LWB236-Real Property A

Caveats

LWB240-REAL PROPERTY A EXAM FLOW CAVEAT [Plaintiff] v [Defendant] 1.0 INTRODUCTION The PRIMARY purpose of the caveat is to protect the interest of the caveators (person who lodges the caveat) interest in land. It has the effect that there is a freeze on the register by preventing the registration of instruments affecting the lot over which it is lodged: s 124 LTA. Also, it gives notice of the interest claimed to anyone who searches the register and constructive notice to anyone who ought to search: Butler v Fairclough; J & H Just (Holdings) Pty Ltd v Bank of NSW. 2.0 WHAT IS THE TYPE OF CAVEAT? There can be a caveat against dealings with the lot: s122 LTA A caveat can be lodged by the registrar of freehold land titles: s17, s122(1)(b) LTA1 A caveat can be lodged against an adverse possessors claim: s104 LTA

2.1 SPECIFIC EFFECT OF CAVEAT Here, [caveator] should lodge a caveat to stop [Bank/rogue/third party purchaser/adverse possessor] becoming a legally registered [mortgagee/owner] of the land/interest in the land. OR Here, [caveator] should lodge a caveat to protect their unregistered interest by preventing [third party] encumbering/defeating their interest by becoming a legally registered [mortgagee/owner] of the land. This will allow [caveator] time to go to court and seek an equitable remedy. 3.0 WHO CAN LODGE A CAVEAT? / CAN [PARTY] LODGE A CAVEAT?
Under s 122(1) LTA, A caveat can be lodged by: (a) a person claiming an interest in a lot; (b) the registrar under section 17; (c) the registered owner of the lot; (d) a person to whom an Australian court has ordered that an interest in a lot be transferred; (e) a person who has the benefit of a subsisting order of an Australian court in restraining a registered proprietor from dealing with a lot. Under s 122(2) LTA a caveat may only be lodged by an equitable mortgagee if it is a caveat to which section 126 applies. Also: - a purchaser under an instalment contract for the sale of land may lodge a caveat under s 74 PLA (this caveat is nonlapsing - a person claiming an interest against an application for adverse possession under s 104 LTA

A PERSON CLAIMING AN INTEREST IN A LOT Under s 122(1)(a) a person claiming an interest in a lot can lodge a caveat.
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Note that a caveat by the Registar does not lapse under s 126 and will remain effective until withdrawn by Registrar, cancelled or ordered to be removed (s 126(1)(d))

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To lodge a caveat the caveator must have a caveatable interest: Miller v Minister of Mines Interest is defined in s 36 of the Acts Interpretation Act 1954 in relation to land to mean a) A legal or equitable estate in the land b) A right, power or privilege over or in relation to the land or other property. In Queensland Estates v Collas it was stated that: Only a person having or claiming to have some legal or equitable interest in the land, partaking of the character of an estate, or equitable claim can be a caveator NB. Definition of estate includes easement, charge, right, title, claim, demand, lien and encumbrance, whether at law or in equity. DOES [PARTY] HAVE CAVEATABLE INTEREST? >>>If legal interest Here [party] has a legal interest in the land and therefore has a caveatable interest. >>>No legal interest Here [party] does not have a legal interest so it is necessary to consider whether there is an equitable interest. Equitable interests are not limited to those capable of registration: Re Peychers Caveat. To determine if there is an equitable interest the courts will look to see if there is an equitable remedy available. >>>If there is an equitable remedy Here there is clearly an equitable remedy available in the form of [injunction/specific performance] and therefore there would be a caveatable interest. >>>If purchaser of a proposed lot in a strata plan Here, [party] is a purchaser of a proposed lot in a [strata] plan, which has not yet been registered & building still under construction. This is analogous to Kuper v Keywest Constructions where it was held that a caveatable interest cannot be claimed in the proposed lot because it does not exist but an interest may be claimed in the lot over which the strata plan will be registered (development site). This was followed in Forder.
>>> Conditional contract eg. obtain finance, approval of subdivision/registration of plan Here there is a conditional contract. Earlier cases took the view that a purchaser under a conditional contract did not have a caveatable interest prior to the fulfilment of the conditions: Re Bosca Lands Caveat. However it is now the law that if there is some form of equitable relief available to protect that interest then there is a caveatable interest: Re Hendersons Caveat. Therefore [Party] would have a caveatable interest.

