FI And D&O International Review, May 2018 – Case Summaries

Case summaries

Financial Institutions - Liability

No duty of care owed to experienced borrower

Deslauriers and another (Appellants) v Guardian Asset Management Limited (Respondent) (Trinidad and Tobago) [2017] UKPC 34

Guardian Asset Management ("GAM") advanced a commercial loan to the Deslauriers in October 2007 for development. After agreed extensions, the Deslauriers defaulted on their loan and GAM sued for repayment and interest in 2009. The Deslauriers denied liability, although they did not dispute the non-payment, and counterclaimed for damages for a loss of TTD 24m for being unable to complete the project due to GAM's failure to advance further loans (which would go over lending limits).

They argued that GAM's failure to disclose these lending limits at earlier stages of negotiation was a misrepresentation and that GAM made a negligent misstatement, failing in its duty of care to disclose the existence of lending limits.

In 2011, judgment was given against the Deslauriers in the High Court of Trinidad and Tobago. In 2016, the Deslauriers' appeal was dismissed by the Court of Appeal of Trinidad and Tobago. This appeal was heard by the Privy Council.

It held that there was no misrepresentation; there was no evidence, prior to entering the loan agreement, that GAM would be asked to make further, future loan advances for the project to be completed. Therefore, the lending limits were not relevant and there was no misrepresentation.

Regarding duty of care, citing Hedley Byrne v Heller [1964] AC 465, the Court held that there had been no assumption of responsibility. In a commercial, arm's length relationship between experienced lenders and borrowers, it would be very unusual for the relationship to give rise to a duty of care to advise the borrower of its internal lending policies or any external influences on its approach to evaluating loan applications. The appeal was dismissed.

Financial advice firm not vicariously liable for agent's actions in relation to property development scheme

Frederick & Ors v Positive Solutions (Financial Services) Ltd [2018] EWCA Civ 431

The appellants ("A") were introduced to a property development scheme run by an acquaintance's business partner ("W"), who was an IFA, appointed as the respondent firm's agent. The money needed for the investment was raised by re-mortgaging A's properties. W submitted the applications for loans through an online portal with a bank, to which he had access because he was an...

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