Wednesday, July 13, 2011

Caveats - accuracy of information and amendment

In my previous posts I discussed what is a caveat and what interests a caveat protects. When a person lodges a caveat, the document is quite simple in appearance but it has a great effect upon a registered proprietor's ability to deal with their land.

I have included a link here to the DPI approved caveat form.

The section which is headed 'Estate or Interest claimed' requires a caveator to state the interest which the caveator is seeking to protect. The section which is headed 'Grounds of claim' requires a caveator to state how the estate or interest claimed arises. These sections attract a lot of attention in litigation because a failure to get these details right could render the caveat defective and lead to a Court order that it be removed.

A Court has a discretion to order the removal of an unintelligible caveat. The Court also has a discretion to amend an unintelligible caveat so that it reflects what is actually claimed by the caveator. So how does a Court decide whether to remove or amend a caveat that is unintelligible? I have discussed these issues below in further detail.
In Re Whalley’s Caveat  [1975] Qd R 111 a caveat was registered which claimed an estate or interest in part of the land described as ‘lots 12, 13 and 14 or Registered plan No. 13811 as appear edged in red on the plan attached and marked A’. There was no such registered plan and Dunn J of the Queensland Supreme Court ordered that the defective caveat be removed as it was embarrassing and unintelligible. Dunn J commented (at 112) that there was no evidence before the Court to justify an inference that some person presently intends to register a plan bearing the number 13811.

In Depas Pty Ltd v Dimitriou and Ors [2006] VSC 281 (Depas), two caveators lodged a caveat over a property claiming 'An estate in fee simple' and saying that the grounds for the caveat were 'As beneficial owner pursuant to an implied trust'. The registered proprietor claimed that the caveat was defective in form because the caveat did not specify with precision the estate or interest claimed.

Gillard J in Depas noted the following missing information in the caveat (at [14]):
  • Because there were two caveators, they did not say whether their interest was as tenants in common or joint tenants.
  • The grounds of the claim did not give any details of the trust including how and when it was established and implied.
  • An equitable interest was claimed but the estate was described as an estate in fee simple, which is a legal estate.
At [14] and [15] Gillard J set out a broad test referring to the High Court decision of Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407:
Reference was made to what three members of the High Court said in Leros Pty Ltd v Terara Pty Ltd, where Mason CJ and Dawson and McHugh JJ said: 
“It has been said that the purpose of requiring the caveator to ‘specify’ the estate or interest claimed is to enable the registered proprietor to know, or find out, the claim which he or she will have to meet. It has also been said that another purpose is to enable the Registrar-General to determine whether a dealing lodged for registration is inconsistent with the estate or interest claimed by the caveator.” 
15 Their Honours then stated what, in my view, is the appropriate test, when they said: 
“In the ultimate analysis it seems to us that ‘specify’ should be understood in the sense of ‘mention definitely or explicitly’.”
Because the caveat in Depas appeared to be unintelligible, counsel for the caveator applied for leave to amend the caveat by asking to delete the estate or interest claimed and substitute the following: 'An equitable interest as co-owner of an undivided share'.

In Depas Gillard J noted at [18] that the Court has power to grant leave to amend a caveat. Gillard J referred to In Re The Victorian Farmers’ Loan and Agency Co Limited (1897) 22 VLR 629 as authority for the proposition that s90(3) of the Transfer of Land Act 1958 (Vic) gave the Court a wide power to amend a caveat by the words 'the Court may make such order as the Court thinks fit'.

The extent of the power to amend may be limited, however. At [20] in Depas Gillard J noted that the decision of Menhennit J in Midwarren Estates v Retek [1975] VR 575 is authority for the proposition that the Court is not permitted to amend a caveat which would result in the substitution of an entirely inconsistent estate or interest. However Gillard J considered that this restriction would likely be futile as the removal of a caveat for a defective description would probably result in the caveator lodging another caveat with a more accurate description, and the parties being back in front of the Court in some weeks. Because of this, Gillard J proceeded on the assumption that the amendment would be made presumably so that His Honour could reach the conclusion that the caveators did not have a caveatable interest.

In Midwarren Estates v Retek [1975] VR 575 (referred to by Gillard J in Depas) the caveators lodged a caveat claiming an 'equitable estate in fee simple under and by virtue of a Contract of Sale dated the 15th day of April 1974'. The caveatorscaveators issued proceedings seeking the return of the deposit.

At the hearing of the matter the caveators deposed to having lodged a second caveat claiming 'an equitable estate by way of lien' to secure the deposit under the contract of sale dated 21 April 1974. The caveator sought leave to amend the first caveat so that the estate or interest claimed was the same as the second.

Menhennit J noted that although s90(3) is wide and allows the Court to give leave to amend a caveat, the power of amendment is limited to the protection given and not the estate claimed, where to do so would result in the substitution of an entirely inconsistent estate or interest (at 577). Menhennit J said that the two interests claimed were inconsistent with each other because 'the lien could be claimed only if the respondents were not entitled to a an estate in fee simple' (at 576). For that reason, Menhennit J said that the Court did not have the power to make that amendment and declined to amend the first caveat, and ordered that the first caveat be removed.

The authorities show that the Court is lenient towards a caveator who doesn't get the language right or makes a small mistake in the form of the caveat. However where the caveator is looking to substitute an estate or interest with an inconsistent one, or where the caveat is unintelligible even with extrinsic evidence to support it, then the Court is likely to order its removal.

However the authorities do show that the Court is willing to proceed on the assumption that leave to amend is granted where to do so enables the Court to reach a conclusion that the caveator has no caveatable interest. This is a helpful approach to avoid the situation contemplated by Gillard J in Depas where a Court orders the removal of a defective caveat only to have the caveator lodge another caveat and return to the Court weeks later.

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