Babies Galore v Kelso Builders Supplies [2006] NSWSC 353

In this case the lessor of a warehouse had a registered lease for 5 years plus an option for 5 more. During the first 5 years the owner gave a mortgage. Then the option was exercised but the option was not registered by the owner who went into liquidation. Thus the lessor only had a equitable lease and not a legal (registered) lease. To protect its position it lodged a caveat. The mortgagee exercised power of sale and sought to lapse the caveat so it could settle the sale. The lessor approached the court for an extension of the caveat. The court noted that:

If a transfer to the purchaser is registered, then, in the absence of fraud and subject to the possible in personam rights which the plaintiff might have against the purchaser, on the principles of Bahr v Nicolay (No. 2) (1988) 164 CLR 604, the purchaser would, on registration, take its interests free from those of the plaintiff. The procedures for lodgement of caveats are designed to prevent just such an occurrence.

Accordingly, upon the usual undertaking as to damages the extension of the caveat was granted.

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