Hanson Construction Materials v Vimwise Civil Engineering [2005] NSWSC 880

This case involved two parcels of land owned by a developer. The developer wanted to refinance one of the properties but there was a caveat blocking the refinance. The caveat related to a charge given by the developer to secure payment for construction materials.

The developer argued that the charge was a floating charge over land and therefore did not create a caveatable interest. The judge noted that:

Whether an equitable charge is created does not depend upon the use of particular words, but rather whether the Court can discern an intention by the parties that the property should constitute a security.

Likewise, whether the charge is a fixed or a floating charge depends on the intention of the parties creating it. The judge decided that the intention of the parties was that the charges were to be fixed charges over freehold property owned by the borrowers as at the date of giving the charge.

As the charges were found to be fixed, the court decided it was unnecessary to consider whether a floating charge over land gives a caveatable interest.

Having so determined the judge then found the caveats were invalid and needed to be removed because the interests were not defined clearly enough. The purpose of a caveat is to notify a person who searches a register of what interest the caveator claims, “equitable interest” is not a satisfactory. In order for a caveat to be valid the caveator must fully and properly describe their interest which requires them to disclose both the nature and grounds of the claim.

Section 74L of the Real Property Act gives the court a dispensing power which excuses defects of form when assessing whether a caveat is valid. Essentially this means if the caveator has substantially done what needs to be done in order for it to be valid, minor omissions are overlooked. In this case, the judge found that failure of the caveator to specify the nature of the interest was so fundamental it amounted to more than a defect of form and therefore did not attract the dispensing power in s 74L. 

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