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Dispute concerning mortgages and loan documents with
allegedly forged signatures
A company was established in 1991 and operated a
paintball/skirmish business on a property in Sydney. In 2004 and
2009 the company entered into loan agreements with a bank. The
amounts totalled approximately $100,000, with a further advance of
$50,000, and two overdraft facilities of $15,000 and $20,000.
The company had two directors, who had both personally
guaranteed an overdraft facility provided by the bank in 1996.
This same guarantee was used as security for both the 2004 and
2009 loans.
Company defaults on loan and bank commences legal
proceedings
Following a default on the loans, the bank commenced proceedings
against the company as principal debtor, and against the two
directors under their personal guarantees.
One of the directors claimed that although he was liable to the
bank under his guarantee for the sum outstanding from the 2004
loan, he was not liable in respect of the 2009 loan – which
had subsumed the 2004 loan – as he had not signed the letter
of offer, the letter of acceptance or the guarantee acknowledgement
for the 2009 loan.
He contended that the signatures on those documents were not
his.
CASE A
The case for the bank
CASE B
The case for the dissenting director
We now concede that the signatures on those documents were not
those of the director and were forgeries. However, we did not know
this at the time the funds were advanced.
We dealt with the company via the other director, who was the
intermediary between us and the company and acted as the
company's agent, and our staff had no reason to suspect that
there was anything irregular about the 2009 loan documents.
ASIC records showed the other director was properly appointed
and so we were entitled to assume that he had authority to act and
that the documents were properly executed.
Further, the original guarantee provided by the directors in
1996 was an unlimited guarantee, which means that in the event of
default by the company, they must pay all the money owing at that
time.
The company has defaulted and both directors are personally
liable for the outstanding debt.
I agree that the signatures on the 2004 loan and the document
to increase the overdraft to $20,000 were mine, and that I was
therefore liable to the bank under the guarantee for those
loans.
However, any liability I might have had under the 2004 loan was
discharged when the company entered into the 2009 transaction.
I believed the transaction in 2004 was a one-off loan and no
funds would ever be redrawn on it.
The 2009 transaction, the further overdraft of $15,000 and the
various redraws made by the company all occurred without my
knowledge or consent. I was not a party to the 2009
transaction.
The bank's officers were wilfully blind to the possibility
that my signature had been forged and therefore the bank cannot
rely on the assumption that the 2009 documents were properly
executed.
The bank should be able to recover the outstanding debt from
the company and the other director, but not from me
personally.
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