Rodrick, Sharon --- "Forgeries, False Attestations and Impostors: Torrens System Mortgages and the Fraud Exception to Indefeasibility" [2002] DeakinLawRw 5; (2002) 7(1) Deakin Law Review 97

Forgeries, False Attestations and Impostors: Torrens System Mortgages and the Fraud Exception to Indefeasibility

Sharon Rodrick*

I Introduction

There are numerous cases in which the signature of a registered proprietor of Torrens System land has been forged on a mortgage of the land, and the mortgage has then been registered. Often, the registered proprietor cum mortgagor is unaware of the existence of the mortgage until the mortgagee - usually a bank, building society or some other type of lending institution - attempts to exercise its powers under the mortgage following a default in the repayments. Many mortgagors who have found themselves in this position have come to court in an attempt to prevent the mortgagee from enforcing the mortgage. However, the fact that the mortgage is registered means that, prima facie, it can be enforced by the mortgagee in spite of the forgery. The only way that the mortgagor can successfully resist the effect of registration is to argue that the mortgage comes within an exception to indefeasibility of title.[1] Since forgery is a species of fraud,[2] and fraud is a statutory exception to indefeasibility in all Australian jurisdictions,[3] fraud is the exception most likely to be relied on by an aggrieved mortgagor. Whether or not the mortgagor will succeed in a fraud claim depends on the meaning and ambit of the fraud exception.

There are a number of factual scenarios involving the forgery of a registered proprietor’s signature on a mortgage which may found the fraud exception to indefeasibility. The most obvious is where the mortgagee has actually perpetrated the forgery.[4] A variation of this scenario arises where a mortgagee gives the mortgage documents to an unrelated third party (frequently a spouse or relative of the mortgagor) with instructions to procure the mortgagor’s signature on the mortgage. If the third party forges the mortgagor’s signature, the mortgagor might argue that the third party was constituted as the mortgagee’s agent for the purpose of procuring the signature, and that the third party’s forgery can be treated as that of the mortgagee. However, the cases suggest that it is unlikely that a forgery committed by a third party in these circumstances will be brought home to the mortgagee on agency principles.[5] Another forgery scenario which can give rise to a finding of statutory fraud occurs where the forgery was committed by a third party for whom the mortgagee was not responsible, and the mortgagee knew of the forgery, but proceeded to take the mortgage. It is clear that knowledge of a forgery is as squarely within the concept of fraud as the commission of a forgery.[6] An inference of actual knowledge on the part of the mortgagee will be made not only where the mortgagee subjectively knew that the mortgagor’s signature was a forgery, but also where a mortgagee’s suspicions were aroused that the signature was forged and the mortgagee deliberately abstained from making further inquiries for fear of learning the truth.[7] In Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd[8] this ‘wilful blindness’ or ‘contrived ignorance’ was described as importing a certain dishonesty into the transaction which could be justifiably classed as fraud.[9] By contrast, the fact that the forgery might have been discovered by the mortgagee had it exercised more care or made more inquiries is not fraud, but mere carelessness.[10]

The focus of this article will be on two other situations involving forgery. The first concerns fraud in the attestation process. It arises where a third party has forged a registered proprietor’s signature on a mortgage of the land, and an agent of the mortgagee attests, contrary to fact, that the mortgagor signed the mortgage in his or her presence. Here the essence of the fraud allegation vis a vis the mortgagee is not that the mortgagee perpetrated the forgery or that the mortgagee knew about or suspected the forgery[11], but that an agent of the mortgagee attested that the mortgagor had signed the mortgage in his or her presence, when in fact the agent was not present when the mortgagor supposedly signed the document. Prior to the decision of the Victorian Court of Appeal in Russo v Bendigo Bank Ltd & Reichman ('Russo'),[12] such conduct on the part of the mortgagee’s agent was consistently regarded as fraudulent. However, in Russo’s case, the Court of Appeal reached a different conclusion, which has put a ‘somewhat different complexion on the consequences of a false attestation’[13]. These cases raise interesting questions about the meaning of statutory fraud and when it will be made out in the context of a false attestation. The bulk of this article is devoted to considering whether Russo can be reconciled with these earlier authorities, and whether it was correctly decided. The second situation with which this article is concerned arises when a person posing as the mortgagor signs the mortgage in the presence of an agent of the mortgagee. Since the person is an imposter, the signature is necessarily a forgery. The mortgagee’s agent believes that the imposter is the mortgagor, and proceeds to attest the imposter’s signature. In this case the substance of the fraud allegation is usually that the mortgagee’s agent was recklessly indifferent to the identity of the mortgagor and to the truth of his or her attestation. However, to date, challenges to the validity of the mortgage by the mortgagor on the basis of fraud have been unsuccessful.[14] This article will compare the ‘imposter’ scenario with the ‘attestation’ scenario, and consider whether the conclusions in the imposter cases are supportable and consistent with the false attestation cases.

It should be noted that a mortgagor who is the victim of forgery might also argue that he or she has rights in personam against the mortgagee which would entitle the mortgagor to have the register rectified.[15] It is beyond the scope of this article to deal with the availability of the in personam exception in the context of false attestations and imposters. Suffice it to say that the in personam exception has played very little part in the cases dealing with false attestations, primarily because in all but one of these cases, the fraud exception was made out on the facts.[16] It might have been expected that the in personam exception would have been pursued in Russo, where fraud was not found. However, although Mrs Russo relied upon matters other than fraud at the trial to defeat the bank’s claim[17], none were the subject of her appeal to the Court of Appeal. As far as the imposter cases are concerned, the in personam exception was not mentioned in Ratcliffe v Watters, but was relied on in Grgic v ANZ Banking Group Ltd[18] as an alternative to fraud. In that case, the Court of Appeal made it clear that Mr Grgic, the aggrieved mortgagor, could only succeed in an in personam claim if he could establish that he had a known legal or equitable cause of action against the mortgagee bank. Four causes of action were relied upon by Mr Grgic[19], but none were made out on the facts. Whilst it is clear that a legal or equitable cause of action is required for an in personam claim, it is equally apparent that not every legal or equitable cause of action that would succeed under the general law will activate the in personam exception under the Torrens System. However, the courts are still in the process of determining which causes of action will succeed and why. The crux appears to be that the claim must not be inconsistent with the doctrine of immediate indefeasibility. Furthermore, some unconscionability on the part of the mortgagee is required. Whether a finding of negligence on the part of a mortgagee as regards establishing the identity of the mortgagor would suffice is far from certain.

II When Will a False Attestation Found an Exception to Indefeasibility?

Before proceeding to consider whether a false attestation will amount to statutory fraud, it is necessary to examine the requirement of attestation.

A The Requirement of Attestation

In many Australian jurisdictions, the Torrens legislation explicitly requires instruments that are presented for registration to be signed by the registered proprietor and attested by a witness.[20] The Registrar[21] may be invested with power to refuse to accept an instrument that has been presented for lodgment if the instrument has not been duly attested by a witness.[22] By contrast, in some jurisdictions the Torrens legislation does not contain any provisions that require the attestation of signatures by a witness.[23] Yet it does not follow that this omission can be relied upon to support an argument that an attestation is immaterial to the registration of the mortgage, or that a false attestation cannot amount to a fraud, since a judge is likely to imply the relevant obligation. For example, in AGC v De Jager[24], Tadgell J found that although the Victorian Transfer of Land Act 1958 was silent regarding the execution and attestation of instruments, at the time, many of the schedules to the Act contemplated that an attesting witness would be present when a person executed an instrument. There was also evidence before Tadgell J that it was Titles Office practice to require attestation. A similar view has been taken of legislation that authorises the registrar to approve forms for use under the Act, if the forms approved by the registrar require attestation.[25]

The wording of an attestation clause can vary. In some cases, the attesting witness attests that the mortgage is ‘signed in my presence by the mortgagor, who is personally known to me’. In this case, the witness is declaring not only that he or she was present and saw the mortgagor sign the document, but also that that person is in truth the mortgagor. In other cases, the attestation clause simply states that the mortgage was signed ‘in the presence of’ the attesting witness. In this case, the witness is arguably only attesting that he or she saw a particular person purporting to be the mortgagor sign the mortgage document, and is not representing that that person is in fact the mortgagor. However, it is possible that a court might imply that the witness is making some representation as to personal knowledge of the identity of the mortgagor.

The main purpose for requiring a registrable document to be signed by a person in the presence of a witness is to prevent the registration of forged documents.[26] Given that registration of an instrument ‘endows that instrument with legal virtue which it may not otherwise possess’[27], it is imperative that statements about who has witnessed execution of documents are true. The responsibility for ensuring that a mortgage instrument is executed and attested in a regular way is said to rest on both parties.[28]

B Allegations Based on False Attestations

Two possible allegations can be levelled against an agent of a mortgagee who attests the signature of the mortgagor, despite being absent at the time the mortgagor supposedly signed the mortgage. Both these allegations have been relied upon to establish fraud on the part of the mortgagee. They will each be considered.

1 Mortgagee Lacks a Belief that the Mortgagor Signed the Mortgage but Falsely Attests that the Mortgagor Signed in His or Her Presence

The first, and more serious, allegation is that the attesting agent either knew or suspected that the mortgagor had not signed the mortgage, or was reckless as to whether or not the mortgagor had so signed, but was prepared to attest that the mortgagor had signed the mortgage in his or her presence. As explained in the introduction to this article, knowledge of a forgery is as much within the concept of fraud as the commission of a forgery. An allegation that a mortgagee, through its agent, knew about a forgery is a serious allegation, and one which a court will not readily uphold. Such a claim was made in Westpac Banking Corporation v Sansom.[29] In that case, the Westpac Banking Corporation insisted on obtaining a mortgage of land jointly owned by Mr and Mrs Sansom as security for an overdraft on their joint account with the bank. Mrs Sansom told the bank’s officers that her husband was terminally ill, so she was given the mortgage documents for the purpose of procuring his signature. In fact, Mr Sansom knew nothing about these arrangements. Mrs Sansom forged his signature to the mortgage and returned the documents to the bank. For her part she signed the document at the bank. An officer of the bank, Mr Tongue, attested that both Mr and Mrs Sansom, who were described on the attestation clause as ‘personally known to him’, had both signed the mortgage in his presence. The mortgage was registered, and when the bank tried to enforce it, the husband argued that the attesting officer lacked a belief that the signature of the husband was genuine[30], that this was fraud, and that this fraud could be brought home to the bank. The court found on the facts that Mr Tongue believed that Mrs Sansom had procured her husband’s signature on the mortgage, and that his conduct in accepting that the mortgage had been signed by the husband was not fraudulent because it lacked the necessary moral turpitude required for statutory fraud.

