Let’s not beat around the bush. Separating can be an expensive and overwhelming process, particularly for a party who may not have control of or access to funds following separation. It is important that all parties have access to legal proceedings.
While the general principle under s117(1) of the Family Law Act (FLA) is that each party pay their own costs, where a party does not have access to funds to meet their legal costs, there are two main options for legal funding; interim costs orders and litigation funding.
1. Interim Costs Orders
Requires a party without funds to make an application to the Court for an “interim costs order” which can be:
- an interim property order pursuant to s 80(1) of the FLA which is also known as a partial property order;
- a spousal maintenance order under s 74 of the FLA which could be for periodic or a lump sum payment; or
- a costs order under s117(2) of the FLA, either to fund ongoing litigation or as security to prevent abuse of court process.
The type of interim costs order sought will determine the evidence required by the Court. However, in the case of Zschokke and Zschokke (1996) FLC 92-693 and confirmed in Strahan & Stahan [2009] the Court identified three factors that are relevant to all applications for costs orders:
- that the respondent is in a position of relative financial strength;
- that the respondent has capacity to meet his or her own litigation costs; and
- that there is an inability on the part of the applicant to meet his or her litigation costs.
2. Litigation Funding
Litigation funding involves a third party funding company who provides capital by way of loan or line of credit, to assist parties to meet legal fees and disbursements. This can help to facilitate access to the legal system that a party may not otherwise be in a position to pay until after their matter resolves. The terms of lending vary between companies, but generally you accrue interest only on the portion of funds that you use and repay the loan in full upon property settlement.