C and F Nominees Mortgage Securities Ltd v Karbotli and Ors
[2020] VCC 987
•22 July 2020
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
BANKING AND FINANCE LIST
Case No. CI-17-05902
| C & F NOMINEES MORTGAGE SECURITIES LIMITED (ACN 089819803) | Plaintiff |
| v | |
| HEND KARBOTLI (also known as Hind Issa) & ORS | Defendants |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 29, 30 April, 1, 4, 5 May, 4 June 2020 | |
DATE OF JUDGMENT: | 22 July 2020 | |
CASE MAY BE CITED AS: | C & F Nominees Mortgage Securities Ltd v Karbotli & Ors | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 987 | |
REASONS FOR JUDGMENT
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Subject:Enforcement of mortgage – Counterclaim to have mortgage declared void
Catchwords: Forged mortgage registered under terms of Transfer of Land Act 1958 – Duty of mortgagee to verify identity of mortgagor Transfer of Land Act 1958 s87A – Whether mortgagee took reasonable steps to verify the authority and identity of mortgagor – Role of Registrar of Titles under s87A of Transfer of Land Act 1958 – Reliance by mortgagee on solicitor’s certificate and “100 point identification” – Certifying solicitor not witnessing mortgage – Reasonable steps not taken – Mortgage to be avoided – Whether owner of subject land entitled in the ]circumstances to recover indemnity from Registrar of Titles pursuant to s110 of the Transfer of Land Act of legal costs not recoverable from mortgagee – Whether mortgagee entitled to indemnity from Registrar of Titles pursuant to s110 of Transfer of Land Act – No indemnity available in light of mortgagee’s “neglect” causing or substantially contributing to own loss
Legislation Cited: ss42, 44, 76, 78, 81, 103, 110 Transfer of Land Act 1958; s87A Transfer of Land Amendment Act 2014; Financial Transaction Reports Act 1988; s14 Interpretation of Legislation Act 1984
Cases Cited:Ku-Ring-Gai Municipal Council v Attorney-General (NSW); Minister for Public Works v Turner (1957) 99 CLR 251; Maxwell v Murphy (1957) 96 CLR 261, 267; WBM v Chief Commissioner of Police (2012) 43 VR 446 [67]; Esber v Commonwealth (1992) 174 CLR 430; Nicholas v Commissioner for Corporate Affairs (Vic) [1988] VR 289; Great Southern Managers Australia Ltd (Receivers and Managers Appointed) (in liquidation) v Clarke (2012) 36 VR 308 [25]; St George Bank Limited v Dunstan (unreported), Supreme Court of Victoria 10 November 1994; McIvor v Westpac Banking Corporation [2012] QSC 404 [93]-[96]; Commonwealth Bank of Australia Ltd v Amadio (1983) 551 CLR 447; Garcia v National Australia Bank Ltd (1998) 194 CLR 395; Winau Aust Pty Ltd v LCC Property Development Pty Limited [2020] NSWSC 434; Titles Strata Management v Nirta [2015] VSC 187; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; Perpetual Trustees Victoria v Cox [2014] NSWCA 328; Small v Tomassetti [2001] NSWSC 1112; Pyramid Building Society (in liquidation) v Scorpion Hotels Pty Ltd [1998] 1 VR 188; Mitchell Morgan Nominees Pty Ltd v Vella [2011] NSWCA 390; Hunt & Hunt v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613; BH Australia Constructions Pty Ltd v Kapeller (2019) 100 NSWLR 367; Fitzgerald v Masters (1956) 95 CLR 420; Wicks v Bennett (1921) 30 CLR 80; Australian Guarantee Corp Ltd v De Jager [1984] VR 483; Bahr v Nicolay (No 2) (1988) 164 CLR 604; Registrar of Titles v Fairless [1997] 1 VR 404;
Judgment:
Orders:1. Within 14 days of this day the parties must bring in short minutes to give effect to these reasons.
2.Costs reserved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Moore | Wotton + Kearney |
| For the Defendant Hend Karbotli For the Defendant The Registrar of Titles | Mr J A F Twigg QC with Mr J McKay | Marino Law Land Use Victoria Legal |
HIS HONOUR:
Background
1 Ms Hind Issa, the first defendant and counterclaimant in this proceeding, is aged 81. Having been born in Lebanon, she was educated to the equivalent of Year 9 and migrated to Australia in 1969. Her first language is Arabic, her second French. She speaks English, but has a limited command of the language.
2 In 1969, she married a Mr Al-Karbutli, also known as Karbotli. She and her husband had three children – a son, James Karbotli, and two daughters, Jennifer Halik and Jumanah Kudssi. She, her husband and their children operated a number of milk bar and convenience stores around Melbourne, eventually moving to the Gold Coast in Queensland. They operated a number of shops in Surfers Paradise via a company called Mazop Pty Ltd. Her daughter, Jennifer, moved to Queensland and Ms Issa assisted in the rearing of her grandchildren.
3 Ms Issa and her husband divorced in 2006. The property settlement reached entailed her former husband transferring a property at 30 Francis Street, Mermaid Beach, and another property at 42 Barak Street, Bulleen, Victoria, to her. Ms Issa resided at Mermaid Beach. Ms Issa said she noted the transfer document at Court Book (“CB”) 665-666, witnessed by a Mr Stephen Picken. Mr Picken, who played a major role in the narrative some years later, was, according to her recollection, retained by her former husband and her son for certain business purposes. (Statement of Hind Issa, 24 April 2020, Exhibit 3, paragraphs 1-14.)
4 During her marriage, Ms Issa had gone under the name “Karbotli”. She reverted to her maiden name “Issa” after her divorce, not wishing to bring back bad memories and in light of her husband’s remarriage. She registered a change of name back to Issa on “Name Register of Queensland” in 2008. (CB 278, Exhibit 3, paragraphs 15-16)
5 The plaintiff, C & F Nominees Mortgage Securities Limited (“C & F”), operates a mortgage investment scheme. According to one of its directors, Mr Skeels, who is also a partner in law firm, McNab, McNab & Starke:
“The contributors are generally individuals who invest on their own behalf or in the name of their self-managed superannuation funds. C&F does not operate as a pooled-fund. The contributors are offered the opportunity to subscribe to specific mortgages. They are entitled to receive a share of the monthly interest payments which are payable pursuant to that particular mortgages (sic).” (Statement of David Campbell Skeels, Exhibit A, paragraph 8.)
Mr Skeels said:
“C&F lends up to 66% of the value of the security property or 50% where the property is vacant land as determined by a sworn valuation. C&F loans are interest only (not principal and interest) and are for period (sic) of 1 to 3 years.” (Ibid, paragraph 9)
6 On 2 February 2017, Mr Skeels said he received an email from Mr Chrish Samuel of Windsor Capital Management (CB 891-2), being a loan application for a borrower, Mazop Pty Ltd (“Mazop”). Mr Skeels said he regarded Mr Samuel as a reputable broker with whom he had dealt previously relative to C & F loans. (Exhibit A, paragraphs 15 and 16) According to the application or proposal, the borrower would be Mazop with guarantees provided by directors, James Karbotli and “Hend Karbotli”, with a mortgage over property at 42 Barak Street, Bulleen, in Victoria, which property was owned by “Hind Issa”. The property was subject to an existing mortgage for $450,000. Mr Samuel explained that “Hend Karbotli” and “Hind Issa” were one and the same person. He referred to an attached credit report from an organisation, “Veda”. He mistakenly said “Hind Issa is her name while she was married”. (Ibid, paragraph 18) The application or proposal attached a certified copy of a Queensland driver’s licence in the name of James Karbotli, a certified copy of his passport and birth certificate, the latter noting he was born Jihad Karbotli and changed his name to “James”. Also included was a Veda credit report for “Hind Issa, also known as Hind Karbotli” and a certified copy of a Queensland driver’s licence for Ms Issa. Mr Skeels had a title search carried out on the Bulleen property which disclosed it was subject to a caveat lodged 19 January 2017, claiming an interest under an unregistered mortgage. He regarded the recent date of the mortgage and the fact that it had not been lodged for registration as curious, raising this matter with Mr Samuel. (CB 912) He said he did not “recall now what response Chrish gave to my inquiries.” (Exhibit A, paragraphs 15-22)
7 On behalf of C & F, Mr Skeels had a loan offer letter by email dated 3 February 2017 (CB 920-931) issued to the directors of Mazop, care of Chrish Samuel. (CB 920-931) Mr Skeels said:
“Notwithstanding the heading of the letter, it was not a loan offer as such but was an indicative letter of offer. It was subject to and conditional upon a number of requirements being met, first and foremost of which was that the amount of the loan could not exceed 66% of an independent valuation of the Bulleen Property. The borrowers were looking for a loan of 1.2M and the letter envisaged a loan in that amount, on the basis of advice from Chrish that the property was worth 1.8M.”
8 In the event, the valuation came in at $1.2 million “as a result of which the maximum C&F was in a position to offer was $800,000.” (Ibid, paragraph 23) Mr Samuel sent an email dated 12 February 2017 to Mr Skeels’ assistant, Ms Silvana Ruberto, which attached the letter of offer with a signed acceptance and a document styled “Originator Agreement” between Windsor Capital Management, Mazop and the guarantors, James and Hend. (CB 874‑888, Exhibit A, paragraph 24) Mr Skeels said he regarded this “Originator Agreement” as “confirmation that Chrish had Mazop’s, James’ and Hend’s authority to seek finance for Mazop and to put forward [the Bulleen property] as security for the loan.” (Ibid, paragraph 25) Mr Skeels delegated the task of conducting further searches and preparing security documents to his assistant, Ms Ruberto, who “undertook various searches as part of our due diligence.” (Ibid, paragraph 26)
9 Mr Samuel emailed to Ms Ruberto a completed Application for Finance, together with a letter from Mr James Karbotli relative to the purpose of the loan and a “Statement of Position” from Mr James Karbotli. (CB 934-944, Exhibit A, paragraph 27) Mr Skeels said that in considering the loan application, he was concerned with two things:
“First, that the loan could be serviced; [viz, that the interest instalments could be paid] and second, that the borrower had a strategy to re-pay the loan which was not based solely on realizing the security.” (Exhibit A, paragraph 28)
The “Statement of Position”, according to Mr Skeels―
“…related to James and Mazop, and I did not distinguish between the two given that James was guaranteeing the loan. On the basis of the information disclosed in the Statement of Position, I assessed that the prospective borrower had been able to accumulate substantial assets from its trading activities. I assessed the Statement of Position with a grain of salt. It seemed aspirational and included things like a $7m life policy which I ignored. It had high values on furniture and jewellery which I also ignored. What I took from it was that the borrower had three businesses operating. As the purpose of the loan was to expand those activities, I considered that serviceability of the loan was not an issue. Further, the prospective borrower had substantial other assets that could be realized before the security had to be sold, which provided it with a strategy to re-pay the loan.” (Ibid, paragraph 29)
The loan offer had included a condition (b)(iv) requiring production of:
“a statement of assets and liabilities of the company and the directors of the company together with proof of income demonstrating capacity to service the loan. A letter from a qualified accountant verifying the companies (sic) and directors (sic) financial position will be required”. (CB 921)
10 The “Statement of Position”, (CB 940-1) was not verified by any independent accountant, rather it was signed solely by Mr James Karbotli. It covered a document also designated “Statement of Position”, setting out in columnar form assets and liabilities. If this document were to be believed, it showed a handsome surplus of assets over liabilities. Assets were shown at approximately $13 million and liabilities were shown as slightly less than $2 million. The Statement of Position did not seem to distinguish between the assets of Mr Karbotli and the assets of his various companies. Under the heading “Existing shops” there was shown valuations of property attributed to Ortrox Pty Ltd, Mermaid Gold Pty Ltd, Yellow Angel Pty Ltd. Also shown as an asset, presumably of Mr Karbotli, was a loan to Mazop Pty Ltd, the borrower, of $1.6 million.
