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Mortgage fraud case ‘reassuring’ for brokers

by Lucy Dean4 minute read
Fraud

In a “reassuring” verdict for brokers, the Supreme Court of New South Wales has ruled against a defendant who argued he had been defrauded as a result of a major bank failing to meet its internal policies.

In Spiliotopoulos v National Australia Bank Limited and Ors, it was alleged that the attesting witness to Mr Spiliotopoulos’ (the defendant) mortgage had not actually witnessed the signature and knew that she was not an attesting witness but had nevertheless signed the mortgage as an attesting witness.

The witness had been asked to attest by Mr Spiliotopoulos’ wife and was implicated in the case as the third defendant, with Mr Spiliotopoulos’ wife the fourth defendant.

Mr Spiliotopoulos sought to have the mortgage removed from the title of the property because NAB had not engaged in normal banking practice by failing to discuss the mortgage with him, and as such did not acquire the loan without notice of the fraud.

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He also argued that, alternatively, the mortgage was obtained by NAB as a result of a fraud committed by the witness upon both the bank and Mr Spiliotopoulos himself.

However, in a verdict that the sector should consider “reassuring”, according to Dentons partner Louise Massey, the Court ruled against Mr Spiliotopoulos, noting that the fraud was not “brought home” to the bank and that the bank’s non-compliance with internal policies had no bearing on whether the bank knew about the fraud.

Ms Massey commented: “The decision is reassuring for the industry, [for] it demonstrates that where the bank or a broker has not participated in any fraud or has no notice that a fraud has been committed and has provided credit into an account in the mortgagor’s name, the Court will apply a logical approach to letting liability fall with the parties who have perpetrated the fraud.”

She added that to avoid becoming implicated in similar cases, brokers should “ensure they are rigorous in informing potential mortgagors of the risks and obligations associated with being a party to a mortgage”.

A face-to-face meeting or phone call could help alert customers to the commitment of a mortgage, she suggested.

In recent weeks, NAB and CBA have made movements to strengthen document verification policies for new clients. Ms Massey said that these movements were “reflective of the industry wanting to take greater measures to protect their customers and participate in best [practice] by having greater safeguards in place.”

[Related: Property developer and strip-club owner charged with fraud]

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