Continuing Profession Development Seminar

CONTINUING PROFESSION DEVELOPMENT SEMINAR

TUESDAY, 3 AUGUST 2004

Chair: Justice McMurdo

Presenter: Andrew Crowe SC

EVIDENCE, PRACTICE AND PROCEDURE SEMINAR

CAVEATS

Legislation

The Land Title Act 1994 (“LTA”) consolidated and amended the prior legislation found in the repealed Real Property Acts of 1861 and 1877. The repealed Acts made separate provision for the lodging of caveats in respect of primary applications,[1] transmissions by death, applications by adverse possessors, by equitable mortgagees, by the Registrar, by direction of the Court and by any person claiming an estate or interest in the land. By contrast, s.121 LTA (Requirements of Caveats) applies to all caveats under the LTA (s.121(3)).

Under the LTA there is one form of caveat (Form 11) whereas under the repealed Acts there were several forms.[2]

Section 75 LTA provides that an equitable mortgage of a lot may be created by leaving a Certificate of Title with the mortgagee. Section 122(2) LTA allows a caveat to be lodged by an equitable mortgagee but such caveat can only be lodged if it is subject to the lapsing provisions of s.126 LTA ie the non-lapsing equitable mortgagee’s caveat once allowed by s.30A of the Real Property Act 1877 is no longer available.

Section 74(1) of the Property Law Act 1974 (“PLA”) creates a right to caveat for purchasers under instalment contracts for the sale of land registered under the LTA. Form 11 (with appropriate changes) is also used for caveats lodged under s.74 PLA.

What is a Caveat and the Form of Caveats

“The caveat procedure does not add to, nor enlarge, existing proprietary rights of the caveator but provides an opportunity for a caveator to protect his or her interest in land, whatever that interest may be, against the registered proprietor, or any other person claiming an estate or interest in the land, attempting to act without regard to the caveator’s interest.” [3]

“… the caveat, while not designed as a substitute for registration, in effect protects the caveator by preserving the status quo until a court has had the opportunity of discovering the underlying rights of the parties, and at the same time gives notice both to the Registrar and the registered proprietor, and others attempting to deal with the title, of the caveator’s interest.” [4]

A caveat in a form of statutory injunction.

Annexed to this paper is an example of a caveat lodged in respect of recent Supreme Court proceedings.

Note that in item 1 after the name of the caveator, the address for service is the address of the caveator’s solicitors. It is important to follow this practice as it ensures that notices of demands from caveatees come directly to the notice of the caveator’s solicitors.

Note with respect to item 6 that the caveat must state not only the name and address of the registered owner of the lot affected by the caveat but also that of anyone else having a right to deal with the lot affected by the caveat.

Section 121(2)(f) LTA requires that the caveat must state “the interest claimed by the caveator”. Section 36 of the Acts Interpretation Act 1954 (Qd) defines “interest” to mean:

“(a) a legal or equitable estate in land or other property; or

(b) a right, power or privilege over, or in relation to land or other property.”

The editors of the Land Titles Law and Practice (LBC) at para [7.730] express the view that, given the breadth of the definition of “interest” provided by s.36 of the Acts Interpretation Act, decisions made in relation to s.98 of the repealed Real Property Act 1861 (“estate or interest in any land”) will remain apt to delineate caveatable interests under the LTA. At para [7.1050] the editors state that for all intents and purposes the legislative provisions will operate in substantially similar manner.

In addition, s.121(2)(g) LTA provides that the grounds on which the interest is claimed must also be stated.

The caveat may relate to part only of the land[5] in which event an appropriate description of that part must be given.

Section 121(1) LTA requires that the caveat must be signed by or for the caveator. Form 11 provides for signature by the caveator or the caveator’s solicitor. If a solicitor is to sign a caveat, as the caveator’s solicitor, the solicitor should be aware of the potential liability under s.130(1) LTA which provides that:

“A person who lodges or continues a caveat without reasonable cause must compensate anyone else who suffers loss or damage as a result.”

In Gordon v Treadwell Stacey Smith[6] a Master of the High Court of New Zealand held that such statutory compensation may be recovered against solicitors responsible for lodging a caveat. There the caveators had become bankrupt before an application for removal of the caveat came on for hearing. The caveat had been ordered to be removed when neither the caveators nor their solicitors appeared to oppose the removal application. Subsequently, the plaintiff brought proceedings against the solicitors seeking statutory compensation. The reported decision concerns an application brought by the solicitors to strike out the statement o claim. The relevant New Zealand provision applied to “Any person lodging any caveat without reasonable cause …”.

The solicitors argued that the words “any person lodging any caveat” can only relate to a person who has a right to lodge a caveat. This argument was rejected by the Master who noted that the legislation required the caveat to be signed by the caveator or his attorney or agent. The Master concluded:

“Clearly if an attorney or agent can sign a caveat, he will also be in a position to lodge it or cause it to be lodged. If such attorney or agent proceeds to lodge a caveat without reasonable cause it seems to me there is no logical reason why that person should not be liable …”

The report does not provide details as to the lodging of the caveat, however, it is assumed that the solicitors not only signed the caveat but also caused it to be lodged.

The outcome of the litigation is reported in 1997 ANZ Conv R 68. At first instance, Heron J held that the solicitors were not liable, however, an appeal was upheld by the Court of Appeal of New Zealand. Damages of $3,185 were awarded against the solicitors. The Court of Appeal concluded that if the parliament had intended to limit liability to caveators the term “caveator” would have been used (as it was elsewhere in the relevant Act) rather than the words “any person”.[7]

The New Zealand decisions have not been referred to in any Australian case law. Halsbury’s, Laws of Australia refers to the Master’s decision without comment.