11 On 21 February 2017, C & F received a valuation of the Bulleen property from Charter Keck Cramer valuing it at $1.2m. (CB 960-7) Mr Skeels noted that, according to the valuation, the property stood vacant and therefore was not Ms Issa’s principal residence. He told Mr Samuel by email of 21 February 2017 (CB 969-72) that in light of the valuation, the proposed loan would be scaled back to $800,000 “being two-thirds of $1.2M”. (Ibid, paragraph 30) Documents for execution were dispatched to Mr Samuel on 22 February 2017. (CB 976-996, Exhibit A, paragraph 31) Executed documents were returned by email of 4 March 2017, including an executed mortgage over the Bulleen property and an executed disbursement authority. (CB 1012-1026, Exhibit A, paragraph 32)
12 On 6 March 2017, original documents were delivered to the officer of C & F, being:
(a)an initialled tax invoice from McNab, McNab, Starke;
(b)an initialled letter from C & F regarding a facility fee;
(c)a 100 point identification check for Ms Issa which attached―
(i)a certified copy of a Queensland driver’s licence in the name of Hind Issa;
(ii)a statutory declaration of Carol Marie Grevis dated 18 January 2017;
(iii)a Westpac Bank statement for an account operated by Hind Issa as trustee of the Lion Enterprises Trust, BSB 034-216, Account No 23-2682;
(iv)a letter dated 25 May 2012 from Westpac Banking Corporation to Hend Issa;
(v)a letter dated 24 May 2012 from Munro Accountants addressed to J Karbotli and H Issa;
(vi)a statement from the Australian Taxation Office dated 22 August 2012, addressed to Hend Karbotli;
(vii)a Quarterly PAYG Instalment Notice dated 28 February 2012, addressed to Hend Karbotli;
(viii)a Notice of Assessment from the Australian Taxation Office dated 14 September 2016 and addressed to Hind Issa. (Exhibit A, paragraph 33)
13 Also included was a 100 point identification check from Mr James Karbotli which included a certified copy of a birth certificate in his name which noted his birth name as “Jihad Karbotli”, a certified copy of his passport and driver’s licence, and a certified Medicare card. Mr Skeels said he “realised the identification provided in respect of Hend was less than the required ‘100 points’ required by C & F”. (Ibid, paragraph 34) The following day, Mr Samuel provided Ms Ruberto with a Certificate of Insurance from Berkshire Hathaway Insurance Australia for the Bulleen property which noted C & F’s interest. (CB 1032-3, Exhibit A, paragraph 35)
14 Meanwhile, Mr Skeels’ assistant, Ms Ruberto, sought production at settlement of the duplicate Certificate of Title for the Bulleen property. On 10 March 2017, she spoke to a Mr Ron Fuchs of Cornwall Stodart, who was acting for the existing mortgagee, FX Money Link International Pty Ltd (“FX Money”). Mr Fuchs told her that “there was an issue in relation to settlement as apparently the duplicate Certificate of Title to the property had been lost and he had not been able to register his client’s mortgage because of the missing title”. (Statement of Silvana Ruberto, Exhibit B, paragraph 25-26). She raised the matter with Mr Samuel on 10 March and later on 22 March when Mr Samuel told her the documents were being prepared “in support of the lost title application” and would be signed that day. (Ibid, paragraphs 27‑28) She was told by Mr Fuchs on 27 March 2017 that the missing title had been located (Ibid, paragraph 30) and settlement of the C & F loan was scheduled for 29 March 2017. (Ibid, paragraphs 31-32)
15 On 27 March 2017, Mr Samuel emailed documents, including a certified copy of a passport for Ms Issa and a certified copy of a Medicare card. Mr Skeels said this was enough to have “100 point” (sic) of identification. (Statement of David Skeels, Exhibit A, paragraph 36) The email also attached certificates from Stephen Picken whom Mr Skeels described as “a practising solicitor, [who] had personally interviewed both guarantors [James and Hend] and, in addition to confirming their respective identities, had explained the nature and effect of the mortgage and satisfied himself that each of the guarantors understood the transaction they were entering into.” He said he “Googled Picken’s name and saw he was listed as a practising Queensland solicitor.” (Ibid, paragraphs 37-38) Being satisfied as to the security position relative to the proposed loan and Ms Issa’s “identity and authority”, Mr Skeels recommended the loan to a number of C & F’s contributors who confirmed their willingness to advance funds. Mr Skeels said, “I was in a position to settle the loan.” (Ibid, paragraph 40) The Solicitor’s Certificate was in the form of a printed or typed document headed “SOLICITORS CERTIFICATE”. It also had a heading at the top “APPENDIX 1 Schedule 1”, with a further heading “FOR USE IN CERTIFICATION WHERE THE PERSON (S) SIGNING IS THE DIRECT BORROWER FROM THE LENDER OR A SECURITY PROVIDER REFERRED TO IN THE DOCUMENTS AS THE BORROWERS”. It contained some six parts, lettered “A” to “F”, concluding with a solicitor’s certificate. The operative terms were “I CERTIFY the above information” and a client’s certificate stating
“I CERTIFY that
I have been handed a copy of this certificate
I have read this certificate
I am the client named
The above information is true”.
It identified the certifying solicitor as “Stephen Richard Picken”. The certificate continued, “I have been asked to interview Hend Karbotli (herein after called “the borrower”). It stated that the certifying solicitor had been provided with:
(i) loan offer documents – C & F Mortgage Securities Ltd;
(ii) mortgage documents – C & F Mortgage Securities Ltd;
(iii) attachments re disbursements and costs.
16 In Part B, the certifying solicitor recorded as stating, according to the typescript, “I explained to the borrower, before the borrower signed the documents, the general nature and effects of the documents required to be signed by the borrower including the risk of loss of any security property and other assets owned by the borrower”. Part D entailed a typed statement, “The borrower stated to me: That he/she/they understood the general nature and effect of the documents. It appeared to me they did have such understanding. That he/she/they were signing these documents freely, voluntarily and without pressure from any other persons”. Part E dealt with identification and referred to “drivers (sic) licence 096820587”. Part F dealt with “TRANSLATION/INTERPRETATION”. This was left incomplete. (CB 1010-11)
17 The mortgage in favour of C & F was dated 3 April 2017. Mr Skeels described it as having the following effect – “Hend, James and Mazop” to repay the C & F loan together with interest thereon by 15 March 2018. Interest was payable at a lower rate of 6 per cent if instalments were paid by the 15th day of each month, failing which the higher rate was 10 per cent. (Ibid, paragraph 44) The principal sum was shown as $800,000 and the mortgagor was described as ‘Hend Karbotli”. The mortgage incorporated the “boilerplate” provisions to be found in the Memorandum of Common Provisions No. AA2712. The principal covenants on the mortgage form itself were introduced as follows:
“The mortgagor covenants with the mortgagee as follows: – ‘To pay the principal sum in the manner and at the times specified’.”
18 The face sheet of the mortgage stipulated that the principal sum was to be repaid “15 March 2018”. Covenant No. 8 read “Mazop Pty Ltd will be primarily responsible for payment of the principal and interest as the money will be utilised by Mazop Pty Ltd”. (CB 1015-1020//1110-1111) Clause 4.2 of the relevant Memorandum of Common Provisions was a guarantee in standard form. Clause 4.2(b) stated, inter alia:
“The Guarantor guarantees to the Mortgagee, due and punctual performance and observance by the Mortgagee (sic) and any Covenantor of the obligations of the Mortgagor and the Covenantor under this Mortgage”. (CB 1119)
19 Covenant No. 7 in the mortgage form itself stated “the Guarantor pursuant to Clause 4.2 is James Karbotli of Amalf (sic) Drive, Surfer’s Paradise Qld 4217”. (CB 1111) No person was described in the mortgage as the “Covenantor”. The mortgage was executed by C & F under its common seal attested by directors, Mr Skeels and Mr Starke. Mazop executed the mortgage “in accordance with section 127 of the Corporations Act 2001”. The signature was described as being of the sole director and sole secretary – James Karbotli. Mr Karbotli also signed as guarantor a provision for the signature of Ms Issa under the name “Hend Karbotli”, which was signed in what appeared to be a febrile or shaky handwriting “Hind” Karbotli. Next to the signature of Mr James Karbotli as a director of Mazop there appeared a further signature, apparently in the same hand as the one signed on behalf of Ms Karbotli as mortgagor. This time the signature was “Hend Issa”. (CB 1112)
20 At settlement, some $448,425.81 was paid to Cornwall Stodart as solicitors for FX Money against a discharge of the unregistered mortgage and a withdrawal of caveat. (Exhibit B, paragraph 32) Ms Ruberto delivered the documents to her firm’s agent for lodgement, but was advised by telephone on 15 April that the covenants page of the mortgage had not been executed by the mortgagor, Ms Issa. (Ibid, paragraph 33) Ms Ruberto emailed Mr Paul Tuddenham, who, she discovered, was another broker “acting on behalf of Mazop” who had requested that she liaise directly with him as to any issues. Mr Tuddenham returned the duly executed document to her. (Ibid, paragraph 34) The mortgage was registered AN182157Q. (CB 1158-1160, Exhibit B, paragraph 35)
21 Mr Tuddenham is a mortgage broker holding the position of Director (Residential, Investment and Commercial Loans) and Financial Strategist at Throsby Broking Services. Around July 2016, he had been introduced by a mutual acquaintance, Gary Kimberley, to a Mr Chris Smith, who, Mr Kimberley told Mr Tuddenham, was “looking for a person to work with him to assist with obtaining finance”. (Statement of Paul Bruce Tuddenham, Exhibit C, paragraphs 1-2) In September 2016, at a further meeting with Mr Smith, he told Mr Tuddenham that he, Smith, represented a person “who had a tobacconist shop, and that this person wanted to expand his business by purchasing existing tobacconist shops, starting new shops and acquiring properties.” (Ibid, paragraph 3) At a further meeting at The Manhattan apartment complex in Old Burleigh Road, Surfers Paradise, Mr Tuddenham was introduced by Mr Smith to other people who worked with Messrs Smith and Kimberley, namely Mr James Karbotli, a director of Mazop. He was told that Mazop “owned a tobacconist shop in Surfers Paradise, as well as a kebab shop and a pizza shop”. (Ibid) Mr Smith told Mr Tuddenham he was being asked to assist in securing finance, starting as soon as he could. Mr Tuddenham said he would “think about it”. (Ibid) He understood “that the administrative operations of [the] businesses were at that time being conducted out of the three-bedroom apartment at The Manhattan complex in which I met with Smith, Kimberley and Karbotli”. (Ibid, paragraph 4) The following month, he was introduced to Carol Grevis, who dealt with accounts and bookkeeping; Tanya Hammant, dealing with setting up and registering company names; Tony Paranthoiene, dealing with property acquisitions; Gilmore Lawrie, dealing with rural property acquisitions; and a woman named Andrea, dealing with accounts. He said Kimberley was also in attendance and he “understood that he was also responsible for property acquisitions”. All of those people were working from the apartment. (Ibid, paragraph 6)
22 Mr Tuddenham described his employment by Mazop which, together with its associated companies, was known as Paradise Tobacconist Group. It was agreed that he would be paid $2,500 per week for his work for Mazop and the other members of the group, though in the event, he said, he was never paid. (Ibid, paragraph 7) Mr Tuddenham said that the operations of the group were described to him by Mr Smith and Mr James Karbotli as follows: Mr James Karbotli was a director of the relevant companies and Mr Smith acted as general manager/administrator, controlling the general operations and giving instructions to Mr Tuddenham. Mr Tuddenham said:
“Smith was the person that I answered to as my immediate supervisor. Smith also appeared to me to be the person who made the financial decisions relating to the business. … I observed that Karbotli and Smith spent a lot of time together, both at the apartment and outside of it, and together they ran the business, but it was clear to me that Smith was the one in charge and providing direction for the business. Karbotli seemed to me to have little input into the decision-making processes … Karbotli had hired Smith to turn the business into a large profitable entity with various trading units.” (Ibid, paragraph 11)
23 Mr Smith told Mr Tuddenham that Mr Karbotli had run the companies poorly and that he, Mr Smith, had a plan involving “acquiring a number of operating tobacconist retail shops, or starting new shops, across various locations, initially in the south east Queensland area”. (Ibid, paragraph 13) Mr Tuddenham said he was tasked with raising finance for the proposed acquisition and stock purchases. He identified financiers, approaching them, completing documents based on information provided to him by Mr Smith, arranging for execution of security documents and conferences with solicitors or witnesses for the purposes of execution. He would deliver finance applications to the relevant broker or financier. Matters would then be documented by a solicitor. According to Mr Tuddenham:
“My role would be to check the documents were completed, signed and initialled where appropriate, and I would send the original completed documents back to the finance company.” (Ibid, paragraphs 16 and 17)
24 A business plan showed that the group was seeking over $2 million in finance. (Ibid, paragraph 18, CB3522-3) This plan referred to seven existing tobacconist shops and a further seven to be acquired or established with the finance raised to be used for that purpose. (Ibid, paragraph 19) The group used “Quill Accountants”, who at relevant times were, according to Mr Tuddenham, “in the process of preparing financial statements”. Such statements were never made available to Mr Tuddenham and, accordingly, Mr Smith told Mr Tuddenham to “try to obtain finance via second tier lenders”. According to Mr Smith, once financial statements were available, the second tier lenders would be refinanced with “mainstream finance”. (Ibid, paragraph 20)
25 Mr Smith told Mr Tuddenham to raise as much finance as the lenders were prepared to advance. Mr Smith was in control of how that money was to be spent. According to Mr Tuddenham:
