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Episode 77
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Substantive Law
Preserving Marital Assets: To Caveat or Not to Caveat?
Law as stated: 15 February 2023
What is this?
This episode was published and is accurate as at this date.
Winner of the Barrister category of the 30 Under 30 Awards, Chauntelle Ingenito from Chalfont Chambers, joins Hearsay to discuss preserving marital assets. With expert insight on the caveat vs injunction debate.
Substantive Law| What area(s) of law does this episode consider? | Preserving marital assets. |
| Why is this topic relevant? | A couple of minutes in the morning list in the Federal Circuit and Family Court of Australia is all it takes to see how important the distribution of property can be in a separation, and just how heated arguments between former spouses about property can become. Under Part VIII of the Family Law Act 1975 (Cth), the Court has certain powers in relation to property. Section 78 permits the Court to make a declaration about the title to property or the property rights. Under section 79, the Court has the power to alter property interests, and under section 114(1)(e) the power to issue an injunction in relation to dealings involving the property of a party to the marriage. Knowing how and when to rely on these sections is a key skill for any lawyer practising in family law. |
| What legislation is considered in this episode? | Family Law Act 1975 (Cth) |
| What are the main points? |
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| What are the practical takeaways? |
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| DT:
1:00 | Hello and welcome to Hearsay the Legal Podcast, a CPD podcast that allows Australian lawyers to earn their CPD points on the go and at a time that suits them. I’m your host David Turner. Hearsay the Legal Podcast is proudly supported by Lext Australia. Lext’s mission is to improve user experiences in the law and legal services and Hearsay the Legal Podcast is how we’re improving the experience of CPD. It only takes a couple of minutes in the morning list of the Federal Circuit and Family Court of Australia to see how important the distribution of property can be in a separation and just how heated the arguments between former spouses about property can become. Now, under Part 8 of the Family Law Act 1975 the Court has certain powers in relation to property and section 78 permits the Court to make a declaration about title to property or property rights. Under the next – section 79 – the Court has the power to alter property interests. And under section 114; the power to issue an injunction in relation to dealings involving the property of a party to the marriage. And that’s what we’re talking about today. The Act operates in conjunction with state legislation – in New South Wales, the Real Property Act – which provides for the registration of interests in real property. Joining me today to explore the interaction of caveats and injunctions in the context of family law proceedings is Chauntelle Ingenito. Chauntelle practices family law and criminal law at Chalfont Chambers in Sydney, and is the 2022 winner of the Barrister category in the 30 under 30 awards. Chauntelle, thank you so much for joining me on Hearsay the Legal Podcast! |
| CI: | Thanks so much for having me today. |
| DT: | Now, Chauntelle, tell us a bit about your practice at the bar, the areas you work in, because you specialise in both criminal and family law. We’ve had a few criminal lawyers on the podcast, a few family lawyers on the podcast, and quite a few lawyers on the podcast who do both. Do they often go together? |
| CI: 2:00 | I think they often do, and particularly in family law where you’re talking about parenting applications and you’ve got a lot of domestic violence involved, you often will find that people need to have an understanding of how the criminal jurisdiction operates in conjunction with the family law jurisdiction, how they operate differently, and how the different practices run in both Courts, particularly in the Local Court of New South Wales or in the other state Courts summary Courts. You need to understand how that relationship between the jurisdictions works. And I found my personal self that it really helps to understand exactly how it operates and how those communicate because often the judicial officers who you’re appearing before don’t actually have an understanding of how the other Court operates. |
| DT:
3:00 | Yeah, that’s interesting. I can definitely see the synthesis between those two areas. And I imagine also in terms of the soft skills required; you’re dealing with people in a very stressful situation that affects their personal lives, if not their commercial or professional lives. And those client management skills and helping someone through what might be the most difficult day of their life that’s probably something in common as well. |
| CI:
4:00 | Absolutely. And I call it people law. It’s different to “a couple of documents in a bundle” that you’ve got to look at and sign and explain what the legal rights are in relation to a contract. It’s a little bit different to personal injury and things like that, where you’re really talking about “how many dollars am I going to get out of a situation“. I call it people law, because you really are dealing with people’s emotions. I’ve always said it’s a person’s worst days to be before that Court often. And they’re dealing with really personal issues so they’re really pouring their hearts out. In crime, particularly when you’re writing subjective material, you’re finding that you really get delving into someone’s personal life and understanding what has caused them to be before the Court that day. And it often does come from historical trauma or the historical issues that have happened in their lives. In the family court system, you’re dealing with people’s most intimate parts of their relationship. It’s often involving significant domestic violence. It often involves what happens behind closed doors. So it’s things that people don’t talk about. They wouldn’t go up to their friend usually and talk on the street about what’s going on behind closed doors. So you’re really delving into what are their innermost feelings and their innermost thoughts. So it is a very emotional area of law that I work in. But I think it’s probably the most rewarding area of work, particularly my dispute resolution practice. We just try to get people out of the Court system as much as possible. |
| DT: | Absolutely. Now in saying all of that; what we’re talking about today is the property aspect of family law proceedings and specifically preserving marital assets in property proceedings. When we’re talking about the breakdown of a relationship, of a marriage or a de facto relationship, and there is property to be distributed, what kind of property are we usually talking about? |
| CI: | So it can be anything that a person has in their name really, or that they even may be a beneficiary to. So there’s a couple of different ways it can operate. Often though, we’re talking about houses, we’re talking about cars, we’re talking about shares. We can talk about Bitcoin, which is another big area that’s started now; we’ve got the cryptocurrency. |
| DT: | I feel like with every guest we’ve had on the show this year, there’s been something about crypto assets. |
| CI: 5:00 | It often is something that now is arising and having an understanding of cryptocurrency is something that family lawyers are really needing to understand and about the mechanics and operations of it. How it works, how it can be sold and transferred because it’s something that the Court really isn’t familiar with. Other assets that can be included are things like superannuation which can be split under particular sections of the Act. And we could also be talking about, depending on the situation, interests in trusts and beneficial interest in those trusts as well. So those are some of the types of things that can be captured. Sometimes it can also include companies and family businesses or companies that somebody may be a shareholder of and the shares in that. |
| DT: | The Court – the Federal Circuit and Family Court of Australia, it’s always a bit of a mouthful; I’m still getting used to saying that – has some pretty broad powers to deal with those assets that aren’t directly in the names of the parties but might be family businesses or trusts, even discretionary ones. |
| CI:
6:00 | Absolutely. And often what occurs is that the company or the business or whatever it might be, might need to be joined to the proceedings to be able to be dealt with, afforded procedural fairness effectively. And often you find that you might have proceedings in Division 1, which is the one that usually deals with the more complex cases, and it might deal with things like complex family trusts, family businesses and assets, and you might have five or six parties to the proceedings because each of those companies is being joined because orders are sought against them. It may be the case that the company is sought to be wound up. It may be the case that the shareholding in that particular company may need to be transferred. It may need to be that there are declarations made in relation to the directorship, shareholdings, or otherwise in those companies because it may affect a party’s entitlement to the shareholding or the beneficial interest in that particular company. |
| DT: | Now, let’s go back a step to what is likely to be the crown jewel in most portfolios of marital assets, the family home. When we’re talking about preserving real property for the purposes of family law proceedings, one option is a caveat. I mentioned that at the top of the episode. When might someone want to lodge a caveat over a property in family law proceedings? And what is the nature of the interest that’s being claimed there? |
| CI: 7:00
8:00 | It’s something that is misconceived, I believe by a lot of people in society. And I think that people assume that just because somebody has a house in their name, they can and they want to say that they have an interest or they want to preserve that particular asset they just can chuck a caveat on it. And each state in Australia is a little bit different the way that caveats operate and how they are to be lodged. But the most common one that is found in family law is people claiming an equitable interest in the land. There is a number of difficulties with that and the way that caveats are registered now or is a little bit different to how it was historically. And one of the benefits of the electronic property exchange platform is that you can register caveats on that electronic exchange platform and it includes a dropdown list of what the interests are. So once upon a time, you used to be able to hand write or type in any words that you really wanted to put into the form and it would be up to the registrar at the Land Titles Office, the relevant land titles registry, to determine whether or not you actually were claiming a proper interest and whether or not that caveat would be registered. It’s a little bit different now. It actually makes it a lot easier for people to register properly drafted caveats because there is a dropdown list that explains what your interest may be. And if you don’t fit into one of those dropdown lists, it’s highly likely you don’t have a caveatable interest in the property. So it is making it a little bit easier for people to actually understand how a caveat is to be lodged and what is required insofar as the detail and the level of particularity that is required in actually lodging a caveat. |
| DT: | Easier to lodge legitimate caveats, maybe a little more difficult to lodge the specious ones. |
| CI: | Absolutely, and that’s exactly what we’re finding in family law. People once upon a time used to just lodge a caveat over a property claiming an equitable interest even if it wasn’t a property in which they did have a legitimate caveatable interest in. And they are two different things – a caveatable interest and an equitable interest. I think people misconceive or misconstrue exactly how they are different. Many people believe that because an asset is belonging to one party. So it may be, and often is, a husband has put all the properties in his name for tax reasons. Or conversely, a husband has put all the properties in the wife’s name for tax purposes for asset preservation purposes. |
| DT: 9:00 | Common technique for families of a certain age in Australia. |
| CI: | Absolutely. One of the issues though is that people do believe that because a property is in the other partner’s name and they now have family law proceedings either commencing or are being proposed to be commenced. That means that they can chuck a caveat on there to stop the property being dealt with. Now, unless you actually have a caveatable interest in that property, the caveat is liable to what’s called lapsing or being withdrawn or being struck off for being improperly lodged. So one of the major issues that we are finding in family law, is that there are improperly lodged caveats over property that don’t claim a proper interest. Just because you were married doesn’t mean you have an interest in the property itself. |
| DT: | It’s often the case that the interest that’s being claimed, where there is some basis for it rather than just “we were married, so I must have an interest” is a resulting or a constructive trust, correct? |
| CI: 10:00
11:00
12:00 | Absolutely. It does often arise in circumstances where there may have been “the property is put into one person’s name for stamp duty purposes for other tax benefit purposes“. But both people put in, say, equal or similar amounts of money into the deposit, or one person may pay the deposit and one person may pay the ongoing mortgage repayments. So it is something that arises out of actual payments towards the property or actual monetary contributions towards the property. It doesn’t always have to be that way. It may be non-financial contributions that give rise to the caveatable interest as well. So it may be significant repairs to the property. It may be the building or construction of dwellings on the land. It may be the clearing of the land. It may be the use of the land in the way that it was that increased the value of the land in a particular way. In some cases people will try to assert an interest because of steps that they have taken to have the land developed. As an example, preparing and lodging development applications on the land. They say that without that the property wouldn’t be worth what it was. So therefore they say that they have an interest in a portion of that land to the value of what that development application may be worth. For an example in a case that I had a bit of a different one in the family courts. We had a husband and wife who purchased a particular property. They paid the deposit on it. They had a contract for sale, but they weren’t able to complete the contract because they had run out of money. They’d purchased other properties. Fantastic for them. The particular property had been purchased as an off the plan lot of land. When it finally was ready to be completed, the parties didn’t actually have any money to complete. They couldn’t get a loan from the bank. So what they did was they on sold that particular property to a family member. The value of the property had actually gone down since they had purchased it. Unfortunately, it’d been a little bit of time since the purchase had happened and when the property was ready to be completed on. The property then was developed by the family member. It increased in value exponentially because we had a great boom in the property values. And the wife asserted a constructive trust or a resulting trust over that property saying that “it was always intended to be ours. He purchased it to help us. He developed it. And therefore we must have some interest because if it wasn’t for us, he wouldn’t have had that land and he wouldn’t have the benefit of this fantastic increase.” The Courts were very concerned because in that particular situation the family member made all the mortgage repayments, had done all the development applications for the particular dwelling, had rented the property, had done all the improvements to the property and the marital parties hadn’t actually done anything. The Court hasn’t given judgment on that one, but the commentary from the bench was “how could the parties have an interest in it if it was sold for market value, it was sold in legitimate terms just because it was a family member. Maybe you had a benefit of not having to go to the market and pay an agent for selling costs. So maybe you’ve actually received the benefit already because you saved some money there and didn’t get any defaults from the developer of the property in relation to not being able to complete on the land and losing your deposits.“ |
