Russo v Bendigo Bank Ltd & Reichman [1999] VSCA 108

Russo v Bendigo Bank Ltd & Reichman [1999] VSCA 108 - VSCA 1999 case summary — Zoe

[26]

In some senses the learned judge's conclusions were curious inasmuch as, upon the facts, he was prepared to hold that, although Miss Gerada knew that Mrs Russo was not present, nevertheless she signed an attestation clause which she knew contained a false representation that she had been present at the time of the appellant's signature. Even though that would probably not amount to forgery (cf. Brott v. The Queen [1992] HCA 5; (1992) 173 C.L.R. 426), signing the attestation clause amounted to a representation both that the appellant had signed the document and that it had been signed in Miss Gerada's presence. Moreover, she was not ignorant of Mr Reichman's instructions which she expressed as requiring, although apparently she had not fully complied with them either on this occasion or on other occasions, that the attestation clause should be signed only when the signatory was present. A representation to that effect is clearly important and had and still has practical significance in what was not disputed to be the ordinary practice of the Titles Office in receiving documents for registration as a means, however imperfect, of authenticating signatures. The notion that the signing of attestation clauses is a mere formality and that their accuracy could be treated casually was roundly criticised by Tadgell, J. in A.G.C. v. De Jager [1984] VicRp 40; (1984) V.R. 483 at 497 where his Honour stated firmly that the notion ought to be rejected, indeed dispelled, for in his opinion "nothing ... could be more unwarrantable". Nevertheless in the present case the learned judge, while accepting what was said in De Jager, concluded that Miss Gerada's behaviour did not amount to fraud, notwithstanding her knowledge of the error of her representation. The explanation, which I believe is apparent from a reading of the whole of his reasons, is that he was not persuaded that she had acted dishonestly. The issue is whether his Honour was correct and to what extent this Court can overturn his finding on this vital question of fact.

[60]

As to the question whether Miss Gerada knew that she was putting the mortgage forward "on the path to registration", there is surprisingly no evidence. One might think that that is a matter which could be inferred. If one was dealing with a person of professional training or long experience as a law clerk, the inference might well be irresistible. But there was no evidence as to Miss Gerada's understanding of conveyancing procedures, nor any attempt to cross-examine her to show what her understanding was. The strongest point against her is her concession that Mr Reichman was adamant that signatures must be attested in the presence of the signatory, from which many would infer that something untoward might occur if that instruction were not followed. What Miss Gerada knew of the process is left to the imagination. Perhaps in most cases documents which she attested were sent directly for lodging in the Titles Office; she may even have been there herself, although there is no evidence to that effect. It may be that most of the work she did was for the bank, in which case the documents would probably have been sent to the bank with a letter from Mr Reichman but would not to her knowledge have been taken further. In the present case one might even infer that the mortgage was sent to the bank to be held as an equitable mortgage pending the need to expend money in registering it. That seems not unlikely inasmuch as the mortgage was not registered until 4 April 1990 which one might assume was the date of lodgment for that purpose. Again there was no evidence as to how or by whom that lodgment was effected (other than the concession that a commercial firm was used, as referred to in para.10) and indeed by that time Miss Gerada had left the employ of Mr Reichman. There was, of course, no evidence that she knew about the significance of attestation clauses so far as the registration of title was concerned. A very careful argument was prepared (for other purposes) on behalf of the appellant to show how significant attestation in the process of registration at the Titles Office was but there was in truth no dispute as to the significance that these clauses play in registering a title. But that is what the trained lawyer knows, not a 19 or 20 year old clerk. Other than that she would be aware that the document might be registered and enforced against the signatory, I do not believe that there is sufficient evidence to show that she was aware of the significance of her attestation in the process of putting forward the mortgage "on the path to registration".

