Sometime between 1840 and 1852 a shepherd by the name of Meldrum settled on the Ovens River near Wangaratta. From here he organised several prospecting parties sending them into the May Day Hills, the earlier name given to part of the Beechworth area and Madman’s Gully just south west of Beechworth. One of these parties returned with a pint pot full of pure gold from a creek which became the famous Spring Creek goldfields. This was in January 1853 – by April in the same year, Madman’s Gully was proving to be very rich and the town of Beechworth was rapidly developing.

It is often thought that the name “Madman’s Gully” was due to its close proximity to the Historic Beechworth Lunatic Asylum, but in fact it was named some 13 or so years earlier – the asylum opened in 1867. One version of its naming appeared in the local press of the time: “When it became known that gold was plentiful at this gully (Madman’s Gully) a great number of persons moved there after their day’s labour, and the following morning some altercations about the ground were going on, when one of the diggers, stark naked, ran out of his tent, with a number of small sticks in his hand, and commenced marking out the ground for himself and others, threatening vengeance at the same time to anyone that would oppose him or be dissatisfied; Hence it is said, is derived this singular name, which is likely to pass down to posterity.”

The historic Mayday Hills Lunatic Asylum opened in 1867 and was surrounded by almost 106 hectares of farmland, making the hospital self-sufficient (tended by the patients) with its own piggery, orchards, kitchen gardens, fields, stables and barn. For recreation, the asylum included tennis courts, an oval and cricket pavilion, kiosk and theatre. Despite its architectural Italianate beauty it also has a dark and morbid past and after 128 years of operation Mayday Hills Hospital closed in 1995.