A more convincing factual basis for a finding of fraud of this nature occurred in National Commercial Banking Corporation of Australia Ltd v Hedley[31]. There a mortgage of a matrimonial home was purportedly given to the bank by a husband and his ex wife. Hodgson J found that the signature of the wife was a forgery.[32] The acting manager of the bank (Mr Grace) falsely attested that the mortgage had been signed in his presence by both mortgagors, who were described in the attestation clause as being ‘personally known to me.’ In fact Mrs Hedley, the wife, had never attended that branch of the bank or met Mr Grace. Thus the attestation was plainly false. The bank registered the mortgage and subsequently sought to enforce it by obtaining possession of the land. Mrs Hedley argued that the bank had obtained the mortgage by fraud. In particular, she alleged that Grace, by his attestation, had represented to the Registrar-General that she had signed the mortgage when in fact this was untrue, and that Grace either held no honest belief as to its truth, or had acted recklessly, not caring whether it was true or not. Hodgson J agreed that there was evidentiary material before the court that could support an inference that Mr Grace did not believe that Mrs Hedley had signed the mortgage. For example, there was evidence that Mr Grace knew, at the time the mortgage was given, that the Hedleys were divorced and living apart.[33] Also indicative of a guilty state of mind was Mr Grace’s failure to return the mortgage to the Hedleys in order to procure an amendment that had been requested by the Registrar-General.[34] In spite of this evidence, Hodgson J was not prepared to draw an inference that Mr Grace held no genuine belief in the authenticity of Mrs Hedley’s signature, primarily because it would amount to a finding that he had deliberately participated in a scheme through forgery to deprive Mrs Hedley of property which she had no intention of mortgaging. Fraud of this nature was considered to be of an entirely different order to a false attestation which is accompanied by a belief that the signature is genuine. It is far more grave. Hodgson J was bolstered in his refusal to draw such an inference by the fact that Grace had no significant motive to indulge in that type of fraudulent conduct. Indeed it would have been quite irrational for him to do so, because he would almost inevitably have been discovered had the bank tried to enforce the mortgage. Rather, Hodgson J viewed Grace as a person who was willing to dishonestly cut corners when it suited him to do so.[35]

These cases indicate that courts will require very strong evidence before making a finding that an agent of a mortgagee held no genuine belief that the mortgage had been signed by the mortgagor, despite his or her false attestation. The decision in Young v Hoger, although not a false attestation case, suggests that a solicitor for a mortgagee who puts in place standard procedures for verifying the mortgagor's identity and who proceeds to dispense with those procedures might be held to be guilty of fraud on the basis that he or she had no factual basis for believing that the mortgagor's signature was genuine.[36]

2 Mortgagee Believes the Mortgagor Signed the Mortgage But Falsely Attests that He or She was Present at the Time

It is more common for an allegation of fraud which is based on a false attestation to proceed on the basis that the mortgagee, through its officers, held a genuine belief that the mortgagor had signed the mortgage document, albeit that the officer concerned attested, contrary to fact, that he or she was present at the time.[37] In this case, the mortgagor’s allegation of fraud is confined to the attestation process and is not accompanied by a suggestion that the mortgagee lacked a belief that mortgagor had signed the mortgage. The greater part of this article will focus on this situation. There are two questions that need to be considered. The first is whether an agent of the mortgagee who acts in this way is likely to be held to have committed a statutory fraud. If the answer is yes, the second question is why, or, if the answer is no, why not. The second question goes to the nature of statutory fraud.

C Do False Attestations Give Rise to a Finding of Statutory Fraud?

As noted earlier, until recently, it was quite clear that a false attestation would be regarded as a statutory fraud, even if the mortgagee’s agent believed that the signature of the mortgagor was genuine, with the result that the mortgage would be defeasible at the suit of the mortgagor. There have been a number of cases where this situation arose and resulted in a finding of fraud on the part of the mortgagee The main ones are: AGC v De Jager,[38] National Commercial Banking Corporation of Australia Ltd v Hedley,[39] Westpac Banking Corporation v Sansom[40] and Beatty v ANZ Banking Group.[41] It seems that a finding of fraud in such cases is based solely on the falsity of the attestation. Indeed, a false attestation has been regarded as fraudulent even where the mortgagor’s signature on the mortgage was genuine.[42] It is explained later in this article that most of these cases characterised the false attestation as a fraud on the registrar.

These four cases are in stark contrast to the conclusion reached by the Victorian Court of Appeal in Russo v Bendigo Bank Ltd & Reichman,[43] where an agent who knowingly made a false attestation was not regarded as fraudulent. Russo has thus introduced doubt into an area that was previously quite settled. The facts of Russo bear repeating in some detail as a prelude to an evaluation of the correctness of the decision.

Mrs Russo’s signature was forged on a mortgage to the bank securing a business loan to her daughter and son-in-law. The forgery was perpetrated by the son-in law. The first Mrs Russo knew of the existence of the mortgage was when the bank tried to enforce it after the repayments fell into arrears. The mortgage transaction was handled by a solicitor for the bank, a Mr Reichman. The purported signature of Mrs Russo was falsely attested by Rita Gerada, a law clerk employed by Mr Reichman. Gerada was 19 years of age and had worked for three years as a law clerk for Reichman’s firm, handling most of their conveyancing transactions. In evidence, Gerada said that she did not remember the specific occasion, or meeting Mrs Russo. However, she conceded that she had been given firm and specific instructions from Mr Reichman never to attest the signature of any person unless that person had in fact signed in her presence, and said she had no reason to believe that Mrs Russo had not signed in front of her. The trial judge, Hedigan J, found that Gerada’s recollection was faulty, and that her attesting signature falsely represented that Mrs Russo had signed in her presence.[44] He found that the son-in-law had forged Mrs Russo’s signature elsewhere, and had brought the forged document into the solicitor’s office, where it was falsely attested by Gerada. Reichman was found not to have had any knowledge of the forgery or of Gerada’s failure to properly attest Mrs Russo’s signature. He therefore acted in good faith when he certified to the bank that the borrower had executed the mortgage. The court had to determine whether Gerada’s conduct was fraudulent and, if so, whether her fraud could be brought home to her employer, Reichman, and, in turn, to his principal, the bank.[45]

The trial judge found that Gerada had attested Mrs Russo’s signature when it was false to do so, although he accepted that Gerada had no reason to believe that Mrs Russo’s signature had been forged. It might have been expected that in light of the previous cases, the trial judge would have proceeded to conclude that Gerada had committed a fraud upon the Registrar in falsely attesting that Mrs Russo had signed the mortgage in her presence. Yet in spite of her false attestation, Gerada was held not to have committed a statutory fraud because she had not acted dishonestly. In the words of the judge:

She attested when it was false to do so, she believing that it was a formality. ... Whilst Gerada did falsely witness, I do not believe that she thought of it in that way.

The trial judge also held that Reichman was not guilty of any fraud. He had put the mortgage on the path to registration with an honest mind, as he was ignorant of the forgery and the false attestation. It therefore followed that the bank had no actual or constructive knowledge of the forgery or the false attestation. Accordingly, the bank was not guilty of statutory fraud and was free to enforce its mortgage against Mrs Russo’s property.

Mrs Russo appealed to the Court of Appeal on two issues: whether the clerk’s false attestation amounted to fraud, and if so, whether her false witness constituted fraud for which the bank was responsible. The case therefore raised an issue both as to the meaning of statutory fraud and as to the categories of people for whose allegedly fraudulent acts a mortgagee taking a registered mortgage will be held responsible.[46] Only the first issue is dealt with in this article.

The Court of Appeal agreed with the trial judge’s finding that Gerada was not guilty of fraud. Ormiston JA, with whom Winneke P agreed, commented that the trial judge’s conclusion that Gerada was not fraudulent might be thought surprising given that Gerada was a party to a false statement and was certainly aware that she should not have done what she did.[47] However, Ormiston JA held that despite this, the trial judge was correct in finding that Gerada was not guilty of fraud, because the critical elements of statutory fraud were absent, namely, dishonesty, moral turpitude, a want of probity, and a wilful and conscious seeking to defeat or disregard another’s rights. In a separate judgment, Batt JA agreed that Gerada was not guilty of fraud, also finding that the critical element of statutory fraud - an intention to adversely affect the rights of another person or at least recklessness as regards the affectation of such rights – was missing on the facts. Two principal reasons were advanced as to why these critical elements were lacking in Gerada.

First, Gerada was not involved in, or aware of, the forgery and had no reason to believe that Mrs Russo had not in fact signed the mortgage. All she knew was that the mortgage had not been executed by Mrs Russo in her presence. The significance of this finding is discussed below.

Second, there was no evidence to enable the court to conclude that Gerada knew that by her false attestation she was putting the mortgage forward on the path to registration.[48] Ormiston JA posited that this was a matter that could have been inferred, and suggested that it might have been inferred had the court been dealing with a person of professional training or long experience as a law clerk.[49] However he refused to make such an inference in relation to a girl of 19 who had only three years experience as a conveyancing clerk. Actual evidence was required, but was lacking. The result was that there was insufficient evidence to enable the court to conclude that Gerada was aware of the significance of her attestation in the process of putting the mortgage on the path to registration. For similar reasons Ormiston JA rejected an argument that Gerada appreciated that lodging the mortgage for registration would convey a representation to the Titles Office that the mortgage had been properly attested and that this amounted to personal dishonesty. On this point, the court found that Gerada was not aware of the significance of her role. Although she knew her attestation was inaccurate, she could well have been unaware of the difference her attestation made in the process leading to registration.[50] She did not appreciate the legal consequences of a failure to comply with what might have seemed to her to be a formality, namely that the Titles Office relies upon attestation clauses as a means of authenticating signatures. Ormiston JA took into account her age and inexperience on this issue and, for this reason, refused to draw an inference that she had the necessary appreciation of the consequences of her false statement.

The case stands for the proposition that an attestation which is untrue, but which is not accompanied by a subjective appreciation of its effect on a mortgage which is destined for registration will be regarded as false, but not fraudulent. The Court of Appeal did not use the concept of recklessness to describe Gerada’s conduct.

1 The Impact of Russo on the Process of Establishing Fraud

Russo has made it impossible to give a clear cut response to the question ‘do false attestations give rise to a finding of statutory fraud?’ Since that case, the answer will depend upon what the attesting witness understood about the role and significance of attestation clauses in the process of registration. Russo requires that before a finding of fraud can be made, the attesting witness must be shown to have known that the attestation was false (meaning that the witness appreciated that he or she represented, contrary to fact, that the mortgagor had signed the mortgage in his or her presence) and to have understood the consequences of a false attestation apropos the process of registration.

The decision of the Court of Appeal raises a number of issues. The first is procedural. It concerns how evidence of an attesting witness’ awareness of the consequences of attestation on registration is to be ascertained, assuming, for the moment, that it is required The second issue is whether Russo is singular in its insistence that the attesting witness must be proven to have had an actual appreciation of the role of an attesting witness in putting the mortgage on the path to registration, or whether a similar requirement is implicit in the earlier cases. The final and most important issue is whether the Court of Appeal is correct in its insistence that a false witness must have understood the repercussions of a false attestation before he or she can be regarded as fraudulent. This matter goes to the nature of statutory fraud. The first two issues will be discussed in this section. The final issue will be discussed in the next major section of this article.

2 Ascertaining Whether an Attesting Witness Knew of the Consequences of Attestation on the Process of Registration

In Russo the Court of Appeal indicated that a court will not readily infer that an attesting witness comprehends the consequences of his or her actions vis a vis the process of registration, but will require direct evidence on the matter. Mrs Russo’s case failed because there was no evidence before the court as to Gerada’s understanding of conveyancing procedures or the process of registration, or whether she thought that the documents she witnessed were sent to the Titles Office and registered, or were simply retained by the bank. There was no evidence as to how and by whom lodgment of the mortgage documents was affected,[51] and no evidence that Gerada knew of the significance of the attestation clauses so far as the process of registration of title was concerned. What she knew of the process of registration was simply ‘left to the imagination’.[52] If the case is indicative of the way in which the Victorian Court of Appeal is going to deal with false attestations, the lesson for counsel is to be far more rigorous in leading evidence to establish the knowledge and experience of the mortgagee’s employees and agents. In the majority of cases, an attesting witness would appreciate the consequences of a false attestation, thus it should not be difficult to establish this by way of direct evidence. In any event, it will be suggested later in this article that a statement outlining the consequences of a false attestation should be inserted on the prescribed form of instrument of mortgage.

