Furthermore, the fact that Eastman had stated that the company “would never have lent Melissa and Fernando the money to buy the house had they known their true credit history and financial situation”, and that Eastman only agreed to lend out the money “After reading the letter from BENZ Bank” have also reinforced the reliance of Eastman on BENZ Bank’s evaluation. And as the case of L Shadow and Associates Pity Ltd v Parameter City Council suggested, BENZ Bank can owe a duty of care to Eastman when it provided information and advice regarding Melissa and Fernando credit status.
Regarding the purpose of the letter itself, there is another case that we can infer: Bathurst Regional Council v Local Government Financial Services Pity Ltd (No. 5). Similar to that case, it is clear that the main purpose of such a letter is to prove that the couple had the ability to pay back the amount of loan lent out. Finally, although not very clearly stated, it is safe to assume that Melissa and Fernando had required BENZ Bank to specifically prepare the letter for Seacoast’s reference, as the bank wrote the letter “Upon their request”.
Moreover, the fact that in the last paragraph of the question BENZ Bank infested that its advice towards Eastman “was incorrect because Melissa and Fernando had missed several loan repayments and were likely to be sued by the BENZ Bank to recover those repayments” has confirmed that BENZ knew that the letter was specifically to “Advice” Eastman. Thus, according to what McHugh J said in Sanded Finance Corporation Ltd v Peat Amharic Hundredfold case, a duty of care was owed by BENZ Bank to Eastman, as the former had advised the latter specifically regarding the credit status of Melissa and Fernando, assuming without any disclaimer written.
Conclusion: A Duty of care is owed, assuming no acclaimer was given in the letter. Step 2: Was the standard of care failed to exercise? Based on the question’s provided fact, the employee making the letter was a new and inexperienced one and the fact that he misread the file had led to the preparation of a wrong and negligent letter of “Advice” to Eastman. Normally, a professional in the banking industry is required to refer to the documents and files of a customer in a reasonably careful manner before writing such letters like this.
And in this case, the error made by the employee itself was clearly due to incompetence and carelessness which is generally unacceptable in the banking industry. Thus, a peer professional opinion test will most likely prove that there is a breach in the duty of care. Since the employee was doing his specified job for BENZ Bank, it was not only him but the bank as a whole was subjected to this failure in exercising the standard of care owed to Eastman Bank.
The cases supporting that a professional in an industry is required to have special expertise in that respective field include Rogers v Whitaker (1992) and NORMA Ltd v Morgan (1999) cases. Conclusion: A Standard of care was failed to exercise Step 3: Did the negligence cause damage readable by the defendant? As the question stated that Melissa and Fernando defaulted on the $500. 000 loan borrowed from Eastman, it is obvious that Eastman had suffered considerable losses in this case.
And we can use the “But for” test to determine easily that there was a direct causation between BENZ Bank’s letter of advice and the damage suffered by Eastman. (“But for” the letter from BENZ Bank, Eastman would not have lent out the money to the couple. ) Conclusion: The damage was directly caused and thus can be awarded back to Eastman. Final verdict: If all the assumptions given above are true, Eastman Bank can totally sue BENZ Bank for their incorrect advice.
