Circuit Finance v Crown & Gleeson Securities [2005] NSWSC 997

This was an application for the extension of a caveat following service of a lapsing notice. The issue was the adequacy of an interest described in the caveat merely as an “equitable interest”. The land was subject to a mortgage and a prior caveat.

Section 74K(2) of the Real Property Act 1900 provides that, on the hearing of such application, the court may “if satisfied that the caveator’s claim has, or may have, substance” make an order extending the operation of the caveat for such period as is specified in the order or until further order of the court, but “if it is not so satisfied must dismiss the application.”  

The question was whether the caveator’s claim had any substance. The caveat claimed an interest described as “an equitable interest” by virtue of a “lease agreement” in respect of a Mitsubishi Pajero. The lease agreement included a charging clause that covered not only the vehicle but also, “all property here after to be held or acquired by the Lessee in addition to the charged property”.

The guarantor granted a charge over her land in favour of the lender. She held her title to the land as tenant in common with another. Justice Brereton found that the charging clause executed by the guarantor was “manifestly capable of supporting a ceaveat”.

Justice Brereton held the description of the interest in the caveat as “an equitable interest” failed to disclose the nature of the interest that was claimed, as follows

However, the caveat, as I have said, describes the nature of the interest claimed merely as “an equitable interest.”  In Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Limited [2005] NSWSC 880, Campbell J considered caveats in substantially the same form, each of which claimed merely “an equitable interest”, said to arise by virtue, in that case, of a document entitled “Application for Commercial Mortgage dated 14 December 2004” between the registered proprietor and the caveator and, in the case of one caveat, relying on the additional facts “Pursuant to the provisions of the guarantee and the indemnity of the application for commercial credit.” 

Campbell J held that a claim to be entitled to an “equitable interest” was insufficient to specify the interest claimed by the caveator.  His Honour pointed out that such a claim “… could relate to a multiplicity of types of interest, from an equitable easement, to the benefit of an option to purchase, to a right to have an agreement for lease specifically performed, to the benefit of a restrictive covenant under a common building scheme. As well, it could relate to an equitable mortgage or charge.”  Whilst acknowledging that the estate or interest in land claimed did not need to be in precise legal language, His Honour concluded that the reader of those caveats could not work anything out about the nature of the interest claimed.  The caveats could not be saved by reference to Real Property Act 1900, s74L, because what was involved was not merely a failure to comply strictly with the requirements of the Part and any regulations made for the purposes of the Part with respect to the form of the caveat, but a substantial failure to disclose the nature of the caveatable interest claimed.

A caveat must specify the particulars of the interest claimed: see clause 7, Schedule 3, Real Property Regulation 2003.    

Without particulars of the nature of the interest it is unlikely the Court will be able to determine whether the interest claimed has any substance to justify an extension of the caveat and said

In Multi-Span Constructions No 1 Pty Limited v 14 Portland Street Pty Limited [2002] ANZ ConvR 85, Barrett J said that “[a] caveat is not an ambulatory or flexible means of maintaining a blocking position in aid of whatever interest, if any, the caveator may have from time to time.”

In Depsun Pty Limited v Tahore Pty Limited (1990) ANZConvR 334, McLelland J, as he then was, held that s 74L did not authorise orders amending the provision of a caveat defining the interest claimed, though it may authorise amendment of the prohibitions contained in a caveat. 

In Jones v Baker [2002] NSWSC 89, Young CJ in Eq said:

Although s 74L of the Act now commands the Court “to disregard any failure of the caveator to comply strictly” with the requirements of the Act and regulation as to form of a caveat, there is a point after which the departure is so far removed that the Court cannot disregard the non-compliance.

… His Honour thought that the purpose of s 74L was to overcome the effect of the cases cited and applied in Vandyke v Vandyke (1976) 12 ALR 621, that even small technical defects would operate to make a caveat ineffective, so that despite the breadth of its language, s 74L was aimed at curing that mischief and not to compelling the court to treat as valid caveats which completely disregard the provisions as to form contained in the Act and Regulation. 

In Hanson v Vimwise, Campbell J thought that s 74L did not extend to allowing an expression of enormous generality such as “an equitable interest” to be treated as sufficient to enable some more precise interest which might be encompassed within it to be substituted when construing the caveat. 

After reviewing the authorities Justice Brereton concluded that the interest was inadequately described and could not support the extension of the caveat.

As to what was required to describe the nature of the interest his Honour said

The nature does not mean whether it is legal or equitable, but whether it is an interest as beneficial owner, joint tenant, tenant in common, lessee, chargee, mortgagee or the like.

The charging clause was capable of creating more than one type of interest and could not alone save the caveat.

The application to extend the caveat was dismissed but with leave to lodge a further caveat:

claiming an interest as chargee pursuant to lease agreement between Jason David Campbell and the plaintiff dated 2 June 2004 and Guarantee of Lessee’s Obligations between Jody-Lee Campbell and the plaintiff of the same date. 

The description given by his Honour of the interest claimed was clearly adequate to support the caveat.

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