There is a concession by Ormiston JA that a court is able to draw inferences about a witness’ knowledge, but this is qualified by a statement that it will only do so if the person concerned is professionally trained or has long experience in conveyancing matters.[53] In the case of Gerada, her youth and inexperience elicited a remarkable reluctance on the part of the court to ascribe such knowledge to her. The only thing that told against Gerada was that she had been firmly instructed by her employer not to do as she did. Ormiston JA conceded that this could have provided the court with a basis for inferring that Gerada must have been aware that something untoward would follow if she did not do as instructed, but he nevertheless chose not to draw such an inference. It is strongly suggested that the Court of Appeal should have been prepared to draw the inference that Rita Gerada had such an appreciation. Although only 19 years of age, Gerada had three years’ experience as a conveyancing clerk. With respect, this period of time is not inconsiderable. Gerada was said to ‘have had the responsibility for dealing with the majority of conveyancing transactions effected through the firm’ and to ‘have been left to deal with most aspects of conventional transactions’.[54] As an employee of a solicitor who was engaged as one of a panel of solicitors by the mortgagee bank, she must have handled dozens of conveyancing transactions during this period of time. It may be true that she did not know whether or not the Mrs Russo’s mortgage would be registered at the Land Registry or retained by the bank in unregistered form, but it is difficult to accept that a conveyancing clerk with three years experience would not have had a basic understanding of the process of registration.[55] Given that she was described as being ‘familiar with most steps along the way of a conventional transaction’, it is surely reasonable to suppose that she would have understood that documents were lodged at the Land Registry and registered, although it seems that she may not have been involved in lodging documents herself.[56]

3 Is Russo Alone in Insisting that the Attesting Witness be Proven to Have Appreciated the Role of an Attesting Witness in Putting the Mortgage on the Path to Registration?

The cases decided prior to Russo did not go to the same lengths as the Court of Appeal to draw a distinction between knowing that one’s attestation is false and understanding the effect of this falsity on the process of registration. The lack of emphasis on this bifurcation is capable of more than one explanation. On the one hand, it could be attributed to the fact that the judges in those cases did not regard knowledge of the consequences of a false attestation as an essential prerequisite to a finding of fraud. If this is the true explanation, then these cases are affirming that a finding of fraud will automatically follow a finding that the attestation is known to be false. Significantly, it would mean that Russo is out of kilter with these earlier authorities. However, the absence of explicit references in these earlier cases to the need for the attesting witness to comprehend the consequences of a false attestation does not necessarily mean that this factor was overlooked by the courts, or regarded as non-essential. There are a number of possible explanations for the lack of emphasis on ‘knowledge of the consequences’ which are consistent with such knowledge nevertheless being part of the essence of the fraud.

First, in some of the earlier cases there was evidence before the court that the agent of the mortgagee knew that the attestation was false and was either aware of, or involved in, the process of registration. For example, in AGC v De Jager,[57] the employees of AGC (the mortgagee) who were responsible for checking the mortgage documents noticed that at least one mortgagor’s signature had not been attested. Mr French, who was a dealer for AGC and who had been given the mortgage documents for the purpose of procuring the mortgagors’ signatures, told these employees that he had not been present when Mrs De Jager signed the mortgage, but proceeded then and there, with their approval, to attest her signature. In spite of their knowledge that the signature of Mrs De Jager had not been properly attested, the employees of AGC lodged the mortgage for registration and it was duly registered. None of the employees were called to give evidence. Nevertheless, an admission to the effect that they were aware of the falsity of Mr French’s attestation was subsequently made in a letter sent by AGC’s State office to its solicitor. Significantly, in the light of Russo’s case, there was also evidence that these AGC employees had lodged the mortgage documents for registration, thus establishing that they were involved in the process of registration. In the words of Tadgell J, these employees ‘must be taken to have known that due attestation of the execution of a mortgage was a prerequisite to its registration having regard to Titles Office practice as dictated by the provisions of the Transfer of Land Act 1958 (Vic)’.[58] Thus both elements – knowledge of the falsity of the attestation and knowledge of the consequences of a false attestation – were satisfied on the facts. This difference was relied on by Ormiston JA as the basis for distinguishing AGC v De Jager from Russo.

In Beatty v Australia and New Zealand Banking Group Ltd[59] an awareness of the registration process was inferred by the court. In that case, a wife’s signature was forged on a mortgage to the ANZ bank of land which she co-owned with her husband. Robyn Mills, a manager’s assistant with the ANZ bank, signed as being present as a witness to the mortgagors’ signatures without the wife, or anyone purporting to be the wife, actually being present. The Victorian Supreme Court, constituted by Mandie J, found that the mortgage bearing the wife’s forged signature must have been handed or delivered to a bank officer. Mandie J appeared to find that Mills appreciated that the mortgage would proceed to registration.[60] However, he surmised that Mills had very probably acted at the behest of another bank officer(s), thus there was probably at least one other bank officer who knew that the mortgage had not been executed by the wife in the presence of Mills.[61] Although this other officer(s) was neither identified nor called as a witness, Mandie J stated that he or she ‘must have known’ that to lodge a mortgage for registration in that state was to falsely represent that the wife had executed the document in the presence of the witness.[62] However, given that the identity of this bank officer was unknown, this was an inference of knowledge, not a finding of knowledge. There are a couple of bases on which such an inference might have been made. First, Mandie J may have assumed that this other officer was Mills’ superior and would have had experience with mortgages, although this was not overtly stated in his judgment. The second basis arose out of the fact that the forged signature of the wife was that of her married name (Hennessy), whereas the signature on the Certificate of Title to the property was in her maiden name (Beatty), the property having been purchased prior to her marriage. Mandie J found that the words ‘nee Susan Elizabeth Beatty’ had been typed on the mortgage immediately following the wife’s typewritten married name by or at the behest of a bank officer after the execution of the mortgage. According to Mandie J, the fact that the plaintiff’s maiden name had been typed on the mortgage subsequent to its execution demonstrated an appreciation on the part of the person who inserted it, that this addition was necessary in order to obtain registration. Evidence given by bank officers in the case revealed an awareness that such an alteration needed to be initialled by the mortgagors. Mandie J concluded that it was a necessary inference that whoever made the alteration could not have been unaware that it would falsely convey to the registrar that the alteration had been made before the mortgage was executed by the mortgagors.[63] Thus an understanding of what was required for registration was assumed to exist.[64]

In some of the cases, the lack of emphasis on ‘knowledge of the consequences’ can be explained on the basis that the court was entitled to draw inferences against the attesting witness because he or she was not called to give evidence. For example, in National Commercial Banking Corporation of Australia Ltd v Hedley,[65] the attesting witness, Mr Grace, was not called to give evidence. Thus the court had received no direct explanation from him as to how he came to attest that Mrs Hedley had signed the mortgage in his presence. Furthermore, there appears to have been no direct evidence before the court as to what Mr Grace understood about the process of registration and the effect of a false attestation upon that process. Given the emphasis in Russo on the subjective understanding of the attesting witness it is pertinent to consider how Hodgson J arrived at his finding that Grace’s attestation was fraudulent. The basis for the decision appears to be that since no explanation was proffered as to why Grace was not called, Hodgson J regarded himself as entitled to infer that the evidence Grace would have given had he gone into the witness box would not have assisted the bank.[66] Hodgson J therefore proceeded to infer that Grace had witnessed the signature in the absence of Mrs Hedley and that in making the assertion that he did to the Registrar-General, Grace either knew it was false or had no honest belief in its truth, or acted recklessly as to whether or not it was true.[67] It is interesting to note that the inferences drawn by Hodgson J all related to Grace’s knowledge of the false attestation and not to his knowledge of its consequences. No specific findings were made by the Hodgson J as to the extent of Grace’s experience in these matters, whether he had lodged the mortgage for registration, or what he knew about the process of registration although there are statements in the judgment that Grace ‘knew the document was to be submitted to the Registrar-General for registration’ and that he ‘put his signature to the document with the intention of obtaining registration by representing something to the Registrar-General which he knew to be false or at the very least was reckless about’. However, it is unclear what evidence Hodgson J based these comments on. It is difficult to proffer an opinion as to whether Hedley is consistent with Russo. It certainly does not overtly emphasise the need for an attesting witness to be shown to have appreciated the consequences of a false attestation. The case may simply demonstrate that a mortgagee will not be permitted to avoid a finding of fraud by refusing to put the attesting witness in the witness box.

As noted earlier, the conclusions reached by Hodgson J in AGC v De Jager, outlined in the previous paragraphs, were made in the absence of viva voce evidence from the employees in AGC's Preston office. None were called as witnesses, although there was evidence to suggest that they could have been called. Thus there was no direct testimony as to what they knew of the process of registration and the effect on that process of a false attestation. Moreover, the author of the letter written to AGC’s solicitor by its State Office was neither identified nor called to give evidence at the trial, despite the serious admissions contained in the letter. Nevertheless, Tadgell J was prepared to find fraud on the part of one or more of the employees in the Preston office for the reasons outlined earlier. The lack of direct evidence that was so important to the court in Russo was not as problematic in AGC v De Jager because the fact that the Preston employees could have been called to give evidence, entitled Tadgell J to draw the inference that nothing they might have said in evidence would have assisted AGC’s case.

Finally, in many of the cases it would have been obvious to the court that the attesting witness was professionally trained and experienced in handling mortgage transactions, especially those holding managerial positions. However, although these witnesses may have been assumed by the court to have a familiarity with the process of registration, in no case did the court underscore the witness’ depth of experience as a basis for the decision.

Thus it can be seen that there are possible explanations for the courts’ lack of emphasis on the need for familiarity with the process of registration that are consistent with it nevertheless being a requirement. However, where the true explanation lies is a matter of conjecture. It is therefore not possible to draw any firm conclusions from these earlier cases as to which of these explanations is most convincing and thus whether these authorities are consistent with Russo. However, it is at least telling that an appreciation of the consequences of a false attestation requirement was not overtly emphasised by the courts as a separate and independent requirement of fraud in the attestation process. It is also interesting that, with the exception of AGC v De Jager, these earlier cases were not referred to by the Court of Appeal in Russo.[68] Thus the cases are not easy to reconcile.[69] This is particularly true of Westpac Banking Corporation v Sansom,[70] where Rolfe J seemed to focus solely on the fact that the attesting witness, Mr Tongue, falsely attested that Mr Sansom was known to him and had signed the mortgage in his presence. Although Mr Tongue was called to give evidence, no mention was made as to what he knew about the ultimate destiny of the mortgage document or of the process of registration. This may be due to the fact that the case is not reported in full. However, that part of the judgment which is reported does not disclose an emphasis on the need for knowledge of the consequences of a false attestation.

D The Rationale for Regarding False Attestations as Fraudulent

In Russo, it was the Court of Appeal’s view of the nature of statutory fraud that formed the basis for its refusal to regard an attesting witness as fraudulent unless the witness is shown to have appreciated the consequences of a false attestation on the process of registration. It is now necessary to consider whether the Court of Appeal in Russo was correct in its insistence that a false witness must have understood the repercussions of a false attestation on the process of registration before he or she can be regarded as fraudulent.

