In Violet Homes Loans Pty Ltd v Schmidt & Anor [2013] VSCA 56 the Court of Appeal unanimously upheld the trial judge’s decision that a mortgage originator

FACTS

In Perpetual Trustees Australia Limited v Schmidt & Anor [2010] VSC 67 the trial judge, J Forrest J, found that Violet Homes Pty Ltd (“Violet”) had acted unconscionably and in breach of the general law, section 51AC of the Trade Practices Act and section 12CB of the Australian Securities and Investment Commission Act 2001.

In 2003 the Plaintiff (“Schmidt”) responded to an advertisement which claimed an investment of $40,000 in  syndicate would lead to a net return of $80,000 within 12 months.  Schmidt range the number given and spoke to a Mr Maddocks (“Maddocks”).  In next month he invested $80,000 in the syndicate.  obtained a line of credit from Perpetual Trustees Australia Ltd [12].  In early 2004 Maddocks pursuaded Schmidt to make further investments.  Schmidt was unable to borrow from his bank, the Bank of Melbourne, because he was a pensioner who had no capacity to repay [13].  Maddocks arranged a loan for Schmidt from Perpetual, preparing the loan application and income declaration.  The documents contained false information, as to Schmidt’s employment situation and his annual income.  Schmidt did not provide the false information but signed the documents without reading them [14].  The documents were provided to a finance broker, Medallion Finance Concepts (“Medallion”) who onforwarded them to Violet [16]. Responding to querries by Ms Bonnici a credit officer at Violet, including a failure to provide an ABN, raised Maddocks prepared an amended the application and had Schmidt sign it [20].  At no time did anyone from Violet deal with Schmidt directly.

DECISION

Unconsionability

The Court found that “..recklessness, in the form of wilful blindness, may in some cases supply the necessary element of moral obloquy”[58].  The court said Read the rest of this entry »