Australia: Caveats – Preventing a Mortgagee’s Power of Sale

Last Updated: 7 July 2010
Article by Philip Stern


A registered proprietor ("Plaintiff") lodged caveats on 30 April 2010 to prevent registration of transfers pursuant to mortgagee sales. On 28 May 2010 ("First Proceedings") the Court held the caveats were invalid and the balance of convenience did not favour an extension of the caveats. The Court ordered the caveats be immediately removed to allow settlement to proceed as scheduled on 31 May 2010. The Plaintiff then lodged further caveats on 31 May 2010 preventing settlement. On 22 June 2010 ("Second Proceedings") the Court ordered these further caveats be removed.

First Proceedings


In McCourt v National Australia Bank Limited [2010] WASC 121 (28 May 2010), the Plaintiff lodged caveats over 2 properties in Dalkeith ("Properties") to prevent alleged improper mortgagee sales ("Caveats"). The Registrar on behalf of the Bank gave notice to the Plaintiff that the Caveats will lapse after 21 days (the equivalent NSW section is s74J Real Property Act 1900 NSW ("RPA")).

The Plaintiff sought a Court order to extend the Caveats. The Bank, as mortgagee, sought a Court order to remove the caveats to proceed with settlement of the mortgagee sales. The Plaintiff alleged the impending settlement was an improper exercise of the Bank's power of sale as the properties were selling for $250,000 under market value.

Caveatable interests and duty of mortgagees

Unlike the Transfer of Land Act 1893 (WA) ("TLA"), in NSW under s74F(2) RPA a registered proprietor fearing an improper dealing may lodge a caveat prohibiting the recording of any dealing on the title. To extend a caveat (in NSW after service of a lapsing notice), a caveator must demonstrate that there is a prima facie case, or a serious question to be tried, and that the balance of convenience favours an extension.

Murphy J held that the duty of a mortgagee exercising power of sale is to act in good faith, which embraces the notion that bona fide steps must be taken not to sacrifice the mortgagor's interest. The mortgagee is not bound to postpone the sale in the hope of obtaining a better price later. [Note: s420A Corporations Act 2001 (Cth) applies to corporate mortgagors; some states also have statutory duties imposed on mortgagee sales under land legislation].

His Honour explained that a mortgagees' duty is variable. The obligation on the mortgagee to consider the interests of the mortgagor proportionately increases depending on the probability of surplus funds being left over for the mortgagor after the mortgagee sale.


His Honour held the Caveats were invalid, the Caveats did not disclose a caveatable interest and the balance of convenience did not favour an extension of the Caveats. The Court ordered that the Caveats be immediately removed. Reasons provided include:

Caveat form

The language of the Caveats was defective as they failed to use proper wording to adequately describe the equitable interests. His Honour held that any allegation of bad faith should be expressed distinctly and positively, the Caveats being inadequately expressed in terms of 'possibilities' of bad faith.

His Honour also held:

"the caveat ought state, in this context, on its face and in terms, that the interest claimed is as registered proprietor: (a) who has granted a mortgage, and (b) where the mortgagee has entered into a contract for sale of the property in bad faith in the purported exercise of the power of sale."

The Plaintiff failed to allude to these matters in the Caveats. The Court also stated that the Caveats were invalid as they forbade any dealing with the properties whatsoever. Caveats in these circumstances should be worded to prevent registration of the improper transfer, not any dealing whatsoever.

No evidentiary basis

The Plaintiff failed to provide adequate evidence of bad faith. The Plaintiff should have provided the Court with current valuations to prove the 2 properties were selling for well below market value. The fact the sale occurred at auction indicates there was a reasonable testing of the market by the Bank.

Balance of convenience

The balance of convenience was in the Bank's favour. The Bank is foremost entitled to recover its debt. His Honour stated that:

"the plaintiff did not offer the usual undertaking as to damages...that, in itself, is an important indication that the plaintiff's application should be refused on the balance of convenience" (see rule 25.8 Uniform Civil Procedure Rules 2005).

