Who Generally Pays Legal Fees in Property Matters?
In family law proceedings, the general rule is that each party pays their own legal costs. This principle is set out in section 117 of the Family Law Act 1975.
However, there are exceptions. In certain circumstances, the court may order one party to contribute to, or pay, the other party’s legal fees.
Legal costs already paid may also be relevant when determining a final property settlement.
When Will the Court Order Costs?
Although costs orders are not common, the court may make one where it considers it appropriate in the circumstances.
Examples include:
- Where one party has breached a court order, forcing the other party to take further legal action
- Where ongoing issues (such as failure to provide required documents) prolong proceedings
- where a party makes a reasonable settlement offer which is refused and then achieves an equal or better outcome at court
A court will consider a range of factors when deciding whether to make a costs Order, including:
- The financial circumstances of each party;
- Whether either party is receiving legal aid;
- The conduct of each party throughout the proceedings;
- Whether a party’s actions caused unnecessary delay or expense;
- Whether one party was wholly unsuccessful; and
- Whether a formal offer to settle was made and unreasonably rejected.
If a court does make an order that one party pays the other party’s legal fees, these costs will most likely be awarded on a “party-party” basis. This means that only a portion of the successful party’s legal costs will be recovered, and that the amount is determined according to a set scale under the court rules.
In more serious cases, the court may order costs on an “indemnity basis”, meaning that the majority (or all) of the legal costs may be recoverable, although this is an Order made only in serious circumstances.
How are paid legal fees in family law matters dealt with in regards to a property settlement?
Since Shinohara & Shinohara [2025] FedCFamC1A 126, paid legal fees are no longer considered an “add-back”, as they were often categorized prior to the handing down of this decision. Now, the Court can only divide what is physically or legally in existence at the time of the trial. Paid legal fees are no longer part of the divisible pool of assets and not included in the matrimonial balance sheet.
The consequence of this decision is that whilst no longer considered an “add-back”, the Court will still take into account paid legal fees, especially in circumstances where one party pays their legal fees from joint assets, whilst the other borrows money to pay for their legal fees. Under the new approach, these expenses are more likely to be considered as part of the overall analysis of contributions and future needs, rather than restored to the asset pool.
If you require legal advice or representation in any legal matter, please contact Armstrong Legal.
This article was written by Ruby Abbott-Monnox - Watts McCray Lawyers
Ruby Abbott-Monnox holds a Bachelor of Criminology and Criminal Justice from the University of New South Wales and a Juris Doctor from the University of Technology in Sydney. She also completed her Graduate Diploma in Legal Practice at the University of Technology in Sydney and was admitted to practice in New South Wales in May 2022. Ruby practises in family...
