Issa v Owens

Case [2023] QSC 4

SUPREME COURT OF QUEENSLAND

CITATION:

Issa v Owens & Ors [2023] QSC 4

PARTIES:

HIND ISSA (ALSO KNOWN AS HEND KARBOTLI)

(Plaintiff)

v

BARRY OWENS

(First Defendant)

BARRY WAYNE OWENS

(Second Defendant)

CORINE MAJORY JOYCE OWENS

(Third Defendant)

GUSTIN GROUP PTY LTD (ACN 006 152 361)

(Fourth Defendant)

JOHN RAMSAY

(Fifth Defendant)

OXYGEN FUNDING SOLUTIONS PTY LTD
(ACN 107 769 415)

(Sixth Defendant)

CATALYST PROVISIONAL LENDING PTY LTD
(ACN 139 887 264)

(Seventh Defendant)

JESS ERNEST MORECROFT

(Eighth Defendant)

JACQUELINE RITA HAINES

(Ninth Defendant)

REGISTRAR OF TITLES

(Tenth Defendant)

STATE OF QUEENSLAND

(Eleventh Defendant)

JAMES KARBOTLI (ALSO KNOWN AS JIHAD KARBOTLI)

(First Third Party)

STEPHEN RICHARD PICKEN

(Twelfth Defendant/Second Third Party)

FILE NO:

BS 10465 of 2018

DIVISION:

Trial Division

PROCEEDING:

Trial

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

24 February 2023

DELIVERED AT:

Brisbane

HEARING DATE:

6, 7, 8 and 9 September 2022

JUDGE:

Crowley J

ORDER:

1.   In respect of the mortgage bearing dealing number 718076402, I declare:

(a)     the mortgage was procured by the fraud of another person;

(b)    the mortgage is null and void;

(c) the First to Sixth Defendants failed to take reasonable steps to verify the identity of the mortgagor before registering the mortgage, as required by s 11A(2) of the Land Title Act 1994 (Qld); and

(d)    the First to Seventh Defendants were not entitled to exercise a power of sale under the mortgage in respect of the property located at 30 Francis Street, Mermaid Waters.

2.   In respect of the transfer of mortgage bearing dealing number 718410563, I declare:

(a) the First to Seventh Defendants failed to take reasonable steps to verify the identity of the mortgagor before registering the transfer of mortgage, as required by s 11B(2) of the Land Title Act 1994 (Qld); and

(b)    the transfer is void and of no effect.

3. Pursuant to s 187 of the Land Title Act 1994 (Qld), I direct the registrar of titles to cancel the instruments bearing dealing numbers:

(a)     718076402 (mortgage);

(b)    718410563 (transfer of mortgage);

(c)     718763578 (correction of name);

(d)    718815263 (unregistered transfer); and

(e)     718858716 (Registrar’s caveat).

4.   In respect of the property at 42 Barak Street, Bulleen, Victoria:

(a)     I declare the First to Seventh Defendants do not have any interest in the property; and

(b) pursuant to s 90(3) of the Transfer of Land Act 1958 (Vic), I direct the registrar of titles to remove the caveat bearing dealing number AQ638142L within 14 days.

5. The Plaintiff’s claim for payment of compensation by the Eleventh Defendant pursuant to s 188A(1) of the Land Title Act 1994 (Qld) is dismissed.

6.   The First to Seventh Defendants’ counterclaim against the Plaintiff is dismissed.

7.   Judgment for the Eighth and Ninth Defendants against the First to Sixth Defendants in the sum of $2,751,666.32 for damages for breach of contract.

8.   The Eleventh Defendant’s third-party claims against each of the First Third Party and the Second Third Party/Twelfth Defendant are dismissed.

CATCHWORDS:

REAL PROPERTY – TORRENS TITLE –…

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Issa v Owens [2023] QSC 4
Case
[2023] QSC 4
Decision Date

CaseChat Overview and Summary

In the case of Issa v Owens, the plaintiff, Issa, was a director of a company that held a property as security for a loan advanced by the defendants, the mortgagees. Issa alleged that her son forged her signature on the mortgage and related documents without her knowledge or approval. The defendants claimed that Issa willingly signed the mortgage. The court was required to determine whether the mortgage was procured by fraud and if the mortgagees obtained the benefit of indefeasibility by registration of the mortgage. The court found that Issa was the victim of fraud and that her signature was forged on the mortgage and related documents. Consequently, the mortgage was null and void, and the mortgagees did not obtain the benefit of indefeasibility. The court also found that the mortgagees breached the purchase contract and were liable to the purchasers for damages. The purchasers obtained an equitable interest in the property, but they did not hold the legal interest in the property and had not obtained an indefeasible interest. Issa retained her indefeasible legal interest in the property, and the purchasers' interest did not prevail over Issa's interest.

