Smit v Carney [2010] NSWSC 910

Mrs Smit was born in 1935. Her son began living with her after his marriage failed. In February 2009, her son claimed he wished to finance a rock concert but she refused to mortgage her property for the purpose of raising those funds. The son resolved to forge a mortgage. The mortgage he entered had a default rate of 146 per cent. Given that the property was worth approximately $800,000 Mrs Smit’s equity in the property would be dissipated in approximately 110 days.

The son prevailed upon a justice of the peace, Mr Singh, to witness the mortgage. The lender at no stage contacted Mrs Smit personally. When the mortgage went into default the lender commenced proceedings for possession and Mrs Smit commenced proceedings to have the mortgage removed or for compensation under the Torrens Assurance Fund. The lender brought an application for summary judgment on the grounds that the mortgage was indefeasible.

Mrs Smit’s defence was that the mortgage was liable to be removed under the Consumer Credit. The courts seem to have conclusively decided that a forgery is not a contract and therefore no relief can be sought under the Contracts Review Act. So far only Van den Heuval v The Perpetual Trustees Victoria Ltd [2010] NSWCA 171 has considered whether or not the code can apply to a forged mortgage. The Court of Appeal was split on the question and, as this case was heard by an Associate Judge on an interlocutory basis, he felt it was inappropriate for him to decide between the dissenting Court of Appeal judges and ordered that the matter go to full hearing. His Honour did express the firm opinion that general law unconscionability could not apply because there was no relevant transaction to examine.

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