[72]

It was argued that the knowledge of Mr Reichman and Miss Gerada could not be imputed to the bank as principal unless that were knowledge gained when acting within the scope or course of their authority. To the extent that Mr Reichman's acts were improper, such as would otherwise be characterised as amounting to fraud, then it was said that that of itself took his acts outside the course of his authority. I confess, notwithstanding the authorities cited to the contrary, that I would have found it hard to reach a conclusion that the bank should not be responsible for the acts of its solicitor in circumstances such as the present, if fraud had been established, assuming the fraud in question not to have been for his own benefit. He was engaged to act as the bank's solicitor and to advise it in relation to the very transaction, that is, what was thought to be a mortgage by the appellant in favour of the bank. What he was doing, at least until the critical moment, was precisely that and so, likewise, I would say that he was so acting at and after the time the false attestation clause was appended. If all he knew (on this hypothesis) was that Miss Gerada was not present, there would have been no frolic of his own and no dealing with the subject of the action so as to deprive his principal of the benefits of the transaction. The only error (on the same hypothesis) would have been to acquiesce in his employee's appending her signature as a witness to a document which turned out later not to have been signed by the appellant. If he had consciously gone forward and obtained registration of the mortgage in the knowledge of, or wilfully blind to, the fact only that it was not properly attested, then I doubt that would have involved him doing something outside the scope of his authority. If he had been party to the lodging of the documents (which is not clear), then he would be doing so in order to carry out the instructions of his client, the bank, and it was only by chance that the document was not properly executed or attested. The same reasoning would apply if Miss Gerada were to be held (contrary to my opinion) to have been guilty of fraud on the same limited basis.

[79]

I agree also with Ormiston, J.A., for the reasons he gives, that the respondent bank was not otherwise guilty of fraud. In case I am incorrect in not characterising Ms Gerada's conduct as fraud for the purposes of s.42(1), I would add the following on the question whether, if so, there was fraud on the part of the bank or its agent, Mr. Reichman. I would be prepared to hold that it is to be inferred that Ms Gerada put the instrument of mortgage on the path to registration by causing it to come to the notice of Mr. Reichman for transmission to the bank for execution and return to him for lodgment, whether directly or through a lodging company, at the Land Titles Office (or by herself transmitting it to the bank for that purpose). But there was no fraud on the part of the bank itself or Mr. Reichman personally. The question is not one of liability on his part in tort for the acts of his employee Ms Gerada, but whether the case is one of fraud within s.42(1). Now, the statutory word "fraud" was interpreted in Assets Co. Ltd. v. Mere Roihi [1905] A.C. 176 at 210 as extending to fraud of the "agents" of the new registered proprietor. That interpretation has ever since been accepted. However, the Privy Council made it clear that the fraud "must be brought home to" the registered proprietor or his agents. That means that it must be sheeted home to the registered proprietor or his agents, that he or they must be shown to be infected by it or complicit in it. The perceptive analysis, if I may respectfully so describe it, of Mere Roihi by Street, J. in Schultz v. Corwill Properties Ltd. (1969) 90 W.N.(N.S.W.) (Pt.1) 529 at 538-541 shows that there are two categories of case that may require consideration. Counsel for the appellant confirmed to the Court that it was only within the first category that he sought to bring the facts here. As to that category, it is true that the reference by Street, J., when dealing with it, to the principle of respondent superior might , if read widely, support the appellant's argument. But I have concluded that the trial judge was correct in holding that this was not a case of fraud. I have reached that conclusion having regard to the following considerations: the paramountcy (as it seems to me) of the principle of indefeasibility of registered title; the fact that agency is not in terms referred to in the statutory exception; the inability of counsel for the appellant (notwithstanding the existence of Torrens legislation for some 140 years) to point to any case where fraud of an employ of an agent of the registered proprietor was held to be a "case of fraud" within s.42(1) or its cognates when neither the registered proprietor nor the agent himself was either complicit in or aware of the employee's fraud; and the fact that the Act in s.110 provides relief, within limits, to those deprived of their title wrongfully. In essence, the agent's employee's fraud cannot be sheeted home to the agent or his principal for the purposes of s.42(1). I agree with the trial judge that there is an important distinction between the fraud of an authorised employee of the registering party and that of an employee of the solicitor for the registering party. In the latter case, if (as here) the registering party is neither complicit in nor aware of the fraud, it is, I consider, too remote from the registering party to affect that party. No case under the Act or its cognates was cited concerning an employee of a solicitor. In Sargent v. ASL Developments Ltd. [1974] HCA 40; (1974) 131 C.L.R. 634, which was of course not a case of fraud under the Act, the solicitor whose knowledge was imputed to his principals was a sole practitioner, as the report of the case at first instance makes clear: [1973] 1 N.S.W.L.R. 481 at 485 and 486.

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Judgment (82 paragraphs)

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