Are there any recent decisions about the enforcement of forged loan documents?

  • Author : Bill Stark - 23-08-2012

In Commonwealth Bank of Australia v Perrin [2011] QSC 274 the Supreme Court of Queensland had to analyse whether a mortgage was enforceable because the wife's signature had been forged.

This case concerned the Perrin family. The case makes interesting reading – it’s a little like a soap opera.
A twenty something salon owner (the defendant) met a twenty something law student;
They married;
He did articles at Allens;
He then joined the legal practice of his 2 older brothers;
He left private practice and joined Billabong;
He becomes a multi-millionaire on the float of Billabong;
In 2007, their fortune was estimated by BRW at over $120million;

At some point in time, the Perrins demolished the family home (registered in Mrs Perrin’s name and on the Gold Coast in Queensland) bought the block next door and built a ‘larger’ house (said to be worth $10m+);
The facts recited in the judgment also refer to an affair between Mr Perrin, and the fact that Mrs Perrin is apparently now in a relationship with her ex husband’s former lover’s ex husband (in other words, the 2 jilted ex’s got together to console each other);
Unfortunately, Mr Perrin invested badly, and lost a lot of money. He became bankrupt.

The bank sued Mrs Perrin seeking to recover possession of the family home.

The judge found that Mr Perrin forged his wife’s signature on various mortgages over the family home and a guarantee of his indebtedness to the Bank.

Section 185(1A) of the Land Titles Act (Qld) provides:
(1A) A registered proprietor of a lot (the relevant mortgagee) who is recorded in the freehold land register as a mortgagee of the lot or an interest in the lot does not obtain the benefit of section 184 [indefeasibility] for the relevant mortgagee's interest as mortgagee if  
(a) the relevant mortgagee
(i) in relation to the instrument of mortgage or amendment of mortgage, failed to comply with section 11A(2); or
(ii) in relation to a transfer of the instrument of mortgage, failed to comply with section 11B(2); and
(b) the instrument of mortgage or amendment of mortgage was executed other than by the person who was, or who was about to become, the registered proprietor of the lot or the interest in a lot for which the instrument was registered. 

McMurdo J decided because the Bank failed to take reasonable steps to ensure that it was the defendant who executed the mortgages in question, in breach of section 11A of the Land Titles Act 1994, it did not gain indefeasibility for its mortgages. The bank had attempted to avoid the consequences of this provision by saying that the court should only remove its mortgages from the titles in question upon payment of the debts owed to it. That attempt failed.

Section 11A of the Land Titles Act (Qld) provides:
(1) This section applies to
(a) the mortgaging of a lot or an interest in a lot; and
(b) an amendment of a mortgage mentioned in paragraph (a).
(2) Before the instrument of mortgage or amendment of mortgage is lodged for registration, the mortgagee under the instrument (the original mortgagee) must take reasonable steps to ensure the person who executed the instrument as mortgagor is identical with the person who is, or who is about to become, the registered proprietor of the lot or the interest in a lot.
(3) Without limiting subsection (2), the original mortgagee takes reasonable steps under the subsection if the original mortgagee complies with practices included in the manual of land title practice under section 9A(2)(c) for the verification of identification of mortgagors.
(4) The original mortgagee must, for 7 years after the instrument is registered, and whether or not there is registered a transfer of the interest constituted by the mortgage
(a) keep, in the approved form, a written record of the steps taken under subsection (2); or
(b) keep originals or copies of the documents and other evidence provided to or otherwise obtained by the original mortgagee in complying with subsection (2).
Maximum penalty 20 penalty units.

There is no equivalent provision in Victoria to sections 11A and 185(1A).

Indeed, if the same circumstances arose here, the Bank would not concede that it would not be entitled to rely upon indefeasibility from the registration of its mortgages.

About the Author

Bill Stark

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