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[2003] NSWSC 1191
plaintiff. Plaintiff's application successful; defence and cross-action struck out pursuant to Part 13; judgment for possession; leave to issue a writ of possession 28 days from judgment; defendants to pay...
The defendants owned registered land. The plaintiff held a registered second mortgage. The defendants claimed the mortgage documents were forged and they never received the money. The court accepted those factual assertions as arguable but found no evidence that the plaintiff, her mortgage manager or solicitor engaged in the common law fraud required to defeat the registered mortgage. Because indefeasibility under s 42(1) Real Property Act protects the registered mortgagee unless the registration resulted from the registered proprietor's own fraud, the defendants had no real triable defence to the ejectment claim. The defence and cross-claim were struck out and judgment for possession entered, with permission to issue a writ in 28 days.
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1,851 words · generated 20/06/2026
This dispute concerned a registered second mortgage over 662 Punchbowl Road, Punchbowl. The plaintiff, Abeeda Khan (as trustee for the Khan Family Trust), was the registered second mortgagee by registration of a Real Property Mortgage (no. 9253502J) dated 25 November 2002 and registered on 31 December 2002, stated to secure $130,000 advanced to the defendants, Abdallah and Sanaa Hadid ([2]–[3]).
2 cited instruments linked from this judgment.
The defendants asserted the mortgage and supporting documents were forgeries: they pleaded that neither signed the documents nor received the funds, and that the mortgage had been procured by fraudulent conduct involving a third party (Anna Maria Palumbo) and various intermediaries. The defendants also pleaded the Contracts Review Act 1980 (NSW) and alleged that the plaintiff's agents (Response Finance Pty Ltd and Heidtman & Co) participated in or were on notice of the fraud ([4]–[6], [15], [23]).
The plaintiff applied under Part 13 of the Supreme Court Rules for summary judgment for possession and to dismiss the defendants' cross-claim. The hearing resolved whether, on the defendants' pleaded and arguable factual case (forgery, lack of signatures, no receipt of the $130,000), there remained any real triable issue such that summary judgment should be refused ([1], [8]–[9], [28]).
Cripps AJ accepted the defendants' factual allegations as arguable for present purposes, including their claim they first learned of a caveat/transaction on or about 26–27 November 2002 and the contemporaneous telephone conversations with the mortgage manager in which the defendants denied signing documents or receiving funds ([10]–[13]). However, the judge concluded there was no material capable of leading to an inference that the plaintiff, her mortgage manager or solicitors had knowledge of, or participated in, the alleged fraud. On that basis the registered mortgage remained indefeasible and the defendants had no personal equity to defeat it ([19]–[23]). The defence and cross-claim were struck out and judgment for possession was entered with leave to issue a writ of possession after 28 days; the defendants were ordered to pay costs ([28]–[30]).
The decision turned on the doctrine of indefeasibility of title under the Real Property Act 1900 (NSW) and the established principle that registration of an instrument imparts an indefeasible proprietary interest unless the registration itself was effected by the registered proprietor's own common law fraud.
Cripps AJ summarised the governing rule succinctly: "It is settled law that s 42(1) of the Real Property Act 1900 confers indefeasibility of title on the registered holder of a mortgage. Fraudulent conduct of itself does not establish a personal equity to have the registration set aside. The registration of a void instrument will be set aside only if registration was the result of the registered proprietor's own fraud. Moreover the fraud must be common law fraud and not equitable fraud such as, for example taking with notice" ([20]). The judgment cited leading authorities for that principle (Breskvar v Wall; Frazer v Walker; Assets Co v Mere Roihi; and an unreported Young J decision) ([20]).
