Issa v Owens
[2023] QSC 4
•24 February 2023
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 – INDEFEASIBILITY OF TITLE – EXCEPTIONS TO INDEFEASIBILITY – FRAUD OR FORGERY – AGAINST REGISTERED PROPRIETOR – where the plaintiff and her son were directors of a company – where a property belonging to the plaintiff was mortgaged as security for a loan advanced to the company – where the original mortgagees subsequently transferred the mortgage to new mortgagees – where the plaintiff alleges her son forged her signature on the mortgage and related documents and mortgaged the property without her knowledge, permission or approval – where the plaintiff’s son claims his mother willingly and knowingly signed the mortgage – whether the mortgage was procured by fraud – whether the mortgagees obtain the benefit of indefeasibility by registration of the mortgage
REAL PROPERTY – TORRENS TITLE – INDEFEASIBILITY OF TITLE – EXCEPTIONS TO INDEFEASIBILITY – GENERALLY – where the mortgagees relied on the solicitor’s supposed attestation to the witnessing of the plaintiff’s signature and his certificates of identity to verify the identity of the mortgagor – whether the original mortgagees took reasonable steps to verify the identity of the mortgagor before registering the mortgage, as required by s 11A of the Land Title Act 1994 (Qld) – whether the new mortgagees took reasonable steps to verify the identity of the mortgagor before registering the transfer of mortgage, as required by s 11B of the Land Title Act 1994 (Qld) – whether the original mortgagees obtained the benefit of indefeasibility when they registered the mortgage – whether the new mortgagees obtained the benefit of indefeasibility when they registered the transfer of mortgage
MORTGAGES – PRIORITY BETWEEN PRIOR LEGAL AND SUBSEQUENT EQUITABLE INTERESTS – where the company defaulted on repayment of the loan – where the property was repossessed by the mortgagees – where the mortgagees sold the property at auction – where the purchasers were oblivious to the alleged fraud when they purchased the property – where the transfer to the purchasers could not be registered because the Registrar lodged a caveat on the title – where the plaintiff remains the registered proprietor of the property but the purchasers are in possession of the property – whether the purchasers’ interest in the property should prevail over that of the plaintiff
REAL PROPERTY – TORRENS TITLE – CAVEATS AGAINST DEALINGS – REMOVAL – POWERS OF COURT – where the mortgagees also lodged a caveat over the plaintiff’s Victorian property – whether the caveat over the Victorian property should be removed under s 90(3) of the Transfer of Land Act 1958 (Vic)
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – TRIAL – DISMISSAL OF PROCEEDINGS – GENERALLY – where the mortgagees filed a counterclaim against the plaintiff – where the purchasers filed a claim against the mortgagees for breach of contract – where the mortgagees did not appear at trial – whether the mortgagees’ counterclaim against the plaintiff should be dismissed under r 476(2) of the Uniform Civil Procedure Rules 1999 (Qld) – whether the purchasers are entitled to judgement against the mortgagees under r 476(1) of the Uniform Civil Procedure Rules 1999 (Qld)
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – where the mortgagees warranted to the purchaser in the contract of sale that they were capable of completing the contract – whether the purchasers are entitled to damages against the mortgagees for breach of contract
DAMAGES – DATE FOR ASSESSMENT OF DAMAGES – where the value of the property has increased since the date of breach – whether it would be unjust to assess the purchasers’ damages for breach of contract at the date of the breach – whether the mortgagees should be ordered to compensate the purchasers for their loss by reference to the current value of the property
REAL PROPERTY – TORRENS TITLE – CAVEATS AGAINST DEALINGS – WITHDRAWAL BY PARTY TO A CAVEAT – where the plaintiff lodged a caveat over the title to the property before the auction – where the plaintiff agreed to withdraw her caveat on the express proviso that ‘all her rights’ were reserved – whether the plaintiff is estopped from asserting her interest in the property because of her conduct in withdrawing the caveat
REAL PROPERTY – TORRENS TITLE – ASSURANCE FUNDS, COMPENSATION AND REMEDIES FOR DEPRIVATION – DEPRIVATION OF INTEREST IN LAND – whether the purchasers will be deprived of their equitable interest in a lot because of the fraud of another person – whether an equitable interest is an ‘interest in a lot’ under s 188 of the Land Title Act 1994 (Qld) – whether the purchasers are entitled to compensation from the State
REAL PROPERTY – TORRENS TITLE – ASSURANCE FUNDS, COMPENSATION AND REMEDIES FOR DEPRIVATION – IN RESPECT OF WHAT MATTERS – OTHER MATTERS – where the plaintiff claims compensation from the State for loss or damage based on the incorrect registration of the mortgage and/or the incorrect registration of the transfer – whether the registration of fraudulent instruments which, on their face, were correct and entitled to be registered, amounts to ‘incorrect registration’ under s 188A of the Land Title Act 1994 (Qld) – whether the plaintiff is entitled to compensation from the State
EQUITY – GENERAL PRINCIPLES – EQUITABLE DOCTRINES AND PRESUMPTIONS – SUBROGATION – GENERALLY – whether, upon payment of compensation by the State, the State is entitled under s 190 of the Land Title Act 1994 (Qld) to be subrogated to the rights of the plaintiff and/or the purchasers
Acts Interpretation Act 1954 (Qld), s 1, s 36, sch 1
Body Corporate and Community Management Act 1997 (Qld), sch 3
Civil Proceedings Act 2011 (Qld), s 58
Evidence Act 1977 (Qld), s 59(2), s 92Land Act 1994 (Qld), s 526, sch 4
Land Title Act 1994 (Qld), s 3, s 11A, s 11A(2), s 11B, s 11B(2), s 17, s 17(2)(e)(ii), s 28, s 30, s 31, s 37, s 38, s 72, s 74, s 79, s 153, s 181, s 182, s 183, s 184, s 184(1), s 184(3), s 185, s 185(1A), s 185(5), s 187, s 187(2)(e), s 188, s 188(1), s 188(1)(a), s 188A, s 188A(1), s 188A(1)(b), s 188B, s 189, s 189(1)(b), s 190, sch 2
Natural Resources and Other Legislation Amendment Act 2005 (Qld)
Property Law Act 1974 (Qld) s 84, s 346(1)(a)
Transfer of Land Act 1958 (Vic), s 90(3)Uniform Civil Procedure Rules 1999 (Qld), r 150(1)(s), r 476(1), r 476(2)
Abigail v Lapin (1934) 51 CLR 58, distinguished
Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57, cited
Ashton v Hunt [1999] 1 Qd R 571; [1998] QCA 308, cited
Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd (2017) 18 BPR 36,683; [2017] NSWCA 99, cited
Barclays Bank plc v O’Brien [1994] 1 AC 180; [1993] UKHL 6, cited
Barlin Investments Pty Ltd v Westpac Banking Corporation (2012) 16 BPR 30,671; [2012] NSWSC 699, cited
Barnes v James (1902) 27 VLR 749, cited
Barry v Heider (1914) 19 CLR 197; [1914] HCA 79, distinguished
Beames v Leader [1998] QSC 44, cited
Beames v Leader [2000] 1 Qd R 347; [1998] QCA 368, cited
Breskvar v Wall (1971) 126 CLR 376; [1971] HCA 70, followed
Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34, cited
Butler v Fairclough (1917) 23 CLR 78; [1917] HCA 9, cited
C&F Nominees Mortgage Securities Ltd v Karbotli [2020] VCC 987, cited
C&F Nominees Mortgage Securities Ltd v Karbotli [2021] VSCA 134, cited
Chan v Cresdon Pty Ltd (1989) 168 CLR 242; [1989] HCA 63, cited
Chan v Liu [2020] VSCA 28, distinguished
Chandra v Perpetual Trustees Victoria Ltd (2007) 13 BPR 25,259; [2008] NSWSC 178, applied
Clark v Raymor (Brisbane) Pty Ltd (No 2) [1982] Qd R 790, cited
Commonwealth Bank of Australia v Perrin [2011] Q ConvR ¶54-765; [2011] QSC 274, cited
Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26, cited
DHJPM Pty Ltd v Blackthorn Resources Ltd (2011) 83 NSWLR 728; [2011] NSWCA 348, cited
Diemasters Pty Ltd v Meadowcorp Pty Ltd (2001) 52 NSWLR 572; [2001] NSWSC 495, applied
El Ali v Tritton (2019) 19 BPR 39,447; [2019] NSWCA 111, cited
Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210, cited
Grgic v Australian and New Zealand Banking Group Ltd (1994) 33 NSWLR 202; [2002] NSWCCA 343, cited
Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326; [1983] HCA 30, cited
IWC Industries Pty Ltd v Sergienko (2021) 20 BPR 41,785; [2021] NSWCA 292, cited
J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546; [1971] HCA 57, cited
Johnson v Perez (1988) 166 CLR 351; [1988] HCA 64, cited
Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8, cited
Klement v Pencoal [2000] QCA 152, distinguished
Lapin v Abigail (1930) 44 CLR 166; [1930] HCA 6, cited
Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265; [1965] HCA 17, cited
London Joint Stock Bank v Simmons [1892] AC 201, cited
March v E & MH Stramare Pty Ltd (1991) 171 CLR 506; [1991] HCA 12, applied
Performance Capital Mortgage Pty Ltdv Motive Finance and Leasing Pty Ltd (2010) 15 BPR 29,267; [2010] NSWSC 429, cited
Perpetual Trustees Victoria Ltd v Tsai (2004) 12 BPR 22,281; [2004] NSWSC 745, cited
Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266, cited
Registrar of Titles v Spencer (1901) 9 CLR 641; [1090] HCA 69, cited
Registrar-General v Behn (1981) 148 CLR 562; [1981] HCA 36, cited
Rice v Rice (1853) 2 Drew 73, cited
Rimmer v Webster [1902] 2 Ch 163, cited
Roberts Gray Pty Ltd v Brunner [2021] VSC 76, cited
Robinson v Harman (1848) 154 ER 363, cited
Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870, citedTanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 135; [2003] HCA 57, cited
COUNSEL:
G Handran KC with B W Wacker for the Plaintiff
No appearance for the First to Seventh Defendants
G Coveney for the Eighth and Ninth Defendants
D Keane for the Tenth and Eleventh Defendants
The First Third Party appeared on his own behalfNo appearance for the Twelfth Defendant/Second Third Party
SOLICITORS:
Marino Law for the Plaintiff
No appearance for the First to Seventh Defendants
Shand Taylor Lawyers for the Eighth and Ninth Defendants
Crown Law for the Tenth and Eleventh Defendants
The First Third Party appeared on his own behalfNo appearance for the Twelfth Defendant/Second Third Party
Introduction
The Plaintiff, Ms Hind Issa, is 83 years old. She has Alzheimer’s dementia. English is not her first language. Her adult daughter, Ms Jennifer Halik, acts as her litigation guardian in these proceedings.
