caveats and unregistered interests

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Caveats and unregistered interests. Prof Cameron Stewart (Thanks to Shae McCrystal errors are Camerons). Caveats. Protection of unregistered interests - PowerPoint PPT Presentation

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Caveats and unregistered interests

Caveats and unregistered interestsProf Cameron Stewart(Thanks to Shae McCrystal errors are Camerons)(c) Cameron Stewart 2009(c) Cameron Stewart 2009CaveatsProtection of unregistered interestsSection 74F - System of lodging a caveat by a person who claims to have a legal or equitable interest in the property any further dealing with the property cannot be recorded unless with the caveators approval freezes any dealing with the land that would impact on the subject of the caveat(c) Cameron Stewart 2009CaveatsThe caveat must specify the prescribed particulars of the interest claimed (s 74F(5)). This means that the caveator must state explicitly the claim that the RP must meet. Historically the Act required caveats to be extremely precise and particular and a lot of law developed around what a valid caveat looked like. Sec 74L requires the court to disregard a caveators failure to comply strictly with the requirements. This allows the court to overlook deficiencies in drafting if the omissions are not gross. At least the caveat should identify the caveatable interest claimed. The Register General has a duty to ensure that the caveat complies with the caveat requirements, but the Register General does not investigate whether the claimed interest is genuine.(c) Cameron Stewart 2009CaveatsThe registrar General will then enter the particulars on the Folio (not the CT) and will notify the registered proprietor of the lodgement of the caveat.

The effect of the lodgement of the caveat is that the Registrar General is prohibited from recording any dealing which would affect the estate or interest claimed by the caveator, unless the dealing was lodged before the caveat was lodged. (c) Cameron Stewart 2009Caveats You can only stop dealings lodged before the caveat from being registered by an injunction in the Supreme Court: Re Rush and Hazell and the Real Property Act [1963] NSWR 78 (c) Cameron Stewart 2009CaveatsDifferent types of caveats:

1.caveat against dealings2.caveat against improper dealing where CT has been lost3.caveat against improper exercise of power of sale4.caveat lodged by RG to protect interest of a person under a legal disability or on behalf of the Queen

(c) Cameron Stewart 2009CaveatsRPA s 74F(1) Any person who, by virtue of any unregistered dealing or by a devolution of law or otherwise, claims to be entitled to a legal or equitable estate or interest in land...

What is a caveatable interest? Must be an interest in land!!! Not just a contractual right or personal right the interest must exist at the time of lodgment no future interestsEgInterest of a purchaser under a contract for saleInterest of an equitable mortgageeOption to purchase landAnd many many more(c) Cameron Stewart 2009CaveatsHow can they be removed? Lapsing notice with dealing serve a notice of lodging a dealing and then 21 days for the caveator to go to SC for extension of time otherwise the caveat lapsesLapsing notice without dealing 21 days to obtain SC order extending caveat - otherwise the caveat lapsesSC order no notice, no dealing - s 74MA(1). (c) Cameron Stewart 2009CaveatsAfter lapsing further caveat by same person based on same interest will be of no effect unless court leave has been obtainedWrongful lodgment if a caveator is found to have wrongfully lodged a caveat they are liable to compensate the person sustaining a pecuniary loss wrongfully means in infringement of the rights of the person against whom the caveat is lodged

(c) Cameron Stewart 2009CaveatsWhat is wrongful? The section refers to lodgement of a caveat without reasonable cause, not lodgement without a caveatable interest. So if a caveat is lodged and there is no interest to protect, this section only comes into play of the lodger had no reasonable cause to think that they had a caveatable interest. Therefore the test is whether the caveator had an honest belief at the time the caveat was lodged on reasonable grounds that a caveatable interest existed: Bedford Properties v Surgo Pty Ltd [1981] 1 NSWLR 106.(c) Cameron Stewart 2009CaveatsButt examples p 751Additional interest payments on a mortgageLost profits from a business to be run on acquired landDamages paid to a purchaser if a sale falls throughDelay of sale resulting in increased capital gains taxLoss recoverable is the loss that can realistically be shown to be attributable to the lodging of the caveat (Lee v Ross (No 2) (2003) 11 BPR 20,991)