On the facts, although Mr Hadid had complained to the mortgage manager (Mr Littleford) and to the plaintiff's solicitors (Heidtman & Co) that the mortgage was a fraud, the judge found those complaints did not prove the agents believed the mortgage to be forged or had participated in its procurement. Knowledge of a complaint, or an increased level of anxiety by the solicitor to hasten registration, did not equate to the sort of common law fraud necessary to destroy indefeasibility ([21], [19], [22]). The court also accepted that the defendants had not sought injunctive relief or otherwise blocked registration after learning of the caveat ([27]).
The Contracts Review Act argument was rejected because of the statutory interplay between that Act and the Real Property Act. Orders under s 7(1)(a)/(b) of the Contracts Review Act would have no effect on a contract that is a registered land instrument by operation of s 19; and while s 7(1)(d) can order execution of another instrument, it cannot, in the absence of fraud by the registered proprietor or her agent, render a registered instrument defeasible ([24]–[26]).
Taken together, those legal propositions meant that even assuming the defendants' factual allegations, there was "no 'personal equity' in the defendants" able to prevail over the registered interest of the plaintiff conferred by registration ([23]). Accordingly, there was no real triable issue and summary judgment (strike out) was appropriate ([8], [28]).
Before this decision, the applicable proposition was already well entrenched: registration confers indefeasibility, and common law fraud by the registered proprietor is required to set aside a registered instrument. The court relied on the High Court and Privy Council line of authorities confirming that position (cited at [20]: Breskvar v Wall; Frazer v Walker; Assets Co v Mere Roihi).
This judgment applied those established principles to a fact pattern of alleged forgery and complaints given to mortgage managers and solicitors. After the case, the practical state of the law, as affirmed here, is that complainants who assert forgery must adduce material showing the registered proprietor or her agents committed or knowingly participated in the fraud at registration if they are to defeat the registered instrument. Mere notice of an allegation, or hurried registration in the face of complaint, will not ordinarily suffice to establish the necessary common law fraud. The judgment also clarifies that procedural remedies under the Contracts Review Act cannot be used to circumvent the protections of the Real Property Act where no proprietor fraud exists ([20], [24]–[26]).
Passage: "It is settled law that s 42(1) of the Real Property Act 1900 confers indefeasibility of title on the registered holder of a mortgage..." ([20]).
Passage: "The registration of a void instrument will be set aside only if registration was the result of the registered proprietor's own fraud." ([20]).
Passage: "At its highest it could be said to be notice ... But that does not establish that Mr Littleford knew or believed that what he was being told was true." ([21]).
Passage: "Accordingly, in my opinion, ... there is no 'personal equity' in the defendants, which would enable their interest to prevail over the interest of the plaintiff conferred by registration." ([23]).
The reasoning is most directly engaged where:
Under such circumstances, this decision supports summary determination in favour of the registered mortgagee unless the defendants can show evidence capable of raising an inference that the registered proprietor (or her agents acting for her) engaged in the common law fraud required to defeat indefeasibility ([9], [19]–[23], [28]).
This judgment itself cites and applies established authorities concerning indefeasibility ([20]). The present judgment does not record subsequent appellate consideration within its text. To determine how later courts have treated Abeeda Khan v Hadid specifically would require targeted post-2003 case-law research. The legal propositions affirmed here, that common law fraud by the registered proprietor is required to defeat indefeasibility, and that equitable notice alone is insufficient, align with long-standing High Court and Privy Council authority relied upon in the judgment ([20]).
Practitioners should therefore treat this case as a clear example of applying well-established principles to a forgery allegation in a summary judgment context; but whether later appellate decisions have applied, distinguished or nuanced this particular 2003 decision is a matter for further case-law research beyond the text of the judgment.
Evidence threshold for agent knowledge: The judgment distinguishes between notice of an allegation and proof that an agent or solicitor believed and acted on that belief in a manner amounting to fraud ([21]). The precise quantum and quality of evidence necessary to infer that an agent's state of mind rises to the level of common law fraud for the purposes of rendering registration defeasible remains fact-sensitive. Practitioners should expect courts to require cogent evidence of knowing participation or wilful blindness.
