HIGH COURT DECISION AFFECTS THE PURCHASE OF PROPERTY

Most purchasers of real estate do not see the need to lodge a caveat on the vendor’s title. A Caveat gives notice of a purchaser's interest but it also places an embargo on a vendor dealing with his or her own land prior to completion of the purchase.

This traditional view of purchasing property will definitely change as a result of the decision in the High Court on 1 August 2007:

Black v Garnock (2007) 237ALR1

The decision of Black v Garnock, is a clear reminder to purchasers to take careful steps to protect their interests. In Black v
Garnock, the Appellants obtained a judgment in the District Court for a sum of money against the vendor. The vendor promised
the Appellants that she would sell her farmland to raise funds to satisfy her debt to them rather than being bankrupted.

A few months after the District Court judgment, the vendor entered into a contract for sale of her farmland with the purchasers. The vendor informed the Appellants that they were likely to receive only a small sum from the proceeds of sale of the farmland, so the Appellants obtained a Writ of Execution against the vendor. The Writ was in favour of the Sheriff and empowered the Sheriff to sell the vendor’s farmland to satisfy the debt to the Appellants. The purchasers however were not put on notice that the Appellants intended to register the Writ. The purchasers' solicitors had been informed that the Appellants' solicitors intended to stop the sale in some way.

In accordance with standard conveyancing procedure a title search was carried out by the purchasers' solicitors on the day of settlement a few hours before actual completion. Noting no prior encumbrances, the purchasers went ahead with completion of the sale. However, after settlement, the purchasers were unable to register their transfer because the Appellants had registered their Writ in the short period of time between the purchasers' final search and the completion of the sale.

The High Court ultimately had to weigh the effect of the Writ of Execution which was registered by the Appellants
on the Torrens Title for the farmland against the rights of the purchasers who settled the purchase having no knowledge
of the Writ.

In a 3:2 decision, the majority of the High Court held in favour of the Appellants.

The warning for Purchasers & Lenders

The decision may seem harsh from a purchaser's perspective given that the Appellants and the Sheriff were aware at the time of registration of the Writ that the purchasers had contracted to buy the land. However, it was an option for the purchasers to lodge a caveat in order to secure their position.

It should be pointed out that the lender had no caveatable interest prior to settlement, so it could not lodge a caveat.

It would thus be advisable for all purchasers to consider lodging a caveat immediately after exchange and ensuring that any final search is completed as close as possible to the time scheduled for settlement.

It is essential that all parties protect their interests as best they can.

For more information on this topic, talk to your solicitor or email us on info@bjslegal.net.au