1 Defining Statutory Fraud

Despite the fact that the fraud exception to indefeasibility has been part of the Torrens System since its inception, Australian courts are still grappling with aspects of the meaning and ambit of statutory fraud. This is largely due to the fact that none of the Torrens statutes contain a definition of fraud. The only assistance that can be derived from the legislation is that notice is expressly excluded from the statutory concept.[71] Apart from this, the meaning of fraud has been left to the interpretation of the courts. There appears to be general consensus amongst the courts as to whose fraud is relevant for the purposes of the statutory exception. The consequence of embracing immediate indefeasibility is that the fraud must be brought home to the registered proprietor or his or her agent.[72] This means that the registered proprietor or his or her agent must either have committed a fraud, or known that the transaction is tainted with the fraud of a third party.[73]

What remains unclear is determining when fraud has occurred. This involves ascribing some content to the concept of fraud. In Russo, the majority of the Court of Appeal affirmed that before a person can be labelled as fraudulent under the legislation, he or she must be shown to have been personally dishonest, and to have consciously sought to defeat or disregard the rights of another person. The majority relied for this definition of fraud on the definition propounded by the New Zealand Court of Appeal in Waimiha Sawmilling Co Ltd v Waione Timber Co Ltd[74] where Salmond J stated that:

The term ‘fraud’ is not here used in its most restricted sense as including mere

deceit, nor in its wider sense as including the constructive or equitable fraud

of the Court of Chancery. It means dishonesty – a wilful and conscious

disregard and violation of the rights of other persons.

Other phrases used by the majority which were equated with personal dishonesty include ‘moral turpitude’ and ‘want of probity’. It is hard to know whether these critical elements of ‘personal dishonesty’ and ‘conscious disregard’ were regarded by the majority as two separate and independent elements, both of which must be present before fraud will be found, or whether they are simply different ways of expressing the same requirement. One gets the impression that Ormiston JA, with whom Winneke P agreed, regarded them as two sides of the same coin: dishonesty is made out if a person wilfully disregards or violates the rights of another. The New Zealand Court of Appeal also seemed to equate the two concepts.

By contrast, Batt J appears to have treated the two requirements as separate and independent. On the one hand he appeared to regard Gerada as having acted dishonestly in so far as she knew that her attestation was false:

I cannot bring myself to think that to sign an attestation clause which states

that a person executed a document in the presence of the attesting signatory

is honest when the attesting signatory knows that the person stated to

have executed the document in his or her presence did not do so.[75]

However, Batt JA proceeded to state that to constitute statutory fraud, more is required:

there must be an intention to affect adversely the rights of another person or at least recklessness as regards the affectation of such rights.[76]

It was the absence of this element which led Batt JA to conclude that Gerada had not committed statutory fraud.

These aspects of fraud, whether separate or intertwined, will now be discussed in the context of false attestations.

2 ‘Dishonesty’, ‘a Conscious Disregard for the Rights of Others’ and False Attestations

Russo is not alone in its assertion that statutory fraud entails personal dishonesty. Indeed, the cases routinely treat personal dishonesty as an essential element of statutory fraud, including the attestation cases decided prior to Russo.[77] Even cases which have broadened the concept of statutory fraud to include some species of equitable fraud maintain that statutory fraud requires dishonesty or moral turpitude. Dishonesty is the concept used by the courts to anchor the concept of statutory fraud, and to prevent it from straying into the realm of pure equitable fraud or constructive fraud. The problem is not in requiring that there be dishonesty, but in identifying when it exists. It is at this level that Russo is informative since it goes into considerable depth in its attempt to put its finger on what dishonesty means in the context of false attestations. In so doing it reached a conclusion that is at odds with that reached in the earlier cases on false attestation.

Having emphasised the need for personal dishonesty, the Court of Appeal proceeded to give three reasons in support of its conclusion that Gerada had not been personally dishonest. First, the court reiterated over and over again that Gerada believed that the signature of Mrs Russo was genuine, thus she was not a knowing participant in the son-in-law’s scheme to deprive his mother of her property.[78] It is undisputed that if Gerada had known or suspected that the signature on the mortgage was not that of Mrs Russo, she would have been guilty of what Hodgson J described in Hedley as a grave form of fraud. However, the fact that Gerada held a belief in the genuineness of Mrs Russo’s signature did not negate fraud. It simply eliminated one type of fraud, leaving the court to determine whether there was fraud of a different nature on Gerada’s part. This compelled the court to make a decision as to whether her false attestation was fraudulent in and of itself. It has already been explained that in each of the earlier cases, the attesting witness was found to have been fraudulent, notwithstanding that he or she held a belief in the authenticity of the mortgagor’s signature.[79]

Second, the court emphasised that Gerada had nothing personal to gain by her false attestation, except possibly the saving of some time and trouble.[80] However, neither the employees of AGC, nor Mr Grace, Mr Tongue or Mrs Mills stood to make any personal gain by their false attestations or by the coming into existence of the mortgages, and yet all were regarded as guilty of statutory fraud.[81] It is frequently the case that a witness makes a false attestation in order to cut corners, usually to save the mortgagor the trouble of coming in to the bank or the solicitor’s office to sign the mortgage document.[82] Or the witness might simply have regarded the attestation clause as a formality that could be lightly ignored. In so far as Russo emphasises the absence of personal gain as a basis for finding that Gerada was not dishonest, the case is out of line with the earlier decisions which clearly regard it as possible for a person to have acted dishonestly without receiving a concomitant personal gain. In its emphasis on Gerada’s ignorance of the forgery and the absence of personal gain, Russo is open to the interpretation that it is attempting to reserve the concept of personal dishonesty for persons who are seeking some financial advantage. Ironically, an agent who is privy to a scheme to defraud a mortgagor by forgery and false attestation and who has something to gain from the scam may be held to have acted outside the scope of their employment, with the result that their ‘obvious’ dishonesty is not brought home to the mortgagee.[83] Thus if Gerada had had something to gain from the false attestation, her fraud may not have been brought home to the bank.[84]

The third reason why Gerada was not dishonest related to the false attestation itself. As explained earlier, the majority regarded Gerada’s apparent lack of knowledge of the consequences of her false attestation as precluding it from treating her attestation as fraudulent.[85] One can only assume that if Gerada had been shown to have understood the consequences of her false attestation vis a vis the process of registration, the Court of Appeal would have been prepared to regard her as dishonest, as it would have had no basis on which to distinguish the case from AGC v De Jager. As it was, Gerada had been false but not dishonest. Whether this emphasis on knowledge of the consequences of one’s false attestation is consistent with the earlier cases has been discussed above.

3 Is Russo Correct in its Insistence that an Attesting Witness Appreciate the Consequences of a False Attestation on the Process of Registration?

Is Russo correct in regarding a false witness as dishonest only where that person appreciated the consequences of the falsity on the process of registration? Or should the essence of the personal dishonesty be the false attestation simpliciter, that is, the untrue representation made by the false witness that he or she was present and saw something occur when he or she was not in fact present and did not see it occur? The requirement that the false witness must have ‘wilfully and consciously sought to defeat or disregard the rights of another person’ sheds light on this issue because it makes it necessary to establish whose rights a false witness has sought to defeat or disregard. Having identified this person, it is easier to determine whether his or her rights can only be said to have been disregarded if the attesting witness understood the consequences of the false attestation. As regards the identity of the defrauded person, there are only two candidates: the Registrar or the mortgagor.

In almost all of the false attestation cases, the courts have characterised a false attestation as a fraud on the Registrar, rather than as a fraud on the mortgagor.[86] For example, in AGC v De Jager Tadgell J stated that:

... when AGC presented the subject instrument of mortgage for registration, it was representing to the Registrar of Titles, as against the mortgagors, an honest belief that they, and each of them, had executed the instrument in the presence of a witness who, if it came to the point, could be relied on to prove the execution. To lodge an instrument for registration in the knowledge that the attesting witness has not been present at execution deprives the lodging party of an honest belief that it is a genuine document on which the Registrar can properly act.[87]

In what way does a false attestation amount to a conscious and wilful seeking to defeat or disregard the registrar’s rights? The Registrar is not a victim of fraud in the sense that he or she suffers personal loss as a result of the registration of the mortgage.[88] However, a false attestation constitutes a violation of the registrar’s right to take the mortgage document at its word when it states that the mortgagor signed in the presence of an attesting witness, and to proceed on the assumption that the mortgage document was properly executed and can be safely registered. A false attestation is therefore an attack on the integrity and reliability of the registration system; the false witness has not acted to quell potential scams by properly employing the protections that have been built into the system.

In Russo the Court of Appeal did not consider it appropriate to regard the Registrar’s rights as having been disregarded by a false witness who did not appreciate that the mortgage document would be registered or that the false attestation would taint the registration process. There is obvious merit in the contention that a conscious disregard of the registrar’s rights cannot have occurred if the attesting witness did not understand that the mortgage document was destined for registration. However, there is an equally tenable argument that a person who falsely attests a signature can sensibly be regarded as having defrauded the registrar, irrespective of whether that person understood the consequences of the false attestation. Such a witness has consciously made an untrue representation and if personal dishonesty is at the heart of fraud, why is it not an appropriate description for a person who has told a deliberate falsehood? An attesting witness must at least be taken to have appreciated that his or her verification of the mortgagor’s signature was necessary for the proper execution of the mortgage, and that the verification was untrue. If the attestation is knowingly false, why is it necessary for the witness to have understood that the attestation clause was there to preserve the integrity of the registration process? An attesting witness can be accurately described as having ‘made assertions to the registrar’ or as having ‘put the mortgage on the path to registration’, even if they are unaware of the consequences of a false attestation. Viewed in this light, these well-employed phrases become descriptions of the outcome of that person’s actions in falsely attesting a mortgage that has since become registered, rather than descriptions of what that person subjectively perceived to be the result of his or her actions.

In reaching the conclusion it did, Court of Appeal appears to have been motivated by a desire to eschew an objective assessment of fraud and to prevent notions of equitable fraud from creeping into the statutory definition. It was crucial to the court that statutory fraud should be rooted in subjective wrongdoing, rather than in an objective assessment of what is or is not acceptable behaviour.[89] This explains the court’s reluctance to find Gerada guilty of fraud in circumstances where it was unclear whether she appreciated the consequences of her actions. However, even if Gerada was unaware of the consequences of her actions vis a vis the registrar, she certainly knew that she should not have done what she did. There was no question of her simply falling short of some objective standard without any personal appreciation of wrongdoing. Even the Court of Appeal conceded that hers was ‘no mere oversight or casual approach to the attesting of signatures which might be thought to be commonplace in the community as a whole.’[90] Gerada could hardly be described as a person who presented a forged document for registration in the honest belief that it was a genuine document which could properly be acted upon, and this is what is required if the mortgagee’s title is to be regarded as indefeasible.[91]

Although the emphasis in the cases has been on the rights of the Registrar, is it also appropriate to treat a false witness as having consciously disregarded the mortgagor’s rights? If the attesting witness knew or suspected that the mortgagor had not signed the mortgage, then it is obvious that the witness has consciously disregarded the mortgagor’s rights. But what if the attesting witness believes the mortgagor’s signature to be genuine? Clearly, an attesting witness who believes in the authenticity of the mortgagor’s signature must be taken to have acted on the assumption that the mortgagor had agreed to mortgage his or her property. Accordingly, the witness cannot be reasonably regarded as having consciously sought to deprive the mortgagor of the property pursuant to a forged document.[92] However, it does not follow that the mortgagor’s rights have not been consciously disregarded by a false witness who believes the signature is genuine. On the contrary, it is argued that a false witness should be treated as having consciously deprived the mortgagor of his or her right to the protection that proper attestation is designed to provide. Although courts have tended to look at the situation in a broad, systemic way by linking this protection to the effect of registration, it is equally apposite to view the situation from the perspective of the mortgagor, and to regard attestation as being imposed for the protection of the mortgagor as an individual.

