Litigation Funding Orders
13 February 2024 · Read time: 7 minutes
Litigation Funding Orders are made by the Court where one party has a vastly disproportionately high access to funds, compared with the other side.
Family Law litigation can be very expensive, and the goal of Litigation Funding Orders is to level the playing field, so that justice isn’t hampered by only one side being able to fund their case.
This has particular relevance in the area of family law, where it is common for one member of the couple to be the “breadwinner” and control the finances of the couple.
Litigation Funding in this context is a mechanic built into the Family Law system to allow for some balancing to occur in litigation that is making its way through the Federal Circuit and Family Court of Australia (FCFOA).
How do you apply for Litigation Funding?
To seek litigation funding, there must be a viable source of funds available. Examples include:
- Savings held solely in your former partner's name.
- Saleable investment properties.
- Non-essential assets (eg a vehicle).
- Proceeds from the sale of property currently held in trust.
Before granting litigation funding, the court will assess whether you have access to alternative funds to cover legal expenses.
If you possess significant income, cash reserves, or personal assets, the likelihood of receiving litigation funding diminishes.
If there are no liquidatable assets or transferable savings, pursuing litigation funding is not advisable. In such cases, you may need to consider Legal Aid or community legal groups instead of using a private lawyer.
At what stage of proceedings can you apply for Litigation Funding order?
Litigation Funding Orders are generally applied for after proceedings have already commenced.
Following this, the case typically progresses to an initial Interim Hearing, during which the request for litigation funding (alongside any other interim orders sought) will be presented and decided upon by a Judicial Officer, typically a Magistrate.
What does a successful Litigation Funding Case require?
The Court will generally consider the following factors.
- The spouse is not required to establish the strength or persuasiveness of their case. They simply need to demonstrate that their case is adequate considering the circumstances, both in terms of its nature and prospects.
- The Court will consider the future estimated value of the the property pool after each party has incurred legal fees for litigation.
- Lastly, the Court will inquire whether the property settlement awarded to the financially vulnerable spouse will be sufficient to cover the litigation funding order.
What needs to be included in the application?
The factors listed above need to be addressed in the Applicant's affidavit material.
This includes attaching any supporting documentation to be relied upon. Examples:
- A Costs Estimate from the Applicant's solicitors, demonstrating the projected future costs of the litigation.
- A Costs Agreement outlining the basis upon which the Applicant's solicitors bill for legal services.
- Documents illustrating how the proposed litigation funds will be allocated, whether towards past or future legal expenses.
- Identification of the Respondent's assets and income to ascertain their capacity to cover their legal fees.
- Identification of the funding source for the litigation expenses.
Different Types of Litigation Funding Orders
The Court can order different forms of distributing the funds.
Partial or Interim Property Orders
The court may issue an order for one party to receive a portion of their final property settlement ahead of schedule. This is appropriate only if the requested amount aligns with their probable entitlement.
For instance, the court would not grant $200,000 advance if the final settlement is estimated at $100,000. These funds may be classified as a partial property settlement, deducted from the final amount, or their treatment may be deferred to a judge at the final hearing.
In essence, this allows a party to access a portion of their final property settlement early to cover family lawyer fees and legal expenses.
The interim property order should be flexible, subject to modification or reversal without nullifying the interim order itself.
Essentially, the key condition for establishing a case for an interim property order is that, at the final hearing, the Applicant will receive an amount equal to or exceeding the interim sum.
Upon successful application, the applicant will receive the requested funds to cover their costs, which will then be subtracted from their final settlement amount.
A spousal maintenance order
In some instances, spousal maintenance may be utilised to finance legal proceedings in family law cases.
The court has the authority to mandate one party to provide the other with an amount to cover their reasonable expenses, which may encompass legal fees.
For spousal maintenance to be granted, the court must ascertain that the requesting party cannot meet their reasonable expenses from their own income or financial resources, while the other party possesses the means to pay. Spousal maintenance orders can be structured as weekly, fortnightly, monthly payments, or as a lump sum.
Notably, spousal maintenance is distinct from the final property settlement and is not deducted from it.
Factors such as age, health, income, and employability are considered in determining eligibility for spousal maintenance.
Cost Orders
When deemed appropriate, the Court may mandate one party to cover the legal expenses of the other. This determination hinges on various factors, including the financial discrepancy between the parties or their conduct during the litigation process.
It's important to note that these costs orders are distinct from property division; they specifically address the burden of legal fees and expenses.
Unlike applications made under Section 79, requests for interim costs orders aren't confined to property settlement or maintenance proceedings. Hence, Section 117 serves as the appropriate authority for seeking litigation funding, particularly in matters such as child welfare proceedings.
Moreover, when there's insufficient existing property to support a lump-sum costs order, the Applicant may opt for a "dollar-for-dollar" order. This type of order becomes necessary when the Respondent covers their legal fees from their current income rather than existing assets like savings.
Typically, it stipulates that the Respondent should pay an amount equivalent to their monthly legal fees and expenses to the Applicant.
One of the advantages of a costs order compared to an interim property order is that funds disbursed on an interim basis can retain their characterisation by the Judicial Officer at the final hearing. Consequently, they may not be considered as part of the applicant's ultimate property settlement entitlements.
Where does this power originate?
The Family Law Act 1975 does not explicitly mention orders for litigation funding. However, both Acts outline various sources of authority under which the Court can issue such orders. These include:
- Partial or interim property orders under Section 79 (or Section 205ZG of the Family Court Act).
- Costs orders under Section 117 (or Section 237 of the Family Court Act).
- Periodic or lump-sum spousal maintenance under Sections 72 and 74 (or Section 205ZC of the Family Court Act).
Sections 79 and 117 (pertaining to partial or interim property orders and costs orders, respectively) are the most frequently utilised sources of authority for litigation funding purposes and are the focus of this article.
Litigation Funding outside of the Court
Depending on your specific case, there are different forms of litigation funding available.
For instance, you may have the option to engage in private funding agreements, where a third party assumes the costs, or you can opt to collaborate with a lawyer who operates under a 'no win, no fee' arrangement.
These funding options usually occur outside the realm of the court.
Looking for legal assistance?
If you need help with any aspect of family law litigation, including exploring the option of a litigation funding order, then arrange a time to speak with one of our lawyers.