| DT: | Yeah. It doesn’t sound as though the parties have been conducting themselves in a way that’s consistent with the maintenance of an interest there. It sounds like they’ve parted with possession, parted with all the financial obligations that go along with it. |
| CI:
13:00 | Exactly. And it’s something that does arise particularly in family disputes. What the Family Court, I think, is seeing exponentially is we’ve got situations where a particular party has parents who’ve assisted in the purchase of a property. They’ve lent some money, there’s been no loan agreement – because there often isn’t between family members any loan agreements. Later on down the track one of the parties separate. One of the parents says; “actually we put all our money into that property. If it wasn’t for us, you wouldn’t have been able to buy that property. We want our money back. It was always a loan.” And they want the benefit of the increase and or they say; “we have an interest in that property because of certain situations such as a constructive or resulting trust. It was always intended to be ours. We just let you live there.” So it’s something that we’re finding a lot now is, we have third party family members joining family law proceedings. |
| DT: | And do you find this enduring principle that I thinks been under attack a few times, but it’s still hanging on there. Do you find that the presumption of advancement is coming up? In those cases? |
| CI:
14:00
15:00 | You’d be surprised how many people don’t understand what the presumption of advancement is in the family courts. And in asset preservation, maintenance, or the distribution of wealth between family members, it’s often something that people are shocked about, that if money’s lent or monies are provided, that therefore they must be loans because otherwise why would people give money? And I have found as of recently, particularly parent to child loans are being pressed a lot more. And now when people are coming to lawyers prior to marriage in circumstances where family members may have provided funds, we’re finding before people are getting married, parents are putting in place with loan documents to try and make sure they can preserve it in the event that there is a breakdown of that marital relationship. As of late there are particular situations in which parties are coming almost to do binding financial agreements, prenups, before people are getting married to make sure that their asset that they may have provided to their child is protected in the event of a marital breakdown years later, just in case. And I have found that in speaking with a number of solicitors, the advice has been to preserve the assets as much as possible prior to marriage. If it is going to be asserted down the track that there is a loan one of the biggest issues is people would give money on a wedding day as a gift, but then later on claim it was a loan because the check butt might say loan or because the transfer by bank transfer said loan and they’re trying to assert that is their loan. It’s very difficult for the presumption of advancement to be rebutted in circumstances where there aren’t any contemporaneous documents that really give rise to there being a presumption. TIP: The presumption of advancement has been criticised as a bit of a hold over. Notably, its operation in Australian law was affirmed as recently as 2022 in the decision of the High Court in Bosanac v Commissioner of Taxation [2022] HCA 34. Effectively, in the context of certain relationships, the giving of property or contributions to property is presumed to be intended as a gift. In other words “advanced” to the other party. Traditionally, this is only in circumstances where a husband advanced property to a wife, or a parent to a child. In Bosanac, the court referred to the earlier decision in Nelson v Nelson [1995] HCA 25 as raising the question whether the presumption could also be extended to an equivalent transfer from a wife to a husband to reflect more modern social structures, but these issues were not the subject of the appeal nor did the court hear any argument. |
| DT: 16:00 | And where that transfer narration is really unilateral. It’s not evidence for common intention. |
| CI: | Absolutely not. And I think it’s sometime for the purposes of later on, arguing that there was a loan intended at the time of the transfer. But in reality, that wasn’t the intention at all. |
| DT: | That’s right. It is interesting though that people are surprised by the operation of the doctrine, isn’t it? And I think that’s really been the challenge to the presumption of advancement in the cases that have challenged it, that it no longer reflects the societal standards in which we’re operating today. The fact that people are surprised to learn that it does operate gives credence to that argument. |
| CI:
17:00 | I think the biggest problem that we have is that people don’t understand the law. And of course, we’re not expecting society and the general public to understand how the law operates. And I think it’s really important before people are distributing wealth amongst their children or their family members, that they actually understand how it all operates in a legal basis. And things are gifts. Unless you’re going to make some documents about loan agreements with an interest rate and repayment schedule and things of that effect it’s likely to be considered a gift. And I think that people need to get legal advice before, particularly parents to children transfers or between siblings, occur. Get some legal advice about what your obligations may or may not be, and how the money may be considered on a number of different varieties of factors. It could even be in relation to estate planning, that it’s really important to actually understand; “will this be a debt owed to the estate, or is this a gift that was done prior?” And will that possibly affect our family provision claim down the line? |
| DT:
18:00 | Even when things are regarded contemporaneously at the time of the advance as a loan mutually, an issue I’ve seen in some relationship breakdowns is that agreement is oral. It’s a loan with no repayment date, so it’s repayable on demand and of course then sits there for more than six years and you’ve got a limitation period issue in terms of that chose in action sitting unpursued for six years. Fascinating area, but returning to caveatable interests on the family home. You are describing some of the ways in which a spouse might improve the value of the home and earn an equitable interest. In doing so, is it always the case that to give rise to an equitable interest value has to be created or added to that property? I’m thinking not so much an example of spouses working on the home, but I’m thinking of the housekeeper cases where there might have been a promise of some equitable interest in return for domestic duties, things like that. |
| CI: | It’s an interesting proposition and one that we probably don’t see very often because usually there would’ve had to have been some monetary value to really give rise to an equitable interest in the property and I personally haven’t seen things like housekeepers arise as claiming an equitable interest in a property because of their ongoing maintenance. I think that’s maybe different though to a spouse who’s the home keeper. It could be different in that kind of situation where the spouse is making improvements such as painting or maintaining the garden. Maintaining the lawns, maintaining the area. |
| DT: 19:00 | Now, it is important as a practitioner to satisfy yourself of the existence of that interest, equitable or otherwise, before lodging a caveat and not go off doing that half-cocked because there can be some serious consequences for the party lodging the caveat if it’s not representative of caveatable interest. Isn’t that correct? |
| CI: | Absolutely and it’s one thing that practitioners have to be aware of, that even if they draft the caveat and send their client off to register it, if it comes back later on down the track that it was actually a solicitor who drafted it, they can still be liable for the consequences of drafting and having filed a caveat that didn’t have a legitimate interest in it. There was a case that arose, I believe it was either in Queensland or New South Wales, in which a solicitor had drafted a caveat for a client to lodge themselves. It was drafted in such legalese that it was obvious that a solicitor had drafted it and the court made a referral to the relevant Legal Services Commissioner of that state because of the improperly drafted caveat. |
