Guirgis v JEA Developments Pty Limited

The facts

1. On 15 December 2018 Mr Guirgis entered into a contract for the sale of the Property. Settlement of that contract was scheduled to occur on 25 February 2019.
2. The Caveat was lodged on 11 February 2019.
3. The Caveat was lodged electronically through PEXA (Property Exchange Australia), which is an electronic lodgment network, by the Conveyancer's company, which was described on the Caveat as the "Responsible Subscriber". The Caveat was electronically signed by the Conveyancer in her name. The form describes the Conveyancer's "signer capacity" as "practitioner certifier" and notes that the Conveyancer signed for the "subscriber", her conveyancing company. The "subscriber capacity" is recorded as "representative subscriber".
4. The Conveyancer's company was recorded on the Caveat as the address for service of notices on the Caveator.
5. The relevant parts of the Caveat are: "ESTATE OR INTEREST CLAIMED Charge By virtue of: Agreement Between JEA DEVELOPMENTS PTY LTD And KIRROLOS GHABRIEL GUIRGIS Details Supporting The Claim: Outstanding loan The Caveator, to the best of the knowledge of the Subscriber identified in the execution of this Caveat document, has a good and valid claim to the estate or interest claimed as specified in this Caveat. This Caveat, to the best of the knowledge of the Subscriber identified in the execution of this Caveat document, does not require the leave of the Supreme Court. This Caveat, to the best of the knowledge of the Subscriber identified in the execution of this Caveat document, does not require the written consent of the Registered Proprietor Of Estate or possessory applicant (as applicable) for the purposes of section 74O Real Property Act 1900. The Caveator, to the best of the knowledge of the Subscriber identified in the execution of this Caveat document, has provided the correct address of the Registered Proprietor as specified in this Caveat. SIGNING Signing Party Role: Receiving I certify that: 1. The Certifier has taken reasonable steps to ensure that this Registry Instrument or Document is correct and compliant with relevant legislation and any Prescribed Requirement. 2. The Certifier has retained the evidence supporting this Registry Instrument or Document. 3. The Certifier has taken reasonable steps to verify the identity of the caveator. Party Represented by Subscriber: JEA DEVELOPMENTS PTY LTD Signed By: [The Conveyancer] Signer Capacity: Practitioner Certifier"
6. Mr Guirgis' solicitor gave evidence that, having been made aware of the Caveat, he telephoned the Conveyancer on 13 February 2019 and they had a conversation in words to this effect: "Solicitor: Can I please have a copy of the agreement that is referenced in the Caveat? Conveyancer: You need to speak with [Mrs Guirgis]."
7. Mr Guirgis' solicitor also gave evidence that follow up letters which he sent on 13 and 14 February 2019 to the Conveyancer asking for evidence to substantiate the Caveat went unanswered.
8. Because settlement of the sale of the Property was scheduled to occur on 25 February 2019, it was necessary for Mr Guirgis to make an urgent application for the removal of the Caveat. The basis of Mr Guirgis' application was his vehement assertion that he had never entered into any agreement of the kind alleged in the Caveat.
9. On 15 February 2019 the proceedings first came before Henry J sitting as Duty Judge. Her Honour made orders for short service and appointed a further return date of 20 February 2019 before the Duty Judge. The matter came before me for hearing in the Duty List on that day.
