Legal Fees and Property Settlement

How to treat legal costs in a property settlement can be a critical issue which can derail property negotiations and a cause for further anxiety.

Ordinarily each party must pay their own legal costs. There are however provisions in the Family Law Act 1975 (as amended) that can give you an opportunity to seek legal costs from the opposing party. These include failure to follow the pre Court procedures and the service of an offer pursuant to the Family Court Rules. We can advise you as to your rights in this regard and the process required.

Can one party pay for their costs out of the matrimonial bank account or business bank account?
In a recent Family Court decision of Telfor and Telfor [2016}FCWA 2 before Walters J, his honour provided;
“By the conclusion of the trial, it had been conceded that the parties’ paid legal fees should be added to property available for distribution between them. Such an approach is entirely uncontroversial: see NHC & RCH [2004] FamCA 633; (2004) FLC 93-204 at [55]- [60]; see also Harrington & Harrington and Ors (supra) at [18][19]. Although the manner in which the Court deals with funds used by the parties to pay legal fees is a matter for its discretion, the following observations are of relevance:

(a) As Murphy J recognised in Hayton & Bendle [2010] FamCA 592; (2010) 43 Fam LR 602 at [127], the payment of legal fees by a party amounts to a premature distribution of property that might otherwise have been available for distribution between both parties in accordance with the Court’s ultimate assessment of their property settlement entitlements.
(b) Although the payment of other expenses (including accommodation or living expenses) after separation and prior to trial might also have the effect of removing funds from the property that could otherwise be available for distribution between the parties, legal fees related to advice dealing with the consequences of a relationship breakdown or anticipated breakdown and family law issues generally, dispute resolution or court processes would not have been paid at all if the parties’ relationship had not broken down or was not likely to break down, or if the parties did not have a dispute to resolve or court proceedings to conduct. To that extent, it is unfair to allow one party what could amount to unfettered or almost unfettered access to funds that would otherwise comprise property available to be dealt with pursuant to the provisions of s 79 to further his or her own side of the case or counter or damage the other party’s case.
(c) In my opinion, and by way of example only, it cannot be said that funds used by the husband to pay legal fees were generated by him post-separation from his own endeavours (exclusively). To so conclude would be to ignore the effect of the wife’s contributions to the welfare of the family after separation and her broader, direct or indirect contributions made during the course of the relationship. A similar argument can be mounted regarding the husband’s contributions to funds used by the wife to pay legal fees.
(d) I am satisfied that both parties should be seen as having an interest in the funds used for the payment of legal fees, whether those funds existed at the date of separation or became available to the parties thereafter. ”

The costs used by the husband which could not clearly be identified as being paid from funds which were unrelated to the marriage were repaid into the pool of assets available for distribution. The costs were an add back into the pool for distribution.

Care must be taken when taking funds from a matrimonial bank account to pay for legal costs and clear and expert advice should be obtained at the earliest opportunity.

Should you not have access to funds for legal costs there are processes that can be undertaken to seek interim distributions of property and in some circumstances legal costs can be paid at conclusion of the property dispute.

Call Joe OHare 07 3266 8999 so that you can receive expert advice on these issues at an early time.

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