| DT: | Wow. |
| CI:
20:00
21:00
22:00 | In New South Wales, there have been a number of solicitors who have been reprimanded or have come before the Office of Legal Services Commissioner for caveats being lodged that had no legitimate interest. TIP: Complaints about legal practitioners and questionable caveats are not uncommon and they can be something that ends up under investigation by the New South Wales Office of the Legal Services Commissioner or an equivalent body in other states. In one example in 2020 – Youssef v NSW Legal Services Commissioner – a NSW solicitor failed to adequately verify the identity of an individual who gave instructions by phone to lodge a caveat – in this case, the complaint was that the solicitor had not taken all reasonable steps to verify the client’s identity before lodging the caveat. The Legal Services Commissioner made a determination that this failure amounted to unsatisfactory professional conduct and reprimanded the solicitor. Now, the circumstance that Chauntelle has just mentioned is also not uncommon. You can find one example of this in the decision in Victorian Legal Services Commissioner v Souki [2022] VCAT 663. In that decision, the solicitor the subject of the disciplinary proceedings – Souki – was charged with knowingly preparing caveats for lodgement on a property in which her client had no interest. In admitting the charge, Souki admitted to facilitating the lodgement of the erroneous and defective caveats which amount to professional misconduct – she did not lodge these herself. At paragraphs 19 and 20, VCAT noted: “this case also underlines the importance of lawyers not feeling pressured into or facilitating in any way the lodging of a caveat that has no proper basis. Lawyers occupy a position of trust and responsibility and are properly described as ‘gate-keepers’ in relation to the lodging of caveats. The case law highlights the damage that can be done when improper or baseless caveats are lodged. The Commissioner’s submissions noted that the lodging of such caveats by legal practitioners is ‘endemic’. If that is so, it is a shameful matter for the legal profession.” So, it is an extraordinarily dangerous thing for a solicitor to be drafting caveats that are, I’d say borderline caveatable interests. Solicitors do need to be satisfied that there is a caveatable interest in the property and not just an interest arising particularly out of a family law situation and it can be other areas of law as well. It can be situations insofar as estate planning is concerned or other things but you do need to be satisfied there is a legitimate equitable interest and therefore arising a caveatable interest in the property before lodging a caveat. It may be the case that you go through a client’s bank statements and you look at all the mortgage payments that came out of their account. It may be the case that you look at all the Bunnings receipts and say, “well, here’s all the tins of paint and here’s a statement that I’m going to take from the client now.” And I think that’s really important that solicitors are taking very detailed file notes of exactly what they are told and where possible, having the client execute a document to confirm that is what they have actually been told. |
| DT: | That’s an effective monopoly in metropolitan Sydney. |
| CI:
23:00 | But a document that is contemporaneous at the time that they can keep on their files and particularly if you can keep it on an electronic record, if possible, keep it there to make sure that that way if anything ever arises, if a requisition is raised, or if there is a lapsing notice and an application to a competent court is made in relation to the continued lodgement or the continuation of that particular caveat. That they actually have the backing to say, “well, I was told all of this by the client and they, at the time, had a legitimate belief that there was an equitable interest in the property.“ |
| DT:
24:00 | I’m so glad you mentioned those evidentiary considerations because I was just about to ask you in terms of being satisfied of that caveatable interest, to what level should we be satisfied because on the one hand you might say, “well, I’m satisfied beyond doubt really, that this person has an equitable interest in the property because there’s something in writing to that effect.” But that’s going to be a very rare situation. Often it’s a financial contribution that’s not the subject of an agreement in writing. It might be a non-financial contribution and that’s then an argument about an equitable interest arising, about a constructive trust, perhaps that might not be certain to arise until a declaration’s made in relation to it. So, as practitioners, should we be satisfied on the balance of probabilities with a real persuasion? Should we be satisfied that it’s reasonably arguable before we lodge a caveat? At what level should we be satisfied that equitable interest exists or arguably exists before we’re comfortable with lodging a caveat? |
| CI:
25:00
26:00 | This is my personal preference and at the end of the day as a practitioner, it’s going to be you who is brought before the court or subpoenaed before the court to give evidence, if it becomes an issue, about whether or not there was a legitimacy to file the caveat itself and if there’s a professional negligence application made about your particular conduct, or if you’re brought before the Law Society of your particular state to explain to the tribunal of fact why you may have lodged a caveat. You need to be satisfied that you are going to be able to stand up and say, these are the factors that I took into consideration. The way that I always operated when lodging caveats is I said to myself, “if I have to run up to the Supreme Court today and argue that my caveat should not lapse and that I have an equitable interest in this property, what documents do I need to be satisfied that I have to do it today?” And I always do it on the contemporaneous, not what we might find, not what the client might bring in later on. It’s “what do I have before me today that I could go up to the Supreme Court before the duty judge and argue, yes, I have an interest in this property”. I often will say to clients, when I was a solicitor, of course, before I would have a caveat lodged, do you have any documents that can verify what you are telling me? And that’s why I say stat decs are great because you might be in the situation that a client might have to swear an affidavit down the track and you might have a contemporaneous document, like a stat dec saying these are the things I told the solicitor at the time. May come up later on if there’s an argument about whether or not there was any credibility in that and that’s why I also recommend getting some contemporaneous documents, particularly if you’re acting for a non-spouse party. And when I say things like that, it may be the case that you’re talking about parents who say, “well, I’ve actually got an equitable interest in my son’s property.” You might say, “well, show me. Why do you have that?” And they might say, “oh well, I went over and I cleaned up the living room once.” And that might not cut the mustard there but I’ve had situations where I’ve had parents say, “well, we transferred $100,000 from overseas. Here’s the bank to show that it came from overseas, from our account in XYZ country. When it came here, we transferred it to them. Here’s the receipt showing that it was transferred to them. At the time I sent my son a text message and I said, ‘hey mate, here’s the money. Can you please buy that property for us? We’d really appreciate it.’” And you have all those documents with you at the time that you lodge that caveat. You keep it on your file. So that way if you had to run up to the Supreme Court today before the duty judge, you could say, “well, here are the documents that would give rise to an equitable interest.” Without having things like that, I would be hesitant in filing caveats. |
| DT: | That might be your personal practice, but it’s one I’d happily endorse. It sounds like a very sensible practice because of course that’s the next step. |
| CI: | Exactly right. |
| DT:
