Are Proceeds of a Sale of a House a Caveatable Interest?

Powell v Stone [2014] NSWSC 574 clarified the question of whether the proceeds of a sale of a house were considered to be a caveatable interest.

The statutory scheme in relation to lodging a caveat is conferred by Section 74F(1) of the Real Property Act 1900 which notes the following:

“Any person who, by virtue of any unregistered dealing or by devolution of law or otherwise, claims to be entitled to a legal or equitable interest or interest in land under the provisions of this Act may lodge with the Registrar General a Caveat prohibiting the recording of any dealing affecting the estate or interest to which the person claims to be entitled.”

Hodgson J in Composite Buyers Ltd v. Soong [1995] 38 NSWLR 286 at Paragraph 14 stated how a caveatable interest can be determined:

“In my opinion, what is necessary is that there be an interest in respect of which equity will give specific relief against the land itself, whether this relief be by way of requiring the provision of a registerable instrument, or in some other way giving satisfaction of the interest claimed by the caveator out of land itself, for example by ordering the sale of the land and payment out of the proceeds of an amount in respect of which the caveator has a charge.”

In other words, the caveatable interest must be an interest in land and is not just a contractual or personal right. In addition, the interest must exist at the time of lodgement.

In the present case, the wife who was the Defendant lodged a caveat over certain property which was owned by the Plaintiff husband. The wife did not have an interest in the land. Pursuant to an order by the Family Court, the husband was ordered to sell the land and the wife placed a caveat.

Brereton J stated that the facts in this case were similar to trustees being appointed to conduct a sale of land where beneficiaries are given rights to the proceeds under Section 66G of the Conveyancing Act 1900 (NSW). A Section 66G situation can arise when disputing joint owners such as a bankruptcy trustee and the non bankrupt owner cannot reach agreement about crystalising the bankrupt’s share in the property and can make an application to the Supreme Court of New South Wales to have the real estate sold.

In Brereton J’s decision, Brereton J made the comment that the husband’s obligation to give proceeds of the sale to his ex-wife was:

“…an obligation akin to that of a trustee for sale to do so, and then to account for the proceeds in a particular way, including in part to the wife. That does not create a caveatable interest in the land itself. “

Brereton J noted that in accordance with Re Della-Franca’s Caveat [1993] 1Qd R 382 where it was held that as the beneficiaries had a former interest in the land they had no caveatable or beneficial interest allowing them to place a Caveat.

Brereton J further noted the cases of Epple v Wilson [1972] VR 440; Simons v David Benge Motors Pty Ltd [1974] VR 585; Efax Proprietary Limited v Charrer (Supreme Court (NSW), Young J, 30 October 1987, unreported) where it was noted that a right to the proceeds of sale of property is not an interest in property.

Lesson Learned

It is important to note in family law proceedings or proceedings under the Succession Act 2006 (NSW) a person who is entitled to sale proceeds of real property does not have a caveatable interest and therefore cannot lodge a caveat to protect any proceeds of sale that they may be entitled to in the future.