Ms Issa and her former husband, Mr Ziad Karbotli, immigrated to Australia from Lebanon in the 1960s. They worked hard to provide for themselves and their three children, James, Jennifer and Jumanah. Over the years, they ran several convenience stores, takeaways and other small businesses, first in Melbourne, and later on the Gold Coast when they moved there in around 2001. The businesses did well enough to allow Ms Issa and her husband to buy two residential properties. The first, located at 42 Barak Street, Bulleen, was the family home in Victoria. The second, located at 30 Francis Street, Mermaid Waters, became their home when they moved to Queensland.
In 2006, Ms Issa and her husband divorced. As part of the matrimonial property adjustment, Ms Issa became the sole registered proprietor of the two residential properties. For Ms Issa, these properties were not simply assets; they were her homes, and they would provide her with financial security in retirement.
After the divorce, Ms Issa continued to live at 30 Francis Street, together with her son, James Karbotli. By this time, James had taken over the family’s Gold Coast businesses and continued to operate them through a company named Mazop Pty Ltd (‘Mazop’).
In early 2018, Ms Halik discovered that the property at 30 Francis Street had been mortgaged as security for a $1,000,000 loan advanced to Mazop (the ‘Mortgage’), apparently without her mother’s knowledge or approval. The initial mortgagees were the First to Sixth Defendants in these proceedings (the ‘Original Mortgagees’). The Original Mortgagees subsequently transferred the Mortgage to the First to Seventh Defendants (the ‘Mortgagees’). The Mortgagees have been aptly described in these proceedings as ‘lenders of last resort’.
Ms Issa’s apparent signing of the relevant Mortgage and associated documentation was purportedly witnessed by Mr Stephen Picken, a former solicitor. Mr Picken has since admitted that he did not, in fact, witness Ms Issa sign any of the documents. He subsequently pleaded guilty to a charge of making false declarations and received a suspended sentence of imprisonment.
In these circumstances, Ms Issa claims she is the victim of fraud. She alleges her son, James Karbotli perpetrated the fraud by forging her signatures and mortgaging her property without her knowledge, permission or approval.
Mr Karbotli denies perpetrating any fraud. He claims his mother willingly and knowingly signed the Mortgage.
By the time Ms Issa apparently became aware of the allegedly fraudulent Mortgage, Mazop had already defaulted on repayment of the loan and the lenders were in the process of taking action to enforce their supposed rights as mortgagees. The Mortgagees took possession of 30 Francis Street and arranged to sell the property at auction. They also lodged a caveat over 42 Barak Street, preventing Ms Issa from dealing with that property (the ‘Victorian Caveat’).[1] The Mortgagees claimed to have an interest in that property as ‘Chargee[s]’ under the terms of the memorandum to the Mortgage.
[1]Exhibit 1 – Trial bundle, 771 (Caveat AQ638142L).
In an effort to protect her interest in the property at 30 Francis Street, Ms Issa engaged a lawyer and lodged a caveat of her own over the title to that property. She informed the Mortgagees and the Tenth Defendant, the Registrar of Titles (the ‘Registrar’) that she had been the victim of fraud. She also reported the matter to the police.
Notwithstanding Ms Issa’s complaints of fraud, the auction went ahead. The property was sold to the Eighth and Ninth Defendants, Mr Jess Morecroft and Ms Jacqueline Morecroft (née Haines), (the ‘Purchasers’), who subsequently entered into a contract of sale with the Mortgagees (the ‘Purchase Contract’).[2]
[2]Exhibit 6 – REIQ Contract for Houses and Residential Land, dated 28 March 2018.
Clause 7.4(1) of the Purchase Contract relevantly provided:[3]
7.4Seller’s Warranties
(1) The Seller warrants that, except as disclosed in this contract at settlement:
…
(c) it will be capable of completing this contract (unless the seller dies or becomes mentally incapable after the Contract Date) …
…
[3]Ibid cl 7.4 (Seller’s warranties).
Annexure A to the Purchase Contract included several special conditions. Notably, cl 18(a) provided:
The Buyer acknowledges that he is aware that the Seller sells the Property and exercises the power of sale conferred by the Mortgage from Hind Issa to the Seller.
The Purchasers were oblivious to the alleged fraud at the time they entered into the Purchase Contract.
Following the auction, lawyers acting for the Mortgagees requested that Ms Issa remove the caveat so that the sale could complete. The Mortgagees denied knowledge of any fraud and insisted they were entitled to act on the signed Mortgage and documents they had been provided.
Ms Issa maintained her signature had been forged and she had been the victim of fraud. She sought to take further steps to protect her interest in 30 Francis Street, but ultimately could not afford to commence proceedings to stop the sale.
Determined to bring about the completion of the sale, the Mortgagees commenced their own proceedings, seeking removal of Ms Issa’s caveat. After subsequent negotiations, Ms Issa eventually agreed to withdraw her caveat in return for payment of $40,000 by the Mortgagees, but on the express proviso that she reserved ‘all her rights’.
Once the caveat had been removed, settlement of the sale of 30 Francis Street completed. The Purchasers paid the balance of the purchase monies to the Mortgagees and, in return, they received an executed transfer (the ‘Transfer’). They took possession of the property and lodged the Transfer for registration. In the interim, however, the Registrar decided to take action in respect of Ms Issa’s complaint of fraud and lodged her own caveat on the title (the ‘Registrar’s Caveat’).[4] Accordingly, the Transfer has not yet been registered.
[4]Exhibit 1 – Trial bundle, 1503 (Caveat no. 718858716).
As a result, although the Purchasers are currently in possession of the property they paid for and where they have lived since settlement, they are not the registered proprietors of 30 Francis Street. Conversely, whilst Ms Issa is the registered proprietor of the property, she does not have possession of her home.
Ms Issa seeks to vindicate her property interests. She wants her home back and she wants the Victorian Caveat removed. She claims the Mortgage is void for fraud. She maintains that her title as the registered proprietor is not defeated by, or subject to, any interest purportedly created by the Mortgage. She further claims that her interest in the property at 30 Francis Street prevails over any interest acquired by the Purchasers.
Accordingly, Ms Issa seeks declarations and orders, pursuant to s 187 of the Land Title Act 1994 (Qld) (the ‘LTA’), necessary to undo the effects of the various transactions and supposed interests created as a consequence of the fraud.
The Purchasers, on the other hand, claim they have an equitable interest in the property at 30 Francis Street, which should prevail over Ms Issa’s interest. They contend they have acquired a right for the Transfer to be registered, and that the Registrar must register the Transfer, which would then make them the registered proprietors. They further claim that in the event Ms Issa’s interest is confirmed, she should nonetheless be estopped from asserting her legal interest in the property because of her conduct in withdrawing the caveat and allowing the sale of the property to complete.
Subject to the resolution of Ms Issa’s claim, the Purchasers also seek damages against the Original Mortgagees for breach of contract or, alternatively, an order for monies had and received.[5]
[5]The third-party claim filed by the Purchasers only names the First to Sixth Defendants, being the Original Mortgagees, as defendants to the claim. The Seventh Defendant was not a party to the Purchase Contract.
Further, each of Ms Issa and the Purchasers also make claims against the Eleventh Defendant, the State of Queensland (the ‘State’), for compensation under the LTA in respect of any deprivation of their interests or consequent losses they have incurred or may incur as a result of any declarations and orders I may make in determining whose interest is to prevail.
Ms Issa also brings a contingent claim for damages for negligence against Mr Picken. This is dependent upon the resolution of her primary claim and her claim for compensation against the State. In addition, the State seeks to have the question of Mr Picken’s alleged negligence determined as between itself and Mr Picken in respect of its opposition to Ms Issa’s claim for compensation under the LTA.
Finally, in the event that any such compensation is payable by the State to either Ms Issa or the Purchasers, the State seeks to be subrogated to the rights of the claimants, pursuant to s 190 of the LTA.[6]
[6]The State’s third-party claims in this respect are only against Mr Karbotli and Mr Picken and are solely premised upon Ms Issa obtaining an order for payment of compensation. There is no similar third-party claim by the State against any of the Mortgagees, nor is there any pleaded claim for subrogation in respect of any compensation that may be payable by the State to the Purchasers. However, in submissions, the State argued that it seeks to be subrogated to the rights of the claimants in respect of any compensation payable to either Ms Issa or the Purchasers.
Issues
To untangle the web of transactions and decide whose interest in 30 Francis Street is to prevail and what declarations or orders are appropriate to make, it is necessary to consider the following issues:
1.Was the Mortgage procured by fraud?
2.Did the Original Mortgagees obtain an indefeasible interest upon registration of the Mortgage?
3.Whose interest in the property should prevail? Is Ms Issa estopped from asserting her interest because of her conduct in withdrawing the caveat?
4.Should the Victorian Caveat be removed?
5.In the event that Ms Issa obtains the relief she claims, are the Purchasers entitled to relief against the Original Mortgagees for breach of contract or for monies had and received?
6.Are either of Ms Issa or the Purchasers entitled to compensation from the State under the LTA? If so, is the State entitled to be subrogated to the rights of the claimants, pursuant to s 190 of the LTA?
7.If Ms Issa is not entitled to compensation from the State under the LTA, is she nonetheless entitled to judgment against Mr Picken for his alleged negligence?
The Mortgage
Before considering the specific issues, it is first necessary to set out a number of relevant details concerning the Mortgage and the circumstances in which it and associated documents were executed.
The Mortgage was purportedly executed on 8 June 2017.[7] At item 1 of the mortgage instrument, the interest mortgaged was noted as the fee simple interest in Lot 25 on Registered Plan 46282, commonly referred to as 30 Francis Street, Mermaid Waters. The named mortgagor was ‘Hind Issa’. The named mortgagees were the Original Mortgagees.
[7]Exhibit 1 – Trial bundle, 728, 1038 (Mortgage). There are several copies of the Mortgage within Exhibit 1.
The debt or liability purportedly secured by the Mortgage was stated at item 5 of the mortgage instrument as ‘$1,000,000 and Amount of Credit as defined in standard terms document no. 716726942’.
At item 6, the ‘Covenant/Execution’ section of the Mortgage stated:
The Mortgagor covenants with the Mortgagee in terms of the attached schedule and standard terms document no. 716726942 and charges the estate or interest described in item 1 with the repayment/payment to the Mortgagee of all sums of money referred to in item 5.
The Mortgage was purportedly executed by ‘Hind Issa’ as mortgagor, and her signature was supposedly witnessed by Stephen Richard Picken, solicitor.
The attached schedule to the Mortgage referred to a document described as the ‘Schedule to Memorandum between the Mortgagees, Mazop Pty Ltd ACN 082 155 155 and the Mortgagor dated on or about the same date as this Mortgage’ (the ‘Schedule’)[8] and noted as a ‘special condition’ that the provisions of the Schedule were incorporated in the Mortgage.
[8]Exhibit 1 – Trial bundle, 1042–7 (Schedule).
