AFS v All Up [2012] NSWSC 1004

This was a priority dispute between two lenders.

AFS financed business equipment based on forged receipts provided by the husband. After AFS discovered the fraud, the wife agreed to charge her property to secure the debt and a caveat was lodged.
After the equipment finance fraud was committed but before the caveat was given All Up purported to loan the wife $300k, also secured with a charge protected by a caveat over her property. However the wife denied borrowing the $300k or signing the caveat.

AFS and All Up both claimed $500k surplus from the sale of the property. Before the court considered the normal rules of priority to see who would prevail (first in time with no disentitling conduct) it first had to determine whether the $300k mortgage was forged. If it was forged it was a nullity and so was disqualified from priority competition.

In rejecting All Up’s suggestion the forgery was a recent invention the court found their caveat to be a forgery because:

  1. the woman’s had no knowledge of her husband’s dealings with All Up;
  2. the woman’s signature did not match All Up’s caveat; and
  3. All Up failed to call the witness to their caveat creating a Jones v Dunkel inference against them (an assumption that the witness’ evidence would have harmed their case.

Click here to read the full judgment.

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