When a relationship breaks down, parties often want to lodge a caveat over a property when it is held in the name of the other party (or a company). The intention being to prevent the property being disposed of before there has been a final division of assets.
Currently, lodging a caveat to protect a family law claim over property is not allowed. There can be very serious consequences for individuals, lawyers or conveyancers who do so.
To protect property from being disposed of or dealt with, an application to the family law courts must be made to seek restraints. Making this application can be costly and it is not always granted, generally requiring evidence there is a real risk of the property being dealt with unless orders are made. Even if restraining orders are in place, a party may disobey the order and take steps to dissipate assets, to defeat the claim of their former spouse.
This is what occurred in the recent case of Wasem & Nasser (No 5) [2024] FedCFamC2F 1063. At the time of separation, the main asset held by the parties was a partially completed development registered in the husband’s sole name and subject to a loan with Westpac, as well as other caveats securing debts to creditors as part of the construction.
Orders were made restraining the husband from dealing with the property, other than to borrow an additional $160,000 to complete construction.
Despite this restraint, and unknown to the wife until it was too late, the husband refinanced the loans and paid out creditors secured over the property, borrowing additional funds of $1.4 million. He then withdrew these funds in cash, expending it all without any proper explanation.
By the time of trial, the husband was not working, and had no assets left to meet the wife’s property settlement claim of potentially more than $1 million.
Had the wife been able to lodge a caveat over the property, her consent would have been required before the refinance could have occurred, and the equity in the property preserved.
In the judgment, His Honour Judge Street of the Federal Circuit and Family Court of Australia, expressed frustration that the law does not recognise a family law claim as a proper purpose to lodge a caveat. He called for urgent law reform to allow this to occur, and prevent the “enormous injustice and unfairness” suffered by innocent parties.
There are countless examples where a caveat would be an inexpensive and useful tool to protect property in a family law dispute. Law reform to permit this would be very welcome, and prevent situations such as the example above from occurring.
