Plaintiff v Defendant

2 Mr Solak's claim against Bank West is, essentially, that the mortgage given by the forger is void and of no effect. Accordingly, he seeks declarations to that effect and an order securing the discharge of the mortgage registered with the Land Titles Office which appears as an encumbrance upon the certificate of title to the property. Bank West's claim in response is that the doctrine of indefeasibility effected by the provisions of the Transfer of Land Act 1958 (Vic) ("the TLA") entitle it to maintain the registration and to enforce the covenant to pay flowing from the forgery.

3 Mr Solak contended that the indefeasibility conferred by registration under the TLA does not extend to secure obligations arising from a forged instrument where the covenant to pay is not registered or found on the title. The issue has been considered in a number of cases under equivalent provisions in other jurisdictions[1] and has received some consideration in learned articles.[2]

4 There has long been no doubt that registration under the TLA provides indefeasibility of title but the question to be asked, and which arises in this case, is "indefeasibility for what?". In Vella v Permanent Mortgages Pty Ltd[3] Young CJ in Eq. considering the effect of indefeasibility of a forged document said:

... the mortgage being forged gets indefeasibility, but one must ask the question "indefeasibility for what?" and the answer is ... that the mortgage is indefeasible for nothing because nothing is secured ...[4]

His Honour concluded that as a matter of construction of the provisions and documents before him, the indefeasibility provisions did not extend to the amounts claimed because, "[w]hen one then construes the mortgage there [were] no monies owing under that agreement because it was a forgery".[5] In reaching that conclusion his Honour followed a line of authorities in New South Wales beginning with PT Ltd v Maradona Pty Ltd.[6]

5 The issue in Maradona, relevant for present purposes, was whether a personal covenant to pay the "Moneys Hereby Secured" in a guarantee was so connected with the estate or interest in the registered mortgage that it also achieved indefeasibility and bound the mortgagor notwithstanding the availability of a defence of non est factum. Giles J held that the personal covenant in an instrument collateral to the mortgage would not attract the protection of indefeasibility if the collateral instrument secured nothing because it was a forgery. His Honour said:

The general position thus indicated is, I think, as follows. That which is attained by registration is, in the words of s 42, an estate or interest in the land. Registration does not validate all the terms and conditions of the instrument which is registered. It validates those which delimit or qualify the estate or interest or are otherwise necessary to assure that estate or interest to the registered proprietor.

The more specific position in relation to a mortgage, and in particular the transfer of a mortgage, requires reference to s 52(1) of the Real Property Act 1900. Referring back to "any transfer" in s 51, it provides:

"52. (1) By virtue of every such transfer, the right to sue upon any mortgage or other instrument and to recover any debt, sum of money, annuity, or damages thereunder (notwithstanding the same may be deemed or held to constitute a chose in action), and all interest in any such debt, sum of money, annuity, or damages shall be transferred so as to vest the same at law as well as in equity in the transferee thereof."[7]

In Provident Capital Ltd v Printy[8] the New South Wales Court of Appeal held that the statutory effect of indefeasibility did not extend to a void covenant found in an agreement separate from the mortgage.[9] In that case the Court resolved the issue upon the construction of s 57(2) of the Real Property Act 1900 (NSW) which required identification of a "default" "in the observance of any covenant ... in the mortgage" or "in the payment, in accordance with the terms of the mortgage ... of [money] the payment of which [was] secured by the mortgage". Basten JA held (Tobias and McColl JJA agreeing) that there was no relevant default because there was no payment in accordance with the terms of the mortgage in circumstances where the mortgage did not itself contain terms specifying the amounts of and times for making payment,[10] and there was no term expressly incorporating the deed of loan into the mortgage.[11]

6 The issue was considered recently by the Court of Appeal in New Zealand in Westpac Banking Corporation v Clark.[12] In that case Westpac agreed to lend money to a person purporting to be Ms Fenech on the security of a mortgage of a property registered in the name of the person whom the fraudster purported to be. One of the issues in the appeal was the effect which registration of the mortgage would have had had it been registered promptly. In giving the reasons of the Court, Glazebrook J reviewed the Australian authorities concluding that registration of a mortgage validates the terms and conditions in the instrument of mortgage which delimit or qualify the estate or interest of the mortgagee in the land,[13] that terms and conditions of other agreements may be incorporated by reference into a registered mortgage of interest but that the personal covenant of a forged or otherwise void mortgage cannot be enforced against the registered proprietor personally.[14]

7 Much of the debate before me, and much of that considered in the New Zealand and other authorities, depend upon the effect of a distinction between a forged mortgage and a forged collateral document. For Mr Solak it was accepted that indefeasibility of title extended to the forged covenant to pay in the registered mortgage but that nothing was owing upon that covenant because it did not incorporate the forged obligation to pay in the separate Bank West home loan contract which had also been signed by the forger purporting to be Mr Solak.

8 The main case put against Mr Solak was the decision in Vassos v State Bank of South Australia,[15] applied by the Court of Appeal in Pyramid Building Society (In liquidation) v Scorpion Hotels Pty Ltd.[16] In Vassos Hayne J held that title obtained by a mortgage on registration under the TLA of a forged instrument of mortgage cannot be defeated on the grounds of fraud if the mortgagee was not a party or privy to the fraud. In that regard his Honour said:

In Frazer v Walker the signature of one of two mortgagors had been forged by the other. The mortgagee, in exercise of its power of sale, sold the land to a third party. The mortgagee and the third party had acted in good faith without knowledge of the forgery. There was therefore no fraud (in any sense of the word) on the part of the persons who sought and obtained registration whether as mortgagee or as purchaser from the mortgagee. Although at common law the mortgage was void, registration of the mortgage was held to be effective to vest and to divest title and to protect the registered proprietor of the mortgage against adverse claims: at 584. This conclusion of the Privy Council was based upon the provisions of the Torrens system legislation of New Zealand including those provisions relating to paramountcy of title and conclusiveness of title that may be regarded as generally equivalent to s 42 and s 41 of the present Victorian legislation.

