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A new filter for state and fault estimation in a class of nonlinear systems is presented in this paper. The observer benefits from both sliding mode control and singular systems theory. The novelty of this approach is based upon dealing with systems prone to faults at sensors and actuators during the course of the system's operation coincidentally. Conditions and proofs of conversion for the proposed observer are presented. A noticeable feature of the proposed approach is that the state trajectories do not leave the sliding manifold even in presence of sensor/actuator faults. This allows for actuator faults to be reconstructed based upon information retrieved from the equivalent output error injection signal. Due to employing a generalized state space form (singular system theory), the sensor faults are also estimated.