The court further found that the mortgagees failed to take reasonable steps to verify the identity of the mortgagor as being identical to the registered owner of the property. As a result, they registered the fraudulently obtained mortgage and transfer of mortgage. The court directed the registrar of titles to cancel the instruments bearing dealing numbers 718076402 (mortgage), 718410563 (transfer of mortgage), 718763578 (correction of name), 718815263 (unregistered transfer), and 718858716 (Registrar's caveat). The court also dismissed the plaintiff's claim for payment of compensation by the State and the defendants' counterclaim against the plaintiff. The court ordered judgment for the purchasers against the mortgagees for damages for breach of contract in the sum of $2,751,666.32. The court further dismissed the State's third-party claims against the first and second third parties.

Orders

Orders of the court

1. In respect of the mortgage bearing dealing number 718076402, I declare:

(a) the mortgage was procured by the fraud of another person;

(b) the mortgage is null and void;

(c) the First to Sixth Defendants failed to take reasonable steps to verify the identity of the mortgagor before registering the mortgage, as required by s 11A(2) of the Land Title Act 1994 (Qld); and

(d) the First to Seventh Defendants were not entitled to exercise a power of sale under the mortgage in respect of the property located at 30 Francis Street, Mermaid Waters.

2. In respect of the transfer of mortgage bearing dealing number 718410563, I declare:

(a) the First to Seventh Defendants failed to take reasonable steps to verify the identity of the mortgagor before registering the transfer of mortgage, as required by s 11B(2) of the Land Title Act 1994 (Qld); and

(b) the transfer is void and of no effect.

3. Pursuant to s 187 of the Land Title Act 1994 (Qld), I direct the registrar of titles to cancel the instruments bearing dealing numbers:

(a) 718076402 (mortgage);

(b) 718410563 (transfer of mortgage);

(c) 718763578 (correction of name);

(d) 718815263 (unregistered transfer); and

(e) 718858716 (Registrar’s caveat).

4. In respect of the property at 42 Barak Street, Bulleen, Victoria:

(a) I declare the First to Seventh Defendants do not have any interest in the property; and

(b) pursuant to s 90(3) of the Transfer of Land Act 1958 (Vic), I direct the registrar of titles to remove the caveat bearing dealing number AQ638142L within 14 days.

5. The Plaintiff’s claim for payment of compensation by the Eleventh Defendant pursuant to s 188A(1) of the Land Title Act 1994 (Qld) is dismissed.

6. The First to Seventh Defendants’ counterclaim against the Plaintiff is dismissed.

7. Judgment for the Eighth and Ninth Defendants against the First to Sixth Defendants in the sum of $2,751,666.32 for damages for breach of contract.

8. The Eleventh Defendant’s third-party claims against each of the First Third Party and the Second Third Party/Twelfth Defendant are dismissed.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

