BOOGADAH INVESTMENTS PTY LTD v WESTPAC BANKING CORPORATION; EUMINA INVESTMENTS PTY LTD v WESTPAC BANKING CORPORATION [1998] NSWCA 41

BOOGADAH INVESTMENTS PTY LTD vy WESTPAC BANKING CORPORATION; EUMINA INVESTMENTS PTY LTD v WESTPAC BANKING CORPORATION

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL COMMERCIAL DIVISION

MASON P; HANDLEY and BEAZLEY JJA 18 February 1998, 18 March 1998 [1998] NSWCA 41

Trusts — Breach — Constructive trust — Moneys paid to bank to reduce personal indebtedness of trustees — Whether moneys paid were trust moneys — Whether moneys were paid to the bank in breach of trust — Whether bank had knowledge of a dealing in breach of trust

Fiduciary duty — Breach — Refinancing arrangement — Whether fiduciary relationship had arisen between the parties — Whether failure of bank to disclose all relevant considerations constituted a breach of fiduciary duty

Between 1948 and 1993, Mr and Mrs Renshaw carried on a farming and grazing partnership known as Boogadah Company. The business was conducted on a 4,300 acre property called "Boogadah". Since 1948 this property had been mortgaged to Westpac Banking Corporation ("Westpac") as security for overdraft facilities used by the partnership. In 1956 Mr and Mrs Renshaw formed a company, Boogadah Investments Pty Ltd ("Investments"). Through Investments, three additional farming and grazing properties were acquired and mortgaged to the Commonwealth Bank. In 1973 a discretionary trust was created, the trustees of which were Eumina Investments Pty Ltd ("Eumina") and Mr Renshaw. Mr and Mrs Renshaw were the sole directors and shareholders of Eumina.

By the mid 1980s Mr and Mrs Renshaw and Investments were having difficulty servicing their respective loans. Using money from a recent inheritance, Mrs Renshaw made two payments to the trust with the intent that the moneys would provide interest that could offset the losses made by the trust. The first payment was an interest free loan to the trust of $400,000 in April 1985, repayable at call. A further payment of $300,000 was made to the trust by Mrs Renshaw in August 1985. In December 1986 and January 1987 the $700,000 was applied by Westpac in reduction of Boogadah Company's indebtedness to the Bank.