NB.

Person with an option to purchase a proposed lot in a strata plan where contract to be entered into on the exercise of the option is subject to registration of the plan has a caveatable interest in development site: Forder v Cemcorp (following Henderson & Kuper). The caveator has a right to call on equity to restrain the developer by injunction from dealing with the site as a whole inconsistently with the rights of the option holder under the deed granting the option; and to restrain the developer from registering a plan that does not accord with the deed: Forder v Cemcorp 2 of 10

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Such rights are not mere contractual rights because they are remedies that affect what the owner can do with her or his land right to obtain these remedies gives rise to interest in the land

>>>Mere equity (personal right to have a contract set aside) Here [party] does have an equitable estate but that estate is only a mere equity, that is for their rights to be enforced they must go to court: Latec. There are 2 competing views on whether a mere equity will allow a caveatable interest. The narrow view is it doesnt: Re Piles Caveat, the broad view is that it does: Re McKeans Caveat endorsed by Andel v Century Car Care & Re Burmans Caveat. In Queensland it is likely that the broad view applies: Andel v Century Car Care. Assuming it does then [party] would have a caveatable interest. NB.

An equitable interest sufficient to support a caveat is not confined to an interest which is capable of being registered: Re Peychers Caveat (beneficial interest of a cestui que trust); Costa and Duppe Properties Pty Ltd v Duppe (a unit holder under a unit trust) There is no requirement that an equitable interest must be supported by an instrument in registrable form: Queensland Estates v Collas Re Piles Caveat: (H convinced W to transfer property on basis that she would receive beneficial interest (not true); interest in the land mere equity W could enforce against H. HELD: could not support a caveat injunction could protect Ws rights) Re McKeans Caveat: (caveat lodged by mortgagor on basis that mor had right to set aside sale by mee who acted in good faith & in breach of s 185 PLA (duty on mee to sell under a mortgage at market value). HELD: mor held an equitable interest in the land; right to set aside contract is equitable interest sufficient to support a caveat)

The following are examples where the courts have HELD that a caveatable interest exists:

The interest of a purchaser under an unconditional contract for the sale and purchaser of the land: Re Oil Tool Sales The interest of a purchaser under an option to purchase the land: Laybutt v Amoco Australia An agreement to grant an easement: Wellington City Corporation Beneficial interest of cestui trust: Re Peychers Caveat, and a unit holder under a unit trust: Costa & Duppe Properties v Duppe A mortgagees interest in the land (Re Dixons Caveat) and the security interest of a creditor who is given a charge over the land: Composite Buyers Ltd v Soong A right to a profit-a-prendre: Connolly v Noone A purchasers lien for return of deposit and instalments paid after the contract is terminated without fault on the part of the purchaser: Ex parte Lord A charge over land given to a creditor to secure payment of a debt: Griffiths v Hodge Where money or building materials belonging to the caveator are misappropriated and applied to make improvements on the land, the caveator will have a right in equity to trace the money and materials and assert an equitable charge over the land. This is an interest sufficient to support a caveat under s121(1)(a): Wickham Developments

The following are examples held NOT to be caveatable interests

A vendor who had been paid for his land and had delivered a memorandum of transfer as his right had been exhausted: Ex parte Durmil No vendors lien in Qld: s 191 LTA. If the purchaser is not able to pay the full purchase price, the vendor should refuse to settle. The holder of a right of pre-emption: Walker Corporation v W R Pateman. However, if the right of pre-emption is triggered (eg by the owner deciding to sell to the person holding the right of pre-emption, and the terms of the sale are stipulated) then the character of the right may change from a mere contractual right to an interest in the property sufficient to support a caveat: Walker Corporation v WR Pateman A claim by a builder under the usual provision in a construction agreement giving the builder possession of the site for purposes of construction work, it was held that this was not an interest in the land; this is to be distinguished from the

