Landa v Perpetual Trustees Victoria [2014] NSWCA 393

We have previously reported the trial judge’s decision in this case.

A doctor was hoodwinked by a fraudulent mortgage broker. The broker told the borrrower he was going to invest money the doctor had, as well as money he arranged for the doctor to borrow from Perpetual Victoria. Instead, he misappropiated it.

The doctor sought declarations that the loan and mortgage with Perpetual Victoria be set aside. This was on the basis that the fraudster was acting as Perpetual Victoria’s agent. This failed before the trial judge.

In the alternative, the borrower sought orders that the loan and mortgage should be set aside as unjust under the Contracts Review Act. This too was rejected by the trial judge.

The borrower then appealed but only on his claim under the Contracts Review Act. 


Perpetual Victoria had appointed Interstar Management Pty Ltd (Interstar) to have overall responsibility for arranging, disbursing and managing secured loans on behalf of Perpetual Victoria. 

Interstar entered into a loan origination and management agreements with Morgan Brooks. Morgan Brooks was empowered to act as the servicer, manager and supervisor of the mortgages.

Morgan Brooks, in turn, entered into an arrangement with the fraudster, and a company controlled by him, to operate a business of originating loan transactions for Interstar and Perpetual Victoria. 

The fraudster acted as agent of Morgan Brooks, with a duty to market and promote the products and services of Morgan Brooks. 

At a social occasion the borrower told the fraudster that he had about $1,600,000 available for investment, being the net proceeds of the sale of his home in Point Piper. the fraudster said that he could invest the sum for the borrower “at Perpetual”.

He told the doctor that the investment would be at 8 percent per annum and that he would receive 1,000 shares in “Perpetual” for every million dollars invested, which would equate to a return of about 12 percent per annum. 

The fraudster said that, in order to invest with “Perpetual”, the doctor should make cheques payable to “Perpetual Trustees”. Obviously Perpetual Australia is a separate entity from Perpetual Victoria. 

The fraudster next asked the doctor whether he had any property that was not mortgaged. The fraudster said that he could arrange mortgages “through Perpetual” and that the money could be reinvested at “the same rate as the cash already invested with Perpetual”. 

He said that he did a large amount of that kind of lending with Perpetual Victoria through Morgan Brooks and that the doctor would be borrowing at 6 percent and earning 8 percent on the investment.

The doctor made enquiries about the relationship between Perpetual Australia and Perpetual Victoria and was informed that Perpetual Victoria was owned 100 percent by Perpetual Australia.

The doctor went ahead and borrowed money from Perpetual Victoria on the security of mortgages of his investment properties and his home respectively. 

On settlement, bank cheques were drawn on the trust account of Perpetual Victoria’s solicitors made payable to “Perpetual Trustees Australia Ltd”. These were provided to delivered the cheques to the fraudster at the direction of the doctor. 

The cheques were not invested with Perpetual Australia, but were paid into an account with Perpetual Australia under the control of the fraudster. The proceeds were subsequently withdrawn from the account and misappropriated by the fraudster.

The Contracts Review Act argument

The doctor argued that Perpetual Victoria established a system and structure that facilitated the potential for abuse by independent mortgage originators and managers such as Mr Cincotta and Morgan Brooks, but failed to monitor the activities of Mr Cincotta and Morgan Brooks as mortgage originators and managers in order to detect such abuse. 


The Court of Appeal reiterated that the fraud perpetrated on the doctor was as a result of his personal relationship with the fraudster, both as an investment adviser and as a friend. That relationship was entirely unrelated to Perpetual Victoria. 

The Court of Appeal held there was no fraud in relation to the making of the applications for loan or in the granting of the mortgages. The evidence suggested that everything that was said to Interstar and Perpetual Victoria on behalf of the doctor was perfectly true and accurate. Everything that was put represented Dr Landa’s intentions. That is to say, he wished to borrow money in the amounts that were the subject of the applications. He had every capacity to repay those amounts had they not been misappropriated by Mr Cincotta.

The Court of Appeal held there was no basis in the evidence for asserting that Perpetual Victoria’s lending structure provided any greater opportunity for Mr Cincotta to deceive Dr Landa than would otherwise have existed if Perpetual Victoria’s lending structure was in any way different.

Click here to read full judgment.

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