Background
Brothers Mohammed Jabir Jaffrullah Khan and Mohammed Junaid Nawab Khan proposed to purchase residential land at Austral, New South Wales. DP Bonds Pty Ltd, acting for underwriter HDI Global Specialty SE, issued a $70,000 deposit bond in the brothers’ names after their finance broker, Mario Massouras, submitted a deposit-bond application containing a counter indemnity in HDI’s favour.
After the purchase did not complete, HDI paid the $70,000 bond to the vendors. The Khans alleged that they had not signed the application, counter indemnity, or contract for sale and sought a declaration that the indemnity was a nullity or should be declared void under the Contracts Review Act 1980 (NSW). DP Bonds had lodged a caveat over another property owned by the Khans; the caveat was withdrawn after the Khans paid $80,000 into court. The defendants cross-claimed for those funds or, alternatively, $70,000 plus interest and costs.
The Court’s Holding
Pike J accepted the uncontradicted handwriting evidence and found it likely that the Khans had not personally signed the deposit-bond applications. Nevertheless, the Court held that they had engaged Massouras to do everything necessary to seek to secure the Austral property, including arranging finance, and had authorised him to procure the deposit bond in their names. The counter indemnity therefore bound them, and their Contracts Review Act claim failed.
The Court also held, as an alternative, that the Khans would have been estopped from denying liability. By 27 February 2024 they believed the contract and bond had been signed fraudulently, yet they did not notify the defendants before HDI paid the bond and instead sought to rely on it to keep the purchase alive. The misleading-or-deceptive-conduct claim failed because the Khans’ conduct concerning their intended home was not “in trade or commerce,” although the Court said the nondisclosure otherwise would have been misleading. The Khans’ claims were dismissed, the defendants’ cross-claim was upheld, and the parties were directed to agree consequential orders concerning the money in court, interest, and costs.
Key Takeaways
- A person may be bound by an agreement bearing a forged signature when an authorised agent acted within the scope of the authority conferred.
- A principal who learns that an instrument was allegedly forged may be estopped from denying it if silence induces a third party to act to its detriment.
- Conduct connected with acquiring residential property for personal occupation is not necessarily conduct “in trade or commerce” for statutory misleading-conduct claims.
Why It Matters
The decision distinguishes proof that a signature was forged from the separate question whether the person who submitted the document was authorised to obtain the underlying transaction. For deposit-bond issuers, brokers, and purchasers, the scope of a broker’s engagement and the parties’ contemporaneous conduct may determine liability even when the named purchasers did not sign personally.
It also underscores the risk of remaining silent after discovering suspected fraud. A party seeking to deny an instrument must act promptly where another party may otherwise rely on it and suffer an irreversible loss.