10. Mrs Guirgis appeared at the hearing unrepresented. Mr Guirgis did not oppose Mrs Guirgis being granted leave to appear for the defendant. She told me that there was no written loan agreement between the defendant and Mr Guirgis. Insofar as she said there was any agreement at all between her or the defendant and Mr Guirgis - what she described as "a husband and wife agreement" - she accepted there was nothing in that agreement by which Mr Guirgis had given the defendant a mortgage, charge or any other interest in the Property.
11. Mrs Guirgis acknowledged that she had caused the Caveat to be placed on the title of the Property as a tactic for the purposes of negotiation in the lead up to a Family Court hearing also scheduled to take place on 25 February 2019.
12. During the course of the hearing I had these exchanges with Mrs Guirgis: "[T4:23-30] HIS HONOUR: Did you go and see the conveyancer … about issuing this caveat? GUIRGIS: I called her over the phone and asked her to do that. She is settling the Caringbah property which he and his friend put a caveat on the property and I have agreed to put the funds in a trust and it is the same conveyancer, sorry your Honour, that I called and asked to please put a caveat on giving her the title to me. … T5:8-18 HIS HONOUR: Did the conveyancer give you any advice about this? GUIRGIS: No. HIS HONOUR: Did you just ask the conveyancer to put the caveat on? GUIRGIS: The caveat, yes. So my understanding is that we have an agreement of any form I mean, it is kind of similar to the caveat that he and his friend put on my properties in my name and they put it on and the Judge, I was here two weeks ago, asked me to put the money into a trust based on no signed agreement, on a verbal understanding. … T9:40-46 HIS HONOUR: And I am very concerned about the fact that this conveyancer seems not to have given you that kind of advice. What did you say to the conveyancer? Was it just one phone call? GUIRGIS: Yes, and the loan that JEA went and obtained from Baccus on the direction of Kirrolos. .. T10:15-36 GUIRGIS: You are asking me what sort of conversation I had with the conveyancer. HIS HONOUR: Yes. GUIRGIS: I let her know that JEA Developments lent Kirrolos the money and to put a caveat on there until the matter is heard before a Judge that could either keep the funds into a trust until it is heard in the Family Court where it belongs, but either way I don't really see that there should be much of an objection. I said to this lovely barrister here (indicated) I am very happy to remove the caveat on the basis that the settlement is going to take place after we are before a Judge where we belong in the Family Court HIS HONOUR: Did the conveyancer ask you about the terms of the loan agreement at all? GUIRGIS: No. She just asked me "Is there an agreement between JEA Developments and Kirrolos Guirgis?" And I said "Yes". HIS HONOUR: Did she ask you whether it was in writing or oral? GUIRGIS: No, we did not go into discussions."
13. The Court resolved Mr Guirgis' application by ordering the defendant to remove the Caveat and pay Mr Guirgis' costs. The balance of his application (for compensation under s 74P of the Act) was stood over to a later date. The Court also asked Mr Guirgis' solicitor to write to the Conveyancer informing her that the matter would be listed on 22 February 2019 to give her an opportunity to make submissions as to why the Court should not refer the papers to NSW Fair Trading to consider whether or not disciplinary action should be taken against her.

