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A Costly Battle: Court Weighs in on Legal Costs After Protracted Family Law Dispute

Introduction

The case of Daily & Daily (No 6) [2024] FedCFamC1F 889 underscores the significant financial and emotional toll of prolonged family law litigation. The judgment, delivered by Berman J in the Federal Circuit and Family Court of Australia, addresses the issue of legal costs following a contentious dispute over property settlement and the enforceability of a Binding Financial Agreement (BFA). This decision ultimately determines the extent to which one party should bear the legal costs of the other, considering financial hardship, litigation conduct, and prior settlement offers.

Facts and Issues

Facts:

  • The parties, Ms. Daily (applicant) and Mr. Daily (respondent), began cohabiting in 1997 and were married in 2005. They separated in September 2018, with a divorce finalized in 2019.
  • The initial litigation focused on parenting arrangements, but the core dispute revolved around property settlement and the validity of a BFA signed in 2005.
  • The applicant sought to set aside the BFA under s 90K(1)(d) of the Family Law Act 1975 (Cth) on the grounds of hardship.
  • The first trial resulted in the agreement being set aside, but this decision was overturned on appeal, leading to a rehearing.
  • The second trial reaffirmed that the BFA should be set aside, allowing for a property settlement in favor of the applicant. The respondent unsuccessfully appealed this decision.
  • Costs became a contentious issue, with the applicant seeking indemnity costs of $235,000 but later agreeing to limit her claim to $150,000 from a joint bank account. The respondent also sought costs but failed to substantiate his claim.

Issues:

  1. Should the applicant be awarded costs, and if so, on what basis?
  2. To what extent should the respondent contribute to the applicant's legal costs, considering financial circumstances and litigation conduct?
  3. Were the settlement offers made by either party relevant to the costs determination?
  4. Did the respondent's opposition to setting aside the BFA and subsequent appeals contribute to the prolongation of litigation and increased costs?

Application of Law

The Court considered s 117(2A) of the Family Law Act 1975 (Cth), which outlines factors relevant to awarding costs, including:

  1. Financial Circumstances of the Parties:
  • The applicant had a stable income as a public servant and had used settlement funds to purchase real property. However, she faced substantial legal costs.
  • The respondent, unemployed and receiving government benefits, had significantly higher legal debts, exceeding $1 million.
  1. Conduct of the Parties:
  • Neither party was found to have acted obstructively or unreasonably during litigation.
  • The respondent did not engage in conduct that unnecessarily increased costs.
  1. Compliance with Previous Orders:
  • There was no evidence that either party had failed to comply with court orders in a way that necessitated further proceedings.
  1. Success in the Proceedings:
  • The applicant was ultimately successful in setting aside the BFA and obtaining a favorable property settlement.
  • The respondent’s appeals and resistance to the agreement being set aside contributed to prolonged litigation.
  1. Settlement Offers:
  • The applicant made multiple reasonable settlement offers, including an offer on 1 August 2023 that closely aligned with the final court orders.
  • The respondent failed to accept or counter with a viable offer, prolonging litigation unnecessarily.
  1. Other Relevant Matters:
  • The Court recognized the significant financial burden on both parties and exercised discretion in determining the quantum of costs.

Analysis of Judgment and Judicial Reasoning

Berman J ruled that a cost order in favor of the applicant was justified, primarily because:

  • The applicant was successful in obtaining the orders she sought.
  • The respondent’s resistance to setting aside the BFA, despite clear legal issues regarding its validity, contributed to unnecessary litigation.
  • The applicant made reasonable settlement offers, which could have resolved matters earlier.

Quantum of Costs Awarded:

  • The applicant originally sought $258,434.59 but limited her claim to $150,000.
  • The Court awarded costs on a party/party basis, totaling $105,569, with a discretionary reduction considering the respondent’s financial position.
  • The Court allowed the respondent to retain a portion of the remaining joint account funds to manage ongoing legal obligations.

Precedents Considered:

  1. Bant & Clayton (Costs) [2016] FamCAFC 35 – The Court emphasized that costs should be assessed based on litigation conduct and reasonableness of offers.
  2. Parke & the Estate of the late A Parke [2016] FLC 93-748 – The Court examined what constitutes being "wholly unsuccessful" in proceedings.
  3. Robinson & Higginbotham (1991) FLC 92-209 – Consideration of settlement offers in costs decisions.

The judgment reflects a balancing act—ensuring the applicant is compensated for unnecessary legal expenses while recognizing the respondent’s financial difficulties.

Take-Home Lesson

"Litigation Comes at a Cost – Settle When You Can"

This case highlights the financial risks of prolonged family law disputes. Courts will consider settlement offers and litigation conduct when awarding costs. Had the respondent engaged meaningfully in settlement discussions earlier, he might have avoided a substantial cost order. Family law litigants should carefully evaluate settlement proposals and avoid unnecessary litigation, as the financial consequences can be severe.

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