Of all the cases, only AGC v De Jager considered attestation from the mortgagor’s perspective and expressly recognised that a falsity amounts to a disregard of the mortgagor’s rights. In that case, Tadgell J remarked that AGC had never had any dealings with Mrs De Jager and therefore had no basis for assuming that she approved of the mortgage unless they were satisfied that she had signed it, which they had no basis for supposing. He said:

In considering whether fraud, in terms of s 42, has been established, one is, of course, not enquiring whether there was fraud in a vacuum but whether there was fraud in the context of particular circumstances .... It is sometimes said that there are no degrees of fraud. Nevertheless in concluding here that the conduct of AGC, through its employees, was dishonest vis a vis Mrs De Jager, I regard the ... fact that AGC had no contractual or other relationship with Mrs De Jager, as making a plain case plainer. AGC had the means of confirming or denying what should have been, to a company in its position, a suspicion of irregularity, whereas she was, in effect, an entirely innocent and ignorant third party. In a contest between them, one may fairly conclude that AGC was in a position of one who ... abstained from making enquiries for fear of learning the truth.[93]

In other words, Tadgell J was of the opinion that an unwitnessed signature should automatically raise a suspicion of irregularity in the mind of an attesting witness and if that witness proceeds to attest the signature, he or she should be regarded as having consciously disregarded the mortgagor’s rights. The suspicion of irregularity should be all the greater if the mortgagor is not known to the attesting witness. A person who falsely attests a mortgage has told a lie, and even if he or she did not intend the mortgagor to suffer loss, and actually assumed that the attestation was giving effect to the mortgagor’s intentions, the witness still told a lie and that lie amounted to a disregard of the mortgagor’s rights. Portraying the situation in this way does not require the witness to have understood the process of registration.

It is therefore concluded that, whether the matter is viewed from the perspective of the registrar or of the individual mortgagor, it should not be necessary to show that the attesting witness understood the process of registration before a finding of fraud can be made. It should only be necessary to show that the witness appreciated that his or her attestation was contrary to fact.

4 The Practical Consequences of the Findings in Russo

Undesirable practical consequences could ensue if it is an essential prerequisite to a finding of fraud by a false attestation that the attesting witness understands the consequences of the false attestation on the process of registration. Such a requirement is capable of producing inconsistencies, because it means that a false attestation may amount to fraud in one case but not in another. For example, two bank officers might each falsely attest to having been present when a mortgagor signed a mortgage, but if Russo is correct, the results in terms of fraud will differ if one officer is experienced in conveyancing matters and understands the significance of his or her actions, and the other does not. The approach taken in Russo allows mortgagees to shelter behind an employee’s inexperience and ignorance of the registration process. Thus the case provides no incentive for banks to train and supervise their officers properly. If mortgagees choose to use inexperienced persons to attest signatures then they should suffer the consequences of so doing, rather than be rewarded for so doing. In light of the fact that most attesting witnesses would understand the nature of their work, the absence of evidence that was such a stumbling block to the court in Russo is not going to be commonplace. Consequently, it is conceded that this objection may not have a great deal of practical application. It would only come into play in the event that a court was dealing with an attesting witness who was very young or new to the job.[94]

The conclusion reached in Russo is also open to criticism on the ground that it does not compel witnesses to take a serious approach to attestation requirements, and in fact endorses the lax approach to attestation that is said to be widespread in the community. Indeed, the trial judge treated Gerada’s belief that attestation was a mere formality as a ground for absolving her. In the Court of Appeal, Batt JA warned against taking such a view of attestation clauses, but his exoneration of Gerada belied his warning. The approach taken by Tadgell J in AGC v De Jager is far more compelling. In that case, AGC submitted that the lack of a witness to Mrs De Jager’s signature was, at most, a formal irregularity that was sought to be overcome by French's attestation. Tadgell J acknowledged that it is commonplace for members of the community to view attestation clauses as mere formalities that can be treated lightly. Indeed, His Honour appeared to concede that to treat a witness who falsely attests a mortgagor’s signature as fraudulent where that witness had no reason to suspect that the signature was not genuine and had nothing personal to gain from the false attestation may not accord with community views about the nature of fraud. However, Tadgell J stated in the strongest terms that attestation requirements are not mere formalities. Rather than take his cue from community perceptions, Tadgell J showed a preparedness to use the statutory concept of fraud as a tool to eradicate this casual approach by ascribing fraud to agents of mortgagees who exhibit this blasé attitude. Presumably His Honour was hoping that, given time, judicial expectations would shape community views.

5 The Appropriateness of Fraud as a Label for False Attestation

In Russo, the Court of Appeal was at pains to ensure that dishonesty remains primarily a subjective concept, and that it cannot be made out by showing that particular behaviour is in all the circumstances dishonest by objective standards.[95] In so far as Russo emphasises the need to ‘get inside a person’s head’ in order to show that the person subjectively understood the consequences of their actions, the Court of Appeal demonstrates an appreciation of the seriousness of labelling a person’s conduct as fraudulent. A person who has been branded by a court as fraudulent carries a stigma and the Court of Appeal appears to be insisting that before this can be allowed to occur, the person must be shown to have had that degree of moral turpitude or want of probity that deserves to be characterised as fraud. According to the court, fraud would have been an appropriate description of Gerada’s conduct only if she had known about the forgery or had something to gain by it[96], or if she had appreciated the consequences of her actions vis a vis the process of registration. It is argued that the Court of Appeal was overly cautious in its concern that statutory fraud might decline into objectivity in the context of false attestations. It has already been argued that a witness who makes a false attestation has been guilty of subjective wrongdoing, namely, the untrue representation contained in the attestation. The cases decided prior to Russo all castigate the attesting witness for the deliberate untruth. Provided the person appreciates that they have made a representation that is contrary to fact, the person’s wrongdoing is not purely objective. It is not a case of the fraud exception being used as a tool to promote policy objectives which are designed to cause people to conform to an acceptable standard of behaviour.

In deciding whether a false attestation should be classed as fraudulent, courts should bear two things in mind. The first is that fraud is not being considered in a criminal law context, but in the context of a statute that, in the absence of fraud, would permit a mortgagee to enforce a forged mortgage in reliance on the concept of indefeasibility of title. In the words of the High Court, statutory fraud is ‘not itself directly generative of legal rights and obligations’.[97] Its role is to ‘qualify the operation of the doctrine of indefeasibility upon what would have been the rights and remedies of the complainant if the land in question were held under unregistered title’.[98] Second, when giving content to the requirement of personal dishonesty in the context of a false attestation, the court should bear in mind that the false witness is not being exposed to criminal sanctions or civil penalties but rather, is being judged in his or her capacity as an agent of a mortgagee who is seeking to enforce its registered mortgage. The bottom line is that it is the mortgagee as an entity that stands to gain if the registered mortgage is held to be indefeasible, and it is the mortgagee as an entity that stands to lose by a finding of fraud. Given that mortgagees benefit from the mortgage, it is not unreasonable for the courts to use the fraud exception as a tool to compel their agents and employees to be rigorous in checking signatures so that the registration system operates with as much integrity as possible. To take this view of fraud is not to render it into a purely objective concept, which is not being advocated, but simply to put the false attestation situation in its proper context. To do otherwise is to allow mortgagees to profit from their agents’ wrongdoing.

III The Mortgagee’s Agent Attests the Signature of the Mortgagor but the Person Purporting to be the Mortgagor is an Impostor

The second scenario with which this article is concerned arises where a person posing as the mortgagor attends the offices of the mortgagee (or the mortgagee’s solicitor) and signs the mortgage. An agent of the mortgagee witnesses the signature of the imposter, believing the person to be the mortgagor, and the mortgage is duly registered. This has occurred in two cases: Ratcliffe v Watters[99] and Grgic v ANZ Banking Group.[100] In both cases, the real mortgagor argued that the mortgagee, through its agents, was guilty of statutory fraud. However, in both cases the court declined to find fraud on the part of the mortgagee, with the result that the mortgage could be enforced against the property of the hapless registered proprietor cum mortgagor.

The specific facts upon which the fraud allegation was built differed somewhat between the two cases. In Ratcliffe v Watters, it was alleged by Albert Watters, the defrauded registered proprietor, that the solicitor for the mortgagees, in his handling of the transaction, was recklessly indifferent to the identification of the registered proprietor/ mortgagor, and that this indifference was of such a degree as to be tantamount to fraud which could be brought home to the mortgagees for whom he acted. Particular objection was taken to the solicitor having attested that the registered proprietor was personally known to him when he had only just met the man purporting to be ‘Albert Watters’. In similar vein, in Grgic’s case, Mr Grgic Snr, the defrauded registered proprietor, alleged that in so far as Mr Sercombe (a bank employee) certified that the man posing as Mr Grgic Snr was ‘personally known to him’ when the two men had never met before, the certification was false. It was also alleged that the execution of the mortgage on ANZ’s behalf by the manager, Mr Jospe, was false because he certified the dealing to be correct for the purposes of the Real Property Act and yet he knew it was not, because he knew that Mr Grgic Snr was not personally known to Mr Sercombe.[101] Mr Grgic Snr argued that the attestation and certification of documents in such circumstances constituted fraud according to AGC v De Jager and National Commercial Banking Corporation of Australia Ltd v Hedley.

In neither case was it suggested that the attesting witness was privy to the fraudulent scheme (concocted in both cases, by children of the registered proprietor) or that he knew or suspected that the mortgagor was an imposter. Rather, it was alleged that the attesting witness was reckless as to the identity of the mortgagor. In Ratcliffe, Street J refrained from deciding whether statutory fraud could be satisfied by recklessly indifferent conduct because he found on the facts that the solicitor in question had not acted recklessly. However, in Grgic, the Court of Appeal was prepared to accept that reckless conduct could suffice for statutory fraud, although it declined to find that the bank officers had acted recklessly.

