A recent Queensland decision has highlighted the importance of checking details when lending money and taking security. In Secure Funding v Car Loans 2 Go, the lender advanced funds for the purchase of a vehicle. However, it was later discovered that the vehicle did not exist, and a car dealer had issued a false invoice.
Financing companies very rarely physically check the existence of assets. Rather, they use information from others. Secure Funding, the lender, argued they had relied on the invoice of a licensed car dealer to prove the car existed. Their argument was that the car dealer should pay their losses flowing from the transaction.
The invoice was sent from the car dealer’s computer. The car dealer had allowed someone else to use their system, and the tribunal held they were responsible for that. However, the car dealer argued the lender failed to conduct a basic REVS registration search. That search would have shown that the car did not exist.
The Tribunal agreed and found the lender could have undertaken a simple search to verify the correct situation. Therefore, the car dealer could not be held responsible, as the true cause was that failure to check.