Vikram Misra, Barrister at Clarence Chambers continues his series into caveats as he provides a comprehensive look into restrictions on the lodgment of further caveats when earlier caveat lapses or is withdrawn. To hear more from Vikram, follow his series here.
Introduction
Section 74O of the Real Property Act 1900 (NSW) (‘the Act’) applies in situations where, a caveat lodged in respect of any particular estate or interest in land subsequently lapses or is withdrawn under specified circumstances (‘the Earlier Caveat’) and the same caveator lodges a further caveat in respect of the same estate or interest, purporting to be based on the same facts as the Earlier Caveat (‘the Further Caveat’).
Pursuant to 74O(2)(a) and (b), the Further Caveat lodged has no effect unless:
- The Supreme Court has made an order giving leave for the lodgement of the Further Caveat and the order or an office copy of the order accompanies the Further Caveat when it is lodged with the Registrar General; or
- The Further Caveat is endorsed with the consent of the primary applicant or possessory applicant for, or the registered proprietor of, the estate or interest affected by the Further Caveat.
This article will consider; the circumstances in which the withdrawal of the Earlier Caveat falls within s 74O, the difficulty in determining whether the Further Caveat is based on the same facts as the Earlier Caveat and obtaining leave from the Supreme Court to lodge the Further Caveat.
Threshold Issue I: What circumstances of withdrawal are covered?
The circumstances in which the withdrawal of the Earlier Caveat falls within the section are specified in s 74O(1)(b) and (c). These are where the Earlier Caveat is withdrawn after an application is lodged with the Registrar-General for the preparation of a notice under s 74C(3), 74I(1), 74I(2), 74J(1), 74JA(3), or withdrawn by order of the Court under s 74MA.
In NSW, if the Earlier Caveat is withdrawn without the issuing of a lapsing notice (or order of the Supreme Court), it may be able to be re-lodged without triggering s 74O. In Verebes v Verebes (1995) 7 BPR 14,408 (‘Verebes’) at 14,412, Young J opined, “that the statutory restriction of filing a second caveat only applies where an earlier caveat has been removed by the court, has lapsed or has been withdrawn following a lapsing notice.” This course of action is obviously not without risk as priority issues will need to be considered[1].
Threshold Issue II: Is the further caveat lodged in respect of the same estate, interest or right purporting to be based on the same facts as the earlier caveat?
Section 74O(1) is triggered when the Further Caveat is lodged in respect of the same estate, interest or right, purporting to be based on the same facts as the Earlier Caveat.
In McCulloch v Fern [2000] NSWSC 729 (‘McCulloch’), Hamilton J held at [7]:
The aim of the provisions of the Act is to restrict the use in an obstructive way of successive caveats based upon essentially the same subject matter; to construe the words “the same” broadly will assist that objective, whereas to construe them narrowly and take the view that interests defined in a legalistically or technically different fashion will escape the section appears to me to be inimical to the legislative intent.
This was followed in Gilles v Penson [2014] NSWSC 1585 (‘Gilles’), where the Court held at [30]:
Authority indicates that s 74O should be construed widely, not narrowly, to promote the purpose of the section, because were the phrase to be construed narrowly, it could allow interests defined in a legalistic and technical way to escape the section.[2]
Caution should be exercised when applying judgments from other jurisdictions, as there are differences in the wording of equivalent state legislation, for example see s 91(4) of the Transfer of Land Act 1958 (Vic), where a Further Caveat cannot be renewed by or on behalf of the same person “in respect of the same interest”.[3]
An example will help illustrate how the Supreme Court construes the phrases, “the same estate, interest or right” and “the same facts”.
In McCulloch [2000] NSWSC 729, the caveator lodged two caveats. The first caveat claimed an interest in land stated as follows: “The caveator is entitled to two undivided one-third shares in the land as tenant in common with the registered proprietors”. The relevant facts supporting the caveat were stated as: “By the payment by the caveator of $93,325.00 of the purchase monies of land to the vendor of such land”.
The first caveat lapsed as a result of a lapsing notice and was not immediately replaced. When it was replaced, it was replaced by a second caveat 6711548 lodged in March 2000 (‘the Second Caveat”).
