Perpetual Trustees v Cox [2013] NSWSC 1583

A husband and wife borrowed monies refinance their mortgage and to have funds undrawn but set aside for future drawdown. However at settlement their broker sent through a direction requiring the funds to be paid into the broker’s account.

When the husband and wife found out they tried to confront the broker. The husband showed up at the brokers office with a sleeping bag and pillow, refusing to leave until he had spoken with her.

Eventually the broker said she had invested the funds on their behalf. Later she signed a document agreeing to pay the money back, but never did.

The bank made play of the fact that the husband and wife initially admitted the signatures were theirs before later claiming they were forgeries. The judge was understanding:

Their previous statements were to the effect that the signatures on the direction appeared to be their own, but they did not recall signing such directions. That they honestly believed the signatures to be their own explains, in part, why they did not immediately cry forgery. They assumed that their signatures must have been procured in what they described as the rushed process of signing the loan documentation.

The court was not impressed that the broker was not produced as a witness to the husband and wife signing. Ultimately the court held that neither the husband nor the wife signed the direction.

The court was not required to make a finding that the broker forged the signature on the direction in order to resolve the case

The bank argued that the borrowers were liable under indefeasibility of the mortgage even for unauthorised drawdowns. In rejecting this the judge noted:

What was required was a lawful drawing down of funds by the borrowers before they could be liable. The unauthorised direction did not attract the protection of indefeasibility. Therefore, it was liable to be struck out because of fraud. Once the direction was void, the lender still retained a mortgage securing the sum of $598,500.00, but was not entitled to enforce that mortgage until some lawful drawdown had occurred. In circumstances where the mortgage secured the “Loan Offer” document, I consider that the documents ought be construed as a single transaction, notwithstanding that each were executed on occasions briefly separated in time.

The court found in favour of the husband and wife.

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