The Register, Equitable Interests and Caveats

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This article is a topic within the subject Property, Equity and Trusts 2.

Contents

Required Reading

Edgeworth et all, Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008, pp. 568-573 [5.140-5.144]; 579-586 [5.152-5.163].

Searching the Register

This section provides practical examples of how one might search the register.

This was discussed in Bursill Enterprises v Berger Bros Trading Co:

  • The concept of constructive notice applies to references (to other documents) made on the register - when the register notifies a creation of rights in another document, a purchaser is expected to read that document in order to ascertain the rights flowing from it, and will be treated has having knowledge of that document.
  • As a result, such rights are treated as having been sufficiently displayed on the register, and thus are not barred by indefeasibility.

Caveats

[1] A caveat is an instrument lodged by the holder of an unregistered interest on a property which stops new registrations on the property (so that no registrations could extinguish his unregistered interest). It can be thought of a registration 'injunction' - no new person can register themselves as the new registered proprietor whilst the caveat stands.

  • It means no new dealings (which would extinguish the unregistered interest) can be done before the issue of the unregistered interest has been resolved in court.
  • Caveats are essential to protect people with unregistered interests who are about to have their interests extinguished by a new act of registration. Since the 'notice provision' (s 43) allows a purchaser to be indefeasible against of unregistered interests even if he had notice of them, the holders on unregistered interests are extremely vulnerable.
  • So, whilst the Torrens system as a whole leaves unregistered interests as extremely vulnerable, caveats exist to provide some sort of protection.

Some of the procedure relating to caveats is detailed here (can be found in ss 74F-74R of the Real Property Act 1900 (NSW):

  • A caveat will be displayed on the certificate of title or folio of the register.
  • After a caveat is lodged, the registered proprietor will be notified that there is a caveat. He can the commence proceedings to remove it (which would involve resolving the issue of the unregistered interest in court).
  • If a caveat exists on a property, and a transfer is lodged for registration of that land, the caveator is notified.
    • He has a certain amount of time to consent to the new dealing or alternatively show why the his unregistered interest should be registered.
    • If he fails to act, consents to the dealing, or if he fails to convince the court, then the caveat is extinguished and cannot be renewed.
  • Note: a caveat is not examined when it is lodged, but only when the issues gets to court (ie, only at court do they examine whether there is a basis to the caveat). That means that a caveat can be lodged and displayed without an basis.

Requirements and Other Law

[2] A caveat can technically be lodged by any person claiming an estate or interest in land under an unregistered instrument.[3] However, there are a few general restricting rules regarding caveats:

  • A caveat will only survive the court process if the person has a 'caveatable interest' (see below).
  • A caveat must be lodged with a 'reasonable cause' , otherwise the caveator will have to compensate the registered proprietor for any costs of removing the caveat (see below).[4]
  • A caveat must specify some details, including the part of the estate claimed by the caveator and the facts on which the claim is founded, and be supported by a statutory declaration.[5]
    • However, s 74L specifies that these formal requirements are not to be enforced when they are the only thing standing in the way of an otherwise operable caveat. The scope of this section is not exactly clear.

Caveatable Interests

[6] Only certain interests can actually support a caveat (ie, form a legitimate basis for a caveat, which will succeed in court). These are called, 'caveatable interests'.

  • Caveatable interests
    • Easements.
    • Interest of purchaser in contract for sale.
    • Mortgage by deeds.
    • A claim that an absolute transfer was intended to operate only as a mortgage .
    • Interest of transferee under an unregistered transfer.
    • Vendor’s lien.
    • Transaction set aside by fraud/misrepresentation.
    • Interest of a partner in partnership assets.
    • A call option to purchase land.
    • Native title if it’s a proprietary right.
    • Adverse possessor can lodge a possessory application pursuant to s 45D(1).
    • Delimitation plans.
    • Interest of lessor in lessee’s covenant not to assign.
  • Non-caveatable interests
    • License to occupy land.
    • Non express trusts ( s82).
    • Restrictive covenant not running with land.
    • Right to net profits of a sale of land.
    • A right of first refusal to purchase.
    • Right in personam (because they are personal), but can be caveated once established as proprietary.
    • Trusts (although can be noted on the register).


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Reasonable Cause

[7] A caveat must be lodged with a reasonable cause, otherwise the caveator will be liable to the costs and damages suffered the registered proprietor as a result.[8]

This was discussed in Bedford Properties Pty Ltd v Surgo Pty Ltd:[9]

  • Facts:The defendant lodged a caveat on the plaintiff's property based on an alleged agreement giving it a right to mortgage. The plaintiff argued that the caveat was without reasonable cause and actually ended up costing him a significant amount of money (because of delays with business, taxes etc)
  • Held: A reasonable cause is not the actual possession of a caveatable interest, but merely an honest belief based on reasonable grounds that the caveator has such an interest. Still, in this case, there was no reasonable ground to believe that there was an interest, to the defendant is liable.


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End

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References

Textbook refers to Edgeworth et all, Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008.

  1. Textbook, pp. 579-80. [5.152].
  2. Textbook, pp. 582-3 [5.155-5.156]. [5.152].
  3. Real Property Act 1900 (NSW), s 74F (1).
  4. Real Property Act 1900 (NSW), s 74P.
  5. Real Property Act 1900 (NSW), s 74F; Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222.
  6. Textbook, pp, 580-2 [5.153-5.154].
  7. Textbook, pp. 584-6 [5.160-5.163].
  8. Real Property Act 1900 (NSW), s 74P.
  9. [1981] 1 NSWLR 106.
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