The Second Caveat stated the interest claimed as: “An equitable interest arising out of an implied/constructive trust or a Mortgage between the Caveator and the registered proprietor”. It stated the relevant facts as follows: “In July, 1988 Kevin Francis McCulloch and his late Wife Maureen Maree McCulloch paid, at the direction of the registered proprietor, the sum of $93,325.00 to John Robert Hankinson, the first Mortgagee of the registered proprietor’s property (then being known as Folio Identifier 7/701071) and to date, no such monies have ever been repaid to the Caveator by the registered proprietor”.
The court held at [6]:
There is no doubt in my view that the second caveat purports to be based on the same facts as the first. In the second caveat the person to whom the $93,325 was paid was described as the first mortgagee rather than as the vendor (and this is in accordance with the facts as they now appear). However, it was the same payment of $93,325 and there was only one such payment between the same parties. It seems to me that the first caveat and the second caveat should be regarded as based on the same facts within the meaning of the section. However, a more vexed question arises as to whether the claim is in respect of the same “estate, interest or right”. The ambit of this expression has not been explored by the Courts and remains somewhat unclear: see per Young J in Taylor v Commonwealth Development Bank of Australia [1992] ANZ ConvR 161. On the one hand, what was originally claimed was clearly a resulting trust arising from payment to the vendor on purchase of the land, but it is now plain that the payment, although made to the person who was historically the vendor, was made to him after the sale and in his guise as mortgagee, rather than in satisfaction of the payment of the purchase price: see Calverley v Green (1984) 155 CLR 242 at 257. The trust interest now claimed is of the nature of an implied or constructive trust, which in equity arises or is declared in circumstances different from those which give rise to a resulting trust. It may not matter much in this case what ruling I make, since if I hold that it is a different interest the result will be that the existing caveat may remain on the title, whereas if it is in respect of the same interest it must be declared to be of no effect pursuant to s 74O, but I propose in any event, for reasons which I shall hereafter give, to give leave to lodge a fresh caveat.
In Taylor v Commonwealth Development Bank of Australia (1992) ANZ Conv R 161, Young J held that the Further Caveat lodged in that case was of no effect under s 74O. This was even though the particulars in the schedule to the Further Caveat listed different documents than those said to support the Earlier Caveat. His Honour held that in that case, “essentially the one transaction was being relied upon by the bank for both caveats”, thereby being based on the same facts as the Earlier Caveat.
What test does the Supreme Court apply in granting leave?
In granting leave, the Supreme Court applies considerations analogous to those it applies when considering an application to extend a caveat[4]. Leave to lodge the Further Caveat can be granted in the following circumstances[5]:
Firstly, where the Earlier Caveat fails for poor drafting rather than for lack of merit, see Schibaia v Elias [2013] NSWSC 1485.
Secondly, where there has been some genuine mistake bringing about the lapsing of the Earlier Caveat. An example of this can be found in Gilles [2014] NSWSC 1585[6]. In granting leave under s 74O(2)(a), the Court held at [34]:
Secondly, the lapsing of the caveat was accidental. Although Ms Becker came fairly late to the Court, she was prevented by administrative action at the Land Titles Office from lodging the Court’s order. But for this accident she would otherwise on Tuesday have obtained an extension of the caveat.
Thirdly, where the caveator would be entitled to an injunction and it is preferable in the public interest to keep a caveat on the title to warn of the existence of the caveator’s interest. This is because where there is a caveatable interest and the balance of convenience favours the maintenance of a caveat, so that an interlocutory injunction would be appropriate, the publicity provided by a caveat, so that the world may be warned of the interest claimed, is a more satisfactory way of maintaining the status quo than the simple grant of an injunction inter partes.[7]
Can leave be granted restrospectively? What if the further caveat has already been lodged but it does not accord with s 74O(2)?