The Court's concerns

1. To appreciate the Court's concerns that arose from Mrs Guirgis' evidence about the Conveyancer's conduct, it is necessary to set out the relevant statutory provisions. These have become somewhat complex with the introduction of electronic conveyancing.
2. Section 74F of the Act prescribes the persons who are permitted to lodge a caveat in respect of land. Subsection 74F(5) prescribes certain procedural requirements which must be satisfied before the Registrar-General will accept the lodgment of a caveat. In particular, it provides that a caveat must (emphasis added): (a) be in the approved form, (b) specify: … (v) the prescribed particulars of the legal or equitable estate or interest, or the right arising out of a restrictive covenant, to which the caveator claims to be entitled, (c) be verified by statutory declaration or, in the case of a caveat lodged by means of an Electronic Lodgment Network, be verified in a way approved by the Registrar-General, and (d) be signed by the caveator or by a solicitor or other agent of the caveator.
3. The "prescribed particulars" referred to in subsection 74F(5)(b)(v) of the Act are the subject of Clause 7 and Sch 3 to the Real Property Regulation 2014 (NSW). The matters that must be specified include (emphasis added): "1. Particulars of the nature of the estate or interest in land claimed by the caveator. 2. The facts on which the claim is founded, including (if appropriate) a statement as to the manner in which the estate or interest claimed is derived from the registered proprietor of the estate or interest or the primary or possessory applicant against which the caveat is to operate. 3. If the caveator's claim is based (wholly or in part) on the terms of a written agreement or other instrument, particulars of the nature and date of that agreement or instrument and the parties to it. 4. If the caveator claims as mortgagee, chargee or covenant chargee, a statement of the amount (if readily ascertainable) of the debt or other sum of money charged on the land (or, if the amount is not readily ascertainable, the nature of the debt, annuity, rent-charge or other charge secured on the land)."
4. The Electronic Conveyancing National Law has been adopted in NSW by the Electronic Conveyancing (Adoption of National Law) Act 2012 (NSW) as the Electronic Conveyancing National Law (NSW) (the "National Law"). Under Rule 8.6 of the Conveyancing Rules made by the Registrar General under s 12E of the Act, nearly all caveats signed on or after the 1 July 2018 must be lodged electronically using an electronic lodgment network. PEXA is such a network.
5. Section 23 of the National Law provides in relation to the use of an electronic lodgment network: "23 Participation rules (1) The Registrar may determine, in writing, rules relating to the use of an ELN (participation rules). (2) The participation rules may (without limitation) include provisions relating to the following matters: (a) the eligibility criteria for subscribers, (b) the obligations of subscribers, including (without limitation) any representations or warranties they are required to give,… (f) the certification of registry instruments and other documents for use in connection with the ELN,… (h) the retention of documents created or obtained in connection with a subscriber's use of an ELN,…"
6. In exercise of the power under s 23 of the National Law, the Registrar General has approved through the NSW Participation Rules for Electronic Conveyancing (Version 5 effective 25 February 2019) rules in relation to the electronic certification noted on electronically lodged caveats (the "Participation Rules").
7. Participation Rule 7.10.1 provides that "the Subscriber must provide those of the Certifications set out in the Certification Rules as are required when Digitally Signing an electronic Registry Instrument or other Electronic Document".
8. Schedule 3 of the NSW Participation Rules sets out the Certification Rules. Clauses 1 - 4 of Schedule 3 are: "1. The Certifier has taken reasonable steps to verify the identity of the caveator or his, her or its administrator or attorney. 2. The Certifier holds a properly completed Client Authorisation for the Conveyancing Transaction including this Registry Instrument or Document. 3. The Certifier has retained the evidence supporting this Registry Instrument or Document. 4. The Certifier has taken reasonable steps to ensure that this Registry Instrument or Document is correct and compliant with relevant legislation and any Prescribed Requirement."
9. Under Rule 2 of the Participation Rules, the "Certifier" is "the Subscriber providing the certifications set out in the Certification Rules".
10. There can be no doubt that the Conveyancer's company was the Subscriber as defined under the National Law and the Participation Rules, being "a person who is authorised under a participation agreement to use an [electronic lodgement network] to complete conveyancing transactions on behalf of another person or on their own behalf". Under Rule 4.3 of the Participation Rules, a subscriber must be of good character and reputation, which requirement is in effect satisfied if the subscriber is a corporate entity whose director is a licensed conveyancer. In signing the Caveat the Conveyancer was acting on behalf of her company and making the representations and certifications set out in the Caveat. Those representations and certifications set out in the approved form of electronic caveat and mandated by the Participation Rules are, for the purpose of s 74F(5)(c) of the Act, the way of verification approved by the Registrar General in the case of a caveat lodged by means of an electronic lodgment network.