“There was insufficient security available to secure finance from most mainstream lenders. The only property [he] was aware of which could be used as security was Karbotli’s house at 8 Amalfi Drive, Isle of Capri, Queensland, which [he] understood [Mr Karbotli] rented out on an Air B&B (sic) … casual basis.” (Ibid, paragraph 22)
26 Mr Tuddenham said that he saw Ms Issa attending a number of meetings in the company of Julie Archer “and the other ladies”. Ms Issa, on his observation, “knew those in attendance as she did not need to be introduced”. He said she was apparently acquainted with Mr Smith, Julie Archer and Ms Grevis, and engaged in conversation with them. (Ibid, paragraph 23) Nevertheless, Mr Tuddenham did not converse directly with Ms Issa, being told ―
“…that her religion … meant that males were not to talk to her unless ‘approved’, and never without Karbotli’s brother in law being present. If I was to talk to her it could only be when either Smith or Karbotli or Archer and the brother in law, were present.” (Ibid, paragraph 24)
27 Mr Tuddenham said in December 2016, Mazop moved operations to a farm on Springbrook Road, Mudgeeraba. After Christmas that year, Mr Smith told Mr Tuddenham that Ms Issa owned the property at 30 Francis Street, Mermaid Beach, in Queensland and 42 Barak Street, Bulleen, in Victoria, and the group “had access to use those properties as security for finance funding of the business”. (Ibid, paragraph 26) He said Mr Smith and Mr Karbotli assured him that Mazop and the group would be purchasing another house in Francis Street [presumably, Mermaid Beach] for Ms Issa when the loans were refinanced. The Bulleen property, he was told, was unencumbered and vacant. Mr Smith and Mr Karbotli assured him that the loans against Ms Issa’s property would be paid off. (Ibid, paragraph 27)
28 In early 2017, Mr Tuddenham said Mr Smith outlined the plan to him “with around 30 tobacconist shops to generate the cash flow which would support the businesses until they were all trading profitably.” (Ibid, paragraph 29) Another plan entailed providing finance to migrants from overseas, developing and subdividing residential land to provide them with housing. These migrants were apparently intended to operate the tobacconist shops. (Ibid, paragraph 30) There was also talk of a meat business and a “gold plant” near Orange in New South Wales. (Ibid, paragraph 31)
29 In January 2017, Mr Tuddenham said he was directed by Mr Smith that the Francis Street, Mermaid Beach, property and the Bulleen property “were available to be used as security”, and that Mr Tuddenham was to “raise as much finance for the business as [he] could using those properties”. (Ibid, paragraph 32) Consequently, Mr Tuddenham contacted Mr Chrish Samuel of Windsor Capital Management, a finance broker who arranged for a loan of $200,000 to Mazop from FX Money upon the security of a mortgage over the Bulleen property. Mr Tuddenham said Mr Smith had advised him that the money was to be used “towards the purchase [of] an existing tobacconist store, and stock”. The loan application was successful. Mr Ron Fuchs of Cornwall Stodart, solicitors in Melbourne, was acting for FX Money and Mazop was represented by Ms Kristina Jukic of Macgregor O’Reilly Nash Solicitors of Surfers Paradise. (Ibid, paragraphs 34‑36) The security property in Bulleen was registered in Ms Issa’s name. Mr Tuddenham said the intention was to transfer it into Mr Karbotli’s name “but there were costs and time associated with doing that, and they [viz, Mazop] didn’t have either”. (Ibid, paragraph 38) To resolve an issue with the FX Money loan, Mr Smith said it was necessary to have Ms Issa appointed a director of Mazop which Messrs Smith and Karbotli “were going to arrange [at] a meeting with Mazop’s accountants”. (Ibid, paragraph 39) There were apparently difficulties and a second amended security document had to be executed. (Ibid, paragraph 40) Ms Jukic, according to Mr Tuddenham, “communicated directly with Karbotli”. Nevertheless, he said that he (Mr Tuddenham) became “a contact point” between the parties. (Ibid, paragraph 42) Mr Smith told Mr Tuddenham, according to the latter, that Mr Karbotli and Ms Issa had attended on Mazop’s accountants to have her appointed as a director. Mr Tuddenham says he “had no reason to doubt that this had in fact occurred”. (Ibid, paragraph 43)
30 On 13 January 2017, Mr Tuddenham said he printed out a set of documents for execution “and handed them to either Smith or Karbotli”. (Ibid, paragraph 44) Mr Smith asked Mr Tuddenham to meet him at a coffee shop in the Q Super Centre, Bermuda Street, Mermaid Waters, “to pick up signed documents associated with this loan”. He said he saw Messrs Smith and Karbotli seated at one table and Ms Julie Archer and Ms Issa at another table. Mr Smith told Mr Tuddenham that “Archer was in the process of having [Ms] Issa sign the loan documents”. The protocol precluding male strangers approaching Ms Issa was repeated by Mr Smith. (Ibid, paragraph 45) Mr Tuddenham said he believed that Mr Karbotli and his mother “had already met with [solicitor] Jukic twice and that the documents had been explained to Karbotli, Issa and Smith.” (Ibid, paragraph 46) Mr Tuddenham was handed a loan agreement and mortgage by Ms Archer, apparently signed by Mr Karbotli and his mother, Ms Issa, with the signatures witnessed by Ms Archer. Another set of apparently executed documents was provided to him with “the only difference being that the witnessing person area was left blank.” Mr Smith and Ms Archer told Mr Tuddenham they were concerned that FX Money might not accept the documents witnessed by Ms Archer and they asked Mr Tuddenham “to sign as a witness to Issa’s signature as a backup should the financier not accept only Archer witnessing the documents.” (Ibid, paragraph 47)
31 Mr Tuddenham said he had no reason to doubt the authenticity of the signatures, in particular Ms Issa’s, and he had understood that an earlier version of the documentation had been signed and witnessed before solicitor, Ms Jukic. (Ibid, paragraph 48) In that belief, he signed as a witness the security documents duplicate to the ones already witnessed by Ms Archer. (Ibid, paragraph 49) Contrary to his expectation, it was these documents rather than the ones witnessed by Ms Archer which were delivered to Cornwall Stodart (Mr Fuchs). (Ibid, paragraph 50) As to Ms Issa’s identity, Mr Tuddenham understood that a certified copy of her driver’s licence, a statutory declaration from a person who had known her for approximately seven years (Ms Grevis) and documentation showing continuity of tax file numbers, despite Ms Issa’s change of name, were provided in support. (CB 856-861; Exhibit A, paragraph 53) A later set of documents increasing the amount advanced by $150,000 was prepared, checked for correctness by Mr Tuddenham, executed and witnessed by Ms Archer. These documents were used for the loan drawdown. (Exhibit A, paragraphs 52-53) The loan was for two months only being repayable 29 March. (Ibid, paragraph 54) Mr Tuddenham said that he did not know the purpose to which the FX Money funds were put. In late 2017, he said Messrs Smith and Karbotli leased Unit 7/20 Expo Court, Ashmore, relocating the group’s operations to that location, where Mr Tuddenham moved eventually. (Ibid, paragraphs 55-56)
32 Meanwhile, Mr Tuddenham was having discussions with Mr Samuel relative to a loan to Mazop of $1.2 million from a lender known as C & F Nominees Mortgage Securities Limited. Mr Tuddenham said that he “was to be the contact point between Samuel and Smith and Karbotli.” The proposed loan was to be secured over the Bulleen property. Mr Tuddenham thought this was “a good loan”, with the interest rate 6 per cent per annum. (Ibid, paragraph 62) Mr Tuddenham advised Messrs Smith and Karbotli that the C & F loan should be used to pay out FX Money, thereby making a first mortgage available over the Bulleen property as security for the C & F loan with “the remaining funds … used to facilitate the purchase of retail tobacconist stores and for associated stock purchase and fitouts of those stores.” (Ibid, paragraph 63) Mr Samuel sent Mr Tuddenham a document styled “Originator Agreement” which he sent to Messrs Smith and Karbotli for execution. He said, “The document required signing by both Karbotli and Issa in order to progress the loan agreement.” He received the document, apparently properly signed and witnessed, though he did not see the signatures being applied. He sent that document and the fee of $2,750 to Mr Samuel. The originator agreement is at CB 874-88.
33 Mr Tuddenham said he completed the details in a finance application relative to the proposed C & F loan which had been provided to him by Mr Samuel. He then gave this to Mr Smith in unsigned form, telling him “that the document needed to be explained to Karbotli and Issa.” Again, he received this document apparently duly signed, though he was not present when the signatures were applied. (Ibid, paragraph 67)
34 This time, Mr Tuddenham said Mr Smith introduced him to a solicitor, Mr Stephen Picken, as being solicitor for Mazop, Mr Karbotli and Ms Issa. Mr Tuddenham was not involved with the execution of security documents. (Ibid, paragraph 69)
35 When settlement occurred on 29 March 2017, FX Money was paid out and C & F was granted a first mortgage over the Bulleen property. The sum of $310,414 was provided to Mazop following the payout of FX Money and various costs. Mr Tuddenham was not aware how these monies were spent, though no leasehold business premises seemed to have been acquired as the business plans referred to earlier suggested as being intended to occur. (Ibid, paragraph 72) There was a delay in settlement due to the unavailability of the duplicate certificate of title and Mr Tuddenham said he “spent a lot of time trying to obtain a replacement copy, before the original document was provided by Smith or Karbotli to Fuchs.” (Ibid, paragraph 73)
36 Around the same time, at Mr Smith’s direction, Mr Tuddenham made an application for finance to a company, Nivex Pty Ltd, via one of its directors, Mr Kevin Steel. The purpose of this loan, he said, “was to facilitate the acquisition of the business premises at 7 [scil 7/20] Expo Court, Ashmore”, which had been leased with a view to purchase. (Ibid, paragraph 74)
37 Mr Tuddenham said Mr Picken was acting for Mazop in the transaction. The loan was for a short time in the sum of $800,000 repayable in three months, and was to be secured by mortgages over the Ashmore property, Mr Karbotli’s property at 8 Amalfi Drive, and Ms Issa’s property at 30 Francis Street, Mermaid Beach. (Ibid, paragraph 76) Mr Tuddenham directed the security documents to Mr Picken and had no involvement in their execution. He understood the Nivex loan was drawn down on 3 April 2017. (Ibid, paragraph 79) He understood that another Nivex loan was raised, but not upon the security of any property owned by Ms Issa. (Ibid, paragraph 80) He was also involved in the drawdown of a loan of $130,000 upon a second mortgage over the Bulleen property with Boon Hooi Tan as lender. He dealt with Mr Samuel and Tan’s solicitor, Mr Fuchs of Cornwall Stodart. (Ibid, paragraph 81) Mr Tuddenham commented as to Mr Stephen Picken:
“Picken did not have a regular office and operated out of his home instead. He did not have any electronic equipment or proper facilities and as a result he would bring documents to PTG/Mazop’s Ashmore office and regularly use the boardroom there. He would regularly ask me to print out, or scan and email documents.” (Ibid, paragraph 94)
38 Following a default by Mazop in the payment of the interest instalment for May 2017, Ms Ruberto, on behalf of C & F, raised the matter by email to Mr Tuddenham. (CB 1358) This led to payment of the interest instalment, $6,666.67, to C & F. (CB 1435, Statement of David Skeels, Exhibit A, paragraph 48) Interest instalments for the following several months were made eventually, but only after demand was made on behalf of C & F on each occasion. (Ibid, paragraphs 49-53) In October 2017, the interest instalment was again missed. Mr Tuddenham advised that payment would be made on 31 October 2017, with further interest instalments on time (Ibid, paragraph 54) but no payment was made. Eventually, Mr Skeels prepared a Notice to Pay pursuant to s76 of the Transfer of Land Act 1958, directing it to Mazop, Mr Karbotli and Ms Issa. He used the address, 30 Francis Street, Mermaid Beach, for Ms Issa, based upon it appearing on her driver’s licence. (Ibid, paragraph 58) On 15 December 2017, C & F commenced the present proceeding to enforce its mortgage.
39 Ms Issa said:
“At some point, Chris [Smith] and James [Karbotli] told me that I had to leave my home [in Francis Street, Mermaid Beach] and live with my daughter Jennifer because there were bad people coming to the house and they feared for my safety.” (Statement of Hind Issa, Exhibit 3, paragraph 22)
She left her home and moved in with her daughter, Jennifer. (Ibid) Around this same time, Jennifer Halik, Ms Issa’s daughter, said she received an email from Paul Reece of Summer Lawyers, stating that “they” [presumably a mortgagee client] would be repossessing the [presumably Francis Street, Mermaid Beach] property and selling it. (Statement of Jennifer Hallick, Exhibit 2, paragraph 31) Ms Halik carried out title searches of the Francis Street property, discovering that there were two mortgages registered against it. She also conducted a title search of the Bulleen property. (Ibid, paragraph 34) She said she printed out these searches and discussed them with her mother, who did not understand what had happened. (Ibid, paragraph 36) On 4 February, James Karbotli met with his mother and his sister, Jennifer. Being confronted with these matters, according to Ms Halik, Mr Karbotli said that Mr Smith “had a plan to fix everything and help repay the loans.” (Ibid, paragraph 37) Then, according to Ms Halik, Mr Smith attended her home, promising that the loans in question would be refinanced and settlement was due 17 February 2018. (Ibid, paragraph 38) No such refinancing occurred and Francis Street, together with another family property at Amalfi Drive in Mermaid Beach, were subject to mortgagee auctions on 24 and 25 March 2018. (Ibid, paragraphs 40-41) (The statement puts these mortgagee auctions in 2017, but this must be a mistaken reference for 2018). In April 2018, Jennifer and her mother attended a police station in Queensland, making a fraud complaint. (Ibid, paragraphs 44-45, CB 3549-3560) Ms Issa denies signing the mortgage over the Bulleen property in favour of C & F and the other mortgages taken out around the same time.
