Introduction

The Supreme Court's recent decision in Taleb v National Australia Bank Ltd [2011] NSWSC 1562 (Taleb v NAB) is a reminder for banks and financial institutions to move promptly to register Real Property Act 1900 (NSW) (RPA) dealings. In this case, had NAB registered sooner it would have avoided costly litigation.

Background

The dispute arose from loans by NAB and Mr Taleb to Hock A Car Investments Pty Ltd (the Company). The key events were as follows:

  1. 28 January 2010 - The Company and Mr Taleb entered into a Deed of Acknowledgment (Deed) recording a substantial debt owing to Mr Taleb. Under clause 1.3 of the Deed, the Company granted Mr Taleb the right to register a Caveat over its land (Property).
  2. 15 October 2010 - NAB provided the Company with a Bill Facility, secured by a mortgage over the Property which was intended to be registered. Searches by NAB revealed no caveats on the folio.
  3. 26 November 2010 - Mr Taleb recorded a Caveat in respect of the Property.
  4. 07 December 2010 - NAB lodged the mortgage for registration. The Registrar General raised a requisition requiring removal of the Caveat before registration.
  5. 20 December 2010 - the Company defaulted under the Bill Facility. NAB sought removal of Mr Taleb's Caveat.

Competing Unregistered Interests - Who Won and Why?

NAB's interest took priority.1 Mr Taleb's delay in lodging his Caveat was unreasonable and fostered NAB's belief that his interest did not exist when they granted the Bill Facility.2

However, Bryson JA was scathing as to NAB's delay in registering their documents. Bryson JA stated that NAB's delay of seven weeks3 meant that it had not acted prudently in its own interests, adding that "Registering a mortgage to secure $1,500,000 should be an urgent project for any lender".4

Had NAB registered sooner, it would have avoided the expense of this litigation. It also would have been able to immediately seek possession of the Property when the Company defaulted in December, instead of having to wait until the Caveat was removed.

Bryson JA also queried whether clause 1.3 of the Deed created an equitable interest in the land in favour of Mr Taleb. His Honour considered the deed as a whole did not support the creation of an equitable charge. Hence there was no interest capable of protection by caveat.

Lessons to Take Away

  • Be prudent in registering dealings - do not let side issues clog up the process;
  • Creditors who seek to rely on clauses in loan or facility agreements granting a right to caveat should ensure that either:
  • the agreement expressly provides the creditor with an interest to caveat; orthe agreement as a whole clearly provides for the implication of an interest which can be caveated,

    and that stamp duty is paid on the transaction, to be enforceable.

The assistance of Alec Bombell, Graduate, of Addisons in the preparation of this article is noted and greatly appreciated.

Footnotes

1Taleb v NAB at [38].
2J & H Just (Holdings) v Bank of New South Wales (1971) 125 CLR 546 at 555.
3The reasons for the delay were largely difficulties with refunds of stamp duty on the discharge of an earlier registered mortgage by Hock A Car in favour of Westpac and other internal delays at NAB.
4Taleb v NAB at [31].

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.