A loan consultant contracted to work for a mortgage banking business had been terminated after he misrepresented the income of a borrower (his cousin) in a ‘low doc’ loan application. He sought a declaration that the termination of his Credit Representative Deed was invalid. The trial judge had found against him, finding that the misrepresentation of income in the application was a material breach that could not be undone and the mortgage banking business had validly terminated his appointment.
The former loan consultant appealed to the Court of Appeal. He alleged the trial judge had made several errors, most notably, that it was an error to find that his conduct was misleading, or that the breach was material, or that the termination was valid, or that the breach was not capable of remedy.
The Judges on appeal dismissed the appeal on all grounds. They confirmed the rulings of the trial judge. In particular, they confirmed that:
- Having regard to the loan consultant’s detailed knowledge of the borrowers’ finances and the inadequate explanations he provided in an attempt to explain the errors in the application, the trial judge was entitled to infer that he had deliberately misrepresented the partnership’s income to ensure that the loan application would be granted;
- The breaches were without remedy because the loan had actually been made to the borrowers and could not be retracted or undone; and because the mortgage banking business had been exposed to a potential criminal liability because of the misrepresentation that could not be discharged by remedial action.
- The deliberate misrepresentation of the income of the partners was a material breach of the Deed and to argue, as the former loan consultant did on appeal, that it couldn’t be said that he acted ‘other than foolishly’ is no answer to the potentially serious import of the breach.