The general principle in family law matters is that each party pay their own costs.

It can often arise in practice that one of the parties — both during the marriage and after separation — controls the majority of the assets, or the liquid assets, of the marriage. This can give the party in control of the funds an unfair advantage in the proceedings because they can more easily fund lawyers, accountants and other experts to provide advice in the proceedings, where the other party does not have that ability.

The control of those funds can come about through registered ownership of particular assets (eg invested funds) or through the operation of a business that is a matrimonial asset, or simply by virtue of one party earning significantly more than the other party.

In cases such as these, the party without the funds for the litigation can make an application to the court for an order for what is colloquially called “interim costs”.

An application for “interim costs” can be brought under any one of three heads of court power under the Family Law Act 1975, namely:

• an interim property order under s 80(1) , which in turn directs the court to the provisions of ss 79 and 75 ;

• a spousal maintenance order under s 74 ; and

• a costs order under s 117 .

In Paris King Investments v Rayhill, Brereton J spoke of these three possible juridical bases for interim costs orders in family law proceedings and noted that “it is important, when contemplating an order for interim provision for litigation expenses, to identify the relevant source of power — because it is the source of power that determines the necessary preconditions and relevant considerations for making the order”: at [29]–[30].

It is open to an applicant to rely on any or all of those heads of power in making an interim application for costs. An important consequence is that if an order is made as an interim property order, then the amount received by the applicant is received "on account of" the entitlement to a property settlement. Arguably, if an amount is received by way of spousal maintenance, or for costs, then the amount is not to be included when the final settlement calculations are done. Generally, when a court makes an interim costs order, it will specify that the trial judge (rather than the judge hearing the interim application) should determine how the payment is to be categorised and its effect at the time of the final property settlement.

It should be noted that an order for interim costs is not (usually) an order made pursuant to s 117, and accordingly the considerations set out in that section do not always apply. An application for “interim costs” is, in fact, generally an application for a “part property settlement” and is an order made under s 80(1). Alternatively, sometimes an application for “interim costs” is actually an application for security of costs whereby a party seeks an amount be “secured” to ensure that it is available to meet any future cost order made in favour of any of that party once orders determining the matter in dispute have been made.

An application can be brought at any time after the substantive property application has been filed.

The circumstances in which an application for interim costs is called for can be seen in When can an application be brought?

In any application for interim orders, the court is confined to the (generally untested) evidence before it and accordingly will only make orders on an interim basis when it is clearly necessary to do so. This is even more the case in cases where the order sought involves the transfer or use of property, rather than for its preservation.

See What principles will the court apply?

Firstly it is necessary to identify the basis on which the application is brought. The case may be presented as an interim property settlement application, a spousal maintenance application, an application for costs, or any combination of those bases. The evidence required will depend on the legislative provisions sought to be relied upon for the making of the proposed orders as applications pursuant to s 117(2) of the Family Law Act 1975 (Cth). Applications for interim property settlement and applications for spousal maintenance are all determined differently and require different evidence to satisfy the respective tests.

The evidence required will depend on the basis for the case being brought.

Practice Tip: The importance of clearly establishing the legal basis (and relevant evidence) for an applications for costs is highlighted in the recent Full Court case of Rankin and Rankin [2017] FamCAFC 29 in which an order made by a trial judge that “the sum of $170,000 should be paid to the wife’s solicitors on account of her legal costs” was appealed on the basis that it was made as a cost order pursuant to s 117 but the trial judge erred by not considering s 117 2(A) of the Family Law Act 1975 (Cth). The Full Court found that a judge could, in certain circumstances, make an order for a party to pay the other’s legal fees out of the net assets prior to final determination and division of the assets — even if it is paid from post-separation income. Care needs to be taken when seeking the order to make it clear that it is a s 79 order — not a cost order.

See What evidence is required?