In Breskvar v Wall (1971) 126 CLR 376, the High Court accepted and applied the conclusions of Frazer v Walker to the Queensland Torrens system legislation - legislation which was not in identical terms to the New Zealand legislation considered in Frazer v Walker but legislation that was held not to be different in any relevant respect. So, Menzies J, at 397, said of Frazer v Walker that: "[it] is important here in establishing that, if and to the extent that earlier decisions were to the effect that an indefeasible title cannot be acquired by the registration of a void instrument, they have lost their authority. It must now be recognised that, in the absence of fraud on the part of a transferee, or some other statutory ground of exception, an indefeasible title can be acquired by virtue of a void transfer. It seems to me to follow that, where there is fraud or one of the other statutory exceptions to indefeasibility, a transferee does, by registration of a void transfer, obtain a defeasible title."[17]

Counsel for Mr Solak accepted that a consequence of this dicta is that Mr Solak is not able to challenge the proprietary interest of Bank West created by registration of the forged mortgage unless he is able to establish that nothing is owing upon the proper construction of what the mortgage secures. In that regard it is relevant to consider what Hayne J went on to say in Vassos:

I consider it of the first importance to recall that the bank's title as mortgagee here is not defeated by the fact of forgery. The bank acquired that title innocent of any fraud or knowledge of fraud. Its title is as mortgagee to secure all amounts owed by any of the mortgagors including amounts owed by any of the mortgagors as guarantors of FHI. Group. Of course two of the three mortgagors never assented to become surety for FHI Group or to give the bank a mortgage as security for any such indebtedness but in no case where the signature of a mortgagor has been forged will that mortgagor have assented to pay the debt secured by the mortgage. If, as the plaintiffs contended, the fact of lack of assent of the mortgagor gives an in personam right to a discharge, then every mortgagor whose signature was forged would be entitled to compel the mortgagee to discharge the mortgage on the basis that the mortgagee was not entitled to demand any more than had been agreed to be paid and the "mortgagor" had never agreed to pay anything. That flies in the face of indefeasibility of title for without any fault of any kind on the part of the mortgagee he could always be compelled to discharge his security and his title obtained by registration could always be set aside at the suit of the defrauded party. Such a conclusion again appears to hark back to the views expressed by Dixon J in Clements v Ellis - views which, as I have said, have been rejected by the High Court in Breskvar v Wan and later cases.

The bare fact that a party has not assented to the transaction recorded in an instrument registered under Torrens system legislation does not, in my opinion, give that person a right enforceable by in personam action to have the transaction reversed. For my part I consider it is clear that more than the bare fact of forgery (and thus an absence of assent) must be shown to found any in personam action of the kind spoken of in Frazer v Walker and subsequent cases.

As Mahoney JA points out in Gosper's Case there has been no comprehensive definition of "personal" equity for these purposes: at 45. Again as his Honour points out it may be possible to discern in the authorities two suggestions about the content of the expression "personal equity" in this context: that the interest must not be inconsistent with the terms or policy of the legislation and that "personal" equities arise only from acts of the new owner: at 45; Breskvar v Wall, at 384 to 385. However whatever the limits may be on such "personal" equities the very language used to describe the right and the reference to the remedies being "in personam remedies" is a clear reference to the remedies being available in circumstances where equity would act, ie, in cases which equity would classify as unconscionable or unconscientious. In the present case, for reasons to which I will refer later, it may well be that the bank did not act without neglect but there is my view no material which would show that the bank acted unconscionably. There was no misrepresentation by it, no misuse of power, no improper attempt to rely upon its legal rights, no knowledge of wrongdoing by any other party. It obtained a mortgage, apparently regular on its face but which was in fact forged. Even if by making reasonable enquiries the bank could have discovered the fact of the forgery I do not consider that that fact alone renders its conduct unconscionable. I do not consider that the plaintiffs have any in personam right against the bank; all that they have shown is the mere fact of forgery of the instrument.[18] (my emphasis)

It was put against Mr Solak that the effect of the above passages is to defeat his claim for a declaration that Bank West's mortgage secures nothing and, therefore, that he is not entitled to have the mortgage discharged. In response to that it was contended for Mr Solak that his Honour's conclusion was expressed without setting out the terms of the forged mortgage in question and, therefore, that it was not possible to conclude that the decision in that case was inconsistent with the proposition that a registered mortgagee could not enforce a forged collateral obligation which was not incorporated by the registered mortgage. The argument for Mr Solak remained that registration of a forged instrument would confer indefeasibility of title, including the covenant to pay moneys secured, provided that the covenant was registered on title expressly or by incorporation, but not if otherwise found in a separate document which, upon its proper construction, secured nothing.

9 It may be accepted that in Vassos his Honour did not construe or set out the covenant to pay in the forged mortgage in question. The mortgage was described by his Honour as "an all accounts mortgage which purports to have been executed by [the true owners] as mortgagors".[19] The plaintiffs in that case, like Mr Solak, sought declarations that the mortgage (and related guarantee and indemnity) were null, void and of no effect and also sought orders for the removal of the mortgage from the certificate of title.[20] It was plain that the bank could not recover personally against the innocent parties on the guarantee and indemnity since they had not in fact signed the document and, therefore, they had not made the agreement.[21] The issue before his Honour was, rather, whether the title of the bank was "subject to an equity or interest preserved" by the TLA.[22] In that regard his Honour said:

In my view it is of the first importance to bear steadily in mind that the questions at issue in this case are not to be resolved by application of one of the two competing labels of "immediate indefeasibility" or "deferred indefeasibility". Those are no more than convenient shorthand expressions generally describing the effect of provisions of Torrens title legislation; they are not in any relevant sense principles from which conclusions can be drawn about the proper construction of the legislation. Further, I consider it equally important to recall that none of the Torrens title legislation to which I have been referred provides for absolute indefeasibility of title. Each of the statutes provides for circumstances in which a registered title may be defeated or qualified. Accordingly, although a policy in favour of immediate indefeasibility is to be discerned in the legislation, that policy is not absolute. Thus, although Windeyer J noted in Breskvar v Wall, at 400, that ". . . the doctrine of an indefeasible title arising by registration was seen as the very essence of the Torrens system from its beginning", his Honour goes on to add that the registered proprietor under a Torrens system has legal property in the land "subject only to equities and such interests as the Act expressly preserves". The question that arises now is whether the title of the bank is subject to an equity or interest preserved by the Transfer of Land Act. That question is not answered simply by applying a principle in favour of indefeasibility for that is to assume the answer to the very question presented for decision.[23]

No argument appears to have been put to his Honour preciously analogous to that relied upon for Mr Solak and found in the line of cases including Vella v Permanent Mortgages Pty Ltd[24] to which I have previously referred. His Honour's conclusion in Vassos that the bank could not recover under a collateral agreement does not necessarily exclude the argument relied upon by Mr Solak, namely, that the invalidity of a connected, but collateral, agreement to the mortgage will not be enforceable as part of the mortgage obligation where the collateral agreement did not create in personam rights because, for example, of being a forgery.

