Perpetual v Buttarelli [2012] WASC 512

The lender obtained summary judgment. The borrower sought a stay a suspension order on the basis that the originator, as agent of the lender, had fraudulently prepared the loan application, or the lender was a knowing participant in the fraud committed by the originator. The mortgagee denied fraud and knowledge of it.

A stay or suspension order requires proof of a reasonable prospect of either setting aside the judgment in a fresh action for fraud or successfully appealing from the judgment. Further to set aside a judgment for fraud, one must show that there is fresh evidence establishing the fraud, but need not show that it was not previously available.

For the mortgage originator to be an agent of the mortgagee requires a consensual legal relationship of a fiduciary character where the agent acts on behalf of the principal and holds itself out as working for or being connection in some way to the mortgagee. The mere task of interviewing prospective borrowers and collection and submitting information does not make the originator agent of the mortgagee.

There are 5 categories of knowledge in equity for knowingly assisting in a breach of trust or fiduciary duty: actual knowledge; wilfully shutting one’s eyes to the obvious; wilfully and recklessly failing to make such enquiries as an honest and reasonable person would make; and knowledge of circumstances that would indicate the facts to an honest and reasonable person.

The court found there was no evidence to find that the mortgage originator was agent for the mortgagee or that the mortgagee committed or knew of the fraud if that is what occurred. Accordingly the court found no reasonable prospects of establishing the judgment was tainted by fraud or that the mortgagee was responsible for any fraud.

The court refused the application.

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