McMahon v State Bank of New South Wales

McMahon (the plaintiff) brought proceedings against the State Bank of New South Wales (the defendant) in the Supreme Court of New South Wales. The dispute concerned the plaintiff's claim for damages arising from the defendant's alleged breach of duty in its handling of a loan facility provided to the plaintiff.

The primary legal issue before the Court of Appeal was whether the State Bank owed a duty of care to the plaintiff in its dealings concerning the loan facility, and if so, whether that duty had been breached. Specifically, the court had to consider the nature and scope of any such duty, particularly in relation to the bank's advice and conduct in managing the plaintiff's financial affairs in connection with the loan.

The Court of Appeal found that the State Bank did owe a duty of care to the plaintiff. This duty extended beyond merely providing the loan facility and encompassed the bank's conduct in advising the plaintiff and managing the loan in circumstances where the bank was aware of the plaintiff's financial difficulties and reliance on the bank's expertise. The court held that the bank had breached this duty by failing to act with reasonable care and skill in its management of the loan, thereby causing loss to the plaintiff. The principles applied centred on the established legal principles governing the duty of care owed by financial institutions to their customers, particularly in situations involving advice and financial management.

The Court of Appeal allowed the plaintiff's appeal, setting aside the trial judge's decision and remitting the matter to the Supreme Court for assessment of damages.