The Court held any wrong could be vindicated by the Plaintiff suing the Bank for damages after settlement of the difference between the sale price and the alleged higher market value. Allegations the Bank had previously sold several other properties of the Plaintiff for less than market value did not assist the Plaintiff's case. The Court stated the Plaintiff had ample opportunity prior to commencing these proceedings to vindicate his complaints. Similarly, the Court held there would have been no surplus money available for the Plaintiff even if the properties sold for the price the Plaintiff alleges was proper.

Second Proceedings


In McCourt v National Australia Bank Ltd [No 2] [2010] WASC 151 (22 June 2010), the Plaintiff lodged further caveats over the Properties ("Further Caveats") preventing settlement of the alleged improper mortgagee sales. The Bank sought a Court order to remove the Further Caveats, which was granted.


The Further Caveats did not have the deficiencies in caveat form identified by the Court in the First Proceedings and an undertaking as to damages was provided. The Court rejected the Plaintiff's interpretation of the TLA provisions and held the Further Caveats be removed pursuant to s138D TLA (the equivalent NSW section is s74O RPA). s74O RPA precludes lodgement of further caveats after a Court orders removal of previous caveats.

The Court explained that, even apart from proper interpretation of s138D TLA (in NSW, s74O RPA) pursuant to which the Plaintiff must lose, the Plaintiff also failed to prove the Further Caveats should remain on title based on equitable principles stated below:


The Plaintiff argued the Bank is estopped from relying on its 29 January 2010 default notice ("Default Notice") to sell the Properties, as the Default Notice was issued contrary to a prior arrangement made during a meeting on 23 September 2008 between the Bank and Plaintiff ("Meeting"). The Plaintiff argued he relied on representations made by the Bank during the Meeting that proceeds of sale of another property of the Plaintiff would be applied by the Bank in a particular way.

The Plaintiff relied on the equitable principle of estoppel expressed in Barns v Queensland National Bank Ltd [1906] HCA 26: a mortgagee is estopped from relying on its strict legal rights under a mortgage if the parties have negotiated that the strict legal rights of the mortgagee will not be enforced (or will be partially enforced or enforced later), and the mortgagor having relied upon the mortgagee's representations, would suffer detriment if the mortgagee reneged on its representations. The Court held the facts did not prove estoppel.

Bad Faith

The Plaintiff argued the mortgagee sales should be prevented as the Bank had exercised its power of sale in bad faith. The Court held there was no bad faith on the facts. The Court explained principles of bad faith, including if a 'serious blunder' occurs during a mortgagee sale causing a large diminution of the sale price, the mortgagee may be liable for damages even if the 'serious blunder' is by an agent such as the real estate agent. Similarly, the Court stated if the price obtained in a mortgagee sale is grossly below market value, that fact alone may evidence bad faith. However, merely obtaining a price below market value is usually insufficient to prove bad faith.

Balance of Convenience

The Court held that even if the Plaintiff had successfully proven estoppel or bad faith, the Further Caveats should be removed based on the balance of convenience. The Court stated the Plaintiff had delayed in making any objection to the Default Notice, having made no objection prior to lodging the Caveats. The Court reiterated there would be no surplus money available for the Plaintiff anyway. Also, the Further Caveats were only lodged on the day settlement was schedule to occur and were not on title at the time the purchasers bought the Properties at auction. The balance of convenience therefore favoured removal of the Further Caveats.


A registered proprietor seeking to prevent an improper mortgagee sale should ensure the caveat is properly drafted so it is not invalid on its terms. A registered proprietor should obtain current valuations and clear evidence of the mortgagee's bad faith in any application to extend a caveat on this basis.

These cases show Courts will not lightly prevent a mortgagee sale by extending a caveat for alleged bad faith. A registered proprietor will have a better chance of extending a caveat to prevent an improper sale if surplus funds would exist for the mortgagor after a proper sale. Also, Courts may maintain the first caveat on title (subsequent caveats are prevented by s74O RPA) preventing a mortgagee sale if a registered proprietor can prove estoppel or bad faith. Clear evidence is required to prove estoppel or bad faith and each case will depend on its particular facts. Courts will ultimately way up the balance of convenience between the parties.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.