Litigation funding orders play a critical role in ensuring procedural fairness in legal proceedings, particularly where an imbalance of financial resources between the parties exists.
These orders are designed to address situations where one party, often in control of substantial assets, is able to fund legal representation while the other is left at a disadvantage. By allowing access to resources that might ultimately be distributed in property settlements, litigation funding orders aim to level the playing field.
This text explores the principles and considerations governing litigation funding orders, with reference to relevant statutory provisions and case law, including their application in interim property and cost orders under family law.
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Alleviating Unfairness with Litigation Funding Orders
Litigation funding orders have a long history and are made to alleviate the obvious unfairness of a party with control of the assets being able to marshal them to pay lawyers, leaving the other party to attempt to pursue the proceedings without being able to resort to property that might subsequently be transferred to them. Each application must be looked at according to its own particular facts and circumstances.
Key considerations
Three matters are relevant regardless of “whether the matter was determined as an interim property settlement order under s 80(1)(h), or as an interim costs (or security for costs) order under s 117(2), or a maintenance order being:
(a) A position of relative strength on the part of one party to the proceedings;
(b) A capacity on the part of such party to meet his or her own legal costs; and
(c) Inability on the part of the other party to meet his or her legal costs.
In addition to the above three matters, the following are relevant for the purposes of a litigation funding order:
(a) An applicant seeking such funding should have “at least an arguable case for substantive relief which deserves to be heard”;
(b) There should be evidence of the applicant’s likely costs of the litigation;
(c) It is not essential that the applicant’s legal representatives will not continue to act unless the costs are paid or secured on an ongoing basis;
(d) An order may make provision for litigation expenses at a rate that appears reasonable in all the circumstances;
(e) An order can be for costs already incurred as well as for future costs and such matters as well as the question of whether the applicant’s lawyers will continue to act in the absence of a litigation costs order may be relevant to the discretion to make an order and the quantum thereof;
(f) Any such order should be framed to protect the parties from risk of injustice which could be done by requiring the funds to be administered by the applicant’s solicitors and applied only to meet the expenses referred to in the order.
Litigation Funding & Interim Property Orders
While the exercise of the cost power carries with it a very broad discretion, that discretion must be exercised carefully for the purposes of litigation funding. The Full Court has affirmed that an order must be framed to protect the parties from any risk of injustice arising from the manner in which the funds are expended.
As to the exercise of an interim or partial property power pursuant to s 79 and s 80(1)(h), the Full Court in Strahan & Strahan [2011] FamCAFC 126; (2011) FLC 93-466 (“Strahan”) revisited the principles effectible to interim or partial property orders, and set out effectively two steps being:
(a) First, establishing that s 80(1)(h) is enlivened. The test is not confined to “compelling circumstances”. Subject to the interests of justice, the usual approach in respect of s 79 is a once and for all order (see Swift & Swift [2020] FamCA 991 at [16]). That said, more is required than the mere fact that upon a final hearing the party seeking the order would receive the property sought (Marchant & Marchant [2012] FamCAFC 181; (2012) FLC 93-520). The “overarching considering” as to the appropriateness of the exercise of an interim property power by the Court must be answered in the affirmative in the interests of justice; and
(b) The second step requires regard to be had to the “usual matters in a s 79 determination” and therefore some assessment of s 79 factors. Given it is an imprecise exercise in the making of these orders, any discretion ought be:
(i) Conservative so as to ensure the final property outcome is not compromised; and
(ii) That the remaining property is sufficient to meet the legitimate expectation of both parties at the final hearing; and
(iii) The interim or partial order is capable of being reversed or adjusted if it is subsequently considered necessary to do so
The principles underlying litigation funding orders underscore the courts’ commitment to justice and equity in legal proceedings. By carefully balancing the interests of both parties and ensuring that orders are framed to prevent injustice, courts aim to protect the integrity of the judicial process. Whether applied as interim property or cost orders, the exercise of judicial discretion must remain conservative to safeguard the ultimate property settlement and ensure fairness at every stage of litigation.
