As family lawyers, we are often asked the question about whether the other party should be forced to pay their legal costs, especially when the other party is taking an unreasonable or very litigious approach.
The unfortunate reality is that in the vast majority of cases, each party will bear their own costs, in accordance with the starting point provided by section 117 of the Family Law Act 1975 (the Act), irrespective of the unreasonableness or the other party.
However, there are circumstances where a court can make an order for one party to pay the legal costs of the other if there are circumstances that justify this, as set out in section 117 of the Act.
One of these circumstances is whether one party has made an offer in writing to the other party to settle the proceedings, and the terms of such offer.
The impact of offers of settlement made during negotiations was the subject of a costs application determined by Schonell J in the Federal Circuit and Family Court of Australia in Schultheiss & Shultheiss (No 2) [2025] FedCFamC1F 181 (Shultheiss).
In Schultheiss, the wife sought an order for the husband to pay her legal costs totalling $235,000 on the basis she had made various offers to the husband to resolve the proceedings, which he rejected. In making the order, the court noted that:
- had the husband accepted the wife's offers, he would have been substantially better off in his final property settlement, as well as saving the significant legal costs of trial;
- none of the offers made by the husband would have seen the wife better off had she accepted them.
On the basis of these offers, the court ordered the husband pay part of the wife's costs (of both the trial and the cost application) in the sum of $174,000.
In making the order, His Honour made some important observations, stating that litigation is "time consuming, emotionally taxing and costly both to the parties but also the community," and encouraging parties to proceedings to "give careful, serious and thoughtful consideration" to offers which would conclude the litigation. He also cautioned parties to proceedings who reject an offer do so "at their peril'.
The decision is an important reminder to parties to family law proceedings that settlement offers should not be made as a token or strategic tool, but should be genuine and realistic attempts to resolve litigation between parties. Doing so can potentially return significant rewards – saving legal fees of continuing the litigation as well as maximising the prospects of cost protection.
Originally published Aug 18, 2025
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