In family law disputes, it is not uncommon for one spouse to be less financially secure than the other. Family law litigation can be expensive. A spouse who proceeds to a final hearing will need to fund a barrister, experts, subpoena fees and solicitor fees to run their hearing.
In one example of Simic & Norton, it was revealed to the Family Court that a husband and wife collectively spent $860,000.00 on legal fees. This is an extreme example. However, it gives you a flavour of costs which can escalate if you do not settle prior to a final hearing.
In relationships where there is financial inequality, the financially less secure spouse may apply for a litigation funding order. This is where, the Court orders one spouse to fund the legal fees of the other.
This is simple where the family law litigation relates to a property settlement, and where both spouses agree that there should be a property settlement. The spouse who seeks litigation funding simply needs to demonstrate the following:
- That he or she will likely receive a property settlement; and,
- That he or she is seeking a litigation-funding amount that is less than the property settlement they will receive, even on their worst case scenario.
A litigation funding order gets more complicated where spousal parties enter into a Binding Financial Agreement or a ‘pre-nup’. What if the financially less secure spouse wants to set the ‘pre-nup’ aside? What if the ‘pre-nup’ states that the financially less secure spouse should receive nothing? In this circumstance, the steps outlined above do not apply.
In Salvage & Fosse [2020] FamCAFC 144, the Full Court established a test for litigation funding for a spouse who want to set aside a ‘pre-nup’ which the spouse deems to be fundamentally unfair. The Full Court said that in order to obtain a litigation funding order, the following applies:
- The spouse does not need to establish that the case is a strong or persuasive. He or she simply need to demonstrate that their case is sufficient, in all of the circumstances as to its nature and prospect.
- The Court then needs to evaluate the nature and quality of the spouse’s claim if the ‘pre-nup’ was set aside. The question is namely, what is likely claim that he or she will get if the agreement were set aside?
- The Court will then look into the future, and ascertain the likely value of the property pool after each party spent legal fees on the first litigation on setting aside the ‘pre-nup’ and on the property settlement.
- The Court will then ask itself, whether the property settlement received by the financially insecure spouse will cover the litigation funding order.
Whether there is a ‘pre-nup’ or not, to prepare for a litigation funding order, it is important to show that your final claim is realistic so that the Court may be convinced to have your spouse assist you with your legal fees.
If you are defending a litigation funding order application, then you must assess whether there is any utility in opposing it if you are seeking orders where you pay your spouse a sum that will easily cover the funding of his or her legal fees.
If you require more information on the above please contact Nevine Youssef on nyoussef@marsdens.net.au or by phoning 02 4626 5077.
The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.
