Two recent decisions of the Supreme
Court of New South Wales provide welcome news for brokers with the
court finding that:
brokers do not owe a duty to borrowers to investigate the
information provided to them by borrowers
it is not unconscionable for a broker not to ensure that a
borrower receives independent advice about a loan
it is not unconscionable for a broker to leave the explanation
of loan documents to a lender.
Both cases involved similar facts;
parents from non-English speaking backgrounds entering into loans
to provide funds for their children.
In the first case, RHG Mortgage Corporation Limited v
Baira  NSWSC 520 Ms Baira and Mr and Mrs Ianni signed
loan and mortgage documents for the purpose of assisting Mrs
Baira's daughter and her husband (Mr and Mrs Ianni's son)
to purchase a property and reorganise business loans. Ms Baira and
Mr and Mrs Ianni apparently provided false information to the
broker in support of the loan applications.
Grove AJ found that the broker had no duty to investigate the
borrowers or to challenge or investigate the truth of what he was
told by them. His Honour also rejected a contention that the broker
was liable for having failed to notice an anomaly in documents
provided to him by the borrowers.
In the second case, Westpac Banking
Corporation v Velingos  NSWSC 607 Mr and Mrs Velingos
signed loan and mortgage documents in the presence of a Westpac
officer and a broker for the purpose of refinancing an existing
loan and providing funds to their son for investment. Mr and Mrs
Velingos' son acted as translator for his parents during the
meeting. Schmidt J found that what the bank officer said at the
meeting to Mr and Mrs Velingos with respect to obtaining
independent advice was not translated to them.
Her Honour found that there was nothing
unconscionable in the broker leaving the explanation of the loan
documents to the bank officer and nothing which could have
indicated to the broker that Mr and Mrs Velingos' son was not
translating accurately what the bank officer said. Her Honour also
found that although it was possible that there was undue influence
occurring, the broker did not act unconscionably in not ensuring
that Mr and Mrs Velingos received independent legal advice.
The decisions highlight the more
onerous duties imposed on solicitors when acting for borrowers. In
past cases, the Supreme Court has found that solicitors owe a duty
to borrowers to enquire into information provided by co-borrowers
(including conducting company and property searches) and has found
solicitors liable for failing to advise borrowers separately from
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