27:00 | In New South Wales, it’s the natural next step. The party who seeks to challenge the caveat will issue a lapsing notice, and then it’s incumbent upon you to defend the interest that you claim. In Queensland, we were just saying before the show started, the party who owns the property doesn’t even have to do that. It’s incumbent on you to commence those proceedings and defend your interests. So, it makes sense that before you lodge that caveat, you should be ready to put your money where your mouth is and run up to court. Now, let’s look at it from the other perspective where we might be acting for a party who believes that there is a caveat improperly lodged over a marital asset. We know, as we’ve just said, we can issue a lapsing notice and have that brought before the Supreme Court under the Real Property Act. Is there anything the Family Court can do in that situation? |
| CI:
28:00
29:00 | The power of the Family Court in Division 1 and we must remember that the Federal Circuit and Family Court of Australia is now different to how it used to be. It used to be the Family Court and the Federal Circuit Court, two very different court situations. The Federal Circuit Court was a summary court of jurisdiction and the Family Court was the superior court of jurisdiction, which had these similar powers that the Supreme Court does in New South Wales. When the courts amalgamated in 2021, they divided in Divisions 1 and 2. Division 1 effectively became the Family Court and Division 2, effectively became the Federal Circuit Court. So, there is still that separation. The Federal Circuit and Family Court Division 1, and I’ll call it Division 1 here out, has cross vesting power insofar as the Supreme Court is concerned and has similar powers. While you may be able to, and I say may be able to, get an urgent hearing date before the Division 1 of the FCFCOA to be able to seek the extension of that caveat, the timeframes are much better insofar as a duty judge’s concerned going up to the Supreme Court and then seeking a transfer under the cross vesting powers so that the interest can be argued at the Family Court if that is the nature of the argument. TIP: We recently recorded an episode with two Senior Judicial Registrars of the amalgamated Federal Circuit and Family Court of Australia, Brett McGrath and Sharney Jenkinson. That episode covered the changes to processes in the amalgamated Court in respect of parenting orders and some of the data and data-driven triage now occurring as part of the Court’s Lighthouse Project. That’s episode 74 and well worth a look for practitioners working in family law. We are finding though, that even in de facto relationships and in marriage relationships often proceedings are being commenced in the Supreme Court because of the delay times and because of the efficiency of the Supreme Court, particularly in real property matters, to have a real property list that actually deals with these kinds of real arguments about real property and so I think that a lot of people are preferring the Supreme Court to have these arguments run and then if it becomes obvious that this is an argument about 79 factors, the court will transfer it on its own. |
| DT: | I imagine even if you were able to get before a Division 1 judge at fairly short notice, one of the first things they’d be asking you is why. You’re taking up their very valuable time when there are some duty judges in the real property list who’d be more than happy to hear your application. |
| CI:
30:00 | Absolutely and it gives rise to other arguments in relation to whether or not the caveat is actually necessary. A lot of the time the reason that people are lodging caveats at a last minute notice is because they’re trying to stop a real property transaction from occurring. Often one of the benefits in lodging a caveat is that it will stop any transaction from occurring, which particularly is in relation to transfers of property after sale. It may be the case that a party has found that their partner is selling a property, or property’s been listed on the market so they pop a caveat on there to stop that transaction from actually completing because it maybe the case they want to retain that property in the property division at the end of the day in a Family Court proceeding. The caveat’s a great way, it’s a statutory injunction effectively, of stopping that sale from occurring. The problem you have though, is that there is an implied undertaking as to damages and any losses that arise out of that caveat being lodged, and particularly if it’s improperly lodged, are born by the caveator – the person putting on the caveat. So, it is more appropriate for there to be other ways that you can stop a transaction from occurring and often a caveat itself is not what the party actually wants, but they’re lodging a caveat just to stop or put a pause on things from happening until they can actually go before the court. As we explained earlier in Queensland you lodge a caveat and you have to commence proceedings or have had commenced proceedings within 3 months. If you receive an injunction from the court that does give rise to an equitable interest in Queensland particularly, and you lodge that injunction at the time. In New South Wales, it can also support a caveat that you have an injunction from the transfer of that particular asset to other parties and that should be lodged at the time that you file the caveat and it is one of the exceptions under Section 74O, insofar as lodging a duplicate or a second caveat after the first caveat has lapsed is with an order of the court that usually will include an injunctive relief provision as part of it. |
| DT: 31:00 | I’m glad you mentioned injunctions because that’s really the other primary way you might preserve a marital asset before a property proceeding is completed and you’re right, often the caveat is really used as that statutory injunction, one granted by PEXA instead of the court. It’s a little bit more convenient but often the injunction is the more appropriate way to go about it and there’s a few different ways to obtain an injunction, of course, the court has in its inherent jurisdiction, the power to order injunctions and we have the statutory form of injunction under the Family Law Act that we described earlier. If a caveatable interest, or the lodging of a caveat is intended to protect a caveatable interest, a proprietary interest in the land, what’s the injunction intended to protect by contrast and how would I go about getting one? |
| CI: | So, injunctions protect the same way. They stop things from happening. That’s what an injunction does or it compels things to happen depending on exactly what the form of the injunction is. |
| DT: | A positive injunction. |
| CI:
32:00 | Absolutely. So, you can make people do things or you can stop people from doing things with an injunction and in family law proceedings, that is the most appropriate methodology insofar as protecting assets is concerned. Injunctions are great. Injunctions can stop bank accounts from being accessed or used or being dealt with in particular ways. They can stop property from being transferred, lodged, sold, or dealt with in other ways. They can also be used, particularly in Family Court where it may be necessary for the property to be sold. And they’re particularly handy when there are situations like properties that need to be sold because the reality is the property can’t be retained by one of the parties. It may be the case that the parties have got a property. Mortgage isn’t being paid by either party, no one’s living in their property. There’s no tenant there but neither party wants to sell it because they want to be difficult but the reality is they need to sell that property, get the asset and the debt liquidated and then have some residual funds. One of the benefits of an injunction though, is that you might have the sale occur, you might have a small distribution to each party to assist them in their ongoing living expenses, you might pay out all of the debt and there may be a small amount of money left at the end of the day. By injunction, those monies can be restrained and that’s one of the benefits that an injunction has that a caveat does not. A caveat doesn’t stop the bank taking possession of the property, in fact if they see a caveat, they might even want to take possession. It may be a breach of the mortgage itself. |
| DT: | It’s probably a breach, the grant of an interest that they haven’t consented to yet. |
