The document appeared to have been forged. There was no statement of the principal sum or its payment in the mortgage but there was a separate loan agreement.
27 In the course of his judgment allowing the appeal, Young CJ in Eq. said, at p 22,283 [13]:
"There is no doubt at all that under the Torrens system a forged mortgage which might be a nullity under the old system title when registered without fraud is fully efficacious as conferring on the mortgagee the interest in land described in the mortgage. It is often said in a shorthand way that the mortgagee gets an indefeasible interest. However, as Campbell J said in Small v Tomasetti [2002] NSW Conv R 56,011 at page 58,306 [9]:
'Notwithstanding that registration confers indefeasibility on a mortgagee there is still a question, 'Indefeasibility for what?'".
28 Later, at 22,284:
"20 Under the old fashioned form of mortgage there was a statement of the principal sum lent and an acknowledgment that the money had been lent. The authorities show that the present type of problem was rarely likely to arise with that type of mortgage because the production of the security document was prima facie evidence of the existence of the debt ( Piccock v Brown (1734) 3 P Wms 288; 24 ER 1069) and that, unless the fact was put in issue by the pleadings, the security itself was sufficient evidence of the payment ( Minot v Eaton (1826) 4 LJ (OS) Ch 134, but see Wansworth Norton Solicitors Nominee Company Limited v Edmonds [1992] 1 NZLR 596). This is set out in the Australian edition of Fisher and Lightwood on Mortgages at par [16.45] and [39.8]. The modern clause, however, does not go that far especially in a facility mortgage requiring drawn downs to be made later. It would thus not seem that any of the traditional protections to mortgagees apply to mortgagees who use this form of loan agreement and mortgage.
21 It is clear that if no monies are lent under a mortgage then the mortgage is just completely void: see Re GM Industries Pty Ltd and the Companies Act (1980) ACLC 40-665 per Needham J. His Honour was there dealing with a company charge rather than a registered mortgage so that the GM decision has to be read subject to the effect of indefeasibility of a registered mortgage. However, as Mr Walsh, who appeared for the Registrar General, so eloquently put it, there may be a registered mortgage, but it may be a registered mortgage which secures nothing.
22 I have already set out the principal part of clause 2.2. [His Honour was here referring to the clause I set out above at [26].)
23 It is, to my mind, a rather ambiguous clause. Mr Donaldson SC said as sweetly as he could that any sensible commercial lawyer looking at it would know what it meant but unfortunately I do not appear to be in that category. However, whatever it means, it refers back to whatever is owing under the secured agreement. As the secured agreement itself does not bring with it any concept of indefeasibility and as there is an issue between the parties as to whether or not it was ever signed by the appellant or merely signed by a person impersonating the appellant, there is not the material to demonstrate to the required standard that there was a loan to the appellant.
24 If there was no loan to the appellant he could not be in default not repaying the loan and, therefore, the mortgagee was not entitled to possession."
29 Tsai, whilst a judgment on an interlocutory application, stands as authority for the proposition that the indefeasibility provisions of the Real Property Act do not entitle a mortgagee to recover under a registered mortgage where the obligation to make payment does not arise under the mortgage but under a separate loan agreement, and where that document was forged. Mr Wales submitted this decision is directly in point.
30 In Small, the signature of the second defendant to a mortgage was forged. The mortgage was registered under the Real Property Act. The second defendant sought the continuation of an injunction restraining the disbursement of proceeds of sale after the registered proprietors of the mortgages had exercised their power of sale. Campbell J declined to continue the injunction. However, in Small the relevant mortgage itself contained this provision:
"The mortgagee has agreed to lend to the mortgagor and the mortgagor has agreed to borrow from the mortgagee the sum of $325,000 (hereinafter called the principal sum)...
(3) The mortgagor covenants to pay to the mortgagee the principal sum or so much thereof as shall remain unpaid on the 12th day of May 2001.
(4) The mortgagor will pay interest on the principal sum or on so much of it for the time being as shall remain unpaid...at the rate of $11.75 (Eleven dollars seventy five cents) percentage per annum as follows".
31 Having referred to the above provision, his Honour continued:
"15 In these circumstances, it is, in my view, clear that the estate or interest in the land which is created by the registration is a charge which secures at the least (so far as the first mortgage is concerned) the sum of $325,000, together with interest which accrues on it and is unpaid, and (so far as the second mortgage is concerned) the sum of $65,000, together with interest which accrues on it and is unpaid."
32 Reference was also made in the course of submissions to PT Limited v Maradona (1992) 25 NSWLR 643. This case, considered by Campbell J in Small, concerned, inter alia, a registered mortgage and a guarantee given by a seventy-five year old woman who, following a stroke, had available a defence of non est factum. Hence, the guarantee was unenforceable, but it was necessary for Giles J to consider the extent of indefeasibility of the mortgage through its registration. What his Honour said was this (at 679):
"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."
33 The conclusion reached in PT Limited was that the mortgage secured nothing as against the disabled guarantor because consideration of the mortgage led to consideration of other documents which were not registered, in order to determine the mortgagee's estate, and as against the guarantor, these other unregistered documents were ineffective because of her lack of capacity.
34 What consideration of Tsai, Small and PT Limited illustrates is the importance of considering the terms of the particular mortgage in order to determine the effect of its registration, and what indefeasibility is thereby conferred.
35 Returning to the present case, Mr Wales submitted that the construction of the mortgage, and in particular the definition of "secured money" in the memorandum, takes one to the deed of loan as the only possible source of indebtedness. However, that document is not the document of the plaintiff. Neither is it "a related agreement" under the mortgage when the definition of "related agreement" is considered. This is because the document does not relate to the mortgagor but to the fraudster.
36 Mr Walsh adopted the submissions advanced by Mr Wales, supporting the ultimate submission, that this particular mortgage, even though registered, secured nothing.