Clients are commonly concerned about the impact that legal costs may have as a result of Family Law proceedings. This concern is compounded when the client is led to believe that they have to pay the other party’s legal costs in addition to their own.
Ben and Lisa separated six months ago. The separation was not amicable, with Ben suddenly moving out of the marital home and refusing to talk or communicate with Lisa. Accordingly, no property settlement has occurred as Ben will not speak with Lisa. Lisa has been considering retaining a lawyer for some time to assist her with the property settlement and communicating with Ben.
Last weekend at a mutual friend’s barbeque, Ben and Lisa ran into each. It was an awkward encounter, made worse by the fact that Ben had been drinking beers all afternoon and Lisa had consumed several wines. As Ben went to leave, Lisa threw her wine over him, causing a verbal argument to ensue. Ben shouted at Lisa that he would “take her to Court for everything she is worth!” and that “I’m going to win in Court and you will have to pay my legal costs!”.
The morning after the barbeque Lisa sorely regrets throwing her wine over Ben. Ben’s words continue to echo in her mind and she is now worried to go and see a lawyer in case she has to pay Ben’s legal costs, as well as her own.
In Family Law matters generally the parties who are involved in the proceedings have to pay their own legal costs (s117 of the Family Law Act 1975).
It does not matter who behaved more poorly in the breakdown of the relationship, or who was at fault for the breakdown of the relationship. The Family Law jurisdiction is a “no fault” jurisdiction, which means that the division of a property settlement and the associated legal costs are not apportioned based on fault. Therefore, Lisa will not be paying Ben’s legal costs on the basis that she threw her wine on him, or that the breakdown of their relationship was not amicable.
There are some exceptions to the parties paying their own legal costs, however these exceptions are rare. Examples of reasons why someone may have to pay the other party’s legal costs are as follows:
Offers of Settlement
If one party has declined a reasonable offer for settlement from the other party and has subsequently been awarded a sum by the Court which was less than that offered, then that party may have to pay the other party’s legal costs.
Losing an Application
If you make an application to the Court and lose that application, then the Court may order that the losing party pay the other party’s costs. This is especially relevant when cases are commenced when it is deemed by the Court that they have no chance of success.
The payment of legal costs by one party to another are categorised as either “Party-Party Costs” or “Indemnity Costs”.
In the Federal Circuit Court of Australia (which is the most common jurisdiction for Family Law property settlements in Australia) costs known as “party-party” costs are the most common form of costs ordered by the Court. Party-Party costs are based on the Court scale and often only represent a portion of the actual costs incurred by that party.
In some cases, “indemnity costs” are awarded by the Court in circumstances where one party’s conduct warrants same. This is a higher level of costs and can cover all of the reasonable costs incurred by a party.