Bofinger v Kingsway Group Limited [2009] HCA 44 | 13 October 2009

ON 13 OCTOBER 2009, the High Court of Australia delivered Bofinger v Kingsway Group Limited [2009] HCA 44 (13 October 2009).

The High Court held that guarantors of a secured loan may recoup contributions they made to the repayment of the loan to a first mortgagee from the remaining surplus securities before the surplus is applied to repay any second or subsequent mortgagee with security over the same property, even if the guarantors have also guaranteed the second or subsequent loans. The guarantors were found the be subrogated to the first mortgagee. Upon repayment of the first loan, first mortgagee had a fiduciary obligation to in good conscience provide the guarantors with the surplus funds and remaining properties.

On the principle of unjust enrichment and how it applies to subrogation, Gummow, Hayne, Heydon, Kiefel and Bell JJ said at [85]:

“The appeal to this Court in Friend v Brooker [63], which concerned the equitable doctrine of contribution, was correctly conducted on the footing that the concept of unjust enrichment was not a principle supplying a sufficient premise for direct application in a particular case. The same is true of the equitable doctrine of subrogation. The oral submissions for the Solicitors correctly recognised this.”

Lawyers

Sydney, Australia

1300 00 2088