Franov v Deposit and Investment Co Ltd

The parties to this appeal were the plaintiff, Franov, and the defendant, Deposit and Investment Co Ltd. The dispute concerned the validity of a mortgage granted by the plaintiff to the defendant. The plaintiff sought a declaration that the mortgage was void and an order for its removal from the register. The matter came before the High Court of Australia on appeal from the Supreme Court of New South Wales.

The central legal issue before the High Court was whether the mortgage, which was executed by the plaintiff in reliance on representations made by the defendant's agent, was voidable due to fraudulent misrepresentation. Specifically, the court had to determine if the agent's conduct amounted to fraud in the context of the transaction and, if so, whether this fraud rendered the mortgage void ab initio or merely voidable.

The court's reasoning focused on the distinction between fraud in the factum and fraud in the treaty. It was held that for a deed to be void ab initio, the misrepresentation must be as to the nature of the document itself, meaning the party signing did not understand they were executing a deed of that kind. In this case, the plaintiff understood she was signing a mortgage document, even if the representations inducing her to do so were fraudulent. Therefore, the fraud was in the treaty, not in the factum, making the mortgage voidable rather than void. The principles of agency were also considered, with the court examining whether the agent's fraudulent conduct could be attributed to the defendant in a way that would vitiate the mortgage from its inception.

The High Court allowed the appeal, setting aside the order of the Supreme Court. The mortgage was declared voidable, and the plaintiff was granted leave to amend her statement of claim to seek rescission of the mortgage.