreement that property be sold at auction, loan discharged and proceeds divided between plaintiffs and Bank in agreed tranches — Property sold to company in which plaintiffs and their relations had interests — Bank refused to perform agreement — Plaintiffs sued for specific performance — Held: Plaintiffs owed fiduciary duties to Bank — Acted in breach of those duties by sale to such company — Bank justified in refusing to perform agreement.

COMMERCIAL AGREEMENT — When involves fiduciary duties.

Mahoney JA Walter Tibeaudo Beck and his son Christopher Kim Beck were the registered owners of a grazing property. (I shall, for convenience, refer to them as "the Becks", although the father Walter Tibeaudo Beck appears to have conducted most of the transactions here relevant). The property was subject to a mortgage to State Bank of New South Wales Limited. For some years disputes had existed between the Becks and the Bank in relation to their indebtedness to the Bank. In those disputes the validity of the Bank's securities had been questioned by the Becks and they had done what they could to defeat the Bank in its attempts to realise upon its security.

On or about 16 January 1991 an agreement was finally made between the Becks and the Bank ("the debt agreement"). The agreement provided, inter alia, for the sale of the property and the division of the proceeds.

In due course, the property was sold at auction. The purchaser was a company Moreco Pty Ltd in which, it appeared, one of Mr Walter Beck's daughters and the husband of another had interests and in respect of which there was an arrangement with Mr Beck senior. When the Bank discovered those associated with Moreco Pty Ltd it refused to carry out its part of the debt agreement. The Becks thereupon sued for specific performance of that agreement. On 18 November 1991 Needham J held that the debt agreement gave rise to fiduciary obligations between the Becks and the Bank and that the Becks had acted in breach of those obligations. His Honour refused specific performance and awarded specific possession of the property to the Bank as claimed by it under its mortgage. The Becks have appealed to this Court against his Honour's judgment.