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Indemnity Costs in Family Law Proceedings

Costs orders, that is, an order requiring the “losing” party to pay the legal costs of the “winning” party, are a rarity in Family Law Court proceedings, particularly when compared to other jurisdictions.

This is because section 117 of the Family Law Act makes it clear that subject to the following considerations, each party should pay for their own legal costs:

  • The parties’ respective financial circumstances, including whether they are in receipt of legal aid;
  • The parties’ conduct during the proceedings;
  • Whether the proceedings were necessary because a party had not complied with a previous Court Order;
  • Whether one of the parties had been wholly unsuccessful in their case; and
  • Whether either party to the proceedings made an offer of settlement in writing to the other party and the terms of that offer, compared to the eventual outcome.

The Court is also entitled to consider any other matters it considers relevant.

The recent single judge Full Court of the Family Court decision of Justice Strickland, Medlon & Medlon (No. 6) (Indemnity costs) [2015] FamCAFC 157, considered these provisions. The Wife brought an application seeking that the Husband’s legal team be restrained from acting on his behalf, essentially on the basis that there was a conflict of interest. She was entirely unsuccessful and the Husband then sought an order for costs against her.

His Honour not only determined that it was appropriate to make a costs order against the Wife, but went a step further, ordering that the costs be paid on “an indemnity basis” meaning that all reasonably incurred costs incurred by the Husband should be paid by the Wife.

The relevant case law, as exemplified by an often cited authority, Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 536, demonstrates that an order for indemnity costs, whilst reserved for exceptional cases, may be appropriate where a party:

  • Properly advised, should have known that they had no chance of success;
  • Knowingly made false allegations of fraud, or irrelevant allegations of fraud;
  • Conducted themselves in such a way that wasted the time of the Court and other parties;
  • Made allegations which should have never been made, or prolonged a case by groundless contentions; or
  • Imprudently refused an offer to compromise.

In Medlon, Justice Strickland found that the very serious nature of the allegations made by the Wife, which were not verified, coupled with the fact that she should have known that she had no prospect of success justified an order that she pay the Husband’s costs on an indemnity basis.

In my experience, it is very common for family lawyers to assert in correspondence that their client will be seeking costs, often on an indemnity basis. Whilst this is obviously sometimes completely appropriate, it is also regularly a strategy to unsettle and intimidate the other party.

If you find yourself on the receiving end of a letter threatening an application for indemnity costs against you, it is my strong advice that you obtain legal advice if you have not already done so. Not only should this give you an impartial and realistic assessment of the prospects of your case, it may also help quell any misplaced fears by giving you a greater sense of certainty and confidence in your legal position.

Image Credit – Robyn Mackenzie ©

Written by Peter Magee on February 22, 2017

Peter is a partner of Armstrong Legal and head of our Family Law Division. He has over 15 years’ experience. His past experience dealing with large cases benefits his family law clients by providing insight into complex and tactical issues. As a result, Peter can often achieve settlements outside Court that may otherwise have not been achievable. View Peter’s profile

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