Responsibility for identifying caveat

[barrybounce]

I am interested to understand who is responsible in the following situation for identifying a caveat exists on a property being used as security in the name of an individual prior to settlement another property.
A friend, lets say Barry, is estranged from wife. After a number of years of separation and paying rent he decides to purchase an apartment. The holiday home owned and maintained solely by him (but in which she has an interest under pooled assets) is put up as security for the loan. He gets approval, all is set for settlement but on the day of settlement the bank lawyer does not proceed because they then discover there is a caveat on the security property.
Turns out the estranged wife has put it on a year earlier and forgotten about it and Barry was never informed.
Who is responsible? It doesn't look like it is Barry, he can't be expected to even know what a caveat is? It doesn't look like like it is Barry's conveyancer because the problem is really between the ban k and the bank's lawyer, not between Barry and the vendor? What are your thoughts?

 

[Docupedia]

Each state has its own property laws, so the answer may differ slightly according to jurisdiction - but I imagine it will be somewhat similar. I'm answering from the Queensland perspective.

There are a few dynamics in play here:
1. The person who lodges a caveat ('caveator') is generally expected to notify the owner of the land they are lodging against ('caveatee'). In Queensland the Registrar of Titles does this - but it is based off the caveator giving the Registrar the correct name and address for service of the notice.
2. Barry, as seller, is generally obligated to inform himself about the status of the title when entering into a contract. This usually means a title search is done - which would disclose the caveat.
3. [This will differ state to state] The contract discloses what encumbrances on the title are to remain following settlement. Anything else must be removed before/at settlement. The caveat is an encumbrance. Further, it's a special encumbrance in that you generally cannot register anything on a title while a caveat is in place - including a transfer of ownership. By failing to disclose the caveat in the contract, it automatically conveys that it will be reduced at or before settlement (at - by providing a removal document capable of being registered).
4. The point of 3 is largely this - by not disclosing the caveat to the buyer, the buyer is entitled to expect that it will be removed at settlement. The buyer does not need to confirm this.

It's Barry's problem to sort out. You can't compel a buyer to settle a contract when they can't get registered as owner - which is what a caveat will do. The buyer's entitled to expect clear title at settlement. No bank is going to advance funds for a settlement if the title may never be transferred to the buyer - they can't get security.

You'll likely find that Barry is in breach of contract for failing to provide clear title at settlement.