10 Section 42 of the TLA provides that the registered proprietor of land (in this case Mr Solak) holds his interests subject to such encumbrances as are recorded on the title. Independently, s 74 provides that the registered proprietor may mortgage the land and s 74(2) provides:

Any such mortgage or charge shall when registered have effect as a security and be an interest in land...

Section 75 effects a statutory implication into every mortgage including the obligation to "pay the principal money" mentioned in the mortgage. The forged mortgage in this case, like that in Vassos, is also an all moneys mortgage. Clause 1.2 of the instrument of mortgage registered on the title to the property purports to secure to Bank West "the payment of the amount owing" by the mortgagor who is described as "you". Previously in the registered mortgage the mortgagor (namely, the "you" I have just mentioned) is identified as "Tarik Solak". An essential step in the argument for Mr Solak is that the "you" and the "Mr Solak" mentioned in the mortgage are references to the actual registered proprietor and, therefore, to the real Mr Solak and not to the forger, whilst the "you" who assumed the obligation to repay the loan in another document (the "Bank West Home Loan Contract") is the forger and not the real Mr Solak.

11 Clause 2.1 of the registered mortgage provides that a reference to "this mortgage" in "this mortgage form, the memorandum or any annexure to this mortgage is a reference to the mortgage made up of this mortgage form, this memorandum and each of those annexures". In other words the registered mortgage expressly incorporates as part of the mortgage the other documents referred to as "this mortgage". Indeed, and to be more precise, clause 2.1 expresses an assertion that "You, the mortgagor" (that is, the real Mr Solak as registered proprietor - albeit it by forgery) agreed that the terms and conditions of "this mortgage" are set out in memorandum of common provisions No AA857 filed at the Land Titles Office and that "this mortgage" included the other documents incorporated by reference.

12 The memorandum of common provisions set out the obligations to pay and a description of what the mortgage secured. Clause 3.1 of the memorandum of common provisions provides:

You will pay the Amount Owing to the Bank in accordance with the terms of a Bank Document.

Clause 4 states that the mortgage was given as security for payment to the bank of the amount owing and for the performance "by you of all your other obligations under this mortgage". "Bank Document" is defined in clause 1.1 to mean:

an agreement or arrangement under which you incur or owe obligations to the Bank or under which the Bank has rights against you and includes a guarantee and this mortgage and any other agreement which you acknowledge in writing to be a Bank Document for the purposes of this mortgage.

"Amount owing" is also defined in clause 1.1 and, relevantly, is defined to mean in effect "all money which you owe the Bank for any reason". In each case the person upon whom the obligation falls is described as "you". Clause 1.1 defines "you" to mean "the person or persons named in the mortgage as the 'Mortgagor' and 'your' has a corresponding meaning".

13 The nub of the argument for Mr Solak was that the person with the obligations under the mortgage, and described as "you", was the real Mr Solak and not the forger purporting to have been Mr Solak whilst the "you" who had assumed the obligation to pay under the memorandum of common provisions was the forger and not Mr Solak because the only obligation to pay arose under a separate contract styled "Bank West Home Loan Contract" signed by the forger and not by Mr Solak. The real Mr Solak not having assumed any obligation to pay anything to Bank West cannot, so the argument ran, have the obligation referred to in the memorandum of common provisions and, therefore, that the obligation to pay was not made indefeasible by registration of the mortgage.

14 The Bank West Home Loan Contract identifies the borrower as Mr Tarik Solak of 21 Wallace Drive, Greenvale and, for the purposes of the contract, defines him as "you". It is that person who assumed the obligation to pay money albeit that he signed it on 16 March 2006 pretending to be the real Mr Solak. The force of Mr Solak's claim would seem, therefore, to depend upon whether there is, as a matter of construction, a mismatch between the "you" referred to in the memorandum of common provisions and the Bank West home loan contract. The argument was that the latter is a contract entered into between Bank West and a person purporting to be Mr Solak but not Mr Solak whilst the memorandum of common provisions imposes upon the real Mr Solak, through registration of the mortgage, only those obligations actually assumed by him.

15 I do not accept this to be the correct construction of the documents. The Bank West home loan contract is intended to come within the definition of "Bank Document" in the memorandum of common provisions and, therefore, to be incorporated into the mortgage. Indeed, the Bank West Home Loan Contract would undoubtedly have been incorporated into the mortgage through the memorandum of common provisions but for the drafting technique employed which identified the agreement by reference to whether the "you" referred to in the clause had incurred or owed obligations to the Bank. That drafting technique is not intended to depend upon an investigation into the existence of legal relations but, rather, as a description of the documents in which the obligations of the mortgagor to pay are to be found. "You" in the definition of "Bank Document" in the memorandum of common provisions is properly to be seen as a drafting device connecting the person named in the mortgage with the person named in another bank document as a means of identifying the document. In this case the person named in the mortgage is, of course, the registered proprietor but the person signing the mortgage as such is in fact the same as the person who signed the Bank West home loan contract as the real Mr Solak. It seems to me that the "you" in the memorandum of common provisions which links the obligation to pay in the home loan contract with the security in the mortgage is the same both as a matter of drafting and as a matter of fact: the "you" was the forger purporting to be Mr Solak in each document. The position is the same as if the memorandum of common provision had described Mr Solak by name.

