13/09/2016, 05:30:PM
13/09/2016, 05:30:PM
Selling and buying property should be a smooth transaction, especially with digital processing where the transaction from start to finish is carried out online. However, the potential for fraud will always be there for the unaware.
Generally, as property owner’s know once your name is registered on the title, your rights to the property are secure, which the registration of your name on the title is indefeasibility of title, however, this protection is not absolute.
Where an act of fraud occurs to a property owner, section 42(1) of the Transfer of Land Act 1958 in Victoria, and sections 42, 43 of the Real Property Act 1900 in NSW, may aid in the situation, though the term fraud is not specifically defined by the legislation. Though a good definition of fraud was stated in the court case of Assets Co. Ltd v Mere Roibi [1905], where the court held, that fraud must constitute actual dishonesty, but when applied to fraud of title, the fraud exception to indefeasibility is narrow.
So let’s have a look at a couple of cases as to how your ownership in property title may be affected by fraud.
In Bank of South Australia v Ferguson (1988), Ferguson was the registered proprietor of the property, and was in default under a loan arrangement with the bank. Ferguson claimed the bank obtained possession of the property through fraudulently modifying loan documents without Ferguson’s consent. The court held the bank had not obtained title to the property by fraud under the loan documents that were modified, as there was no intent of fraud on the part of the bank in lending the money.
Then in Australian Guarantee Corporation v De. Jager [1984], Mr Jager forged his wife’s signature on mortgage documents, and the Australian Guarantee Corporation new the mortgage documents were not signed properly and that Mrs Jager signature was required. The court held that Australian Guarantee Corporation due to their constructive knowledge that Mr Jager had fraudulently signed on behalf of his wife, and the fact the bank required Mrs Jager signature, was held to have participated and committed fraud against Mrs Jager.
However, in Grgic v ANZ (1994) Mr Grgic was the registered title owner of land. His son who was in possession of the land had a friend who found the certificate of title to the property, and presented the title to the bank for a mortgage by impersonating and signing as Mr Grgic on the loan documents. The real Mr Grgic upon discovering this event claimed that the bank and its employee had committed fraud against him, as they did not ensure the loan documents were signed by the correct person. The court held that the bank had not committed fraud, as there was no dishonesty by the bank or its employee, but rather was negligent in its duty of care to Mr Grgic by failing to be meticulous with the document signing.
When fraud is committed against the registered title owner of property, the establishment of dishonesty and moral turpitude is required. In Russo v Bendigo Bank Ltd [1999], Mrs Russo was the registered title owner of the property. Mrs Russo son-in-law had taken a collateral mortgage over her property without Mrs Russo knowing using a conveyancing firm. Consequently, once Ms Russo found out of the fraud, she brought a claim against the conveyancing firm and the bank. However, the court held that fraud could not be attributed to the conveyancing firm or the bank as neither party had acted dishonestly or with moral turpitude. The claim of fraud failed.
In the digital age where the complete property transaction can be conducted in a secure environment online with PEXA, and where scrutiny is applied to verification of identity in property transactions, the possibility of fraud occurring against the registered title holder is minimized.
Fraud is never completely eliminated, so be prudent, and take the extra step in your property transactions by getting that legal advice to protect your legal rights and interests.
The comments in the aforementioned do not constitute legal advice and are general in nature, and if legal advice is required please contact: John Melis at Legal AU Pty Ltd (03) 9999 7799
Legal AU Pty Ltd Lawyers are “Liability limited by a Scheme approved under Professional Standards Legislation.”