11. It was apparent from the terms of the Caveat and Mrs Guirgis' evidence (which the Court had no reason other than to accept as prima facie truthful) that the Caveat and the Conveyancer's purported certification of it on behalf of her company were deficient in at least five respects by reference to the requirements of the prescribed particulars (see paragraph [21] above) and the Certification Rules (see paragraph [26] above): 1. The facts on which the claim was based including, most importantly, whether the alleged agreement was oral or written and when it was said to have been entered into were not included. 2. There was no statement of the amount of the debt or its nature. 3. For the Conveyancer to be able to state that "to the best of the knowledge of the" Conveyancer the caveator had a good and valid claim to the estate or interest claimed requires more than a casual or incomplete inquiry. There appeared to have been a complete failure to take proper steps to ascertain whether or not the defendant had a good and valid claim to the estate or interest claimed in the Caveat. I deal with this further in paragraphs [30] to [33] below. 4. The first certification that the Conveyancer had taken reasonable steps to ensure that the Caveat was "correct and compliant with relevant legislation and any Prescribed Requirement" could not, on the evidence before the Court, have been correct. 5. The second certification was also, in this case, completely misleading because the Conveyancer had not retained anything. Mr Guirgis' solicitor was acting entirely reasonably in contacting the Conveyancer to ask for a copy of the alleged agreement. The assertion of an agreement in this context when read together with the second certification would lead any reasonable reader to think that there was a written agreement.
12. It is necessary to say something more about the Conveyancer's representation that "The Caveator, to the best of the knowledge of the Subscriber identified in the execution of this Caveat document, has a good and valid claim to the estate or interest claimed as specified in this Caveat". The expression "to the best of the knowledge" of the Conveyancer conveys a representation that the Conveyancer has a suitable level of knowledge about how an interest in land can arise and has taken reasonable steps to inform himself or herself of the relevant facts so as to be able to express a properly informed opinion. The same is true of the other statements in the Caveat which are said to be "to the best of the knowledge of" the person or entity electronically signing the Caveat.
13. In relation to such statements, I respectfully adopt what was said by Austin J in Australian Securities and Investments Commission v Vines [2005] NSWSC 738; (2005) 55 ACSR 617: "[1448] I agree with ASIC (written submissions (Fox), para 225) that words such as "to the best of my knowledge, information and belief", "any other matter of which I am aware" and "I am not aware of any other matter", when used in a formal representation or sign-off document executed by a person with executive responsibility for the matters certified, contain an implied representation. The representation is that the signatory has taken appropriate steps to satisfy himself or herself, through inquiry, of the matters certified, so as to make the statements reliable and meaningful. If the signatory has not taken such steps, the document is misleading to that extent."
14. His Honour's conclusion on this point was not disturbed in the subsequent appeal: Vines v Australian Securities and Investments Commission [2007] NSWCA 75; (2007) 73 NSWLR 451.
15. None of this to suggest that such statements amount to an unqualified warranty of the existence of the relevant state of affairs. A statement that has properly been made to the best of someone's knowledge might ultimately be incorrect. As I observe in paragraph [41] below, whether a caveatable interest exists can sometimes be a matter of real legal complexity. The issue for present purposes is that the person without whose certification the caveat could not be electronically filed must have reasonable grounds to give the requisite representations and certifications.
16. On the basis of Mrs Guirgis' evidence and the matters I have set out in the preceding paragraphs, I formed the view that the Conveyancer appeared to have lodged the Caveat on behalf of the defendant with either a reckless disregard for the Conveyancer's obligations or the Conveyancer had failed to meet the standard of care to be expected of a reasonably competent conveyancer certifying a caveat. These failures had led to Mr Guirgis having to expend considerable legal fees and to the Court's time being wasted over a matter that ought never have come before it. No reasonably competent conveyancer who had bothered to take proper instructions from Mrs Guirgis would have co-operated in the lodgement of the Caveat. Had the Conveyancer acted with the requisite skill and diligence, a great deal of money and the parties' and Court's time would almost certainly have been saved because Mrs Guirgis would not have been able to lodge the Caveat herself.

