BNY Trust Company v Moore [2012] WASC 255

An elderly husband and wife refinanced a loan on their house, after having gone into default. The mortgage broker acting on the refinance submitted a loan application on their behalf which had been signed by them in blank form while the husband was in hospital and later completed by the mortgage broker, showing a monthly income of their business of $10,500 and submitted to the lender. The husband and wife say they never saw the completed form and never authorised the broker to state that the business earned that amount. Further, the declaration as to self-certification of earnings was not signed by the husband and a subsequent statutory declaration by the husband as to earnings was allegedly forged.

The court considered five serious questions to be tried on the facts:

  1. was the broker the agent of the mortgage manager?
  2. was the mortgage manager the agent of the trust manager and servicer?
  3. was the trust manager and servicer the agent of the lender?
  4. did the mortgage manager and or trust manager owe a duty of care to the borrowers?
  5. was the broker, mortgage manager or trust manager acting unconscionably?

In effect the question for the court was whether the alleged falsification of information could be sheeted home to the lender, through agency principles, so as to impute knowledge from the broker through the intermediaries to the lender.

The court found that the broker was agent of the borrowers, not the lender and hence the first three questions fell away.

The court also found no duty of care owed by the lender to the borrowers to assess their capacity to repay a loan or to verify the details provided in a satisfactory loan application. The court said:

The law does not recognise any duty upon a lender to assess the capacity of a borrower to repay a loan. Nor must a lender ascertain the viability of a loan or verify the details provided in a loan application. A lender is not a branch of a social services agency. It is entirely for the lender to determine what inquiries it should make to verify information given in support of a loan application. On receipt of an apparently regular and satisfactory loan application, there is no obligation on the lender to pursue further detailed inquiries as to the circumstances of the applicant for the loan, the proposal transaction to which it relates, or the commercial viability of the loan.

The court did not accept that the lender’s credit policy created any duty to the borrower. A credit policy protects the lender. If a loan is made in breach of the lender’s internal guidelines, it does not give rise to any rights on the part of the borrower. The court noted that the borrowers’ attempt to portray themselves as a victim, when they got their loan, was at odds with commercial reality and had no merit.

The court noted that WA did not have the equivalent of the NSW Contracts Review Act which give rise to allegations of asset lending and as such, any principles under that case law are of dubious worth.

The court also found that for a credit impaired “lo doc” loan, the credit policy was not breached. The court found no unconscionable conduct on the part of the bank. The court also rejected that the borrowers were at any special disadvantage because the loan application was signed whilst the husband was in hospital and given their ages. The court noted they were experienced borrowers and understood the transaction. Age itself is not a special disadvantage.

The court gave summary judgment for the lender.

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