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In 1987, farmer
William Gunn granted the Bank of New Zealand a security over his livestock, making all proceeds of any livestock sales to be payable to the bank. However, the security did allow the farmer to sell livestock during "ordinary course of business".
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The following year however, Gunn sold 3,081 lambs via his livestock agent Elders
Pastoral, later not only deducting their normal commission for the sale, also deducted the bulk of the remaining proceeds to offset other monies owed by the farmer to Elders.
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On discovery of this development, the bank advised Elders that these monies were payable to them under their security, adding that the money from the sale should be held as a constructive trust for the bank.
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NZPC 3; UKPC 29; 3 NZLR 129; 1 WLR 1090; (1990) 2 PRNZ 333 is a cited case in New
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The court held that the money was to be held as a constructive trust for the Bank of New
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