There has been a recent decision in the Supreme Court of New South Wales in Bellissimo v. JCL Investments Pty Limited  NSWSC 1260 (2 November 2009) which examined the extent to which a consent, given in a document, to lodgement of a Caveat establishes a caveatable interest of the Caveator (that is, the person claiming an interest in another’s property).
In the decision it was acknowledged that historically there have been cases where it has been held that an agreement that one party to lodgement of a Caveat carries an implied agreement to confer an interest in land. However, that implication could be made only where there is no sufficient indication to the contrary, which depends on the construction of the document in which the consent to lodge a Caveat is given.
In this case a solicitor included in his Costs Agreement with an individual client a provision stating “my costs are secured by a Caveat over the property in your name or under your control”. The client’s home was owned in a corporate name and the solicitor then had the company sign a Deed of Guarantee in favour of the solicitor, in which document the corporate owner of the client’s home agreed to the lodgement of a Caveat to secure the fees.
The Solicitor lodged a caveat and sought to extend the operation of the Caveat after the owner of the property caused the issue of a Lapsing Notice.
The Court took the view that had it been intended to create a charge whereby the solicitor could apply to the Court for an order for sale of the property or for appointment of a receiver, one would expect that the nature of that arrangement would be spelt out clearly in an agreement between solicitor and client or between a solicitor and a company associated with the client and not be left to implication.
The situation commonly arises in various pro forma contracts relating to the provision of finance where the relevant clause confers on the lender or finance provider a right to lodge a Caveat against a specified or any property of the borrower as security for the financial accommodation provided.
In Iaconis v. Lazaar  NWSC 1103, Young CJ observed that:
“If the facts show that there is a pro forma document and a person of limited commercial experience has signed it without evidence being proffered by the lender that the clause has been properly explained to the person who is said to have given the charge by or on behalf of the person providing financial benefit, the Court may very well come to the conclusion that the former person never intended to give a charge notwithstanding the words used in the document.”
The Court has taken the view in the above instances that where consent to lodgement of a Caveat is given without an express creation of a charge over a property, the intention of the parties may well be to prevent the owner of the property the subject of the Caveat from dealing with the property without the consent of the caveator rather than create an actual interest in the land.
The Court held that such negative covenant does not of itself create an interest in land.
It would seem therefore that when preparing documents which purport to confer on a party a right to lodge a Caveat as security for the performance of obligations by another party, you should ensure that the document contains a clause expressly charging the property of the other party with the performance of its obligations under the agreement and also providing for the consent of that party to the lodgement of a Caveat.
Similarly, when examining documents for a party which purport to give the right to lodge a Caveat, you should look at such documents critically as to the circumstances in which the document was signed with a view to determining whether or not a caveatable interest has in fact been given and whether or not the continuance of any Caveat lodged pursuant to the Agreement can be sustained by the other party.