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Snapshot

  • Family law litigants often experience inequality, and thus disadvantage, in terms of their capacity to pay legal bills during litigation.
  • A remedy for this is the so called ‘dollar-for-dollar’ order, designed to level the playing field.
  • There are two main schools of thought on these orders:
    • The orders are uncertain and therefore can’t be considered ‘just’;
    • The orders are considered ‘just’ because the timing and amount of the order is determined by the payer’s legal bills.

After separation, it is often the case that the wealth and resources of the parties are  controlled by one spouse who derives an advantage from being in a superior financial position to fund their legal costs, usually from matrimonial property. The desirability of legal representation for both parties and achieving fairness in access to representation underpin the concept of dollar-for-dollar cost orders.

Dollar-for-dollar orders have been described as ‘a set of machinery provisions to ensure that for any dollar the financially advantaged party spends on legal costs and disbursements on the case, the disadvantaged party is also provided a dollar to spend on their case’ (Verdon & Verdon [2020] FamCA 824 at [131] (‘Verdon’). The amount and timing of payment to the payee is determined by the payer’s payment of their own legal bills.

Source of power

Fundamental to the making of any order is the identification of the relevant source of power. The source of power determines the necessary preconditions and relevant considerations for the making of an order.

There is no power to order costs at common law and the starting point under the Family Law Act 1975 (Cth) (‘the Act’) is for each party to bear his or her own costs. The power to make a dollar-for-dollar costs order is found in s 117(2) of the Act. Less commonly used sources of power to order funds that can be used for costs are: s 79 in conjunction with s 80(1)(h) (interim property distribution); and s 114 (injunctions). Different considerations apply when making orders under these sections.

In Re JJT; Ex Parte Victoria Legal Aid [1998] HCA 44, Gaudron J expressed the view that s 117 of the Act is ‘not simply a power to make an order for costs’ but rather a power to make an ‘order as to costs’ (at [2]). In support, Kirby J held the word ‘costs’ as used in s 117(2) of the Act is broad enough to include future as well as past costs (at [60]).

The authority for s 117 of the Act being the source of power for dollar-for-dollar costs orders was affirmed in later cases, including the Full Court decision of G & T [2003] FamCA 1076, Iphostrou & Iphostrou [2011] FamCA 20 and Moroni & Moroni [2014] FamCA 664, where Watts J determined  ‘section 117(2) provides sufficient power to make the ‘dollar for dollar’ order subject to the consideration of the matters in section 117(2A)’ (at [110]).

Considerations

In Zschokke & Zschokke [1996] FamCA 79; (1996) FLC 92-693, the Full Court identified three relevant considerations for making a dollar-for-dollar order:

  • Relative financial strength on the part of the payer;
  • Capacity on the part of the payer to meet their own legal costs; and
  • Inability on the part of the payee to meet their legal costs.

The Full Court considered whether the payee would receive at least the amount they were advanced by the interim costs order on a final basis. The uncertainties of a property settlement claim were considered fatal under s 79 in conjunction with s 80(1)(h), but not necessarily fatal under s 117(2) of the Act.

Differing authorities

Recently, Wilson J in Verdon observed authorities on dollar-for-dollar costs orders ‘do not speak with one voice on the subject’ (at [95]). In Niu & Zhai [2015] FamCA 599, the wife sought a dollar-for-dollar costs order and the husband submitted such an order was beyond the power of s 117(2). The husband’s submission was rejected by Austin J: ‘[t]he jurisdiction and power to make such orders have been repeatedly accepted over many years’ (at [92]).

In Quayle and Perceval [2018] FamCA 664 and Selena & Montez & Ors [2017] FamCA 583, McClelland DCJ grappled with the Court’s power to make a dollar-for-dollar costs order under s 117 of the Act. McClelland DCJ doubted that s 117 could be used to make a dollar-for-dollar costs order at a point in time when it is not possible for the Court to fulfil its obligation to consider the matters referred to in s 117(2A), namely, to determine whether the party seeking costs has been ‘wholly unsuccessful’ in proceedings.

In Quayle & Perceval, McClelland DCJ accepted the wife’s inability to fund her case, making a dollar-for-dollar costs order under s 114 (the injunctive power) rather than s 117(2). McClelland DCJ held s 114 of the Act empowers the Court to make a dollar-for-dollar costs order having regard to the balance of convenience and circumstances of the case.

