Caveats Part III: Beware PEXA does not water down legal requirements for lodgers
- Published 09.05.2022
What is PEXA?
PEXA is an electronic conveyancing platform, which is currently in operation in NSW, VIC, QLD, ACT, SA and WA. It is mandatory for all mainstream conveyancing transactions in NSW, VIC, SA and WA.
PEXA streamlines the process for conveyancing transactions. It enables financial institutions, solicitors, licensed conveyancers and land registries to effect transactions online. PEXA supports the following:
- the lodgment and registration of Land Title dealings and instruments, including caveats; and
- the settlement of all financial transactions at a nominated date, including the exchange of settlement monies, duties, taxes and the payment of any third party disbursements.
Who can use PEXA?
PEXA may only be used by registered subscribers. This eliminates the risk of untrained users lodging documents that may affect the accuracy of the centralised registries’ recording landholdings, dealings, security and other interests.
PEXA’s increasing mandatory application renders it harder for members of the public to lodge caveats ‘over the counter’.
Legal obligations of subscribers
Although PEXA streamlines the process, the fundamental requirement that a caveator be able to establish an interest in land is unchanged.
A caveat lodged using PEXA that is successfully challenged because it was lodged ‘without reasonable cause’, exposes the lodging party to liability for compensation in the same way as a paper or manually lodged caveat.
Under s23 of the Electronic Conveyancing National Law the Registrar in each jurisdiction has established Participation Rules based upon the Model Participation Rules ('Rules') developed by the Australian Registrars National Electronic Conveyancing Council.
Under the Rules, the act of lodgment by a subscriber amounts to them certifying that they have undertaken reasonable steps to verify:
- the identity of the client they are lodging the caveat on behalf of;
- that they hold a properly completed Client Authorisation to register the caveat;
- that they have retained the evidence supporting the caveat; and
- the caveat is correct and compliant with the relevant law and any prescribed requirement of the relevant registry.
The certification process:
- gives parties to a transaction confidence that the Rules have been complied with and the caveat is correct; and
- amounts to a representation by the Certifier that the caveat electronically registered complies with relevant legislation, the Rules and any other requirements.
Consequences of non-compliance
Guirgis v JEA Developments Pty Ltd (NSWSC 2019) provides a clear example of the potential consequences for non-compliance with the Rules.
In that case, orders were sought for the removal of a caveat lodged in reliance upon a loan agreement. The application succeeded because the court found there was no caveatable interest in the land. The caveator was ordered to pay the caveatee’s costs.
Relevantly, the court found the conveyancer lodging the caveat using PEXA failed to make enquiries to verify the sufficiency of their client’s caveatable interest.
The court found the caveat was deficient in the following respects:
- the interest claimed lacked sufficient details;
- the conveyancer’s certification that 'to the best of their knowledge' the caveator had a good and valid claim that required more than a casual or incomplete inquiry;
- the certification the conveyancer had taken reasonable steps to ensure the caveat was ‘correct and compliant with any Prescribed Requirements’ could not have been correct on the evidence before the court; and
- the conveyancer was misleading in certifying that evidence was retained to support the caveat because on the evidence before the court they had not retained anything.
The court found that any reasonably competent conveyancer who took proper instructions from their client would not have lodged the caveat and that ‘had the conveyancer acted with the requisite skill and diligence, a great deal of money at the parties’ and court’s time would have almost certainly been saved.’
The court contemplated referring the conveyancer to NSW Fair Trading, but opted not to because the conveyancer apologised and showed remorse.
Legal practitioners, registered conveyancers and clients must be acutely aware that lodgment over PEXA does not water down the legal requirements for a caveat.
When advising clients and accepting instructions to lodge a caveat using PEXA, practitioners and conveyancers must ensure they make the necessary enquiries to ensure compliance with the relevant legislation and rules, especially assessing the validity of the caveatable interest claimed.
If a caveat is lodged ‘without reasonable cause’, the client risks exposure to a claim for compensation and the legal costs of responding to an application for removal of the caveat.
Practitioners also risk facing disciplinary action if they provide false or misleading certifications for caveats lodged over PEXA.
Turks is a registered PEXA subscriber and our practitioners are highly experienced in its use. We will advise on the merits of your caveatable interest and ensure the PEXA lodgment process is lawfully completed.