The Schedule relevantly noted it was the ‘Schedule to Summer Lawyers – Memorandum – 2015 also known as…Queensland Registered Standard Terms 716726942’ (the ‘Memorandum’).[9]
[9]Ibid 985–1003 (Memorandum).
The Schedule further noted it was a deed and was to be interpreted as if all the provisions set out in the Memorandum were set out in the deed.
The Schedule recorded the following relevant details:
Loan Date ____ June 2017[10]
Term DateThe same day of the month which is 2 Months after the Loan Date.
Interest Rate 120% per annum
BorrowerMazop Pty Ltd ACN 082 155 155, Hind Issa and Jihad (nee James) Karbotli
GuarantorHind Issa and Jihad (nee James) Karbotli
[10]An exact date was not included.
The Schedule was purportedly executed as a deed on behalf of Mazop by James Karbotli and ‘Hind Issa’ as ‘Borrower/Chargor’, each signing in their apparent capacity as a director of Mazop. Each also apparently signed as ‘Guarantor/Chargor’. Mr Picken signed each section, purporting to have witnessed each of Mr Karbotli and Ms Hind Issa sign the deed in his presence.
In addition to the Mortgage supposedly executed by Ms Issa in respect of her interest in the property at 30 Francis Street, Mr Karbotli simultaneously mortgaged a property of his own, located at 8 Amalfi Drive, Surfers Paradise.[11] That mortgage was also dated 8 June 2017.
[11]Exhibit 1 – Trial bundle, 1040 (Amalfi Drive mortgage).
As I understand these documents and the evidence given at trial, the $1,000,000 loan provided by the Original Mortgagees to Mazop was secured by mortgages over both Mr Karbotli’s property at 8 Amalfi Drive and Ms Issa’s property at 30 Francis Street. Further, both Mr Karbotli and Ms Issa were to be personal guarantors in respect of the loan to Mazop and granted the Original Mortgagees a charge over all their property as security for ensuring Mazop discharged its obligations.
On 9 June 2017, an electronic version of the Mortgage was lodged online by Summer Lawyers, the lawyers acting for the Original Mortgagees and later the Mortgagees. It was subsequently registered and allocated dealing no. 718076402.[12] The original Mortgage, supposedly executed by ‘Hind Issa’ and witnessed by Mr Picken the previous day, was retained by Summer Lawyers and was not physically lodged with the Registrar. The original Schedule was also not lodged or registered.
[12]Ibid 980 (Mortgage no. 718076402).
On or about 15 August 2017, the Mortgagees, Mazop, Mr Karbotli and Ms Issa purportedly entered into a deed of variation (‘Deed of Variation’),[13] whereby the Schedule in respect of the Mortgage was varied (the ‘Substituted Schedule’). The Substituted Schedule indicated the amount of the loan was increased to $1,125,000 and added Catalyst Provisional Lending Pty Ltd, the Seventh Defendant, as one of the credit providers.[14] The ‘Loan Date’ was stipulated as 9 June 2017 and the ‘Term Date’ was varied to ‘4 months after the Loan Date’.[15] The Deed of Variation was again purportedly executed on behalf of Mazop by Mr Karbotli and Ms Issa as directors and each again purportedly signed as personal guarantors in respect of the loan to Mazop. The Substituted Schedule was not lodged or registered.
[13]Ibid 1049–56 (Letter from Stephen Pick, Solicitor to Sumner [sic] Lawyers, dated 15 August 2017, enclosing executed Deed of Variation).
[14]Ibid 1050–8 (Deed of Variation).
[15]Ibid 1052 (Deed of Variation – Substituted Schedule).
On 12 September 2017, the Original Mortgagees executed a transfer of the Mortgage to the Mortgagees (the ‘Mortgage Transfer’). The Mortgage Transfer was registered on 21 November 2017.[16]
[16]Ibid 982 (Transfer no. 718410563).
On 23 May 2018, an instrument was registered to correct the details of the name of the Seventh Defendant recorded on the register.[17]
[17]Dealing no. 718763578. The Seventh Defendant had erroneously been recorded as ‘Catalyst Provision Lending Pty Ltd’.
Under the terms of the Mortgage, the Memorandum and the Substituted Schedule:
(a)Mazop covenanted to repay the loan on or before the Term Date;[18]
(b)Mazop granted the Mortgagees the Mortgage over the ‘Charged Property’, 30 Francis Street, to secure the repayment of the loan;[19]
(c)Mazop granted a charge over all its Personal Property to secure repayment of the loan[20] and acknowledged, warranted and represented that its ‘property’[21] was now ‘charged property’;[22]
(d)Mr Karbotli and ‘Ms Issa’, as ‘guarantors’,[23] purportedly guaranteed all payment obligations of the Borrower, Mazop;[24] and
(e)all ‘property’ of the guarantors was purportedly charged as security for the performance by the guarantors of their obligations.[25]
[18]Exhibit 1 – Trial bundle, 994 (Memorandum, cl 7.1).
[19]Ibid 997 (Memorandum, cl 31).
[20]Ibid 999 (Memorandum, cl 35).
[21]‘Property’ being defined in the Memorandum to mean ‘any asset in rem or in personam’.
[22]Exhibit 1 – Trial bundle, 999 (Memorandum, cl 36.1).
[23]Ibid 1052 (Deed of Variation – Substituted Schedule).
[24]Ibid 996 (Memorandum, cl 24).
[25]Ibid 996 (Memorandum, cl 29.1).
Was the Mortgage procured by fraud?
Although the First to Seventh Defendants filed a Defence and Counterclaim some time ago, none of the Mortgagees appeared at trial, nor did the Twelfth Defendant/Second Third Party.[26]
[26]However, Mr Picken did appear as a witness and gave evidence at trial in response to a subpoena issued on behalf of the Plaintiff.
Ms Issa submitted that I would find that her signatures on the various mortgages and associated documents within the Trial bundle (Exhibit 1) were forged and that the mortgages were procured by fraud. The State and the Registrar made similar submissions.
The Purchasers did not make any submissions as to the authenticity of the signatures.
Mr Karbotli, who appeared for himself at trial as a third-party, filed a defence in which he variously contended:
(a)Ms Issa did execute the Mortgage;
(b)Ms Issa’s assertion that he forged her signature on the Mortgage remains an unsubstantiated allegation, unsupported by any evidence; and
(c)with respect to the State’s third-party claim against him, Ms Issa would first need to prove that he was the perpetrator of the fraud, and she has not provided any evidence to support her claim.
In support of his position, Mr Karbotli swore an affidavit in which he stated:[27]
Issa’s assertion that she did not sign the documents relating to this loan is false. I saw her sign these documents and others.
Other witnesses also saw Issa in the company of Stephen Picken during meetings held at my business premises at Ashmore - a fact which she continues to deny.
…
…it is my contention that, had the business continued and the loan been repaid, there would have been no dispute whatsoever regarding the loan. The truth is that Issa was happy to use the property as security whilst the loans were repaid. On this occasion the loan could not be repaid by the business and, only then, did she claim to have no knowledge!
[27]Exhibit 9 – Affidavit of James Karbotli, affirmed 2 September 2022.
Mr Karbotli gave evidence at trial. He confirmed his affidavit was true and correct to the best of his knowledge and belief and that he wished to rely upon it in the proceedings.
Mr Karbotli gave the following evidence during cross-examination.
In mid-2016, he had three businesses at the Gold Coast which were operated by Mazop, being a kebab shop, a tobacconist and a pizza shop. He was the sole director of Mazop at the time. By the middle of 2016, a friend of his, named Chris Smith, was involved in his businesses. Around this time, he had a plan to expand the number of shops or businesses that he was operating and to undertake other ventures, such as commercial property acquisition and residential property development. At some point in 2016, the three shops operated by Mazop in Surfers Paradise were shut down.
At this time, he occupied commercial premises at 7 Expo Drive, Ashmore. From December 2016 through to June 2017, there were between 12 to 20 employed or contracted staff working from the premises. One of those persons was his business broker, Paul Tuddenham.
By early 2017, he was looking for finance to fund the acquisition of a leasehold to franchises. A meeting was held in the board room at Expo Drive, where he, Mr Smith, Mr Tuddenham and at least one other person met with Mr Picken. At the meeting, Mr Karbotli explained that he was looking to expand the tobacconist arm of the business and undertake some other activities such as commercial property and residential property development. Following the meeting, Mr Karbotli engaged Mr Picken to undertake legal work for his businesses.
At some point in time, he offered up his mother’s houses as security for the loans he required to undertake his business expansion. He submitted an application for finance to ‘C&F Mortgage Fund’ on behalf of Mazop, seeking a loan for the purchase of additional leasehold franchise premises. The property at 42 Barak Street was offered as security.[28] He maintained that the Barak Street property was offered as security after a discussion with his mother and that his mother had signed the finance application. He denied the suggestion that he, or someone else, had forged his mother’s signature. He confirmed that ‘C&F Nominees’ subsequently approved a loan in favour of Mazop, following the application for finance.
[28]Exhibit 10 – Application for finance.
Mr Karbotli was shown, and identified, a copy of a mortgage instrument which recorded the details of the mortgagor as ‘Hend Karbotli’ and the mortgagee as ‘C&F Nominees Mortgage Securities Limited’.[29] The mortgage document recorded the principal sum as $800,000, which was to be repaid by 15 March 2018. The document was dated 3 April 2017.[30]
[29]C&F Nominees pursued a claim in the County Court of Victoria against Ms Issa. The claim was unsuccessful at trial: C&F Nominees Mortgage Securities Ltd v Karbotli [2020] VCC 987 (‘C&F Nominees v Karbotli’). A subsequent appeal was also unsuccessful: C&F Nominees Mortgage Securities Ltd v Karbotli [2021] VSCA 134.
[30]Exhibit 11 – Mortgage of land.
He agreed he had signed the mortgage as the sole director/sole secretary of Mazop as well as the ‘Guarantor’. The mortgage was also purportedly signed by ‘Hend Karbotli’. He denied the suggestion that he had forged the ‘Hend Karbotli’ signatures. He confirmed that the mortgage was in respect of the 42 Barak Street property, which was provided as security for the loan advanced by C&F Nominees.
He gave evidence that in about the first six months of 2017, his mother had happily signed up to mortgages on about five occasions to support lending to Mazop. Most of the loans were short term loans with high interest rates from ‘lenders of last resort’. He agreed that his mother did not have any guaranteed source of income at the time and that he provided the only source of funds to repay the loans. He acknowledged that Ms Issa risked losing her mortgaged property if he defaulted on repayment of the loans. He agreed that by June 2017, securities had been registered over his mother’s homes in support of lending in excess of $1.8 million.
Mr Karbotli identified a further mortgage in respect of the property at 42 Barak Street, purportedly signed by his mother, using the name ‘Hend Karbotli’, as mortgagor, in favour of ‘FX Moneylink International Pty Ltd’ to secure a loan of $350,000.[31] Mr Karbotli denied the suggestion that he had signed the mortgage as ‘Hend Karbotli’.[32]
[31]Exhibit 1 – Trial bundle, 717–18 (42 Barak Street mortgage).
