John Macmillan

27 March 2019

Recently, on 26 February 2019, a first reported judicial analysis of the law relating to caveats in the Australian Electronic Conveyancing Network was delivered by Justice Kunc in  Guirgis v JEA Development P/L. [2019] NSWSC 164.

The facts were simple and as between the parties, not unusual.

A client instructed a licensed conveyancer to lodge a caveat urgently to prevent her husband disposing of land over which the client had no control.

Family Court proceedings were fixed for 25 February 2019. The husband had earlier obtained an order requiring the wife to lodge in court the settlement proceeds of a property in the wife’s name which the wife had sold.

The instructions were oral. The conveyancer asked whether an agreement existed between the client or her company and the husband and was orally assured there was. The conveyancer did not seek a copy of any written agreement and did not enquire whether there was a written agreement. On receiving the above instructions, the conveyancer lodged a caveat electronically on behalf of a company of which the wife was sole director and shareholder.

The conveyancer was a subscriber to PEXA one of the two electronic conveyancing networks. This caveat caused the delay of an imminent settlement of the sale of the property owned by the husband to be delayed. However successful proceedings by the husband before Justice Kunc in the Supreme Court Practice Court resulted in the removal of the caveat.

The case later was listed before Justice Kunc in the Practice Court to examine the conduct of the conveyancer in this ‘egregious’ case. The conveyancer fell upon her sword with bountiful apologies and an undertaking to conduct further study, which enabled her to avoid referral by his Honour to the NSW Fair Trading Department for disciplinary action.

The Judge then embarked on a most helpful analysis of the  legislation  governing electronic conveyancing and the duties of participants especially  Subscribers to an ECN  whose duty it is to certify to a Registrar that the transaction may proceed according to law  and  that in the case of a caveat that the intended caveator has ‘ … a good and caveatable interest .’

The judge enunciated five deficient representations made by the conveyancer (28-30) in the caveat.
He said there may be instances  in which, whether the caveator has a ‘good and caveatable interest’ as required to be certified by both the Subscriber (Solicitor or licensed conveyancer) and any lodging party, may be ‘… a question of considerable legal difficulty ’,  but this was not such a case (41).

At 42 Justice Kunc stated “The legislative and regulatory scheme which I have set out above assumes that the person making the various representations and certifications in an electronically lodged caveat has the requisite degree of knowledge and has approached their task with appropriate diligence.”

It follows that Solicitors and Licensed conveyancers need to be most careful that a caveatable interest exists and is supported, not by mere allegations, but preferably by written evidence, preferably agreements containing a charge against the relevant land by registered proprietors in favour of caveators.

Especially Solicitors should examine their Fee agreements to ensure that the required ground for a caveat is clearly spelled out by formal words charging an interest in the land.

There are reported cases throughout Australian courts determining that a caveat lodged without foundation may result in costs and damages orders against the caveator, and significantly also against practitioners.

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