Role of haste and conduct surrounding registration: The judge observed that urgency to register (e.g. to protect priority) and "manoeuvring" to utilise indefeasibility does not, of itself, constitute fraud ([22]). Where a mortgagee or its agent actively sought to exploit registration despite strong contrary evidence, future courts may be asked to examine whether that conduct suffices for common law fraud; this judgment suggests courts will scrutinise such conduct carefully but will not lightly infer fraud.
Interaction with statutory remedies (s 126 and other provisions): The court mentioned possible remedies under s 126 Real Property Act as an avenue for aggrieved registered proprietors ([27]). The strategic interplay between pursuing a statutory claim for loss and resisting ejectment by asserting defective registration remains a practical question for litigants.
Use of Contracts Review Act where forgery alleged: Cripps AJ rejected a submission that the effect of s 42 is to "deem" a contract into existence for Contracts Review Act purposes and held that s 19 prevents s 7(1)(a)/(b) orders from affecting registered instruments ([24]–[26]). Whether creative arguments might be advanced in other factual matrices to obtain relief under s 7(1)(d) without proving proprietor fraud is a potential area for argument but is constrained by the statutory text and this reasoning.
Remedies against intermediaries: Although the judgment assumed arguable causes of action in separate proceedings against intermediaries (Response Finance, brokers, witnesses), those claims were not determinative of the present ejectment claim ([15]–[16]). The scope and success of such personal claims remain to be tested in full trial proceedings separate from the indefeasibility issue.
In summary, this judgment is a useful, practical application of the indefeasibility doctrine in the context of alleged forgery and highlights the evidential hurdles for challengers to a registered mortgage. Practitioners should focus on obtaining clear evidence of the registered proprietor's or her agent's culpable state of mind if seeking to overturn registration, and consider parallel statutory or personal causes of action where the land title cannot be defeated.
CITATION : Abeeda Khan (as Trustee for the Khan Family Trust) v Abdallah Hadid & Anor [2003] NSWSC 1191 HEARING DATE(S) : 02/12/03 JUDGMENT DATE : 18 December 2003
JUDGMENT OF : Cripps AJ DECISION : (i) Plaintiff's appeal is successful; (ii). Judgment made for possession; (iii) The plaintiff has leave to issue a writ of possession 28 days from today; (iv) Defendants are to pay the plaintiff's costs of the motion
CATCHWORDS : possession - mortgage - registration indefeasible by title despite alleged fraud Contracts Review Act 1980 (NSW) LEGISLATION CITED : Real Property Act 1900 (NSW) Supreme Court Rules Assets Co v Mere Roihi [1905] AC 176. CASES CITED : Breskvar v Wall (1971) 126 CLR 376 Frazer v Walker [1967] 1 AC 569 J A Westaway & Sons v Registrar General & Ors (NSWSC unreported, 15 August 1996) PARTIES : Abeeda Khan (as Trustee for Khan Family Trust) - Plaintiff Abdallah Hadid & Sanaa Hadid - 1st & 2nd Defendants FILE NUMBER(S) : SC 10537/03 COUNSEL : P Newton - Plaintiff A Rogers - 1st & 2nd Defendants SOLICITORS : Heidtman & Co - Plaintiff Equity Lawyers - 1st & 2nd Defendants
IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION
10537/03 - Abeeda Khan as Trustee for the Khan Family Trust v Abdallah Hadid & Anor
JUDGMENT 1 HIS HONOUR: This is an application pursuant to Part 13 of the Supreme Court Rules for summary judgment in favour of the plaintiff Abeeda Khan as trustee for the Khan Family Trust against the defendants Abdallah Hadid and Sanaa Hadid in ejectment and for an order for possession and that a writ of possession issue forthwith. The plaintiff also seeks an order that the cross claim of the defendants be summarily dismissed. 2 The defendants are the registered proprietors in fee simple of a property known as 662 Punchbowl Road Punchbowl being the whole of the land comprised in C/T Folio Identifier 17/12834. The plaintiff is the second mortgagee claiming an estate or interest in the land by reason of the registration of a Real Property Mortgage 9253502J over the subject property on 31 December 2002. 