16 It is inherent in any forgery that the victim of the forgery has not assumed contractual obligations upon which he or she can be sued personally. It is, therefore, not an answer to the consequences of indefeasibility that there may be no personal obligations assumed by the true owner of the land where the covenant to pay is identified by the mortgage. In Pyramid Building Society (In liquidation) v Scorpion Hotels Pty Ltd[25] Hayne J sitting in the Court of Appeal (with whom Brooking and Tadgell JJA agreed) observed:

It has not been contended that the indefeasibility of the mortgage does not extend to the covenant for payment and it is plain that it does so extend.[26]

In this case, I consider the proper construction of the mortgage to be that the covenant to pay is found in the mortgage, incorporating, as it does, the memorandum of common provisions and, through it, the Bank West home loan contract. Accordingly, the mortgage, albeit forged, is effective as security.[27] This conclusion is, in my view, consistent with the authorities relied upon for Mr Solak. The contrary outcomes in each of Printy, Chandra and Tsai depended upon the collateral agreement not having been incorporated into the mortgages. The contrary outcome in Yazgi depended upon the instrument of mortgage providing a narrower and overriding definition of "mortgage debt" than that in the collateral document. In the case before me the mortgage document refers to, incorporates, and intends to incorporate, the obligations in the collateral document upon the stated assumption expressed in all three agreements that the person assuming the obligation and mortgaging the property is the same. In Vella Young CJ in Eq. held that the forged loan agreement was not incorporated in the mortgage.[28] His Honour's further observation (upon the assumption of incorporation) that when "one then construes the mortgage there are no monies owing under that agreement because it was a forgery"[29] is, if taken literally, inconsistent with the outcome in Vassos and contrary to the passage from Scorpion Hotels I have quoted above.[30]

17 Counsel for Mr Solak did not submit that I should adopt the broad view of the dicta from Vella; that is, it was not contended (in my view correctly) in this case that a covenant to pay obtained by forgery could not be enforced upon registration. The system of title by registration gives effect to the public policy in favour of the title standing in the register over other competing claims. The important public policy in the Torrens system of land titles was recently expressed to be that "the land title register should be sufficient of itself to inform those concerned about the nature and extent of any outstanding interest in relation to the land".[31] The forger harmed both Mr Solak and the mortgagee but, upon registration of the mortgage, the mortgagee's title was secured and must have effect notwithstanding the impact against the interests of another innocent party. Not every term, covenant and condition in a mortgage is apt to benefit from the consequences of registration (hence, in part, the question "indefeasibility for what?"), but a covenant to pay found in, or incorporated in, the registered mortgage is, in my view, within the public policy which the statute favours in preference to other wronged parties. It is not to the point that a mortgage as a security could exist without a covenant to pay[32] or that a covenant to pay in a mortgage may be collateral to a debt arising from a separate loan agreement.[33] As was said by Basten JA in Provident Capital Ltd v Printy[34] the fact that "certain personal covenants secured by the mortgage" may be "divorced from the mortgage" does not provide a sound basis for reading down terms in a mortgage for the purposes of their statutory effect.

18 It is therefore unnecessary for me to consider the claims and cross-claims between defendant, third parties and fourth parties. However, I should state my findings and my conclusions about any apportionment of liability in case it becomes relevant hereafter.

19 Bank West's claim against the third parties (that is, Aussie and AHL) arises from an origination agreement it made in September 2002 with Aussie. In August 2006 AHL effectively assumed the obligations of Aussie pursuant to a novation deed with effect from 1 July 2004. Accordingly, although AHL was not itself an actual participant in any of the events or transactions giving rise to the dispute, it was the party liable to Bank West for Aussie's default (if any).

20 The origination agreement appointed Aussie to perform various services for Bank West throughout Australia including, relevantly, in New South Wales, Victoria and Western Australia. Aussie's tasks included the introduction of potential clients to Bank West including the preparation and completion of various forms. Clause 4.1 of the origination agreement provides:

The Originator agrees to comply with the Service Procedures including provision of Client Information and provision of a properly completed and singed signature identification statement in the Bank's standard form.

Various terms used in this clause are defined in clause 1.1 of the origination agreement but the phrase "signed signature identification statement in the Bank's standard form" is not one of them. Bank West did, however, have a form for identification of customers which was incorporated by Aussie as part of its computer program package made available to its brokers for completion. I will return to that form later but note that it required the sighting of original documents used to identify the potential customer. Bank West's claim against Aussie is, essentially, that the loan application submitted to Bank West on behalf of the person purporting to be Mr Solak included the completed Bank West's standard identification form identifying the borrower without having sighted original identification documents contrary to clause 4.1. That is maintained by Bank West to be the cause of its loss for which it claims indemnity against Aussie pursuant to clause 9.1 of the origination agreement, and hence against AHL pursuant to the novation deed. Bank West did advance $560,000 to the person purporting to be Mr Solak whose identity is not known. The funds were paid to a company called Willowcorp Pty Ltd ("Willowcorp") but have not been received.

21 Aussie's (and AHL's) claim against Mr Kheir and Kheirs Financial Services (that is, the fourth parties) is based upon Mr Kheir's processing of the loan pursuant to a contractor agreement between his company, Kheirs Financial Services, and Aussie. The agreement is described as "Aussie representative contractor agreement" ("the contractor agreement") and was signed by Mr Kheir on behalf of Kheirs Financial Services. The contractor agreement entitled Kheirs Financial Services, through Mr Kheir, to introduce potential customers who would, in turn, be matched to financiers such as Bank West. Clause 3.4 of the contractor agreement required, as an essential condition, the identification by Kheirs Financial Services of the customer by personal interviews and identification. The clause specifically required the conduct of interviews to be "face to face".

22 The relevant facts leading to the creation of the loan upon forged documents began when Mr Kheir was phoned by the person claiming to be Mr Solak. Mr Kheir, and Kheirs Financial Services, are based and conduct business in New South Wales. In February 2006 Mr Kheir was telephoned by a person introducing himself as Tarik Solak. That person informed Mr Kheir that he required a loan facility and that Mr Kheir had been referred to him by someone with whom he had previously dealt. The false Mr Solak said that he was in Melbourne, had several unencumbered properties and required a loan facility for some developments he was undertaking in Turkey. He greeted Mr Kheir with an Islamic greeting and the two had a general discussion about Mr Kheir's recent pilgrimage to the Haj. Mr Kheir had no reason to disbelieve that the person on the telephone was who he represented himself to be and the Islamic greeting and general discussion about a pilgrimage doubtlessly added to the sense which Mr Kheir had that he was dealing with the real Mr Solak.

