Case note: mortgage signature not valid

In Patrick John Ford by his Tutor Beatrice Ann Watkinson v Perpetual Trustees Victoria Limited [2009] NSWCA 186 the NSW Court of Appeal upheld a decision that Mr Ford was entitled to rely on the plea of non est factum and the loan agreement and mortgage over his home were therefore found to be void.

The plea of non est factum is made out when a signer’s mental incapacity prevents any understanding at all about what he or she is signing.

Mr Ford has a congenital intellectual impairment. He is illiterate and was found by the primary judge to have had no understanding at all of the transaction of purchase and the loan and mortgage.

Mr Ford, placed his signature on a loan agreement and mortgage with Perpetual Trustees Victoria Ltd (Perpetual), for the loan of $200,000 secured over Mr Ford’s residential property. The loaned funds were used to purchase a cleaning business in Mr Ford’s name. The business was to be for the benefit of Mr Ford’s son, who manipulated his father’s entry into the transaction. The business subsequently failed and Mr Ford defaulted on the loan agreement. Perpetual commenced proceedings for possession of the property.

Mr Ford was not liable in restitution to repay the loaned funds, except for the $24,857 he received into his personal bank account.

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