Australian Regional Credit v Mula

In the case of Australian Regional Credit v Mula, the plaintiff, a finance company, sought an order for possession of land due to the defendant's default under a lease agreement. The mortgage taken as security for payments due under three lease agreements was forged, along with the lease agreements themselves. The transactions were executed for the benefit of the mortgagor's de facto son-in-law, with the mortgagor having no knowledge of the transaction. The court had to determine whether the mortgage charged the land with the debts owed under the three leases, whether the finance company had knowledge of the forgery before registering the mortgage, and whether the failure to deal directly with the mortgagor gave rise to a personal equity enforceable against the finance company.

The court examined the defences of the mortgagor, considering whether the Yerkey v Jones principles could apply to relationships beyond that of husband and wife, outside the context of a surety, and where documents had been forged. Additionally, the court considered whether the solicitor was liable for negligent misstatement, particularly if the initials and signatures of the solicitor were forged, and whether the solicitor signed the mortgage and left it in the possession of the probable fraudster. The court concluded that the mortgage charged the land with the debts owed under the three lease agreements, and the finance company had no knowledge of the forgery before registering the mortgage. However, the failure to deal directly with the mortgagor gave rise to a personal equity enforceable against the finance company.

The court held that the Yerkey v Jones principles could apply to relationships beyond that of husband and wife, outside the context of a surety, and even where documents had been forged. The court found that the solicitor was not liable for negligent misstatement, as the initials and signatures of the solicitor were forged, and the solicitor did not sign the mortgage and leave it in the possession of the probable fraudster. The court ordered that the finance company's claim for possession of the land be dismissed, and the defendant be entitled to recover the costs of the proceeding.