In this case the mortgage secures a line of credit of $800,000. The loan has been fully drawn. The borrower alleges and the lender concedes that $578,000 was advanced pursuant to forged cheques. The mortgagor has now paid what was owing from unforged cheques but the lender seeks to enforce the mortgage to recover the money from the forged cheques. The mortgagor has been doing a poor job defending the claim and the lender brought a strike out motion. After due consideration the court gave the mortgagor another chance and dismissed the strike out application.
For those readers curious to know what will be the outcome of this case notwithstanding that a mortgage is genuinely signed if money is advanced pursuant to a fraud (for example fraudulent cheque directions or forged cheques) then it is not recoverable. In such cases ironically the lender is in a better condition if the mortgage was also forged, then the principles of indefeasibility would apply – see Siahos v J P Morgan Trust Australia Limited  NSWCA 20 and Perpetual Limited v Costa  NSWSC 1093.