Citigroup v CrediProtect [2010] NSWSC 1054

Citigroup sold about $62.3 million worth of consumer debt to CrediProtect. The purchase price was 5.78 cents in the dollar, payable in three installments. The first two installments were paid, but the third instalment of $2,736,285, was not. Citigroup sued CrediProtect and two guarantors.

The guarantors argued the deed of guarantee was obtained by unconscionable conduct on the part of Citigroup. Alternatively that their signatures were procured by misleading or deceptive conduct in breach of the Trade Practices Act. The alleged representations made by the bank were:

  1. That at least one other active bidder had bid in the region of 6 cents in the dollar;
  2. That the rate of return used by CrediProtect was very conservative;
  3. That CrediProtect would recover that debt at a much higher rate of return (15% to 18% of face value);
  4. That Citigroup would provide CrediProtect with 100% of its contingent collection work in order to assist the Defendant financially if it purchased the book of debt at the higher price.

The misrepresentation case was lost, in the main, because the judge was unable to believe the guarantors. He noted:

As to Ms [guarantor], it is apparent that she was prepared, on several occasions, to misrepresent the truth to her business associates. For example, she told her business partner that she had a tentative $400,000 approval to fund a call centre in Manila. That was untrue. She did that, she said, to advance her commercial interests by pushing him along. I will not take up time by detailing other instances of her misleading, indeed dishonest conduct, of the kind that I have just referred, save to note in relation to one she acknowledged the untruth of it in her affidavit.

The unconscionability case was lost because the judge was unable to conclude that Citigroup took unconscientious advantage of any perceived financial vulnerability on the part of the guarantor. On the contrary, the judge was of the opinion she was excited by the projected returns and the prospect of “super profits”.

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