40 When Mr Skeels became aware, it was contended, that Ms Issa had not executed the C & F mortgage, he entered into correspondence with Mr Picken inquiring as to what had occurred relative to the execution of the mortgage. Following some correspondence which Mr Skeels did not apparently regard as entirely satisfactory, he sent an email to Mr Picken dated 18 June 2018, stating, inter alia:
“I’m going to ask you outright and I would appreciate a straight response:
When you signed the Solicitor’s Certificate in relation to my client’s mortgage on 4 March, 2018 had you attended on Hend Karbotli or Hind Issa prior to doing so?
Did you confirm her identity as the Certificate attests?
Did you explain the nature and effect of the mortgage documents as the Certificate attests?”
Mr Picken replied:
“1. I identified her as per the ID documents produced to me. There now appears to be a suggestion that Hind Nessa [sic] and Hind Karbotli are different persons. I take issue with this and with the allegation that her son forged her signature.
2. I did not meet with her during this transaction having been advised by her son that she could not attend a meeting. Reluctantly, I agreed to witness her signature subject to seeing the ID documents. I attempted to convey advice to her via her son, but this obviously did not happen.” (CB 1765-66)
This proceeding
Plaintiff’s claim
41 The plaintiff has brought this proceeding against Ms Issa, her son, James, the company, Mazop Pty Ltd, as the first three defendants, together with Mr Picken as the fourth-named defendant and the Registrar of Titles as the fifth-named defendant.
42 In its Second Further Amended Statement of Claim (referred to hereafter as simply the Statement of Claim) C & F alleges that by a mortgage registered 3 April 2017, Ms Issa mortgaged the Bulleen property to secure a principal sum of $800,000 advanced by C & F to Mazop, together with interest thereon. It was said that the mortgage obliged Ms Issa and Mazop to repay the principal sum and interest on 15 March 2018, and to pay monthly interest instalments on the 15th of each month. Costs of enforcement of the mortgage were to be paid by Ms Issa and Mazop “on an indemnity basis”.
43 Next it was said that Mr Karbotli had guaranteed payment of the principal sum and interest and indemnified C & F against loss. Ms Issa and Mazop had, according to the Statement of Claim, defaulted in the payment of principal and interest and, as at 15 May 2017, owed some $813,828.32, which remained outstanding, despite the demand constituted by a Notice to Pay dated 22 November 2017. Therefore, according to the Statement of Claim, C & F was entitled to possession of the Bulleen property pursuant to s78 and 81 of the Transfer of Land Act. Despite demands to vacate, Ms Issa has refused to give up possession of the property.
44 Noting a defence taken by Ms Issa to the effect that she did not sign the mortgage and did not have her identity as mortgagor verified in accordance with the requirement of the Transfer of Land Act with the effect that, by virtue of s87A of that Act, the mortgage was void, C & F said that if this contention were accepted, it would suffer loss and damage by being unable to recover its principal and interest. According to the Statement of Claim, Mr Picken, the fourth defendant, in the circumstances owed a duty of care in giving his certificate relative to the mortgage dated 4 March 2017, which he breached by failing to take reasonable care in giving that certificate and thereby inflicting loss and damage upon C & F, which C & F sought to recover as damages against him. Alternatively, it was said that he had engaged in misleading or deceptive conduct and was likewise liable in damages to C & F. A default judgment was entered against Mr Picken for damages to be assessed. He took no part in the trial.
45 Next, the Statement of Claim referred to the security documents relative to the FX Money mortgage loan which was paid out by C & F. It was said that if the C & F mortgage were found to be void, in the circumstances, C & F should be subrogated to the rights which FX Money would have had, had it not been paid out.
46 Finally, if the mortgage were found to be void, C & F claimed to be entitled to indemnity from the Registrar of Titles pursuant to s110 of the Transfer of Land Act.
Defence and Counterclaim of Ms Issa
47 In her Further Amended Defence and Counterclaim filed 30 April 2020, Ms Issa denied executing the mortgage and said that the “second defendant” [viz her son, James] “fraudulently signed her signature on the mortgage”. She said she did not authorise or direct him or any other person to sign on her behalf.
48 According to Ms Issa, C & F did not take reasonable steps to verify her authority and identity to ensure that the person “executing the purported mortgage, as mortgagor, was the same person who was (and is) the registered proprietor of the land”. Therefore, she said by virtue of s44 and s87A of the Transfer of Land Act, “the purported mortgage [was] void and of no effect”.
49 She said C & F did not advance any moneys to her, nor did she authorise, direct or consent to C & F advancing money to anyone else. Finally, she said on its proper construction, “the mortgage … secured nothing”.
50 She also denied receiving C & F’s Notice to Pay. She admitted refusing to pay the amounts referred to in the Notice to Pay and admitted refusing to grant possession of the land to C & F, but denied it was entitled to possession. As to the FX Money mortgage and loan agreement she made similar denials.
51 By way of Counterclaim, she repeated her denials of having signed the C & F mortgage and the contention that by virtue of s87A of the Transfer of Land Act C & F had been obliged “to take reasonable steps to verify the authority and identity of [Mrs Karbotli] to ensure that the person executing the purported mortgage, as mortgagor, was the same person who was (and is) the registered proprietor of the land”. She said that C & F relied on Mr Picken “to verify her authority and identity of [Mrs Karbotli]” for the purposes of s87A, and in the circumstances Mr Picken was C & F’s agent for the “purpose of verifying the authority and identity of [Mrs Karbotli]” as required by s87A. She said Mr Picken did not verify her authority and identity. She said Mr Picken knowingly falsely represented that he had verified her authority and identity by giving the Solicitor’s Certificate relative to the mortgage. She said the mortgage was “void and of no effect”. Alternatively, if she was held liable to C & F “on any basis claimed by C & F” she was entitled to be indemnified pursuant to s110 of the Transfer of Land Act 1958.
52 The Counterclaim sought declaratory relief against C & F to the effect it was “party or privy to the fraud” whereby the mortgage was recorded as an encumbrance on title to the Bulleen property and that the mortgage was therefore “wholly null, void, ab initio and of no effect” by virtue of s44 of the Transfer of Land Act 1958 or s87A(5) of the Act, based on C & F’s failure to take reasonable steps to verify her identity and/or authority. She sought a declaration that she was not liable to C & F for any amounts under the mortgage and she sought an order that the title to the Bulleen property be amended so as to remove the mortgage “on the basis that the mortgage ‘secured nothing’”. She also sought an order that the duplicate Certificate of Title be delivered up to the Registrar of Titles.
53 Alternatively, she sought declaratory relief as to her entitlement to be indemnified under s110 of the Transfer of Land Act against the amount required to discharge the mortgage. She sought further declaratory relief against the Registrar and orders expunging the mortgage from the Register.
Reply and Defence to Counterclaim
54 In its Reply and Defence to Counterclaim, C & F said that it held indefeasible title to the mortgage pursuant to s42 of the Transfer of Land Act. It denied that it relied on Mr Picken to “verify the authority and identity of [Ms Issa]”. It denied that Mr Picken was its agent for any purpose. If, contrary to that contention, he were regarded as C & F’s agent:
“… then the conduct of Mr Picken as alleged … if proven, constitutes fraudulent conduct by Mr Picken, being conduct outside the scope of Mr Picken’s authority as agent for [C & F], and was conduct about which [C & F] was unaware and by engaging in such fraudulent and unauthorised conduct, Mr Picken was not acting as [C & F’s] agent;”.
55 In any event, it was said that if Mr Picken engaged in fraudulent conduct, “then that fraudulent conduct did not procure any amendment of the Register under s44”. Therefore, it was said that reliance on that section was “misconceived”.
56 C & F said “it took reasonable steps to verify the authority and identity of Ms Karbotli by relying, in combination, on [various] matters” [viz, the certificate, the 100-point Identification Check Form, the Statutory Declaration by Ms Grevis, the Westpac Bank statement, a letter dated 25 May 2012 from Westpac Banking Corporation to Ms Issa, a letter from Munroe Accountants to J Karbotli and H Issa, a statement from the Australian Taxation Office dated 22 August 2012 and a Quarterly PAYG instalment notice, another Notice of Assessment from the ATO, a visa report, a certified copy of a passport, a certified copy of a Medicare card, the Originator Agreement, a title search of the land and a Berkshire Hathaway Certificate of Insurance].
57 If, which was denied, Ms Issa did not sign the loan agreement and FX Money mortgage, with her signature being fraudulent:
“…
the forgeries were committed by [James Karbotli] with the assistance of a Christopher Smith … and a Julie Archer and others as part of an elaborate deception to obtain money from her on the security of the land and other properties owned by her”.
58 The various steps alleged as part of the “elaborate deception” were set out and it was said, therefore:
“… no matter what reasonable steps [C & F] could have taken to identify and verify the authority of [Ms Issa], James, Smith and Archer would have ensured that all steps would have been satisfied in the fraud against [Ms Issa] was given effect”.
Transfer of Land Act, s87A
59 In 2014, as a part of the program to transition Victoria’s conveyancing system to a purely electronic one, extensive amendments were made to the Transfer of Land Act 1958 by the Transfer of Land Amendment Act 2014. Section 87A was amongst the amendments.
60 That section provided, inter alia:
“87AMortgagee to verify identity of mortgagor for execution of mortgage or variation of mortgage
(1) At the time of execution of a mortgage or a variation of mortgage, a mortgagee must take reasonable steps to verify the authority and identity of a mortgagor to ensure that the person executing the mortgage, or on whose behalf the mortgage is executed, as mortgagor is the same person who is, or is to become, the registered proprietor of the land that is security for the payment of the debt to which the mortgage relates.
(2) For the purposes of subsection (1), the mortgagee is considered to have taken reasonable steps to verify the authority and identity of the mortgagor if the mortgagee has taken steps consistent with any verification of identity and authority requirements—
(a) determined by the Registrar in accordance with section 106A; or
(b) set out in the participation rules (within the meaning of the Electronic Conveyancing National Law (Victoria)).
(3) If, in relation to a mortgage, the Registrar is satisfied that the mortgagee did not take reasonable steps to verify the authority and identity of the mortgagor and the registered proprietor of the land did not grant the mortgage, the Registrar may—
(a) if the mortgage has not been registered, refuse to register the mortgage; or
(b) if the mortgage has been registered, remove the mortgage from the Register.
…
(5) If the Registrar removes a mortgage from the Register under subsection (3)—
(a)the mortgagee no longer has an indefeasible interest in the mortgaged land; and
(b) the mortgage is void.
(6) If the Registrar removes a variation of mortgage from the Register under subsection (4) the variation is void.”
61 In 2017, s87A(1) was amended with effect from 20 September 2017, omitting the opening words, “At the time of execution of a mortgage” and replacing those with “In respect of a mortgage”.
62 Ms Issa places primary reliance upon s87A in her Defence and Counterclaim. As previously narrated, the key event in this dispute relative to the contested mortgage and surrounding events occurred in the first half of 2017, that is, after s87A, in its original form, was enacted, but before the subsequent amendment. A matter in dispute between the parties was which version of s87A should be regarded as governing the present dispute. Mr Moore, counsel for C & F, contended that the second version should be regarded as applicable. Mr Twigg QC and Ms Tadros, on behalf of Ms Issa, and Mr McKay, on behalf of the Registrar of Titles, contended that it was the original version of the section which was relevant.
