The general rule for costs in Family Law matters is that each party bears their own costs (Family Law Act 1975 (the Act) (sec 117(1)). However, there are exceptions to this rule, and the court can make orders requiring one party to pay the other’s costs.

What the court considers

If the court believes there are circumstances that warrant it, it can make an order for costs (Family Law Act 1975 sec 117(2)). The Act sets out the factors the court should consider, including:

1. the parties’ financial circumstances;
2. whether either party made an offer to settle, and the terms of the offer;
3. whether parties have followed previous orders;
4. the conduct of the parties in the proceeding;
5. whether a party is legally aided;
6. whether a party has been wholly unsuccessful in the proceedings;
7. any other matter the court considers relevant.

The presence of one of these factors is sufficient for the court to make a costs order.

There is no distinction between costs orders for property matters and parenting matters.

If an Independent Children’s Lawyer is appointed, unless a party is legally aided or would suffer financial hardship if they had to pay, the court can order that each party bears the cost in proportions it considers fair.

Offers to settle

A court may make a costs order against a party who has declined an offer to settle, if after the final hearing it can be shown that party would have been better off accepting the offer. This power is available to:

1. minimise the cost of litigation
2. ensure that both parties seriously consider offers
3. settle, to avoid discourage a wealthier party from dragging out proceedings to exhaust the other party, and
4. reduce the court’s considerable workload.

Conduct of parties

The court will consider any failure to comply with the Federal Circuit and Family Court (Family Law) Rules 2021, including failure to:

1. answer specific questions from the other party;
2. disclose documents; and
3. admit the truth of facts or the authenticity of documents.

Party and party costs

Costs orders are usually 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 set out in the Federal Circuit and Family Court (Family Law) Rules 2021.

Party and party costs are usually significantly less than your actual legal fees.

An order for costs is not a penalty or a payment of damages: it is made to compensate a party against expenses incurred in proceedings.

Indemnity Costs

An indemnity costs order means that one party must pay all costs reasonably incurred by the other party. The court will award indemnity costs only in exceptional circumstances.

A recent Family Law case (Jaros & Calden) listed situations when it may be appropriate for a court to make an order for indemnity costs. When:

1. a party makes allegations of fraud knowing them to be false; or
2. a party makes irrelevant allegations of fraud;
3. misconduct that causes loss of time to the court and to other parties;
4. proceedings being instituted and maintained for an ulterior motive;
5. where proceedings were commenced disregarding known facts, or clearly established law; and
6. making allegations which ought never have been made or a case based on groundless contentions.

In that case, Judge Heffernan said: “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.”

Where to Now?

Contact us if you need legal advice and representation in a Family Law matter.