Vella was described by the Court as “national president of a group of motor bike enthusiasts known as ‘the Rebels’”. He went with his friend Caradonna to his solicitor’s office and collected the title deeds to various properties. He then gave the title deeds to Mr Caradonna for the purpose of consolidating the loans over the properties related to a joint business venture promoting a boxing match between Anthony Mundine and Danny Green in autumn 2006.
However, Caradonna through a broker, Mr Rutty, fraudulently used the title deeds to obtain loans from Permanent Mortgages Pty Ltd and Mitchell Morgan Nominees Pty. Caradonna forged Vella’s signature on the mortgages and the supporting documents.
Caradonna arranged for a solicitor, Flammia, to hold out that he was acting for Mr Vella in relation to the loan applications and mortgages. A Ms Palumbo signed the mortgage documents as witness to Vella's forged signature.
After settlement of the transactions over $2.4 million was deposited into a joint account of Vella and Caradonna. Caradonna then drew the entire $2.4 million out of the joint account, using cheques with Vella's forged signature.
Vella commenced proceedings in the Supreme Court asking that the mortgages be set aside on the basis that they had been fraudulently signed.
This case raised many issues of interest to lenders.
Under the Real Property Act if a person obtains a registered interest in land without that person having committed any fraud, that person’s interest is “indefeasible” and binds the registered proprietor of the land. Accordingly, because Permanent and Mitchell Morgan became registered as mortgagees without any fraud on their part, those mortgages were indefeasible and bound Vella, the registered proprietor. However the court said that the mortgages only secured the moneys owing on the all monies mortgages. As the mortgages were forged there was no money owing on those mortgages and the registered mortgage secured no money. Accordingly the court ordered that the mortgages be removed from Vella’s titles.
Hunt & Hunt were negligent in having prepared the all monies mortgage. The proportion of their negligence for the loss suffered by Mitchell Morgan was 12.5%.
Because Hunt & Hunt had been induced to certify title on the basis of representations made by the lawyer Flammia, Hunt and Hunt were entitled to recover that 12.5% from Flammia. Unfortunately at this time Flammia was bankrupt.
The purported witness to Vella’s forged signature on the Permanent mortgage, Ms Palumbo, was ordered to pay $1,151,500.00, being the loss which her actions had caused Permanent.
The Consumer Credit Code applies when an individual borrows money for personal domestic or household purposes. Section 11 of the Code says that if a borrower makes a declaration under that section that the credit is to be applied wholly or predominantly for business or investment purposes, then the credit is presumed conclusively not to be provided for personal domestic or household purposes.
This signature of Mr Vella on the Section 11 certificate which was provided to the lenders was forged. The court therefore held that no declaration had been provided for the purposes of the Consumer Credit Code to take the loan outside the Code.
The Court then considered the "substance and reality" of the transaction to determine the purpose of the credit and said:
The loan was either for investment, for repaying business loans or for the boxing promotion business. There is just not one scinntilla of evidence to suggest that it was for domestic purposes.
Accordingly, the Consumer Credit Code did not apply, and Mr Vella was not able to rely on Section 38 of the Code to have the mortgages removed from the titles to his land.