3 The statement of claim was filed on 4 March 2003. The plaintiff recited the mortgage dated 25 November 2002 and its registration on 31 December 2002 pursuant to which the plaintiff claimed to have advanced the sum of $130,000 to the defendants. It was alleged that in breach of their obligations the defendants had defaulted in repayment and in consequence thereof the plaintiff was entitled to possession. 4 By their amended defence the defendants deny the plaintiff's right to possession. They assert they never received any monies from the plaintiff and deny they executed any documents in connection with the mortgage. They also pleaded non est factum to all documents relied on by the plaintiff in support of the validity of the mortgage and any loan agreement. The non est factum claim was abandoned during the hearing for the reason, one supposes, that the defendants are not alleging they signed documents in the belief that what they signed was radically different from what the document contained - rather it was that they never signed any documents. The defendants have also pleaded clause 7 of the Contracts Review Act 1980 (NSW). 5 In their amended statement of defence the defendants deny that they personally or through their agents executed, authorised the execution or ratified the execution of the mortgage document or any documents in support of it and deny they received any monies from the mortgagee. They allege the mortgage was procured by the fraud of Anna Maria Palumbo and that at all relevant times prior to registration the plaintiff was on notice by her servants or agents that the mortgage had been procured by fraud. The particulars of defence are included and they refer to conversations between the first named defendant and an unnamed person from the plaintiff's solicitors Heidtman & Co on or about 27 November 2002 and a conversation between the first defendant and the plaintiff's mortgage manager Response Finance Pty Ltd on or about the same day. It is alleged that the plaintiff by her servants and agents (Heidtman & Co and Response Finance Pty Ltd) and after being told that the mortgage had been executed by fraud procured the registration of the mortgage under the provision of the Real Property Act 1900 on 31 December 2002. 6 By their cross-claim the defendants deny any knowledge of the transactions relied on by the plaintiff and allege that the plaintiff's agent Response Finance Pty Ltd was a party to the fraudulent conduct of the forgers and for that reason the mortgage was unenforceable and should be set aside. 7 Although the defence originally appeared to be asserting fraudulent conduct by the plaintiff and her agents with respect to the execution of the mortgage the claim pressed before me was that the plaintiff by her agents (her solicitors Heidtman & Co and mortgage manager Response Finance Pty Ltd) were guilty of fraud by registering the mortgage after they had been told by the first named defendant that the defendants were the victims of fraudulent conduct. 8 Mr Newton on behalf of the plaintiff and Mr Rogers on behalf of the defendants accept that for the purpose of determining whether the defendant's defence should be struck out and summary judgment entered, the party seeking the orders bears the onus of satisfying the court that there is, in effect, no real question to be tried. This means, as I would understand the authorities, that the defendants do not have to affirmatively establish the correctness of their defence - summary judgment is not appropriate if the claim raises a triable issue of fact. 9 For the purpose of dealing with this application I have assumed facts asserted by the defendants and set out below to be arguable questions of fact:
MR LITTLEFORD: It went to Overseas Travel Services. We have got your ID's
MR HADID: Is my ID sufficient to give a loan. I don't know you and you don't know me.
MR LITTLEFORD: Go and see you solicitor, John Hancock". 13 At the same time the following conversation also took place: MR LITTLEFORD: I've got you and your wife's photo ID plus both your signatures"
Mr HADID: It's a fraud. It wasn't me. Would you like to meet me and my wife?
MR LITTLEFORD: No, no I wouldn't like to meet you. I haven't got time".
