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District Court 15 December 2023

Well Nigh Funding No 1 Pty Ltd v Tang

[2023] NSWDC 564

Fraud & dishonesty
CONTRACT PROOF OF SIGNATURE ALLEGATION OF FRAUD ONUS OF PROOF ISSUE ESTOPPEL A DOPTION

Citation: Well Nigh Funding No 1 Pty Ltd v Tang [2023] NSWDC 564
Court: District Court of New South Wales
Date: 15 December 2023
Judge: Newlinds SC DCJ

Background

A lender commenced proceedings against a borrower to recover money allegedly advanced under a written loan agreement dated March 2017. The loan was for $472,500 and was secured by a mortgage over a property in Parramatta. After repayments and the application of the net proceeds from the mortgagee sale of that property, the lender claimed an outstanding balance of approximately $135,350.

The borrower, who was self-represented, did not dispute receiving the principal sum or her general obligation to repay it. Her central argument was that she had not signed the written loan agreement, and therefore she was not liable for the interest rate it contained (approximately 7.99% per annum). If she owed no interest, or only a modest rate, the arithmetic suggested she had in fact overpaid and would be entitled to a refund.

Prior to these proceedings, the borrower had brought proceedings in the Supreme Court seeking to extend a caveat she had lodged on her own property in an attempt to prevent the lender exercising its mortgage rights. Those proceedings were dismissed by consent in September 2019 with no order as to costs.

  • Whether the borrower in fact signed the written loan agreement, and which party bore the onus of proof on that question
  • Whether the consent dismissal of the earlier Supreme Court caveat proceedings gave rise to an issue estoppel binding the borrower
  • Whether, even if the borrower did not sign the agreement, she adopted it by her conduct
  • Whether the parties were bound by a conventional estoppel preventing either from denying the agreement's binding force
  • Whether the lender's failure to hold an Australian credit licence precluded it from recovering the debt

Decision

Signature and onus of proof

The court accepted the plaintiff's proposition that where a party alleges forgery, that party bears the onus of proving it, consistent with Damjanovic v York Agencies and the elevated standard under s 140(2) of the Evidence Act 1995 (NSW). However, Newlinds SC DCJ emphasised that this principle does not reverse the lender's fundamental onus of proving, on the balance of probabilities, that the signature on the document was actually the borrower's. The lender did nothing more than tender the document and argue the borrower had failed to prove forgery. That was insufficient. The court found itself unable to conclude either that the signature was a forgery or that it was the borrower's signature, and proceeded on the basis that no legally effective signature bound the borrower under the written agreement.

Issue estoppel from the caveat proceedings

The lender argued that the consent dismissal of the Supreme Court caveat proceedings constituted a final determination giving rise to an issue estoppel on whether the borrower was bound by the written agreement. The court rejected this argument. A consent order dismissing proceedings does not, of itself, amount to a judicial determination of the underlying merits. No finding on the signature question was made in those proceedings, and the borrower's underlying claim was never resolved.

Acceptance by conduct and conventional estoppel

Despite finding that the written agreement was not proven to have been signed, the court held that the borrower's conduct bound her to its terms. She made regular monthly repayments at the amount specified in the written agreement for a period consistent with its terms, and she had accepted the principal sum knowing a loan was being made on certain terms. The court found this constituted adoption of, and a conventional estoppel in favour of, the written agreement. Both parties had conducted themselves throughout the loan on the assumption the written agreement governed their relationship, and neither could resile from that common assumption.

Australian credit licence

The borrower contended the lender had no Australian credit licence as required under regulation 23B of the National Consumer Credit Protection Regulations 2010 (Cth). The court did not resolve whether a licence was required. It held that even if one was required and the lender did not hold it, nothing in the relevant legislation operated to extinguish or bar recovery of the underlying debt. This point did not assist the borrower.

Quantum and costs

Having found the borrower bound to the written agreement, the court was satisfied the sum of $135,350.13 was due as at 17 August 2022. The court exercised its discretion under s 100 of the Civil Procedure Act 2005 to award post-judgment interest at the statutory rate rather than the contractual rate. Although the written agreement contained an indemnity costs clause, the court declined to award indemnity costs because no notice of such a claim had been given to the self-represented borrower, and instead ordered costs on the ordinary basis.

Orders Made

  • The defendant pay the plaintiff $135,350.13 together with interest at the rates prescribed under the Civil Procedure Act 2005 (NSW) from 17 August 2022 to 15 December 2023, agreed between the parties as $12,272.34
  • Judgment for the plaintiff in the total sum of $147,622.47
  • The defendant pay the plaintiff's costs of the proceedings on the ordinary basis

Key Takeaways

  • A plaintiff who relies on a signed document to establish contractual liability bears the onus of proving on the balance of probabilities that the signature belongs to the defendant. Tendering the document alone, without more, does not discharge that onus simply because the defendant has failed to prove forgery.

  • Where a borrower alleges that a signature is a forgery, the Briginshaw standard (and s 140(2) of the Evidence Act 1995 (NSW)) requires the borrower to prove that allegation. However, failure to do so does not, by itself, establish the document's binding force on the defendant.

  • The District Court confirmed that a consent order dismissing caveat proceedings does not constitute a final judicial determination of the underlying merits capable of founding an issue estoppel, even where the parties' affidavit evidence put the central merits squarely in contest.

  • Acceptance of loan funds and regular repayments at the amount prescribed by a written agreement can constitute adoption of, and give rise to a conventional estoppel in favour of, the agreement's terms, even where a valid signature is not established.

  • Under the legislative framework considered in this case, the absence of an Australian credit licence does not, of itself, preclude a lender from recovering an outstanding debt.

Legislation and Cases Referenced

Legislation
- Civil Procedure Act 2005 (NSW), s 100
- Evidence Act 1995 (NSW), s 140(2)
- National Consumer Credit Protection Regulations 2010 (Cth), reg 23B
- Real Property Act 1900 (NSW), s 74J

Cases
- Damjanovic v York Agencies Pty Ltd [2003] NSWCA 222
- Eastwood and Holt v Studer (1926) 31 Com Cas 251
- Ekes v Commonwealth Bank of Australia [2014] NSWCA 336
- Gray v Gray [2004] NSWCA 408
- Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2014] NSWCA 34
- National Companies and Securities Commissioner re Register of Titles (1990) 2 ACSR 493
- New South Wales Trustee and Guardian v Philpott [2017] NSWSC 472
- Re Application of Sutherland & Arnautovic [2014] NSWSC 821
- Vella v Aliperti (1995) NSW Conv R 55-750

Secondary Sources
- Butt, "Removing Caveats" (1994) 68 ALJ 524