A husband forged his wife’s signature on a loan and mortgage for deposit monies to purchase their family home. The loan was secured by a second mortgage over the wife’s investment property.
The wife consented to becoming the registered proprietor of the family home and signed a loan, mortgage and guarantee for the balance of the purchase monies in the belief that her husband had paid the deposit out of his own funds and would meet the repayments.
The wife succeeded in having the forged mortgage set aside on the bases that it was a forgery. The lender of the deposit sought repayment of the money advanced in an action for money had and received on the basis that it was paid pursuant to a mistake of fact that the documents had been signed by the wife. The wife argued it was unjust to order restitution because she had changed her position on the faith of the deposit monies.
The lower court held that the wife had changed her position and it would be inequitable to require her to pay it back, noting that she retained nothing more than a memory of having owned and lived in the property. The lender of the deposit monies appealed.
The lender argued that the cause of the wife entering into the transaction to purchase the home was not her belief that her husband had provided the deposit from his own funds but her risky decision to commit to a mortgage with a greater than 95% LVR together with her belief that her husband could fund the mortgage. It was this and not her mistaken belief that her husband had paid the deposit from his own funds that was the real cause of her detriment. The wife’s belief that her husband’s business had provided funds for the 10% deposit was neither a necessary nor sufficient condition of the wife’s decision to enter into the NAB loan and the NAB mortgage and therefore did not cause her to change her position.
The Court of Appeal noted that the wife only consented to the transaction because she believed the deposit had been paid by her husband. The Court of Appeal noted that while the wife’s decision to enter into the loan and mortgage may have been made for a variety of reasons, that did not preclude her from having entered into it in reliance on her belief that her husband paid the deposit from his own funds. Further, the fact that she suffered detriment because her husband failed to repay the bank loan for the balance does not preclude it being on the faith of the deposit that the wife entered into the loan and mortgage. The Court of Appeal agreed it would be inequitable to now require the wife to repay the loan for the deposit. The lender’s argument that the wife was enriched when she became the owner and the value of that enrichment must be assessed was rejected on the basis that there was no evidence as to the value of the equity ascribed to the deposit monies.