Both Ratcliffe and Grgic raise the issue of the degree of familiarity that is required before an attesting witness can honestly and plausibly claim that a mortgagor is known to him or her. Both cases indicate that the degree of familiarity need only be slight and need not be based on a pre-existing personal acquaintance with the mortgagor, since in neither case had the attesting witness ever set eyes on that person. Further, both cases suggest that the requisite familiarity can arise from what is known or can be inferred about the mortgagor from the circumstances in which the document was signed by the imposter. In both cases, there was enough information that could be gleaned from the circumstances which enabled the agent to witness the signature in circumstances which did not amount to fraud. In Ratcliffe v Watters, Street J held that when the solicitor’s actions were put into context, there were at least three factors which indicated that there was no act or omission on his part which rendered him party to a course of conduct so reckless as to be tantamount to fraud. The first concerned the apparent bona fides of Susan Watters, who was the daughter of the real registered proprietor and the one responsible for concocting the fraudulent scheme. It was Susan Watters who had made the initial approach to the solicitor and indicated to him that she wished to borrow money on the security of the land that then stood in the name of her father. She falsely led the solicitor to understand that the land would be transferred to her by her father. The mitigating factor in relation to Susan Watters was that she had been recommended to the solicitor by an officer of a finance company who was known to the solicitor.[102] Second, Susan Watters was in possession of the Duplicate Certificate of Title. This was significant because it tended to substantiate her story. Third, the persons in attendance at the meeting at which the land was supposedly transferred from Albert Watters to Susan Watters and then mortgaged to the mortgagees, deliberately created an atmosphere which would set at rest any doubts that the solicitor might otherwise have had concerning the identity of the father.[103]

In similar vein, the Court of Appeal in Grgic held that the phrase ‘personally known’ did not require the degree of intimacy for which Mr Grgic Snr’s counsel contended, and that even if it did, Mr Sercombe’s attestation could not be regarded as fraudulent unless he either knew that the impersonator was not Grgic Snr, or acted recklessly, without caring whether or not the impersonator was Grgic Snr. On the facts, the evidence demonstrated that Mr Sercombe really believed that the impersonator was Grgic Snr, and there were a number of factors which tended to substantiate that belief. First, the attesting witness, Mr Sercombe, had been introduced to ‘Mr Grgic Snr’ by established customers of the bank, namely, his son and daughter-in-law. Second, as in Ratcliffe v Watters, the impersonator was able to produce the Duplicate Certificate of Title to the property.[104] Third, the impersonator was able to produce other documents which contained the signature of the real Mr Grgic and which enabled the bank officers to compare the signatures.[105] The same observations were made in respect of the manager’s certification of the mortgage as correct. The Court of Appeal contemplated that fraud might have been found had the bank officers sought to take unfair advantage of Mr Grgic. Such an inquiry seems to be tantamount to asking whether the bank officers consciously sought to disregard Mr Grgic’s rights. However, there was no evidence that this was the case. On the contrary, a diary note made by Mr Jospe showed that the impersonator had been informed of the nature of his obligations and offered the opportunity to take the documents away and obtain independent legal advice from a solicitor, an offer he naturally declined. The court concluded that a person who presents a forged document for registration or a document which has been fraudulently obtained is not guilty of fraud if that person honestly believes it to be a genuine document which can be properly acted upon. A less than meticulous practice as to the identification of persons purporting to deal with Torrens System land does not amount to conduct so reckless as to be tantamount to fraud.

Interestingly, all of the information which formed the basis for the beliefs of the attesting witnesses in these two cases was received passively by those witnesses. There was no suggestion that to avoid a finding of fraud an attesting witness must conduct some independent inquiries of his or her own.

The conclusions in Ratcliffe and Grgic regarding statutory fraud were correct. Indeed, in one sense, the mortgagees were as much the victim of deception as the mortgagor. Clearly, neither the solicitor in Ratcliffe nor the bank officers in Grgic could be described as having acted dishonestly or with moral turpitude, or as having consciously sought to defeat or disregard the rights of others. Unlike the false attestation cases, there was no subjective awareness of any problem in the transaction, and in neither case did the agent concerned make an attestation which he knew or suspected was contrary to fact. Counsel for the bank in Grgic was correct when he argued that AGC v De Jager should be distinguished on the basis that AGC’s employees knew that the mortgage had not been signed by an attesting witness who was present at the time the mortgagor apparently signed the mortgage, yet they allowed the mortgage to go forward for registration.[106] Likewise, Hedley was distinguishable on the basis that the bank officer had attested the mortgagor’s signature when in fact the mortgagor had never attended the bank nor met the officer.[107] However, the conclusions reached in Ratcliffe and Grgic should not be taken to mean that a witness who attests the signature of an imposter can never be held to be fraudulent. As noted earlier, in Grgic the court clearly contemplated that reckless conduct was capable of amounting to fraud. However, fraud would presumably be found only where the attesting witness had no grounds for believing that the imposter was the mortgagor.

In spite of their refusal to regard the agents of the mortgagee as fraudulent, the judges in Ratcliffe and Grgic all expressed disapproval at the way in which the agents had acted. In Ratcliffe, Street J took the opportunity to comment on what he described as the rather loose conveyancing practices regarding the identification of transferors in connection with the attesting of signatures. Street J stated that, on the facts, the solicitor had the ‘slenderest justification’ for positively asserting that the individual who had affixed his signature on the mortgage was personally known to him, and that the certification that he personally knew the father was incautious. However, Street J acknowledged that the solicitor only did what many other solicitors would have done in similar circumstances. His Honour stated that in view of the effect of registration on void transfers, it was necessary to remind solicitors of the significance of identifying transferors or mortgagors with the persons who represent themselves to be authorised to transfer or mortgage.[108] Similar criticisms were voiced by the New South Wales Court of Appeal in Grgic, although in more muted language. There, Powell JA stated that with the benefit of hindsight these bank officers were probably ‘less meticulous than they might have been’ in seeking to establish that the person introduced to them was in truth Mr Grgic Snr.[109] In light of the conclusions reached in these cases, mortgagees have been given little incentive to improve sloppy identification practices, despite these words of warning.

Requiring proof of identification where a putative mortgagor is unknown to officers of the bank is not an onerous obligation. Banks routinely require proof of identification when a new account is opened, so why not when they are proposing to lend a large amount of money over the security of property, which is usually a person’s home? Persons inclined to object to the introduction of such measures on the basis that the Torrens System is designed to facilitate cheap and quick conveyancing transactions should appreciate that what is being suggested here is not that the mortgagee investigate the title, but that the mortgagee verify identity. In any event, the production of documents such as a passport, birth certificate, a driver’s licence etc are relatively easy for a mortgagor to produce and would add little expense, length or complication to the mortgage transaction.

Through what mechanism could such an obligation be imposed and enforced? It has already been explained that the courts have been justifiably reluctant to use the fraud exception as a tool to overcome deficiencies in identification practices. However, it is argued that courts should consider (or, in the case of the New South Wales Court of Appeal, reconsider) whether a mortgagee who has failed to obtain adequate proof of identification from a mortgagor should be exposed to an in personam exception. In particular, courts need to determine whether an in personam claim can be based in negligence, and, if so, what actions the mortgagee should be expected to take in order to avoid a finding of negligence. Earlier in this article it was noted that Mr Grgic had argued that the bank owed him a duty to exercise reasonable care in ascertaining that the apparent mortgagor was in fact the registered proprietor of the land. He alleged that the bank breached this duty by, inter alia, failing to adopt careful and prudent business practices for the adequate identification of the apparent mortgagor. The court held that even if it was accepted that the bank owed Mr Grgic a duty to exercise reasonable care in ascertaining that the apparent mortgagor was in fact the registered proprietor of the land, the bank’s officers did not fail to exercise reasonable care. In the words of Powell J:

Not only was Mr Sierra introduced to them by the ANZ’s known customers, Mr Grgic Jnr and his wife, as Mr Grgic Jnr’s father, but ... Mr Sierra had with him not merely the certificate of title, but the form of mortgage which Mr Grgic Snr had apparently earlier signed in relation to then proposed loan to Mr Grgic Jnr and his wife by the CBA, and, Mr Sierra was offered the opportunity to take the proposed new form of guarantee mortgage away so that he might consider it and take legal advice in respect of it before signing it.[110]

It is suggested that mortgagees should be expected to be alive to the fact that these scenarios are ripe for fraud. Accordingly, the courts should reconsider whether it should suffice for mortgagees to be passive recipients of information put before them by putative mortgagors, or whether it is more appropriate to expect them to take the initiative and make positive inquiries as to identity. It is suggested that the factors that were relied upon by the mortgagees in these two cases to avoid a finding of fraud should not suffice to avoid an in personam claim based on negligence. For example, possession of Duplicate Certificate of Title may make a putative mortgagor’s story believable, but it does not establish his or her identity. It is likely that a person who is going to practice a scheme of this nature is going to have to have possession of the Duplicate Certificate of Title and mortgagees should be alive to this fact. Furthermore, offering the mortgagor the opportunity to take independent legal advice may demonstrate that the bank is not seeking to take advantage of that person, but it does not have anything to do with establishing identity. Finally, in light of the fact that so many of the cases involve deception practiced by family members on each other, mortgagees should be wary of dealing with family members who purport to act on behalf of others.

IV Suggestions for Reform

It has been argued in this article that the position in relation to false attestations post Russo is unsatisfactory. It has also been argued that although the imposter cases were correct in so far as the courts refused to find fraud, they did little to set appropriate standards of conduct for mortgagees. It now remains to provide some suggestions as to what could be done to rectify the problems that have been identified in this article. First, there are some simple alterations that could be made to the forms of mortgage that would improve the situation. For example, the forms of mortgage could be re-designed to require the mortgagor to provide evidence of identity. Ideally, the form should spell out what evidence will suffice (for example, a passport or a driver’s licence). The evidence of identity that is required should include a photograph and a signature. This would significantly reduce the chance that the person purporting to be the mortgagor is an imposter. Further, the attestation clause could include a warning to the attesting witness along the following lines: ‘To falsely attest that you have seen a person sign the mortgage may be regarded as fraud by a court of law.’ This would make clear to the witness the consequences of a false attestation, thereby avoiding the situation that arose in Russo.

Second, and more fundamentally, changes to the Torrens System could be made which would impose consequences on mortgagees who adopt sloppy and careless business practices. At present, the Torrens System is operating in a faulty manner in so far as it relies heavily upon banks and lawyers to do all the checks in mortgage transactions, whilst at the same time supplying them with little or no incentive to do so. The point has already been made that cases such as Russo and Grgic do not provide banks with any inducement to review their procedures. It is possible that changes to the Torrens System could emanate from the courts, but given their recent tendency to set the threshold of fraud so high, this is unlikely. Courts would either need to significantly widen the concept of fraud, or expand the in personam exception so that it catches some of the slack practices identified in this article. Courts inclined to develop the in personam exception would need to determine whether it should parallel the fraud exception so that a mortgage could be removed from the register if the exception is made out, or whether it should be restricted to forms of relief that do not involve rectification of the register. It is more probable that any reform of the law would come in the form of legislation. The recently enacted Land Registration Act 2002 (UK) contains provisions which permit the register to be rectified in circumstances that are wider than fraud.[111] Australian parliaments might consider whether similar legislation should be introduced here.

There are other matters that arise out of the cases discussed in this article that, for reasons of space, have not been addressed in this article. One matter arises out of the fact that mortgagees are usually corporations. This gives rise to two interesting issues: whether knowledge of various persons within the corporation can be aggregated to produce a finding of fraud on the part of a corporation, and the categories of people for whose fraudulent acts a registered mortgagee should be held responsible. The latter issue is made all the more topical as a result of dicta by Batt JA in Russo that even if Gerada’s false witness was fraudulent, her fraud was too remote to sheet home to the bank, in so far as she was an employee of an agent of the mortgagee. Another issue is the consequences that flow from a finding of fraud on the part of the mortgagee. This gets particularly complicated where the property is co-owned and one co-owner has forged the signature of the other co-owner on a mortgage. If fraud is brought home to the mortgagee because its agent has falsely attested the innocent co-owner’s signature, it is necessary for courts to determine the nature of the mortgagee’s rights over the land in light of the fact that the mortgage of the forging co-owner’s share remains enforceable.

* Lecturer in Law, Monash University. I sincerely thank my colleagues Pam O&#82[1]Connor and Adiva Sifris for their helpful comments and advice in respect of this article.

