Bank of Western Australia Limited v National Australia Bank Limited

The Bank of Western Australia Limited initiated legal proceedings against the National Australia Bank Limited, asserting that the latter owed it money due to the floating charge held over the assets of the second defendant, which had subsequently gone into liquidation. The Bank of Western Australia claimed that when the second defendant deposited some of the loaned funds with the National Australia Bank in term deposits, this constituted a crystallisation of the floating charge. Consequently, the Bank of Western Australia sought an accounting from the National Australia Bank regarding the term deposits.

The central legal issues before the court were whether the Bank of Western Australia's charge over the second defendant's assets had become fixed upon the deposit of the funds in term deposits, and if the National Australia Bank's right of set-off was subject to the Bank of Western Australia's fixed charge. Additionally, the court needed to determine the meaning of the phrase 'ordinary course of business' in this context, and whether the National Australia Bank was required to account to the Bank of Western Australia for the term deposits.

In reaching its decision, the court examined the nature of the floating charge and its crystallisation. It concluded that the term deposits did not result in a crystallisation of the charge. The court held that the 'ordinary course of business' meant the typical business practices of the parties involved, which did not include the deposit of funds in term deposits as a means to crystallise a floating charge. The court also found that the National Australia Bank's right of set-off was not subject to the Bank of Western Australia's fixed charge, as the set-off occurred in the ordinary course of business and did not affect the priority of the charges.

Given these findings, the court dismissed the Bank of Western Australia's claim against the National Australia Bank, holding that no accounting was necessary for the term deposits.