In Bellissimo v JCL Investments Pty Ltd  NSWSC 1260 (2 November 2009), a landowner consented to a caveat being lodged. The caveator brought a Court application to extend the caveat. The issue was whether consent creates a caveatable interest. In summary, whether an equitable interest arises depends on the construction of the document in question.
The document was a guarantee in which the landowner “agreed that Bellissimo has a caveatable interest in the property and that Bellissimo will withdraw the caveat upon payment…”
Cases have held that an agreement that one party has authority to lodge a caveat carries an implied agreement to confer an interest in land. However, that implication will be made only where there is “no sufficient indication to the contrary”, which depends on the construction of the document.
In this case, the Court held that if the parties intended to create a charge, they would have been explicit. It was more likely that the parties only intended to prevent the landowner from dealing with the property without the caveator’s consent. Such a negative covenant does not create an interest in land. In any event, stamp duty had not been paid so any mortgage was unenforceable, and the form of the caveat was defective. Merely describing the interest as “equitable interest” fails to comply with fundamental requirements of the Real Property Act.
Parties to “consent to caveat” clauses should ensure that the clause reflects the party’s intentions. The potential caveator should ensure that the clause explicitly states that a charge is being granted, and that stamp duty is paid before lodgement of the caveat. Landowners should ensure that they are not granting more than they wish to grant if they have no intention of granting an equitable interest in the land. Insolvency practitioners should also be astute to caveats that are not supported by an interest in land.
Philip Stern, Partner
ADDISONS Commercial Lawyers
We thank Philip Stern, Nicole Tyson, Peggy Wong and the team at Addisons for allowing us to reproduce this article from their “Punchy Points – Addisons Insolvency Update” series.