Superior Diamond Products v Camilleri [2006] NSWSC 1169

In this case the lender made three separate loans to two borrowers on second, third and fourth ranking mortgages. The value of the land was grossly misrepresented and the lender was able to recover nothing from the land.

These proceedings were brought against the two borrowers in debt and the broker in deceit. All three defendants were subject to sequestration orders (bankrupt) nevertheless the lender was able to proceed against the broker, Adrian Camilleri because the action was brought in deceit.

None of the defendants were represented and the court had to make its finding ex parte. The court noted in action for the deceit the High Court in Neat Holdings v Karajan [1992] HCA 66 stated:

… strict proof is necessary where so serious a matter as fraud is to be found.

No liability for deceit by the broker was found or claimed in relation to the first advance. However the lender then agreed to make a further loan after being falsely told by the finance broker that the borrowers had found a buyer for the land. Similarly the third loan was advanced because of more false representations made by the broker. The evidence established that the false representations were fraudulent in that the broker knew them to be false and yet made such representations to induce the lender to act to its detriment and advance monies to the borrower. Accordingly, the broker was found liable to the lender for damages for deceit.

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