This is a common question faced by many people who separate. Litigation can be expensive and it is not uncommon for one person to control most of the parties’ wealth in a relationship. In this situation, the person who does not have control of the parties’ wealth or who earns a much lower income than the other party, is at a disadvantage.
So, what can be done?
The disadvantaged party can apply for a Court order to give them access to funds before the litigation is concluded. This can be done in two different ways.
Applying for an interim costs order
This is an order made specifically to allow one party to access funds for the purpose of funding their litigation. The funds can come from a variety of sources – for example, it could be a cash payment from the other party, proceeds from the sale of a joint property, or from the parties’ savings.
When applying for an interim costs order, the Court will consider many factors, including:
- The applicant’s and the respondent’s financial circumstances to assess whether the applicant actually needs an interim costs order and whether there are sufficient funds in the asset pool for this purpose;
- The applicant’s inability to fund their legal costs and the consequences of this;
- Whether the applicant has made enquiries for alternate financing and the outcome of those enquiries, for example, can the applicant borrow money from a family member?
- The applicant’s estimated legal costs.
When an interim costs order is made, it is important that the quantum of the costs order and the purpose of the order is specified. This ensures that the party receiving the funds, do not receive a “blank cheque” to use as they please.
Applying for an interim property settlement order
This order allows one party to receive funds as an interim property settlement. This means that the -funds will form part of any final property settlement ultimately received by that party. For example, if that party receives $300,000 as an interim property settlement, and the Court ultimately orders they should receive $1m as a final property settlement, then they will only get a further payment of $700,000. There is no obligation for the funds to be used to finance the party’s litigation.
The matters that the Court must take into account when considering an application for interim property settlement are different from those for an interim costs order. It is important to seek specialist advice about these matters, particularly because the different types of orders can have different impacts on the outcome of the final property settlement.