11 November 2020

Caveats may be used to secure an individual’s rights over property where they have a caveatable interest over land. See our other article on Caveats for more information. However, if a caveator wrongfully lodges a caveat they can be held liable for any damage that follows.     

Section 74P of the Real Property Act 1900 provides that where a person:

1. lodges a caveat,
2. procures the lapsing of a caveat, or
3. after being requested to do fails to withdraw a caveat,

without reasonable cause, such a person may be liable for damages.

What is ‘without reasonable cause’?

The Court of Appeal¹ has held that to sustain a claim under this provision it must be shown that:

1. The caveator did not have a caveatable interest,
2. The caveator did not have an honest belief based on reasonable grounds that a caveatable interest existed,
3. The caveator lodged the caveat deliberately to infringe the interest of the registered proprietor.

The caveator must have an honest belief that they do have a caveatable interest in the property in order to lodge a valid caveat. Case law demonstrates that in order to hold an honest belief as to their interest over property, caveators are expected to obtain proper advice and be reasonably sure of their grounds for lodging.

In most instances where a caveat has been lodged wrongfully, the removal of the offending caveat is an adequate remedy.² However, a caveat lodged in deliberate infringement of the rights of the registered proprietor or interested person may render the caveator liable for the damage caused to the registered proprietor.³

Damages incurred from lodging a wrongful caveat are primarily the financial losses that result. These include legal costs, as well as the costs incurred due to delayed transactions, failed settlements, or interest accrued due to delay.

In Gilles v Salem⁴the applicant filed a defective caveat which was then lapsed by the respondent. The applicant was ordered to pay the respondent’s costs on an indemnity basis.