23 Mr Kheir had never met Mr Solak but knew of him. Mr Solak has some reputation as a kick boxer appearing frequently on pay television. Mr Kheir described himself in evidence as a sports fan and had watched the real Mr Solak kick boxing several times on commercial sports television. Mr Kheir and the person pretending to be Mr Solak discussed kick boxing in their first telephone conversation and believed the enquiry to come from the real Mr Solak.

24 Mr Kheir requested material to complete Aussie's application form from the person he thought to be Mr Solak, including identification documents, and subsequently received a fax from the person purporting to be Mr Solak containing the material requested including copies of the real Mr Solak's passport and licence. The material also included financial statements and documents purporting to be Mr Solak's personal tax returns and a company tax return and a statement of assets and liabilities.

25 How it was possible for the forger to have access to some of the documents of the real Mr Solak was explained by the latter in his evidence. His uncontradicted evidence was that he left Australia on 2 February 2006 to return on 30 June of that year. He returned with an intention to sell the property and discovered that the duplicate certificate of title was missing from the place he had left it in his home. The property had an upstairs room which he used as an office in which he kept various documents including the duplicate certificate of title and copies of licences, passports and other documents relating to his business affairs. No-one was living in the house whilst he was away and on his return he discovered that a kitchen window had been broken and that the security recording machine connected to security cameras around the property was missing. These matters were reported to the police who, it seems, are still investigating the matter. Mr Solak gave evidence of his belief that the police think that the perpetrator of the theft and forgery may be a person known to Mr Solak who, however, is not in Australia and was last spoken to by Mr Solak when, to his belief, the other person was in Ireland. Apart from that suggestion, however, Mr Solak's uncontested evidence was that he did not know who illegally entered his residence, or who had successfully impersonated him and fraudulently obtained a loan upon a forged mortgage.

26 The person purporting to be Mr Solak, therefore, had access to the duplicate certificate of title and to some copies of documents of the real Mr Solak which he was able to use to provide identification of himself as Mr Solak. In particular he provided a copy of Mr Solak's actual Australian passport and driver's licence. He also provided copies of tax returns, financial statements and company tax returns with personal details including the real Mr Solak's name, address, date of birth and statement of assets and liabilities. A curiosity of the provision of this information by fax was that Mr Kheir had been provided with a fax number at which to send forms to the forger for completion and signature (being, I assume, a private fax number in Melbourne) but that the impersonator sent to Mr Kheir faxes from two different post office fax machines rather than from the number he had given Mr Kheir.

27 Once Mr Kheir received the information he downloaded it onto a dedicated laptop computer which had been provided to him by Aussie with a program that would rank available loan offers in terms of the best deal available from the bankers through which Aussie was able to advance funds. Mr Kheir then phoned the person purporting to be Mr Solak to advise which banks would consider the proposal and Bank West was chosen by the forger as the preferred lender.

28 At that point Mr Kheir had a problem which led to a phone call about which there was some conflict of testimony. The problem arose from the fact that he, Mr Kheir, was in Sydney whilst the person purporting to be Mr Solak was in Melbourne. This, according to Mr Kheir's evidence, caused him a difficulty because he did not know how to proceed with a "remote" application. To resolve the problem, according to Mr Kheir, a phone call was made to a Mr Dean Gillespie at Bank West who Mr Kheir knew and who was the relevant manager responsible at Bank West for relationships with brokers such as, and including, Mr Kheir through Aussie. Mr Kheir's version of that conversation was that he asked Mr Gillespie what he should be doing to process the application given that Mr Solak was in Melbourne and that he, Mr Kheir, was in Sydney. Mr Kheir's recollection was that Mr Gillespie had advised him that he could fax the application to the client and have the client sign it but that he had to make sure that the original signature on the application was forwarded back to Mr Kheir and that he had to have it on file. Mr Kheir was emphatic that at no time did Mr Gillespie tell him about getting an authorised referee of the applicant or of the existence of a separate form for authorised referees on the Bank West website. The Bank West form completed by Mr Kheir included a different form for identification, namely a 100 point signatory identification form. Neither version of the conversation was that there was any specific discussion about how the form actually completed was to be completed in the case of a "remote" application. Mr Gillespie's version of the conversation was a qualified certainty that he would have informed Mr Kheir that he could send Mr Solak to a branch in Melbourne for identification if the issue of identification had been raised.

29 In my view, it is probable that the relevant conversation between the two was a combination of each of their recollections. Mr Gillespie is probably right in saying that he would have said to Mr Kheir that a customer could be identified at a branch in Melbourne if that had been the express object of Mr Kheir's question. Mr Kheir probably asked about the process for conducting a remote (that is a non face to face application) without specifically enquiring about how to satisfy the requirement of identification. It is probable that the conversation between the two focused upon completion of the application form without specific reference to how the 100 point signatory identification form could possibly be completed as required by the information and statements on the form. One thing which is clear is that Mr Kheir did not say to Mr Gillespie, and gave no evidence that he did say, something to the effect of "but how do I satisfy the 100 point signatory identification form if I don't see him"? Nor did Mr Kheir say to Mr Gillespie something to the effect of "but how will the obligation imposed upon banks to satisfy the 100 point check be met"? There is no suggestion, and there is no foundation upon which I could find, that Mr Gillespie said that Mr Kheir was not obliged to comply with banking law obligations to identify a new customer by meeting the 100 point check. These omissions are, in my view, significant because Mr Kheir had previously worked with the Commonwealth Bank and by the time of the relevant transaction was both an experienced broker and was well aware of the obligation to obtain a 100 point identification of persons when opening bank accounts. It is, therefore, probable (and I find to be the case) that Mr Gillespie did not in his first conversation with Mr Kheir turn his mind to or express any view about how the requirement of identification in the Bank West forms could be satisfied other than by its completion according to its terms. Similarly it is improbable (and I find not to have been the case) that Mr Kheir was told that he need not have complied with the obligation to satisfy the 100 point signatory identification form.

30 After his conversation with Mr Gillespie, Mr Kheir printed out the Bank West form from the laptop computer provided by Aussie and faxed it to the person purporting to be Mr Solak for the latter's completion. The signed parts of the completed form was returned by fax to Mr Kheir who undertook what he described as his normal checks to ensure that everything was signed where it should be signed and made certain that the application to the best of his knowledge was complete in his usual way. He then faxed the information to Bank West.

