A recent decision of the New South Wales Supreme Court has highlighted the potential financial implications where parties involved in Family Court litigation incorrectly lodge caveats in order to secure the payment of their property entitlements.

In the case of Powell v Stone, the ex-husband sought the removal of a caveat that had been lodged over a property by his ex-wife. The caveat was lodged in order to secure a payment of $100,000 that the ex-wife (the caveator) was entitled to receive as part of her property settlement.

The Family Court orders issued in relation to the couple's settlement provided that, in the event the payment of $100,000 had not been made by the due date, then the property over which the caveat was lodged would be sold with the proceeds being used to pay out the caveator's entitlement.

In its decision, the Supreme Court found that having the right to proceeds from the sale of a property did not amount to a "caveatable interest" in the property. A caveatable interest or claim can only be made in respect of the land itself, not the proceeds of sale of the land. As such, the Court found that ex-wife had no caveatable interest in the land and, therefore, that the caveat should be removed.

The ex-wife was then ordered to pay the ex-husband's indemnity costs totalling $9,000, even though the caveat had been voluntarily withdrawn prior to the hearing.

According to the Court, "this was a caveat that should never have been lodged, and having been lodged, ought immediately have been withdrawn. …… It needs to be clearly understood that the practice of lodging caveats in this type of situation is one to be deprecated, and one which the Court will do its utmost to discourage."

Lessons learned

The lodgement of a caveat must always be carefully considered to ensure it is an appropriate step. Parties to family law proceedings should ensure that they review all options for securing their entitlements when drafting final property orders.