Right to the Proceeds of Sale Create a Caveatable Interest

Vikram Misra, Barrister at Clarence Chambers continues his series into caveats as he debates whether the right to the proceeds of sale of real property create a caveatable interest. To hear more from Vikram, follow his series here.

A practitioner will usually face this question in two situations where one’s client has an entitlement to proceeds of the sale of real property:

1. where orders are made as to the sale of property in Family Court proceedings; and
2. where trustees are appointed for the sale of land pursuant to s 66G Conveyancing Act 1919 (NSW). [2]

In Powell v Stone [2014] NSWSC 574 (‘Powell’), Brereton J considered an application to withdraw a caveat that claimed an interest in property described as, “a person with a right to have their land sold and to have a portion of the proceeds of sale”. The caveat was lodged over property that was subject to orders for sale in Family Court proceedings, with the proceeds of the sale (less relevant costs associated with the sale) to be distributed to the purported caveator.

His Honour held:

“[3] A right to the proceeds of sale of property is not an interest in property [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).

[4] A close analogy to this case is one where trustees are appointed for the sale of land and beneficiaries are given rights in the proceeds under (NSW) Conveyancing Act 1919, 66G, and its equivalents. In Re Della-Franca’s Caveat [1993] 1 Qd R 382, it was plainly held that in such a case, the beneficiaries being those formerly interested in the land – have no caveatable or beneficial interest in the land. Their interest in the land is converted by the s 66G order into an interest in the proceeds of sale.

[5] In the present case, the wife never had an interest in the land. The husband was ordered to sell the land, and had 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. The caveat was doomed to be removed.”

The same sentiment was echoed in Marco Rossi v Yingyu Si [2016] NSWSC 368 as regards entitlement to a property settlement under the Family Law Act 1975 (Cth). His Honour, Kunc J, held:

“[9] The evidence demonstrates that the only basis for the interest in the Property which is claimed by Ms Ho is her alleged entitlement under the FLA to a property settlement. This is not a new problem for this Court. On several earlier occasions judges of this Division have come to the view that a claim grounded only in an alleged entitlement to a property settlement under the FLA does not create a caveatable interest in the land which may be part of the assets available for such a settlement[1].”

Rather than claim a caveatable interest, the appropriate method of protection would be to obtain an injunction preventing the disposal of the proceeds of sale of the property.

Key takeaways:

• a right to the proceeds of sale of property does not create a caveatable interest in real property;
• alleged entitlement under the Family Law Act 1975 (Cth) to a property settlement does not create a caveatable interest, the appropriate method to protect any claim against the property would be by obtaining an injunction.

[1] Citing; Ryan v Kalocsay [2009] NSWSC 1009; Choi v Kim [2013] NSWSC 1774; Reddacliffe v Strickland [2010] NSWSC 1028; Vo v Nguyen [2014] NSWSC 1622; Wu v Dardaneliotou [2008] 1319.

[2] Cf. the general principle that after sale of the secured property an equitable mortgage is converted to a charge on the proceeds of sale for the interest of the mortgagee: see AVCO Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679.

Vikram Misra was admitted as a solicitor in 2012 and called to the NSW Bar in 2015. He maintains a broad commercial practice and is regularly briefed in matters relating to taxation law, property law, construction law and equity. Vikram has completed a Graduate Diploma in Taxation Law at the University of Sydney in 2015 and a Master of Laws majoring in construction law and contract law at the University of Melbourne in 2016. You may connect with Vikram via email counsel@vikrammisra.com or LinkedIn

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