The decision of Guirgis v JEA Developments Pty Ltd (2019) NSW ConvR ¶56-410 (“Guirgis v JEA”) provides a timely reminder about how practitioners should not lodge caveats on their client’s behalf without having taken steps to ascertain that, to the best of the practitioner’s knowledge, the client has a good and valid claim to lodge a caveat.
Caveats in NSW now have to be lodged electronically.
When lodging an electronic caveat, a practitioner (lawyer or conveyancer) certifies that they:
a) Have taken reasonable steps to ensure that the caveat was “correct and compliant with relevant legislation and any prescribed requirement”; and
b) have “retained the evidence supporting” the caveat.
A failure on the part of the practitioner to discharge their abovementioned duties may mean that the practitioner can face disciplinary action, the NSWSC has warned.
• What is a caveat?
The registration of a caveat ‘freezes’ the title of a property, allowing (subject to some exceptions) no further dealing (such as a transfer or mortgage) to be lodged on title without the caveator’s consent.
A caveat can be withdrawn (by the caveator or an order of the Supreme Court) or can lapse (by service of a Lapsing Notice on the caveator).
In order to lodge a caveat over a property, the caveator must have a “caveatable interest” in that land.
A caveator lodging a caveat without a valid caveatable interest opens them up to potential claims for damages and costs.
Furthermore, a practitioner lodging on behalf of a caveator client must only do so if, to the best of their knowledge, the client’s caveatable interest is valid, and that the practitioner can make the abovementioned certifications.
• Caveatable interest in that land?
Caveatable interests are equitable or legal interests in that land.
A common mistake people make is to think that they can lodge a caveat over someone’s property where that person owes them money.
The only way a caveatable interest actually exists is if, for example, the person who owes you money gave you an interest in the particular land (such as a “charge”) in return for you providing them the money.
A common example of a caveatable interest arises with sale of land contracts; the buyer obtains an equitable interest in the property upon exchange of contracts.
It is always wise to seek professional advice to determine whether you have a caveatable interest.
• Guirgis v JEA
In Guirgis v JEA, a husband and wife were involved in a family law dispute.
The wife came up with the idea of lodging a caveat over a property owned by the husband, just prior to the husband selling the property. The wife believed this would be a useful tactic in negotiating the family law matter.
The problem? The wife had no caveatable interest in that land.
The wife went to a conveyancer, and told the conveyancer that her company (JEA Developments Pty Ltd) had given a “loan” to the husband, and that she wanted the conveyancer to lodge a caveat.
The conveyancer failed to make any enquiries about this “loan” whatsoever, failed to take reasonable steps to ascertain whether there was a caveatable interest, and failed to obtain any supporting evidence (there was no written agreement in existence).
The lodgment date of the caveat was 13 February 2019, and the caveat would have stopped the sale proceeding with settlement due on 25 February 2019.
The husband made an urgent application in the NSWSC before the Duty Judge.
The defendant was ordered to remove the caveat and pay the husband’s costs.
But His Honour Kunc J had notable further ordered that the conveyancer appear before the court and explain why the conveyancer should not be referred to the Department of Fair Trading in relation to the conveyancer’s conduct.
The conveyancer apologised unreservedly, making full and frank admissions of her wrongdoing, and undertaking to the court to undertake a training course in relation to the electronic lodgment of caveats. On that basis, the court decided to take no further action.
His Honour did, however, chastise the conyeyancer’s actions in great detail.
According to His Honour at para , “no reasonably competent conveyancer who had bothered to take proper instructions from Mrs Guirgis would have co-operated in the lodgement of the Caveat.”
His Honour then provided a final reminder that the Court “has a role to ensure the integrity of the operation of the laws relating to conveyancing” and that the court should refer matters to the appropriate authorities where it thinks fit.
For professional advice, contact Maclarens Lawyers on 96823777.