Vella v ANZ [2009] NSWSC 123

This case was the tail end of complex proceedings involving forged mortgages. Young CJ in Eq dealt with a cross claim brought by La Trobe (through its trustee Permanent Mortgages) against the broker who introduced the loan.

The broker was sued in his personal name for misleading conduct in breach of Section 42 of the Fair Trading Act 1987 and negligent misstatement under the common law. La Trobe argued the broker knew that La Trobe would be relying on the documents he submitted. The broker was not accused of being a party to the fraud, rather it was alleged the loan application he submitted was misleading because of a failure to verify the borrowers signature was genuine.
Under the Fair Trading Act the intent of the defendant is irrelevant and it makes no difference that the misrepresentation was careless rather than fraudulent.

The broker argued that the structure of the mortgage industry was such that there was no room for any implied warranty by a broker submitting an application that all statements in the application are genuine, truthful, and accurate. Indeed, any reasonable broker would expect that lenders advancing large sums, would themselves have systems in place to guard against fraud.

The Judge decided against La Trobe in relation to the misleading conduct claim on the grounds that he could not infer reliance on the details in the application. He found that the broker reasonably expected that the lenders would make their own enquiries and that the information in the application was “merely the start of the process”.

The Judge also decided against La Trobe in relation to the negligent misstatement claim. Although the Judge acknowledged that the forwarding of an application was an indispensible step in the chain of events that led to the loss, he found that:

The broker was not in factual or legal control of the process, the persons dealing with the application were by no means vulnerable people, they were seemingly experienced people in the mortgage market, there was ample opportunity at each stage of the process for checks and appropriate enquiries to be made and a reasonable person originating the process would probably expect such checks and enquiries to be made.

One curious aspect of the case was that La Trobe argued there was an originator agreement and while the broker argued there was none. Possibly because the claim was not framed in contract His Honour did not deal with the issue.

Click here to read the full judgment

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