Pursuant to s 117 of the Family Law Act 1975, each party to proceedings in family law shall bear their own costs. This is in contrast to other types of civil litigation where the responsibility for costs is assigned following the determination and conclusion of a matter.
There are, however, exceptions to the general principle, and s 117(2A) sets out the matters to which the Court shall have regard in determining whether to make a costs order against a party. These include:
- the financial circumstances of each of the parties;
- the conduct of the parties in relation to the proceedings, including in relation to pleadings, discovery and production of documents, and directions to answer questions and admissions of facts;
- whether the proceedings were necessitated by the failure of a party to comply with previous orders of the Court;
- whether any party has been wholly unsuccessful in the proceedings; and
- whether either party has made an offer in writing to the other party to settle the proceedings, and the terms of such an offer.
Costs that are awarded to be paid by one party by another are known as “party-party costs”, and the rules governing them are set out in the Federal Circuit Rules 2001 and the Family Law Rules 2004. Unless the Court orders otherwise, the amounts payable for a party-party costs order are set out in the schedules of the rules.
However, in exceptional circumstances the Court does have the liberty to depart from these scales. Where the conduct of a party warrants it, the Court can award the payment of all costs that the other party reasonably and properly incurred, in what are known as “indemnity costs”. Some examples of where indemnity costs may be awarded include:
- where a party makes false or irrelevant allegations;
- where there is evidence of particular misconduct causing loss of time to the Court and the parties;
- a party unduly prolonging a case with groundless allegations; and
- a party unreasonably refusing an offer to settle.
It is important for litigants to keep these principles in mind at all times, to ensure that they comply with the rules and orders of the Court, and to make pragmatic and economical decisions where possible.
Costs of protracted litigation can exceed tens of thousands of dollars for each party. This can substantially reduce the asset pool available for distribution to the parties at the finalization of the matter, and this can be further compounded by a costs order.