Who Pays for the Legal Costs?
As a general rule under the Family Law Act, each party is expected to bear their own costs, meaning that each party is responsible for paying for their legal fees irrespective of whether they ‘win’ or ‘lose’ the case.
However, the court may exercise its discretion to make a costs order as it thinks just to do so. Under the Family Law Act, in deciding whether or not to make a costs order contrary to the general rule, the court will consider the following:
- The parties’ financial circumstances, including whether either party was received legal aid.
- The conduct of the parties in the proceedings.
- Whether the proceedings concerned a party’s failure to comply with a previous court order.
- Whether a party was wholly unsuccessful in the proceedings.
- Whether either party made an offer to settle and the terms of such offer.
- Such other matters as the court considers relevant.
Exceptions to the General Rule
The circumstances in which the court may exercise its discretion to make an order contrary to the general rule include the following:
Frivolous or Vexatious Proceedings
Where the proceedings are baseless or have no reasonable prospect of success, the court may be inclined to make a costs order against the offending party. The court may also prevent or limit that party’s right to bring further proceedings.
Wholly Unsuccessful
Costs orders may be made in favour of the ‘winning’ party in proceedings where one party has been wholly unsuccessful, particularly where their claims had no real merit. This generally occurs in appeal cases.
Failure to Comply with Orders
Where proceedings have been brought against a party due to their failure to comply with existing court orders, costs will often be awarded to the successful party.
Misconduct
The court may make a costs order against a party whose conduct warrants such an order. For example, where a party has failed to comply with their obligation to make full and frank disclosure, refused to negotiate, knowingly made false allegations against another party, or knowingly given false evidence.
Disparity in Financial Circumstances
The court may order costs in favour of one party where there is a disparity in the parties financial circumstances. However, this will not justify a costs order if the financially weaker party has conducted the proceedings in an unjustifiable manner.
Types of Costs Orders
Interim Costs Orders
The court may make an order requiring payment of money or transfer of property to provide funds to one party to fund an application for property settlement.
Party-Party Costs Order
Costs orders are ordinarily made on a party-party basis, in which case the unsuccessful party must pay the successful party's costs as assessed or agreed. Note that party-party costs will ordinarily only cover a portion of your legal costs, and you may still be liable to pay some of your legal fees.
Partial Costs
The court may make a costs order that a person pay some part of a party’s costs.
Indemnity Costs
An indemnity costs order will require the unsuccessful party to cover all of the successful party’s costs.
An indemnity costs order will only be made in extreme circumstances, e.g., where the proceedings were commenced for some ulterior motive and had no chance of success, where one party knowingly makes false allegations of fraud, where there is evidence of misconduct, where groundless allegations have unduly prolonged the case, or where a party has unreasonably refused an offer to compromise.
Specific Amount
A costs order may be made, ordering that one party pay a specific amount towards another party’s costs.
Costs of Independent Children's Lawyer (ICL)
An ICL is normally funded by Legal Aid. However, parties will ordinarily be required to contribute to the costs incurred by the ICL unless it is shown that they would suffer financial hardship if ordered to do so. In practice, financial hardship may be established in the following circumstances:
- Where a party received an income-based pension, allowance or benefit; or
- Where a party has a low income and modest assets.
Costs Orders Against Lawyers
The court may make a costs order against a party’s lawyers. Costs orders against lawyers are generally made in the following circumstances.
- The lawyer has failed to comply with the rules or procedures.
- The lawyer has engaged in improper or unreasonable conduct.
- The lawyer has committed gross negligence.
- The lawyer has sought to improperly initiate or maintain legal proceedings.
Pursuant to rule 12.15 of the Family Law Rules, a costs order may require that a lawyer:
- Not charge a client for specified work.
- Repay money to a client paid for legal costs.
- Pay the costs of another party.
DISCLAIMER: The information provided above is published for general informational purposes only and is not intended to be nor should it be relied upon as a substitute for legal or other advice.