The Supreme Court of the Australian Capital Territory recently considered the elements to be satisfied in order for the Court to maintain or extend a caveat in the context of a "no caveat" clause in a contract.

Key Takeaways

In Elliot v Elly Property Wright Residential Pty Ltd [2024] ACTSC 192, the ACT Supreme Court found that even if the lodgement of the caveat would involve a breach of contract, a person claiming an interest in property is not deprived of their statutory right due to the contractual provisions. However, the existence of a "no caveat" clause may be taken into account by the Court when deciding whether to maintain the caveat.

It is common for ‘off-the-plan’ property purchase contracts to include a ‘no caveat’ clause.

Developers should be aware that this does not necessarily prevent a caveat from being lodged or maintained. However, the inclusion of a no caveat clause in a contract in circumstances in which a caveat is subsequently lodged may give rise to a claim for damages for breach of contract in terms of costs incurred as a result of the caveat.

Subject to careful consideration of risk, cost and benefit, purchasers may keep the lodgement of a caveat in their armoury in terms of protecting their interest, even if the contract has a no caveat clause.

What Happened?

In June 2021, Christopher Elliot and Thuy Vu (plaintiffs) entered into a contract to purchase a unit in an off-the-plan development from Elly Property Wright Residential Pty Ltd (defendant). The contract contained a ‘no caveat’ clause.

There was confusion around the defendant's willingness to comply with the contract. In August 2022, the defendant notified the plaintiffs that it intended to rescind the contract and the parties engaged in negotiations in this respect. Proceedings ultimately stemmed from such negotiations and the Court found that the defendant could not rescind the contract. In April 2024, the plaintiffs' solicitors wrote to the defendant seeking an undertaking that the defendant intended to be bound by the contract. When they received no response, the plaintiffs lodged a caveat over the land.

At this point, there were a number of dealings that the defendant needed to have registered in order for the development to proceed, such as mortgages and a units plan. The solicitors for the plaintiffs received two lapsing notices and they then wrote again to the defendant requesting undertakings to be bound by the contract. Following no response, the plaintiffs filed an application to maintain the caveat.

The plaintiffs approached the Court to make orders to extend the caveat.

What was the Outcome?

The Court agreed to extend the caveat until further order of the Court.

A caveator of a property must be able to demonstrate two elements to extend a caveat, being that:

1. There is a serious question to be tried as to the existence of the caveator's interest in the land; and
2. The balance of convenience favours the maintenance of the caveat.

Regarding the first element, the plaintiffs were able to demonstrate an interest in the land through their contract for purchase of a unit, even if the land was yet to be divided by registration of a units plan. The Court did not accept the defendant's argument that in order for there to be a serious question there should be some threat upon the right to complete the contract.

Regarding the second element, the Court agreed that the balance of convenience favoured maintenance of the caveat, noting that the caveat should not impede the progress of the development. While caveats are generally viewed as obtrusive and disruptive, the Court appreciated that the plaintiffs recognised the need for development to proceed. The plaintiffs indicated a willingness to provide consent to registrations as required.

The Court agreed that it was not unreasonable for the plaintiff to ensure their interest is adequately registered on title including in recognition that the defendant had previously indicated an intention to rescind the contract.

Further information / assistance regarding the issues raised in this article is available from the authors Emma Reilly, Partner and Ella Mather, Lawyer, or your usual contact at Moray & Agnew.