| CI: 33:00 | Absolutely and so the better way for people to be dealing with assets particularly is to seek an injunction from the court, from things occurring. Again, depending on what the intention of that asset is down the track. Injunctions are great because they can also be given to the bank. So, just before Christmas last year, it was Christmas Eve, lucky me. I’d been given notice that some significant funds – and it was almost the entirety of the asset pool – was about to be transferred overseas where we would never see it again. We ran up to the Division 1 of the court that evening and sought an injunction against the bank basically to stop the monies from being transferred or dealt with other than $1000 per week for living expenses. So, appreciating that people do need money and have access to their bank accounts to live, but the bank put a block on the account from there being any more than $1000 withdrawn each week, so that way we could preserve the bulk of that marital pool and the marital pool in that case was only $100,000. |
| DT: | Yeah. |
| CI:
34:00 | So, really we did need to stop it from going anywhere and so the Family Court was really great. They were able to deal with that urgently on Christmas Eve, unfortunately and they were able to get that injunction done. We had an order granting us relief to give a copy of those orders to the bank. So, that way they were aware of exactly the operation and the mechanisms of that. There are different banks and the different banks have different ways that they deal with things. Unfortunately, there are some banks who take a very strict approach insofar as injunctions are concerned and will even restrict internet login access once they receive notice that there is a proceeding on foot that requires them to have an injunction. There are some banks who actually look into the form of the injunction and the injunctive orders and do comply with the orders to allow people to have that flexibility of movement, but just won’t allow transfers to occur. They may change daily limits insofar as what you can withdraw from the bank. They may have daily limits on what you can transfer but they are very handy ways to stop assets from going around or being dealt with and they can be on third parties as well, which is one part that is very handy. The person who is affected by an injunctive order does not need to be a party to the proceedings. |
| DT: 35:00
36:00 | That’s such an interesting example, the positive injunction as a means of preserving assets. When I asked you the question, I thought, well, obviously we’re talking about negative injunctions, we’re talking about freezing orders, really, but this idea that selling the property by way of an order for sale is actually preserving the asset from its dilution by capitalised payments on the mortgage is a fascinating one. And that is also a good point about the benefit of an injunction over a caveat in the circumstances of a mortgagee exercising their power of sale. A caveat that represents a charge or an equitable mortgage can be sold through by a mortgagee; can’t do the same thing with an injunction. So, an important benefit. It sounds like the injunction is the more flexible of the two remedies here, you can use it to protect non-proprietary interests. It can be used both positively and negatively. It can be used over third party property or to injunct third party rights but of course, it’s a little more difficult to obtain than the lodgement of a caveat. So, let’s talk about making an application for an injunction under the Act and your Christmas Eve, 2021 application might be a good case study because often it’s the case that when you’re applying for an injunction, you’re doing so on very short notice. There are usually practice notes that explain how you’re going to make that application on short notice but if I were doing that in the Family Court, making an application at short notice to a duty judge how would I go about that? |
| CI:
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39:00 | You need to have proceedings on foot. So, it may be the case that the parties have not been before the court yet but because you have some urgency, you don’t have to comply with the usual pre-action procedures, which is very, very handy. You will need to make an initiating application and as part of your initiating application in your interim orders or interlocutory orders sort, you will need to include the relief for the injunctive orders and you’ll need to include and particularise the final relief that you’d be seeking. For example, if you were seeking that the property gets sold on final orders, but you’re seeking that the property be retained and be injuncted from sale in your interim orders, the court’s going to look at it and say, “well, if you’re seeking that the property be sold at the end of the day anyway, what’s the issue?” And you might have to explain that. How you explain that is; you pop it in your affidavit. Now, one of the ways that I did it on Christmas Eve was we had a solicitor who swore the affidavit. What was very handy was the solicitor in the particular situation had tried to contact the other party. She’d tried to call them, she’d tried to email them, she’d even texted them and asked them, “hey, look, we’re going to commence proceedings if you won’t respond to us because we know that you have the entirety of the marital pool in your bank account, the $100,000. We’re really worried that you’re going to transfer it overseas to a country that we’re never going to be able to claw it back from” – it wasn’t like it was New Zealand where you might be able to try and claw it back that way. It was a very difficult to deal with country – “and if we don’t hear from you, we’re going to have to go up to the courts.” There was no response. So, the solicitor swore an affidavit as to what she had been advised and believed insofar as the balance of the bank account, what the bank account number was, the evidence that we had for what the bank account number was, we had the transfers from the one party’s bank account showing the account numbers that it had been transferred to originally and what had happened in that situation and we were able to show exactly what the bank account was, exactly where the money had been transferred to. We particularised exactly why we had a belief that the money was going overseas. There’d been some contact to travel agents through the grapevines and that particular party was from overseas as well. So, there was a lot of reasons for us to believe that we were going to need to go up before the court. You will need to put on what’s called a financial statement or a financial questionnaire. The financial questionnaire is not a mandatory document, but it does very much assist the court on an urgent basis to understand why you’re arguing for an injunction to be lodged, particularly because the court needs to be satisfied that the asset is actually needing to be injuncted to be able to meet whatever case you’re seeking when it comes to a final orders of the court. So, you’ll need to put on your initiating application, you’ll need to have as part of your initiating application, interlocutory orders, seeking for the preservation of the asset. I always recommend people to put on some urgency, and you’ll need a letter of urgency to the court, effectively explaining what the affidavit says in very short form, not the level of detail, but explaining why there is such a significant urgency insofar as that application is concerned, it’s lodged online through the Comcourts Portal. You can’t lodge them in person anymore, unfortunately but it also is very handy because it means you can do it at midnight from home and then you might email it to the relevant registry for the attention of the duty judge so that they are aware that there is an application that has been filed. Provide the case number and explain why there is such an urgency in the application being before the courts on an urgent basis, particularly Christmas Eve. Nobody wants to be before the courts, but it often is those injunctions that are the only thing that people are hearing about and then once you have a return of that you’ll get some orders serving the other party with those documents. You do, usually, have to make some attempts to try and let the other party know about the fact that you’ve commenced proceedings. In the case that I had on Christmas Eve, the court actually asked me if I wanted the other party to be contacted because they were concerned that if they had gotten wind of the proceedings, that the monies would be transferred overseas immediately because of online banking. So, the court in that particular case found it was much more appropriate to actually not invite the other party to be heard on the application and said to me that if it wasn’t for the fact they had some questions about the affidavit that was drafted at midnight on the 23rd of December, they would’ve had it on the papers that morning and then just released the orders. So, the court then needed to be satisfied that the orders were in the best interest of the parties to reserve the asset pool as was necessary to be able to give everybody their entitlements under section 79. |
