A costs order is an order made by the court that one party to litigation has to pay all of part of the legal costs incurred by another party. In family law, each party is usually required to pay their own litigation costs unless there are particular circumstances that, in the court’s opinion, justify a costs order.
Should A Costs Order Be Made?
When determining whether a costs order should be made or what kind of order should be made, the law requires the court to consider the following:
- each party’s financial circumstances;
- whether parties are represented by legal aid;
- the conduct of the parties to the proceedings, including whether each party complied with the rules of pleadings, disclosure and other similar matters;
- whether the application was necessary because a party did not comply with a court order (for example, an application for the recovery of a child);
- whether a party was wholly unsuccessful in the proceedings; and
- whether either party made an offer in writing to settle proceedings.
In addition to the above considerations, the court can also have regard to any other matter that is deemed relevant in the circumstances.
It is very difficult to obtain a costs order in parenting proceedings. This is because it is often almost impossible to determine whether one parent has been “wholly unsuccessful” in the proceedings such that, combined with other considerations, it is just for an order to be made.
In property matters, a party will often write a letter outlining an offer of settlement to the other party prior to the final hearing. This is because if the offer is rejected, the letter can assist the party in obtaining a cost order at the end of proceedings. This is particularly so if the other party receives a less favourable outcome from the court than what was offered prior to attending court.
There are different types of costs orders that can be made, depending on the circumstances that give rise to the costs order. These are:
Party/Party costs are intended to reimburse one party for legal costs which they have paid or owe to their solicitor. This order is made where the costs have been agreed between the parties or assessed. In practice, party/party costs usually only provide partial reimbursement of the costs incurred in litigation.
If the court orders costs to be paid and does not fix the amount, or if costs are an entitlement under the Federal Circuit Court and Family Court Rules 2021, costs are to be calculated as follows:
- in Division 1 of the Federal Circuit and Family Court of Australia, the scale of costs contained in schedule 3 of the Federal Circuit and Family Court (Family Law) Rules 2021;
- in Division 2 of the Federal Circuit and Family Court of Australia, the scale of costs contained in Schedule 3 or the scale of costs contained in Schedule 1 of the Federal Circuit and Family Court (Family Law) Rules 2021.
The court is at liberty to exercise discretion when applying the scale and may make orders that a specific amount be paid or apply another method to determine costs.
Solicitor And Client Costs
Solicitor/client costs are the costs of the lawyer’s services and associated work in preparing and conducting the litigation as well as the lawyers ‘out of pocket’ expenses (also known as disbursements).
An order that costs be paid on a solicitor and client basis usually results in a larger amount than party/party costs.
The court has the power to make an order on a solicitor and client basis, except where there is a valid costs agreement. Costs between solicitors and clients are determined by the scale in Schedule 3 of the Act.
Indemnity cost are all costs incurred during the litigation. This includes fees, charges, disbursements, expenses and remuneration incurred by a party in undertaking the proceedings. Indemnity costs orders are rare in family court proceedings.
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