MR HADID: Look mate I haven't signed any paper for a loan, neither has my wife. Whatever papers you have in front of you is a fraud". 14 On 29 November 2002 Mr Theos, a partner in Heidtman & Co having the conduct of the matter for the plaintiff, wrote to the first mortgagee Resimac Ltd seeking its consent to the registration of the second mortgage. In the letter he wrote, "We respectfully request this matter be treated urgently". 15 I have also had regard to allegations in Supreme Court proceedings number 20052 of 2003 in which the present defendants are plaintiffs. They have taken proceedings against Abeeda Khan (the plaintiff in these proceedings), Response Finance Pty Ltd the mortgage manager, Peter Fisher & Co, said to be a mortgage broker, Lorenzo Flammia, a lawyer who claimed to have witnessed the signatures of Mr and Mrs Hadid, John Hancock, solicitor who claimed to be acting for Mr and Mrs Hadid, and Anna Maria Palumbo who, it is alleged, by her misrepresentation and fraudulent conduct, caused the mortgage to be executed in the names of Mr and Mrs Hadid. 16 Although (with exception of the claim against Anna Maria Palumbo) the allegations in Supreme Court proceedings number 20052 of 2003 are claims in negligence and not of fraud, I am prepared to assume for the purpose of these proceedings that the plaintiff has an arguable case against the third, fourth, fifth and sixth defendants in those proceedings that they may be answerable to the present plaintiffs in causes of action other than negligence. 17 On 25 November 2002 and in response to a letter from John Hancock purporting to act for Mr and Mrs Hadid monies were directed to be paid out as follows:
(e) Overseas travel (Anna Maria Palumbo) $111,967.50 18 I should here mention, of course, that I am dealing with the allegations of the defendants in the present proceedings. I have not heard from people against whom allegations have been made otherwise than Heidtman & Co and Response Finance Pty Ltd the mortgage manager. 19 In my opinion there is no material capable of leading to an inference that the mortgagee (Abeeda Khan), her mortgage manager (Response Finance Pty Ltd) or her solicitors (Heidtman & Co) had knowledge of the fraudulent conduct. Mr Theos, who had the carriage of the matter, has given evidence that he had no knowledge of the fraud. He said that he asked for the consent of the first mortgagee as a matter of urgency because that was standard practice in view of the fact that priority could be lost if another mortgage was registered. The subject mortgage was for three months only. Mr Theos has conceded that the knowledge he received that the defendants alleged that the transaction was fraudulent increased his anxiety to have the mortgage registered as soon as possible. 20 It is settled law that s 42(1) of the Real Property Act 1900 confers indefeasibility of title on the registered holder of a mortgage. Fraudulent conduct of itself does not establish a personal equity to have the registration set aside. The registration of a void instrument will be set aside only if registration was the result of the registered proprietor's own fraud. Moreover the fraud must be common law fraud and not equitable fraud such as, for example taking with notice: Breskvar v Wall (1971) 126 CLR 376; J A Westaway & Sons v Registrar General & Ors (NSWSC unreported, 15 August 1996 Young J; Frazer v Walker [1967] 1 AC 569; and Assets Co v Mere Roihi [1905] AC 176. 21 I have already referred to the conversations between Mr Hadid and Mr Littleford and Mr Theos. At its highest it could be said to be notice to Mr Littleford that a claim would be made that the mortgage was forged. But that does not establish that Mr Littleford knew or believed that what he was being told was true. The evidence against Mr Theos does not establish that he had reason to suppose the mortgage was a forgery accepting as I do that Mr Theos would have been aware of the allegation made by Mr Hadid and which he said raised his level of anxiety. 22 On behalf of the defendants Mr Rogers has submitted that he is entitled to relief provided he can establish "moral turpitude" associated with the registration of the mortgage and if that is so he therefore has an arguable case for subsequently establishing common law fraud. The moral turpitude alleged is the registering of the mortgage on 31 December 2001 against the background that it was done in order to defeat a claim the defendants might have otherwise had arising from the void instrument. I have already referred to the authorities which establish it is necessary to prove common law fraud. As was pointed out by Young J in Westerway & Sons v Registrar General & Ors fraud was not established merely because being aware of a complaint, the plaintiff "manoeuvred things" to get the benefit of "the system" i.e. indefeasibility. 