Perpetual Trustees Victoria v Van den Heuvel [2009] NSWSC 57

In this case the husband left his wife the following note:

“I’m very sorry what I have done but I have had a very bad gambling problem and I have borrowed money on the house and I can’t repay it. Now the (sic) are taking the house…”

The lender had unfortunately used an “all monies” mortgage which meant the forgery of the wife’s signature put the enforceability of the mortgage into question. However the court held that unlike the Yazgi case (which had materially identical facts) the drafting of the loan and mortgage made the indefeasible mortgage security for the debt.

In Yazgi the mortgage secured all the money advanced to 2 people under a loan agreement to which they were both parties. As a matter of fact, money was only advanced to one of them, and the other one was not a party to the agreement due to forgery. The Court of Appeal found that the money advanced under the loan agreement did not fall within the money secured as defined by the mortgage, as the mortgage was referring to moneys loaned jointly to the two persons but there were no such monies.

By contrast in this case, there was the same basic situation of money ostensibly being loaned to two people, but due to fraud only one received the money and only that person was a party. The mortgage, however, was drafted differently to that in Yazgi, in that it defined the “Secured Money” as “all amounts which are payable at any time or are contingently owing or payable to you under a Secured Agreement” (with “you” meaning, atypically, the mortgagee). The Loan Agreement was drafted to provide for a joint and several liability, and thus as the genuine signatory to the Loan Agreement owed money under that agreement, the entirety of the loan became “Secured Money” under the terms of that definition in the mortgage. Thus the mortgagee’s indefeasible interest comprised a mortgage over the entire property securing the entirety of the loan.

The second ground of attack relied upon by the wife was a Contracts Review Act claim. His Honour quoted with approval  Riz v Perpetual Trustees Australia Ltd [2007] NSWSC 1153 at [78] Brereton J said:

To hold that the undetected provision of false information by or on behalf of a borrower to a lender in an attempt to obtain a loan resulted in the loan contract being unjust against the lender would be to invert commonsense, logic and justice, by protecting the wrongdoer against the victim. To grant remedies under the Contracts Review Act on such grounds would be to convert an Act, intended to achieve just results, into an instrument of injustice.”

However His Honour also noted there was no contract to review. The wife was not a party to the loan and the mortgage was not a contract insofar as the lender was relying on it as a charge on the land. His Honour quoted Barwick CJ in Breskvar v Wall at 386:

It is the title which registration itself has vested in the proprietor. Consequently, a registration which results from a void instrument is effective according to the terms of the registration. It matters not what the cause or reason for which the instrument is void.”

His Honour concluding on the issue:

I am neither persuaded that the mortgage upon registration is deemed to be a contract nor that the second defendant has standing to seek relief under the Contracts Review Act. The existence of a contract between the plaintiff and second defendant is fundamental to the claim for declaratory relief under the Contracts Review Act and the claim for relief under that Act must fail.

A claim based on the Consumer Credit Code was disposed of on similar grounds.

Although the wife failed totally against the lender she succeeded against the Registrar General who had to compensate her for her half of the value of the property.

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