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LWB236-Real Property A Caveats situation where a builder has a charge over the land given to the builder to secure payment of a debt as this is an interest in the land: Re PT Stevens Earthmoving Pty Ltd Caveat Interest of a builder in completed works: HG & R Nominees v Caulson A claim to an interest in a matrimonial home where divorce proceedings commenced but no order had been made by the court as to the property: Re Weeks Caveat A co-owner of land over which statutory trustees for sale had been appointed and after the trustees had entered into a contract of sale, did not have a caveatable interest in the land, only an interest in the proceeds of the sale: Re Trepas Pty Ltd An interest in a partnership is not a caveatable interest because of the nature of a partner interest in the partnership assets, and thus this is not a right to specific property only a right to a portion of the surplus after realisation of assets and payment of debts: Chettle v Brown

NB.

A caveat does not convert the interest which it seeks to protect into a registrable or registered interest, nor does it enlarge the rights of the caveator: Butler v Fairclough. An equitable interest in the land is sufficient but a mere contractual or personal right will not: Re PT Stevens A personal interest or right does not amount to a caveatable interest: Queensland Estates v Collas Consent of the registered owner does not give a caveatable interest: Queensland Estates v Collas THE REGISTRAR

Under s 17 LTA the registrar can lodge on behalf of people who cant lodge to protect themselves or where a caveat is required to be lodged as a matter of urgency. Under s 17(2) the caveat may be lodged to prevent a dealing which may prejudice any of the following: a) The State, Cth or Local Government b) A minor c) Intellectually handicapped d) Person who is absent from the State e) A person because of i) Misdescription of the lot or its boundaries; or ii) fraud or forgery f) a person (other than a person mentioned in a-d) who has an interest in a lot and where because of the nature or urgency of the particular circumstances, there is no practicable alternative to registering a caveat: s 17(4). There is NO COMPENSATION PAYABLE by the State under ss 188 and 188A for loss or damage suffers because of the lodgement of such a caveat: s 189(1)(i) LTA. THE REGISTERED OWNER OF THE LOT Under s 122(1)(c) LTA a registered owner can lodge a caveat but this is a non-lapsing caveat. It will remain effective until withdrawn, cancelled by the Registrar or ordered to be removed by the Court. NB. The right for a registered owner to caveat becomes important where there are fraudulent dealings with property. PERSON HAVING BENEFIT OF A COURT ORDER Under s 122(1)(d) a caveat can be lodged by a person to whom an Australian court has ordered that an interest in a lot be transferred. Under s 122(1)(e) a caveat may be lodged by a person who has the benefit of a subsisting order of an Australian court that restrains a registered proprietor from dealing with a lot. A caveat lodged under s 122(1)(d) and (e) will not lapse under s 126 provided an office copy of the court order is deposited in the 4 of 10

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registrars office at the same time that the caveat is lodged: s 126(1)(c). If so, the caveat will remain effective until it is withdrawn or removed by the registrar or court order. AGAINST A CLAIMED TITLE BY POSSESSION Any person objecting to the application for title by adverse possession (made under s 99 LTA) and who has an interest in the lot the subject of the application may lodge a caveat over the lot at any time before the claimant is registered as owner of the lot: s 104 LTA. 4.0 IS THE CAVEAT IN THE APPROPRIATE FORM? A caveat must comply with the formalities set out in s 121(2) LTA. OR What a caveat must contain is set out in s 121(2). Of the things listed the most contentious are A description of the affected part: s 121(2)(e), and the interest claimed by the caveator s 121(2)(f), the grounds upon which the interest is claimed: s 121(2)(g)
121(2) The caveat must state (a) the name of the caveator; and (b) an address where documents can be served on the caveator; and (c) unless the registrar dispenses with it, the name and address of (i) the registered owner of the lot affected by the caveat; and (ii) anyone else having the right to deal with the lot affected by the caveat; and (d) the registered interest affected by the caveat; and (e) if the caveat relates to only a part of a lota description of the affected part; and (f) the interest claimed by the caveator; and (g) the grounds on which the interest is claimed.

