The Caveat to Being a Licenced Conveyancer: Court Emphasises Heightened Standard of Care

The case of Guirgis v JEA Developments Pty Ltd [2019] NSWSC 164 provides an important lesson to licenced conveyancers of the possible consequences that they may face by improperly supporting a caveat application where they fail to take reasonable steps to ascertain the information and evidence necessary to support the application. In this case, the Court found that the caveat lodged by a licenced conveyancer (the Conveyancer) had absolutely no merit and there was no evidence supporting the claims made in the application. The Conveyancer was called before the Court who held that she had failed to meet her obligations as a licenced conveyancer and fell far below the standard of care reasonably owed by a person in her position. She escaped further disciplinary action by making certain undertakings to the Court.

Factual Background

On 15 December 2018, Mr Guirgis (the Purchaser) entered into a contract to purchase a property with settlement due to occur on 25 February 2019. The Purchaser was involved in a Family Court dispute with his wife, Mrs Guirgis. On 11 February 2019, Mrs Guirgis lodged a caveat through JEA Developments Pty Ltd (the Caveator), a company of which she was the sole director. The Caveat specified that the claimed interest in land was by virtue of a loan agreement. The caveat was lodged electronically and signed by the Conveyancer which certified that to the best of the Conveyancer’s knowledge, the Caveator had a good and valid claim to the property in question.

In the proceedings, the Caveator conceded that she had lodged the Caveat as a negotiation tactic in the lead-up to a Family Court hearing which was also due to occur on 25 February 2019. It was later revealed that the Conveyancer had not sought any further information about the alleged loan agreement from the Caveator, nor whether the agreement was oral or in writing. Furthermore, it was found that the Conveyancer did not answer the Purchaser’s request for information regarding the loan agreement claimed in the Caveat. Consequently, the Court became increasingly concerned with the Conveyancer’s conduct and called her to the hearing.

Judgment

The Court took particular exception with the Conveyancer having signed that she “to the best of her knowledge” identified that there was a good and valid claim by the Caveator. The Court emphasised that the expression “to the best of the knowledge” of the Conveyancer provided a representation that the Conveyancer had a suitable level of knowledge about how an interest in the land had arisen and had taken reasonable steps to ascertain the relevant facts to gain an informed opinion. It was clear on the evidence that the Conveyancer had no such information and had taken no steps to come to an informed view. The Court concluded that either the Conveyancer displayed reckless disregard for the obligations she owed as a licenced conveyancer or failed to meet the standard of care that is to be expected of a reasonably competent licenced conveyancer.

The Court considered referring the Conveyancer to Fair Trading for disciplinary action but ultimately was satisfied that because the Conveyancer demonstrated an understanding of her error and provided an undertaking to undergo further training and education, such action was not necessary.

Lessons

In its concluding remarks, the Court emphasised that with the NSW conveyancing system shifting to an electronic platform, “the role of conveyancers, solicitors … as persons qualified to prepare and lodge caveats becomes all the more important”. This is because ordinary members of the public are no longer able to lodge a caveat without the assistance of a ‘subscriber’ who in most cases will be a licenced conveyancer or solicitor. The purpose of these subscribers is to ensure court resources are not expended on the removal of completely unmeritorious caveats. Furthermore, such applications create unnecessary financial and commercial burdens on both purchasers and caveators.

This case demonstrates that, under a modern electronic conveyancing system, the validation provided by solicitors and licenced conveyancers is taken very seriously. Accordingly, solicitors and licenced conveyancers should be sure to take reasonable steps to understand the information and evidence that may support a caveat application before lodgement or risk facing disciplinary action.