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Banks and Disclaimers and the Little Guy

By Tony Johnson - 9 Jul 2019

Do you feel that the law always seems to favour the Banks (the big guys) against the little guy? In Court, the Banks are always well funded and have technical arguments readily available to them. All, however, is not lost. The recent Court of Appeal decision in Bushline Trustees struck a blow for the little guy.

It was claimed that the Bank had misled its client as to the possible down side of financial transactions they were proposing and had also failed to comply with verbal undertakings they had given as to funding being available.

In the Court of Appeal, the Bank did not focus on whether it had misled or failed to comply with its undertakings. Instead, the Bank sought to reply upon:

  1. Its "disclaimer clause" relating to statements made during negotiations.
  2. Its "entire agreement clause" which it argued meant that only the words in the written document could apply to the contract.

Applying what is now the Contracts and Commercial Law Act, subpart (3) (which deals with contractual remedies) the Court of Appeal pointed out that an exclusion or disclaimer clause needs to be "fair and reasonable" before it can be enforced.

In making its decision, the Court will have regard to all the circumstances of the case.  The Court indicated that it would look at the true bargain between the parties.

Applying that test, the Court considered that it was not fair and reasonable (given the specific circumstances) that the Bank would be able to effectively say:

"Notwithstanding what we promised we would do and what we represented to be true, you have no claim against us even though we did not do what we said we would and what we represented to you is false".

The decision is a heartening one for the little guy. Each case will turn on its own fact but at least the Court has raised the possibility that restrictive provisions such as "disclaimers" and "entire agreement clauses" will not be enforceable if in all the circumstances it would be unfair and unreasonable.

The firm's commercial litigation team can assist you in relation to issues such as those that arose in Bushline Trustees or in any general commercial law dispute.


Tony Johnson


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