Bendigo and Adelaide Bank v Cairncross [2011] NSWSC 1385

The borrower invested in managed investment schemes. He used money borrowed  from the bank. When the investments failed he sought to escape repayment of the loans arguing that the bank was liable for misrepresentations made by the managed investment scheme. This claim had very flimsy basis, it was that the bank was referred to in the investment documentation as the “preferred financier of the scheme”.  

The court found the following claims had to be struck out —that the bank:

  1. as promoter of the scheme, breached its fiduciary duties to the borrower;
  2. was vicariously liable under the ASIC Act for misrepresentations in the product disclosure statements;
  3. engaged in unconscionable conduct under the Australian Consumer Law and the ASIC Act;
  4. knew of the breach of fiduciary duty by the attorneys who signed the loans on behalf of the bank.

However the Court allowed the borrower to argue that:

  1. the lender gave the borrower defective product disclosure documents under the Corporations Act;
  2. the loans were unjust within the meaning of the Contracts Review Act;

on the basis that an inference could be drawn from the bank being the preferred financier of the scheme that it knew of the representations and that it was arguable the bank knew the borrower would rely on them.

Click here to read the full judgment

 

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