The general rule in Family Law Proceedings is that the parties each bear their own costs of the proceedings, however there are some circumstances in which the Federal Circuit and Family Court of Australia (‘the Court’) can use its discretion and make what are known as ‘Costs Orders’.
If the circumstances justify the ordering of costs, the Court has the power under section 117 of the Family Law Act 1975 to make a Costs Order against a party to a Family Law Proceeding. The Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (‘the Rules’) also provide further guidance as to Costs Orders at Chapter 12.
What you need to know about Costs Orders?
The Court will consider the following circumstances prior to making a Costs Order:
(a) The financial circumstances of each of the parties to the proceedings;
(b) Whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c) The conduct of the parties to the proceedings in relation to the proceedings including but not limited to the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters (e.g. failing to provide full and frank disclosure, non-compliance with Orders for the filing of material and failing to admit the truth of certain facts or the authenticity of certain documents);
(d) Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the Court or failure to comply with the Pre-Action Procedures;
(e) Whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f) Whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) Such other matters as the Court considers relevant.
So it is clear that the Court has a broad discretion in terms of the issuing of Costs Orders and can make Costs Orders of its own initiative, or a party may apply for a Costs Order at any stage during the proceedings.
Types of Costs Orders
There are three (3) types of Costs Orders the Court can make which are as follows:
1. Party to Party Costs
This is where the Court makes a Costs Order pursuant to the ‘scale’ contained in Division 1 and Division 2 of the Rules. The scale provides an amount which the Court can order be paid to a party for their engagement in the various stages of Family Law Proceedings, such as the filing of or response to an Initiating Application, attendance at an Interim Hearing or attendance at a Final Hearing for a few examples.
These Costs Orders do not equate to the full ‘dollar for dollar’ amount of the legal costs incurred by the party, but rather reflect a lower amount pursuant to the scale. The Court can however use its discretion and vary from the scale and issue higher or lower amounts as they see fit based on the individual circumstances of the matter.
These are the most common form of Costs Orders that are ordered by the Court.
2. Indemnity Costs
This is where the Court decides based on the circumstances of the matter to depart from the scale and order that a party pay all the other party’s costs ‘reasonably and property incurred’. This means the Costs Order will require payment of close to or the full amount the other party has paid to their solicitors and counsel for the proceedings or a part of the proceedings.
These forms of Costs Orders are only ordered in exceptional circumstances. The exceptional circumstances considered when ordering Indemnity Costs include the following:
(i) Where false allegations of fraud are made by a party who knows them to be false or the making of irrelevant allegations of fraud;
(ii) Where there is evidence of particular misconduct which causes loss of time to the court and the other parties;
(iii) Where the proceedings were commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law;
(iv) Where allegations were made which should never have been made or the litigation was prolonged by groundless contentions;
(v) Where there was an imprudent refusal of an offer to compromise;
(vi) Where a party is in contempt of court;
(vii) Where a party is deliberately not truthful and provides false and/or misleading information to the Court;
(viii) Where there is continued non-compliance with the Rules and/or Court Orders; or
(ix) Where there are continued breaches of Court Orders.
3. Costs Orders against Lawyers
This last form of Costs Order is rare, however the Court can decide either of its own initiative or by application of a party to make a Costs Order against a lawyer which requires the law firm to not charge for work done, repay money already paid, pay the costs of a party or repay another person’s costs.
These Costs Orders only occur in exceptional circumstances where a lawyer has caused costs to be incurred by a party or other person because of the following:
(i) A serious failure to comply with the Rules or an Order;
(ii) A serious failure to comply with a Pre-Action Procedure;
(iii) Improper or unreasonable conduct; or
(iv) Undue delay or default.
Why it is important to consider Costs Orders?
Since the changes were implemented to the Court in September 2021 we are seeking an increase in Costs Orders being issued by the Court, increasing both the risk of receiving a Costs Order against you or your solicitors or the benefit of receiving a Costs Order in your favour.
So, it is important to ensure that both yourself and your solicitors are complying with the Pre-Action Procedures, the Rules and any Orders issued by the Court. For a few examples, should you fail to provide your instructions to your solicitors in a timely manner, these instructions are not accurate or are deliberately deceitful or misleading you are at real risk of receiving a Costs Order against yourself which can be significant.
In the alternative if you are struggling with another party failing to comply with the Pre-Action Procedures, the Rules, or Court Orders it is important to consider your options in terms of making an Application for a Costs Order, as this may assist substantially in the payment of your legal fees depending upon the circumstances.
Please contact our team at Richardson Murray to book in for a free initial consultation to find out more about the risk of Costs Orders or your options in terms of making an Application for a Costs Order.
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