The court appoints a litigation guardian when a litigant lacks the capacity to instruct their lawyer, either because they are mentally impaired or under 18 years of age.
A litigation guardian is required to act in best interests of the party and has the same obligations as a lawyer. The purpose of the role is to protect the rights of litigants who would otherwise be disadvantaged and court process. Lord Justice Chadwick in the 2003 case of Masterman-Lister v Brutton & Co said:
“The pursuit and defence of legal proceedings are juristic acts which can only be done by persons having the necessary mental capacity; and the court is concerned not only to protect its own process but to provide protection to both parties to litigation which comes before it. A defendant is entitled to expect that he will not be required to defend proceedings brought against him by a person of unsound mind acting without a next friend (mentally sound representative).”

Rules
Rules 3.12 to 3.18 of Part 3.5 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 provide that a person can be appointed as a litigation guardian if they are an adult, have no interest in the proceeding adverse to the interest of the person needing the guardian, and can fairly and competently conduct the proceeding for the person needing the guardian.
A litigation guardian can be appointed by the court or by application. A court can also substitute or remove them.
A party to proceedings needs a litigation guardian “if the person does not understand the nature or possible consequences of the proceeding or is not capable of adequately conducting, or giving adequate instruction for the conduct of, the proceeding” (Rule 3.12(1)). Also, unless the court orders otherwise, “a minor in a proceeding is taken to need a litigation guardian in relation to the proceeding” (Rule 3.12(2)).
If a person suitable to be appointed as a litigation guardian cannot be found, the court can ask the Attorney-General to appoint someone.
The court can order payment of a litigation guardian’s costs and expenses by a party or from the income or assets of the person for whom the guardian is appointed.

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