Caveats: The interest is in the detail

It is commonly assumed that holding a “caveatable interest” in land and successfully lodging a caveat with Landgate is enough to protect a caveator’s interest.

In fact, lodgment of a poorly prepared or “defective” caveat can not only leave a caveator unprotected, it can expose the caveator to a compensation claim from the landowner.

Recent cases in Western Australia and New South Wales have highlighted the importance of getting the details right when lodging a caveat.

Describing interests

In Rowe v Albany Chalets [2015] WASC 85 the Supreme Court found that, as a partner, the applicant held a caveatable interest in land which constituted partnership property.

However, Justice Mitchell said the caveat’s description of that interest “as chargee” was “inapt”, not “an appropriate description” and “too broad to be a specific description of the nature and extent of their interests”.

The caveat could not be extended without fixing the defect and the defect could not be fixed without altering the interest claimed rather than simply clarifying, expressing better or more fully the interest claimed.

On that basis, the application to extend the caveat was dismissed.  Justice Mitchell ultimately decided that the balance of convenience favoured a four day injunction restraining dealings with the land until the registered proprietor and the proposed purchaser could take part in the proceedings.

However, his findings in relation to the form of the interest claimed show the importance of specific and accurate descriptions of caveatable interests.

Taking account of joint tenants

In Rahgeb Naguib Awadallah v Hymix Australia Pty Ltd [2015] NSWSC 117 (Rahgeb), the Supreme Court of New South Wales considered the impact of caveats on joint tenants under the NSW equivalent of the Transfer of Land Act 1893 (WA).

A caveat was lodged claiming an equitable interest under a debt guarantee given by one of two joint proprietors of land.  The other proprietor was not a party to the guarantee.

The guarantor proprietor specifically consented to registration of a caveat over the land prohibiting any dealings affecting the caveator’s interests.

The Court considered two similar cases with different outcomes.  Both involved land held in joint tenancy and both involved caveats naming only one of the registered proprietors.

In Andrews v Wilcox [2008] NSWSC 280 (Andrews), the caveat was not allowed to stand because it was found to interfere with the unnamed joint tenant’s rights with respect to the property and therefore went beyond the caveator’s rights.

In Allen Taylor & Company Pty Ltd trading as Boral Timber & Ors v Norman Leslie Harrison [2010] NSWSC 1021 (Allen Taylor), the Court distinguished the case from Andrews, saying that the caveators had made it clear that they did not seek to prohibit the unnamed proprietor from dealing with her interest.

In Rahgeb, Justice McDougall took his lead from Allen Taylor, saying that it was clear, reading the caveat as a whole, that the charge was only asserted against the named proprietor.

The protection of that interest by the caveat would have consequences for the exercise of the unnamed proprietor’s rights.  Effectively, she could not sell, mortgage or transfer her interest without the consent of the caveator.  But that was the nature of joint tenancy and a practical consequence of caveat system for protecting interests in land.

As a result, Justice McDougall found that the caveat did not go beyond the caveator’s rights under the guarantee.

Lavan Legal comment

It is clear from these cases that simply lodging a caveat is not enough to protect an interest.

Great care must be taken in determining whether the interest is caveatable, the correct form of caveat (that is, whether it is a “subject to claim” caveat or an “absolute” caveat) and then ensuring that the details included in the caveat will withstand court scrutiny.

If the details such as the claimed interest and relevant parties are not accurate and specific, at best, the caveator’s interest will not be protected.  At worst, the caveator may also find themselves exposed to a compensation claim by the registered proprietor.

Many people lodge “absolute” caveats over the title to the relevant land.  An “absolute” caveat prohibits the registration of any dealing on the title to the affected land.  The circumstances warranting an “absolute” caveat are very limited.  In our experience, the use of the “absolute” caveat is much abused.  This article highlights that there are very real risks in the inappropriate use of caveats.