The cost of litigation is often the most important non-legal issue parties want to know about when deciding whether to take a matter to Court.
Litigation is more expensive and usually takes longer than resolving a matter out of Court. While the majority of matters in the family law jurisdiction resolve by agreement, and most family lawyers work towards achieving this in the first instance, a portion of matters require the intervention of the Court to determine issues in dispute.
Sometimes we hear clients speak of “getting the other party to pay my costs” or “when he/she loses, they will have to pay my legal fees.” In family law proceedings, the default principle is that each party bears their own legal costs.
Judges do have a discretion under the Family Law Act 1975 to make orders requiring one party to pay the other party’s legal costs. Costs orders may be made where the circumstances justify it. To determine whether a costs order should be made, the Court takes into account:
• The financial circumstances of the parties
• The conduct of the parties to the proceedings
• Whether proceedings were necessary because a party had failed to comply with previous Court Orders
• Whether one party has been “wholly unsuccessful” in the proceedings
• Whether a party has made written offers to settle the proceedings and the result of the proceedings is equal to or better than that offer
• Any other relevant matters.
Where a cost order is made, it is usually made as assessed by a schedule of costs under the relevant Court Rules or on a party-party basis. This means the costs were necessarily incurred and reasonable. Both types of costs orders will usually be less than the actual costs the litigant incurred. In exceptional circumstances, indemnity costs may be awarded for payment of all costs reasonably incurred.
Even in cases that don’t go to Court, parties should weigh the cost and benefit of concluding matters at an early stage against their future legal expenses if it were to continue, when making decisions about process or settlement.
In property matters, out-spending your eventual entitlement from the family law property division on legal fees is an unfortunate outcome and one which can be avoided. Good lawyers will not only be upfront about their fees and disbursements, but also provide clients with sound advice about the substance of their matter and commercially focussed
advice, to assist parties in making settlement decisions.
For example, Annie might be entitled to receive $25,000 from her husband as a final property settlement, but her husband is only offering her $20,000. When thinking about that offer, Annie should consider that the differential of $5,000 between her proposal and her husband’s, could potentially be spent on legal fees to take the matter to Court.