s 121(2)(f) requires there to be a sufficient description of the interest claimed by the caveator. Here [party] claims] a ________ interest over the property. s 121(2)(g) requires the grounds upon which the interest is claimed. Here _________________ What is of issue on the facts is the description of the affected part as required by s 121(2)(e). Here the interest is for _____ but the caveat has been lodged over the whole property_________. This description may be considered to wide, however this will be considered below. Prima facie the caveat appears to cover all formal requirements. Here the caveat will not prevent registration of [exception below] because of s 124(2)(?).
A normal caveat will not prevent registration of the following (a) an instrument specified in the caveat as an instrument to which the caveat does not apply; (b) an instrument if the caveator consents to its registration; (c) an instrument executed by a mortgagee whose interest was registered before lodgment of the caveat if (i) the mortgagee has power under the mortgage to execute the instrument; and (ii) the caveator claims an interest in the lot as security for the payment of money or moneys worth; (d) an instrument of transfer of mortgage executed by a mortgagee whose interest was registered before lodgment of the caveat; (e) another interest that, if registered, will not affect the interest claimed by the caveator.

It is important to note that only the registrars caveat has a wide blocking effect: s 124(3) 5 of 10

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Subsection (2)(d) does not apply to a caveat lodged by the registered owner. s 124(4) Section 124(2)(e) operates eg. where a purchaser enters into a contract to purchase a unit off the plan and lodges a caveat to protect that interest. Interest claimed will be as purchaser of a lot in a building format plan which is to be registered over a particular parcel of land. Registration of the building format plan will not affect the interest claimed by the caveator and the caveat should not prevent the registration of that plan: Kuper v Keywest Constructions.

5.0 WHEN WILL THE CAVEAT LAPSE? A caveat under s 122(1)(a) will lapse after three months from the lodgment date: s 126(4)(a)(ii) However it will not lapse after three months if Lodged by the registered owner: s 126(1)(a) Lodged with the consent of the owner: s 126(1)(b) Lodged by the Registrar: s 126(1)(c) To avoid lapse of a caveat the caveator may start court proceedings: s 126(4) and (5). If commenced before lodging the caveat, they are taken to have complied with s 126(4)(a): s 126(6). Early Lapsing Section 126(2)-(5) provides a mechanism whereby the caveatee may bring about an early lapsing of he caveat. The process is: s 126(2) a caveatee can serve notice requiring the caveator to commence court proceedings to establish the interests claimed under the caveat: s 126(3) The caveatee must notify the Registrar within 14 days that notice has been given to the caveator s 126(4)(a)(ii) - The caveator must commence proceedings within the 14 days or the caveat will lapse. s 126(5) If no action is taken by the caveatee at all then the caveat will lapse after 3 mths; There is NO obligation on the caveatee to serve the notice under s 126 and the caveatee at ALL times has the right to apply under s 127 for an order by the Court that the caveat be removed. However the procedure for early lapsing is relatively quick and inexpensive The caveat may be withdrawn under s 125. Where the caveat is non-lapsing, an application to the court under s 127 may be the only way to remove the caveat if the caveator is not prepared to withdraw it and it cannot be cancelled by the Registrar under s 128. REMOVAL OF THE CAVEAT WITHDRAWAL The caveat may be withdrawn under s 125. CANCELLATION The Registrar may cancel the caveat under s128(1) LTA if he/she is satisfied: a) The interest claimed by the caveator has ceased 6 of 10

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b) The claim of the caveator has been settled by agreement c) The nature of the interest claimed does not entitle the caveator to prevent registration of an instrument that has been lodged. The caveator must be given 7 days notice of the registrars intention to cancel the caveat: s 128(2) If the caveator lodges the interest claimed in the caveat for registration, the registrar may remove the caveat immediately before registering the instrument: s 128(3) COURT ORDER FOR REMOVAL The caveatee may apply at any time for an order for removal from the Supreme Court: s 127(1) NB.

