A recent case in the Supreme Court of Queensland demonstrates one of the little-known problems of home ownership—what happens if the home you bought and paid for is embroiled in a familial legal battle.
When Jess and Jackie Morecroft bought a house in Mermaid Waters, from a Mortgagee in Possession, they tried to transfer the house title into their names. They had an executed transfer but, when they tried transfer the property into their names, they couldn’t because the Titles Office Registrar had placed a caveat over the title.
A caveat effectively freezes the title so no one can make any changes to it until the issue of ownership is sorted out. A caveat can only be lodged by someone with an ‘interest’ in the property. In this case, there were two caveats: first, the Seller Ms Issa’s (which was later removed), as registered owner and a subsequent one lodged by Registrar, pursuant to Ms Issa’s claim of fraud.
Ms Issa claimed that her name had been forged on various mortgage documents. It appears that a relative had mortgaged Ms Issa’s home as security and then defaulted on the mortgage loan. So Issa claimed that as the mortgage had been fraudulently obtained, the mortgagees did not have the right to sell her home.
Already confused? Here’s a timeline
- early 2018 Ms Issa’s daughter (Ms Halik) discovered Mermaid Waters had been mortgaged as security by her brother Mr Karbotli (who claims his mother willingly and knowingly signed the mortgage) who defaulted on repayment of loan.
- The mortgagees took possession and arranged to sell property at auction. Ms Issa lodged a caveat over property title, informed Registrar of fraud and reported fraud to police.
- Despite her complaints, the mortgagees’ auction went ahead.
- The property sold to Morecrofts at auction – in clause 18(a) of Annexure to their purchase contract there was a special condition: ‘The Buyer acknowledges that he is aware that the Seller sells the Property and exercises the power of sale conferred by the Mortgage from Hind Issa to the Seller.’
- After auction Morecroft’s lawyers requested removal Issa’s caveat to complete the sale.
- Ms Issa commenced legal proceedings to stop sale.
- The Morecrofts responded with their own proceedings to remove Issa’s caveat
- Issa agreed, in return for $40,000 and the proviso she reserved ‘all her rights’.
- The caveat was removed and settlement took place. Morecrofts paid the balance of the purchase monies.
- The Morecrofts took possession, received an executed transfer and lodged it for registration.
- Meanwhile the Registrar took action re Ms Issa’s fraud complaint and lodged a Registrar’s caveat on title.
- The caveat freezes the title so Morecrofts’ transfer of title couldn’t happen.
- The net affect at that time was that the Morecrofts were currently in possession, had paid for the house, but were NOT the owners. Ms Issa was owner but didn’t have possession.
- Issa wanted her home; she claimed fraud and wanted all the instruments undone re their effects on her interest
- The Morecrofts claimed their equitable interest should have priority over Issa’s interest and wanted transfer of the title to their names and damages against the original mortgagees for breach of contract.
- Both Issa and the Morcrofts sought compensation for deprivation of interest OR losses they had incurred upon court’s declarations/orders.
- State of Queensland sought to be subrogated of the rights of the claimants [that is to take over the claim on their behalf].
The Queensland Supreme Court found that Ms Issa was a victim of fraud: Her signature was forged on the mortgage and associated documents ‘without her knowledge or approval’. The effect is that the mortgage over the house was declared null and void. Mortgagees had not taken ‘reasonable’ steps to prove the identity of the mortgagor before registering the mortgage at Queensland Titles (required Land Title Act 1994 (Qld) s 11A(2). This had a cascading effect on subsequent instruments lodged at Queensland Titles (under s 187 of the Land Title Act 1994 (Qld)). The court ordered the Registrar to cancel those instruments (a mortgage, transfer of mortgage, correction of name, unregistered transfer and the Registrar’s caveat).
The Morecrofts were awarded damages for breach of contract. Ms Issa got to keep her house.
But, this was not the end. The issue of costs and compensation arises. As noted earlier, the Morecrofts and Issa want the State of Queensland to compensate for any deprivation of interest and for costs incurred. On 10th May 2023, Crowley J. ruled that the State of Queensland does not have to compensate the Morecrofts for their legal expenses, indeed, they have been charged by the court to contribute to costs incurred by the State and Ms Issa.