Westpac Banking Corporation v Adelaide Bank Limited

The Westpac Banking Corporation sought to determine the priority between two mortgages held over the same property, specifically whether the second mortgagee could be subrogated to the rights of the first mortgagee. The dispute arose because the second mortgagee took a mortgage without notifying the first mortgagee and subsequently deposited money into an account held with the first mortgagee in an attempt to close the account. The Adelaide Bank Limited argued that the second mortgagee should be subrogated to the first mortgagee's rights, while the Westpac Banking Corporation contended that actual notice was required for the rule to apply. The case was heard by the Supreme Court of South Australia.

The central legal issues before the court were whether actual notice was necessary for the rule in Hopkinson v Rolt to apply, and if the second mortgagee could be subrogated to the first mortgagee's rights. The court also needed to determine whether the subsequent advances made by the second mortgagee could be tacked to the first mortgagee's security. The Adelaide Bank argued that constructive notice, actual notice, or knowledge attributable to the first mortgagee was sufficient, while the Westpac Banking Corporation maintained that actual notice was required.

The court found that the rule in Hopkinson v Rolt is grounded in equitable fraud, necessitating actual notice for its application. The court held that there was no actual notice prior to the letter revealing the second mortgage. Consequently, the second mortgagee could not be subrogated to the first mortgagee's rights. The court also ruled that the subsequent advances could not be tacked to the first mortgagee's security because the second mortgagee had notice that the authority to close the account was not in conformity with the first mortgagee's procedures. The correspondence was handled by a junior clerk, and the mortgagors made further drawings, which meant that the second mortgagee's actions did not conform to the first mortgagee's procedures.

The court concluded that the second mortgagee could not be subrogated to the first mortgagee's rights, and the subsequent advances could not be tacked to the first mortgagee's security. The court found in favour of the Westpac Banking Corporation.