Evidence in support of caveats and constraints on electronic lodgement


Kellehers recently advised on urgent proposals to lodge a caveat. We are increasingly concerned that the tick-a-box approach adopted by national and state electronic lodgement systems impede the exercise and priority of client property rights. Digital strategies and service-delivery algorithms need adjustment to correctly reflect the law.

This NewsFlash paints scenarios of our recent advice. They are altered to preserve client confidentiality.  Both involved matters referred to us from other professionals. The scenarios both involved urgency and complex considerations concerning the existence (or not) of a caveatable interest.

Electronic Lodgement Networks may, and in many instances do, require the the lodging party or their professional advisor to certify prior to lodgement that a caveatable interest exists and that, at the certification date, that person holds formal documents evidencing the interest.

Scenario 1
An elderly father allowed land to be registered in his daughter’s name, pursuant to a complicated trust arrangement. The daughter sold the property subject to instructions to transfer purchase monies to a personal bank account of her own, leaving the father without sufficient funds to maintain his home in his old age. Settlement and transfer of title were scheduled within days of Kellehers receiving instructions. The buyer had no notice of the father’s interest and had not protected its contractual interest by lodging a purchaser’s caveat.

Scenario 2
A body corporate claiming land by adverse possession discovered late in the application process that fencing arrangements to the claimed land had been interfered with over a significant period during the fifteen-year limitation period. At the same time, adjoining land was subject to active development activity. A caveat would ensure notice to an adjoining owner and prospective purchasers in the development area.


A caveat is a relatively simple, quick and inexpensive way to achieve priority on the Register.

A caveat generally prevails over an unregistered interest. So the father’s caveat, if lodged before the  purchaser’s caveat or transfer, would prevail. The ‘possessory rights’ caveator would prevail over subsequent lot transfers.

However, the person lodging the caveat (caveator) must – significantly – have an ‘interest’ in the land to be caveated[1]. The question of what kinds of interests can be protected by a caveat is complex and contested. It is certainly not a tick-a-box matter.

The Transfer of Land Act 1958 (Vic) (TLA) does not define an ‘estate or interest’, and the caselaw does ‘not provide an exhaustive list of what interests meet the standard[2].

Generally, a person must have what is called a proprietary interest.[3]  However,:

… in appropriate circumstances, an equitable interest in land is capable of supporting a caveat even where that interest will not compel the registered proprietor to deliver a registrable instrument.’[4]

Caveatable interests can be wide and varying and may (but not always will) include:

  • A purchaser under an agreement for sale,[5] or certain conditional agreements for sale[6];
  • A registered or equitable mortgage[7];
  • Beneficiaries of an interest in a trust;
  • A registered proprietor who fears a false transfer of ownership;
  • A tenant, but only in certain circumstances[8];
  • A builder’s contractual right to charge the land with all moneys owing[9], but only in certain circumstances; and
  • An easement[10].

By contrast, interests determined as non-caveatable include:

  • rights arising from agreement to share profits on resale of land[11];
  • the interest of a person who has made improvements to another person’s land, but has not obtained an order for relief[12]; and
  • possession of a building site by a builder[13].

What is certain is that the ‘interest’ must be in the nature of a ‘proprietary’ entitlement to land.

Loans and Debts

A simple contract, or obligation for a landowner to pay money, generally creates no interest in land. Generally, a debt or loan agreement creates no caveatable interest[14], even where judgement has been obtained[15]. However, some Courts have found that, in certain circumstances, it would be inequitable to deny an interest if:

from the whole of the circumstances of the transaction it was the intention of the parties that the lender should have security over the property…’.[16]

Circumstances of relevance may apply where there exists a written agreement that specifically refers to a title or caveat.  In Coleman v Bone[17], a loan in informal language included the words:

About the $50,000 I shall want to put caveat on the property’.

In this case, after her signature, the debtor wrote:

signed in contemplation of a properly worded and witnessed legal agreement being drawn up by the date of settlement’.

The NSW Supreme Court found this agreement created a caveatable interest.  It held that the contemplation of a later agreement was:

not inconsistent with an intention that the loan document should itself give rise to binding obligations unless and until superseded by the further document’.

In Wilson v Graham[18], the NSW Supreme Court again upheld a caveatable interest created by a loan agreement that provided, in the event of default, that the lender had:

the right to… lay first claim to any other property in [the debtor’s] name to the value of the debt plus costs’.

In McMillan v Dunoon[19], a loan agreement stipulated that the debtor would provide a ‘deed of charge’ over her land as security to the lender. The Victorian Supreme Court (VSC) upheld a caveatable interest on the basis that the words of the agreement demonstrated the parties’ intention to charge the property with the debt and constituted a security.

Certain building contracts frequently include specific provisions creating a charge which Courts may recognize as creating a caveatable interest[20]. However, in such cases, even where the builder has possession of the property, that alone will not create a caveatable interest[21] unless it is combined with the carrying out of improvements to the land in circumstances where it would be unconscionable for the builder or contractor to receive no payment for its work[22].