Where a Further Caveat has already been lodged without leave of the Supreme Court or consent of the registered proprietor, leave cannot be given nunc pro tunc (retrospectively). In Redman Construction Pty Ltd v Tarnap Pty Ltd [2005] NSWSC 1011 (‘Redman’) the Court held at [23]:
The terms of s 74O(2) are inconsistent with it being possible to grant such leave retrospectively. As Sperling J said in Hanover Investments v Registrar General [1999] NSWSC 21, the court has no power to make an order pursuant to the proviso to s 74O which would have retrospective effect, because that part of the proviso which requires that any order or an office copy must accompany the further caveat when lodged could not be complied with in the case of an order which purported to operate in relation to a caveat that had already been lodged, so that it could not have been intended that the court would have the power to make such an order which had effect in relation to a caveat already lodged.
This is however, not fatal to the caveator arguing that leave for a fresh caveat should be granted. In Redman, the caveator found itself in the situation where the Further Caveat had been lodged without leave of the Supreme Court. The Court held at [24]:
However, notwithstanding that circumstance, it may be appropriate to give a leave to lodge a further caveat if the caveator would be entitled to an injunction to restrain transactions, it being preferable in the public interest to keep a caveat on the title rather than restrain by injunction the registered proprietors from dealing with the title. In McCulloch v Fern and Hanover Investments v Registrar General the court made orders pursuant to s 74O(2) to enable a further caveat to be lodged, notwithstanding that the current caveat was one which was ineffective by operation of s 74O, having been lodged without leave or consent when leave or consent was required.
Alternatively, a caveator may also seek an injunction under s 74R of the Act. See Halaga Developments Pty Ltd v Grime (1986) 5 NSWLR 740, 747.
What relief can a registered proprietor seek?
In some circumstances, a registered proprietor can seek an injunction restraining the further lodgment of a caveat[8]. In O’Neil v Kwon [2016] NSWC 1706, Davies J held at [51]:
Similarly, in Stocks and Holdings (Imperial Arcade) Ltd v Fink (1965) 82 WN (Part 1) (NSW) 386 McClelland CJ in Eq granted an injunction to a registered proprietor to restrain the lodgment of a caveat where the probable injury which the proprietor would have suffered from unsustainable caveats could not be remedied adequately by damages. Where the issue has previously been tried and determined it may be appropriate for the Court to issue an injunction against any further litigation or lodgment of caveats about the same matter: Lethbridge v Mitchell (1887) 8 LR (NSW) 249 at 254.
Concluding Remarks
Before lodging a caveat, practitioners should investigate the facts of the matter to ascertain whether the lodgment will trigger s 74O. Where it is triggered, always seek either the consent of the registered proprietor or leave of the Supreme Court before lodging the Further Caveat.
It should also be noted that an order made by the Supreme Court to lodge a Further Caveat may be made on specified terms, i.e. Further Caveat only allowed for a specified period of time, see for example: Telsa Nominees Pty Ltd v Bingi Pty Ltd [2005] NSWSC 1323. This may be useful for both parties (caveator and registered proprietor) to address issues arising out of the inquiry into the balance of convenience.
[1] Bunnings Group Ltd v Hanson Construction Materials Pty Ltd & Anor [2017] WASC 132. LTDC Pty Ltd v Cashflow Finance Australia Pty Ltd [2019] NSWSC 150.
[2] See McCulloch v Fern (2000) 10 BPR 18,073 at [7]; Sinn v National Westminster Finance Limited [1985] VR 363; Gurwitz v Gurwitz (1988) V ConvR 54-317 and Taylor v Commonwealth Development Bank of Australia (1992) ANZ ConvR 161.
[3] Layrill Pty Ltd v Furlap Constructions Pty Ltd [2002] VSC 51, [11]. Further, some state legislation covers voluntary withdrawals – compare with the position in NSW outlined above.
[4] Xcel Rural Properties Pty Ltd v South Creek Dairy Pty Ltd (2002) 10 BPR 19,067. Is there a serious question to be tried in the sense that the caveator holds the interest claimed and does the balance of convenience favour the caveat being lodged?
[5] Bell v Mainbader Pty Ltd (1991) BPR 21,031.
[6] Also see Bell v Mainbader Pty Ltd (1991) BPR 21,031, where the lapsing of the Earlier Caveat was brought about by an error on the part of the Registrar-General
[7] For an example see, McCulloch [2000] NSWSC 729.
[8] O’Neil v Kwon [2016] NSWC 1706, [50]. Also see Verebes (1995) 7 BPR 14,408.
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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