Can a bank lose a property valuation report ?

Sarenco,

Surely the loan officer fraudulent misrepresentation of the rental income on the property to the bank induced the bank to enter contract with the borrower. The loan officer is body corporate for the bank, his fraudulent misrepresentation by default then induced the borrower into the said contract as the bank agreed to contract ,if the loan officer had acted truthfully, the bank would not have sanctioned the loan.

From a criminal law perspective all the necessary ingredients are there to charge the loan officer with fraud. How come the civil proofs are not there.

DebtCert said:

Indeed, as the OP referenced nine separate mortgages in post #10.

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Ah, gotcha. Sorry, I didn't draw the link between the two posts.

It really depends on all the factual circumstances. The quantum and number of loans would certainly be relevant and whether or not the disputed loan agreement contains a warranty to the effect that the borrower is not acting as a consumer.

Rebuttal said:

Surely the loan officer fraudulent misrepresentation of the rental income on the property to the bank induced the bank to enter contract with the borrower. The loan officer is body corporate for the bank, his fraudulent misrepresentation by default then induced the borrower into the said contract as the bank agreed to contract,if the loan officer had acted truthfully, the bank would not have sanctioned the loan.

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Well, the bank might theoretically have a cause of action against its own loan officer but it doesn't follow that the borrower was induced by any misrepresentation on the part of the bank to enter into the contract.

Was the borrower even aware of the content of the internal bank document when he entered into the loan agreement? Even if he was, he would have to demonstrate that he actually relied on this alleged misrepresentation at the time he entered into the contract and that this was the bank's intention in making the misrepresentation to him.

None of these elements are evident to me from the facts as presented.

Rebuttal said:

Should he even go to the police ?

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To be frank, I don't think the Gardai would take any action unless the complaint was made by or on behalf of the bank. And even then...

Sarenco,

does the legal description below not bring the borrower within the ambit of being a victim of fraudulent misrepresentation,

(iii) intent to induce reliance. The representor must intend for the representee to rely on the representation in the way that the representee actually does. The test for intent is what can objectively be inferred from the circumstances. It is possible that the plaintiff is not the immediate recipient of the representation. However, so long as the plaintiff belongs to the class of persons to whom the representor intended the representation to pass, he is not deprived of sufficient standing to bring a claim.

(iv) actual reliance by the representee. There must be a correlation between the representation, the intended reliance and actual reliance by the plaintiff. The representation need not be the only reason for the plaintiff’s conduct, but it must materially influence the plaintiff. In terms of proof, actual reliance will generally be inferred from the circumstances: if the plaintiff acts in a manner on the basis of the representation that one would ordinarily expect given all the circumstances, this will suffice.

ie, the borrower acted in a manner that he normally would- he accepted the loan offer from the bank.

But where was the representation to the borrower in the first place? Never mind intent and reliance.

Sarenco,


(i) an untrue representation of fact. The untrue representation may be written or oral, and may be express or implied by conduct. To be actionable, the representation must be of a actual nature. An indication of opinion or personal intention will not usually constitute a representation as to its substance, although it can constitute a representation of the fact that the representor holds that opinion or intention at the time, which may suffice, depending on the circumstances of the case. An omission to disclose relevant information will not ordinarily constitute a representation. The exceptions to this are where:

• the non-disclosure renders other statements misleading; or
• the law recognises that the relationship between the parties belongs to a category which requires disclosure. Such relationships include fiduciary relationships (a special relationship of trust and confidence, eg between trustee and beneficiary, and which can ground a separate cause of action (see below, Breach of fiduciary duty) or transactions which are uberrimae fidei (required to be in utmost good faith).

Sarenco,


(i) an untrue representation of fact. The untrue representation may be written or oral, and may be express or implied by conduct. To be actionable, the representation must be of a actual nature. An indication of opinion or personal intention will not usually constitute a representation as to its substance, although it can constitute a representation of the fact that the representor holds that opinion or intention at the time, which may suffice, depending on the circumstances of the case. An omission to disclose relevant information will not ordinarily constitute a representation. The exceptions to this are where:

• the non-disclosure renders other statements misleading; or
• the law recognises that the relationship between the parties belongs to a category which requires disclosure. Such relationships include fiduciary relationships (a special relationship of trust and confidence, eg between trustee and beneficiary, and which can ground a separate cause of action (see below, Breach of fiduciary duty) or transactions which are uberrimae fidei (required to be in utmost good faith).

