Costs Orders In Family Law

The general rule for costs in family law matters is contained in section 117(1) of the Family Law Act 1975, which states “each party to proceedings under this Act shall bear his or her own costs”. However, there are exceptions to this rule, and the court can make orders requiring one party to pay the other party’s costs.

What must be considered

Section 117(2) of the Act states that it the court believes there are circumstances that warrant it, it can make an order for costs. The Act sets out the factors the court should consider, which include:

• the financial circumstances of the parties;
• whether any party receive Legal Aid;
• the conduct of the parties in the proceeding;
• whether parties have followed previous orders;
• whether any party has been wholly unsuccessful in the proceedings;
• whether either party made an offer to settle, and the terms of the offer;
• any other matter the court considers relevant.

However, there is no requirement for more than one of these factors to be present before a costs order is made.

Further, there is no distinction made in the Act between costs orders for parenting or property matters.

If an Independent Children’s Lawyer is appointed, the court can order that each party bears the cost in a proportion the court considers fair. This applies unless a party has received Legal Aid or a party would suffer financial hardship if it had to pay.

Offers to settle

A court may make a costs order against a party who declines an offer to settle, if after the final hearing it can be seen that party would have been better off accepting the offer. This power is available to ensure offers to settle are considered seriously by both parties, to minimise the cost of litigation, to reduce the court’s considerable workload, and to avoid the risk of a wealthier party dragging out proceedings to exhaust the other party.

Conduct of parties

Any failure to comply with the Federal Circuit and Family Court (Family Law) Rules 2021 will be considered, such as:

• failing to disclose documents;
• failing to answer specific questions from the other party;
• failing to admit truth of facts or the authenticity of documents.

Party and party costs

It is standard for a costs order to be made on a “party and party” basis, where an unsuccessful party is ordered to pay the costs of the successful party. However, a successful party will not be able to recover all of its legal costs. It will be able to recover only the costs for certain items of work on a scale prescribed under the Federal Circuit and Family Court (Family Law) Rules 2021.

It is important to remember that party and party costs will generally not reflect the amount you have been charged by a lawyer; usually party and party costs will be significantly less than your actual legal fees.

It is also worth noting that an order for costs is made to compensate a party against expenses incurred in proceedings; costs are not a penalty or a payment of damages.

Indemnity costs

An indemnity costs order means that one party must pay all costs that the other party reasonably incurred. There must be exceptional circumstances for the court to depart from the usual practice by awarding indemnity costs.

In the 2020 Federal Circuit Court case of Jaros & Calden, Judge Heffernan listed situations when it may be appropriate for a court to make an order for indemnity costs:

• where a party makes allegations of fraud knowing them to be false;
• or a party makes irrelevant allegations of fraud;
• evidence of particular misconduct that causes loss of time to the court and to other parties;
• the fact that proceedings had been instituted and maintained for an ulterior motive;
• where proceedings have been commenced in disregard of known facts, or clearly established law; and
• the making of allegations which ought never to have been made or a case based on groundless contentions.

He went on to say: “Parties must be dissuaded from making baseless allegations, disobeying court orders for tactical reasons, using children as weapons in a litigious war of attrition and wasting court time.”

For advice or representation in any legal matter, please contact Armstrong Legal.