A recent lender favourable Privy Council decision has put lender duties back in the spotlight, an area in which we have seen a lot of focus in recent years, particularly in the context of misselling claims. Claims can be for breach of a statutory duty, or for breach of contract, but claims can also arise from statements made in the selling process, or a failure to disclose certain information. These claims could be for misrepresentation, negligent misstatement or fraudulent misrepresentation.
The Deslauriers case considered whether a lender is required to disclose lending limits and policies to a commercially experienced borrower and whether a failure to do so could result in a claim for misrepresentation or negligent misstatement.
The Deslauriers case
Following appeals in the courts of Trinidad and Tobago, the Deslauriers case was brought before the Privy Council, which has the power to consider decisions from overseas territories. The case concerned a facility which, in part, was intended to fund a property development in Trinidad and Tobago. The lender’s refusal to advance further money to the borrower was challenged but the lender claimed that making further advances would result in lending limits being exceeded.
Before the loan was agreed, the lender, a non-bank, was asked to explain the differences between borrowing from itself and from banks. The borrower believed that the lender had failed to tell it about any internal or external lending limits or policies that might affect the availability of additional loans to fund future phases of the development. The borrower maintained that the lender was aware of the need for further loans.
The borrower claimed that it was entitled to damages because the lender’s failure to disclose the information relating to the lending limits it was subject to amounted to misrepresentation, and that the lender was under a duty to inform the borrower of any lending limits. Failure to do this amounted to a negligent misstatement.
