The interest in land must arise from 'any unregistered instrument or dealing or by devolution in law or otherwise'. In Victoria, there is a divergence of views on what interest in land is afforded protection by a caveat.
I have discussed the divergence of views below.
As I noted in my first post on this topic, interests are usually unregistered for the following 3 reasons:
- A registrable document has been executed giving rise to the interest, but it has not been registered (e.g. an executed but not registered mortgage).
- A transaction has occurred giving rise to the interest, but a registrable document in respect of the interest has not been executed or registered (e.g. a loan providing for a mortgage of property).
- The interest is not able to be registered (e.g. an equitable charge).
Batt J's decision in Classic Heights Pty Ltd v Black Hole Enterprises Pty Ltd (1994) V Conv R 54-506 (Classic Heights) is considered to be the narrow view and stands for the proposition that unregistrable interests in land are not afforded protection by the caveat procedure.
In Classic Heights the Court was faced with an application for removal of two caveats which claimed leasehold interests. A preliminary question for determination was as follows (at 3):
In order to support a caveat under s89(1) of the Transfer of Land Act 1958 (a) must the caveator have an instrument which can be registered on the Register for the land the subject of the caveat and which, upon being registered, will register an estate or interest in the land as claimed by the caveat; or (b) is it sufficient that the caveator have a right arising from the transaction giving rise to the alleged caveatable estate or interest to compel the registered proprietor to deliver an instrument as aforesaid; or (c) is it sufficient that the caveator otherwise has an estate or interest in land as claimed in the caveat.In Classic Heights Batt J said that 'in order to support a caveat under s89(1) the "estate or interest" claimed must either (a) arise from a registrable instrument; or (b) be based on a transaction which will entitle the caveator to an instrument which will lead to a recording in the Register.' Batt J based his reasoning mainly on Miller v Minister of Mines  AC 484 (Miller) which concerned a caveat used to secure protection of a mining license which was not registrable under the property law system, but had its own system of registration separate to the property law system. Batt J cited Lord Guest from Miller as follows:
'The caveat procedure is an interim procedure designed to freeze the position until an opportunity has been given to a person claiming right under an unregistered instrument to regularise the position by registering the instrument.The caveat procedure is inapt for the purpose of securing the registration of the mining licence.'
The broader view, which is now considered to be the more acceptable view, was set out by Harper J in Crampton v French (1995) V Conv R 54-529 (Crampton). In Crampton, the Court was faced with an agreement which provided 'In the event that the borrower defaults under this agreement the borrower authorises the lender to lodge any necessary caveat against property known as 28 Portland Street, Mulgrave to better secure the amount outstanding including any interest'.
The plaintiff made a submission based on the view of Batt J in Classic Heights and Harper J disagreed with this view (at 9):
This would be a strange result. In principle, one would think that interests which the law has long recognised as being interests in land should under the Torrens system receive protection comparable to that which they receive under the general law. There is no reason to believe that, in enacting the Transfer of Land Act, the legislature intended to abolish such interests. On the contrary, the community in general has as a commonplace occurrence continued to create equitable interests in land in the belief that, whether or not the execution of a registrable instrument might be compellable as a result, the system was not inimical to their continued interest. Yet it they cannot be the subject or a caveat (for, under a system or title by registration, there is no other means of protecting interests which cannot be registered) they are almost it not entirely defenceless against an incompatible but registrable interest; and this is so even it the latter interest is created, in breach of his lawful obligations, by the registered proprietor who granted the earlier, unregistrable, interest. Such a result would seem to me to be productive of injustice.
On the balance of authority, the view of Harper J has been preferred over that of Batt J. For instance, Warren CJ in the Supreme Court of Victoria in Schmidt v 28 Myola Street  VSC 343 (Schmidt) preferred Harper J's view after referring to the history of authority on the issue. Schmidt concerned an application to remove two caveats which claimed an interest over a property that was held in a unit trust. Warren CJ said the following at  and :
20 In my view the words in s 89(1) of the Transfer of Land Act are plain and ought to be applied as meaning what the words say. The words are cast so as to encompass a range of circumstances that may arise in the context of commercial transactions concerned with land. The categories are not closed by the imposition of a narrow concept of traditional “caveatability”. In my view such an approach steers away from proper analysis and consideration of the nature of the interest that a caveator may seek to protect. In essence, a caveat is a quasi injunction to preserve the status quo. The word “otherwise” in s 89(1) is reflective of and consistent with that purpose.
21 Accordingly, in appropriate circumstances, an equitable interest in land is capable of supporting a caveat even where that interest will not compel the registered proprietor to deliver a registrable instrument.
Even though the view of Harper J is preferred, the view of Batt J still remains open to argument. A lot of caveat litigation is based on interests which are unregistered for the reason that they are unregistrable. If the view of Batt J became in vogue over that of Harper J, then a lot of unregistered and unregistrable interests would be defeated when there was a change of ownership or dealing. I believe that this is the main reason that Harper J's view is the popular view.