A $40 Million Loan Secured by One Letter: An Australian Diocese in Court Over Its Debt

• The Commonwealth Bank sued the Anglican Diocese of Bathurst over $40 million in debt
• The court heard the only security for the loan was a letter of guarantee from the then bishop
• The synod had agreed to sell property to repay the bank, but sales did not proceed
• Council members said they were advised the diocese had no power to sell

The Anglican Diocese of Bathurst in western New South Wales, which oversees 34 parishes from the Queensland border to the Blue Mountains, was in court in 2015 as the Commonwealth Bank sued it over $40 million in outstanding debt, ABC News reported on April 29, 2015.

Council member Marilyn Baker told the court that after just a few meetings it was clear the diocese was in great financial difficulty. She said she knew the church faced millions of dollars in debt but was never told how dire the finances were. The court heard that the only security for the $40 million loan was a single letter of guarantee from the bishop at the time, Richard Hurford. Several council witnesses acknowledged they had approved the loan and were therefore responsible for ensuring the bank was repaid.

The judge was told the diocese’s synod had unanimously agreed to sell property and land worth millions of dollars to repay the bank. But three council members said the diocese later received legal advice not to sell any assets. Coral McFarland, who joined the council in 2008, said the sales did not go ahead because the council was told it did not have the power to sell properties and land. The court also heard that several parishes strongly resisted selling any of their assets to pay down the debt.

The case exposed how a church body could borrow heavily without the governance to match, and then find itself unable, or unwilling, to use its property to repay.

Jamaican congregations taking loans for new buildings, schools or halls can learn from Bathurst. A lender needs proper security, and a church council needs to know who has legal authority to pledge or sell property before it signs anything. When church land is held in trust for parishes or members, as it often is, the power to sell may be far more limited than leaders assume. Checking the trust deeds, getting legal advice first and keeping members informed can prevent a building project from becoming a courtroom fight.

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