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Forgery - Invalidating the security on a loan |
A recent appeal case is a timely reminder to everyone with financial interests that not only should steps be taken to ensure that fraud is not perpetrated which may render a security interest unenforceable, but that care should be taken to properly describe any security interests in loan and security documents. |
Mrs X was the registered proprietor jointly with her husband of property over which a mortgage was registered in their names. |
The wife's signature was forged by her husband on both the mortgage and a housing loan contract that the mortgage was intended to secure. |
There was no dispute that the registration of the mortgage gave the lenders rights over the property that had been mortgaged. There was also no dispute that the husband was liable for the indebtedness under the housing loan contract and that that indebtedness was secured by the mortgage over his interest in the property. |
When the matter first went to court the judge decided that the bank had rights over all of the property - both the husband's and the wife's share. However, Mrs X's solicitors prepared an appeal that argued to protect her interests. They put to the judge that the bank's rights created by its registered mortgage were limited to her husband's interest in the property and did not extend to her own. |
The appeal judge agreed that as there was no joint borrowing by virtue of the forged loan agreement, then the mortgage could not have been secured over the wife's interest in the property. |
