Electronic caveats and their limitations

This article was first published at LSJ Online, February 2024.

In brief: The Supreme Court has handed down an important decision dealing with electronic caveats lodged online. When lodging electronic caveats, practitioners should be aware that the options for the description of 'estate or interest claimed' listed in an Electronic Lodgment Network Operator are limited.There is an interim solution which, in certain circumstances, allows lodgment of caveats as dealings withexception under the Lodgment Rules.

Background

In late 2022, Kunc J handed down the decision in Brose v Slade [2022] NSWSC 1785 (Brose). The decision highlighted the issue that electronic caveats prepared via Electronic Lodgment Network Operators (ELNOs) restrict the possible descriptions of the estate or interest claimed by a caveator (at [77]). In Brose, the defendant unsuccessfully contended that the electronic caveat in question was invalid because it incorrectly described the 'estate or interest claimed'.

In the judgment, Kunc J identified that an estate in fee simple (which is, in practice, one of the most commonly used descriptions of an ‘estate or interest claimed’ selected by practitioners when lodging electronic caveats) does not arise by a beneficial interest in a trust (at [79]).

It is important for practitioners to identify the correct ‘estate or interest claimed’ in caveats, particularly in light of Kunc J’s observation that the drop-down options in an ELNO are limited. Section 74F of the Real Property Act 1900 (NSW) (RP Act) provides that caveats lodged under that section must be lodged in the approved form. Further, clause 7 and Schedule 2 of the Real Property Regulations 2019 (NSW) provide that caveats lodged under section 74F of the RP Act must specify the particulars of the nature of the estate or interest in land claimed by the caveator.

Ultimately, a caveator may have the benefit of the Court’s discretion under section 74L of the RP Act. Section 74L provides that the Court may disregard any failure of a caveator to comply strictly with the requirements of Part 7A of the RP Act.

Regardless, practitioners should be aware of the interim solution available for lodging caveats, particularly where a caveator is claiming a beneficial or equitable interest in land and there is no appropriate or valid description in the drop-down list in an electronic caveat in an ELNO.

Interim solution

The Office of the Registrar General (ORG) has confirmed it is looking at possible changes to the electronic caveat form in response to concerns raised by Kunc J in Brose. However, implementing any changes will take some time due to the technical nature of modifying the electronic conveyancing system.

The ORG has offered an interim solution by allowing the lodgment of caveats as a dealing with exception under Lodgment Rules exception 1.4.3 (Rule 1.4.3). Rule 1.4.3 is a general exception and it applies to dealings where transactions are unsuitable for electronic lodgment and are supported by written evidence from NSW Land Registry Services (NSW LRS) confirming the same.

When lodging a caveat where there is no appropriate description in the drop-down list for the 'estate or interest claimed', the following steps should be taken:

• Prepare a caveat using the Caveat LRS Form 08X, which can be accessed from the NSW LRS website;

• Email eConveyancing@nswlrs.com.au requesting written confirmation from NSW LRS that the caveat is not suitable for electronic lodgment, relying on the decision in Brose and indicating there is no appropriate description in the drop-down list of the ‘estate or interest claimed’ in an electronic caveat in the ELNO;

• ​Attach a Lodgment Rules Exception Form identifying Rule 1.4.3 and a copy of the email from NSW LRS in relation to Form 08X being lodged as a dealing with exception; and

• Prepare and lodge the caveat via the ELNO by creating a dealing with exception in ‘Documents’ and selecting 'Caveat (08X)' as the document type in the ELNO’s render page.