This was an application under s 74K of the Real Property Act 1900 to extend the operation of a caveat. The caveat was lodged by the plaintiff against the title of the registered proprietor, which was the first defendant. The second defendant was the first lender.
The second defendant had marketed the property, but there was no evidence that a sale has been agreed to or that it was imminent. Negotiations and marketing were continuing.
The caveat stated an interest in the land as under an equitable mortgage dated 9 December 2003 for an amount of $2.7 million and all moneys becoming payable under the terms of the loan agreement dated 9 December 2003, an agreement made between the plaintiff and the first defendant. The action prohibited by the caveat under schedule 2 was the recording in the register of any dealing with certain irrelevant exceptions. It was completely incompetent for a person claiming an interest as subsequent lender to claim that he or she had the right to effect a superior mortgage. The caveat, accordingly, in its present form, was something that could not stand.
There was then application to amend the caveat. There is no explicit authority in the Act that gives the Court power to do this. McLelland J in Depsun Pty Ltd v Tahore Holdings Pty Ltd held that the Court was empowered to amend defects in schedule 2 of caveats, that is, the action prohibited by the caveat. Accordingly the Court did have that power.
The Court was prepared to amend the schedule but there were other matters which were fatal to the caveat.
Even though a caveator has an interest in land, if the evidence shows that interest in land is overridden by a superior interest in the land, then the caveat should almost always be removed.
So if the caveat protects a third mortgage, or the first two mortgages account for the whole of the value of the land, and there is no dispute as to what that value is, then almost always the caveat would be removed.
In 70 Pitt Street Sydney Pty Ltd v McGurk  NSWSC 413, Campbell J, without referring to that case at all but referring to other authorities:
“Where land which is subject to a mortgage has been sold for a price which will be completely payable to a first mortgagee, a subsequent mortgagee is not entitled to maintain a caveat which will prevent completion of that sale … . A caveat can be removed in that situation under section 74MA even if … the caveat is a valid one and the initial lodgment of the caveat was something the caveator was entitled to do”.
There was evidence from the first lender that, in the marketplace, the presence of a caveat caused a depression of the market and, although this may be overstated, that factor is one that would need to be taken into account were one to get to the stage of balancing convenience; the convenience which the other side says is “protection” would be lost for the alleged second equitable lender but that is a relatively minor matter especially the court not know what enquiries were made at the time of making the loan as to the amount owing under the first mortgage.
The Court held the whole of the first lender’s activities were likely to be slowed up by the caveat. The caveat was not permitted to remain. Proceedings were dismissed with costs.