Anthony Mundine fought Danny Green in April 2006, a fight won by Mundine. The fight was promoted by Angelo Caradonna with the help of Allessio Vella. They were a bit short on cash to promote the fight and arranged to borrow money from a friend to show that they had money in the bank and could be relied upon.
Mr Vella also had three properties which were unencumbered.
Mr Caradonna got hold of the Certificates of Title and then used them to borrow money from two lenders. The sums involved were more than two million dollars.
Mr Caradonna forged signatures to enable the lending transactions to proceed. Mortgages were obtained to secure the loans and were registered.
The money disappeared and not long after Mr Vella found out about the mortgages and drawings of the loan advances from a joint account. Litigation followed which was in layman's terms 'messy'.
The lenders sought to enforce their rights for recovery pursuant to the mortgage against the properties secured. Mr Vella argued that the transactions were fraudulent and that he should not be liable as a borrower.
Mr Caradonna presumably disappeared.
Our land transfer and registration system relies upon the recording of interests in property and generally speaking registration of a document whether it be as to ownership, a loan, or a lease, takes priority immediately upon registration. Except in the case of fraud.
The judge who heard the case initially found that although the mortgage had gained 'indefeasibility' it was worded as to secure money payable by Mr Vella to the lender and as, because of the fraud, no money was payable the mortgage secured nothing and should be discharged.
The possibility of that finding led to the solicitors for the lender being joined as a defendant on the basis that they were a concurrent wrongdoer with Mr Caradonna under the Civil Liability Act. That Act, provides that in respect of claims for economic loss or damage to property and in respect of claims which can be apportioned, that liability can be apportioned against concurrent wrongdoers in an amount reflecting the proportion of damage caused by that person having regard to the extent of that person's responsibility for the damage or loss.
The issue arose therefore as to whether or not the solicitors were responsible for any damage or loss and if so, how that responsibility should be apportioned. The lenders of course were unable to enforce their mortgages and were looking to recoup whatever losses they could.
The court found that the solicitors had been negligent and apportioned liability as to 12.5% of the lenders loss. Although other parties were responsible for the balance of the loss, no monies could be recovered from those parties.
One might think that the lawyers had done what they needed to do. They arranged for a mortgage to secure the lending of money. The solicitor handling the matter regarded the mortgage transaction as a more or less routine task and did not direct his mind to the possibility of fraud. Many lenders enter into arrangements with legal service providers for what are perceived as routine matters such as mortgages where the charge for the work done is reduced to the bare minimum and perhaps it should not be surprising to lenders if their legal advisors treat work as routine and put less effort into the work than the work requires.
The court found that what the mortgage should have provided for, was a covenant to pay a stated amount. Many mortgages contain covenants by a mortgagor to repay the principal, to pay the interest and to preserve the security. The mortgage which had been prepared secured money actually owing by Mr Vella to the lender. In other words there had to be money owing by Mr Vella to the lender. The court found that there was no money owing by Mr Vella to the lender.
Fraud is a difficult issue and arises regularly in property transactions.
Don't be surprised if you find yourself having to produce proof of identification on a more regular basis in relation to land transactions.
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