Sorry, don't know what happened

There is a particular statutory rule for statements concerning the creditworthiness of another person. Fraudulent misrepresentations provided to enable another party to obtain credit are only enforceable if they are provided in writing and signed (section 6, Statute of Frauds Amendment Act 1828). This avoids the situation whereby the representor would effectively become a guarantor of any credit advanced through making a fraudulent misrepresentation.

In this case the loan officer signed the bank's declaration of compliance with the banks code and practice on lending. It is the representer who is committing the fraud.

Ok, what statement did the bank make to the borrower that was misleading due to the non-discourse of some material fact which rendered the statement misleading?

From the facts as posted there was no statement or representation at all by the bank to the borrower, never mind one that was rendered misleading by some non-disclosure.

To the extent that there was a fraud (and that is far from clear), it was committed on the bank - not the borrower.

Sarenco,

I think I get what you are saying but I will have to refer to my friends documentation and get back to you.

What legal recourse has this borrower when the bank's loan officer has breached the bank's internal criteria for issuing mortgages so that the borrower obtained a mortgage that they simply did not qualify for or could not afford. This mortgage then went into default.

Rebuttal,

I would agree with Sarenco, that, on the face of it, there appears not to be enough evidence to satisfy the tort of deceit, however having said that he can take an action against the bank based on professional negligence, which on the face of it, is most definitely satisfied. On another point, if his friend does goes to the Gardai and the loan officer is subsequently charged with fraud, seeing that his friend was directly affected by the fraud ( obtained inflated mortgage approval ), this matter can be brought to the civil courts attention. Fraud unravels everything.

I'd draw your attention to the Supreme Court case KBC Bank V BCM Hanby Wallace.

In this case the Supreme Court concluded:

The Supreme Court

The Supreme Court reviewed the evidence and clarified the finding of “deception” stating that the High Court judgment “cannot and should not be read as imputing any intentional dishonesty or deliberate misleading to any partners or officers of the appellant firm”.

The Court noted that banks have a duty when reviewing whether to make any given loan to assess the soundness, financial standing and trustworthiness of the prospective borrower as well as the viability of the proposed venture. This meant that banks should have robust and comprehensive credit analysis and approval processes to ensure adequate monitoring of risk, as required by the EC (Licensing and Supervision of Credit Institutions) Regulation 1992. These duties are quite independent of any reliance the bank might place on any third party, such as a solicitor.

Thanks very much to all the posters to date, lots of food for thought.

Was the bank acting in some sort of advisory capacity in its dealings with the borrower?

There is certainly no general duty on a lender to offer advice to a borrower or otherwise to act exclusively in the best interests of a borrower.

Does a bank owe a duty of care to it's customers ?

Firstly, to borrowers. It depends on whether or not the borrower is a commercial customer of the bank or a domestic customer and if the latter, the provisions of the Consumer Credit Act must be complied with by the bank so as to ensure that they fully understand what they are doing. The Consumer Credit Act may also include borrowings in relation to the family home and may also include commercial transactions, borrowings in respect of which are secured on the family home. The bank has to realise that they may be dealing with consumers and therefore have to take care that not only is the Act complied with but also that the borrowers are properly and independently advised. A High Court judge recently described this requirement as the parties having “equality of arms” – in other words, that a bank with all its expertise and professional advisors is equally matched by the quality of advice being given to the borrowers.

Therefore, in terms of the duty of care owed to borrowers, a borrower classified as a consumer has a special entitlement to a duty of care under the Consumer Credit Act and other legislation applicable.In relation to the “arm’s length” borrower that appears to the bank to be properly and comprehensively advised and represented and to which the Consumer Credit Act does not apply, then the bank’s duty ( with a number of minor exceptions) is not to mislead the borrower in any material way about the particular transaction.

Fair enough, the reference above to professional negligence threw me.

Is there any suggestion that the bank mislead the borrower regarding the terms of the loan product? I assume the borrower was capable of understanding these terms and that he was advised by a solicitor in this transaction - no?

Breach of duty in negligence liability may be found to exist where the defendant fails to meet the standard of care required by law. Once it has been established that the defendant owed the claimant a duty of care, the claimant must also demonstrate that the defendant was in breach of duty. The test of breach of duty is generally objective, however, there may be slight variations to this.

Sarenco, would this apply in this case as the bank has lost the valuation reports and indeed did not supply my friend with a copy of the mortgage deeds to the various properties in contravention of section 123 and 130 Consumer Credit Act 1995 respectively.