Case study: Unconscionable conduct

In 2009, a property agent contacted Henry and Alyssa to discuss investment opportunities. The property agent also introduced Henry and Alyssa to a broker. The broker reviewed their financial position and advised them that they could afford to purchase an investment property.

Henry and Alyssa then engaged the broker to:

  • refinance their existing loan with lender A, and
  • arrange loans with lenders B and C to allow them to purchase vacant land and build an investment property on the land.

Henry and Alyssa claimed that the broker acted unconscionably when it recommended the loans because they could not afford to repay the loans without substantial hardship. 


The broker claimed that they could meet their financial obligations under the loans with the incomes they declared at the time of the loan applications. 

The broker also said that Henry and Alyssa’s financial hardship was due to flood damage to the investment property which they were not insured for, and Henry’s inability to find work because of constant rain during this period.

The information available to us showed that the broker:

  • knew or should have known that Henry and Alyssa could not afford to repay the loans, and
  • failed to disclose to lender C the loan application he had submitted to lender B.

Henry and Alyssa needed to keep their home because Alyssa’s elderly parents and her disabled adult sister also lived there. We therefore concluded that Henry and Alyssa would not have knowingly accepted the risk of:

  • defaulting under the loans, and
  • losing their home if there was a default.

We took the view that the broker’s recommendation exposed them to the serious risk of defaulting on their loans and losing their home.

The broker did not accept our recommendation to settle the complaint and it was referred to the Ombudsman for Determination.

The Ombudsman found that the broker engaged in unconscionable conduct because he:

  • deliberately withheld key information from lender C to get the loan approved, and
  • knew that, or was recklessly indifferent to the fact that, Henry and Alyssa could not afford the proposed loan repayments.

The Ombudsman ordered that the broker pay Henry and Alyssa $102,905 as compensation for the financial loss they had suffered as a result of the broker’s conduct.