31 The information faxed by Mr Kheir to Bank West was some 42 pages. The first page is described as a home loan application form bearing the logos for both Aussie and Bank West. It is signed at the bottom by Mr Kheir immediately under the words:

I confirm all applicable requirements have been satisfied, including but not limited to the sighting of original documentation for all savings, income and FTRA identification evidence.

Mr Kheir gave evidence that he did not know, and at the time of giving evidence still did not know, what the letters "FTRA" stood for, but that he did know that they referred to the requirement to obtain 100 points of identification. The tenth page in the 42 page fax he sent to Bank West was a page completed by him and signed by him. It is headed "100 point signatory identification form" and contemplates signatory identification in one of the two alternative ways: either a sighting of original documents by the person completing the form without sending the originals to Bank West, or alternatively, the completion of identity information in a table if original documents were not being forwarded to Bank West. The form made clear that originals were in all cases to "be sighted" with the only alternatives being about whether copies of documents were going to be forwarded to Bank West. The Bank West form, unlike the requirement made by Aussie in the contractor agreement, did not in terms require a face to face meeting with the client but it did require the sighting of originals. Curiously, Mr Kheir purported to complete both alternative sections of the form (that is, the section applicable where copies were going to be forwarded to the bank as well as that where they were not going to be forwarded to the bank) and signed and dated it. However, he left blank the section asking: "results of check - has verification been achieved".

32 Mr Kheir did not sight the original documents used by the forger to obtain the loan. No part of the conversation between Mr Gillespie and Mr Kheir as recalled by the latter was to the effect that originals need not be sighted by the broker. The failure of Mr Kheir to sight the original documents needs also to be understood in the context of the obligations he had under the contractor agreement with Aussie to have a face to face interview with each customer as I have already mentioned. Aussie had given him training on, amongst other things, this requirement and, as I have also already mentioned, he had extensive experience and knowledge about the importance of customer identification as something more than a mere formality. Indeed, clause 3.4 of the contractor agreement with Aussie (which states clearly the need to have a "face to face interview" with each customer), appears under the heading "identification of customers" and begins with an explanation of the need for customers to be personally interviewed and identified in "order to reduce the risk of fraud".

33 The application form, once it reached Bank West, was processed, solicitors were retained to prepare mortgage documents, accounts were opened and $560,000 disbursed to Willowbank on 5 April 2006. No one at Bank West seems to have noticed that the 100 point signatory identification form had been completed incorrectly and in part not at all. Nor it seems did anyone at Bank West follow fully its own internal procedures of undertaking personal identification before opening an account. Bank West, rather, acted on the defective (and partly incomplete) information provided by Mr Kheir and, in due course, disbursed funds. On 8 March 2006 Bank West wrote to Mr Kheir informing him that the loan application had been unconditionally approved. On 13 March 2006 Bank West wrote to "Mr Solak" advising him that the loan application had been approved and enclosed a loan contract and ancillary documents for reading, completion and return to Bank West. Gadens solicitors were nominated as the solicitors to effect the mortgage transaction for Bank West. On 21 March 2006 Gadens wrote to "Mr Solak" enclosing original loan and ancillary documentation to be signed and returned to Gadens lawyers. All was apparently received and completed by the person purporting to be Mr Solak. A Bank West equity access account was opened in the name of Mr Solak and funds were disbursed.

34 The claim and cross-claims between defendant, third parties and fourth parties raise many interesting and difficult questions concerning the basis of liability and potential apportionment of liability between concurrent wrongdoers based upon potentially different statutory provisions in different jurisdictions. Little purpose will be served by a detailed examination of the various contentions because, in the end, the critical question is how I would apportion the loss between the concurrent wrongdoers upon a common standard. Accordingly, I shall confine myself to some general observations about the competing claims and deal mainly with my conclusions about apportionment on the facts.

35 Bank West contended that its claim was not an apportionable claim under any of the relevant provisions, namely, Trade Practices Act 1974 (Cth) s 87CB; Wrongs Act 1958 (Vic) s 24AF, Civil Liability Act 2002 (NSW), s 5AI, or Civil Liability Act 2002 (Western Australia). Bank West's claim against Aussie and AHL is not one for damages "made under s 82 of the Trade Practices Act 1974" within the meaning of "apportionable claim" in s 87CB. However, the apportionability of claims under the State legislation all depend fundamentally upon whether the claim is one "arising from a failure to take reasonable care". Bank West's claim against the third parties is not pleaded as such but the factual pre-condition to the operation of the relevant statutory regimes does not depend upon how a claim is pleaded but whether the statutory precondition exists, namely whether the claim arises from a failure to take reasonable care. In Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd[35] Middleton J said that the words "arising from a failure to take reasonable care" should be interpreted broadly.[36] In my view the State regimes providing for apportionment of liability between concurrent wrongdoers requires a broad interpretation of the condition upon which apportionment provision depends to enable courts to determine how the claim should be apportioned between those found responsible for the damage. The policy in the legislation is to ensure that those in fact who caused the actionable loss are required to bear the portion of the loss referable to their cause. That task ought not to be frustrated by arid disputes about pleadings. Support for that conclusion may be found by the circumstance that a "failure to take reasonable care" can arise as much from an obligation in tort as in contract. In this case Bank West's claim for indemnity based upon a failure to sight original documents (that is, a breach of contract) may aptly be described as a failure to take reasonable care for the purposes of the apportionment provisions. The views relied upon by Bank West from Commonwealth Bank of Australia v Witherow[37] and Gunston v Lawley[38] do not require a different conclusion. Bank West's action is in my view one "based on an alleged failure" by the third parties to take "reasonable care".[39]

36 The more difficult task is to determine in numerical or percentage terms the proportion of an entire loss as between concurrent wrongdoers. In that task there is also the difficulty of determining what, if any, amount should be attributed to the unknown or unnamed fraudster. The amount, if any, of loss apportionable to the fraudster gives rise to particular issues which, in this case, are perhaps best dealt with separately after first considering the claim as between the other potential wrongdoers as a single unit.