| DT: | And that approach of dealing with the initial hearing of an application for freezing orders, ex parte is pretty common, isn’t it? |
| CI: 40:00 | Absolutely. |
| DT: | To ensure that no one acts to circumvent those proposed freezing orders, at least in the short term but being heard ex parte on an injunction application means that you have some responsibilities to the court to put before the court all of the material that the other side might have put before the court if they had been there. Tell us a little bit about that. |
| CI:
41:00 | Absolutely. So, one of the obligations in an ex parte application is that you’re making sure that you’re giving the court the entirety of the story and not just your client’s side of the story. Sometimes it means putting your devil’s advocate hat on and often in those kinds of applications you have to really think what are the other side going to be arguing about? In that particular situation, I was quite lucky. The rest of the asset pool was a vehicle which was worth about $5,000. We didn’t know about what the other bank accounts were, so I couldn’t talk to the court about that and I had to explain to the court that while we had been given wind that there was a trip booked to overseas, we didn’t have any confirmation of the tickets or anything to that effect. So, I did have to unfortunately, play my own devil’s advocate in that particular application and some people might say, “well, why do you have to tell the court all of that information?” That is your obligation in an ex parte application is to present the entirety of the case, the good and the bad as to why the court may or may not make that order, but the court will go on the balance of convenience, particularly in preservation of assets like bank account funds in determining whether or not the application will stand and that’s why it’s so important to have all of your evidence before the court and be as frank with the court as possible, explaining that while there may be some bad points about your case and why there may be some arguments against the injunction, it’s best for the orders that you’re seeking to be actually made. |
| DT: | Sometimes it’s a good exercise in stealing the thunder of those arguments, isn’t it? If you can make them and then explain why they might not be as strong as your own arguments. |
| CI:
42:00 | Absolutely and I think sometimes it really helps you also determine whether or not your application actually has legs to stand on. It’s often the case that when preparing an application like that, you’re going through the usual motions of, okay, what’s the evidence that I need to be satisfied about to actually seek the injunction in the first place? But as part of the consideration in an injunction and assuming that you’re going to have an ex parte, or that you might have it with an opponent who has very limited instructions, you actually have to think about what are they going to say? What are the other points? And so you might, when you’re doing your drafting of your evidence with your client, look into it and say, “okay, well let me ask you some questions about the other side of the situation.” And you might go through those and you might look at it and go, “well, actually, from what you’re telling me, an injunction’s not necessary at all.” You might actually approach it this way and there may be another way to approach it. It may be the case that people are seeking an injunctive order on the sale of a particular property, unless that particular property is something very special and there’s a reason that you don’t want to sell it, it may be the case that there is actually five other properties in the pool that can meet the interest that you’re trying to assert. So, the sale of one property may not then be needed to be injuncted in circumstances where there might be a whole raft of other assets that might be able to meet what you’re claiming as your interest. Really injunctions are not intended to just freeze everything. They’re intended to freeze as much as is necessary. |
| DT: 43:00 | And of course, not being completely frank with the court on an ex parte application can often cost you the benefit of the orders you obtained in the first place. I think there was a case involving Kyle Sandilands where some freezing orders were overturned because of a failure to be frank about the state of things on the ex parte application. |
| CI: | With that one, one of the biggest issues is that as practitioners, it actually can give rise to a complaint to the Legal Services Commissioner if you have been willfully negligent in being frank with the court. Particularly, I think one of the biggest problems with junior practitioners, and I say that with myself included because I still consider myself to be junior, I’ve only just turned 30 so I’m still under that 30 category, but with junior practitioners, they’re worried about disappointing their clients and they’re worried about what their clients might think if they start telling the court all of the bad things about their case and they’re worried that they might not win the application but at the end of the day, your ethical obligations to the court are paramount and that’s one thing that I think a lot of junior practitioners need to have at the forefront of their mind, your obligations to the court are paramount and they are before your obligations to your client and so it can result, particularly if you’ve been willfully unfrank with the court, it can result in a complaint to the Legal Services Commissioner and a question as to whether or not you should continue to practice. |
| DT: 44:00 | Absolutely. Now, we’ve talked about two possible solutions to preserving marital assets today. We’ve talked about the caveat and the caveatable interest, and we’ve talked about the injunction, especially the urgent injunction. My question for you now is more of a strategic or forensic one than a legal one. Suppose I have a client who does have an arguable equitable interest, is there any situation in which I might want to seek an injunction to preserve the asset to which that equitable interest relates, even though I might be able to lodge a caveat? Is there any circumstance in which I’d rather do the latter than the former? |
| CI:
45:00 | There’d be a couple of reasons why you might wish to seek an injunction, particularly if you’re talking about real property. It may be the case that you want to seek an injunction against all of the assets of the marital pool, or a large chunk of the assets of the marital pool, and not just one property. It may be the case that you want to try and preserve a lot of things before the court. It may be the case that the application is urgent and you want some urgent dealings happening and one of the easiest ways to get an urgent hearing is with an injunction. With a caveat, while you might be able to just preserve the asset and keep the status quo alive either that caveat’s going to lapse and you’re going to have to commence proceedings anyway so you’ve just doubled your workload and doubled the amount of money that you’re spending with your client but also if you want to get before the court, which is what you should be doing. If you claim a caveatable interest, really you’re claiming an equitable interest that has to be litigated before the court and so it may be the case that bringing an injunction is the quickest way to be able to get your case before the court, even in a preliminary sense, so that way you can start to actually litigate that particular argument. |
| DT: | It at least means filing an originating process that claims the relief that the equitable interest ultimately relates to. |
| CI: | Absolutely. The biggest thing, as I’ve said for practitioners to be concerned about is if you are filing a caveat, but you wouldn’t go up to the Supreme Court and argue your case that same day, you probably shouldn’t be filing the caveat. |
| DT: | We’re nearly out of time but before we go, I started off with a question about your blend of criminal and family law in your practice. I might finish with that as well. For any one of our listeners who wants to replicate that blend and wants to work in those two areas, what would your tip to them be? |
