Preservation of assets in Family Court proceedings

A decision handed down in 2016 in the Supreme Court of South Australia has the potential to change the way family lawyers and their clients seek to preserve and protect real estate from either being disposed of (sold or gifted) or further encumbered (used as security for additional borrowings) when spouses separate.

In that particular case one spouse lodged a Caveat over a property owned by a company of which the husband was the sole director and shareholder. The Caveat claimed that the wife had an interest or an estate in the property as a result of having made financial and non-financial contributions to the acquisition, maintenance and improvement of the property. The husband applied for the removal of the Caveat by lodging a document at the Lands Title Office. The effect of lodgement of that document was that the wife had 21 days within which to apply to the Supreme Court of South Australia seeking an Order extending the period of 21 days until the dispute between the husband and wife was determined.

The husband objected to the extension of time on various bases. They were:

  1. That the interest the wife was seeking to protect was a right under the Family Law Act and as a result is not an interest that is capable of being protected by way of a caveat;
  2. The wife had failed to institute substantive proceedings for final relief in the Supreme Court and therefore could not obtain the extension of time;
  3. The interest that the wife was claiming was not sufficiently identified and therefore could not be protected by way of a Caveat; and
  4. The Supreme Court did not have jurisdiction to deal with the matter because it was a ‘matrimonial cause’ and therefore within the exclusive jurisdiction of the Family Court.

Ultimately, the Court disagreed with the husband on the first three points but agreed with him on the last point. The Judge found that the matter currently before her was a ‘matrimonial cause’ and within the exclusive jurisdiction of the Family Court and therefore the Supreme Court did not have jurisdiction to hear the matter.

This casts doubt on whether spouses should be lodging Caveats over Titles to real property in order to protect their interest in that property and prevent their former spouse from either disposing of or encumbering that property. The alternative avenue would be to seek an injunction in the Family Court of Australia or the Federal Circuit Court of Australia but this of course presents its own difficulties including timing and enforceability. It often takes many weeks between filing an urgent application and obtaining an Order and even if an Order is obtained, it does not prevent someone from breaching that Order and ultimately selling a property or encumbering a property.

Ben Farmer

31 July 2017