Mark Anthony Conlan as Liquidator of Rowena Nominees Pty Ltd v Trevor Connolly as trustee for the Connolly Family Trust

The case involves a dispute between Mark Anthony Conlan, the liquidator of Rowena Nominees Pty Ltd, and Trevor Connolly, the trustee for the Connolly Family Trust, before the Supreme Court of Australia. The primary issue is whether the proceeds from the recovery of loans made by a finance broker were assets of the broker or if they were subject to any interest held by the investor or borrower claimants under a trust for their benefit. The case also raises questions regarding the tracing of funds, specifically whether funds paid into an overdrawn bank account can be traced after being used to acquire an asset in a round robin transaction. The court had to decide if there is an exception to the principle that tracing is not possible in such cases, particularly when there was an intention to make such a payment to repay the overdraft borrowing when the borrowing was incurred. Additionally, the court considered whether there is a broader proposition allowing tracing even without such an intention.

The court examined the contention that if the intention to use the trust money to acquire the asset was established, the order in which events occur should not necessarily be critical to the claim. The court referenced judicial support for this proposition, including the House of Lords' decision in Foskett v McKeown and obiter observations in Bishopsgate Investment Management Ltd v Homan. The court noted that while there may be an exception to the principle that tracing is not possible, the connection between the payments and the misappropriations of funds needed to be evidential and sufficient to enable the invocation of this exception. The court ultimately concluded that the contention was still open and that the order of events should not be decisive unless there was a clear intention to use the trust money to acquire the asset.

The Supreme Court of Australia held that the proceeds of the recovery of the loans were not necessarily the assets of the broker, and there could be an exception to the principle that tracing is not possible when there is an intention to use trust money to acquire an asset. The court emphasized that the availability of equitable remedies should depend on the substance of the transaction rather than the strict order of events. However, the court also noted that this exception would only apply if there was a clear evidential connection between the payments and the misappropriations of funds. The court did not find such a connection in this case, leaving the issue open for future determination.

The final orders of the court will depend on the outcome of the trial, where the claimants may establish their entitlement to the proceeds of the recovery of the loans. The court's decision highlights the importance of the intention behind the transactions and the need for clear evidential connections when making claims for equitable tracing.