63 Mr Moore noted that at the day of commencement of the proceeding the second or amended version of s87A(1) was in force. He continued (Closing submissions, paragraph 44), “It is submitted that the effect of the amendment repealed the former s87A(1) and the amended s87A(1) is the section that applies to this proceeding”. He referred to Ku-Ring-Gai Municipal Council v Attorney-General (NSW); Minister For Public Works v Turner (1957) 99 CLR 251, 265. Mr Twigg QC and Ms Tadros, on behalf of Ms Issa, in their Closing Submissions in Reply, said “There is nothing in the 2017 TLA Amendment … to suggest that [the amendment] was intended by the legislature to ‘repeal’ s87A(1) or to have retrospective effect”. (paragraph 18) As to the presumption against retrospective operation of legislation, they referred to Saraswati v R (1991) 172 CLR 1, 17 per Gaudron J. They said that, in general, amending legislation, in the absence of a clear statement to the contrary, was deemed not to have retrospective operation. They referred to Maxwell v Murphy (1957) 96 CLR 261, 267 per Dixon CJ; WBM v Chief Commissioner of Police (2012) 43 VR 446 [67] per Warren CJ. They said this presumption was codified by s14(2) of the Interpretation of Legislation Act 1984, which they said had the effect that an amendment or a repeal should not, in the absence of an intention to the contrary, affect the previous operation of the provision or anything done or suffered under that provision, or affect any right, obligation acquired, accrued or incurred.
64 In oral submissions, Mr Moore said that before the filing of her Counterclaim and as at the date of the 2017 amendment, Ms Issa had no more than a right to rely upon s87A, which did not amount to an accrued right. Alternatively, what the defendants alleged was a proposed “retrospective” construction of the amended s87A was, in truth, no more than the attachment of new rights and obligations for the future by reference to past events, which was not properly to be regarded as giving the legislation a retrospective effect.
65 In a celebrated passage in the judgment of Maxwell v Murphy, Dixon CJ said:
“The general rule of the common law is that a statute changing the law ought not, unless the intention appears with reasonable certainty, to be understood as applying to facts or events that have already occurred in such a way as to confer or impose or otherwise affect rights or liabilities which the law had defined by reference to the past events. But, given rights and liabilities fixed by reference to past facts, matters or events, the law appointing or regulating the manner in which they are to be enforced or their enjoyment is to be secured by judicial remedy is not within the application of such a presumption. Changes made in practice and procedure are applied to proceedings to enforce rights and liabilities, or for that matter to vindicate an immunity or privilege, notwithstanding that before the change in the law was made the accrual or establishment of the rights, liabilities, immunity or privilege was complete and rested on events or transactions that were otherwise past and closed. The basis of the distinction was stated by Mellish L.J. in Republic of Costa Rica v. Erlanger. ’No suitor has any vested interest in the course of procedure, nor any right to complain, if during the litigation the procedure is changed, provided, of course, that no injustice is done’”. (1957) 96 CLR 261, 267
(Footnotes omitted.)
66 To similar effect, s14(2) of the Interpretation of Legislation Act 1984 provides:
“(2) Where an Act or a provision of an Act—
(a) is repealed or amended; or
(b) expires, lapses or otherwise ceases to have effect—
the repeal, amendment, expiry, lapsing or ceasing to have effect of that Act or provision shall not, unless the contrary intention expressly appears—
(c)revive anything not in force or existing at the time at which the repeal, amendment, expiry, lapsing or ceasing to have effect becomes operative;
(d) affect the previous operation of that Act or provision or anything duly done or suffered under that Act or provision;
(e) affect any right, privilege, obligation or liability acquired, accrued or incurred under that Act or provision;
(ea)affect any immunity or indemnity conferred or given by or under that Act or provision;
(f) affect any penalty, forfeiture or punishment incurred in respect of an offence committed against that Act or provision; or
(g) affect any investigation, legal proceeding or remedy in respect of anything mentioned in paragraphs (e) to (f)—
and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed, as if that Act or provision had not been repealed or amended or had not expired, lapsed or otherwise ceased to have effect.”
67 Mr Twigg QC and Ms Tadros in oral submissions said that when, according to Ms Issa’s case, a forged mortgage was purportedly created over her land and then submitted for registration under the Transfer of Land Act, she acquired a right under the original version of s87A to relief relative to that mortgage. Alternatively, the mortgage could be regarded as subject to an accrued defect. In the Ku-Ring-Gai Municipal Council case, a question for the court was whether a fixed interest rate of 4 per cent per annum payable on compensation moneys for a compulsory acquisition by the Public Works Act 1984 was payable, despite an amendment substituting a variable rate by virtue of s5 of the Land Acquisitions (Charitable Institutions) Act 1946.
68 The distinction between an accrued right which, the statutory and common law presumptions say, should not be impinged upon in the absence of an express legislative intention to do so, on the one hand, and a mere right to take advantage of an enactment (which is not regarded as an accrued right), on the other hand, may be difficult to draw. In Esber v Commonwealth (1992) 174 CLR 430, the High Court considered an application by a Commonwealth employee made to the Commissioner for Employees’ Compensation under s49 of the Compensation (Commonwealth Government Employees) Act 1971 to redeem his entitlement to periodic payments under that statute in the form of a lump sum. Section 49 gave the Commissioner a discretion as to whether or not to allow such redemption, particular considerations being prescribed in ss(5). Mr Esber’s application to the Commissioner was dismissed. The period to seek review of the Commissioner’s determination from the Commonwealth Administrative Appeals Tribunal expired, but Mr Esber made an application out of time seeking an enlargement of time in which to bring his application to the Tribunal. Before that application was heard, the 1971 Act was repealed and replaced by the Commonwealth Employees’ Rehabilitation and Compensation Act 1988. The 1998 Act excluded the redemption of weekly payments of compensation over $50. The Administrative Appeals Tribunal concluded that the 1971 Act continued to apply and granted the redemption, but that determination was reversed by a two-to-one majority in the Federal Court of Australia. Upon further appeal to the High Court, the Tribunal’s determination was restored by majority. In a joint judgment, Mason CJ, Deane, Toohey and Gaudron JJ, said that Mr Esber “had a right to have his claim to redemption determined in his favour if the delegate had wrongly refused his claim”. They approved a statement by Hope JA in New South Wales Aboriginal Land Council v Minister Administering the Crown Lands Act [The Winbar Claim No 3) (1988) 14 NSWLR 685, 694, where his Honour said, “‘[t]he right might be said to be a conditional one, namely, conditional upon the relevant facts being established, but the right was nonetheless a right because it was conditional’”. (1992) 174 CLR 430, 440 Their Honours rejected the view that Mr Esber had no more than a right to take advantage of an enactment.
69 In the present case, if Ms Issa’s case is made good, leading to a finding that C & F did not take the reasonable steps referred to in s87A, she had a right to have the subject mortgage avoided, albeit a conditional one. The power to avoid the subject mortgage, depriving it of the indefeasibility it might otherwise enjoy, is, based on the language of s87A, discretionary (see s45 of the Interpretation of Legislation Act 1984). Nevertheless, the fact that a right may be conditional and might depend upon an exercise of discretion, as the right or claim to redemption being pressed by Mr Esber was, does not deprive the “right” of the character necessary for it to be regarded as accrued for the presumption against retrospectivity to apply to it.
70 Nor can it be said that the revised version of s87A merely attaches for the future consequences by reference to past events. In Nicholas v Commissioner for Corporate Affairs (Vic) [1988] VR 289, Mr Nicholas was subjected to certain bans and limitations relative to his involvement in the management of companies based on past insolvency. The regime was stricter than the one in force when the prior insolvencies had occurred. The Full Court, consisting of Kaye, Fullagar and King JJ, rejected his contention that an order restricting and banning him based on the new provisions involved giving an impermissible retrospective operation to them. Once it is accepted as the reasoning above requires it to be, that following the grant of the allegedly forged mortgage, Ms Issa acquired a conditional right to have it declared void, such an interpretation in the present case must be rejected.
71 It is the original version of s87A enacted in 2014 and coming into effect in 2015 which governs this proceeding, not the revised version, which came into force in 2017.
72 The Explanatory Memorandum for the bill which became the Transfer of Land Amendment Act 2014, and which introduced s87A to the principal Act, stated inter alia:
“New section 87A(1) provides that a mortgagee must take reasonable steps to verify the authority and identity of a mortgagor before the execution of a mortgage or variation of mortgage.
New section 87A(2) also provides that the mortgagee is considered to have taken reasonable steps if the mortgagee verified the authority and identity of the mortgagor in accordance with the requirements determined by the Registrar. A mortgagee can either follow the standard set by the Registrar or verify the authority and identity of the mortgagor in some other way that constitutes reasonable steps.
***
New sections 87A and 87B are designed to address the situations where mortgagees do not confirm they are dealing with the registered proprietor. Currently, this poor business practice is effectively underwritten by the State once the mortgage is registered. This is because the registered proprietor can be required to pay to secure a discharge of the fraudulent mortgage. The registered proprietor then generally requests an indemnity from the State. The State operates a comprehensive scheme for persons who experience loss as a result of a number of matters including an amendment to the Register (for example, the registration of a fraudulent mortgage).
It is not appropriate that registered proprietors (and ultimately the State) should be expected to reimburse mortgagees for fraudulent mortgages when the mortgagee failed to property verify the authority and identity of the person they were transacting with. When these requirements are not complied with, and the mortgage has not been granted by the registered proprietor, the mortgagee will lose the benefit of the mortgage and the Registrar will remove the mortgage from the Register. …”
Forgery and subrogation
73 Ms Issa’s Defence and Counterclaim turns crucially upon a denial that she executed the mortgage and an assertion that her son fraudulently forged her signature. C & F did not, in its Reply and Defence to Counterclaim, admit that the mortgage was forged. Ms Issa gave evidence that she did not sign the mortgage and she was not challenged on this in cross-examination. Again, there was evidence from handwriting expert, Mr John Heath, to the effect that the mortgage signature was not hers. Mr Heath was not required to attend for cross‑examination. I therefore proceed on the basis that Ms Issa’s signature on the subject mortgage was a forgery.
74 As previously noted, as a “fall-back” position, C & F pleaded that if its mortgage were found to be a forgery, as regards what purported to be Ms Issa’s signature, it should be entitled to be subrogated to the rights of FX Money as mortgagee under the mortgage which was paid out by a portion of C & F’s outlays. In his opening remarks, Mr Moore, on behalf of C & F conceded that if it were found that the FX Money mortgage itself was forged, then C & F’s claim for subrogation to the FX Money mortgage could not be pursued. In light of the uncontradicted evidence of Mr Heath, not merely relative to the C & F mortgage but also the FX Money mortgage, the subrogation claim cannot succeed and it was not pursued by Mr Moore in his Closing submissions.
Power of the Registrar
75 The Registrar of Titles is a defendant in this proceeding. He appeared by counsel, Mr McKay. As is evident, whilst a number of issues arise, the outcome of this proceeding turns crucially upon the operation of s87A of the Transfer of Land Act 1958 and upon the facts of this case. That section places the discretionary power to take action in the event that a mortgage is found to be forged in circumstances where the mortgagee failed to take reasonable steps to verify the authority and identity of the purported mortgagor in the Registrar. It is he (or she) who is empowered, where the mortgage remains unregistered, to decline to register it or, in the case of a registered mortgage, remove it from the Register, thereby depriving the mortgagee of an indefeasible interest in the mortgage planned and rendering the mortgage void. Parliament could have vested that power in the Court, as defined in s4 of the Act, or severally in the Court and the Registrar. Instead, it has chosen to vest the power and discretion in the Registrar, solely. Based simply on textural considerations, one might have expected the issue as to the alleged forgery and whether C & F took reasonable steps to verify the identity and authority of the purported mortgagor to be determined by the Registrar. Leaving it to the court system (presumably the Supreme Court), perhaps, to consider the Registrar’s action in proceedings for judicial review, it seems that Ms Issa and her advisers urged the Registrar to exercise the powers bestowed upon him by s87A without resort to court proceedings. The Registrar declined to do this. His counsel, Mr McKay, explained that the Registrar, in the present circumstances, saw himself as ill-equipped to determine the contested questions of fact and law which have been argued before me. Mr McKay noted that the Registrar did not have the full panoply of procedural powers for gathering evidence, if necessary, by compulsion, which was held by the courts. The Registrar therefore left the s87A issues to be determined by this Court. When I raised these issues with Mr McKay, he referred me to s103(1) of the Act which empowers the Court to direct the Registrar “to make any amendments to the Register or otherwise to do any act or make any recordings necessary to give effect to any judgment, decree or order of the court”. In light of these considerations, I was persuaded it was appropriate for the Court to take the lead on matters which, on the face of the Act, appeared to be within the sole authority of the Registrar.
Reasonable steps
76 I now come to what is the central issue in this proceeding, namely whether, upon the evidence, it should be found that, as Ms Issa contends, C & F failed to take reasonable steps to verify the authority and identity of the person who executed the mortgage in its favour over Ms Issa’s Bulleen residence.
