Case law updates – Is a Constructive Trust a Caveatable Interest?

In Mayrin DM Pty Ltd v Kaiyu Deng [2019] NSWSC 1552, Mayrin (the Caveator) brought an application to extend a caveat over two properties in order to complete a preliminary discovery process.

In this case, Deng (the Acquisition Specialist) was employed under contract by the Caveator to locate and purchase suitable properties for investment.

There was evidence which demonstrated that the Caveator was especially interested in Westmead and other suburbs adjoining the Sydney Metro West Transport development.

The date of this employment contract was in April 2017. The Acquisition Specialist left the employ of the Developer on 22 January 2019.

On 31 January 2019 and 7 March 2019, the Acquisition Specialist became the registered proprietor of two properties in Westmead (the Properties).

The Caveator lodged a caveat on the Properties and argued that the relevant caveatable interest was that he had an equitable interest in the Properties due to the fiduciary obligations owed to him by the Acquisition Specialist.

The Court observed that s74K(2) of the Real Property Act 1900 (NSW) (the Act) provides the Court with the power to extend the operation of a caveat if it is satisfied that the caveator’s claim has substance.

In determining this question, the Court considered an array of authorities which explored whether the breach of a fiduciary duty and/or the creation of a constructive trust could be a caveatable interest in land.

The Court found that the available authorities indicated that if the Caveator was able to demonstrate that the Acquisition Specialist breached their fiduciary duty, there was a strong prospect that the Caveator would be entitled to a transfer of the property.

It was concluded that a constructive trust could indeed give rise to a caveatable interest.

The Acquisition Specialist also attempted to argue that the caveat was invalid on the basis it was not in the proper form as it did not state that the Caveator was claiming an interest by way of constructive trust.

However, the Court held that there was sufficient identification by way of the Caveator’s reference to a breach of fiduciary, contractual and statutory duties owed by the Acquisition Specialist. Therefore, the Court allowed the application to extend the operation of the caveat.

Gary Newton
Partner, HWL Ebsworth Lawyers