By Russell Cocks, Solicitor
First published in the Law Institute Journal
The article Caveats – Forcible removal 1 considered the question of removal of caveats from the point of view of a caveator who had a legitimate caveat but was faced with a demand from a third party to provide a withdrawal to allow a dealing to proceed. This article considers removal of caveats from the point of view of the registered proprietor who believes the caveat to be illegitimate and requires it to be removed.
Section 89A Transfer of Land Act 1958 (Vic) provides a relatively simple procedure to achieve removal. The registered proprietor, or other interested party, makes application to the Registrar for service of a notice upon the caveator that the caveat will lapse unless the caveator issues proceedings to substantiate the caveat. If those proceedings are not issued, the caveat ‘shall lapse’ and the applicant will have achieved the desired result in a relatively quick and cost effective way.
The application is supported by a certificate signed by a legal practitioner who certifies that ‘the caveator does not have the estate or interest claimed’. This requirement places some limits on the suitability of this process as the certifier must be satisfied that the certificate is based on sound evidence. One common example of the use of this procedure is where a purchaser has lodged a caveat, but the contract has subsequently been rescinded. Typically the purchaser shows no interest in withdrawing the caveat but the certifier is able to conclude that the ‘estate or interest claimed’ has been terminated by rescission and can safely certify as to that legal situation.
At the other end of the spectrum is a caveat claiming an interest arising pursuant to a trust. Such an interest is much more amorphous in nature and it would be unsafe to certify that the interest does not exist until a court had ruled on its validity, and consequently the s 89A procedure is not appropriate in such circumstances. Indeed, it is probably professional misconduct to certify in such circumstances.
Somewhere between the clearly certifiable lack of an interest in the rescinded contract scenario and the non-certifiable trust claim lies the common situation of a very old caveat lodged on the basis of a loan made by a now-defunct finance company which the registered proprietor assures the legal practitioner has been repaid. Assuming that those instructions are correct, the ‘caveator does not have the estate or interest claimed’ but the certifier is not able to rely on any objective evidence in that regard and must weigh up the subjective evidence provided by the registered proprietor. Whilst never wanting to sign an inappropriate certificate, the certifier can take some solace in the fact that the certificate itself will not operate to defeat the caveat but merely serves to bring the application to the notice of the caveator and the caveator remains free to take action to justify the caveat.
If the caveator does not give notice to the Registrar that proceedings to substantiate the caveator’s claim are on foot then ‘the caveat shall lapse’ and the Registrar may remove the caveat after a period of not less than 30 days – reduced from 35 days in 2009 – has elapsed from service on the caveator by the Registrar of notice of the application. The Registrar allows some number of days as a grace period for service by post, so the number of days from certification until removal may be closer to 40.
Section 90(3) Transfer of Land Act 1958 provides an alternative method of forcible removal if the legal practitioner is unable to provide the certificate required by s 89A. This section requires the issue of proceedings and will therefore be many times more expensive than the s 89A method, although undefended proceedings might result in an order that the caveat be removed in a relatively short period of time. The cases indicate that the touchstone for determination of the application is the ‘balance of convenience’ test and if the application is contested the applicant will have the onus of establishing that the balance of convenience favours removal of the caveat. See Rogers v Censori & Anor [2009] VSC 309.
If a caveat lapses pursuant to s 89A or is removed pursuant to s 90(3) then s 91(4) provides that the caveat ‘shall not be renewed by or on behalf of the same person in respect of the same interest’ and s 118 makes a person who lodges a caveat ‘without reasonable cause’ liable to pay compensation. But both provisions offer little comfort to a registered proprietor who has achieved lapsing or removal, only to find a second caveat lodged. Some solace may be taken from Westpac Banking Corporation v Chilver & Ors[2008] VSC 587 where the court also ordered that the Registrar not register (sic.) a caveat lodged by the caveator when the court was satisfied that there was a real possibility that the caveator would seek to re-lodge and Deutsch v Rodkin & Ors [2012] VSC 450 where the court awarded substantial damages against relatives of the caveator who successively lodged caveats contrary to s 118.
Tip Box
Whilst written for Victoria this article has interest and relevance for practitioners in all states.