Vikram Misra, Barrister at Clarence Chambers begins his series into caveats as he outlines their importance for property lawyers and describing their interest in Part 1.
A caveat is a powerful weapon in a property lawyer’s arsenal to protect their client’s interest in real property. All too often however, legal practitioners lodge caveats that fail to adequately describe the interest claimed by the caveator. This places the client in a position where the caveat may be attacked and declared defective, not only prejudicing any priority of interest, but also exposing the client to a claim for damages[1].
Section 74F(5) of the Real Property Act 1900 (NSW) (‘the Act’) sets out the requirements for a caveat, including that the prescribed particulars of the legal or equitable estate or interest be specified. This must be read in conjunction with Schedule 2 of the Real Property Regulation 2019 (NSW) [2] (‘the Regulations’), which contains a more detailed list of what is required to be provided on the caveat form. Note that not complying strictly with point 4 is curable by 74L of the Act, see: Business Acquisitions Australia Pty Ltd v Renshall [2006] NSWSC 1238; FTFS Holdings Pty Ltd v Business Acquisitions Australia Pty Ltd [2006] NSWSC 846; Allen Taylor & Co Pty Ltd t/as Boral Timber v Harrison [2010] NSWSC 1021 and Break Fast Investments Pty Ltd v C & O Voukidis Pty Ltd [2011] NSWSC 871.
Section 74L of the Act permits the Court to disregard any failure of the caveator to comply strictly with the requirements of this Part and or any regulations made for the purposes of this Part with respect to the form of the caveat. Note that this section does not permit the court to disregard defects of ‘substance’.
The description of the prescribed particulars of the legal or equitable estate or interest is a possible ground for attacking a caveat on the basis that it is a defect in substance if not particularised sufficiently. Such a defect in substance is not curable by section 74L of the Act, see: Jones v Baker [2002] NSWSC 89 and Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Ltd [2005] NSWSC 880.
Whether or not a caveat adequately describes the estate or interest is to be decided from the point of view of a person examining the caveat, i.e. a third person examining the caveat document. This person need not necessarily be the registered proprietor. Merely describing the particulars of the estate as an “equitable interest” and nothing more has been held by the Courts to be a defect in substance, as it could relate to a multiplicity of types of interest and it does not assist a person reading the caveat to know whether a dealing would affect the estate claimed. See: Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Ltd [2005] NSWSC 880; Circuit Finance Pty Ltd v Crown & Gleeson Securities Pty Ltd [2005] NSWSC 997; Raptis v Wija Investments Development Pty Ltd [2007] NSWSC 870 and Bellissimo v JCL Investments Pty Ltd [2009] NSWSC 1260; Perpetual Trustee Company Ltd v English [2011] NSWSC 264.
Further, describing the estate or interest as “an equitable interest pursuant to a clause in a deed or agreement” has also been held to be a defect in substance. In Schibaia v Elias [2013] NSWSC 1485, McDougall J declined to extend the operation of a number of caveats which stated the nature of the estate or interest claimed as “an equitable interest pursuant to clause 5 of the deed of variation dated 25 July 2006 between Jack Citraro & Ors and Violette Schibaia”. His Honour explained at [24] – [25]:
In the present case, Mr Jaramillo submitted, the facts were different to those considered by Campbell J [in Hanson] because the estate or interest described was one said to have been “created pursuant to clause 6 of the Deed of Variation”… Thus, he submitted, anyone who looked at the Deed of Variation would know what the estate or interest was.
That submission cannot be correct. The whole purpose of the Real Property Act is to try and prevent the need for people to go behind the Register, in particular to go behind documents that have been recorded or lodged, to see what estates or interests there are in land that is subject to the provisions of the Real Property Act. The Deed of Variation was not annexed to the caveat. The relevant clauses (cl 5 in the case of Mrs Schibaia and cl 6 in the case of Mr Schibaia) were not set out. A person reading the caveat would not know whether clause 6 created a charge, or an equitable mortgage, or an option to purchase, or an agreement for lease, or any other equitable interest in land.
As such, drafters must stray away from describing a caveator’s interest too widely, i.e. by merely stating “legal or equitable interest” or describing the interest only by reference to an instrument. A proper description would identify with precision the interest claimed with reference to any instrument that gives rise to that interest.
[1] Section 74P of the Real Property Act 1900 (NSW).
[2] Formerly Schedule 3 of the Real Property Regulation 2014 (NSW), now repealed
Vikram Misra was admitted as a solicitor in 2012 and called to the NSW Bar in 2015. He maintains a broad commercial practice and is regularly briefed in matters relating to taxation law, property law, construction law and equity. Vikram has completed a Graduate Diploma in Taxation Law at the University of Sydney in 2015 and a Master of Laws majoring in construction law and contract law at the University of Melbourne in 2016. You may connect with Vikram via email counsel@vikrammisra.com or LinkedIn 
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