37 AHL's position can be put to one side because its responsibility to the loss is wholly that attributable to Aussie. The position of Kheir Financial Services can similarly be dealt with as being equivalent to that of Mr Kheir personally. In other words, I see no separate amount of loss apportionable to AHL that would not be apportionable to Aussie or any separate amount of loss apportionable to Kheir Financial Services that would not be apportionable to Mr Kheir. The three principal contenders for apportionment of loss, therefore, are: Bank West, Aussie and Mr Kheir (putting aside the forger).

38 The task in apportioning liability amongst concurrent wrongdoers is to be undertaken in a real and pragmatic sense to identify who is to blame for the loss and who should bear the liability.[40] The primary focus in that undertaking is to determine, as best as may be possible, the "causal potency" of the various factors which singularly or together went to bring about the loss caused. In my view the conduct of Mr Kheir was the primary cause of the loss as between him, Aussie and Bank West. He had contractual and statutory obligations to identify the person claiming to be Mr Solak. He was the person best placed to verify identity and, because of that fact, was the person upon whom the obligation was placed by contractual agreement and emphasised as such in the training provided to him by Aussie. He was not told by Mr Gillespie that identification was not necessary and did not make any attempt either to secure the original documents (which of course was unlikely given the nature of the documents) or to ask Mr Gillespie what should be done, not about the form to be conveyed by fax as a remote application, but rather about the documents relevant to identification of the person seeking the funds. He did not state on the form anything that might have put Bank West on notice that a vital element for completion of the transaction (namely, identification of the applicant) had not been completed by him. Page 13 of the 42 page fax he sent to Bank West referred to his conversation with Mr Gillespie but only to state that Mr Gillespie had "acknowledged suitability of product sought". Nothing was said anywhere in the information conveyed by Mr Kheir about the lack by him of sighting of identification documents. A person reading the "100 point signature identification form" on page 10 of the 42 page fax he sent to Bank West, might conclude that it had been defectively completed but that he had in fact sighted the documents. Had he not done so it was incumbent upon him to make that clear, not to complete any part of the form, and to indicate as the results of his check that verification had not been achieved.

39 His position as the person with primary contact to the applicant made others substantially reliant upon him. The contractual obligations imposed upon him by Aussie, and indirectly by Bank West, reflected the reality of the situation that he was the person in primary contact with the customer. The outsourcing effected by the various arrangements between Bank West, Aussie and Kheir Financial Services, to their mutual financial profit and interest, placed the primary burden upon Mr Kheir to ensure the identity of the person with whom they would in turn contract and deal. In fact his dealing with the person purporting to be Mr Solak was careless in many respects. In addition to those I have already mentioned, I should mention some others. Mr Kheir originally received from the person purporting to be Mr Solak only the signed pages of the loan application documents and could not have known for certain what other information that person was declaring to be true and correct. Mr Kheir first received tax returns that had not been signed by the forger and subsequently received the signed pages (which had previously not been signed), but obviously backdated, by the person he thought was Mr Solak. He also received faxes from the person purporting to be Mr Solak from different post office fax machines rather than the one to which Mr Kheir had sent faxes to him. None of these matters were pursued in any way by Mr Kheir.

40 The position of Bank West is not free from causative loss. Mr Gillespie may only have been asked about the processing of applications remotely between Melbourne and Sydney but he did not turn his mind to the important task of how identification of the customer would be made. Accepting that Mr Gillespie would have said that the customer should attend a Melbourne branch if he had been asked, does not carry with it (and I do not find) that he was asked or that he did say to Mr Kheir that the customer should attend a branch for identification. I have no doubt that if Mr Gillespie had said that to Mr Kheir that Mr Kheir would, in turn, have said that to the person purporting to be Mr Solak. In other words, I find that Mr Gillespie did not seriously turn his mind to all of the ramifications of a remote application when asked by Mr Kheir about what to do. Mr Gillespie should have done so. Furthermore, Bank West subsequently received and accepted forms which were defective on their face and had insufficient internal processes to ensure that the fraud was not prevented either by a thorough dealing with the forms provided by the broker or at the subsequent stages of the opening of accounts and the payment of cheques from them.

41 Aussie's contribution to the ultimate loss is insignificant in this case. Its system was essentially to act as intermediary between the broker and the banker. It did have a training system and, in my view, was entitled to rely upon the systems in place which ought to have avoided the fraud. Mr Kheir's counsel also suggested that some culpability was to be borne by Gadens as Bank West's solicitors for not detecting the fraud, and possibly the ANZ Bank (as the collecting bank for the cheques) for not having verified the signatures upon presentation of cheques. In my view neither have been shown reliably responsible for any part of the loss. In no way could either be said to be causative of the loss beyond their participation in a series of transactions which might, at best hypothetically, have enabled either to intervene if something had appeared to be irregular. Neither was joined as a party and none of the hypothetical wrongdoing of the ANZ or Gadens was reliably explored or tested.

42 In my view the apportionment as between Mr Kheir (including Kheir Financial Services), Bank West and Aussie should be 70%, 30% and 0%.

43 The position of the fraudster complicates this apportionment. In Ginelle Finance Pty Ltd v Diakakis,[41] Hoeben J held that the proper apportionment of responsibility in that case to be 90% to the fraudster and 10% to the solicitor. An almost identical result was reached in Chandra v Perpetual Trustees Victoria Ltd.[42] In Vella v Permanent Mortgages Pty Ltd[43] Young CJ in Eq said that it would be quite wrong simply to say that those two cases almost compel subsequent courts to reach the same apportionment in similar cases but that they did provide guidance.[44]

44 In some cases the fraud will be no more than the setting in which loss is caused by the action of others or will be a pre-condition to an apportionable loss, but not necessarily an operative cause in all the circumstances. In principle I see no prohibition on apportioning liability upon the fraudster where the fraudster's conduct is plainly part of the causative elements resulting in the loss. In this case it undoubtedly is to some extent.

45 The fraudster's portion of liability would swamp that of the others if moral blameworthiness were the overriding criteria to determine apportionment. However, it seems to me that the primary focus of the apportionment provisions is not to give expression to moral sanction but to apportion as between operative causes. On that basis it seems to me that in this case the fraudster may be seen responsible for about half of the operative cause of the loss: it may be true that the fraudster caused loss by deceiving others, but those deceived in this case were partly responsible by the way in which their conduct enabled the deceit to be effected. Accordingly, if I had been required to do so, I would have apportioned the loss as between the parties before me as follows: 50% to the fraudster; 35% to the fourth parties jointly; and 15% to Bank West.

