A son borrowed money secured by his parents’ house by a mixture of forging their signatures and telling them it was to refinance their mortgage. In fact, they were increasing their loan from $40k to $440k. In addition, the parents were Greek, had limited English and Several months after settlement, the loan was split into two loans, one of $40k on which the parents paid the interest, and one for the balance.
The bank argued that even though the son signed the documents, the parents ratified the agreement by acting as if they accepted what their son had done. The Court held that as the signature on the loan agreement was a forgery, it was not capable of being ratified.
However, the borrowers had continued to make repayments for some time after learning of the fraud. The Court found that as a result, they could not now avoid the loan for that reason. The bank had, however, acted unconscionably, particularly as they had not checked the signatures on the ID against the signatures on the documentation. The loan was therefore unjust.
The borrowers were required to account to the bank for the $57k that had discharged their previous mortgage. They had already made $50k or so in repayments and therefore were only required to pay the balance of $7k. As the sum was so small, the Court ordered that the mortgage be discharged.
The bank sought orders that the mortgage remain, but be unenforceable during the borrowers’ life, as the fraudster is the sole beneficiary of their will. However, the Judge noted:
I am not persuaded that the borrowers or their property should be burdened in the interests of the party guilty of unconscionable conduct.
The Court also noted that the borrowers may need to sell the property to move into a nursing home.
Importantly, the Court was very concerned about the costs of the proceedings. The Court book had not been properly prepared and there was extensive duplication. It was 2000 pages, much of which was not relevant. The Judge called for submissions as to why orders should not be made against the solicitors personally. No decision has yet been handed down on that question.
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