The borrowers own land at Crows Nest which is subject to a first mortgage by St George Bank. The borrowers subsequently borrowed a further $884k from the lenders and under a loan agreement granting the lender certain securities (including over the Crows Nest property) as well as a charge over all land that they held. The following day the lender lodged a caveat over the Crows Nest property. The borrowers are seeking to have the caveat withdrawn (s74MA RPA) so they can refinance the St George debt on favourable terms. The borrowers agree to the lenders lodging a further caveat once the St George debt is discharged (s74O RPA).
As the lender has shown it has a caveatable interest it must show that the balance of convenience favours the maintenance of that caveat. A caveat will be withdrawn by the court where the party applying for the withdrawal has an interest in land superior to that of the caveator, especially where that party is being prevented by the caveat from a legitimate exercise of its rights (Kerabee Park Pty Ltd v Daley  2 NSWLR 222). This is analogous to the present case as St George as a judgement creditor could exercise its rights as mortgagee which would be superior to the unregistered mortgage of the lender. A valid caveat could also be removed by the court if it prevents the registered proprietor from the legitimate exercise of a right in respect of the land, which includes a proper sale or refinance.
Bransgroves Lawyers argued that the removal of the caveat would defer the priority of the caveator’s equitable mortgage and therefore should not be removed. However, the court was not satisfied on the evidence that the proposed refinance would defer the lender’s priority and therefore the caveat was maintained. It was significant that the lender did not offer an undertaking as to damages.