Mortgage Fraud: Dangers Inherent in “All Monies” Clause

mortgage fraud

Mortgage Fraud. Lenders again warned of the dangers inherent in seeking to rely on an “all monies” clause contained in a mortgage.

In the matter of Perpetual Trustees Victoria v English & Anor [2010] NSWCA 32, the Supreme Court of New South Wales was once again required to consider the enforceability of a registered mortgage that had been fraudulently executed by a co-owner.

The Facts

The registered mortgagee, Perpetual Trustees Victoria (Perpetual), applied for an order for possession of land registered jointly to Mr and Mrs English. The application relied on a default in repayment of amounts said to be secured by the registered mortgage (Mortgage) in favour of Perpetual. The estranged wife, Mrs. English, denied any liability on the basis that her husband had forged her signature on the mortgage.

There was no dispute between the parties that the registered mortgage conferred an indefeasible title in favour of Perpetual. However, the extent of the interest created by the mortgage was in issue. In order to determine the extent of the interest, the court was required to consider the construction of the mortgage documentation.

The Judgment

The Mortgage contained an “All Monies” clause which referred to all amounts payable under a “Secured Agreement”. In interpreting the definition of “Secured Agreement”, the Court of Appeal held that the Mortgage did not secure any monies due by Mrs English as there was no valid “Secured Agreement” due to the fact that the loan agreement required the signature of all persons to whom the offer was made.

Despite the findings in relation to Mrs English, the Court of Appeal held that it would be unfair for Mr English as the perpetrator of a forgery (mortgage fraud) to escape liability on the basis that his forgery rendered the documents void. Consequently, Perpetual was able to access Mr English’s equity in the mortgage property.

This decision is a further reminder to all legal advisors and financiers of the perils associated with relying on “All Monies” clauses in a mortgage. The judgment of the New South Wales Court of Appeal may be read in full by following the link below:

Elliott May Lawyers specialise in all aspects of mortgage lending and enforcement, including preparation of offer documentation, loan agreements, mortgages, priority deeds, PPSA charges and guarantees, as well as issuing possession proceedings and facilitating the exercise of power of sale by mortgagees.

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