Navigating a lawsuit and concerned about the costs? Litigation funding is your answer.

It's no secret that legal services and hiring a lawyer can be costly. However, to ensure that more people have access to resources such as legal professionals, there are mechanisms, like litigation funding, in place. Designed to ease the financial strain of legal disputes, this form of financing supports individuals who lack the funds for upfront legal expenses.

The importance of litigation funding has been recognised in the Australian legal landscape, particularly in family law. This is due to the types of matters that need to be resolved in family law and the common dynamics of relationships and marriages – where one party may earn more money or the only income of the family, while the other party primarily parents or acts as the homemaker. If a split occurs, the primary parent or homemaker may not have access to finances to be able to cover their legal fees, making court proceedings or legal services difficult to access.

In this article, we discuss the different types of litigation funding available within the family law system in Australia.

Types of litigation funding in family law

Litigation funding, also known as legal financing, can seem complicated but essentially, it's a way to provide money to a party who otherwise lacks funds needed to litigate a claim. It is an important element in facilitating access to the legal system.

Although the litigation funding industry is a relatively recent development, it is now a well-established business in the Australian legal marketplace.

Depending on the matter that you're dealing with, there are various types of litigation funding that you could have access to. For example, there are opportunities to enter into private funding agreements where a third-party steps in to cover the costs or you can choose to work with a lawyer who offers their services on a 'no win no fee' type arrangement. These types of litigation funding are typically done outside of the Court.

However, in family law in Australia, there are some ways the Courts can exercise their power and make orders that are mechanisms of "litigation funding" for legal proceedings going through the Federal Circuit and Family Court of Australia. The types of litigation funding orders the Court can make include:

  • A partial property order – also known as an interim property order
  • A spousal maintenance order – this could be periodic or a lump-sum style payment
  • A costs order – where the legal fees of one party are covered by the other party.

These types of orders all depend on there being funds available between the parties involved, such as that one party is earning enough money to not only support themselves but to also provide support to other party, or property that can be sold or is to be divided between the parties.

Applying for litigation funding

Applying for partial property settlement orders, spousal maintenance orders or costs orders to assist with litigation funding involves formally requesting the Court for financial assistance via an application filed to the Court.

The application will differ depending on the option you choose, however, as part of the application you will likely need to demonstrate immediate financial need through detailed affidavits and supporting documents.

The Court will evaluate the merits of the application by reviewing the assets and income of the Respondent and the ability of the parties to meet their own legal fees. The Court will take into account possible other sources of finances such as income, assets or savings.

As there are various time limits in family law matters, it's recommended to talk to a family law specialist about your litigation funding options.

Partial property division

A property settlement is the fair distribution of the assets of the former couple, and in cases where litigation funding is required, a Court could order an interim distribution of property before a final settlement is reached, serving as a partial payment of the ultimate final property settlement entitlement.

What this means is that one party may be able to receive a portion of their final property settlement early in order to be able to cover their family lawyers cost and legal expenses. It's important to keep in mind that the funding amount must be less than what is likely to be the applicant's entitlement in the final property settlement.

If successful, the applicant will receive the applied for funds to cover their costs and this will be deducted from their final settlement amount. Before applying for this type of litigation funding it's best to talk to experienced property settlement lawyers.

Spousal Maintenance

Spousal maintenance is a part of Australian family law where one partner might have to pay money to the other after they separate. This helps the partner who can't support themselves financially right away. It's a bit like a helping hand to make sure they can cover their basic living costs or even legal fees during a court case about their separation.

The law looks at things like how old each person is, how healthy they are, what they earn, and if they can work, to decide if spousal maintenance should be paid. The main idea is to help both people keep living a life that's not too different from when they were together, as much as this is fair and possible. So, spousal maintenance is really about giving temporary support to the partner who needs it while they sort out their financial independence.

In some situations, spousal maintenance may be ordered to help to fund legal battles in family law cases. This means if one partner doesn't have enough money to pay for a lawyer or court fees, spousal maintenance might cover these costs. This financial support ensures that both partners have a fair chance to present their case in Court, making the legal process more balanced.

Costs orders

Costs orders are another critical aspect of the financial dynamics in family law litigation, alongside spousal maintenance. When the Court sees fit, it can order one party to pay the legal expenses of the other. This decision is based on whether there are reasonable grounds to do so, which could include the financial disparity between the parties or the conduct of the parties during litigation. Importantly, these costs orders are separate from the division of property or assets; they specifically address the burden of legal fees and expenses.

This mechanism serves to level the playing field, ensuring that both parties have a fair opportunity to participate in the legal process. It acknowledges that the cost of legal representation and court proceedings can be a significant barrier to justice for individuals with limited financial resources.