Perpetual Trustees Australia Ltd v Schmidt

The followin

IN THE SUPREME COURT OF VICTORIA	Not Restricted
AT MELBOURNE COMMERCIAL AND EQUITY DIVISION

No. 9311 of 2005

PERPETUAL TRUSTEES AUSTRALIA LIMITED	Plaintiff
(ACN 000 431 827)
v
MANFRED PETER SCHMIDT	Defendant
and
VIOLET HOME LOANS PTY LTD (ACN 120 045 025)	Third Party

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JUDGE:	J. FORREST J
WHERE HELD:	Melbourne
DATES OF HEARING:	29, 30 September & 1, 6 October, 10, 25, 26 November 2009.
DATE OF JUDGMENT:	4 May 2010
CASE MAY BE CITED AS:	Perpetual Trustees Aust Ltd v Schmidt & Anor
MEDIUM NEUTRAL CITATION:	[2010] VSC 67

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UNCONSCIONABLE CONDUCT – Whether unconscionable conduct of mortgage originator – Provision of finance – Client of mortgage originator defrauded by non-party – Whether mortgage originator acted as agent for finance provider - Implied agency – Scope of authority of agent – Whether contributory negligence available to a finding of unconscionable conduct – s 51AC Trade Practices Act – s 12CB Australian Securities and Investments Commission Act.

MORTGAGE – Loan contracts and mortgages – Low Doc loans – Borrower persuaded to sign completed loan application forms – Loans approved on false financial information without knowledge of borrower.

PRINCIPAL AND AGENT – Whether finance broker agent of mortgage originator – Whether mortgage originator agent of trustee - Whether broker acting for borrower or lender – True nature of relationship – Conduct of business by mortgage originator – Implied agency – Scope of authority of mortgage originator.

TORT – Duty of care – Negligence – Whether duty owed by mortgage originator to borrower – Whether contributory negligence available to finding of unconscionable conduct.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R. Moore	HWL Ebsworth
For the Defendant	Mr S. Marantelli	Wisewoulds
For the Third Party	Mr J. Wilson SC with	Mingos Kay Lawyers
Mr P. Bravender-Coyle
HIS HONOUR:

Introduction

1. Manfred Schmidt, a retired printer, was induced by a conman, Mr Ian Maddocks (“Maddocks”), to invest in property developments in Myola Street, Carrum. Maddocks was ultimately gaoled; the investments were worthless. Mr Schmidt lost over $200,000 as a result of Maddocks’ activities.

2. In May 2004, in order to finance his investments, Mr Schmidt obtained a loan from Perpetual Trustees Australia Limited (“Perpetual”), secured by a mortgage over his home. Although the loan was originally for the sum of $190,000, now, five years later, there is nearly $450,000 owing on it.

3. Perpetual had nothing to do with the loan other than providing the funds. In addition to Maddocks, there were three other intermediaries involved in arranging Mr Schmidt’s loan: Macquarie Securitisation Limited (“MSL”), Violet Home Loans Australia Pty Ltd (“VHLA”) and Medallion Finance Concepts Pty Ltd (“Medallion”).

4. Mr Schmidt accepts that he signed the loan documents (which contained many false details) and the mortgage; however he asserts in his counterclaim that VHLA was Perpetual’s agent and Perpetual is therefore liable for VHLA’s conduct. He argues that VHLA, the loan facilitator, acted unconscionably in procuring and submitting the loan and therefore his repayment to Perpetual should be limited. He…