The general principle in family law matters is that each party pay their own costs.

It can often arise in practice that one of the parties — both during the marriage and after separation — controls the majority of the assets, or the liquid assets, of the marriage. This can give the party in control of the funds an unfair advantage in the proceedings because they can more easily fund lawyers, accountants and other experts to provide advice in the proceedings, where the other party does not have that ability.

The control of those funds can come about through registered ownership of particular assets (eg invested funds) or through the operation of a business that is a matrimonial asset, or simply by virtue of one party earning significantly more than the other party.

In cases such as these, the party without the funds for the litigation can make an application to the court for an order for what is colloquially called “interim costs”.

An application for “interim costs” can be brought under any one of three heads of court power under the Family Law Act 1975 (Cth), namely:

• • an interim property order under s 80(1), which in turn directs the court to the provisions of ss 79 and 75(2);
• • a spousal maintenance order under ss 72 and 74; and
• • a costs order under s 117(2) either to fund ongoing litigation or as security to prevent abuse of court process.

There are equivalent provisions which apply for de facto parties in Western Australia under the Family Court Act 1997 (WA).

In Paris King Investments v Rayhill [2006] NSWSC 578, Brereton J spoke of these three possible juridical bases for interim costs orders in family law proceedings and noted that “it is important, when contemplating an order for interim provision for litigation expenses, to identify the relevant source of power — because it is the source of power that determines the necessary preconditions and relevant considerations for making the order”: at [29]–[30].

It is open to an applicant to rely on any or all of those heads of power in making an interim application for costs as long as it is clear which head of power you are relying on and that your affidavits in support make it clear the evidence your client is purporting to rely on in support of each element required for each head of power. An important consequence is that if an order is made as an interim property order, then the amount received by the applicant is received "on account of" the entitlement to a property settlement. Arguably, if an amount is received by way of spousal maintenance, or for costs, then the amount is not to be included when the final settlement calculations are done. Generally, when a court makes an interim costs order, it will specify that the trial judge (rather than the judge hearing the interim application) should determine how the payment is to be categorised and its effect at the time of the final property settlement.

It should be noted that an order for interim costs is not (usually) an order made pursuant to s 117(2), and accordingly the considerations set out in that section do not always apply. An application for “interim costs” is, in fact, generally an application for a “part property settlement” and is an order made under ss 79 and 80(1). Alternatively, sometimes an application for “interim costs” is actually an application for security of costs whereby a party seeks an amount be “secured” to ensure that it is available to meet any future cost order made in favour of any of that party once orders determining the matter in dispute have been made.

When can an application be brought?

An application can be brought at any time after the substantive property application has been filed.

The circumstances in which an application for interim costs is called for can be seen in When can an application be brought?

What principles will the court apply?

In any application for interim orders, the court is confined to the (generally untested) evidence before it and accordingly will only make orders on an interim basis when it is clearly necessary to do so. This is even more the case in cases where the order sought involves the transfer or use of property, rather than for its preservation.

When deciding under which power an application for interim costs will be made, the applicant should refer to relevant case law as to applicable principles to guide the court. In most cases the court will rely on achieving a just and equitable result in making a decision in order to balance the interests of both parties and protecting their assets until a final determination is made. Often the court will leave the characterisation of a payment made at interim stage for the trial judge to decide when the nature of the pool of assets, income and needs of the parties has been fully explored.

See What principles will the court apply?

What evidence is required?

First it is necessary to identify the basis on which the application is brought. The case may be presented as an interim property settlement application, a spousal maintenance application, an application for costs, or any combination of those bases. The evidence required will depend on the legislative provisions sought to be relied upon for the making of the proposed orders as applications pursuant to s 117(2) of the Family Law Act 1975 (Cth). Applications for interim property settlement and applications for spousal maintenance are all determined differently and require different evidence to satisfy the respective tests.

The evidence required will depend on the basis for the case being brought.

Practice Tip: The importance of clearly establishing the legal basis (and relevant evidence) for an applications for costs is highlighted in the recent Full Court case of Rankin and Rankin [2017] FamCAFC 29 in which an order made by a trial judge that “the sum of $170,000 should be paid to the wife’s solicitors on account of her legal costs” was appealed on the basis that it was made as a cost order pursuant to s 117 but the trial judge erred by not considering s 117(2A) of the Family Law Act 1975 (Cth). The Full Court found that a judge could, in certain circumstances, make an order for a party to pay the other’s legal fees out of the net assets prior to final determination and division of the assets — even if it is paid from post-separation income. Care needs to be taken when seeking the order to make it clear that it is a s 79 order — not a costs order (ie, one under s 117).

See What evidence is required?

Security for costs

Orders made to give security for costs not yet incurred are made under s 117(2) usually in limited circumstances such as where the conduct of a party has caused significant delays to the proceedings, where they are likely to be wholly unsuccessful or where there has been a settlement offer. The financial position of the parties is very much under scrutiny in such an application.

See Security for costs.