In this case, the lender placed a caveat over several properties owned by the guarantor. The guarantor sought orders to have the caveat removed to enable sales of the property to go ahead. The evidence showed that the sales proposed were undervalue and were made to acquaintances of the borrower.
The lender claimed a caveatable interest by virtue of a charging clause drafted by Matthew Bransgrove as follows:
As further security the Guarantor hereby charges all freehold which the Guarantor may now have or in the future may acquire and the Guarantor further agrees that the Mortgagee may require execution by the Guarantor of such form of additional security containing the same terms and conditions as the Mortgage referred to in the Schedule.
The borrower argued that there was no caveatable interest, or that if there was, then the caveat was defective in describing the nature of the interest. The guarantor gave evidence that he noticed that the clause “raised some issue as to caveats” but, as he could not find a list of any properties in connection with the clause, understood that the defendant would not be entitled to lodge a caveat upon any property except for the property subject to the loan. The judge found it was irrelevant as no relief was sought in relation to the clause. Accordingly, on its face the clause clearly charged the land. The next question was whether the interest described on the caveat “unregistered second mortgage” was accurate, as the mortgage was an equitable mortgage. The judge found that this was splitting hairs and noted that even if the description was wrong he had the power to disregard such an inconsequential defect. He stressed this was different from those cases where the interest is described as “equitable interest”.
The next question was whether the caveat, although valid, should be removed on the balance of convenience. The courts have the power, where a caveat which protects a small interest in preventing a larger transaction proceeding, to order the removal of the caveat if alternate security is offered. In this case no alternate security was offered. The court also has the power, where there is no equity available for the caveator (because the first mortgage eats up the whole value of the property), to order the removal of the caveat. This was not the case here because the valuations showed there was equity and that the properties were being sold undervalue. Accordingly the lender succeeded and the caveats were maintained.