This article forms part of a sub-series dealing with extension of caveat applications in NSW.
In Part 1, we considered the issue of time regarding making the application. In this Part 2, we will consider the applicable legal test, focussing on the first limb.
The power of the Court to extend the operation of a caveat is found in s 74F of the Real Property Act 1900 (NSW)(Act). The test is similar to that of an interlocutory injunction in that the caveator bears the onus to show that:
the caveat has or may have substance (i.e. that there is a serious question to be tried) (First Limb);
the balance of convenience favours the maintenance of the caveat (Second Limb).
In order to satisfy the First Limb, the caveator must show that it has a caveatable interest in the subject property. A caveatable interest is a proprietary interest and must be in existence at the time of lodging the caveat. Although the list of caveatable interests is not closed, generally the most common interests in property capable of sustaining a caveat include (and are certainly not limited to):
an equitable charge;
an equitable mortgage;
a constructive trust; and
a resulting trust.
When drafting the caveat, particular attention should be paid to the specific requirements stated in 74F(5) of the Act and Schedule 2 of the Real Property Regulation 2019 (NSW) (Regulation). The Court may in certain circumstances, disregard a failure to comply strictly with these requirements if they amount to a “defect in form”, not a “defect in substance”. An example of a defect in substance includes a failure to state the correct interest claimed. An example of a defect in form that is excusable is a failure to state the quantum where the caveat claims an interest by way of mortgage or charge, see cl 4 of Schedule 2 of the Regulation.
When acting for a caveator seeking to extend the caveat, particular attention should be given to ascertaining if there is a valid interest capable of sustaining the caveat prior to filing an application to extend the caveat. Ideally this would have been done prior to lodging the caveat, but one should always check, especially in cases where the caveat was lodged by another person. Likewise, when acting for a registered proprietor, attacking the validity of the alleged interest is one tact to take when defending against an application to extend the caveat. In both cases, the existence of a caveatable interest is a critical factor.
In my next article, I will consider the Secomd Limb, being the balance of convenience.
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