When a husband forges his wife’s signature for the sale of their property

Jargo v Patterson [2022] NSW 1049

The transaction

The purchasers claimed that they entered into a valid and binding contract for the purchase of a property at Burwood in Sydney from the husband and wife owners for a purchase price of $4,507,000, however the owners denied that the alleged contract was made, claiming that Ms Patterson did not sign the contract but rather, her signature was placed on the contract by Mr Patterson but he lacked the authority to do so.

The purchasers acknowledged that whilst Ms Patterson may not have signed the contract, Mr Patterson nevertheless had actual authority to bind Ms Patterson to the contract – either pursuant to a specific authorisation to sign the contract, or a general authorisation to sell the property.

The exchange of contracts

The Court focused in quite some details on the events before, during and after the exchange of contracts – including the history of the property's marketing and prior attempts to sell, the engagement of the agent, and the numerous meetings and phone calls between Mr Patterson and the agent leading up to exchange, as well as the fact that Ms Patterson was working from home on the day in question, only a short distance away of where the dealings between the agent and Mr Patterson took place.  It was found that at no time did the agent (nor either of the purchasers) have any contact with Ms Patterson.  Rather, it was Mr Patterson who provided the agent with the contract, purportedly signed by both owners.  Contracts were subsequently exchanged, with a section 66w certificate (meaning that the purchasers forfeited their cooling-off rights).

A couple of days later, Mr Patterson told the agent that he considered he could get a better price and he didn’t want to sell to the purchasers anymore.  He claimed that he felt pressured by the agent.  Ms Patterson claimed that she hadn’t authorised him to sign on her behalf.

The Court’s considerations

The central issue was the validity of the contract, which the plaintiffs maintained was valid and remaining on foot, noting the numerous steps taken by Mr Patterson to advance the sale in the period up to the exchange of contracts, and suggesting that Ms Patterson knew about the transaction and gave him permission to proceed as he did.  Ms Patterson argued that she did not execute the contract and was not otherwise aware of its execution, such that the contract was invalid, void and not enforceable.

In terms of the reliability of the witnesses’ evidence, the Court noted that the agent had a vested interest in the outcome of the matter, considering the potential $45,070 (plus GST) commission to be earned by him, and was prepared to place his own signature on the contract as a purported witness of both signatures.  Likewise, the Court treated the evidence of Mr Patterson with caution, noting much of his evidence was self-serving, particularly his inability to remember the order of the events surrounding the contract signing.  The Court rejected Mr Patterson’s claim that the agent exerted pressure on him to sign the contract on behalf of Ms Patterson.  The Court even stated:

“I think that Mr Patterson would be well capable of doing what he did without Ms Patterson’s authority, behind her back.”

An apparent difficulty for Ms Patterson was the fact that she had forwarded emails regarding the sale onto Mr Patterson, but she argued that she was a “mere conduit” although she accepted that she had read and understood the content of the emails.

The outcome

The Court did not accept that Mr Patterson had either a specific authority to sign the contract, or a more general authorisation to sell the property.  The Court accepted that Ms Patterson had no involvement with any sale process at any time during 2020, noting that the day-to-day or week-to-week dealings regarding the property were generally left to Mr Patterson, but that did not extend to an authority to sell the property.

Accordingly, the Court held that the purchasers had failed to establish that when Mr Patterson signed the contract for Ms Patterson, he had actual authority to do so, and therefore, no binding contract for the sale of the property was entered into.

The legal costs

Typically, costs will “follow the event”.  That is, the unsuccessful party will pay the successful party’s costs of the litigation.  However in this instance, the Court subsequently ordered that the purchasers were to pay Ms Patterson’s court costs (noting she was “innocent in relation to the circumstances surrounding the execution and exchange of contracts”), but not the costs of Mr Patterson whose “plainly unreasonable conduct” significantly contributed to the litigation.  The further decision regarding costs can be read here.