[32]The stated name of the mortgagor is ‘Hend Karbotli’ but the mortgage is signed in the name ‘Hind Karbotli’.
Mr Karbotli was further shown documents, dated 27 February 2017, relating to his mother, under the name ‘Hind Issa’, being appointed and consenting to act as a director of Mazop.[33] Mr Karbotli denied that he had signed the documents as ‘Hind Issa’. He maintained his mother became a director so that they could refinance the homes to get the next loan for Mazop.
[33]Exhibit 1 – Trial bundle, 719–21 (Memorandum of resolution of the directors and consent to act as director).
Mr Karbotli further identified mortgage no. 717949065 executed in favour of ‘Nivex Pty Ltd’, purportedly signed by ‘Hind Issa’ on 3 April 2017 as mortgagor to secure a loan of $893,000.[34] The loan was to be repaid on or before 3 July 2017 at a specified rate of 96% per annum and a lower rate of 58.8% per annum, with interest payable monthly in arrears. The witness to the ‘Hind Issa’ signatures was Stephen Picken, solicitor. Mr Karbotli could not recall, but he thought that he was there at the time he and his mother signed the documents in the presence of Mr Picken. He denied that he was the person who placed his mother’s signature on the documents. He agreed that he used the document after it was signed, but he denied that he did so without his mother’s knowledge.
[34]Ibid 723–5 (Mortgage no. 717949065).
Mr Karbotli was then shown a copy of the Mortgage for 30 Francis Street, purportedly signed by his mother as ‘Hind Issa’,[35] and a series of other associated documents signed by, or relating to, his mother, including a copy of the Deed of Variation.[36] He confirmed that each of those documents, including the Mortgage, were supposedly witnessed by Stephen Picken. He denied that he had forged his mother’s signatures on the documents. He accepted that he did not know whether Mr Picken actually witnessed his mother sign any documents.
[35]Ibid 728–30 (Mortgage).
[36]Ibid 744–9 (Deed of Variation).
Mr Karbotli identified a photograph of his mother holding her driver licence and passport for identification purposes.[37] He thought he had taken the photograph, but he denied the proposition that he had told his mother that he needed to take the photograph of her for the purposes of taking a holiday. He maintained that he told her it was for the loans. In response to the further proposition that his mother never had any face-to-face interaction with Mr Picken for the purposes of executing any documents or having him explain them to her, Mr Karbotli stated that his mother saw Mr Picken in the office.
[37]Ibid 758 (Photograph of Hind Issa holding identity documents). A similar photograph of Mr Karbotli appears at 759.
Mr Karbotli was shown a copy of a letter addressed to ‘Mrs H Nessa’ of 30 Francis Street, Mermaid Beach, dated 7 June 2017, written by Stephen Picken.[38] He could not remember if it was a letter Mr Picken had prepared for him that day. The letter outlined that Mr Picken had been instructed by Mr Karbotli, on behalf of Mazop, in relation to a loan to it from ‘Gustin Group Pty Ltd’ (the Fourth Defendant). The letter further stated:
I consider myself acting for James and Mazop. However James tells me that we met many years ago, although I cannot recall. If he is correct it may have been when Mazop acquired the business in Surfers Paradise. In any event, I think you should obtain separate legal advice as I am told the loan is for working capital for Mazop, and you will have no control over how it is spent or how it will be repaid. James tells me the loan must be finalised tomorrow. You are being asked to give a mortgage over Francis Street and your personal guarantee, thereby exposing all of your assets.
All I can do is to tell you the advice I have given to James and to Mazop.
I have told James to seek main stream [sic] finance from one of the Banks as the terms of the loan are very onerous. You will see from the schedules to the mortgage that the Interest rate is 10 % per month or 120% per annum. The mortgage will secure $1,125,000. Interest of $80,000 plus the other items listed on page 5 of the schedule will deducted [sic] at settlement. It will also secure any default costs, including further interest until repaid. The Lender does not have to pursue James or Mazop first before enforcing against you.
I understand from James that a meeting is scheduled for tomorrow for you and James to sign the documents. I will be asked to witness the documents. I need to see the ID documents required by the Lender, and which James has agreed to supply.
I look forward to seeing you tomorrow. Please call me if you have any concerns.
[38]Exhibit 1 – Trial bundle, 1212 (Letter from Stephen Picken to Hind Nessa, dated 7 June 2017).
Mr Karbotli did not recall talking to his mother about the letter. He stated that she just trusted him and that he did tell her about the loan.
He denied forging his mother’s signature on any of the documents he had been shown. He agreed that he used the documents, but he said that he only did so with his mother’s understanding and acceptance.
Notwithstanding the evidence given by Mr Karbotli, I consider there is clear and compelling evidence that Ms Issa’s signatures on the various mortgage documents and associated documents were forged and the mortgages in question were procured by fraud. I am satisfied that Ms Issa’s signatures on the Mortgage and its associated documents were forged. Further, I am satisfied to the requisite standard that Mr Karbotli, whether alone or with others associated with him, forged those signatures and perpetrated the fraud in respect of the Mortgage. [39]
[39]Having regard to the gravity, nature and consequences of those allegations in accordance with Briginshaw v Briginshaw (1938) 60 CLR 336.
The contrary evidence commences with the evidence of Ms Issa. I admitted various previous statements made by Ms Issa as evidence in the trial, pursuant to s 92 of the Evidence Act 1977 (Qld), on the basis that Ms Issa was unable to attend to give evidence as she was unfit by reason of a medical condition.[40] Throughout her various statements, Ms Issa repeatedly and consistently maintained that she had been the victim of fraud, her signature had been forged and her homes had been mortgaged without her knowledge, agreement or permission. In particular, she denied signing the Mortgage.
[40]Transcript of Proceedings, Issa v Owens (Supreme Court of Queensland, Crowley J, 8 September 2022) 4-7:32–12:20. The various statements that were admitted were Exhibit 1 – Trial bundle, 3507–19 (Queensland Police Service fraud report form, together with an attached Word document, submitted 18 April 2018), 1198 –1200 (Copy of a Queensland Police Service witness statement signed by Ms Issa, dated 23 April 2018), 1587–1591(Affidavit of Hind Issa in respect of the proceedings in the Victorian County Court in C&F Nominees v Karbotli, sworn 28 August 2018), 1732–41 (Witness statement of Hind Issa provided in respect of the proceedings in the Victorian County Court, dated 4 May 2020), 1742–67 (Transcript of the evidence given by Hind Issa in the Victorian County Court proceedings on 4 May 2020), 1380 (Email sent on behalf of Ms Issa to the Registrar of Titles (Qld), dated 10 May 2018), 1499 (Email sent on behalf of Hind Issa to the Registrar of Titles (Qld), dated 3 July 2018). As a supplement to these statements, a bundle of copies of some of the statements, annotated to highlight sections which were not admitted as evidence, in accordance with my ruling, was provided by the Plaintiff and marked for identification ‘E’ (and later admitted into evidence as Exhibit 14).
Relevantly, in her written statement attached to the Queensland Police Service Fraud Report Form, dated 18 April 2018, Ms Issa stated:[41]
[41]Exhibit 1 – Trial bundle, 1193–5 (Statement of Hind Issa to the Queensland Police Service).
My name is Ms Hind Issa. I’m a 79 year old woman. I am currently penniless, homeless and involved in an emotional and financial crisis. I’m the victim of fraud.
I had 2 homes, one located in Queensland and one in Victoria – I’ve worked hard my whole life for these homes since I migrated to Australia in the late 1960s. 7 days a week small businesses – milk bars and convenience stores. Both my homes were… mortgaged without my knowledge, agreement or permission and now both been repossessed by the finance companies involved… I have not signed, agreed or received one piece of paper, ever been in contact with or received one penny from the mortgagees.
My home in Queensland has been sold at auction on the 25/03/18. My home in Victoria is currently in possession of the mortgagee.
…
I used to live in my Queensland house with my son James Karbotli who would come and go as he pleased. My ex husband, James and myself were involved in a company called Mazop in which we had 3 shops in Surfers Paradise since 2001. James has been paying my bills since my divorce from his father in 2006. James has been running the shops without my involvement since then…
At the beginning of 2017, James introduced me to a business partner of his that he said has a lucrative business proposition – it was a mining venture. His name is Christopher Bruce Smith and his wife is Julie Archer. My daughter Jennifer, son in law Bill and I were present at a meeting which he presented the ‘scheme’. We all agreed it was highly dubious and didn’t think twice about it. Over the course of a few months Chris and Julie were coming and going to my Queensland home in the presence of James. They were attempting to persuade me on several occasions to get involved with their businesses. I told them without a moment’s hesitation ‘NO, THANK YOU!’ James took me on drives to places I don’t know about and showing me what he’s doing. I kept telling him good luck, but I have no involvement in this. I’m too old and physically incapable of handling any stress to be involved. I’m tired, in chronic pain and my health is failing. They also discussed a holiday, where James would take me to London and other places. They requested a photo of me holding my passport and drivers licence for the travel agent. I didn’t even think at that time to question James about this. It wasn’t until about 3 weeks ago, I realised that this was part of the deception.
They offered to put my homes in a trust as they kept telling me the company Mazop that James had his business interests in, was in trouble and they wanted to protect my assets and my name was in Mazop. They bought papers saying that they were going to buy my homes, but after I showed these papers to my daughter Jennifer, we both felt highly dubious as the paperwork was unofficial. Like someone had typed it on a word document. I told James and Chris many, many times that I do not want to be involved in any of the new businesses with Chris. I believed that was the end of that.
I did have a mortgage of about $200,000 on Queensland house at the time. James kept saying he will pay it off. On the 11/2/18 Jennifer contacted the NAB on the phone and they told us both that the loan was paid off, but was refinanced for $1,000,000 through a power of attorney. We attended the Broadbeach branch on the 13/2/18. Confronting James about this, he responded this was all paperwork and everything was going to be paid off and be ok. His words: ‘under control and relax’.
Approximately since February 2018 Chris and James told me to leave my home in Queensland and to live with Jennifer as there were bad people coming to the house and he feared for my safety. James told me he owed money to bad people, but he promised he was working on paying them off. He told me it was for a short time. He promised a few weeks at the most. I would go back and forth sometimes sleeping at my house as I needed some alone time and I would go and come to get some clothes and personal effects when I needed them. It was a very stressful time and I was believing every word James told me.
… Jennifer, Bill and I confronted James. He told us it was connected to Mazop. Then Jennifer showed James the title searches and he took the papers and left saying he needed to ask Chris.
… They both assured me on many occasions that the loan would be repaid. I believed them as I had no choice. Chris assured me that settlement was going to be on 17/2/18 and I would get my house back. Then Chris kept saying they were awaiting a payout figure from Paul Reece – the lawyer who is on the NAB discharge papers and the same lawyer representing the mortgagees who repossessed my house and sold my Queensland home at auction even though Jennifer had informed Paul Reece of the fraud via email.