77 Mr Moore, on behalf of C & F, contended that it should be found that his client had taken reasonable steps to verify the identity of the person executing the mortgage in its favour. He said the Explanatory Memorandum for the 2014 amendments introducing s87A did not refer “to a benchmark against which reasonableness is to be tested”. (Closing submissions, paragraph 45) He said the matter should be analysed in this way: “Did the mortgagee take reasonable steps to obtain information verifying the identity and authority of the mortgagor and second, did the mortgagee reasonably rely on the information obtained?” (Closing submissions, paragraph 46) He said that “reasonable” was not a synonym for “guarantee” or “proof positive”. Rather, it described “a standard of conduct that is fair”. (Closing submissions, paragraph 47) It was appropriate, he said, to commence the process of statutory construction by consideration of the ordinary grammatical meaning of the words “having regard to their context and legislative purpose”. He referred to Great Southern Managers Australia Ltd (Receivers and Managers Appointed) (in liquidation) v Clarke (2012) 36 VR 308 [25].
78 According to Mr Moore, the evidence showed that C & F satisfied itself that Ms Issa and Ms Karbotli were one and the same person and received the biographical page of her passport, a certified Medicare card and her driver’s licence, albeit expired. The expiry, he said, “should not be regarded as a fatal flaw in its reliance on that document. The purpose of providing the driver’s licence is to provide photographic evidence of the person identified.” (Closing submissions, paragraph 50(b)) The licence was only five weeks expired “and the expiry of such duration is irrelevant for its intended purpose”.
79 He referred to the terms of the certificate given by Mr Picken.
80 It was permissible, said Mr Moore, for a mortgagee to rely on a Solicitor’s Certificate as to the matter certified “unless the party relying on that certificate is put on notice of matters which indicate that some or all of the matters may not be true”. (Closing submissions, paragraph 51) There was nothing on the face of this certificate which would call its veracity into question. He referred to St George Bank Limited v Dunstan (unreported), Supreme Court of Victoria 10 November 1994, per Hayne J, and McIvor v Westpac Banking Corporation [2012] QSC 404 [93]-[96], per Applegarth J. He said the certificate was dated 4 March 2017, and on or about that date “C & F Nominees received the executed C & F mortgage”. (Closing submissions, paragraph 54)
81 Mr Moore conceded that the certificate did not indicate that Mr Picken had witnessed Ms Issa’s execution of the mortgage. The witness shown on the document was one Julie Archer. According to Mr Moore, “it was reasonable for Mr Skeels [of C & F] to believe that she [Ms Issa] had done so [viz, executed the mortgage] by reason of the certificate representations and the contemporaneity between the date of the certificate and the receipt of the executed mortgage”. (Closing submissions, paragraph 55) Mr Skeels and C & F were not to be faulted, he said, for failing to obtain “proof positive” that Ms Issa was the person who had signed as mortgagor. He said such a high standard was not prescribed by s87A(1). (paragraphs 56-57)
82 Mr Moore said in any event C & F had received a certificate of currency of insurance from Berkshire Hathaway noting C & F Nominees’ interest in the Bulleen property. The duplicate Certificate of Title had also been forthcoming. These matters, he said, “fed into Mr Skeels’ state of mind that he was dealing with the person who was the registered proprietor of the Bulleen property”. He noted Mr Skeels’ evidence that insurance companies would only provide that sort of material to the registered owner of the property. (Transcript (“T”) 309, Line (“L”) 21 – T310, L19)
83 The matters relied upon by C & F as constituting “reasonable steps” for the purposes of s87A fall broadly into two categories: first, the material generated by the “100-point check” and certain other associated materials such as the Certificate of Insurance from Berkshire Hathaway, and secondly, the certificate given by Mr Picken. The first observation to make relative to these matters is that they were not adopted in response to the enactment of s87A. I asked Mr Skeels, a director of C & F and its principal witness:
“Did any, and if so, what, changes in procedure relative to mortgage lending take place in your firm [that is the law firm McNab, McNab and Starke, solicitors for C & F] and with your client company C & F?”
He replied:
“I’m not aware that any particular changes took place.” (T284, L14–19)
84 The 100-point check seems to have derived ultimately from regulations made pursuant to what was initially enacted by the Commonwealth Parliament as the Cash Transaction Reports Act 1988, since retitled the Financial Transaction Reports Act 1988. The focus of that legislation was not upon forged mortgages. In moving its Second Reading, the then Minister for Justice, Senator Tate, said:
“Recent investigations have confirmed that numerous accounts have continued to be opened in false names and millions of dollars in cash have been laundered through those accounts. The financial institutions have agreed to co-operate with law enforcement bodies and to implement new procedures in an endeavour to prevent the abuse of their services by criminals ... The Bill provides comprehensive measures for the control of the cash economy and minimisation of tax evasion.” (Commonwealth Hansard Senate, 25 November 1987, 2413 Column 2)
85 The Solicitor’s Certificate in its terms seems to be directed to a complex of issues which derived from decisions of the High Court of Australia and trial and intermediate courts of appeal in the last decades of the 20th Century in cases such as Commonwealth Bank of Australia Ltd v Amadio (1983) 151 CLR 447 and Garcia v National Australia Bank Ltd (1998) 194 CLR 395.
86 In cross-examination by Mr Twigg QC and Ms Tadros for Ms Issa, and Mr McKay for the Registrar, Mr Skeels sustained criticism for the alleged inadequacy and inappropriateness of documents used for the “100-point check”. Some documents emanating from the Australian Tax Office were years old and were criticised as not being “current”. The driver’s licence was expired. Mr Skeels was correct in saying that taken together these documents did tend to establish, or, at least, could be regarded as reasonable steps to establish, that Ms Issa was the same person as Ms Karbotli, and that at various times in her life and in different circumstances her given name was rendered as “Hind” and at other times as “Hend”. The driver’s licence was not current. Plainly, an expired driver’s licence is more likely to be discarded by its owner and might fall into the hands of a fraudster. On the other hand, the crucial significance of a driver’s licence is its creation of an officially endorsed link between the name of an individual and that person’s facial appearance as depicted in the photograph. Plainly, a lender would be concerned to establish that the borrower named in its security documents was an existing person as distinct from a fictitious person or a mere alias.
87 In their totality, the 100‑point check and related documents established that Ms Issa was a real person whose name had been variously recorded over the years. In particular, she was the person shown as the registered proprietor of the Bulleen property. In themselves, however, these documents were incapable of establishing that she was the person who purported to execute the mortgage. In themselves, they could not be regarded as reasonable steps toward establishing the identity of the person signing the mortgage. They could constitute such steps in combination with something else, and the “something else” would be proof, or, at least, some distinct indication, that the person who executed the mortgage was the person depicted in the recently-expired driver’s licence. The entire purpose of “photo ID” is to enable the person seeking to establish the identity of a subject to compare the officially labelled photograph, as in a driver’s licence or passport, with the features of the person to be identified. In the absence of such comparison, “photo ID” is incapable of establishing identity. That comparison constitutes the indispensable link in the process.
88 What C & F relied upon to establish that crucial link was the Solicitor’s Certificate, which, as a standard form, seems to have been framed with entirely different issues in mind. The provisions as to advice and so forth imply that a face-to-face meeting has occurred between the person signing as mortgagor and the certifying solicitor, but there is no explicit certification to that effect. Whether the steps taken by C & F are to be regarded as “reasonable” for the purposes of s87A must be judged not merely, or perhaps not even primarily, by reference to the facts of this particular case, but rather by reference to a range of scenarios which the prudential and security regime should seek to deal with. Indeed, an excessive concentration on what in fact happened in this instance could be most unfair to a mortgagee seeking to establish it had taken reasonable steps because of the inevitable tendency to rely on hindsight rather than reasonable foresight, which must be the appropriate standard.
89 I consider two hypothetical situations. In the first, someone purporting to be a guarantee mortgagor has copy security documents delivered to a solicitor, together with 100‑point check material including a current recently-certified copy of the driver’s licence of the named mortgagor, under cover of a note requesting the solicitor to provide the advice and certificate as a matter of urgency. Later the same day, someone claiming to be the named mortgagor makes contact with the solicitor, complaining of inability to attend his or her office, for instance because of a recently-broken ankle, and requesting that the necessary advice be given over the telephone and that the solicitor certify without requiring a face-to-face interview. The better view of the text of the certificate would be that such a thing is impermissible, based upon what is implicit in a number of its provisions. On the other hand, one asks, can a certificate which is to provide so vital a function in the process of identification be regarded as a reasonable step, or part of a reasonable step, where it arguably leaves open such a loophole. Fraudsters, one may think, are skilful people, well able to persuade others to act in ways against their better judgement.
90 In another hypothetical situation, a proposed guarantee mortgagor might attend a solicitor for the purposes of receiving independent advice and having a certificate completed, accept the advice and indicate a willingness to execute the mortgage documents, leaving the solicitor to complete the certificate and release it to the borrower. The guarantee mortgagor might overnight think better of what he had decided to do, and the following morning advise the proposed borrower that he would not grant the mortgage. A fraudster might complete the mortgage and have it witnessed by someone else, as was the case in the present proceeding, leaving the mortgage transaction to proceed on the basis of a forged instrument. In that latter case, the Solicitor’s Certificate would be absolutely correct, and the solicitor could not be criticised on any basis.
91 To return to the facts of the present case, in my view a process which relies upon steps which were designed for another purpose and fails to require, explicitly and directly, a link between the photo identification and the actual execution of the mortgage document cannot, either individually or in combination, constitute the taking of reasonable steps to establish the identity of the mortgagor.
92 I am fortified in these conclusions by the comparison between the practices which C & F followed in 2017 and which, on Mr Skeels’ evidence, remained entirely unaffected by the enactment of s87A, whether in its original or amended version, and the practice which it now follows. From 1 January 2018, electronic conveyancing became mandatory and paper transactions, such as the ones which we are now dealing with, could no longer be undertaken. (T102, L14-25) Mr Skeels said, “we’ve changed the way we operate, yeah, because we have to certify, which we didn’t previously.” (T182, L28‑30) Under the new regime, the process of identification is outsourced only rarely. Mr Skeels identified one occasion where “we knew the solicitor acting for the mortgagee [sic mortgagor] personally. … we’d had previous dealings with ... the mortgagor personally. Ah, it was a very limited circumstance and it almost never happens because … it’s incumbent on the solicitors acting for the mortgagee to give those certifications.” (T183, L28-T184, L4)
“The Mortgage secured nothing”
93 What I have said as to the operation of s87A resolves the issue as to the effectiveness of C & F’s mortgage as against Ms Issa and the Bulleen property. Nevertheless, I should say something as to a further argument advanced on Ms Issa’s behalf by Mr Twigg QC and Ms Tadros; namely, that as a matter of construction the C & F mortgage “secures nothing”. Mr Twigg QC and Ms Tadros said that the mortgage, as a matter of construction, secured nothing:
“because the covenant to repay any debt to C & F Nominees is premised upon the money having actually been advanced to, and received by, Ms Issa, being the borrower on the face of the mortgage. Pursuant to the terms of the mortgage, without money actually being advanced to Ms Issa, there is simply nothing to which the alleged debt can attach.” (Closing submissions, paragraph 161)
94 This, they said, was a matter of contractual construction:
“based on the ordinary legal principles relevant to the construction of a commercial contract.” (Ibid, paragraph 162)
They referred to Winau Aust Pty Ltd v LCC Property Development Pty Limited [2020] NSWSC 434 [5], [61]–[63]; Titles Strata Management v Nirta [2015] VSC 187 [93]–[101]. They referred to the well-known formulation as to the construction of a commercial contract from the joint judgment of French CJ, Hayne, Crennan and Kiefel JJ in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 [35]. As to the construction of the mortgage contract, they noted the incorporation by reference of Memorandum of Common Provisions No. AA2712 (CB 1113–1133). There were no surrounding circumstances which could be considered, or antecedent documents to refer to, because the premise on which this issue was being considered was that Ms Issa’s signature had been forged. They concluded:
“this essentially leaves the Court with only the terms of the mortgage and the MCP to consider.” (Closing submissions, paragraph 166)
95 Next, they noted that “Hend Karbotli”, viz Ms Issa, was shown as mortgagor, and the operative words of the mortgage were:
“The mortgagor mortgages to the mortgagee the estate and interest specified in the land described ... This mortgage is given in consideration of and to better secure the principal sum lent or agreed to be lent to the mortgagor by the mortgagee.” [emphasis added by counsel]. (Closing submissions, paragraph 168)
96 They noted, further, that the covenant to repay principal is introduced by the words: “the mortgagor covenants with the mortgagee” and that the principal sum of $800,000 was to be “repaid” by 15 March 2018. They said the effect of the word “repaid” was that “money has been paid to someone and that money will be returned or paid back.” They referred to Perpetual Trustees Victoria v Cox [2014] NSWCA 328 and Winau Aust Pty Ltd v LCC Property Development Pty Limited [2020] NSWSC 434.
