Caveats – resist applications for extensions with caution

In the recent decision of Murphy Toenies v Family Holdings Pty Ltd as trustee for the Conway Family Trust [2019] WASC 423, Smith J reviewed the principles relevant to the extension of a caveat pursuant to section 138C of the Transfer of Land Act.


The applicants (Purchasers) had each purchased long term residential sub-leases (Sub-Leases) of properties which were owned by the respondents Family Holdings Pty Ltd atft Conway Family Trust and AJH Projects Pty Ltd atft Hopkinson Family Trust (Owners).

In early April 2018, the Owners signed an authority granting an entity within the group of companies owned by Sterling First (Aust) Ltd (Sterling Entity) the authority to act as managing agents (Agents) to find short-term tenants, limited to a period of 4 months, for the properties.

The Purchasers purchased the Sub-Leases in respect of the properties for a term of 7 years with 7 options of 5 years each.

Prior to entering into the Sub-Leases, the Purchasers were provided with a copy of a long term head-lease (Head Lease) for the same length of time as the Sub-Lease, said to have been entered into by the Owners and Stirling Entity by the Agents.

In or around mid April 2018, prior to taking possession of the properties, the Agents asked each Owner (having already signed the relevant Sub-Lease) to enter into a short term sub-lease for a period of four months (Short Term Lease), purportedly at the request of the Owners.

In mid to late October 2018, each Owner was served with a notice to vacate their property on the basis that their Short Term Lease had expired.

In March 2019, the Owners lodged caveats over each of the 3 properties claiming a proprietary interest in their property.

The Sterling Group went into liquidation on 10 June 2019 and the liquidator disclaimed the Head-Leases in accordance with the provisions of section 568 (1) of the Corporations Act.

In September 2019, the Owners issued proceedings seeking vacant possession of each property on the basis that the Short Term Leases in respect of the Properties have expired (Possession Proceedings).

In each of the Possession Proceedings, the Purchasers alleged that the Owners had:

  • facilitated the marketing of each of the properties, as part of the ‘Sterling New Life’ Product offered by a Sterling Entity;
  • the Owners, through the Sterling Entity had made representations, which the Purchasers relied on, which had caused them to enter into the Sub-Leases; and
  • the Short Term Leases are of no effect.

The Purchasers did not admit the disclaimer notices.

In each of the applications to extend the caveats, the Purchasers alleged that they are tenants of the properties pursuant to the Sub-Leases.

Smith J noted that the Owners contend that:

  • the marketing material produced by the Sterling Group contained representations that were false and misleading;
  • the marketing carried out by the Sterling Entity was, at least, arguably conduct engaged in on behalf of the Owners as their agent within the scope of their actual authority.

Smith J held that:

‘it is improper, on an application to extend an existing caveat, to attempt to resolve conflicting affidavit evidence or to evaluate the evidence in a kind of preliminary trial. It is important, however, to have regard to the evidence before the court….. For the claim not to have substance, it must be without foundation.’

Her Honour held that there was a serious question to be tried as to whether or not:

  • both the Head Leases and the Sub-Leases were valid; 
  • whether either the Head Leases or the Sub-Leases had been terminated, either by operation of law, or by abandonment; and 
  • that the balance of convenience favoured the extension of each of the Owner’s caveats pending the determination of the main proceedings.

Lavan comment

Unless you can demonstrate that there is no substance to a claim which has been brought, for example, because the claim is not in respect of an interest which is caveatable, the Court will be reluctant not to exercise the discretion given to it by section 138C of the Transfer of Land Act to extend the operation of a caveat until proceedings are finalised. 

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.