12 September 2007
This Court of Appeal decision removed any lingering uncertainty regarding the law on forged mortgages and so called all monies mortgages. All monies clauses are where the registered mortgage states that it secures all monies owed by the borrower to the lender. This then allows the active provisions (the term, the amount, the interest rate etc) to be included in a separate unregistered agreement (usually a deed of loan or facility agreement).
Usually under the Torrens System if a mortgage is forged the lender can still sell the land and recover the debt. The problem with all monies clauses is that they have been held not to give the lender guaranteed title to the land if a forgery is involved. In these cases the single court judges held that although the all monies mortgages were indefeasible they secured nothing.
Mr Yazgi forged his wife’s signature on both the mortgage and on the deed of loan. It was agreed by all parties that the property had to be sold and that the lender would have access to the husband’s half of the property. The question in dispute was whether the wife’s half of the proceeds could be used to payout the loan. The trial judge held the all monies clause secured the husbands debt. This was based on interpreting “any agreement which you” as meaning both of them separately.
The Court of Appeal overturned the trial judge holding that on proper interpretation the mortgage did not charge the wife’s interest in the property. The Court ordered the property be sold by a trustee and the wife be refunded her equity in the property less half of the payout figure of the prior mortgage which was paid out by the forged mortgage. The court cited the cases of Tsai, Chandra and Printy with approval and has therefore put to bed any hope lenders might have had those cases would be overturned.
Bransgroves Lawyers continually warns lenders not to use all monies mortgages. Despite the raft of recent cases:
lenders continue to ignore the peril of using all monies mortgages. Matthew Bransgroves has been warning lenders since 17 November 2003 (in a College of Law paper on Indefeasibility of Mortgages) not to use all monies mortgages.
Matthew Bransgrove has presented over fifteen papers for the NSW College of Law on mortgage-related topics. He is a co-author of the 2008 LexisNexis textbook ‘The Essential Guide to Mortgage Law in NSW’ and the 2013 LexisNexis textbook ‘The Essential Guide to Mortgage Law in Australia’. He has written eleven articles for the NSW Law Society Journal.