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Are you protected from fraud?


The Victorian Supreme Court decision of Perpetual Trustees Victoria Ltd v Xiao Hui Ying[1] is a reminder that financiers must remain vigilant of the risk of documents being fraudulently signed.  In this alert, Senior Associate Are Watne and Solicitor Nicholas Hew discuss why financiers should take this opportunity to consider the procedures and protections they currently have in place and determine whether further protections need to be implemented.

Key points

  • In Queensland, subject to the satisfaction of certain requirements and exceptions, a financier will gain the benefit of indefeasibly on registration of a mortgage.  Examples of the requirements which need to be satisfied include financiers’ obligations under section 11A of the Land Title Act to take reasonable steps to confirm the identity of the mortgagor before the mortgage is signed.  The benefit of indefeasibly is an important protection for financiers.  However, the protection provided by indefeasibly will only extend to the covenant for payment in the mortgage.

  • In the decision referred to above, the signature of the wife (who was the borrower and mortgagor) was forged on the mortgage and loan documents.  The husband acted fraudulently in obtaining the loans and the wife was unaware the loans had been obtained.

  • The loans went into default and the amount owed to Perpetual Trustees Victoria Ltd was $1,221,953.07.

  • The mortgage sought to be relied upon by Perpetual Trustees Victoria Ltd was an “all moneys” mortgage which provided that the mortgage was security for the payment of all “Secured Money” payable under a “Security Agreement” (being all agreements between the mortgagor and the mortgagee).  

  • Put simply, the Court found that since the loan agreement had been fraudulently signed, there was no “Secured Money” or any “Security Agreement”, meaning that the mortgage secured nothing. 

  • In reaching this conclusion, the Court adopted the reasoning of the New South Wales Court of Appeal (most recently, the decision of Perpetual Trustees Victoria Ltd v Cox[2]  in which the loan agreement and a mortgage had been validly signed, however a payment direction had been forged.  The Court determined that the amount the subject of the payment direction was not “Secured Money” and the mortgage was therefore not security for that amount) and rejected contrasting Victorian authorities.


Financiers commonly require documents (such as witness certificates) be provided by the person who witnesses a mortgagor’s signature on a mortgage.  Given the possible consequences outlined above, in situations where loan documents (such as a loan agreement, facility offer or a payment direction) are not signed in the financier’s presence, financiers should consider whether the signatures on those documents require evidence verifying the authenticity of the signatures.


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