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ARTICLE · 08 JUNE 2015

No duty to speak on the Bank as secured creditor

Corrs Chambers Westgarth
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The Bank was not required to inform the Builder of its position when it became aware of the sale of land contract.

AustraliaFinance and Banking
David Abernethy
David Abernethy
Jason Salman
Jason Salman
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BACKGROUND

Westpac Banking Corporation (Bank) funded Bronte Properties Pty Ltd's (Developer) purchase and development of a property into a block of units. The terms of the funding agreement provided that the Developer was required to seek the Bank's consent prior to entering into any pre-sale contracts for the units. The Bank took a mortgage over the property as security.

The Developer engaged ZH International Pty Ltd (Builder) as its builder. During the course of construction, the Developer experienced cash flow difficulties and was unable to make initial progress payments of approximately $750k to the Builder. In response to this, an arrangement was reached between the Developer and the Builder whereby the construction would continue on the basis that Builder would be sold one of the units for $1.3m less any amounts owing under the construction contract. The sale price of $1.3m was substantially below market value. That sale arrangement was documented in a sale

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