CASE DETAILS
On 14 October 2024, the Supreme Court of New South Wales decided the case Cui v Salas-Photiadis in relation to caveats registered against title.
Parties Involved
- Plaintiff: Yi Cui
- First Defendant: Nicolas John Salas-Photiadis
- Second Defendant: Simpo Property Services Pty Ltd
Case Background
On 12 April 2024, the plaintiff entered into a contract to purchase a home from the second defendant for $4,350,000. The plaintiff paid a deposit of 10% and arranged financing through Westpac. A PEXA Workspace was created to facilitate the settlement. On 20 May 2024, the first defendant lodged a caveat against the property, claiming an interest as a ‘charge‘ under a Loan Agreement.
Settlement Issues
Despite the caveat, the parties proceeded with the settlement on 28 June 2024. The usual settlement steps were completed, but the next day, Westpac received a requisition from Land Registry Services stating that the transfer and mortgage could not be registered due to the caveat.
LEGAL ARGUMENTS
Plaintiff’s Claims
The plaintiff filed a Summons on 10 September 2024 seeking an Order under section 74MA of the Real Property Act 1900 (NSW) to withdraw the caveat. The plaintiff also sought compensation and specific performance of the contract against Simpo.
Loan Agreement
The first defendant’s interest arises from a Loan Agreement with Simpo, dated 27 February 2024, which included a security interest described as a mortgage and charge. The agreement was in the form of a Deed and secured a facility limit of $2 million.
Home Building Act Argument
The plaintiff argued that the Loan Agreement was invalid under section 7D of the Home Building Act 1989 (NSW), which prohibits contractors from claiming an interest in land.
COURT’S ANALYSIS
Validity of the Caveat
The Court analysed whether the caveat sufficiently specified the first defendant’s interest and whether it was invalid under the Home Building Act. The Court found that the first defendant’s interest as a ‘charge’ was sufficiently described and that the Loan Agreement created a valid equitable mortgage.
Impact of Home Building Act
The Court agreed with the plaintiff that section 7D of the Home Building Act 1989 (NSW) applied, but it did not invalidate the entire Loan Agreement, only the part securing payments for residential building work. The remaining security interests were valid.
Key Takeaways
The key takeaways in relation to caveats are as follows:
- Specification of Interest: The Court emphasised the importance of accurately specifying the nature of the equitable estate or interest claimed in a caveat. In this case, the first defendant’s interest was described as a ‘charge’, which the Court found to be sufficiently accurate to describe an equitable mortgage.
- Home Building Act: The Court discussed the application of section 7D of the Home Building Act 1989 (NSW), which prohibits contractors from claiming an interest in land under certain circumstances. The Court found that while section 7D of the Home Building Act 1989 (NSW) applied, it did not invalidate the entire Loan Agreement, only the part securing payments for residential building work.
- Substance of Caveat: The Court found that the first defendant had a good arguable case that the caveat had substance. The balance of convenience favoured the continuation of the caveat until the rights of the parties could be dealt with on a final basis.
- Procedural Considerations: The Court declined to make an Order under section 74MA of the Real Property Act 1900 (NSW) to withdraw the caveat at this stage and scheduled the matter for further directions.
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