97 They said a construction which would have Mazop as the borrower would be “contrary to the ordinary and natural meaning of the words used in the mortgage and the MCP”. A statement that Mazop would be primarily responsible for the payment of the principal and interest and would utilise the money, they said:
“suggests that, at best, Ms Issa has promised to C & F Nominees that she will separately agree with Mazop to ... allow Mazop to use an unspecified amount of the principal sum loaned to her by C & F Nominees in consideration for Mazop taking responsibility for repaying any money that she owes to C & F Nominees.” (Closing submissions, paragraph 177(b))
98 They said this nevertheless is premised on Ms Issa’s actually having received the money. They also referred to the evidence indicating that Ms Issa did not sign any disbursement authority.
99 Mr Moore, on behalf of C & F, submitted that the indefeasibility which he said s42 of the Transfer of Land Act granted to his client’s mortgage extended to the covenant to pay as well as to the statutory charge. He relied on Small v Tomassetti [2001] NSWSC 1112.
100 In Small v Tomassetti the Court accepted that the mortgages under consideration and purportedly signed by Mrs Tomassetti were forgeries. One of the mortgages included a statement:
“The mortgagee has agreed to lend to the mortgagor and the mortgagor has agreed to borrow from the mortgagee the sum of $325,000 (hereinafter called the principal sum) ...”
101 There was a covenant on the part of the mortgagor, viz Mrs Tomassetti, to:
“pay to the mortgagee the principal sum or so much thereof as shall remain unpaid on the 12th day of May 2001.”
102 The other mortgages were to similar effect. In accordance with the decision of the Victorian Court of Appeal in Pyramid Building Society (in liquidation) v Scorpion Hotels Pty Ltd [1998] 1 VR 188, 196 and other authorities, his Honour concluded that in the circumstances the indefeasibility granted to the registered mortgages extended to the covenants to pay.
103 Perpetual Trustees Victoria v Cox [2014] NSWCA 328, upon which Mr Twigg QC and Ms Tadros placed extensive reliance, does not deal with the indefeasibility or otherwise of covenants to pay in forged mortgages nevertheless indefeasibly registered as Small’s case did. In Cox’s case the mortgagors did execute the mortgage in question. The mortgage purported to secure three separate loan facilities. The third of those loan facilities was purportedly drawn down, but the moneys were not advanced to the mortgagor. The funds representing the third loan facility were, according to the findings of the Court, apparently misappropriated by a finance broker. The Court of Appeal held the mortgage unenforceable as regards this third loan facility. The Court found, as a matter of construction, that the mortgage secured only money advanced to the Coxes. Leeming JA gave the principal judgment, which was concurred in by Macfarlan and Emmett JJA. At [72] his Honour said:
“[I]t is not necessary to enter into the debate as to the status of a mortgagor’s personal covenant to repay: cf J Stoljar, ‘Mortgages, indefeasibility and personal covenants to pay’ (2008) 82 ALJ 28.”
104 The effect of the Court’s decision is that:
“[I]f as a matter of construction, the mortgage does not take effect as a security over the land in relation to a claimed debt ... registration of the mortgage will not entitle the mortgagee to exercise remedies, such as the power of sale, to enforce any such claimed debt or obligation.” Perpetual Trustees Victoria Ltd v English [2010] NSWCA 32 [68]
105 In Winau Aust Pty Ltd v LCC Property Development Pty Limited [2020] NSWSC 434, mortgagees advanced $4m against the security of registered mortgages over three separate parcels of land. A fraudster represented himself to be the sole shareholder and director of the land-owning company. The moneys advanced were advanced into a bank account in the name of the land-owning company but controlled by the fraudster. Kunc J held the mortgages to be unenforceable because the moneys purportedly secured, as a matter of construction, needed to be moneys advanced to the land-owning company or at its direction, whereas the moneys purportedly secured were advanced to the fraudster or at his direction.
106 The two lines of authority are not, so far as I can see, readily reconcilable. The distinction between the two seemed to turn upon fine linguistic points in the construction of the mortgage rather than upon the fundamental principles affecting indefeasibility.
107 In the present case it is unnecessary to seek to distil the true rule governing the indefeasibility of covenants to pay in registered mortgages. The problems affecting C & F’s mortgage are more fundamental and structural than the ones considered in cases such as Winau and Cox. As the survey of the evidence above indicates, the C & F mortgage was documented to give effect to a transaction in which C & F was to advance money to Mazop with Mr James Karbotli as guarantor and Ms Issa as guarantee mortgagor. The easiest way to document such a transaction would be to have an “off the register” loan agreement showing Mazop as borrower with a guarantee or guarantees showing Mr Karbotli and Ms Issa as guarantors with Ms Issa’s liability as guarantor secured by a registered mortgage. Documentation in this form, however, would run the risk that if, as a matter of general law, any of the “off the register” documents were a forgery, an indefeasible registered mortgage would be ineffective to secure the relevant debt because the “off the register” documents would be nullities unprotected by any doctrine of indefeasibility (Mitchell Morgan Nominees Pty Ltd v Vella [2011] NSWCA 390 [16]–[17] per Giles JA; Hunt & Hunt v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613).
108 No doubt with these considerations in mind, those acting for C & F sought to document the transaction in a single mortgage instrument in registrable form. The evidence did not disclose what standard forms of mortgage had been drawn and were available to practising solicitors from, for instance, the Law Institute of Victoria. In parlance that may perhaps be somewhat old-fashioned now, what seems to have been envisioned was an “indirect mortgage” from Ms Issa; that is, one which did not secure moneys advanced to her, but rather, secured by way of guarantee mortgage moneys advanced to a third party, namely Mazop. The mortgage form chosen was not apt for this purpose. Rather, as the submissions of Mr Twigg QC and Ms Tadros demonstrate, it contemplated that the moneys would be advanced to the mortgagor, viz Ms Issa. The one and only person identified as guarantor in the mortgage was Mr Karbotli.
109 The structural issue described was, it seems, intended to be dealt with by Covenant 8 on the face of the mortgage, quoted at [18] above, providing that Mazop would be “primarily responsible for payment of the principal and interest”. It did not, however, stipulate that the moneys would be advanced to Mazop or at its direction. As Mr Twigg QC and Ms Tadros accurately identified, the mortgage purported to secure moneys advanced to Ms Issa. No moneys were actually advanced to her or at her direction, nor was any such loan even purportedly made.
110 In BH Australia Constructions Pty Ltd v Kapeller (2019) 100 NSWLR 367, Leeming JA, sitting as a Judge of the Common Law Division, said:
“It is to be borne in mind that, quite apart from rectification in equity, obvious mistakes in contracts could be corrected as a matter of construction at law. This has been the case for centuries. Lord St Leonards regarded it as a “great mistake” to think there was no such power at common law.” (2019) 100 NSWLR 367, 390 [105]
111 According to his Honour, two conditions were necessary to be made out for this common law jurisdiction to be exercised: first, that the literal meaning of the words in the contract constitute an absurdity, and, secondly, that it is self‑evident what the objective intention is to be taken to have been. [107]
112 In Fitzgerald v Masters (1956) 95 CLR 420, Dixon CJ and Fullagar J said that in construing written contracts:
“Words may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency.” (1956) 95 CLR 420, 426–7)
113 In the same case, McTiernan, Webb and Taylor JJ said:
“It is trite law that an instrument must be construed as a whole. Indeed it is the only method by which inconsistencies of expression may be reconciled and it is in this natural and common sense approach to problems of construction that justification is to be found for the rejection of repugnant words, the transposition of words and the supplying of omitted words ... Many illustrations may be given of the circumstances in which these processes have been followed but to do so would add nothing to the rule that the intention of the parties is to be ascertained from the instrument as a whole and that this intention when ascertained will govern its construction.” (1956) 95 CLR 420, 437)
114 As Leeming JA observed, this power at the construction stage is separate from the equitable jurisdiction to rectify written instruments so as to accord with the underlying agreement. In the present case, because of the forgery, there was no underlying agreement between Ms Issa and C & F. No resort could be had to the equitable doctrine of rectification. Further, as Mr Twigg QC and Ms Tadros have correctly observed, because Ms Issa and C & F were not even apparently ad idem, no resort may be had to surrounding circumstances or matters supposed to have been in the joint contemplation of the parties in aid of construction of the words. Here, it is only by reference to a consideration of underlying matters not contained in the registered instrument that the true structural intent of this transaction, as far as C & F was concerned, may be clearly discerned, and the inconsistency between that intent and the documents as prepared may be rendered evident.
115 In those circumstances, the high degree of certainty required for the exercise of the common law jurisdiction to “correct” the wording cannot be reached. As previously explained, the equitable doctrine of rectification is unavailable. Even if either of these powers were available, a relatively neat and clear alteration of words to achieve what C & F may be thought to have intended to achieve in the security documents is not obvious. To alter the words so that the principal sum and the consideration for the mortgage is identified by reference to moneys advanced to Mazop or at its direction would raise the question as to the basis upon which Ms Issa could be liable for the repayment of moneys advanced to Mazop and how her real estate could be mortgaged to secure that liability. Plainly she could only be liable as a surety. The liability of sureties is a fragile one. A whole host of relatively innocuous matters, such as the grant of time to the principal debtor to repay the guaranteed debt, may lead to the release of the surety’s liability. Typically, boilerplate guarantees and guarantee mortgages include lengthy provisions removing these types of defences. If the wording of the mortgage were reordered so as to make Ms Issa what C & F clearly intended her to be, viz a guarantor of the liabilities to it of Mazop, none of these provisions would be included.
116 The contentions of Mr Twigg QC and Ms Tadros on behalf of Ms Issa on this point should be accepted.
The role of Mr Picken
117 Another issue raised was the role of Mr Picken. According to Ms Issa’s Counterclaim, Mr Picken should be treated as C & F’s agent and his certification should be regarded as knowingly false. (Closing submissions, paragraph 8) Accordingly, it was said that the fraud exception to the indefeasibility otherwise granted by s42 of the Transfer of Land Act was engaged and the mortgage should be treated as void for that reason. (Closing submissions, paragraphs 9(b) and (c)) Whilst in the passage in the transcript of his cross-examination by counsel for the Registrar, Mr Skeels was prepared to accept that the procedure adopted by C & F constituted “outsourcing” of the identification of the mortgagor. C & F’s view was that Mr Picken was not its agent.
118 In his Closing submissions, Mr Moore said that his client did not rely on Mr Picken, but rather on the certificate given by Mr Picken. This seemed a fine distinction. Presumably, it boiled down to a contention that his client no more appointed Mr Picken than it could be regarded as having appointed an officer of a planning authority its agent if it relied on a certificate as to the planning status of the subject property given by that officer. Aside from the distinction relied on by Mr Moore, identification of persons carrying out functions on behalf of others as “servants or agents”, on the one hand, for whom a principal is responsible, and independent contractors, for whom a principal is not responsible, has proved a difficult issue in the law of tort.
119 Mr Moore referred to Dal Pont’s Law of Agency (2nd ed) 2008, paragraph 4.3; Bowstead and Reynolds on Agency (20th ed), paragraph 2–030; and Garnac Grain Co Inc v HMF Faure and Fairclough Ltd [1968] AC 1130, 1137, per Lord Pearson, which authorities stated, according to Mr Moore, an indispensable requirement for agency that the alleged principal agrees to or consents to the establishment of the agency relationship. He said that whilst his client relied on the certificate, it did not rely on Mr Picken. It did not even know who Mr Picken was until receipt of the certificate. It did not, he said, consent to Mr Picken’s being its agent. It had no control over Mr Picken.
120 In the end, it may be unnecessary to explore and resolve these issues. Mr Picken’s status as agent or non-agent of C & F becomes relevant only if it can be said that what Mr Picken did amounted to fraud. Such a finding should not lightly be made. As Knox CJ and Rich J said in Wicks v Bennett, “It imports something in the nature of ‘personal dishonesty or moral turpitude’.” ((1921) 30 CLR 80, 91) On the account given of himself by Mr Picken, he appears to have been weak and foolish, rather than one who engaged in actual moral turpitude. He was shown to have “cut a corner”, but there is nothing to suggest that he was part of the apparently wider scheme to raise money fraudulently upon the security of the Bulleen property. Mr Picken was well aware that he had not given “face to face” advice to Ms Issa. It has not been established, however, that he was aware that a forged signature had been or would be applied to the mortgage. However, in Australian Guarantee Corp Ltd v De Jager [1984] VR 483, a mortgagee whose employees were aware that an attesting witness had not been present to see the mortgagor sign the relevant mortgage was held to be guilty of fraud, disentitling it to an indefeasible title. A few years later in Bahr v Nicolay (No 2) (1988) 164 CLR 604, the High Court held that registered proprietors of an estate in fee simple could not rely on indefeasibility as against the claim of unregistered lessees where the proprietors had undertaken an obligation at the time of purchasing the land to recognise and accept the claims of an unregistered lessee. Mason CJ and Dawson J said, “There is no fraud on the part of a registered proprietor in merely acquiring title with notice of an existing unregistered interest or in taking a transfer with knowledge that its registration will defeat such an interest”. ((1988) 164 CLR 604, 613) Their Honours said that the registered proprietors’ repudiation of the obligation to respect the unregistered lease was fraudulent “because it has as its object the destruction of the unregistered interest notwithstanding that the preservation of the unregistered interest was the foundation or assumption underlying the execution of the transfer [to them]”. ((1988) 164 CLR 604, 615) Arguably, these authorities represent a wider view of the concept of “fraud” as an exception to indefeasibility than is to be found in older authorities such as Wicks v Bennett. If, on such basis, Mr Picken is regarded as having acted fraudulently, it is necessary to consider whether, in the circumstances, he is to be regarded as C & F’s agent. In my view, he should not be so regarded. The distinction relied on by Mr Moore is correct, in one sense, as Mr Skeels’ considered reliance on Mr Picken’s certificate in this case, and similar certificates in other cases, constituted “outsourcing” on the part of C & F. If one accepts this line of reasoning, putting to one side whatever arrangements are made under the new regime of electronic conveyancing described by Mr Skeels, under the old paper-based system the parties, such as transferees and mortgagees, routinely “outsourced” the task of witnessing the signature of the mortgagor or transferor. No doubt, some mortgagees and transferees would have insisted on seeing the counterparty sign in the presence of the mortgagee or transferee, or one of his, her or its servants or agents. More typically, however, the “witnessing” was undertaken by someone in the transferor or mortgagor camp. These persons would not, by any stretch of the imagination, be regarded, for that reason, alone, as agents of the mortgagee or transferee. In my view, Mr Picken should be seen in the same light. He was not C & F’s agent.