…
I finally gave up believing James and Chris around the 19/03/18. Chris and James promised me that the loans would be repaid. All their promises were empty…
… Mark Steele firstly advised getting an injunction – but I couldn’t afford $10-15,000 to do this. Then he put a caveat on both properties. He advised that may prevent the sale of Queensland house, but it was still sold at auction under the mortgagee represented by Paul Reece… [sic]
…
Stephen Picken is a lawyer who’s [sic] name appears a lot on the mortgage documents. I have not seen this man since we first came to the Gold Coast many many years a go [sic]. He was James’ lawyer.
…
As Ms Issa’s statements were admitted by me as evidence in circumstances where she was unfit to attend to give evidence at trial, she was not available to be cross-examined. Mr Karbotli sought to resist the admission of her statements on various bases, including that he had a right to confront his accuser and that he wished to cross-examine Ms Issa. I noted at the time that I ruled on the admissibility of the statements that I would take these matters into account when assessing the weight to be given to Ms Issa’s evidence.
In doing so, I also have regard to the further evidence that was adduced at trial, which in my view undoubtedly implicates Mr Karbotli in the frauds perpetrated upon his mother and substantially corroborates the evidence of Ms Issa in all material respects.
First, there is the evidence of Jennifer Halik. In her affidavit evidence, Ms Halik stated:[42]
[42]Exhibit 1 – Trial bundle, 188–200 (Affidavit of Jennifer Halik, sworn 5 May 2022).
…
18.In 2006, my parents got divorced.
…
23.After the divorce, my Mum said to me that she did not want to carry my father’s name anymore…
24. In 2008, at Mum’s request, I helped her formally change her surname to Issa, her maiden name…
25.As far as I am aware, Mum has not used the name ‘Karbotli’ since.
…
26. Early in March 2016, James told me that the wanted to introduce his new business partner to Mum, Bill and me.
27.Shortly after that discussion, my husband, Bill, and I went to Mum’s house at Francis Street. Bill and I sat around the dining table with my Mum, James and a man who he introduced to us as Chris (and who I now know to be Christopher Bruce Smith) …
28. Chris talked to all of us around the table about mining opportunities and at one stage said words to the effect of, are you interested in being involved?...
29.I saw Chris and/or his wife Julie Archer… on a handful of times over the next couple of years with James, and on at least 3 occasions at my Mum’s house.
30.Mum said to me a few times words to the effect that James and Chris had asked her to go into business with them, but she had said that she was not interested because she was too old and sick and had already worked hard all her life.
…
38.In or about late January 2018, James and Chris came to my house and, in the presence of both me and Bill, James said words to the effect of, can Mum move in with you for a few days, a week at the most? James went on to say words to the effect that he had borrowed money from some underworld figure in Melbourne and that for Mum’s safety she needed to move in with Bill and I until he repaid the money.
…
40.After hearing what James had said to us…I performed an electronic title search of the Francis Street Property. Based on my discussions with Mum, I understood that National Australia Bank…had a mortgage on the property. When I searched the title, I noticed there were two other mortgages on the property…
41.I also performed an electronic title search of the Bulleen Property and saw that there was a mortgage registered against it.
42.… When I showed Mum the title search for both properties, she said to me words to the effect that she did not know anything about those mortgages…
43.On 4 February 2018…James, Mum and I sat at a table and I showed him the documents from my searches…James said words to the effect of ‘Chris helped me and we took money from the finance companies so we can get the businesses off the ground’. He said words to the effect that he had ‘made a mistake’ but that he is ‘fixing it’. Mum said words to the effect of ‘why did you bring me into this mess?’ James said in response words to the effect that ‘Chris will tell you all about it’. James then said words to the effect of, ‘are you going to send me to jail?’ At this point I looked at Mum. She looked shocked, scared and went pale, her eyes went wide…James said to Mum and I words to the effect that Chris had a plan to fix everything and help repay the loans and to trust him.
44.Soon after, Chris came to my house with James…Chris said words to the effect that James had done wrong. He said words to the effect that ‘You didn’t know anything about this because James didn’t want you to know that he was a failure. He couldn’t tell his family that he was in such trouble.’… Mum said words to the effect that ‘I had no idea about these mortgages’. Chris said words to the effect that he and Julie were refinancing their own properties and that they had a contract with Summer Lawyers that was going to settle on 17 February 2018 for $2.6 million and that refinance would clear the mortgages. He said words to the effect that once that was done, Mum would get her properties back and she could then put them into a trust to protect them.
In cross-examination, Mr Karbotli put a question to Ms Halik about an occasion she had deposed to in her affidavit where, on 13 February 2018, Chris Smith and James had called her and said words to the effect that ‘everything was on track to repay the debts and get Mum’s house back’. Mr Karbotli suggested that it was in fact he who had called and that he had put Chris Smith on the phone to tell Ms Halik that they were working on refinancing. In response, Ms Halik stated, ‘To my recollection, Chris said that he refinanced his properties to repay the loans that they fraudulently took out in my mum’s name.’
Mr Karbotli did not further challenge this evidence, nor did he challenge any other evidence given by Ms Halik relating to Ms Issa’s properties being mortgaged without her knowledge and both his and Chris Smith’s apparent involvement in those matters.
Second, there is the evidence of Mr John Heath. Mr Heath is a forensic document examiner. He provided a report, dated 25 November 2019,[43] and a supplementary report, dated 4 March 2020,[44] in which he expressed his opinions regarding the authorship of a number of questioned documents. Those documents included the Mortgage in respect of the property at 30 Francis Street.[45] In his original report, Mr Heath concluded:
There is an abundance of evidence present to conclude that the questioned signatures are false [simulated] signatures, and not written by the specimen provided, notwithstanding the copied nature of questioned signatures available for examination purposes.
[43]Ibid 308–438 (Expert handwriting report request, dated 25 November 2019).
[44]Ibid 439–47 (Expert handwriting report request, dated 4 March 2020).
[45]Ibid 318–19 (Examined copy of the mortgage, dated 8 June 2017, by which 30 Francis Street was mortgaged to the First to Sixth Defendants as security for a loan of $1,000,000), 320–2 (Examined copy of the mortgage, dated 3 April 2017, by which 30 Francis Street was mortgaged as security for a loan of $893,000 from Nivex).
Mr Heath gave evidence at trial, confirming that he still held the opinions expressed in his reports. Mr Heath gave the following evidence when cross-examined by Mr Karbotli:
… Can you state conclusively that the signature on the documents you examined is not that of Hind Issa? --- Yes, I can.
…
Can you guarantee that this is not the signature of Hind Issa? --- In my – in my opinion it’s not Hind Issa… I can guarantee it in my expertise. I wasn’t there when they were signed… but in my opinion they are false signatures.
Third, there is the evidence of Mr Stephen Picken. Mr Picken gave evidence confirming that he was a retired solicitor but had acted for James Karbotli for about 15 years, up until late 2017. He gave evidence of having a meeting in early 2017 with Mr Karbotli, Chris Smith and Mr Smith’s wife, Julie Archer. He stated they discussed a potential change of lawyers from the firm that had, at the time, been acting for Mazop. He recalled that Mr Smith outlined a proposed expansion of the tobacconist shops as well as plans to acquire commercial and domestic land for some sort of development purposes. He further stated that they had discussed refinancing Hind Issa’s properties and a property owned by Mr Karbotli.
Mr Picken confirmed that he was later instructed to act in respect of transactions involving borrowings secured by Ms Issa’s properties, both in Queensland and in Victoria. He recalled that the lenders were private lenders and the terms of the loans were very usurious in terms of interest rates, costs and expenses and set up fees.
With respect to the property at 42 Barak Street, Mr Picken confirmed he was involved in a previous loan and mortgage in favour of C&F Nominees. He confirmed that his role principally involved witnessing Ms Issa’s signature on several security documents and personal guarantees. He confirmed that he did not have any face-to-face dealings with Ms Issa, whether in respect of that transaction or any other transaction, and that he never spoke to her.
Mr Picken confirmed that he had signed the Mortgage in respect of the $1,000,000 loan secured by 30 Francis Street, purporting to witness Ms Hind’s signature as mortgagor on 8 June 2017. He confirmed that Ms Issa was not in his presence, and he did not witness her sign any documents. He further explained:
I was advised by Mr Karbotli that the refinancing transactions…had to be concluded on or before the 8th of June and it was extremely urgent that they be completed by then… and I was instructed to carry out all the usual searches and inquiries or satisfy the requirements of the lenders… I said, ‘Well, look, yourself and your mother would have to come in before the 8th, which is the deadline which Mr Smith has imposed and she would have to bring some identification documents; passport, drivers licence and the like....
Mr Picken stated that this conversation occurred on 7 June 2017, with a view to the matter being completed the following day on 8 June 2017.
In addition to acting for Mr Karbotli and Mazop in respect of the Mortgage, Mr Picken also performed the role of ‘Identifier’ on behalf of the Original Mortgagees. In that capacity, Mr Picken completed a Combined Appointment as Identifier Certificate and Identification Certificate, [46] in which he falsely claimed to have met with Ms Issa face-to-face and to have carried out an identification procedure which involved him comparing Ms Issa’s appearance to that depicted in identification documents she supposedly produced to him.
[46]Ibid 731–2 (Combined appointment as identifier certificate and identification certificate, dated 8 July 2017).
Mr Picken gave evidence that on 7 June 2017, he gave Mr Karbotli a copy of the security documentation and a letter to take with him. In the letter, which was addressed to Mr Karbotli’s mother, Mr Picken stated that he considered himself to be acting for the company, Mazop, and its director, James Karbotli; that she should get her own separate legal advice; and that he had advised the company not to sign the documents as the terms were very onerous.
Mr Picken gave further evidence that on 8 June 2017, he met with Mr Karbotli who told him that his mother could not attend the meeting as she was at the hospital. He stated that Mr Karbotli then produced a large number of security documents which had already been signed by his mother, but not witnessed. He stated that he then witnessed Mr Karbotli sign all the documents in his presence. He further stated that Mr Karbotli produced Ms Issa’s passport, driver licence and Medicare card or bank card and he compared the signatures on those documents with the signatures of Ms Issa on the security documents. He stated that, being satisfied that the signatures were one and the same, he signed the documents purporting to witness Ms Issa’s signature even though she was not in his presence. He subsequently provided the security documents and certified copies of Ms Issa’s identification documents to Summer Lawyers, the lawyers acting for the Original Mortgagees.