Section 130 LTA refers to “a person ….” Other sections in Part 7 Division 2 – refer to “caveator”. Section 121(1) LTA provides that the caveat must be signed by or for the “caveator” – ie the term is used to describe the person claiming an interest prior to lodgement and registration. In Queensland, as in New Zealand, if the legislature had intended the liability to be limited to the caveator the section could have so provided. It is not so limited and, accordingly, it is only prudent to proceed on the basis that a solicitor lodging a caveat is potentially liable under s.130 LTA.

Types of Caveats

There are 5 types of caveats namely:

1. Caveats by the Registrar to prevent certain dealings.

2. Caveats by purchasers under instalment contracts.

3. Private caveats under Part 7 Division 2 of the LTA.

4. Caveats against applications for title by adverse possession.

5. Court ordered caveats.

In this Seminar we shall discuss the second and third types of caveats.

Caveats by Purchasers under Instalment Contracts

Section 74(1) PLA gives a purchaser under an instalment contract for the sale of land registered under the LTA a right to lodge a caveat subject to it being expressed to be lodged under s.74(1). The caveat prevents the registration of any instrument affecting the land the subject of the contract until completion of the contract.

Section 74(1A) PLA provides as follows:

“A caveat lodged under this section is taken for the purposes of the Land Title Act 1994 to have been lodged other than under Part 7 Division 2 of that Act.”

Section 126 LTA deals with lapsing of caveats. Section 126(1)(e) provides as follows:

“This section does not apply to a caveat if –

…

(e) it is lodged other than under this division.”

The effect of the combination of s.74 of the PLA and s.126(1)(e) of the LTA is that a caveat lodged under s.74(1) of the PLA will be non-lapsing.

An application to remove such a caveat can be brought under s.74(2) of the PLA which provides as follows:

“(2) A caveat lodged under this section may on the application of any person interested be removed upon proof to the satisfaction of the Registrar or of the court –

(a) that the purchaser has consented to removal of the caveat; or

(b) that the instalment contract has been rescinded or determined or discharged by performance or otherwise; or

(c) any other ground which justifies removal of a caveat.”

Caveats under Part 7 Division 2 of the LTA

Who may lodge a caveat?

Section 122(1) LTA provides that the following may lodge a caveat:

(a) a person claiming an interest in a lot;

(b) the Registrar under s.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.

An interest in a lot does not include an interest in a proposed allotment under the Land Sales Act 1984 that a person obtains when the person agrees to purchase the allotment under that Act.[8]

Upon lodgement of the caveat, the Registrar must give written notice of this fact to each person whose right to registration of an instrument is affected by the caveat.[9]

Lodgement of the caveat prevents registration of an instrument affecting the lot until the caveat lapses or is withdrawn, removed or cancelled.[10]

If a party wishes to terminate a contract a caveat should not be lodged (except by a purchaser seeking to recover a deposit) as this would be inconsistent with such an intention and may be regarded as affirmation of a contract notwithstanding breach.

Claims and Grounds

Helpful precedents of claims and grounds are set out at para [3-615] CCH Queensland Conveyancing Law and Practice, Volume 1 and in Land Titles Law and Practice (LBC).

Although it was once thought that the interest had to be sufficient to entitle the caveator to specific performance, the Queensland Court of Appeal in Re Henderson’s Caveat[11] found that it is sufficient to ground a claim of a caveatable interest if the caveator is entitled to protect the interest claimed by specific performance, injunction or other equitable relief. The Full Court, in so deciding, doubted the decisions of Re Bosca Land Pty Ltd’s Caveat [1976] Qd R 119; and Re Dimbury Pty Ltd’s Caveat [1986] 2 Qd R 348. The Full Court noted that there is weighty opinion in the High Court suggesting that an equitable interest in land can exist when a claimant is entitled to something less than a full decree of specific performance ordering conveyance (Chan v Cresdon (1989) 168 CLR 242). The relevant claim to land was subject to a subdivision which was subject to local authority approval. Dimbury was authority for the proposition that until that approval was obtained no caveatable interest arose.

The caveator does not have to establish an immediate entitlement as against the current registered proprietor of a lot. The caveator might be a purchaser from a person entitled to a transfer from the registered proprietor. In that situation the caveat should allow the transfer from the registered proprietor to the caveator’s vendor.

Clearly, a purely contractual or personal right will not suffice to support a caveat.

Examples of caveatable interests are as follows:

1. Caveat as purchaser under a contract (but not in respect of a proposed allotment under the Land Sales Act 1984 – s.122(3) LTA).

2. Caveat as grantee of an option (Laybutt v AMOCO Australia Pty Ltd (1974) 132 CLR 57).

3. Caveat as mortgagee of an estate in fee simple under an unregistered mortgage.

4. Caveat as equitable mortgagee by deposit of Title Deed.

5. Caveat as purchaser under an instalment contract.[12] In Re Moore’s Caveat[13] the purchaser under an instalment contract instead of forbidding registration until completion of the instalment contract forbad registration of any dealing “until this caveat … [be] withdrawn, or by order of the Supreme Court … withdrawn” McPerherson J ordered removal of the caveat as it was not a caveat within the contemplation of s.74(1) PLA.

6. Caveat as a beneficiary under a resulting, constructive or implied trust.

7. Caveat as entitled Co-Owner.

8. Caveat as holder of a purchaser’s lien (refund of deposit monies when the caveator has rescinded contract) (Ex parte Lord [1985] 2 Qd R 198) Where the contract goes off through no fault of the purchaser, in respect of that part of the purchase price which has been paid, equity treats the purchaser as a secured creditor, the security being a lien over the property. The right arises automatically and is not dependent on action to enforce the lien being successful.

9. Caveat as equitable chargee under a building contract (where the contract specifically charges the land).