The Conveyancer's contrite explanation

1. The Conveyancer appeared before the Court on 22 February 2019. I explained the Court's concerns to the Conveyancer to the effect of the matters set out in paragraphs [29] above and informed her that the Court wished to give the Conveyancer an opportunity to explain why the matter should not be referred to the Secretary of NSW Fair Trading to consider whether some form of disciplinary action should be taken. I gave the Conveyancer an opportunity to seek legal advice and to appear by a solicitor or counsel. The Conveyancer declined that opportunity and indicated that she wished to make her explanation there and then.
2. The Conveyancer acknowledged that she understood that even if there was an agreement for a lender to advance funds to a borrower, without more that agreement did not give the lender an interest in the borrower's land. Her explanation continued (at T3:22-48): "CONVEYANCER: It is the first caveat I have ever put on. I understand that I did not actually obtain the correct documentation to prove that my client had a claim on the estate, on the property. With going through PEXA there are a lot of steps in trying to do it. I was informed of the urgency of the tasks and I understand that should not have taken any precedence (sic) in it. I totally understand that I erred and I have wasted the Court's time and caused problems. HIS HONOUR: All right. CONVEYANCER: And I have downloaded all the information from LRS NSW, about caveats and I am looking to do further education with PEXA in relation to lodging them. HIS HONOUR: Very well. How long have you been in practice as a conveyancer? CONVEYANCER: Ten years but I have never, ever put a caveat on before, I always prefer people to do it because I just say, I don't do that work. It was just that my client rang me at 10 o'clock at night and then at 6:00am in the morning, because she tried to put it on herself and because she is not registered with PEXA she couldn't, and so that is the only reason why and she thought it was settling that day and she had an interest and needed the money. We needed to protect the money. So that is the only reason why I actually did it. I understand that I was, allowed my client's wishes to take precedence over what I should have done."
3. At the conclusion of this explanation, the Conveyancer undertook to the Court to attend an appropriate course in the next 12 months in relation to the electronic lodging of caveats.
4. On the basis of the Conveyancer's explanation and undertaking, I decided that it was not necessary for the Court to take the matter any further.

Conclusion

1. As New South Wales' conveyancing system moves to a completely electronic platform, the role of conveyancers, solicitors and others as persons qualified to prepare and lodge caveats becomes all the more important. Ordinary members of the public are, in practical terms, no longer able to lodge caveats without the intervention of a "Subscriber", who in many cases will be a solicitor or licensed conveyancer. The requirement to give the requisite representations and certifications operates to confer on them the role of a guardian at the gate.
2. Dealing with caveats takes up a considerable amount of time in the both the Equity Division's Duty List and Real Property List. Although the Act contains compensation provisions in respect of caveats that have been improperly lodged, that compensation can only go so far to compensate a registered proprietor for the delay, stress and expense caused by a caveat that should never have been filed. The community also suffers because the Court's time is taken up when it should not have been.
3. I have no doubt that, in the present case, if the Conveyancer had made the proper inquiries, the Caveat would never have been lodged. This is probably one of the more egregious cases to have come to the Court's attention. The Court readily accepts that in some cases whether or not a caveator has a "good and valid claim to the estate or interest claimed in the land" can be a question of considerable legal difficulty. However, in many cases it is not. This is one such case.
4. The legislative and regulatory scheme which I have set out above assumes that the person making the various representations and certifications in an electronically lodged caveat has the requisite degree of knowledge and has approached their task with appropriate diligence. The Court and the community expect nothing less. A party who has suffered loss as a result of circumstances such as those in this case may be able to seek compensation under the Act and, like any other consumer, can complain about the conduct of a licensed conveyancer to NSW Fair Trading.
5. In my respectful opinion, the Court also has a role to ensure the integrity of the operation of the laws relating to conveyancing to which the Court must give effect. Where it appears to the Court to be necessary, and after affording the person concerned procedural fairness, I see no reason why the Court should not draw matters such as the present to the attention of the appropriate authority for it to take such action as it thinks fit. As a result of the Conveyancer's properly candid and contrite explanation, in the end that step was not required in this case.

Amendments 26 February 2019 - Paragraph 29 - the words "were not included" added to the end of sub-clause (1). DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 26 February 2019