As I have not upheld the State’s defence of Ms Issa’s compensation claim on this basis, it is unnecessary to further consider Ms Issa’s claim against Mr Picken for damages for negligence.Conclusion In summary, I find that Ms Issa was the victim of fraud. Her signature was forged on various mortgages and associated documents without her knowledge or approval. In particular, I find that the Mortgage in respect of her home at 30 Francis Street was not executed by her and that it was procured by fraud. I find that the Mortgage is therefore null and void. Similarly, I find that Ms Issa did not execute the Schedule or the Deed of Variation associated with the Mortgage. Her signatures on those documents were forged. I find that Ms Issa’s son, Mr James Karbotli, perpetrated the fraud that led to the fraudulent Mortgage in respect of 30 Francis Street and that he, or others associated with him, forged Ms Issa’s signatures on the Mortgage and associated documents. I find that Mr Stephen Picken, a former solicitor acting for Mr Karbotli, falsely claimed to have witnessed Ms Issa sign the Mortgage and various other mortgages and associated documents. Although I do not find he was complicit, in doing so, he enabled the Original Mortgagees to obtain and register the fraudulent Mortgage. I further find that the Original Mortgagees failed to take reasonable steps to verify the identity of the mortgagor as being identical to the registered owner of 30 Francis Street, Ms Issa. As a result, they registered the fraudulently obtained Mortgage. Similarly, the Mortgagees failed to take reasonable steps to verify the identity of the mortgagor as being identical to the registered owner when the Mortgage Transfer was lodged for registration. Although the Mortgage and Mortgage Transfer were each registered, I find that neither the Original Mortgagees nor the Mortgagees obtained the benefit of indefeasibility of their interest because of their failure to take reasonable steps to verify the identity of the mortgagor. I find that the Mortgagees had no right to exercise a mortgagee’s power of sale in respect of 30 Francis Street when they entered into the Purchase Contract with the Purchasers, and I find that they had no right to transfer the property. They breached the Purchase Contract and are consequently liable to the Purchasers for damages. I find that the Purchasers obtained an equitable interest in 30 Francis Street when they entered into the Purchase Contract. However, as the executed Transfer has not been registered, they do not hold the legal interest in the property and have not obtained an indefeasible interest. In those circumstances, Ms Issa was, and is, the registered owner of the property at 30 Francis Street. She retains her indefeasible legal interest in an estate in fee simple. Accordingly, there is no question of competing equities to be resolved as between Ms Issa and the Purchasers. Nevertheless, even if there was, I am not satisfied there is any proper basis, nor that it would be just and fair in all the circumstances, to postpone Ms Issa’s interest to the interest of the Purchasers.

Ratio Decidendi

Legal Principle Established

Section 182 of the LTA deals with the effect of registration of an instrument. It provides:182Effect of registration on interestOn registration of an instrument that is expressed to transfer or create an interest in a lot, the interest—(a) is transferred or created in accordance with the instrument; and(b) is registered; and(c) vests in the person identified in the instrument as the person entitled to the interest. When an interest in a lot is registered, it becomes indefeasible. In that respect, s 184 provides:184 Quality of registered interests(1)A registered proprietor of an interest in a lot holds the interest subject to registered interests affecting the lot but free from all other interests.(2)In particular, the registered proprietor—(a) is not affected by actual or constructive notice of an unregistered interest affecting the lot; and(b) is liable to a proceeding for possession of the lot or an interest in the lot only if the proceeding is brought by the registered proprietor of an interest affecting the lot.(3)However, subsections (1) and (2) do not apply—(a) to an interest mentioned in section 185; or(b) if there has been fraud by the registered proprietor, whether or not there has been fraud by a person from or through whom the registered proprietor has derived the registered interest. Exceptions to the indefeasibility of registered interests are set out in s 185, which relevantly provides:185 Exceptions to s 184(1)A registered proprietor of a lot does not obtain the benefit of section 184 for the following interests in relation to the lot—(a) an equity arising from the act of the registered proprietor;…(e) the interest of another registered proprietor making a valid claim under an earlier existing indefeasible title for all or part of the lot;…(1A)A registered proprietor of a lot (the relevant mortgagee) who is recorded in the freehold land register as a mortgagee of the lot or an interest in the lot does not obtain the benefit of section 184 for the relevant mortgagee’s interest as mortgagee if—(a) the relevant mortgagee—(i)in relation to the instrument of mortgage or amendment of mortgage, failed to comply with section 11A(2); or(ii)in relation to a transfer of the instrument of mortgage, failed to comply with section 11B(2); and(b) the person who was the mortgagor under the instrument of mortgage or amendment of mortgage was not the person who was, or who was about to become, the registered proprietor of the lot or the interest in a lot for which the instrument was registered.(1B)For subsection (1A)(b), a person was the mortgagor under an instrument of mortgage or amendment of mortgage if the person executed the instrument as mortgagor, including, if the instrument is an electronic conveyancing document, through a subscriber digitally signing the instrument under the Electronic Conveyancing National Law (Queensland).(1C)Also, for subsection (1A)(b), a person was the mortgagor under an instrument of mortgage or amendment of mortgage if the instrument is an electronic conveyancing document and the person signed, as mortgagor, a document that under the participation rules under the Electronic Conveyancing National Law (Queensland)—(a) was required as a supporting document for the instrument of mortgage or amendment of mortgage; and(b) was required to be kept by the original mortgagee mentioned in section 11A(2).…(5)If an issue arises in a proceeding as to whether a person registered as a mortgagee does not obtain the benefit of section 184 because of subsection (1A), proof that the person complied with section 11A(2) or 11B(2) rests on the person.…