Fraud as an exception to indefeasibility of title can only be applied if the fraud can be assessed as either originating from the bank or the result of an action, or lack of action, by the bank.

Fighting property fraud: People and banks

Fraud as an exception to indefeasibility of title can only be applied if the fraud can be assessed as either originating from the bank or the result of an action, or lack of action, by the bank.

In the recent case of Spiliotopoulos v National Australia Bank Limited [2017] NSWSC 971, the Supreme Court of New South Wales confirmed the principle that fraud as an exception to indefeasibility of title can only be applied where the fraud can be ‘brought home’ to the bank.

In the above case, the plaintiff sought to set aside a registered mortgage on the grounds of fraud. He alleged that the witness who attested the plaintiff’s signature had been fraudulently applied, and alleged that the bank did not engage in normal banking practice by failing to discuss the mortgage with him.

Both of the claims were dismissed, and the Court held that the plaintiff could not prove that the bank had knowledge of the alleged fraud.

Importance

This case affirms that fraud will not affect a registered proprietor’s interest unless the mortgagee has actively participated in the fraud or the knowledge of the fraud able to be ‘bought home’ to the mortgagee. Further, a bank’s failure to comply with its own internal policies and procedures is not sufficient to elevate its conduct to fraud.

Additionally, in this case, the plaintiff nevertheless received and benefitted from the funds advanced under both loan agreements and had not sustained any loss. Therefore the Court cannot grant damages or compensation to the plaintiff.

Importance of Verification of Identity

This situation above highlights the importance of verification of identity.

Victorian legislation requires formal verification of identity in conveyancing and property transactions to reduce the risk of identity fraud and fraudulent property transactions. This ensures the correct person is dealing with the land.

Examples of problems that can come up after you purchase your property include fraudulent acts by prior owners, such as forged documents that transfer no title to the real estate, forged mortgages, or forged satisfactions or releases of mortgages, impersonation of the true owners of the land by fraudulent persons, and/or instruments executed under expired or fabricated power of attorney.

At Dangerfield Exley, we follow a strict adherence to formal verification of identity requirements. We use SecureID for our in-office verifications and recommend ZipID or Australia Post if our clients are unable to attend our office. This ensures our clients are protected, and the transaction proceeds smoothly.

Contact Dangerfield Exley should you require more information about property fraud.

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