113712-1792324317138-ORAL_PRESENTATION_NICOLE_MCCCO

[Virtual Presenter] Today I will advise Harry about the unauthorised mortgage over his home and whether the subsequent mortgagee sale to Fast Loans Pty Ltd should be set aside..

[Audio] Harry and Megan jointly own the property, worth $800,000 and initially debt-free. Megan has gambling debts and secretly obtains $600,000 from Swift and Sharp Loans. Dean impersonates Harry. The mortgage is signed and witnessed, verified by S&S's solicitor and electronically registered. Megan disappears overseas. After default, S&S exercises its power of sale and sells the property at an Albany auction held on a public holiday and advertised in a Victorian newspaper. The purchaser is S&S's subsidiary, Fast..

[Audio] There are five linked issues. First, whether the mortgage binds Harry. Second, whether registration protects S&S despite the forged signature. Third, whether S&S could exercise its power of sale, assuming the required notices were given as the question directs. Fourth, whether the unusual sale process breached S&S's duty to act in good faith. Fifth, whether Fast's status as a subsidiary affects its statutory protection..

[Audio] Section 105 permits a proprietor to mortgage land and requires an approved form. Section 105AA is directly relevant to the electronic lodgement. A mortgage must not be lodged electronically unless the mortgagee has signed it and holds a counterpart signed by the proprietor. S&S did not hold a counterpart genuinely signed by Harry. Dean impersonated Harry. This gives Harry a strong statutory argument. However, section 105AA does not expressly say that a registered mortgage becomes void if the section is breached, so the provision must be considered with the Torrens registration regime..

[Audio] The difficulty for Harry is Torrens indefeasibility. Section 68 protects the registered estate except for recognised exceptions, including fraud. In Breskvar v Wall the High Court explained the central role of registration in Torrens title. More importantly, Registrar of Titles v Franzon involved a forged mortgage in Western Australia. The High Court held that an innocent financier obtained an indefeasible interest on registration. Therefore, Harry cannot rely on forgery alone. He would need to establish that S&S's conduct falls within the relevant fraud exception or that the later statutory requirements produce a different result..

[Audio] The assignment expressly says to assume all relevant section 106 notice requirements were met. That issue should therefore not consume the analysis. Section 108 permits sale by public auction or private contract after the statutory default process. It also says a purchaser is not required to inquire into default, notice or the propriety or regularity of the sale. Accordingly, Harry's strongest argument is not simply that S&S made an enforcement mistake. It is that S&S improperly exercised its power and that Fast cannot rely on purchaser protection in the circumstances..

[Audio] The mortgagee exercises the power for its own benefit but must act in good faith and must not recklessly or wilfully sacrifice the mortgagor's interests. Pendlebury is the leading High Court authority. The WA cases apply that standard. McCourt explains that a mortgagee may choose when to sell, but must take bona fide steps and allow appropriate advertising so that the best reasonably obtainable price can be achieved. Here, the Perth location, Albany auction, public holiday and Victorian newspaper advertising are unusual when considered together..

[Audio] Section 202 is potentially decisive. If Fast is a bona fide purchaser for valuable consideration, its registered title may be protected despite earlier fraud or error. But Fast is not an independent stranger: it is S&S's subsidiary. That does not automatically remove statutory protection, but it makes the circumstances particularly important. Harry should investigate Fast's directors, control, knowledge of the mortgage's origin, the sale price, whether the transaction was pre-arranged and whether Fast knew about any impropriety..

[Audio] On balance, Harry has a serious basis to challenge the transaction, but the outcome is not automatic. The mortgage issue is complicated by Franzon. The sale issue is stronger because of the unusual auction arrangements and Fast's relationship with S&S. The decisive evidence concerns Fast's bona fides and knowledge. If Fast knew of the defects or participated in improper conduct, Harry has a stronger basis to seek relief against the transfer. If Fast is protected by section 202, Harry's proprietary claim is much weaker and compensation becomes the principal alternative..

[Audio] The immediate priority is evidence. Harry should obtain the mortgage and transfer, electronic lodgement records, Sally's verification material, auction instructions and advertising, valuation and reserve-price material, the sale price and bidding records, and Fast's corporate information. If Fast's transfer has not yet been registered, urgent interim relief should be considered. If it has been registered, the available remedy depends on whether Fast is protected by section 202..

[Audio] My final advice is that Harry should urgently challenge the mortgagee sale rather than assume the property is lost. The strongest proprietary case depends on defeating Fast's claim to bona fide purchaser protection. The mortgagee's conduct should also be challenged. However, if Fast establishes bona fide purchaser status for valuable consideration without notice, Harry may be unable to recover the land and should pursue the appropriate compensation or damages remedies..