Mercantile Mutual Life Insurance Co Ltd v Gosper

Facts

Mrs Gosper was the registered proprietor of a mortgage over her property. Her husband, without her knowledge or consent, forged her signature on a variation of the mortgage that increased the principal sum and extended the mortgage to cover his business debts. Mercantile Mutual Life Insurance Co Ltd, as mortgagee, sought to enforce the varied mortgage against Mrs Gosper.

Issues

1. Whether the Torrens indefeasibility provisions protected a mortgagee who had registered a variation of mortgage procured by the forgery of the registered proprietor's signature. 2. Whether a registered proprietor retains an equity or in personam right to restrain enforcement of a forged dealing notwithstanding the registration of that dealing.

Holding

The New South Wales Court of Appeal held that the variation of mortgage, having been procured by forgery of Mrs Gosper's signature, was void and unenforceable against her, and that indefeasibility under the Real Property Act 1900 (NSW) did not protect the mortgagee in respect of a dealing that was a nullity ab initio by reason of forgery.

Ratio decidendi

Indefeasibility of title under the Torrens system does not extend to protect a registered dealing — including a variation of mortgage — that was brought about by forgery of the registered proprietor's signature; such a dealing is void ab initio and the registered proprietor retains an in personam right enforceable against the party who took the benefit of the forged instrument to have the dealing set aside or its enforcement restrained.

Obiter dicta

Mahoney JA observed that the in personam exception to indefeasibility is not confined to cases of fraud or unconscionability in the strict sense, and may extend to circumstances where a party seeks to use the machinery of registration to take advantage of a forgery or other fundamental legal nullity. The court also noted uncertainty as to the precise boundaries of the in personam exception more generally.

Significance

Mercantile Mutual Life Insurance Co Ltd v Gosper is a leading New South Wales authority on the vulnerability of registered dealings that are void for forgery, confirming that Torrens indefeasibility does not cure a complete nullity and that the in personam exception operates to protect a registered proprietor whose title or encumbrance was varied without any genuine act on their part.

Key authorities

• Frazer v Walker Frazer v Walker [1967] 1 AC 569applied
• Breskvar v Wall Breskvar v Wall (1971) 126 CLR 376applied
• Assets Co Ltd v Mere Roihi Assets Co Ltd v Mere Roihi [1905] AC 176considered
• Bahr v Nicolay (No 2) Bahr v Nicolay (No 2) (1988) 164 CLR 604considered
• Logue v Shoalhaven Shire Council Logue v Shoalhaven Shire Council [1979] 1 NSWLR 537considered