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A Costly Pursuit: When Litigation Fails in Family Law

Introduction

The case Berfield & Berfield (No 4) [2024] FedCFamC1F 881 presents a cautionary tale of how unsuccessful litigation can lead to significant financial consequences. The Federal Circuit and Family Court of Australia ruled on a costs dispute following an unsuccessful equitable claim made by the wife against her husband's siblings. The judgment highlights the importance of well-founded claims, judicial discretion in cost orders, and the implications of unsuccessful litigation on parties' financial standing.

Facts and Issues

Facts

  • The applicant, Ms. B Berfield ("the wife"), initiated property proceedings against her former husband, Mr. C Berfield ("the husband"), under Part VIII of the Family Law Act 1975 (Cth).
  • The wife successfully obtained a property settlement order where the husband was to pay her an adjustment sum of $396,352.
  • In addition to her claim against the husband, the wife sought equitable relief against the husband's siblings, Mr. D Berfield and Ms. E Berfield ("the siblings"), regarding a property they co-owned.
  • The court rejected the wife’s equitable claims in a previous decision (Berfield & Berfield (No 2) [2024] FedCFamC1F 573), determining she had no legal or beneficial interest in the property.
  • The siblings then applied for costs orders against the wife, seeking indemnity costs or, alternatively, a portion of their legal expenses.
  • Key legal issue: Whether the wife's unsuccessful claim justified an order for her to pay the siblings’ legal costs.

Application of Law

Legal Principles on Costs in Family Law

  • Section 117(1) of the Family Law Act 1975 (Cth) establishes the general rule that each party bears their own costs.
  • However, s 117(2) provides the court with discretion to award costs if "justifying circumstances" exist, considering factors in s 117(2A):
  1. Financial circumstances of the parties.
  2. Conduct of the parties during proceedings.
  3. Whether a party was wholly unsuccessful.
  4. Any other relevant matters.

Court's Analysis

  1. Financial Circumstances (s 117(2A)(a))
  • The wife argued financial hardship due to her disability and limited income.
  • The siblings countered that financial difficulty does not preclude a costs order, as they also faced financial strain from the litigation.
  • The court was not persuaded that either party’s financial position justified or negated a costs order.
  1. Conduct of the Parties (s 117(2A)(c))
  • The siblings contended that the wife pursued a weak and poorly formulated claim, causing unnecessary delays.
  • The wife defended her position, arguing that she sought expert evidence in good faith but faced delays.
  • The court did not find the wife’s conduct unjustifiable and rejected this ground for indemnity costs.
  1. Success or Failure in Litigation (s 117(2A)(e))
  • The wife was wholly unsuccessful against the siblings.
  • The court noted that while her claim was connected to the matrimonial cause, it remained a distinct legal issue requiring the siblings' participation.
  • This justified a costs order against the wife.
  1. Other Considerations (s 117(2A)(g))
  • The court observed that had the wife pursued her equitable claim in a general civil jurisdiction, costs would ordinarily follow the event.
  • This reinforced the decision to award costs against her.

Judgment and Reasoning

Justice Harper ruled that:

  • The wife must pay 50% of the siblings' legal costs on a party/party basis (rather than indemnity costs).
  • The payment must first come from the $100,000 held in trust by the wife’s solicitors.
  • The wife was not ordered to pay the full amount of the siblings' legal costs due to her financial situation and the fact that her claim was not hopeless or frivolous.

Precedents Relied Upon

The court referenced several cases in considering the costs order, including:

  • Moorcroft & Moorcroft (2020) 60 Fam LR 361 – Indemnity costs are awarded only in exceptional circumstances.
  • Parke & The Estate of the Late A Parke (2016) FLC 93-748 – Costs orders must be exercised judicially under s 117(2).
  • Prantage & Prantage (Costs) [2014] FamCA 850 – No single factor under s 117(2A) takes priority; the court considers all relevant factors.

Ultimately, the court found that indemnity costs were not justified, as the wife’s claim, while unsuccessful, was not wholly unreasonable.

Take-Home Lesson

This case underscores the financial risks of litigation in family law. While costs orders are rare, pursuing weak or unfounded claims against third parties can lead to adverse financial consequences. Parties must:

✅ Ensure their legal claims are well-supported by evidence before proceeding.

✅ Understand that losing a case can result in cost orders against them, especially when third parties are involved.

✅ Recognize that even in family law, costs can be awarded against unsuccessful litigants in certain circumstances.

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