Where the caveat is lapsing under s 126, it may be more appropriate (and less expensive) to wait out the period for lapsing in the hope that the court application will not be necessary Where the caveat is non-lapsing, an application to the court under s 127 may be the only way to remove the caveat, if the caveator is not prepared to withdraw it and cannot be cancelled by the registrar under s 128.

Proceedings under s 127 are treated by the courts as being analogous to an application by the caveator for an interlocutory injunction to restrain a dealing with the property: Re Burmans Caveat The court will not decide issues of fact: Re Oil Tool Sales. It will leave these to trial. The caveator is required to establish that: a) The caveat contains all matters required under s 121 LTA: Re Hendersons Caveat b) The caveator has the necessary interest in the land c) The caveator has proved 1. That there is a serious question to be tried; AND 2. That the balance of convenience is that the status quo be maintained and that the caveat stand If these cannot be established the court will order removal: Re Burmans Caveat Considering each in turn SERIOUS QUESTION AND BALANCE OF CONVENIENCE The caveator has the onus of proving: 1. The caveators claim to an interest in the property does raise a serious question to be tried, and 2. The balance of convenience requires the status quo to be maintained, and thus the caveat to continue. Serious question to be tried For a matter to be a serious question it must not simply be a frivolous or vexatious issue. There should be a dispute as to the facts. Balance of convenience favours the caveat remaining in place Compare the prejudice to the rights of the caveator with the prejudice to the rights of the caveatee. A caveator may be required to give an undertaking as to damages in order to sustain a caveat: ASE v Blucrest. If a person wants a caveat and takes the benefit but are unwilling to make an undertaking as to damages, this will go against the balance of convenience. The facts of our case are similar to _________. 7 of 10

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Re Burmans Caveat:
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Here there was a large amount owing on a mortgage and the value of the property was somewhat less than the value of the mortgage. There was no offer by the caveator to pay into the court and no prospect of the mortgage being completely set aside. So on the balance of convenience the caveat was removed (so mortgagee could exercise the power of sale)

Re Hendersons Caveat:
Facts This is the case that involved the 2 acre block of land as part of parcel 69. Hendersons interest in the land was as equitable fee simple holder The interest was never noted on the register, although it was noted on survey maps for one of the many sales of the land. She lodged a caveat over the whole of the land, not just the 2 acre parcel. The latest owner, Harburg, sought to have the caveat removed under s 127 Held: At first instance, the court held that there was a serious question to be tried and that the balance of convenience favoured the preservation of the status quo. On Appeal a number of issues were raised by the appellants to argue that there was not a serious question to be tried: 1. There was no caveatable interest because it was a conditional contract 2. The caveat was too wide 3. The respondents delay should defeat her claim Held: The Majority on appeal held that there was a caveatable interest even though it was a conditional contract due to recent High Court authority The court held that the caveat was not too wide, as although it was for the entire block, the two acre area has not yet been subdivided nor did it have its boundaries exactly established by any decision of the Court on firm evidence agreed between the parties. The delay wouldnt defeat the claim either, as she had made her interest in the land known to the registered proprietor, and only caveated when she realised he was going to act adversely to her interest.

