Xiao v Perpetual Trustees [2012] VSCA 85

A woman alleged that her signature had been forged on a mortgage and guarantee. She claimed that she was not aware of the loan and that she had been made a director and shareholder of the company without her knowledge.

The woman had delayed proceedings for a myriad of reasons ranging from medical grounds, terminating solicitors and difficulties with understanding English. The court gave a direction that any further delays would need to be supported with evidence.

Seeking a further adjournment she had a medical practitioner give evidence to obtain a further adjournment but this was refused. She did not return when the trial continued the following day.

Judgment was handed down in her absence granting Perpetual possession of the property. The trial judge rejected her claims of forgery but found that even if her signatures had been forged she had ratified the forgeries as there was much correspondence between her and the mortgage originator and broker such that ‘it would absolutely beggar belief’ to say that she was unaware of the mortgage and received no benefit from it.

She then sought to set aside the judgement. The trial judge on this application refused to set aside the judgement because:

  1. she had demonstrated no good reason for failing to appear at the trial when she admittedly knew that it was to take place and was taking place.
  2. there would be prejudice to the lender if her she succeeded because the amount due under the loan transactions far exceeded the value of the Property she had no money to satisfy any shortfall.

The borrower appealed. The Victoria Court of Appeal found for the borrower and overruled the trial judge stating:

The trial judge failed to give any real weight to the fact the borrower may have a bona fide defence on the merits. If her defence is or may be true, then it is a very serious matter, notwithstanding her delinquent procedural conduct and potential prejudice to Perpetual, to shut her out from a full hearing. I therefore think that the decision of the judge justifies setting aside the judgement.

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