Caveats and Family Law

A recent decision of the Supreme Court of New South Wales has found that a Family Court Order giving a party a right to proceeds of sale of a property is not a caveatable interest, and parties who lodge caveats for such purpose risk having an indemnity costs order being made against them for costs incurred by the other side in removing the caveat.

Underlying the Supreme Court action of Powell v Stone [1] were Orders made between the parties in the Family Court of Australia on 17 November 2013. Pursuant to such Orders the Husband was to pay to the Wife the sum of $100,000.00 within 60 days, failing which he was to sell a property owned by him and pay the Wife from the proceeds of sale.

The Wife lodged a caveat over the property in order to protect her payment. The Wife’s caveat claimed an interest described as “a person with a right to have their land sold and to have a portion of the proceeds of sale”. The Husband subsequently applied to the Supreme Court seeking that the caveat be removed.

Finding in the Husband’s favour, the Court held that a right to proceeds of sale of property is not an interest in property capable of sustaining a caveat.

Justice Brereton drew an analogy between the facts in this case and circumstances where trustees are appointed to sell land and beneficiaries are given rights in the proceeds considering in both situations that a right to the proceeds of sale from a property was not a “caveatable interest in the land itself”.

His Honour criticised the caveat being lodged in such circumstances, saying that the practice was one “which the Court would do the utmost to discourage”.

The Court ordered that the Wife pay the Husband’s costs on an indemnity basis despite the caveat being subsequently voluntarily withdrawn by the Wife following negotiations between the parties Charlotte Patterson prior to the hearing of the matter.

The New South Wales case will  likely have repercussions in Queensland where, pursuant to the Land Title Act, a party claiming an  interest in a property is able to lodge a caveat, provided the interest claimed is of a type that has been recognised by the courts as capable of sustaining a caveat.

In light of the Supreme Court’s decision, parties seeking to protect an entitlement to proceeds of sale will need to consider alternatives to lodging a caveat. Alternatives may include:
1. Prohibiting the party from dealing with or disposing of the property;
2. Seeking more prescriptive orders about the sale of the property;
3. Providing remedies where a party seeks to breach an order. [1] [2014] NSWSC574.