Mr Picken was shown a copy of a photograph of Ms Issa holding her driver licence and passport, signed by Mr Picken, dated 9 June 2017, which he had certified was a copy of the original sighted by him.[47] Mr Picken explained in his evidence the circumstances in which he had certified that document, stating:
From memory, the lender imposed, at a very late stage in the proceedings, an additional condition. Namely, that the identity documents which had been checked by me and signed and forwarded to their office, they then responded saying ‘well, no, that’s not good enough. We want the individuals, namely Mr Karbotli and … his mother to stand in front of the camera and someone to take a photograph holding… their respective identity documents’…
[47]Ibid 758 (Photograph of Hind Issa holding identity documents).
It is to be noted that Ms Issa’s driver licence expired on 15 January 2017. Thus, the copy of the driver licence certified by Mr Picken, forwarded to the Original Mortgagees and depicted in the photograph which he also certified, was no longer a current, valid licence.
Mr Picken was taken to further documents, including a letter dated 29 August 2018, written by him and addressed to his professional indemnity insurer, Lexon Insurance.[48] Mr Picken confirmed it was a letter he had written in response to a letter he had received from his insurer. The letter written by Mr Picken stated, in part:
I must admit that following a ‘brain snap’ I did sign the certificates, following assurances given to me by James Karbotli, one of the Directors, who has now implicated me in an alleged fraud committed by him. Clearly I have been duped by him into giving the certificates, but that does not assist me.
[48]Ibid 1713 (Letter from Stephen Picken to Lexon, dated 29 August 2018).
Mr Picken also confirmed that on 10 October 2019, he provided a statement to the police regarding the matter, in which he confirmed that he had never witnessed Ms Issa’s signatures on any of the loan and mortgage documents associated with the Nivex and Gustin Group loans and mortgages.[49] In that statement, Mr Picken had also confirmed that it was Mr Karbotli who presented him with the loan and mortgage documents, which had already been signed by Ms Issa, and that he had been assured by Mr Karbotli that she had signed the documents in his presence.
[49]Ibid 1805–16 (Witness Statement of Stephen Picken, dated 10 October 2019).
Mr Picken further confirmed that on 24 March 2020, he pleaded guilty to an offence of making false declarations and was sentenced to 6 months’ imprisonment, to be suspended for an operational period of 18 months.
Mr Picken agreed that he had completed and signed the independent solicitor certificate documents, which purported to confirm that he had provided independent advice to Ms Issa as the borrower in respect of the loan advanced by C&F Mortgage Securities Ltd and the mortgage in respect of the 42 Barak Street property, in circumstances where he did not give Ms Issa any such advice and did not meet with her in respect of those matters.[50]
[50]Exhibit 3 – Solicitor’s certificate and client’s certificate, dated 4 March 2017; Exhibit 4 – Independent solicitor’s certificate, dated 4 May 2017.
In cross-examination by Mr Karbotli, Mr Picken was asked if he recalled a meeting at Mr Karbotli’s Ashmore offices with himself, two other staff members and Ms Issa, in mid-2017. Mr Picken stated he did not recall seeing Mr Karbotli’s mother there.
Mr Karbotli did not challenge any of the other evidence given by Mr Picken.
Fourth, there is the evidence of the signatures on the documents themselves. I have compared the purported signatures of Ms Issa on each of the alleged forged mortgages and associated documents against Ms Issa’s confirmed signatures on other documents in evidence adduced at trial.[51] I have also done the same exercise in respect of the documents purportedly signed by Ms Issa appointing her as a director of Mazop. Quite aside from the fact that some of the alleged forged signatures are in the name ‘Hind Karbotli’, being a name that Ms Issa no longer used at the time, in my opinion it is clear that the purported signatures are pictorially different from the known signatures and writing of Ms Issa.
[51]Pursuant to s 59(2) of the Evidence Act 1977 (Qld), the Court may compare a disputed writing with any writing that is genuine and act upon its own conclusions in relation thereto.
Fifth, there are the odd and, to my mind, implausible, surrounding facts and circumstances in which Ms Issa apparently agreed to mortgage her properties and signed the mortgage documents. It is inherently improbable and unlikely that Ms Issa, a retired, elderly woman with no source of income other than her pension, would have knowingly and willingly mortgaged her homes as security for loans of significant sums of money, apparently advanced by lenders of last resort to her son’s company, in circumstances where the interest rates and repayments were extremely onerous and oppressive.
Finally, it is pertinent to note that although Mr Karbotli maintained that he was not involved in any forgery of his mother’s signatures or in the fraudulent procuring of the mortgages over her properties, he did not give any evidence directly contradicting the evidence, given by Ms Halik and in his mother’s statements, that he admitted to them that he was involved. The uncontradicted evidence of these statements against interest further bolsters my conclusions.
Did the Original Mortgagees obtain an indefeasible interest?
Having concluded that the Mortgage was procured by fraud, the next issue to consider is whether the Mortgagees nevertheless obtained an indefeasible interest when they registered the Mortgage.
The LTA regulates the registration of freehold land and interests in freehold land in Queensland. Amongst other things, it provides for a system for registering title to, and transferring interests in, freehold land.[52] It creates a system of title by registration, rather than a system of registration of title.[53]
[52]LTA s 3.
[53]Breskvar v Wall (1971) 126 CLR 376, 385–6 (Barwick CJ) (‘Breskvar’).
The foundation of the system under the LTA is the freehold land register kept by the Registrar. In that regard, s 28 of the LTA provides:
28Particulars the registrar must record
(1)The registrar must record in the freehold land register the particulars necessary to identify—
(a) every lot brought under this Act; and
(b) every interest registered in the register; and
(c) the name of the person who holds, and the name of each person who has held, a registered interest; and
(d) if the person who holds a registered interest is a minor—the minor’s date of birth; and
(e) all instruments registered in the register and when they were lodged and registered.
(2)The registrar must also record in the freehold land register anything else required to be recorded by this or another Act.
A ‘lot’ is relevantly defined within sch 2 of the LTA as:
a separate, distinct parcel of land created on—
(a)the registration of a plan or subdivision; or
(b)the recording of particulars of an instrument.
The LTA does not define an ‘interest in a lot’ or an ‘interest’. However, sch 1 of the Acts Interpretation Act 1954 (Qld) (‘AIA’) provides the following applicable definitions:[54]
interest, in relation to land or other property, means—
(a)a legal or equitable estate in the land or other property; or
(b)a right, power or privilege over, or in relation to, the land or other property.
estate includes easement, charge, right, title, claim, demand, lien and encumbrance, whether at law or in equity.
land includes messuages, tenements and hereditaments, corporeal or incorporeal, of any tenure or description, and whatever may be the interest in the land.
[54]By virtue of s 36 of the AIA, in any Act, a term defined in sch 1 has the meaning stated in the schedule.
Pursuant to s 37 of the LTA, an indefeasible title for a lot is created upon the recording of the particulars of the lot in the freehold land register. Section 38 of the LTA further provides that the indefeasible title for a lot is the current particulars in the freehold land register about the lot.
With respect to the obligation of the Registrar to register instruments, s 30 of the LTA provides:
30Registrar must register instruments
(1)On lodgement of an instrument, the registrar must register the instrument if—
(a) the person who lodged it complies with the requirements of this Act for its registration; and
(b) the instrument is not inconsistent with another Act or law; and
(c) if the instrument is a plan of survey—it is not inconsistent with another plan of survey.
(2)However, subsection (1) does not prevent the person from withdrawing the instrument.
(3)If the instrument is a plan of survey and it is inconsistent with another plan of survey, the registrar may—
(a) give a written notice to a registered proprietor of a lot that may be affected by registration of the plan of survey; or
(b) require the person who lodged the instrument to give a written notice, in the way the registrar requires, to a person mentioned in paragraph (a).
Pursuant to s 31 of the LTA, upon registration of an ‘instrument’[55] in the freehold land register, the instrument forms part of the register.
[55]‘Instrument’ is defined in sch 2 to include ‘a request, application or other document that deals with a lot and may be registered under this Act’.
Section 182 of the LTA deals with the effect of registration of an instrument. It provides:
182Effect of registration on interest
On 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.
…
Schedule 2 of the LTA provides the following relevant definitions in respect of a registered proprietor of a lot:
registered proprietor of a lot means a person recorded in the freehold land register as a proprietor of the lot.
proprietor of a lot means a person entitled to an interest in a lot, whether or not the person is in possession.
Part 6 of the LTA provides for dealings directly affecting lots. Division 3 of pt 6 deals with mortgages. Within that division, s 72 provides:
72 Mortgaging lot etc. by registration
(1)A lot or an interest in a lot may be mortgaged by registering an instrument of mortgage for the lot or interest.
(2)However, a mortgage is not an interest in a lot that can be mortgaged.
The effect of registration of a mortgage is dealt with by s 74 which provides:
74 Effect of registration of a mortgage
A registered mortgage of a lot or an interest in a lot operates only as a charge on the lot or interest for the debt or liability secured by the mortgage.
As noted previously, the relevant property the subject of the Mortgage in this case is commonly described as 30 Francis Street, but more particularly known as Lot 25 on RP46282, an estate in fee simple.[56] Ms Issa is currently recorded on the register as the ‘registered owner’ of the lot.[57]
[56]Exhibit 1 – Trial bundle, 1771–2 (Current title search, 26 April 2022).
[57]Schedule 2 of the LTA provides that a ‘registered owner’ of a lot means the person recorded in the freehold land register as the person entitled to the fee simple interest in the lot.
Upon registration, the Mortgage operated as an indefeasible charge on the lot for the debt or liability which it secured, subject to s 184(3) of the LTA. Registration of the Mortgage did not create or transfer any legal estate in the lot, including the estate held by Ms Issa as the registered owner.
Similarly, registration of the Mortgage Transfer did not create or transfer any legal estate in the lot, including the estate held by Ms Issa. Rather, the Mortgage remained an indefeasible charge, subject to s 184(3).
As the terms of s 185(1A) stipulate, a mortgagee who registers a mortgage instrument will not obtain the benefit of indefeasibility in respect of their interest where the mortgagee has failed to comply with the requirements of ss 11A(2) or 11B(2) of the LTA.
Section 11A of the LTA provides:
11AOriginal mortgagee to confirm identity of mortgagor
(1)This section applies to—
(a) the mortgaging of a lot or an interest in a lot; and
(b) an amendment of a mortgage mentioned in paragraph (a).
(2)Before the instrument of mortgage or amendment of mortgage is lodged for registration, the mortgagee under the instrument (the original mortgagee) must take reasonable steps to ensure the person who is the mortgagor under the instrument is identical with the person who is, or who is about to become, the registered proprietor of the lot or the interest in a lot.
(2A)For subsection (2), a person is the mortgagor under an instrument of mortgage or amendment of mortgage if the person executes 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).
(2B)Also, for subsection (2), a person is the mortgagor under an instrument of mortgage or amendment of mortgage if the instrument is an electronic conveyancing document and the person signs, as mortgagor, a document that under the participation rules under the Electronic Conveyancing National Law (Queensland)—
(a) is required as a supporting document for the instrument of mortgage or amendment of mortgage; and
(b) is required to be kept by the original mortgagee.
