Perpetual Trustee Company v Kotevski [2009] NSWSC 1228

This involved a loan of $224,000 by way of first mortgage over the home unit of a borrower who was 74 years old, could not speak English, and who’s only apparent source of income was an aged persons pension of about $500 per fortnight. The case was interesting because it appears to have involved fraud. The borrower claimed that a man who “scared and intimidated” him from the Serbian community asked to borrow money on his apartment while he was waiting for a “compo payout”.

In finding the contract unjust, Justice Patten noted:

It seems to me, no sensible person would make, or participate in making, a loan of $224,000 to a 74 years old aged pensioner for a term of 30 years without at least a close consideration of the purpose of the loan. Ms Pogson knew, from more than one source, that Mr Kotevski was born on 24 August 1931. If she had thought about it for a moment, she should have realized that the reference in the Baycorp credit search to DSS Kogarah may mean that Mr Kotevski was in receipt of a pension paid by the Department of Social Security. If she did not realize this then, in my view, she had an obligation to make a further inquiry, particularly as the bald statements in the LoDoc declaration that Mr Kotevski was a builder in receipt of $75,000 per annum, plainly begged a number of questions.

One of the dangers of Perpetual making a loan such as this one was that the borrower may be under the influence of a third party for his or her own purposes. In my opinion, the failure to make reasonable inquiry facilitated the wrongdoing of Mr Micic and all contributed towards the making of a loan which, in my view, should never have been made. In my opinion, in all the circumstances, the justice of this case requires an order declaring the loan contract void.

The lender cross claimed against the broker for misleading and deceptive conduct but failed when it was unable to establish reliance on the representations. In effect, it was doing its own underwriting and not relying on the broker to do so.

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