A wife allegedly forged her husband’s signature on a mortgage which was registered. The forgery was unknown to the lender. The husband and wife defaulted and the lender sued for possession. The issue was whether the lender was entitled to possession of the husband’s interest in the land.
The court restated the principles relevant to indefeasibility:
- Registration of a forged mortgage confers an indefeasible title on the mortgagee, provided that the mortgagee has not been party or privy to the fraud and no other exception to indefeasibility applies;
- Registration of the mortgage does not necessarily ensure the validity of every term of the mortgage, so a personal right created by a covenant in a mortgage, such as a guarantee, is not rendered indefeasible by registration of the mortgage;
- In New South Wales, the view has been taken that a personal covenant in a registered but forged mortgage to pay the amount of the mortgage debt, where the debt exceeds the value of the property, is not protected by the indefeasibility provisions; and
- Generally speaking, if the mortgagee specifies a sum of money (plus interest) as the amount secured by the mortgage, the charge created by the mortgage will secure the amount so specified even if the document creating the indebtedness is void.
The court found the covenant to pay in the mortgage joint and several (not joint only) and held the wife obliged to pay the entire principal sum. The court held that the lender was entitled to possession against both husband and wife, noting:
These determinations are always difficult because one of two innocent parties must suffer from the criminality of the fraudulent party. However, the husband may have rights to claim against the Torrens Assurance Fund.