(3)Without limiting subsection (2), the original mortgagee takes reasonable steps under the subsection if the original mortgagee complies with practices included in the manual of land title practice under section 9A for the verification of identification of mortgagors.
(4)The original mortgagee must, for 7 years after the instrument is registered, and whether or not there is registered a transfer of the interest constituted by the mortgage—
(a) keep, in the approved form, a written record of the steps taken under subsection (2); or
(b) keep originals or copies of the documents and other evidence provided to or otherwise obtained by the original mortgagee in complying with subsection (2).
Maximum penalty—20 penalty units.
(5)The registrar may, whether before or after the registration of the instrument, and whether or not there has been registered a transfer of the interest constituted by the mortgage, ask the original mortgagee—
(a) to advise the registrar about the steps taken by the original mortgagee under subsection (2); and
(b) to produce for the registrar’s inspection the written record mentioned in subsection (4)(a) or the originals or copies mentioned in subsection (4)(b).
(6)The original mortgagee must comply with a request under subsection (5) unless the original mortgagee has a reasonable excuse.
Maximum penalty—20 penalty units.
(7)This section applies to an instrument of mortgage only if it is executed after the commencement of this section.
As to the merits of the claim, however, I agree with the first matter raised by the State. In my opinion, the proper construction of the phrase ‘incorrect registration’ within s 188A(1)(b) of the LTA does not encompass a circumstance where a person has suffered loss or damage because of ‘the fraud of another person’. In my view, the proper construction of the phrase ‘incorrect registration’ within s 188A(1)(b) is limited to the erroneous registration of instruments. I do not accept that it extends to the correct registration of a fraudulently procured instrument.
In my opinion, these conclusions follow when the plain terms of ss 188(1) and 188A(1) are considered and contrasted. Both sections stipulate a circumstance of ‘incorrect registration’, but the circumstance of ‘the fraud of another person’ only appears in s 188(1)(a). I consider this to be a deliberate omission, evincing a legislative intention to restrict the circumstances in which the State may be liable to pay compensation for loss and damage suffered by a person adversely affected by the operation of the Torrens title system created and regulated by the LTA.
In my view, the legislative history of the provisions further demonstrates why this is the proper construction of s 188A(1)(b). When the LTA first commenced, the relevant provision for entitlement to compensation was s 173, which stated:
173 Entitlement to compensation
A person is entitled to be indemnified by the State if the person is deprived of an interest in a lot or suffers loss or damage because of—
(a) the fraud of another person; or
(b) the incorrect creation of an indefeasible title in the name of another person; or
(c) incorrect registration; or
(d) an error in an indefeasible title or in the freehold land register; or
(e) tampering with the freehold land register; or
(f) reliance on the incorrect state of the freehold land register; or
(g) loss, destruction or improper use of a document deposited or lodged at the land registry or held by the land registry for safe custody; or
(h) an error in a search by the Registrar or a member of the land registry staff carried out at someone else’s request; or
(i) omission, mistake, breach of duty, negligence or misfeasance of or by the Registrar or a member of the staff in the land registry; or
(j) the exercise by the Registrar of a power in relation to an application or dealing with which the person had no connection.
The original wording of the section provided for a single compendious basis for entitlement to compensation for a person who was either ‘deprived of an interest in a lot’ or who ‘suffers loss or damage’.
Section 173 was later renumbered as s 188.[183] Section 188 remained as the only compensation entitlement provision within the LTA until 1997, when the Body Corporate and Community Management Act 1997 (Qld) amended s 188 and introduced s 188A.[184] The amendments to the LTA separated the single compendious provision into two, with s 188 dealing with compensation for a person ‘deprived of a lot or an interest in a lot’, and s 188A dealing with compensation for ‘loss or damage’. That formulation continues to be the current position under the LTA.
[183]Land Act 1994 (Qld) s 526, sch 4.
[184]Body Corporate and Community Management Act 1997 (Qld) sch 3.
Of these amendments, the Explanatory Note to the Body Corporate and Community Management Bill 1997 relevantly stated:[185]
The amendments to the provision have divided the existing section to better clarify the rights of claimants. Section 188 provides instances where a person may claim compensation from the State.
Clause 188A limits a person’s right to claim compensation for the instances referred to in the clause if the loss or damage is caused by an incorrectness in the land title register and the incorrectness is capable of correction by the registrar under section 15.
[185]Explanatory Note, Body Corporate and Community Management Bill 1997 (Qld) 62.
At the time, s 15 the LTA relevantly provided:
15Registrar may correct registers
(1) The registrar may correct any register kept by the registrar if the registrar is satisfied that—
(a) the register is incorrect; and
(b) the correction will not prejudice the rights of the holder of an interest recorded in the register.
(2)The registrar’s power to correct a register includes power to correct a particular in the register or an instrument forming part of the register.
(3) If a register is corrected, the registrar must record in the register—
(a) the state of the register before the correction; and
(b) the time, date and circumstances of the correction.
(4) A register corrected by the registrar under this section has the same effect as if the relevant error had not been made.
(5)For subsection (1)(b), the rights of the holder of an interest recorded in the register are not prejudiced if the holder acquired or has dealt with the interest with actual or constructive knowledge that the register was incorrect and how it was incorrect.
…
In my view, the legislative history confirms s 188A was introduced to limit the State’s exposure to pay compensation for ‘loss or damage’. In pursuit of that aim, s 188A(1) deliberately omitted ‘the fraud of another person’ as a basis for entitlement to compensation from the State. Accordingly, the phrase ‘incorrect registration’ in s 188A(1)(b) does not encompass ‘the fraud of another person’.
Although Ms Issa relied upon the decision and reasoning of Bryson AJ in Chandra, in my view, that case does not support Ms Issa’s claim. Chandra also concerned the registration of a fraudulent mortgage, but the claim for compensation there was under a legislative provision that is materially different to s 188A(1)(b), namely s 129(1)(a) of the Real Property Act 1900 (NSW), which permitted compensation for loss or damage suffered as a result of ‘any act or omission of the Registrar-General in the execution or performance of his or her functions or duties under this Act…’. It is also worth noting that in Chandra, the Registrar-General did not contest the claimed entitlement to compensation.
In assessing the claim in Chandra, Bryson AJ described the basis for entitlement to compensation in the following way:[186]
[5] Subject to possible questions affecting quantum, the plaintiffs’ costs of the litigation, after giving credit for costs otherwise recovered, are within the meaning of s 129(1) loss or damage which they suffered as a result of the operation of the Act in respect of their land, arising from an act or omission of the registrar General as referred to in s 129(1)(a). The registration on the title register for their house of a forged mortgage and the attempt to enforce it imposed on them the practical necessity of proceeding, with all available speed, to claim judicial remedies…
…
[11]…In my view ss 129(1) and 129(2) operate in a complementary way. Subsection (1) is inclusive and its provisions particularly para (a) serve the purpose of protecting persons adversely affected by the operation of the Torrens system; and fault or failure by the Registrar General is not a necessary part of an act or omission which falls within para 1(a). Subsection (2) operates differently; it complements subs (1) in that in the stated cases it excludes compensation which otherwise would fall within an entitlement under subs (1). Although there are references to ‘any act or omission’ both in subs (1)(a) and in subs (2)(a) consideration of context and purpose shows that the reference in subs (2)(a) is not to any act or omission at all of the person suffering damage; such a reading would go far towards depriving the provision of compensation of effect, and would produce some absurd results. The reference must be limited to any act or omission which is in some way a fault, a failure or is otherwise shortcoming in a way which makes it an appropriate ground for limiting the extent of compensation. In some way this is fault-related.
[186]Ibid 25,260 [5], 25,262 [11].
It is plain from the foregoing that the relevant New South Wales provision considered in Chandra was enlivened simply because the Registrar-General had registered the fraudulent mortgage.[187] In my view, that is not the position under s 188A(1)(b) of the LTA. Under s 188A(1)(b), the loss or damage must be because of an ‘incorrect registration’. The plain words of the statute require a claimant to establish something ‘incorrect’ about the fact or process of registration of an instrument. That has not been established in this case.
[187]Ibid.
Consequently, I do not consider Ms Issa has an entitlement to be paid compensation by the State. It is therefore not necessary to consider the other bases upon which the State sought to resist Ms Issa’s claim, nor the State’s third-party claims against Mr Karbotli and Mr Picken in respect of any compensation that may be payable by the State to Ms Issa.
The Purchasers’ compensation claim
I turn now to consider the Purchasers’ claim for compensation. The Purchasers make a primary claim for compensation under s 188(1)(a) of the LTA for deprivation of their equitable interest in the property because of the ‘fraud of another person’.[188]
[188]Third Party Statement of Claim against the Eleventh Defendant (State of Queensland), filed 26 August 2019, 3 [3], 7–8 [19]–[21].
The Purchasers also make a separate claim under s 188A(1)(b) of the LTA for their legal costs and expenses of these proceedings, as loss or damage suffered as a result of the ‘incorrect registration of the Mortgage’ and, further and alternatively, the ‘incorrect registration of the Transfer of Mortgage’.[189] This separate claim is made on a similar basis to the claim made by Ms Issa under s 188A(1)(b). For the reasons I have set out above, I do not consider the Purchasers have any entitlement to claim such compensation either.
[189]Ibid 3 [3], 8 [22]–[24].
Accordingly, the only claim to be considered is the claim made pursuant to s 188(1)(a).
The State’s submissions
The State denies any liability to pay compensation to the Purchasers.
The State contends that the Purchasers have not been deprived of an interest in land as contemplated by s 188.[190] The State submits that on its proper construction, s 188 does not extend to an entitlement to compensation beyond ‘registered interests’.[191]
[190]MFI B – Submissions on behalf of the State and Registrar, 20 [85].
[191]Ibid.
The State further submits this conclusion is borne out by the meaning of the word ‘lot’ as used in s 188, read together with ss 28, 37 and 181.[192] The State argues that if the intention of the LTA had been to compensate for the loss of interests in land which had not ever been registered, then s 188 would refer to an ‘interest in land’ or ‘land’ rather than a ‘lot’ or ‘interest in a lot’.[193]
[192]Ibid 21 [88]–[89].
[193]Ibid 21 [89].
The State submits that even if it is wrong and the Purchasers were deprived of an interest in land, no compensation would be payable because the equitable interest of the Purchasers is of no value.[194] The State argues that the measure of any compensation payable can be no more than the value of the interest that has been lost. The State submits that the Purchasers have an equitable right to enforce the Purchase Contract against the Mortgagees by requiring specific performance. However, because the Mortgagees do not have an indefeasible interest by reason of s 185(1A), the Purchasers will not be able to obtain specific performance of the contract. Accordingly, their right is worth nothing.
[194]Ibid 22 [92].
Finally, in the event the State is ordered to pay any compensation, it seeks declarations that it is entitled to be subrogated to the rights of the Purchasers against the First Third Party and the Twelfth Defendant/Second Third Party under s 190 of the LTA.
