Initially, you might be unsure of the cost of family law legal proceedings. However, there are many options available. If you’re financially vulnerable, there is no reason you should face legal costs without assistance. However, it’s essential to understand the differences between the financial options available. This helps with an informed decision about what financing is right. A common point of confusion can be the difference between litigation funding for family law and a line of credit.
Key takeaways
- Litigation funding helps clients cover litigation costs through a third-party agreement.
- Non-recourse funding means the financer doesn’t recover funds if the case fails.
- Funding depends on a high likelihood of case success.
- Litigation funding may cover legal fees, costs for expert witnesses, and essential court expenses.
- The goal is to provide fair access to legal representation.
- Litigation funding was prohibited in Australia until it was permitted by the High Court in 2006.
- Clients risk cost orders if litigation funding fails.
- Litigation funding requires clients to follow their lawyer’s advice.
- JustFund’s line of credit is a customised, lawyer-supervised financing option.
- JustFund credit lines allow clients to choose their own lawyer.
What is litigation funding family law?
Litigation funding involves a third party entering into private funding agreements with clients or law firms to cover their own legal fees. Here are some basic elements of litigation funding.
Repayment
Litigation funding agreements for family law typically require the clients to repay the funds and provide a share of the settlement proceeds. Most types of litigation funding are non-recourse, which means that if the case is unsuccessful, the financer won’t recoup any money.
Chances of success
Since the funding is non-recourse, the financer will want to assess your chances of success, including considerations like spousal maintenance and the types of litigation funding most appropriate for your case. Funding is typically reserved for cases likely to result in sufficient assets to cover their fee, ensuring that the potential recovery justifies the investment.
What legal fees are covered?
Family law matters that proceed to court involve various costs. This may depend on the other party’s actions, the necessity of a partial property division, and the types of litigation funding available. These costs may include the following.
Legal services
Lawyers usually charge hourly to represent clients in court, with rates varying based on the lawyer’s experience. The complexity of the case influences the time a lawyer needs to dedicate to it. For cases where one party primarily parents and has limited resources, covering fees alongside basic living costs can be challenging. The Family Court Act provides certain provisions to address financial disparities, but costs can still be substantial depending on the circumstances.
Court fees
A flat fee for everyday clients appearing in court can be particularly burdensome for those with limited financial resources. In cases involving significant litigation expenses, a costs order may be issued to help manage these fees, with litigation funding applying to cover essential court-related costs, alleviating financial pressure on the client.
Clients may enter into a costs agreement to outline their obligations, including any lump sum spousal maintenance, litigation funding, or cost orders applying toward their court-related expenses. This structure helps ensure that necessary resources are available to cover daily fees while maintaining fair access to legal support, even in complex family law cases.
Expert witnesses
Expert witnesses may be required to give evidence during a hearing, particularly in complex family law and child welfare proceedings. Expert witnesses could include psychologists, valuation experts, and other specialists. Procuring professional reports to submit as evidence can cost thousands of dollars, adding to the already high expenses, including legal fees. In some cases, spousal maintenance orders may specifically address these additional costs to support the caregiving parent.
However, litigation funding purposes may also cover these expenses when there is a need to ensure fair access to professional evidence in court.
Value of litigation funding in family legal proceedings
Litigation funders may provide essential support to family law clients, especially given the financial dynamics often present in divorce proceedings. It’s common in family law that one litigant will have access to much greater financial resources than the other. This is usually due to one party giving up employment during the marriage to care for children and keep the home safe. This spouse may be left financially vulnerable following a divorce.
A litigation funding order could help level the playing field in Australian family law litigation. This is particularly important because extended litigation in Family Court can lead to high legal expenses.
In cases where existing property is insufficient to cover these costs, litigation funding can provide a crucial financial lifeline. As the Australian legal marketplace adapts, such funding options are becoming increasingly important for clients navigating the costs associated with family law matters.
Concerns about litigation funding for family law
Litigation funding wasn’t legal in Australia before 2006. This form of finance was prohibited under the common law doctrines of maintenance and champerty. Maintenance is the agreement that an unconnected third party will provide a litigant with financial support. Champerty is a particular form of maintenance wherein the funding is provided in exchange for a share of the proceeds of a property settlement.
The prohibition was lifted by the High Court decision in Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd. Litigation funding has since expanded into an important industry for people seeking support for their legal expenses.
Additional costs
A funder will offer an indemnity that covers the respondent’s legal costs if the litigation is unsuccessful; however, this is usually capped. If the costs order exceeds this cap, the client will be responsible for the additional expense. In some cases, arrangements may include provisions for costs orders, partial property division, or spousal maintenance to help clients manage these potential costs, providing a more balanced financial approach in case of an unsuccessful outcome.
In the litigation funding industry, such arrangements may involve a partial property division or other measures to help manage upfront legal expenses. A litigation funding order may also specify conditions under which these costs are covered, including how much clients may need to pay money monthly towards fees. Clients working with a family law specialist should carefully review the terms of any proposed litigation funds, as they may still bear financial responsibilities beyond the indemnity limit, which could affect their ongoing budget for monthly fees.
