These proceedings arose out of an earlier case where a broker received an application for finance from a 74 year-old pensioner, which was in fact completed by a friend of the broker and the broker provided it to a lender (through an intermediary). A solicitor provided independent legal advice to the pensioner. The pensioner defaulted and the lender sued for possession.
The lower court found the loan was unjust and declared the agreement and mortgage void pursuant to the Contracts Review Act. The pensioner also succeeded in his cross-claim against the solicitor, who was found to have made misleading and deceptive representations to the lender to the effect that the pensioner had signed the loan agreement freely and voluntarily. The court ordered that the pensioner’s verdict against the solicitor be held on trust for the lender.
The lender appealed against the court’s decision to dismiss the lender’s cross-claim against the broker. The cross-claim sought damages for misleading and deceptive conduct against the broker. The broker argued that he simply acted as a conduit and the lender needed to verify the information itself. The broker also argued that the intermediary’s failure to discover the information was incorrect was an “intervening cause of loss”. The lender argued that by submitting the application, the broker represented that it had instructions to borrow the money and that the pensioner had signed the application documents.
The Appeal Court rejected the broker’s arguments and found the broker liable on the cross-claim. It noted that even if the intermediary acted carelessly, the misleading conduct of the broker induced it to submit the application to the lender. Unlike the court below, it found the lender to have relied upon the broker’s misleading conduct. This resulted in the lender’s loss being borne 35:65 by the solicitor and the broker. The case is a reminder to solicitors and brokers of liability attaching to their misleading conduct, which remains even if a lender is careless provided reliance and causation can be proved.
The court refused to consider contributory negligence as a defence because the broker had not demonstrated that he owed a tortious duty of care and had breached it (with the same behaviour that was misleading and deceptive). Had he done so he would have been able to claim contributory negligence (even though the action against him was framed as a statutory breach).