Consideration of the Purchasers’ compensation claim
I reject the State’s submissions concerning the construction of s 188. In my opinion, it is clear that s 188 does extend to provide for compensation for equitable interests.
In my view, the provisions of the LTA cited by the State do not support the argument it advances with respect to the proper construction of s 188. It is, of course, the case that s 37 provides that an indefeasible title for a lot is created on the recording of the particulars of the lot in the freehold land register, s 28 prescribes the particulars the Registrar must record in the freehold land register, and s 181 provides that an instrument does not transfer or create an interest in a lot ‘at law’ until it is registered. However, none of those provisions say anything about equitable interests.
As already traversed earlier in these reasons, it is well established that although the LTA creates a system of registration of title and confers indefeasibility upon registered interests, it also recognises equitable interests. The question for consideration here is whether the phrase ‘interest in a lot’ in s 188 incorporates an ‘equitable interest’ or only means a ‘registered interest’.
In my opinion, when the definition of ‘lot’ in sch 2 of the LTA is read together with the definitions of ‘interest’, ‘estate’ and ‘land’ in sch 1 of the AIA, it is clear that an ‘interest in a lot’ under the LTA may include an equitable interest.
I consider the decision in Diemasters Pty Ltd v Meadowcorp Pty Ltd (‘Diemasters’) also supports the Purchasers’ argument with respect to entitlement to compensation.[195] In that case, the plaintiff companies provided a loan to another company, Meadowcorp Pty Ltd (‘Meadowcorp’), on the security of a property owned by Meadowcorp. The sole director of Meadowcorp subsequently discharged the mortgage by means of stolen and forged bank cheques. Meadowbank then sold the property to Chelliah and Jain. The plaintiff companies lodged a caveat before the discharge of the mortgage and transfer were lodged for registration.
[195](2001) 52 NSWLR 572.
In the proceedings before Windeyer J, the plaintiff companies sought to uphold their interests as unpaid mortgagees against the interest of the purchasers, Chelliah and Jain. Jain sought compensation from the Torrens Assurance Fund under s 129(1)(e) of the Real Property Act 1900 (NSW), which relevantly provided:
129Circumstances in which compensation payable
(1) Any person who suffers loss or damage as a result of the operation of this Act in respect of any land, where the loss or damage arises from:
…
(e) the person having been deprived of the land, or of any estate or interest in the land, as a consequence of fraud…
…
The term ‘land’ was defined in s 3 of the Act to mean ‘[l]and…of every kind and description or any estate or interest therein…’.
Windeyer J considered Jain’s compensation claim could not succeed because he and Chelliah were joint tenants and Chelliah had been aware of and a party to the fraud. Nevertheless, his Honour went on to consider that matter on the basis that Jain was not affected by his co-owner’s fraud. Thereafter, in comments that were strictly obiter but which nonetheless referred to relevant authority, Windeyer J observed that under a former legislative provision, it had been clearly established that an interest in land included an unregistered interest, and his Honour concluded the same would apply to s 129.[196] His Honour further noted that ‘deprivation’ could extend to being outranked in priority to other interests.[197]
[196]Ibid 583 [31].
[197]Ibid.
Although the statements made by Windeyer J dealt with different legislative provisions, those provisions were not materially different to s 188 of the LTA, having regard to the various definitions in the LTA and AIA that I referred to above. I consider the decision in Diemasters bolsters my conclusion that s 188 of the LTA is to be construed in a way that extends to equitable interests.[198]
[198]Ibid.
With respect to the merits of the Purchasers’ claim, I am satisfied that there was ‘fraud of another person’ in respect of the procuring of the Mortgage. However, it is still, of course, necessary to establish a causal connection between that circumstance and the Purchasers being deprived of their equitable interest. So much is apparent from the use of the words ‘deprived of’ and ‘because of’ in s 188(1). The Purchasers must establish that they were deprived of their interest because of the fraud procured and perpetrated by Mr Karbotli.
The relevant test for causation in this context is the common sense test identified in March v E & MH Stramare Pty Ltd.[199] Applying that test here, I am satisfied that the Purchasers have, as a matter of common sense, been deprived of their equitable interest in a lot because of the fraud of another.[200] I am satisfied that the conduct of each of Mr Karbotli, Mr Picken and the Mortgagees may be said to have caused or contributed to the loss suffered by the Purchasers. However, I consider the fraud committed by Mr Karbotli to be the origin of that loss. Although the other parties were not complicit in Mr Karbotli’s fraud, I do not consider theirsubsequent conduct severed the chain of causation. Because of the fraudulent Mortgage, the Mortgagees were able to register their interest and subsequently exercise a purported power of sale under the Mortgage, and the Purchasers thereby acquired their equitable interest in the property upon entering into the Purchase Contract. That is all now to be undone because of the original fraud. Accordingly, the Purchasers are, in my view, entitled to be compensated by the State.
[199](1991) 171 CLR 506; Chandra (n 182) 25,263–4 [16]–[19] (Bryson AJ).
[200]I also note the concession in MFI B – Submissions on behalf of the State and Registrar, 23 [97] that any loss suffered by the Purchasers was ‘not caused by the registration being “incorrect” but rather by the conduct of the Mortgagees and in a more distance sense the fraud perpetrated against the Plaintiff’.
That then brings me to the question of the quantum of the compensation to be paid.
I do not accept the argument advanced by the State that the Purchasers’ equitable interest is of no value. It is correct to say that the Purchasers cannot now obtain specific performance of the contract. However, it seems to me that the State’s argument ignores the fact that the root cause of the Purchasers being deprived of their interest is the fraud by Mr Karbotli. His fraud was the ‘true and operative cause’ of the Purchasers’ ultimately being deprived of their interest. While the Original Mortgagees and the Mortgagees failed to comply with ss 11A and 11B of the LTA, they were only able to register the Mortgage and the Mortgage Transfer instruments because of the fraud perpetrated by Mr Karbotli in the first place.
In my view, the proper measure of the compensation payable is that which would put the Purchasers in the same position, as far as money can do it, as if they had not been deprived of their interest because of the fraud.[201] As the orders I will make will result in the Purchasers being deprived of their interest upon judgment being given, in my opinion, the appropriate amount of compensation would be the current value of the property, rather than the value of the property when they acquired their interest. According to the valuation report in evidence before me,[202] that amount is $2,700,000.
[201]Registrar of Titles v Spencer (1909) 9 CLR 641, 653 (O’Connor J); Registrar-General v Behn (1981) 148 CLR 562, 568 (Gibbs CJ, Mason J agreeing at 569).
[202]Exhibit 1 – Trial bundle, 2024–70 (Valuation report of Ben Windsor, dated 6 June 2022).
There remains one final unresolved issue with respect to the Purchasers’ entitlement to be paid compensation by the State. As I have already determined that the Purchasers are also entitled to judgment against the Original Mortgagees and payment by them damages for breach of contract, a question arises with respect to whether they should also receive compensation from the State. It obviously cannot be the case that the Purchasers may ‘double dip’ and recover both amounts.
Unfortunately, this issue was not addressed in submissions at the trial.
Noting that under s 188B(2) of the LTA the Court ‘may make any order it considers just’, it may be the case that this issue can be appropriately addressed by the wording of the order I make for payment of compensation. For example, the order might be expressed in terms that the State is to pay compensation to the Purchasers only if the Purchasers do not receive payment of the full amount of assessed damages for breach of contract from the Original Mortgagees. On the other hand, the State may well be prepared to pay the full amount of compensation and therefore a contingent order would be unnecessary.
I will hear the parties further as to the terms of the order that is to be made.
The State’s right of subrogation
It is next necessary to consider the State’s rights of subrogation under s 190 of the LTA.
Section 190 of the LTA provides:
190State’s right of subrogation
(1)On payment of any compensation under section 188 or 188A, the State is subrogated to the rights of the claimant against any other person, in relation to the deprivation, loss or damage under the section.
(2)If the State, in exercising its rights under subsection (1), receives an amount that is more than the amount it paid to the claimant, the State must pay the difference to the claimant after deduction of the State’s costs.
The State filed third-party claims against Mr Karbotli and Mr Picken, by which is seeks to be subrogated to the rights of Ms Issa against each of them in the event that the State is ordered to pay any compensation to Ms Issa. Because I have concluded that Ms Issa is not entitled to any such payments of compensation, these claims are redundant.
However, because I have concluded that the Purchasers are entitled to be paid compensation by the State, s 190 would appear to enable the State to exercise any rights of the Purchasers, against any other person, in relation to being deprived of their interest in the property at 30 Francis Street. That would include any rights they may have against the Original Mortgagees, the First to Sixth Defendants.
It may well be therefore that, upon the State’s payment of any compensation to the Purchasers, the State would be subrogated to the rights of the Purchasers as against the Original Mortgagees. That might include the State exercising any rights of the Purchasers to pursue and recover from the Original Mortgagees the judgment debt payable by them for damages for breach of the Purchase Contract.
Again, none of these matters were the subject of any submissions made at trial.
I also again note that the State has not filed any claim seeking declarations or other relief against the Original Mortgagees, Mr Karbotli or Mr Picken in the event that it is ordered to pay compensation to the Purchasers.
Accordingly, it is not necessary or appropriate that I make any declarations or orders in favour of the State as sought by its third-party claims, or as against the Original Mortgagees.
Mr Picken’s negligence
The final aspect of Ms Issa’s claim to consider is her claim against Mr Picken for damages for negligence.
Although Ms Issa pleaded such a claim, it was specifically predicated on the basis that the State’s defence to Ms Issa’s compensation claim, by reason of s 189(1)(b) of the LTA, would be upheld. That is, that no compensation would be payable because the relevant deprivation, loss or damage suffered by Ms Issa would be found to have been caused, or substantially contributed to, by the neglect of Mr Picken, an indemnified legal practitioner purporting to act on behalf of Ms Issa. It was in this context that the State, by its third-party claim against Mr Picken, required all questions relating to Mr Picken’s allegedly negligent conduct vis-à-vis Ms Issa to also be determined in its case against Mr Picken.
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.
I find that neither Ms Issa nor the Purchasers are entitled to compensation from the State under s 188A(1) of the LTA for their legal costs and disbursements. However, I find that the State is liable under s 188(1) of the LTA to compensate the Purchasers as they have been deprived of their equitable interest in the property at 30 Francis Street because of the fraud of another person.
As the premises for the State’s third-party claims against Mr Karbotli and Mr Picken do not arise, it is unnecessary to further consider and decide those claims. Similarly, as the basis for Ms Issa’s negligence claim against Mr Picken is not enlivened, it is unnecessary to further consider and determine that claim.
As the First to Seventh Defendants have not appeared at trial, it will be appropriate to dismiss their counterclaim pursuant to r 476(2) of the UCPR.
Orders
Accordingly, I make the following orders:
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.
I will hear the parties as to costs and any further orders required.
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