1 At various times in the past, registered proprietors whose signatures had been forged on a registered mortgage also sought to rely on the doctrine of deferred indefeasibility. Under this doctrine, a mortgagee who got on to the register pursuant to a forged document only acquired a defeasible title, irrespective of whether the mortgagee perpetrated or was aware of the forgery. Indefeasibility, or immunity to attack, would attach only when there had been a further dealing with the land in good faith. Deferred indefeasibility was initially accepted by the courts in the early days of the Torrens System (see Gibbs v Messer [1891] UKLawRpAC 2; [1891] AC 248; Clements v Ellis [1934] HCA 18; (1934) 51 CLR 217), but was laid to rest by the Privy Council in Frazer v Walker [1967] 1 AC 569 and by the High Court in Breskvar v Wall (1971) 126 CLR 376. It was briefly resurrected in Victoria in Chasfild v Taranto [1991] VicRp 16; [1991] 1 VR 225. In that case Gray J took the view that the Transfer of Land Act 1958 (Vic) contained a provision – s 44(1) - that adopted deferred indefeasibility. This provision was peculiar to Victoria and, according to Gray J, took Victoria outside the ambit of Frazer v Walker and Breskvar v Wall. Chasfild was not followed in subsequent single judge decisions of the Victorian Supreme Court, including Eade v Vogiazopoulos (1993) V Conv R 54-458; [1999] 3 VR 889; Vassos v State Bank of South Australia [1993] VicRp 74; [1993] 2 VR 316; Rasmussen v Rasmussen [1995] VicRp 38; [1995] 1 VR 613 and Koorootang Nominees Pty Ltd v ANZ Banking Group Ltd [1998] 3 VR 16 at 73. The case was finally overruled by the Victorian Court of Appeal in Pyramid Building Society v Scorpion Hotels Pty Ltd [1998] 1 VR 188. This article proceeds on the assumption that an argument based on deferred indefeasibility is no longer open to a mortgagor.

[2] At first blush, the decision of the High Court in Bank of South Australia Ltd v Ferguson [1998] HCA 12; (1998) 192 CLR 248 appears to contradict the proposition that a forgery will always be regarded as fraud. In that case, a bank manager who forged the signature of a registered proprietor was held not to have committed statutory fraud. However, the registered proprietor’s signature was not forged on the mortgage itself, but on an internal bank document which was used in processing the mortgagor’s loan application. The High Court held that the bank, through its manager, was not guilty of statutory fraud because the forgery did not operate on the mind of the mortgagor or induce detrimental action on his part. By contrast, the forgeries referred to in this article involve the forgery of the signature of the mortgagor on the mortgage document.

[3] Land Titles Act 1925 (ACT) s 58; Real Property Act 1900 (NSW) s 42; Real Property Act (NT) s 69I; Land Title Act 1994 (Qld) s 184; Real Property Act 1886 (SA) s 69I; Land Titles Act 1980 (Tas) s 40; Transfer of Land Act 1958 (Vic) s 42; Transfer of Land Act 1893 (WA) s 68. The legislation in the Northern Territory and South Australia creates a separate exception to indefeasibility in the case of forgery: Real Property Act (NT) s 69II; Real Property Act 1886 (SA) s 69II.

[4] If the forgery is the immediate act of the person whose title is impeached, then a finding of fraud will inevitably follow once the forgery is proven. However, the position is not as straightforward where the mortgagee is a corporation, which is usually the case. Obviously a forgery can be committed only by a natural person, so the issue is whether that person’s forgery can be brought home to the mortgagee and regarded as that of the mortgagee itself. Whether this can be done will fall to be determined by the application of agency principles. The mortgagor must show not only that the forgery was perpetrated by an agent of the mortgagee (such as an employee of the mortgagee or a solicitor acting for the mortgagee) but also that the commission of the forgery was within the scope of the agent’s actual or apparent authority. Provided the agent was acting within the scope of his or her actual or apparent authority, the agent's acts do not cease to bind the principal merely because the agent was acting fraudulently and in furtherance of his or her own interests: F M B Reynolds and B J Davenport, Bowstead on Agency, (13th ed, 1968) 242. However, where the agent has forged the mortgagor’s signature in order to make a personal gain from the loan money – in other words, where the loan money has been applied for the agent’s own benefit - the agent's actions may well be regarded as falling outside the scope of authority: Schultz v Corwill Properties Pty Ltd (1969) 90 WN (Pt 1) (NSW) 529. If the agent is regarded as having been engaged on a frolic of his or her own, the agent’s fraud cannot be brought home to the mortgagee, and the mortgagee would be entitled to enforce the mortgage.

[5] An argument to this effect was put to the court in AGC v De Jager [1984] VicRp 40; [1984] VR 483 but it was unnecessary for Tadgell J to assess the merits of the argument, because the evidence did not permit him to make a finding that Mr French, the third party to whom the mortgagee had given the mortgage documents in order that he might procure the signatures of the mortgagors, had forged the mortgagor’s signature. Indeed, it was not even clear that Mr French knew that the mortgagor’s signature was a forgery. A similar argument was pursued with more force in Westpac Banking Corporation v Sansom (1994) 6 BPR 13,790. In that case, a bank gave mortgage documents to a wife in order that she might procure her husband’s signature. The wife proceeded to forge her husband’s signature on the mortgage. The decision of the House of Lords in Barclays Bank PLC v O’Brien [1994] 1 AC 181 was relied on by counsel for the husband as support for the contention that when the bank handed the wife the mortgage for execution, she became the bank’s agent for the purpose of procuring valid signatures, that her conduct in forging her husband’s signature on the mortgage was a fraud which could be attributed to the bank as principal. Rolfe J rejected the submission that the wife was acting as the bank’s agent, finding that O’Brien did not support the agency theory contended for by counsel: (1994) 6 BPR 13,790 at 13,799. Note that Rolfe J found that the bank was fraudulent on other grounds, which are discussed later in this article.

[6] Assets Co Ltd v Mere Roihi [1905] UKLawRpAC 11; [1905] AC 176 at 210.

[7] Ibid. For an application of the 'suspicions aroused' principle in the context of a forged mortgage see: Young v Hoger [2000] QSC 455; (2001) Q Conv R 54-548.

[8] [1998] 3 VR 133.

[9] Ibid 143.

[10] Vassos v State Bank of South Australia [1993] VicRp 74; [1993] 2 VR 316, 332-3; Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133, 143-6 and 158-160

[11] Commission of the forgery or knowledge of the forgery might also be alleged against a mortgagee (see below), but this is separate to the false attestation argument.

[12] [1999] VSCA 108; [1999] 3 VR 376.

[13] Peter Butt, ‘False Attestations and Fraud’ (2000) 74 Australian Law Journal 420.

[14] Ratcliffe v Watters (1969) 89 WN (Pt 1) (NSW) 497; Grgic v ANZ Banking Group Ltd (1994) 33 NSWLR 202.

[15] Often, courts do not make it clear whether they are using the phrase ‘in personam claim’ to describe a claim which (if made out) would lead to rectification of the register, or whether an in personam claim includes other forms of relief such as monetary compensation in the form of damages.

[16] A passing reference was made to the availability of the in personam exception in AGC v De Jager [1984] VicRp 40; [1984] VR 483, 499, but Tadgell J found it unnecessary to consider what he described as ‘the interesting and difficult question’ whether Mrs De Jager, the mortgagor, might have been able to pursue rights in personam against AGC, the mortgagee. The in personam exception was also alluded to in National Commercial Banking Corporation v Hedley (1984) 3 BPR 9477, 9482, which is discussed below. Whilst accepting that the conduct of the mortgagee’s agent (Mr Grace), was not fraudulently directed at the mortgagor (Mrs Hedley), Hodgson J, said that it nevertheless amounted to serious negligence against her, and was prepared to entertain the idea that this might have formed the basis of an in personam claim against the bank. He queried, but did not decide, whether the result of such negligence would merely be a claim for damages against the bank or whether it would amount to an exception to indefeasibility which would have given Mrs Hedley the right to have the mortgage set aside.

[17] They included non est factum, forgery, unilateral mistake of fact, special disadvantage and unconscionable conduct: [1999] VSCA 108, para 2; [1999] VSCA 108; [1999] 3 VR 376, 377.

[18] (1994) 33 NSWLR 202.

[19] The causes of action were deceit, misleading and deceptive conduct under the Trade Practices Act 1974 (Cth), breach of statutory duty, and negligence.

[20] Provisions pertaining to attestation might be located in the Torrens legislation itself or in regulations made pursuant to the legislation.

[21] Different jurisdictions have different titles for the registrar. In this article, that person will be referred to as the Registrar, except when discussing a specific case in which that person bears a different title.

[22] See, for example, Real Property Act 1900 (NSW) s 36(1D).

[23] This is true of the Transfer of Land Act 1958 (Vic).

[24] [1984] VicRp 40; [1984] VR 483

[25] Beatty v Australia and New Zealand Banking Group Ltd [1995] VicRp 57; [1995] 2 VR 301, 315

[26] Westpac Banking Corporation v Sansom (1994) 6 BPR 13,790, 13,796 per Rolfe J. See also Scallan v Registrar-General (1988) 12 NSWLR 514, 519. In AGC v De Jager, Tadgell J explained that strict provisions as to proof of execution were part of the answer to predictions made by early critics of the Torrens System that proprietors would be deprived of their estates because of the opportunities for fraud and forgery that publicity of title would open up’: [1984] VicRp 40; [1984] VR 483, 497.

[27] GA Jessup, Land Titles Office Forms and Practice, 4th ed. at 338, cited in AGC v De Jager [1984] VicRp 40; [1984] VR 483, 497.

[28] Hickey v Powershift Tractors Pty Ltd (1999) NSW Conv R 55-889.

[29] (1994) 6 BPR 13,790

[30] The report of the case does not specify what evidence was adduced by the husband to support his contention that Mr Tongue did not believe his signature was genuine. However, there is a statement in the judgment of Rolfe J that no attempt was made by the bank to verify the truth of Mrs Samson’s statement regarding her husband’s illness.

[31] (1984) 3 BPR 9477

[32] Hodgson J did not make a finding as to who had forged Mrs Hedley’s signature. However, Mr Hedley had pleaded guilty to the forgery in a separate criminal charge.

[33] That the Hedleys were living apart was evident from the mortgage itself, which stated the addresses of the Hedleys as being at different places. Further, Mr Hedley testified that he had told Grace that he was divorced, and that he had met Grace at a social occasion which he attended with a woman who was not his wife.

[34] The Registrar-General had raised a requisition which required as one possible course of action the adding of a letter to the name of Mrs Hedley as stated on the mortgage. The mortgage was sent to the branch with a direction that if the alteration was made it should be initialled by the mortgagors. In defiance of this direction, Grace had the alteration made and initialled it himself. The document was then resubmitted for registration.

[35] In both Sansom and Hedley, other arguments were advanced by the defrauded mortgagors as to why the respective banks should be held to have committed a statutory fraud. These arguments were ultimately accepted by the courts and are discussed below.

[36] [2000] QSC 455; (2001) Q Conv R 54-548.

[37] An analogous situation arises where a third party has purported to attest the mortgagor’s signature and the mortgagee, through its employees, knows that the third party was not present when the mortgagor signed the mortgage.

[38] [1984] VicRp 40; [1984] VR 483.

[39] (1984) 3 BPR 9477.

[40] (1994) 6 BPR 13,790.

[41] [1995] VicRp 57; [1995] 2 VR 301.