46 I should note for completeness that Bank West's claim against the third parties for indemnity included a claim for the interest payable under the forged loan agreement with the forger. The quantum claimed, and accepted to be the correct amount, if payable, up to 18 February 2009 was $109,205.50. Bank West's argument was that its loss on the forged loan (assuming it could not enforce the mortgage secured against the property) entitled it to interest from the third parties by way of indemnity. The claim was not for the use of money advanced[45] but upon the terms of a contract not able to be enforced. It was a different claim from that rejected by Giles J in State Bank of New South Wales v Yee[46] on which the third parties relied. In that case his Honour held that the Court should not assume damages for loss of use of money and should not find a loss by application of interest rates payable under a forged mortgage in the absence of evidence about the bank's use of funds. The claim in Yee was for negligence against a solicitor and not upon a contractual right to be indemnified for loss as in this case is Bank West's claim against AHL (through Aussie). The question in this case, unlike that in Yee, is not one to be determined by reference to Bank West's proof of loss, but, rather, by whether the contractual entitlement between it and Aussie required the latter to indemnify the former for the contractual loss between Bank West and the forger.

47 Clause 9.1 of the origination agreement between Bank West and Aussie required the latter to indemnify Bank West against "any liability or loss, expenses, damages, actions, claims and costs (including legal costs on a solicitor and own client basis) sustained or incurred, arising directly or in connection with any default or breach by Aussie". The "loss" contemplated by this clause includes the interest payable on the forged agreement. Accordingly, if I had been required to make an order about this matter, I would have included the interest component claimed by Bank West against AHL (through Aussie) pursuant to the origination agreement and the novation deed.

48 I will dismiss the proceeding between plaintiff and defendant with the consequence that the subsequent proceedings between defendant, third parties and fourth parties will also, in effect, be dismissed. However, I will relist the proceeding on 20 March to hear the parties on the form of orders and on any question concerning the costs to be paid by any party against another. To that end I direct that any party wishing to be heard on the form of orders to be made or on any costs to be ordered should file and serve upon all other parties by no later than 4.00pm on 19 March a copy of any form of order they seek to have made and any affidavit or other material upon which they intend to rely.

[1] Yazgi v Permanent Custodians Ltd [2007] NSWCA 240; Provident Capital Ltd v Printy [2008] NSWCA 131; Chandra v Perpetual Trustees Victoria Ltd [2007] NSWSC 694; (2007) 13 BPR 24,675; Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505; Robinson v Nishtom Pty Ltd [2009] NSWSC 36; Perpetual Trustees Victoria Ltd v Cipri [2008] NSWSC 1128; Permanent Custodians Ltd v Ali [2008] NSWSC 1264; Perpetual Trustees Victoria Ltd v Tsai [2004] NSWSC 745; Small v Tomassetti [2001] NSWSC 1112; Westpac Banking Corporation v Clark [2008] NZCA 346.

[2] Peter Butt "Limits of indefeasibility: Registered mortgage not securing obligations under forged loan documents" (2007) 81 ALJ 713; Justin Vaughan "What do forged "all monies" mortgages secure?" (2008) 82 ALJ 671; and Jeremy Stoljar "Mortgages, indefeasibility and personal covenants to pay" (2008) 82 ALJ 28.

[3] [2008] NSWSC 505.

[6] (1992) 25 NSWLR 643.

[8] [2008] NSWCA 131.

[9] Ibid, [42], [50] (Basten JA, Tobias and McColl JJA agreeing).

[12] [2008] NZCA 346.

[13] Ibid, [30]-[31], [70] and [90 (d)].

[15] [1993] VicRp 74; [1993] 2 VR 316. Vassos was referred to in the decision in Vella although not, it seems, on the question of the extent of indefeasibility upon registration of a forged instrument: Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505, [371-[377].

[16] [1998] 1 VR 188.

[24] [2008] NSWSC 505.

[25] [1998] 1 VR 188.

[27] Transfer of Land Act 1958 (Vic) s 74(2).

[28] [2008] NSWSC 505, [298]-[299].

[30] See also Public Trustee v Paradiso (1995) 64 SASR 387, 388 (Prior J, Cox and Lander JJ agreeing); Lansen v Olney [1999] FCA 1745; (1999) 100 FCR 7, 35; Conlan v Registrar of Titles [2001] WASC 201; (2001) 24 WAR 299, 361 (Owen J).

[31] Queensland Premier Mines Pty Ltd v French [2007] HCA 53; (2007) 82 ALJR 115, 118 (Kirby J).

[32] English Scottish and Australian Bank Ltd v Phillips [1937] HCA 6; (1937) 57 CLR 302, 308 (Latham CJ); Queensland Premier Mines Pty Ltd v French (2007) 82 CLR 115, 123 (Kiefel J, Gleeson CJ and Gummow, Kirby, Hayne, Heydon, Crennan JJ agreeing).

[33] French v Queensland Premier Mines Pty Ltd [2006] VSCA 287, [86] (Callaway JA); Queensland Premier Mines Pty Ltd v French [2007] HCA 53; (2007) 82 ALJR 115, 125 [57] (Kiefel J, Gleeson CJ and Gummow, Kirby, Hayne, Heydon, Crennan JJ agreeing).

[34] [2008] NSWCA 131, [38].

[35] [2007] FCA 1216; (2007) 164 FCR 450.

[37] [2006] VSCA 45, [13] (Maxwell P, Buchanan JA and Redlich AJA agreeing).

[38] [2008] VSC 97, [20], [47] (Byrne J).

[39] [2006] VSCA 45, [13] (Maxwell P, Buchanan JA and Redlich AJA agreeing).

[40] Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463 [94] (Palmer J), Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505, [591] (Young CJ in Eq).

[41] [2007] NSWSC 60.

[42] [2007] NSWSC 694; (2007) 13 BPR 24,675.

[43] [2008] NSWSC 505.

[45] Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125.

[46] (1994) 33 NSWLR 618.