23 In their cross-claim the defendants have asserted that the contract was obtained by "the fraudulent conduct of a number of parties including the plaintiff's agent Response Finance Pty Ltd and is, in the circumstances unenforceable and liable to be set aside". I have already referred to the allegations being made by the plaintiff in Supreme Court proceedings number 20052 of 2002 and have assumed, in their favour, that they may have an arguable case in fraud against certain persons or corporations referred to in the statement of claim. But there is nothing in the information before me capable of raising an inference that the plaintiff, Heidtman & Co or Response Finance Pty Ltd were guilty of common law fraud in having the mortgage registered. Accordingly, in my opinion, and on the assumptions I have made there is no "personal equity" in the defendants, which would enable their interest to prevail over the interest of the plaintiff conferred by registration. 24 As I have said the defence of non est factum has been abandoned. However the defendants claim that by operation of s 7(1) of the Contracts Review Act 1980 they are entitled to relief being, presumably, an order pursuant to s 7(1)(d). Leaving to one side whether the mortgage was a "business" contract and that on its face it is not self-evidently unjust, it must be borne in mind that the defendants claim that the mortgage was a void instrument because of the forgeries associated with its execution. Mr Rogers on behalf of the defendants has submitted that although it is his clients' claim that no contract was entered into between the plaintiff and them, the effect of s 42 of the Real Property Act 1900 operates to "deem" a contract to be in existence and thus generate an entitlement to relief under the Contracts Review Act 1980. He advanced no authorities supporting that proposition. 25 Pursuant to s 7(1)(a) a court may make an order declaring a contract void or pursuant to s 7(1)(b) make an order varying in whole or in part the provisions of a contract. However by operation of s 19, an order under s 7(1)(a) and/or s 7(1)(b) would have no effect in relation to a contract so far as the contract is a land instrument registered under the Real Property Act. 26 Pursuant to s 7(1)(d) a court may, in relation to a land instrument, make an order requiring execution of another instrument that varies or has the effect of varying the provisions of the land instrument or which terminates or affects the operation of the land instrument. In the present case the court could not make an order in the absence of fraud of the registered proprietor or her agent that would have the effect of rendering defeasible the registered instrument. As I have said, there is no evidence capable of establishing fraud of the mortgagee, her solicitor or her mortgage manager. 27 The defendants took no steps by way of injunction or otherwise to prevent registration of the mortgage after being informed of the caveat on 26 November 2002. They are in the unfortunate position that they face eviction from 662 Punchbowl Road, Punchbowl. They may, of course, have a claim pursuant to s 126 of the Real Property Act and/or be in the position to raise money to pay out the mortgage and make a claim on the funds. However at the present time there is no defence to the claim of the plaintiff in ejectment. 28 I have come to the conclusion that the plaintiff's application must succeed and the defence and the cross-action should be struck out pursuant to Part 13 of the Rules of Court and that judgment should be given for possession and leave to issue a writ of possession 28 days from today. 29 I have postponed the issue of writ for a period of 28 days because I have not overlooked the possibility that the defendants may be able to raise money to pay the mortgage debt within time and avoid the sale of their property. 30 The defendants are to pay the plaintiff's costs of the motion.
Last Modified: 12/22/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Abeeda Khan (as Trustee for the Khan Family Trust)
Abdallah Hadid & Anor
(1971) 126 CLR 376
Plaintiff's application successful; defence and cross-action struck out pursuant to Part 13; judgment for possession; leave to issue a writ of possession 28 days from judgment; defendants to pay plaintiff's costs of the motion (see [28]–[30]).