Evidence required by PEXA

PEXA digital lodgement rules require that any party lodging a caveat using PEXA must certify, before lodgement, that it has and will retain documents supporting the caveat. Failure to hold and retain such documents can result in removal from the PEXA scheme and will amount to a breach of the PEXA contract.

Given the above, PEXA lodgement of a caveat cannot now occur unless the professional lodging party holds documents that, in its professional opinion, support a caveatable interest.  These documents must, at the date of certification, evidence a sufficient interest  that they could, if disputed, withstand court challenge, along with PEXA audit or penalty action, including the professional’s right to continue with PEXA.

As can be seen from the cases covered in this NewsFlash, the law as to what is a caveatable interest is complex and far from a simple tick-a-box matter.  Yet in the last month, this digital tick-a-box certification process has prevented professional lodging parties providing a PEXA certificate.  In both cases, the clients considered that they had a proprietary interest but, given the urgency, could not immediately produce evidentiary documents.  However, the risks imposed on their professional advisers prevented them providing the tick-a-box certification. 

This tick-a-box certification placed on a professional lodging party creates a ‘high-bar’ of professional responsibility and individual personal risk. In our view, such tick-a-box certificates create a direct conflict of interest between a professional and their client – and, as a result, can result in denial of their client legal rights, i.e. where a caveat is not lodged due to the risk faced by the certifying lawyer should the documents at date of lodging be subsequently held to be insufficient.

In the case of the elderly father, due to the urgency, the lawyers held no documentary evidence of the trust, although the client believed he had such documents and could locate them if he had more time. As there existed only oral evidence, the lawyers were unable to certify. Likewise, in the adverse possession claim, there was, at the date of certification, no documentary evidence sufficient to certify a caveatable interest. In both instances, there appeared to be a strong likelihood that a caveatable interest did exist and supporting documentary evidence would ultimately become available.

However, nowhere in the case law does the test of a caveatable interest exclude oral or other evidence. The caveatable interest test is not a test of the mindset of a lodging party or the documentary suite available to it. The PEXA certification is not appropriate given the legal principles that apply to the tests for caveatable interest.

Grounds required by PEXA

In addition, the grounds of caveat that can be relied on by a professional are prescribed by a set of pre-determined selections that the PEXA operating system requires to be used.

One such selection is a ground of caveat labelled “implied, resulting or constructive trust.”

InYamine v Mazloum [2017] VSC 601, recently retired Justice John Dixon indicated that “The use of the phrase is usually evidence of a degree of loose thinking” (at [20]).

The observation suggests it may be difficult to square up to the courts the suggestion that the Form required by PEXA is adequate in the circumstances, including with respect to incompletely constituted trusts.

Compensation Payable for Lodging Caveat without Reasonable Cause

Section 118 TLA creates an entitlement to compensation for losses arising from the lodgement of a caveat ‘without reasonable cause’. It provides that any person who lodges a caveat without reasonable cause is liable for damage sustained by any other person ‘as a court deems just and orders[23]. The onus is on the party seeking compensation. Section 118 TLA does not place the liability on the caveator per se, in contrast with other sections where a ‘caveator’ is expressly mentioned.

(I)t is not necessary to establish as a precondition to an entitlement to compensation … that lodgement of the caveat was occasioned by any hint of ‘wrongfulness’ or moral blameworthiness or turpitude of any kind. All that is necessary is that there be no ‘reasonable cause’ for lodging the caveat.” (Croft J) (underline added).[24]

Reasonable cause’ is not determined by whether an actual caveatable interest existed at the time of lodging, but whether the lodging party had an ‘honest belief based on reasonable grounds’ that a caveatable interest existed[25]. It is not enough for the party seeking removal of the caveat to show that the interest did not exist. The party claiming loss must show that the lodging party knew this[26].

A caveat is lodged without reasonable cause where the caveator, or their agent, does not have an honest belief based on reasonable grounds that he or she has a caveatable interest[27].

Even so, an ‘honest belief based on reasonable grounds’ may be insufficient if the caveat is found to be lodged:

for an ulterior motive[28] and without regard to its effect on transactions to which the caveator had agreed.’[29]

Any person lodging a caveat deemed to have been unreasonably lodged faces serious risks, including liability compensation along with payment of legal costs. 

The question is whether the caveat was unreasonably lodged. Even if subsequently withdrawn and ‘not unreasonably maintained’ after being lodged, the point of risk is at the time of lodging the caveat.[30]

If the caveat is reasonably lodged, the law is unsettled in Victoria as to whether rights to compensation arise where it becomes unreasonable to maintain the caveat.[31] In Edmonds v Donovan[32], it was argued that:

damage flows always from the maintenance of a caveat rather than its lodging; for even if lodged without reasonable cause it is only the instance of the caveator in refusing to withdraw it that, in the final analysis, can cause damage to the registered proprietor’.

