Recently, a bank successfully obtained an order to summarily dismiss a claim against it. The claim arose out of a loan advanced by the bank to purchase farm land. Almost six years after the land was purchased, the borrowers alleged that they had paid too much for the land. The borrowers brought a claim against the bank, alleging that the bank had advised them that they should purchase the property and that it was worth what they paid for it. The causes of action were based on breach of contract, negligence, breach of fiduciary duty and breach of the Fair Trading Act.
The High Court confirmed the well-established principles in relation to a bank's liability for negligence and breach of fiduciary duty. Essentially, if a bank chooses to give advice to its customer about the quality of an investment, the bank may assume a duty to give sound advice. The focus is on whether any advice given by the bank might have resulted in the bank "crossing the line" between a normal business relationship and one in which the bank had a dominating influence.
In the circumstances, the High Court held that no aspects of the borrowers' claim could succeed. Accordingly, the claim was dismissed.
See Court decision here.