[42] Hickey v Powershift Tractors Pty Ltd (1999) NSW Conv R 55-889. Note, however, that the consequences of a finding of fraud differ if the signature is genuine.

[43] [1999] VSCA 108; [1999] 3 VR 376.

[44] Russo v Bendigo Bank Ltd, Supreme Court of Victoria 174/93, Hedigan J, 8 September 1997

[45] In this respect the case was one step removed from the previous cases in that it concerned an employee of an agent of the mortgagee.

[46] For a discussion of the agency aspect of the decision see: Conlan v Registrar of Titles [2001] WASC 201; (2001) 24 WAR 299, 345-6.

[47] Gerada had been firmly instructed by Reichman never to attest the signatures of persons who had not signed documents in her presence.

[48] The trial judge had also held that Gerada had not put the mortgage on the path to registration with knowledge of the falsity.

[49] [1999] VSCA 108, para 39; [1999] VSCA 108; [1999] 3 VR 376, 386-7.

[50] [1999] VSCA 108, para 40; [1999] VSCA 108; [1999] 3 VR 376, 387.

[51] This observation seems to be at odds with an earlier statement by Ormiston JA that the firm forwarded documents for registration through a commercial company engaged for the purpose of lodging and filing documents at the Titles Office: [1999] VSCA 108, para 11; [1999] VSCA 108; [1999] 3 VR 376, 379.

[52] [1999] VSCA 108, para 39; [1999] VSCA 108; [1999] 3 VR 376, 387.

[53] [1999] VSCA 108, para 39; [1999] VSCA 108; [1999] 3 VR 376, 386-7.

[54] [1999] VSCA 108, paras 6, 9; [1999] VSCA 108; [1999] 3 VR 376, 378, 379.

[55] This author is not alone in thinking that Gerada was fortunate in not being found to have acted fraudulently: see Butt, above n 13, 420.

[56] It appears that Reichman’s firm engaged a commercial company to lodge and file documents at the Titles Office: [1999] VSCA 108, para 11; [1999] VSCA 108; [1999] 3 VR 376, 379.

[57] [1984] VicRp 40; [1984] VR 483.

[58] Ibid 498.

[59] [1995] VicRp 56; [1995] 2 VR 292.

[60] Mills is described as having become responsible for the registration of the subject mortgage (at 305) and as having put the mortgage on the path to registration (at 314).

[61] Mandie J thought it possible, but unlikely, that Mills had taken it upon herself to sign as a witness.

[62] [1995] VicRp 57; [1995] 2 VR 301, 314.

[63] See also National Australia Bank Ltd v Maher [1995] VicRp 23; [1995] 1 VR 318, 332-3 where the insertion of title particulars by a bank manager on the instrument of mortgage after the mortgage had been signed by the mortgagor was held to be fraudulent.

[64] Both the attestation and the alteration were held to be dishonest and to amount to a fraud by the bank.

[65] (1984) 3 BPR 9477.

[66] In taking this approach Hodgson J relied on Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298. In that case, the High Court held that where an inference is open from facts provided by direct evidence, and the question is whether it should be drawn, the circumstance that the defendant disputing it might have proved the contrary had he chosen to give evidence is properly to be taken into account as a circumstance in favour of drawing the inference.

[67] Hodgson J also considered himself entitled to draw inferences regarding the more serious allegation of fraud discussed earlier in this article, but he elected not to do so.

[68] The Court of Appeal was not bound by these cases and it is certainly not being suggested that the court’s decision in Russo was made per incuriam.

[69] This view is shared by Jane Solly ‘Fraud and the Mortgagee – How a Registered Mortgage Can Be Undone’ (2000) 14(8) Australian Property Law Bulletin 77, 78.

[70] (1994) 6 BPR 13,790

[71] Land Titles Act 1925 (ACT) s 59; Real Property Act 1900 (NSW) s 43; Real Property Act (NT) s 72; Real Property Act 1886 (SA) s 186,187; Land Titles Act 1980 (Tas) s 41; Transfer of Land Act 1958 (Vic) s 43; Transfer of Land Act 1893 (WA) s 134. See also Mills v Stockman [1967] HCA 15; (1967) 116 CLR 61. Note that the position in Queensland is different. Section 184(2) of the Land Title Act 1994 (Qld), which deals with notice, does not expressly provide that knowledge of an unregistered interest is not of itself fraud. For a discussion of the position in Queensland see Robert Chambers, An Introduction to Property Law in Australia (2001), 472-4.

[72] In the celebrated words of Lord Lindley in Assets Co. Ltd v Mere Roihi, ‘fraud by persons through whom he (the registered proprietor) claims does not affect him unless knowledge of it is brought home to him or his agents’: [1905] UKLawRpAC 11; [1905] AC 176, 210.

[73] It has already been explained that knowledge of a third party’s fraud extends to circumstances where the mortgagee’s suspicions were aroused but he or she failed to make further inquiries for fear of learning the truth.

[74] [1926] AC 101.

[75] [1999] VSCA 108 , para 54; [1999] VSCA 108; [1999] 3 VR 376, 391.

[76] Ibid.

[77] Assets Co Ltd v Mere Roihi [1905] UKLawRpAC 11; [1905] AC 176, 210; Butler v Fairclough [1917] HCA 9; (1917) 23 CLR 78, 90, 97; Stuart v Kingston [1923] HCA 17; (1923) 32 CLR 309, 329, 356; National Commercial Banking Corporation of Australia Ltd v Hedley (1984) 3 BPR 9477, 9481; Bahr v Nicolay [1988] HCA 16; (1988) 164 CLR 604, 614; Grgic v ANZ Banking Group Ltd (1994) 33 NSWLR 202, 221; Beatty v Australia and New Zealand Banking Group Ltd [1995] VicRp 57; [1995] 2 VR 301, 314; Pyramid Building Society v Scorpion Hotels Pty Ltd [1998] 1 VR 188, 191, 193; Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133, 142, 159; Conlan v Registrar of Titles [2001] WASC 201; (2001) 24 WAR 299, 328.

[78] See, for example, [1999] VSCA 108, paras 3, 20, 35; [1999] VSCA 108; [1999] 3 VR 376, 377, 381, 385. Mrs Russo’s failure to prove otherwise was described as a weakness in her case.

[79] It has already been explained that in Sansom and Hedley, arguments were put that the attesting witness held no such belief, but they were rejected on the facts. In AGC v De Jager, Tadgell J found that at all times the employees of AGC had acted in the belief that the signature on the mortgage was that of Mrs De Jager.

[80] [1999] VSCA 108, para 42; [1999] VSCA 108; [1999] 3 VR 376, 388.

[81] The Court of Appeal did not allude to the fact that this factor was also absent in the other cases.

[82] The attesting witness may have been assured by a spouse or relative of the mortgagor that the mortgagor was too old or unwell to come and sign the mortgage, or that it was otherwise inconvenient for the mortgagor to attend in person.

[83] Schultz v Corwill Properties Pty Ltd (1969) 90 WN (Pt 1) (NSW) 529.

[84] This suggests that there is limited scope for the concept of statutory fraud to operate in the context of agency.

[85] The concept of recklessness – that is, that Gerada was reckless as to the consequences of a false attestation – was not employed by the court. Given the willingness of the New South Wales Court of Appeal in Grgic v ANZ Banking Group Ltd (1994) 33 NSWLR 202 (discussed later in this article) to incorporate recklessness into the concept of fraud it would have been helpful if this had been considered by the Court of Appeal.

[86] See, for example, Commercial Banking Corporation of Australia Ltd v Hedley (1984) 3 BPR 9477, 9480, 9482; Beatty v Australia and New Zealand Banking Group Ltd [1995] VicRp 57; [1995] 2 VR 301, 315.

[87] [1984] VicRp 40; [1984] VR 483, 498.

[88] Note, however, that a defrauded mortgagor may seek to claim compensation under the compensation scheme and the Registrar would be a defendant in the action.

[89] Some have applauded the Court of Appeal for refusing to set the threshold level of conduct that amounts to fraud too low and for imposing an equity-free conception of fraud: see James McConvill ‘Equity in the Torrens System’ (2001) 8 Australian Property Law Journal 191.

[90] With respect, the statement made by Jane Solly that ‘the false attestation of the conveyancing clerk involved no conscious impropriety ... in regard to the false attestation’ is not supported by the case. See Solly, above n 69, 78.

[91] Assets Co. Ltd v Mere Roihi [1905] UKLawRpAC 11; [1905] AC 176.

[92] This point was made clearly in National Commercial Banking Corporation of Australia Ltd v Hedley (1984) 3 BPR 9477.

[93] [1984] VicRp 40; [1984] VR 483, 499

[94] Note, however, that this all depends on the court’s view of experience! In Russo, three years experience as a conveyancing clerk was not regarded as sufficient to allow the court to infer that Gerada must have understood the ramifications of her false attestation. So depending on the court’s view of experience, inconsistencies may arise more often than anticipated.

[95] [1999] VSCA 108, para 41; [1999] VSCA 108; [1999] 3 VR 376, 387-8.

[96] It has already been explained that a witness who is motivated by personal gain might not be held to have been acting in the scope of his or her actual or apparent authority.

[97] Bank of South Australia Ltd v Ferguson [1998] HCA 12; (1998) 192 CLR 248, 256.

[98] Ibid

[99] (1969) 89 WN (Pt 1) (NSW) 497.

[100] (1994) 33 NSWLR 202.

[101] Mr Grgic also alleged that Mr Sercombe was not competent to attest a mortgagor’s signature in the first place. He argued that the Real Property Act 1900 (NSW) required a mortgagor’s signature to be attested by a person who is not a party to the dealing, and that Mr Sercombe was, as a bank employee, a party to the dealing. The court held as a matter of statutory interpretation, that the provisions of the Real Property Act 1900 (NSW) as they then stood did not preclude attestation by an employee of a party to the instrument. Thus Mr Sercombe’s failure to identify himself as an ANZ employee was not fraudulent.

[102] The solicitor also believed that the guarantor was known by the finance company officer.

[103] (1969) 89 WN (Pt 1) (NSW) 497, 502.

[104] The Duplicate Certificate of Title had been in the possession of Mr Grgic Jnr and his wife because in 1987 Grgic Jnr and his wife had prevailed upon Grgic Snr to put up his property as security for a loan. To that end, all three went to the Commonwealth Bank of Australia to fill out a loan application. Grgic Snr took the Duplicate Certificate of Title with him and left it at the bank pending the processing of the loan application. The loan was ultimately refused and Grgic Jnr subsequently picked up the documents and held on to them.

[105] The document was the form of mortgage which Mr Grgic Snr had earlier signed in relation to a proposed loan to be made to Mr Grgic Jnr and his wife by the Commonwealth Bank of Australia.

[106] (1994) 33 NSWLR 202, 217.

[107] Ibid.

[108] Street J also noted the frequent lack of adherence to the statutory forms which purport to prescribe the only persons authorised to attest the transferor’s or mortgagor’s signature, and urged faithful compliance with the directions.

[109] (1994) 33 NSWLR 202, 221.

[110] (1994) 33 NSWLR 202, 223-4.

[111] Land Registration Act 2002 (UK) s 65 and Schedule 4. See Pamela O’Connor, ‘Registration of Title in England and Australia: A Theoretical and Comparative Analysis’, Paper presented at the Fourth Biennial Conference of the Centre for Property Law, University of Reading, 25-6 March 2002.