A caveat is an important tool used to protect a person’s interest in land, but when used incorrectly it exposes the caveator and, given PEXA, the lodging party, to considerable risk.

Dr Leonie Kelleher OAM

Copyright © Kellehers Australia 2023.

Liability limited by a Scheme approved under Professional Standards Legislation.

[1] Section 89(1) of the Transfer of Land Act 1958 (TLA) allows any person with ‘any estate or interest in land’ to lodge a caveat with respect to that land. A caveat lodged under the TLA protects ‘any estate or interest in land’ and, when lodged, prevents any later dealing on title.

[2] CFHW Pty Ltd v Burness [2014] VSC 451 Warren CJ at [23].

[3] McMahon v McMahon [1979] VR 239; CFHW Pty Ltd v Burness [2014] VSC 451.

[4] Schmidt v 28 Myola Street Pty Ltd (2006) 14 VR 447 per Warren CJ at [21].

[5] Fernandes v Houstein (1963) 4 FLR 355.

[6] Jessica Holdings Pty Ltd v Anglican Property Trust Diocese of Sydney (1992) 27 NSWLR 140.

[7] Avco Financial Services Ltd v White [1977] VR 561; Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870.

[8] Costa and Duppe Properties Pty Ltd v Duppe [1986] VR 90; Official Trustee in Bankruptcy v P & R Alvaro Enterprises Pty Ltd (1992) 111 FLR 47.

[9] Wright v Bridge Wholesale Acceptance Corp (Aust) Ltd [1993] 1 VR 502.

[10] Re Paul (1902) 19 WN (NSW) 114; Deanshaw v Marshall (1978) 20 SASR 146.

[11] Simons v David Benge Motors Pty Ltd [1974] VR 585.

[12] Ex parte Goodlet & Smith Investments Pty Ltd [1983] 2 Qd R 792.

[13] HG & R Nominees Pty Ltd v Caulson Pty Ltd [2000] VSC 126.

[14] Bacon v O’Dea (1989) 25 FCR 495, 505 [31] (Northrop, Gallop and Pincus JJ), Neoform Developments & Interiors v Town & Country Marketing [2002] NSWSC 344 (Young CJ).

[15] Perchey v Crawford (1871) 2 SCR (Q) 149, Hall v Richards (1961) 108 CLR 84 per Kitto J @ 93-94. Tasmania is an exception (s134(1) TLA (Tas).

[16] Evandale Estates v Keck [1963] VR 646 at 652 per Hudson J.

[17] (1996) 9 BPR 16,235.

[18] (1997) 10 BPR 19,051.

[19] [2005] VSC 440.

[20] For example, Griffith v Hodge (1979) 2 BPR 9474, Sindoro Pty Ltd v Koen [1982] ACLD 493, Venios v Machon (1986) 3 BCL 171, Bullen v Christian John Properties Pty Ltd (1987) ANZ Conv Rep 478, George Bevan Pty Ltd v Robert Patrick Pty Ltd (1987) 4 BPR 9457, Gibson v Co-ordinated Building Services Pty Ltd (1989) ANZ Conv Rep 587, Henery Property Development Pty Ltd v McLennan (1992) V Conv R 54-468, Rising Developments v Hoskins (1996) 39 NSWLR 157.

[21] Re PT Stevens Earthmoving Pty Ltd’s Caveat [1975] Qd R 69m @ 70, Graham H Roberts Pty Ltd v Maurbeth Investments Pty Ltd [1974] 1 NSWLR 93.

[22] Twenty-Sixth Shackle Pty Ltd v Drever (1994) V Conv R 54-493.

[23] s118 TLA.

[24] RDN Developments Pty Ltd v Shtrambrandt & Ors [2011] VSC 130 per Croft J at [18].

[25] Bedford Properties Pty Ltd v Surgo Pty Ltd [1981] 1 NSWLR 106 per Wootten J at [108].

[26] Edmonds v Donovan (2005) 12 VR 513. The PEXA certificate may be seeking to avoid compensation claims, by setting up a digital process that the algorithm purports to align with what might be deemed to be ‘reasonable cause’ under s118 TLA.  However, again, a certification reliant solely on a document suite at date of certification and some extrapolation from it by the lodging party, in our view, is inconsistent with the applicable compensation law.

[27] Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd [1990] 21 NSWLR 459. Nelson v Kimberley Homes Pty Ltd [1989] ANZ ConvR 123.

[28] ‘’Ulterior motive’ is not part of the PEXA certification.

[29] Arkbay Investments Pty Ltd v Tripod Funds Management Pty Ltd [2014] NSWSC 1003 per Robb J at [17].

[30] South Eastern Secured Investments Ltd (recs & mgrs apptd) [2011] VSC 662 (Daly J).

[31] Halsbury’s Laws of Australia at [355-8325].

[32] Edmonds v Donovan [2005] VSCA 27 at [98].