Nathan v Dollars & Sense Finance Ltd - [2007] NZCA 177

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IN THE COURT OF APPEAL OF NEW ZEALAND
CA197/05
[2007] NZCA 177

BETWEENDOLLARS & SENSE FINANCE LIMITED
Appellant

ANDREREKOHU NATHAN
Respondent

Hearing:16 May 2006

Court:William Young P, Glazebrook and Robertson JJ
Counsel:W G C Templeton and P J Stevenson for Appellant
J L Foster for Respondent

Judgment:4 May 2007 at 4 pm

JUDGMENT OF THE COURT

AThe appeal is dismissed.
BCosts of $6,000 plus usual disbursements are awarded to the respondent.

REASONS
William Young P (dissenting) [1]
Glazebrook and Robertson JJ [78]
WILLIAM YOUNG P (dissenting)

Introduction
[1] Mrs Rerekohu Nathan is the registered proprietor of a half interest in a property in Kerikeri. Dollars & Sense Ltd has a first registered mortgage over the property as security for money it lent to her son, Mr Rodney Nathan (Rodney). Mrs Nathan knew nothing of the transaction as Rodney had forged her signature on the mortgage documentation. When Dollars & Sense took steps to exercise its power of sale to recover the money lent to Rodney, Mrs Nathan sought to invoke the fraud exception to the indefeasibility provisions of the Land Transfer Act 1952 (the LTA).
[2] In a judgment now reported at [2006] 1 NZLR 490, Winkelmann J held that when Rodney forged Mrs Nathan’s signature he was acting as an agent for Dollars & Sense, that his forgery (or knowledge of it) should be attributed to Dollars & Sense and that, in any event, Dollars & Sense had been wilfully blind to the possibility of fraud. Accordingly, she declared the mortgage void ab initio, and directed the District Land Registrar to remove it from the Register. Dollars & Sense now appeals against that judgment.
[3] The critical issues in the case are:
(a)Can Rodney’s forgery (or knowledge of it) be attributed to Dollars & Sense? And,
(b)Was Dollars & Sense wilfully blind to the possibility that Rodney had forged his mother’s signature?

Before I address those issues directly, I will discuss in a little more detail the factual background and also the general legal context (as to which additional written submissions were sought and obtained from counsel).
The factual background
[4] Rodney began working at the Settlers Tavern in Whangarei in 1990 or 1991 as Assistant Manager. The Settlers Tavern was bought by Setz Holdings Ltd (Setz) in mid-1995. Around the same time Rodney acquired a 10% shareholding in Setz. The other shares in Setz were held by a Mr Bruce Bryant (as to 40%) and Madison Investments Ltd (as to 50%). Madison held its interest in Setz effectively on behalf of Further Developments Ltd, an unlisted public company. Its nominee on the Setz board was Mr Peter Harris.
[5] In 1996 Mr Bryant was bought out of Setz which was then restructured so that Rodney obtained a 40% interest in the company and Madison’s interest moved to 60%. The $245,000 which was required to buy out Mr Bryant was provided by Rodney who in turn borrowed…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2007] NZCA 177
Decision Date: 4 May 2007

CaseChat Overview and Summary

Dollars & Sense Finance Ltd (Dollars) brought an appeal against the decision of the High Court, which declared the mortgage over a property owned by Mrs Nathan void ab initio and ordered Dollars to remove the mortgage from the register. Mrs Nathan had signed the mortgage in favour of Dollars, but had not actually signed the mortgage, as her son, Rodney, had forged her signature. Dollars sought to exercise its power of sale over the property, relying on the doctrine of indefeasibility of title under s 62 of the Land Transfer Act 1952. The High Court found that the mortgage was void due to fraud and declared that Dollars was not entitled to have the mortgage registered or to enforce it. Dollars argued that Rodney's forgery should not be attributed to it, and that it was not wilfully blind to the possibility of fraud. Mrs Nathan claimed that the mortgage was void due to the fraud of Rodney, who was acting as Dollars' agent, and that Dollars was wilfully blind to the possibility of fraud. The Court of Appeal held that Rodney was not the agent of Dollars in relation to the forgery, and that Dollars was not wilfully blind to the possibility of fraud. The appeal was dismissed, and costs of $6,000 plus usual disbursements were awarded to Mrs Nathan.

Orders