Flexibility
The funder will expect the client to adhere to the advice of their nominated family lawyer. While this expectation may seem reasonable, family law disputes aren’t always straightforward. Matters such as spousal maintenance, monthly legal fees, and other aspects of family law require clients to be active participants in their cases, as these financial considerations can significantly impact the case’s progression and outcome.
Expecting the client to be entirely passive in the process doesn’t account for the realities of a family law matter, which may involve complex issues like spousal maintenance and interactions with the other party. These cases frequently require a more nuanced approach than typical litigation funding options provide, especially as the case moves toward a final hearing or requires a lump sum to cover costs. Legal financing can alleviate some of these burdens, but the intricate nature of family law can make securing adequate legal services difficult without active client participation.
Legal fee loans, for instance, offer clients the flexibility to actively engage in and fund legal cases in a way that aligns with their personal and financial needs, including obligations like spousal maintenance. These loans can provide essential support as clients navigate the complexities of family law matters within the Federal Circuit, ensuring they have the resources needed for a fair legal process.
Litigation funding orders
Parties can apply to the Court for assistance with family law legal fees, including support for spousal maintenance needs and legal expenses. Although the Family Law Act doesn’t specifically reference litigation funding orders, certain provisions can be interpreted to assist financially disadvantaged litigants. In some cases, legal aid may be available to supplement funding, ensuring access to the legal resources needed to navigate family law matters effectively.
Under Section 79, the Court can make an interim property order. This allows the party to receive a portion of the final property settlement early. This helps them cover necessary costs. An interim property order may also require the other spouse to pay spousal maintenance. A spousal maintenance order can assist with childcare duties and compensate for a decreased earning capacity.
A line of credit for your property settlement
A line of credit differs significantly from litigation funding. JustFund resolves litigation funding’s shortcomings by offering a more flexible solution that can be applied toward covering legal expenses and achieving a final property settlement. JustFund provides a holistic set of benefits contributing to an optimal financial outcome.
Repayments
As we’ve already discussed, different types of litigation funding require the initial funding to be repaid, often along with a portion of your property settlement, which can impact the resources available for quality legal representation.
Additionally, some funding arrangements may not fully consider spousal maintenance obligations or the complexities of the legal system, limiting the financial assistance clients receive. JustFund’s line of credit offers a tailored approach, allowing clients to address these financial commitments while preserving their resources for effective legal representation.
However, JustFund’s line of credit is reimbursed from your property settlement at a fixed interest rate, allowing clients to focus on securing the best legal representation for their case. Which provides a more significant benefit? This leads to the next factor.
Tailored financing
JustFund is a team of fintech and family law professionals dedicated to supporting clients with legal services tailored to the complexities of Family Court proceedings. JustFund is concerned with the merits of your case, with funding decisions overseen by family lawyers who understand a client’s financial needs. This ensures that funding aligns with the case’s requirements.
Other lenders can’t assess funding in the same way. Litigation funders aren’t experts in the family law system, particularly when navigating the Family Court.
Flexibility
One of the great benefits of a line of credit from JustFund is its flexibility. With litigation funding, clients have little choice in the legal advice they’re given. JustFund can work with whichever law firm the client wishes to engage, allowing them to manage their legal fees in a way that suits their circumstances. The clients and their lawyers can pursue the most appropriate legal strategy together. This is important for many reasons.
Clients need to feel confident with their lawyer, legal strategy, the associated legal fees, and any considerations around spousal maintenance. JustFund partners with over 600 of Australia’s most reputable family law firms and legal professionals, ensuring clients receive the guidance and support they need.
Unlike a lump sum, a line of credit releases funds when needed, offering a flexible alternative to traditional litigation funding. This approach provides financial certainty to clients and law firms, supporting immediate needs through partial property settlement and securing resources for the final settlement. This ensures that funds are available precisely when required throughout the legal process.
Broader coverage
Litigation funding, including litigation funding orders and partial property settlement orders, only applies to cases that proceed to court proceedings. However, many cases don’t reach this stage. Good family law firms strive to avoid court action, as mediation is generally more cost-effective and less emotionally challenging for clients. JustFund financially supports lawyers exploring alternative resolution methods outside of court proceedings, enabling clients to work toward a fair outcome without the stress of a full court trial while safeguarding their interests for a final settlement.
Conclusion
We understand that some Australians fear the prospect of legal disputes, especially when facing family law matters. Family law litigants are often in financially challenging circumstances and may require financial support to manage their legal costs effectively. Clients have options to manage these costs, and it’s important to understand their differences.
Litigation funding is popular in family law, especially for clients facing challenging legal disputes. While it has drawbacks within the Australian legal landscape, JustFund strikes a balance by providing clients with the funding they need at minimal cost, tailored to Australia’s unique demands of family law cases.
Apply for funding today and see how JustFund can assist you.