What are unregistered interests?Barry v Heider (1914) 19 CLR 197 The facts of Barry v Heider are a little convoluted and we dont need to get into them. Mr Barry was the RP of a fee simple in Torrens land. Barry was defrauded by Schmidt who tricked him into signing a transfer form saying that he would sell the property for much less than it was worth. Schmidt then used the transfer form/CT to raise a couple of loans with Mrs Heider, using the property as security. Nothing had been registered. So, the transfer form has not been registered and neither have the mortgages so you have a group of unregistered interests. Barry tried to argue that as all the mortgagees had were unregistered mortgage instruments, those instruments could not create any interests in the land itself because of s 41. So hes saying that they have contractual rights against Schmidt but that they cannot have any proprietary equitable rights in the land because s 42 says you cant have such rights without registration.(c) Cameron Stewart 2009What are unregistered interests?Decision of Griffiths CJ Griffith reviews the provisions of the legislation; Notes that Parts of the legislation clearly envisage the operation of unregistered interests: Part nine of the act deals with trusts; the caveat provisions; and provisions allowing suits of specific performance. Griffiths CJ concludes that Torrens legislation does recognise unregistered interests in land. Isaacs finds that s 41 denies effect to an instrument until registration, it does not deny effect to the rights arising out of the transaction that gave rise to the dealing. No legal interest can be created because no legal interest can arise in land without registration but if equity would enforce the agreement then an equitable interest can arise before registration.(c) Cameron Stewart 2009What are unregistered interests?Isaacs J at 216: Does not touch the form of contracts. A proprietor may contract as he pleases, and his obligations to fulfill the contract will depend on ordinary principles and rules of law and equity consequently, section 41, in denying effect to an instrument until registration, does not touch whatever rights are behind it. Parties may have a right to have such an instrument executed and registered; and that right according to accepted rules of equity, is an estate or interest in the land.

(c) Cameron Stewart 2009What are unregistered interests?Chan v Cresdon (1989) 168 CLR 242 - per Mason, Brennan, Deane and McHugh JJ at 257:Though the unregistered instrument is itself ineffective to create a legal or equitable estate or interest in the land, before registration, the section does not avoid contracts or render them inoperative. So an agreement will be effective, in accordance with the principles of equity, to bring into existence an equitable estate or interest in the land. But it is that agreement, evidenced by the unregistered instrument, not the instrument itself, which creates the equitable estate or interest. In this way no violence is done to the statutory command [in s 41].(c) Cameron Stewart 2009(c) Cameron Stewart 2009Competing unregistered interestsBreskvar v Wall (1971) 126 CLR 376 - Mr and Mrs Breskvar executed a transfer to Petrie as security for a loan. Petrie fraudulently used the transfer and sold to his grandson Wall, who became registered owner. Wall sold to Alban Pty Ltd but before they could register their interest the Breskvars lodged a caveat which injuncted the sale. The conflict was therefore between the interest of Breskvars and the interests of Alban Pty LtdBarwick : 'title by registration'. What sort of interest did Wall have? What sort of interest does Alban have? What interest do the Breskvars have?(c) Cameron Stewart 2009Competing unregistered interestsHeid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326, Heid agree to sell land to Connell Investments. Connell was owned by Newman McKay & Co. Heid accepted advice from Newman to use their employee (Gibby) as a solicitor. The solicitor was unqualified. Heid left for overseas and left Gibby to complete the sale and put part of the proceeds into an investment. The remainder of the proceeds were not to be paid by Connell but to be secured by way of a mortgage in favour of Heid. In fact Connell mortgaged the property to Reliance before it registered the sale from Heid to Connell. After registering the sale but before Reliance's or Heid's mortgage could be registered, Heid discovered the fraud. Whose mortgage took priority?(c) Cameron Stewart 2009Competing unregistered interestsGibbs CJ focused first on priority based upon the time of creation of the relevant equitable interests, with such priority being displaced only if the equities favoured the holder of the interest created second in point of time. His Honour, at 333, said:In the present case the interest of the appellant was first in time. The question therefore is whether his conduct has the consequence that [the holder of the second equitable interest] has the better equity, and the appellant's interest should be postponed to that of [the holder of the second equitable interest].(c) Cameron Stewart 2009Competing unregistered interestsAt 341, Mason, Deane JJ observed:It will always be necessary to characterize the conduct of the holder