| CI: 46:00
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48:00
49:00
50:00 | I was very fortunate as a junior practitioner, I worked in a law firm that did everything. When I say everything, I mean everything. We did crime, we did family, we did equity, we went up to the Federal Court, we went down to the Local Court, we went to VCAT, NCAT, all of the CATs, but I was extraordinarily fortunate to have a very broad practice area and be able to deal with lots of different areas. So, it’s given me a very good leg up in terms of where I’m practicing now and how I’ve practiced at the bar. The best way that you can do a broad practice is working in small firms. While the larger firms and the more specialised firms might be great in their one particular practice area, you do miss out on that broad spectrum of understanding of how the law operates and what considerations there are in all of the courts. I will say that there are certain courts which have a higher evidentiary basis insofar as what the judges are concerned about than other courts. There is a perception that at particular courts you don’t need as much evidence as at other courts and I think that there’s a problem with practitioners who are stuck in one small practice areas because they don’t have that great understanding of exactly what is required on an evidentiary basis in other courts, particularly if you’re seeking orders, that might affect some cross vesting legislation and jurisdiction. I think that it’s really important for practitioners if they can, of course to try and get out and try different areas of law, particularly before specialising because the reality is you might not know what you like. When I did my Practical Legal Training, I was convinced I was going to be an employment lawyer. I went through uni. I hated crime at uni. I hated family law at uni, and I did it just in case, but I hated it at uni. I thought I loved employment law. I did my Practical Legal Training in an employment law firm and absolutely hated it in practice. I then went to the firm that I did the majority of my practice in before I went to the bar and I was given an extraordinarily large area of different practice areas which predominantly was crime and family, but that did include a lot of civil litigation as well, and found that I really enjoyed having a broad spectrum of areas of law and I think that was really important, particularly if somebody wants to be a family lawyer to actually understand how the other areas of law operate. Often we find in family law that it sometimes impinges on bankruptcy law, insolvency law, corporate law, trusts, equitable interests, real property. So, all of those kinds of areas of law do flow into family law. So, being a family lawyer does not mean that you just know and understand section 60CC or section 79 of the Act and how that affects families specifically and in a small bubble but you do need to understand how other areas of law can operate and how a family dynamic, particularly ones that have got a lot of money and a lot of assets, what other interests, what other issues, what other considerations have to be made when determining a pathway for a particular piece of litigation? It’s often the case that it might look very simple, but really you might have shadow director issues insofar as companies are concerned. You might have shareholder agreements that impinge upon family companies. You may have a case like I have had in the past, everything’s in the wife’s name, but she actually has no idea what’s going on with any of the companies, company’s going into liquidation, and she’s brought before ASIC to explain what exactly has happened with all of her companies and she sits there and goes, “I have absolutely no idea what you’re talking about. What do you mean that my name’s on a company?” We’re finding it now that it’s going to be a lot easier for ASIC to be able to actually understand who is dealing with companies because now in order to be a director of a company, you’re required to give a director ID, which is digital ID. They have to make sure that the person actually exists and the information that’s being provided is actually truthful so that way they can really hone down on improper dealing. And, see, as a family lawyer, a lot of people wouldn’t know exactly how that all operates if they’ve been operating in the bubble of the Family Law Act and the Family Court so I do think it’s really important that people do spread their wings out a little bit. If you don’t have the opportunity as part of your actual practice and your job to appear and practice in other courts or other jurisdictions, take a couple of days off, go and sit down at the Local Court domestic violence list and understand exactly how domestic violence orders work. I think that’s a really, really important way for family lawyers to actually understand how orders operate in conjunction with the family courts. If you can go up to the real property list and watch Justice Stark run through the real property applications and understand exactly how real property orders work. Sit in the equity list and understand exactly how equitable interests may arise and listen to some cases on equitable interests. The other really important thing that I think family law practitioners need to do is jump on case law. The New South Wales CaseBase where you can read judgments and actually understand how sometimes the Family Law Actis involved in the state courts and exactly how cross vesting powers work. It’s one of the best things that I think I ever did as a practitioner was every week I would jump on case law and read what the current judgments were and see exactly if any of them had any Family Law Act involvement. It’s really important to understand how that all operates insofar as Harman obligations are concerned. So, where there are multiple proceedings involving the same parties in different jurisdictions, how you might use those documents all in your Family Court proceeding. I think that’s something that really is important to understand exactly how you might get that evidence before the Family Court or how you might get Family Court evidence before that particular court and possibly depending on what kind of work you’re doing in your family law practice, go down and watch Justice Black in the corporations list if he’s still running it at the moment or whoever is running the corporations list on a Monday morning and actually understand how corporations may be affected by the Family Law Act or how the Family Law Act and family law proceedings might be affected by the corporations list. |
| DT: 51:00 | Absolutely. A profession where there is so much pressure to specialise and specialise early into this spiral of ever increasing specialisation. You specialise in corporate advisory work and then corporate advisory work just for this type of corporation and then just in this jurisdiction for this type of corporation, it’s a overlooked benefit to really learn a broad range of practice areas and I think we’ve talked on this show before about the benefits of being a generalist fox and not a specialist hedgehog and I’m sure we will again but Chauntelle, thank you so much for joining me today on Hearsay the Legal Podcast. |
| CI: | Thank you so much for having me. |
| Ross Davis:
52:00 | As always, you’ve been listening to Hearsay the Legal Podcast. I’d like to thank our guest Chauntelle from Chalfont Chambers for coming on the show! If you’re keen to hear more in the family law space, check out the episode with Andrew Tiedt, who explores the issue of coercive control. If you’re an Australian legal practitioner, you can claim one Continuing Professional Development point for listening to this episode. Whether an activity entitles you to claim a CPD unit is self-assessed, but we suggest this episode entitles you to claim a substantive law point. More information on claiming and tracking your points on Hearsay can be found on our website. Hearsay the Legal Podcast is, as always, brought to you by Lext Australia, a legal innovation company that makes the law easier to access and easier to practice, and that includes your CPD. Finally, before you go, I’d like to ask you a favour. If you like us, please leave us a Google Review. It helps other listeners find us and that means that we can keep making the great content that you love. Thanks for listening and we’ll see you on the next episode of Hearsay. |
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