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Securing your money, Caveats, Postponing equities and Getting Paid

If you’re in the business of taking security against real property, you’ll be all too familiar with the process of registering mortgages or lodging caveats on the basis of a charging clause or an unregistered mortgage. You’ll probably also be aware that, all things being equal, a contest as to who has priority between multiple caveators is determined, not by reference to who lodged their caveat first, but rather by whose caveatable interest was created earlier in time. Well, most of the time that’s the case.

An interesting exception to this general rule can arise when an a caveator with a later in time interest alleges that the conduct of caveator with an earlier in time interest amounts to disentitling or postponing conduct. This can occur where the caveator with the earlier in time interest has delayed in lodging a caveat for a significant period of time and the caveator with the later in time interest has, in the interim, loaned against the property on the basis that there are not other interests notified against the title of the property. The argument here is that had the caveator with the later in time interest been aware of the earlier in time interest it would not have advanced the loan at all or in the amount it did.
That said, the ‘mere’ failure to caveat is not automatically postponing conduct. The proper question is whether, in fairness and in justice, the earlier interest should be postponed to the later interest. In consideration of that question the Court considers ‘all the circumstances’, including the conduct of both parties, and whether it is reasonably foreseeable that a later equitable interest will be created and that the holder of that later interest will assume the non-existence of the earlier interest.

The effect of this doctrine may also vary between states as the laws between each state varies, most notably in Queensland where caveats automatically lapse after 3 months unless proceedings are commenced to establish the caveatable interest claimed.

If you are taking security against real property, whether it be primary or secondary security, and whether it be in Queensland or interstate, you should take advice on the best means and strategy to protect your interests. We act for clients across Australia who require security against real property (amongst other things) to advance loans.

Call Luke Gunthorpe 07 3152 4403 or Bruce Pasetti 07 3152 4402