It may be argued that here the caveat is too wide. Here the interest is in ______ but the caveat is protecting _______. It is likely the court would decide in line with [case]. NB. In Re Whalleys Caveat the caveat which described the subject land by reference to unregistered plans of subdivision was held to be unintelligible and embarrassing. It was ordered to be removed. In effect, Whalley attempted to lodge a caveat over non-existent lots, and the court suggested this was not appropriate subject matter for a caveat. In Queensland Estates, the caveator held a share of individual property as a tenant in common and lodged a caveat over the whole property court gave 14 days to amend caveat so it covered only his share In Re Hendersons Caveat, the caveat was lodged over the entire parcel of land when the interest was only for 2 acres of it. It was held that this was not too large, as there were no clear boundaries over the 2 acre block In the case of Re Powells Caveat, the caveator had an interest in right of way over adjoining owners land but lodged a caveat over the whole of the land instead of just the portion affected by the easement (Davies J said in Re Hendersons Caveat that this would be decided the other way now)

6.0 REGISTRAR MUST GIVE NOTICE The Registrar must give written notice of lodgement of a caveat to each person whose interest is affected by the caveat: s 123 LTA. 7.0 LODGEMENT OF A SECOND CAVEAT

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Under s 129 LTA if a caveat lapses, is withdrawn, cancelled or removed, or is rejected by the registrar under s 157, a second caveat cannot be lodged on the same, or substantially the same grounds unless the court grants leave to do so. NB.

The court should consider whether there is a satisfactory explanation for the lapse of the first caveat, and any delay in making the application and whether the respondent would be unduly prejudiced by the making of a second caveat. An extension of a settlement date on a contract is not substantially different grounds upon which leave would be granted to lodge another caveat on a lot: Re ADC Properties (Qld) Pty Ltds Caveat EA & S Plaster Co v Registrar of Titles: 1st caveat concerned an equitable charge (ie. security), and 2nd concerned an equitable mortgage. HELD: sufficiently different, equitable charge is purely hypothetical cf. equitable mortgage is something tangible

8.0 REMEDIES: 8.1 WILL THE CAVEAT BE REMOVED? >>>If failed to establish major arguments It is likely the court would order the removal of the caveat as [caveator] has failed to prove all the necessary elements namely ________________. Under s129 the court will order removal of a defective caveat. If the court gives leave a caveat may be lodged on the same or similar grounds: s 129, however this is unlikely to occur. >>>If too wide is all thats wrong Because the caveat is only too wide the court may amend it. Section 129 LTA allows the court to order removal of a defective caveat and at the same time to give leave to lodge a further caveat on the same grounds but with the defects corrected. The court may also amend the caveat themselves: Queensland Estates 8.2 COMPENSATION FOR IMPROPER CAVEAT Section 130(1) LTA allows damages to be awarded where there is a lodging or continuing of a caveat without reasonable cause. This includes the power to award exemplary damages: s 130(2) There is a rebuttable presumption that the caveator lodged or continued the caveat without reasonable cause for s 130(3). Prior to 1997 the wording of s130(3) was different. This wording lead to the decision in Farvet Pty Ltd v Frost which gave meaning to the heading of the section. Following this case the section was amended and now it makes it clear that the onus is on the caveator to rebut the presumption of s130(3). To rebut this presumption [caveator] would have to establish that the caveat was lodged with reasonable cause by proving that the caveator had an honest belief based on reasonable grounds that he/she had a caveatable interest. Here ________. Assuming the presumption is not rebutted [caveatee] would still have to show loss or damage as a result of the lodgement or continuation of the caveat. Therefore it may be difficult to get compensation. 9 of 10

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If the approach of Demack J in Farvet v Frost is correct, then [caveatee] may have to show that the caveat was lodged for an improper purpose. Here, _____. Therefore, _____. NB. Young v Rydalmere Credits Pty Ltd: caveator held to have lodge a caveat not to the protection of his own interests, but for an ulterior motive and without regard to the effect that the caveat would have on other people involved in the transactions on the land. Kuper v Keywest Constructions Pty Ltd: a caveat is lodged without reasonable cause if the caveator does not have an honest belief based on reasonable grounds that he/she has an interest capable of supporting a caveat.

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