Section 117 of the Family Law Act 1975 (“FLA”) sets out the general principle that “each party to proceedings under this Act shall bear his or her own costs”. However, that general principle is subject to certain other provisions of the FLA. If there are justifying circumstances, then the Court has power to make such costs order as the Court considers just requiring that one party pay the legal costs of another. These are known as “party party costs”.
For example, when considering what costs order, if any, should be made, section 117 (2A)(f) FLA requires the Court to have regard to “whether either party to the proceeding has made an offer in writing to the other party to the proceeding to settle the proceeding and the terms of any such offer”.
Section 117 (2A) FLA also requires that the Court when considering what costs order, if any, should be made, have regard to the conduct of the parties to the proceedings in relation to the proceedings.
Unless the Court chooses to make a different order, the amounts payable in the Federal Circuit Court of Australia for a party party costs order are set out in Schedule 1 of the Federal Circuit Court Rules 2001.
However, the Court may instead order that a party pays a specific amount of costs or may apply order that costs be determined using some other method. For example, where the conduct of a party justifies it, a Court may make a costs order on an indemnity basis. This means that the party then must pay all costs that the other party reasonably and properly incurred.
In the recent case of Laniga & Carron (No.2)  FCCA 3536 (4 December 2018), a single judge decision of the Federal Circuit Court of Australia, the Court made orders for division of property between a former husband and wife. The orders made provided for the wife to receive a greater share of the parties’ assets than the wife would have received under the terms of various offers for settlement that the wife had made to the husband prior to the trial. The husband had failed to accept any of those offers made by the wife.
The Court also made a costs order against the husband. That is, orders that the husband pay the wife’s costs of and incidental to the property proceeding between the parties as well as the wife’s costs of the application made seeking a costs order. It was further ordered that those costs be assessed on a party/party basis, on the Family Court Scale of costs, from and including the date upon which the wife had made her first offer for final settlement to the husband.
The basis for making the costs order was that the wife had made genuine attempts to settle the proceedings on a number of occasions by making offers that proposed settlements for the adjustment of property in her favour whereby she would receive less from the property pool than what was ordered by the Court in her favour following a trial of the issues.
The Court stated that the husband should have accepted those offers by the wife. Had he done so, there would have been a substantial saving for the wife in costs that she had had to go on to incur through to preparing for trial.
Whilst the Court was willing to make an order for payment of costs, the Court did not accept the submission made by the wife that the husband pay the wife’s costs of the proceedings on an indemnity basis. The presiding judge was not satisfied that the husband had been malicious in rejecting the wife’s offers for final settlement. Instead, the Court considered that the husband had presented at the trial as someone who was overwhelmed by the breakdown of the marriage and the court proceeding. The husband had represented himself throughout the proceedings and had not had the benefit of sound legal advice. Whilst the presiding judge said that this in itself was not always an excuse, in this case the Court considered that a costs order against the husband ought not to made on an indemnity basis.
The Court took into account the respective financial positions of each of the husband and the wife when reaching its decision. Whilst the husband may have the liquid capital to pay party/party costs orders, the Court considered that he may not be able to satisfy a costs order for the payment of costs assessed on an indemnity basis from that capital. If the costs order had been made against the husband at the higher level on an indemnity basis, he may have to sell the former matrimonial home in order to comply with such an order. As that may then lead to further litigation with then further significant costs to the wife, the Court held that the husband pay the wife’s costs on that party/party basis only.