Ms Issa’s claim against the Registrar
121 Section 110 of the Transfer of Land Act 1958 provides, inter alia:
“(1)Subject to this Act any person sustaining loss or damage (whether by deprivation of land or otherwise) by reason of—
…
(b)any amendment of the Register;
…
(3)No indemnity shall be payable under this Act—
(a)where the claimant his legal practitioner, conveyancer or agent caused or substantially contributed to the loss by fraud neglect or wilful default or derives title (otherwise than under a disposition for valuable consideration which is registered in the Register) from a person who or whose legal practitioner, conveyancer or agent has been guilty of such fraud neglect or wilful default (and the onus shall rest upon the applicant of negativing any such fraud, neglect or wilful default);
(b)on account of costs incurred in taking or defending any legal proceedings without the consent of the Registrar, except any costs which may be awarded against the Registrar in any proceedings in which the Registrar is a party;
… .”
122 The principal claim which was made against the Registrar on Ms Issa’s behalf to cover the eventuality that the mortgage over the Bulleen property might be held to be indefeasible, falls away in light of the findings which I have made relative to s87A of the Act. In the event, Ms Issa has not been deprived of her estate in the Bulleen property. There remains, however, the question whether she can recover the outlay by way of costs which she has made in this proceeding to the extent that they are not recoverable from C & F, which is to be regarded as her principal antagonist in this dispute. It was common ground that her ability to recover these amounts against the Registrar depended upon the true construction and application, on the facts found, of s110(3)(b) of the Act and whether she should be regarded as having defended these proceedings and brought her Counterclaim “without the consent of the Registrar”. Mr McKay’s principal submission on behalf of the Registrar was that the “consent” which was required of the Registrar to enable these costs to be recovered from him under the indemnity provision be along the lines of “the Registrar of Titles for the purposes of s110(3)(b) of the Transfer of Land Act 1958 hereby consents to Ms Issa defending County Court proceeding No. CI-17-05902 and filing a counterclaim in that proceeding seeking to have the plaintiffs’ mortgage or purported mortgage over her land avoided pursuant to s87A of the said Act”. In fairness to Mr McKay, he may not have intended to insist upon such formality and particularity, but he did say that mere general assent to Ms Issa’s defence of this proceeding and/or filing a counterclaim was not sufficient.
123 Mr Twigg QC and Ms Tadros contended that, in the circumstances, the Registrar, in taking the position which I have described earlier, of declining himself to make any determinations or taking any action under s87A and leaving it to the court as a body better equipped to make the necessary findings of fact or law, constituted the consent necessary for s110(3)(b). Mr Twigg QC and Ms Tadros said that on 28 May 2018, their client wrote to the Registrar asserting that her signature had been forged on the mortgage. She requested the Registrar to exercise powers under s87A(3)(b) of the Act. (Ms Issa’s affidavit, dated 24 August 2018; Exhibit “HI-6”, CB 261-2), they said the Registrar replied:
“I consider it a matter for the court to decide whether the verification of identity and authority process complies with the Registrar’s Requirements, in any given case.
I cannot exercise my discretion under s87A(3)(b) of the Transfer of Land Act 1958 to remove the mortgage from the Register unless I am unequivocally satisfied that the mortgagee did not take reasonable steps to verify the authority and identity of the mortgagor and that you did not grant the mortgage.” (Exhibit HI-7, CB 263-4)
124 Following further correspondence in the provision of information by Ms Issa’s solicitors, they said the Registrar responded as follows:
“I have been provided with copies of court documents relating to County Court proceeding No. CI-17-05902. The plaintiff in the proceeding seeks enforcement of mortgage AN782157Q.
I am not prepared to consider your client’s request to remove mortgage ANZ872157Q (sic) [from] the Register under s87A(3)(b) of the Transfer of Land Act (TLA) any further, as to do so may interfere with the Court’s jurisdiction.
It is likely that an issue in the enforcement proceeding will be whether the mortgagee took reasonable steps to verify the authority and identity of the mortgagor as required by s87A(1) of the Transfer of Land Act 1958. I consider that the Court is best placed to best determine this issue. This is especially the case as it appears there might be multiple parties involved in this matter.”(CB 1840-1840A)
125 Mr Twigg QC and Ms Tadros referred to the definition of “consent” in the Macquarie dictionary as meaning “assent; acquiescence; permission; compliance”. That same dictionary, they said, defined “acquiescence” as meaning, inter alia, “the act or condition of acquiescing or giving tacit assent; a silent submission, or submission with apparent consent … Law (sic) such neglect to take legal proceedings in opposition to a matter as implies consent thereto”. They submitted that in taking the position the Registrar did, he acquiesced in the defence of the proceeding and the filing of the counterclaim and hence should be regarded as having consented to it. (Closing submissions, paragraphs 199-208) They said, in the circumstances, the Registrar “essentially advised Ms Issa to seek declarations from the Court in order for him to even consider exercising his discretion under s87A(3)(b)”. In his submissions in reply on behalf of the Registrar, Mr McKay said at paragraph 40:
“The Registrar did not consent to the issuance of the proceeding by C & F, or the counterclaim made therein by Ms Issa … Further, no evidence was adduced at trial that could sustain a finding that Ms Issa has paid, or is liable to pay, any such costs (or as to the quantum of any costs that are paid or payable). Accordingly, any application for costs against the Registrar cannot proceed under s110(1) of the TLA, and must instead be deferred until the conclusion of the proceeding to be determined in the ordinary way by reference to the ordinary principles attending the making of costs orders in civil litigation.”
126 Section 110 of the Transfer of Land Act 1958 prescribes no particular formality or mode which is essential to a finding that the Registrar has consented to the bringing or defence of proceedings. In my view, the matters relied on by Mr Twigg QC and Ms Tadros give a proper basis for a finding that the Registrar has indeed consented to the defence of the proceeding and the bringing of the counterclaim. The Registrar at least acquiesced in this course and, by the terms of the correspondence already quoted and the general position which he has taken, and which is described earlier this judgment, virtually invited Ms Issa to take this course.
127 The costs which, for the reasons I have explained, may be recoverable by Ms Issa constitute a piece of principal relief under the terms of s110 of the Transfer of Land Act. The issue of costs of the proceeding by way of relief ancillary to the principal determinations in the proceeding remains outstanding. The form of costs indemnity accruing to Ms Issa is at least partially dependent on the costs order made in the proceeding, generally. This is a matter on which the parties should be entitled to make further submissions and perhaps adduce further evidence following the publication of these reasons.
C & F’s claim against the Registrar
128 Mr Moore contended that if the Court’s determination led the Registrar to amend the title by avoiding and deleting his client’s mortgage in pursuance of s87A and the subsequent section, this event would engage s110 of the Act such that C & F would be entitled to indemnity from the Registrar from the effects of the amendment of title.
129 An initial reaction to this contention is that, in light of the Explanatory Memorandum for s87A and the following sections introduced in 2014, this would be an incongruous result. The purpose of this legislative package, according to the Explanatory Memorandum, was precisely to exonerate the Assurance Fund from liability to compensate registered proprietors defrauded by forged mortgages being accorded indefeasible status. It would be incongruous to reinstate that outcome by a side wind with the Assurance Fund now being held liable to the mortgagee of the expunged mortgage. Nevertheless, the incongruity of such a result cannot provide the answer to Mr Moore’s contention. This response must proceed from the proper construction of the statutory provision. Whilst Parliament may be presumed, generally, not to legislate so as to produce incongruous results, unless a particular incongruity can be escaped by the application of orthodox principles of statutory construction, the incongruity must stand.
130 Mr Moore contended that s110(3)(a) of the Act did not preclude C & F from being successful in its claim for indemnity. He relied upon the decision of the Court of Appeal in Registrar of Titles v Fairless [1997] 1 VR 404. In Fairless’s case, Mr Fairless was an elderly property owner lacking in business experience. He was prevailed upon by a neighbour, an apparent family friend, under the guise of arranging building works, to execute contracts of sale and transfers of property to the neighbour and his wife. Mr Fairless claimed indemnity from the Registrar under s110 of the Act. The Registrar had contended the compensation claim was defeated by s110(3)(a) of the Act. His claim for indemnity succeeded at trial before Hansen J. An appeal to the Court of Appeal was dismissed. Phillips JA, with whom Tadgell JA concurred, said that an indemnity under the section could be denied to a claimant:
“[W]here it occurs in consequence of fraud, neglect or wilful default on the part of the claimant or his solicitor or agent, that may be the sole factor, or if not the sole factor then a substantially contributing factor, leading to the registration of an “other person” in place of the claimant.” ([1997] 1 VR 404, 417)
131 The Registrar contended that, in the circumstances, Mr Fairless’s loss or damage was caused by or substantially contributed to by his “neglect” in signing the documents proffered to him without proper consideration of their effect. According to the Registrar, acting without reasonable care for one’s own interests was a “neglect” in the relevant sense. Phillips JA said:
“It may be accepted readily enough that “neglect” includes a failure to take reasonable care for one’s own interests, particularly in a context where, in order to be relevant, such “neglect” must have “caused or substantially contributed to the loss”: where the taking of due care for one’s own interests might have prevented the loss, it can perhaps be said, at least in certain circumstances, that the failure to take that care caused or substantially contributed to the loss which might otherwise have been prevented.”
132 His Honour accepted the analysis which had found favour with Hansen J at trial; namely, that what was reasonable needed to be judged “in the context of the facts” where Mr Fairless was led by fraud into a false understanding. ([1997] 1 VR 404) Phillips JA considered that the relevant neglect to engage the proviso must “be either the sole cause or, if only a cause, that its contribution to the loss be considerable, large or big.” ([1997] 1 VR 404)
133 It need hardly be said that the facts of the present case are vastly different from those dealt with by the Court of Appeal in Fairless. Here, the person alleged to have been guilty of “neglect” to engage the proviso in s110 was a commercial lender operated by partners of a law firm. Whilst Mr Fairless in the circumstances could reasonably have regarded himself, as he apparently did, as dealing with an individual who had his best interests at heart, effectively as a fiduciary, C & F could have had no such understanding of its relations with Ms Issa, her son, and the company Mazop Pty Ltd. This was an “arm’s length” commercial transaction in which each of the parties must be understood to have been pursuing its own commercial interests to the exclusion of any attempt to “look after” or promote the interests of the other party.
134 The duty which, upon my findings, must be regarded as having been neglected by C & F, was not merely the generalised duty that all persons have to take reasonable care of their own interests, but a specific statutory duty to identify the named mortgagor as the person executing the relevant mortgage pursuant to s87A of the Act. Whatever view might have been taken on the particular facts in Fairless’s case, C & F’s failures, here, made a contribution to C & F’s loss which, to use the words of Phillips JA ([1997] 1 VR 404, 421), was “large or big”.
135 C & F’s claim for indemnity under s110 fails.
Disposition
136 I will direct that the parties bring in short minutes to give effect to these reasons within 14 days of this day. The outcome represents a substantial victory for Ms Issa. In addition, the Registrar’s contentions have been successful on all but one point. Ms Issa’s prayer for relief includes some duplication. In addition, there may be debate as to whether in the circumstances it is necessary for the Court to give directions to the Registrar or whether declaratory relief and the terms of these reasons would be sufficient to lead the Registrar to exercise his powers under s87A of the Transfer of Land Act.
137 C & F’s claim to enforce the mortgage must necessarily be dismissed.
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