In the recent case of Boensch v Pascoe [2019] the High Court gave clarity in relation to what was a ‘reasonable cause’ to lodge a caveat, for the purposes of claiming compensation under s74P of the Real Property Act 1900. In the case, Mr Boensch was a trustee holding property beneficially for his children, and was subsequently declared bankrupt. Mr Pascoe was appointed his trustee in bankruptcy and lodged a caveat over the Trust Property. Mr Boensch commenced proceedings claiming that Mr Pascoe did not have reasonable cause to lodge a caveat over the property. The Court emphasised that one does not have a reasonable cause if they do not have a caveatable interest and if they do not have an honest belief based on reasonable grounds that they have a caveatable interest. The High Court ultimately held that if a trustee in bankruptcy has reasonable grounds to conclude that a bankrupt trustee has a beneficial interest in property held on trust for another, the trustee will have justified cause to lodge the caveat Therefore, Mr Pascoe as the trustee in bankruptcy had a reasonable cause and Mr Boensch was not entitled to compensation. This case provides guidance for trustees in bankruptcy as to when lodge a caveat on property held by a bankrupt on trust and highlights the importance of ensuring that caveats are lodged with reasonable cause.

 

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