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Loans - lending to one partner without authority or consent of other partner - bank blame for breakdown of relationship between partners - assessment of appropriate compensation for direct loss and inconvenience
Ms C and her former partner, Mr D, borrowed money from the bank to build a house on a section they owned. Ms C understood that the loan was for $285,000.
Some months later Ms C and Mr D sold the property. Ms C then discovered that the amount owed to the bank was over $316,000. She found that, a few months previously, an additional $30,000 approximately had been made available by the bank without her knowledge.
Ms C accused Mr D of obtaining a further loan without her consent. Mr D said the bank had made a mistake, but Ms C did not believe him. Ms C and Mr D then separated.
Because of the additional loan, some of which appeared to have gone into Mr D’s business, Ms C received less than she was expecting from the sale of the house. Ms C complained to the bank. She said that the bank’s actions had had a catastrophic effect on her and her children’s lives. She blamed the bank for the ending of her relationship with Mr D and sought compensation of $35,000.
The bank offered compensation of $3,000 for the inconvenience caused to Ms C. This was not accepted and Ms C complained to me.
I met with Ms C. After some discussion and calculations it became clear that, in fact, the difference between what Ms C received from the sale of the property and what she thought she would receive was only $7,000.
We then discussed the bank’s offer of compensation for inconvenience. Ms C accepted that, while the bank’s actions had contributed to the stress and anguish she had suffered on her relationship break-up, the bank could not be held solely responsible for the situation. There had to have been other issues between Ms C and Mr D that contributed to their difficulties. Therefore Ms C accepted that the bank’s offer of $3,000 compensation for inconvenience was reasonable.
Following my meeting with Ms C, I advised the bank that Ms C’s claim for direct loss had been reduced to $7,000. After some deliberation, the bank agreed to offer Ms C $7,000 as compensation for direct loss, in addition to the $3,000 compensation for inconvenience.
Ms C accepted the bank’s increased offer.