Whilst there is considerable consistency between the property laws of Victoria and New South Wales, there are also significant differences.

Some differences in practice are:

• nomination in New South Wales is virtually unheard of as it creates a second duty, but is common in Victoria as it does not; and
• deposit release is prohibited in New South Wales but common in Victoria.

Some differences in the law are:

• acquiring an easement by prescription is banned in New South Wales but still available in Victoria; and
• there is no equivalent in New South Wales to Victoria’s statutory right to clawback fraudulent transactions s 172 Property Law Act 1958.

Perhaps the best known example of the difference was the view previously held in New South Wales that the existence of an illegal structure on land constituted a defect in title and allowed a purchaser to avoid the contract. This was in contrast with the Victorian view that such a defect was merely a quality defect and that the vendor was protected by the principle of caveat emptor. The New South Wales view was ‘corrected’ (that is; brought in line with Victoria) by the Court of Appeal in Carpenter v McGrath 40 NSWLR 39 and consistency has reigned since.

In recent years a significant difference has again occurred with New South Wales taking a ‘radical’ view of the impact of fraud in certain mortgage transactions. In both jurisdictions it is accepted that whilst fraud is an exception to indefeasibility, nevertheless registration of a fraudulent instrument by a party who was not party to the fraud will be indefeasible. Mortgagees have therefore been able to rely on mortgages that have been fraudulently signed provided that the mortgage was registered and the mortgagee was not itself a party to the fraud. However in New South Wales an argument was accepted that it was possible to look ‘behind’ the mortgage at the document that constituted the agreement to repay as it was that document that created the obligation that justified the mortgagee’s security interest and the extent of the mortgagor’s covenant to repay was to be determined by a consideration of the contractual agreement between the parties.

If that contract (loan agreement) created an obligation to repay a specific amount then the covenant to pay protected by the indefeasible mortgage was enforceable. However if the loan agreement referred to an ‘all monies’ mortgage relating to past and future advances then it was said that the mortgagor’s covenant to pay arose contractually from the ancillary documents that related to the actual advances and that if those documents were fraudulent then the covenant to repay arose outside of the protection of the indefeasible mortgage. Essentially, it was said, no money was advanced pursuant to an ‘all monies’ mortgage as the money was advanced pursuant to forged documents.

Victorian mortgagees quaked in trepidation as an army of decisions mounted on the north bank of the Murray River set to wreck havoc on Victorian all money mortgages but Pagone J. in Solak v Bank of Western Australia [2009] VSC 82 manned the ramparts and beat off the hordes by upholding an all monies mortgage and the lenders breathed a sigh of relief. However a Trojan Horse has appeared in the form of Perpetual Trustees Victoria Limited v Xiao [2015] VSC 21. Hargrave J. has adopted the New South Wales analysis of an all monies mortgage and has described the decision in Solak as ‘plainly wrong’.

The scene is now set for a definitive decision by the Victorian Court of Appeal on what is an important point of law. According to Xiao a mortgagee of a forged all monies mortgage is not able to enforce the mortgage or undertake a mortgagee’s sale. Whether confirmation of Xiao will have retrospective repercussions is a matter for the future.

The mortgagor’s victory in Xiao was somewhat pyrrhic as Hargrave J. went on to find that Xiao in fact held the property on trust for the forger (her husband) and that the lender was entitled to judgment against the husband, who had also been joined as a defendant. Hargrave J. was obliged to overcome the presumption of advancement applying to a transfer from husband to wife but did so by finding adequate evidence that it had been the intention of the husband at the time of transfer to retain the beneficial interest in the land.

The mortgagee would therefore be faced with the need to enforce this judgment by way of a Warrant of Execution rather than a mortgagee’s sale. The mortgagee’s possession of the certificate of title would aid that exercise.