Vikram Misra, Barrister at Clarence Chambers, continues his series into caveats. In this article, he discusses the practitioner’s professional responsibilities and obligations in respect of lodging a caveat. Follow the series here.
In the age of electronic conveyancing, an understanding of a practitioner’s professional responsibilities and obligations in respect of lodging a caveat has never been more important. In Guirgis v JEA Developments Pty Limited [2019] NSWSC 164, Kunc J summarised the position quite clearly:
“[39] As New South Wales’ conveyancing system moves to a completely electronic platform, the role of conveyancers, solicitors and others as persons qualified to prepare and lodge caveats becomes all the more important. Ordinary members of the public are, in practical terms, no longer able to lodge caveats without the intervention of a “Subscriber”, who in many cases will be a solicitor or licensed conveyancer. The requirement to give the requisite representations and certifications operates to confer on them the role of a guardian at the gate.
[40] Dealing with caveats takes up a considerable amount of time in both the Equity Division’s Duty List and Real Property List. Although the Act contains compensation provisions in respect of caveats that have been improperly lodged, that compensation can only go so far to compensate a registered proprietor for the delay, stress and expense caused by a caveat that should never have been filed. The community also suffers because the Court’s time is taken up when it should not have been.
[42] The legislative and regulatory scheme which I have set out above assumes that the person making the various representations and certifications in an electronically lodged caveat has the requisite degree of knowledge and has approached their task with appropriate diligence. The Court and the community expect nothing less. ….”
In some cases, costs orders and compensation may not be the only risk for parties and practitioners who lodge a defective caveat. Professional disciplinary proceedings may also follow[1].
From 11 October 2021, all caveats, irrespective of the date they were signed, must be lodged using an electronic lodgement network[2]. As a “Subscriber”, practitioners will be making certain certifications and representations by lodging a caveat using an electronic lodgement network.
Under the Electronic Conveyancing National Law (NSW) adopted in NSW in 2012, the Registrar General has approved the NSW Participation Rules for Electronic Conveyancing. Schedule 3 of the NSW Participation Rules sets out the Certification Rules[3] which apply upon lodging a caveat electronically:
- The Certifier has taken reasonable steps to verify the identity of the caveator or his, her or its administrator or attorney.
- The Certifier holds a properly completed Client Authorisation for the Conveyancing Transaction including this Registry Instrument or Document.
- The Certifier has retained the evidence supporting this Registry Instrument or Document.
- The Certifier has taken reasonable steps to ensure that this Registry Instrument or Document is correct and compliant with relevant legislation and any Prescribed Requirement.
In addition to these certifications, on the face of the caveat, there are certain representations that a practitioner makes upon lodging a caveat electronically. One of these representations is, “the Caveator, to the best of the knowledge of the Subscriber identified in the execution of this Caveat document, has a good and valid claim to the estate or interest claimed as specified in this Caveat”.
Acting inconsistently with one’s obligations and responsibilities may result in findings of unsatisfactory professional conduct or even professional misconduct. Two recent cases provide examples of both findings.
In Youssef v NSW Legal Services Commissioner [2020] NSWCATOD 85, the Tribunal affirmed a determination of the NSW Legal Services Commissioner that a solicitor engaged in unsatisfactory professional conduct by failing to verify the identity of their client prior to the lodgement of a caveat. The Commissioner determined the disciplinary matter by making an order that the solicitor be reprimanded.
The reasoning of the Tribunal provides a good example of what constitutes taking “reasonable steps” to verify the identity of the caveator. The Tribunal held:
[67] … the material issue for consideration is whether the Solicitor failed to take adequate steps to verify the identity of the caveator Carmen Machuca before lodgement of the caveat on or about 25 August 2018 purportedly on her instructions. In executing the caveat on behalf of Carmen Machuca, the Solicitor stated as the certifier that she had taken all reasonable steps to verify the identity of the caveator.
[69] Here, the Solicitor continues to assert before the Tribunal, as she did before the Commissioner, that she took reasonable steps to obtain instructions from Mrs Machuca as a new client of her firm. In a letter to Aberdeen Lawyers dated 12 September 2018, she wrote:
“[W]e are well aware of the requirements of obtaining identification before any caveats or other documents are lodged on behalf of our clients. … [I]n our practice every new client is verified with either their drivers’ licence or passport before their details are entered into our system. Carmen Machuca is not the exception.”
[70] Even if we were to consider this type or level of identity verification adequate prior to lodgement of a caveat on a client’s behalf (which we do not), the Solicitor did not verify Mrs Machuca’s identity as a new client with her (recently expired) driver’s licence. Photo identification such as a driver’s licence is of no utility if the legal practitioner does not see the face of the person purporting to rely on that identification. The Solicitor did not see the face of the person on the other end of the telephone line; she saw only the photograph of a hand with the recently expired driver’s licence.
[71] We do not consider that the steps taken by the Solicitor on 25 August 2018 to confirm the identity of the person she was speaking to (through a third party’s interpretation) were sufficient to discharge her professional responsibilities. There was no face to face meeting to confirm the client’s identity. There was no adequate photo identification verification. There was no insistence on the Solicitor’s part on any visual identification, nor any other form of identity verification.
[72] The Solicitor was on notice that Mrs Machuca was 97 years old (the birthdate being clearly visible on the photo of the expired driver’s licence), and that Mrs Machuca spoke no English. She was thus clearly in a vulnerable group, which required an even greater level of care to be taken to verify identity and cognisant instructions.
[73] The Solicitor neither spoke nor understood Spanish. There was no Spanish interpretation from a person independent from Mrs Machuca, nor any efforts to obtain the services of an independent professional interpreter. That left the Solicitor in the position where she relied entirely on the representations of Mrs Rosario Connell – those representations went not only to the identity of Mrs Carmen Machuca but also the content of the instructions purportedly being given by the person on the other end of the phone. While Mrs Connell was known to the Solicitor as she was an existing client, it was nonetheless inappropriate for the Solicitor to rely solely on Mrs Connell’s representations in the way that she did.
In Victorian Legal Services Commissioner v Souki (Legal Practice) [2022] VCAT 663, the Tribunal made a finding of professional misconduct where the solicitor prepared and facilitated the lodgement of erroneous and defective caveats with the Registrar of Titles with knowledge that the purported caveator had no caveatable interest. The solicitor was reprimanded, their practising certificate was suspended for one month and they were ordered to complete 3 additional CPD units on substantive property law and ethics.
It is vital that practitioners do not take the act of lodging a caveat lightly and are aware of what certifications and representations they are making upon lodgement of a caveat. In some cases, it may be prudent for a solicitor to engage counsel to provide an opinion on matters pertaining to the lodgement of the caveat to be certain that they have complied with their obligations under the Electronic Conveyancing National Law (NSW).
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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. Vikram is also a contributing author to the Security of Payment (NSW) and (SA) sections of the looseleaf Commercial Arbitration Law & Practice Service for Thomson Reuters. You may connect with Vikram via email counsel@vikrammisra.com or LinkedIn
[1] Youssef v NSW Legal Services Commissioner [2020] NSWCATOD 85, [66].
[2] Rule 8.8 of the Conveyancing Rules, Version 6 effective 11 October 2021.
[3] As at the date of this article, v 6 is in force (commencing 12 April 2021).