In Selena & Montez, McClelland DCJ declined to make a dollar-for-dollar costs order, determining that such an order was ‘necessarily not certain and can only be ascertained by the occurrence of subsequent events which, in this case, are the payment of legal costs by the husband’ (at [95]). McClelland DCJ determined the wife would receive at least $500,000 in a final property settlement and ordered $44,922 to be paid as a partial property settlement pursuant to s 79 with s 80(1)(h).

In Atkins & Hunt [2018] FamCA 14, Watts J reached a different conclusion to McClelland DCJ, making a dollar-for-dollar costs order pursuant to s 117(2) of the Act. Watts J agreed with the Full Court in Fitzgerald v Fish and Anor [2005] FamCA 158 that ‘nowhere in subs (2A) or elsewhere in s 117, is there any prescription that more than one factor must be present before an order for costs is made’ (at [43]). Watts J held that he was not ‘precluded from making a dollar for dollar order because its quantum would not be certain and only able to be ascertained on each occasion the husband pays monies to his lawyers or other professionals for their services in respect of the case’ (at [47]).

In Verdon, Wilson J considered the dollar-for-dollar order in some detail (at [126]-[139], [145]). In this case, the wife sought a lump sum partial property settlement of $500,000 plus litigation funding of $500,000. The husband agreed to pay $348,288.63 by way of a partial property settlement and anything over by way of a dollar-for-dollar costs order. The husband’s contention was that any partial property settlement payment over the amount he proposed would not be just and equitable based on assessment of s 79(4) of the Act. The wife did not seek a dollar-for-dollar order on the basis that ‘[i]t is undesirable for a litigant … to be at the mercy of the other litigant both continuing to retain lawyers, and to pay them’ (at [68]). Preferring the reasoning of McClelland DCJ in Selena & Montez and Quayle & Perceval, Wilson J refused to make a dollar-for-dollar costs order and ordered an interim lump sum partial property settlement payment of $500,000 to the wife.

Challenges

Anticipatory costs do not sit comfortably within the design of s 117(2) of the Act. The requirement for a finding that a dollar-for-dollar costs order is ‘just’, having regard to s 117(2A) is difficult to satisfy. Section 117(2A) of the Act requires the Court to have regard to the factors including the financial circumstances of the parties and whether a party has been wholly unsuccessful in proceedings. A finding that a party has been wholly unsuccessful in proceedings cannot be satisfied if there have been no determined proceedings. Additionally, dollar-for-dollar costs orders do not set amounts or time frames, which make the orders inherently difficult to assess as ‘just’.

In Quayle & Perceval, McClelland DCJ held that a dollar-for-dollar costs order ‘does not permit an evaluation as to whether the costs order is logical, fair or reasonable, and it deprives a party who is adversely impacted by such an order of the opportunity to review it on that basis (at [80]). In that case, McClelland DCJ was critical of Zschokke, concluding that the Full Court constructed s 117 of the Act in a way that gave ‘it an overly expansive operation, beyond its intended purpose’ (at [63]). McClelland DCJ found the construction in Zschokke was contrary to the High Court’s interpretation in Re JJT; Ex Parte Victoria Legal Aid [1998] HCA 44 and Cachia v Hanes [1994] HCA 14, where ‘costs actually incurred in the conduct of litigation’ could come under s 117(2).

Conversely, an alternate view considers dollar-for-dollar costs orders as capable of satisfying s 117(2) as the orders contain self-regulatory mechanisms controlled by the timing and amount of the payer’s legal costs. An assumption as to reasonableness on both aspects of timing and amount, along with statutory regulation of costs, ensures the order made is ‘just’.

There is an inherent risk that dollar-for-dollar orders mean a ‘downing of the tools’ as the payer ceases their legal representation to avoid funding their spouse’s case against them, effectively delaying progression in a case. In the end, both parties may be unrepresented, and the value and even identity of property in the pool unknown.

Where does that leave these orders?

Litigants can apply for litigation funding orders relying on s 114 or s 117 of the Act. Ligation funding orders enable financially disadvantaged parties to effectively run their case and ensure access to justice. Alternatively, litigants can make an application for a partial property settlement order, pursuant to ss 79 and 80(1)(h) of the Act.

Dollar-for-dollar costs orders can be problematic, with differing judicial views and the prospect of the financially advantaged party becoming self-represented. Tightly drafted orders can compel the payer to request bills from their lawyers but cannot bind lawyers to issue bills or remain on the record. A lump sum litigation funding order should be preferred if a source of funds can be identified.


Allysha-Jane Merrett is a senior associate at Watts McCray.