Who Pays the Legal Costs in a Family Provision Claim in Sydney?
The question of legal costs is often the first thing people ask when considering a Family Provision Claim against an estate in Sydney. It’s a critical concern, as litigation can be expensive.
While the general rule in most civil litigation is that "costs follow the event" (the loser pays the winner's costs), Family Provision Claims in the Supreme Court of NSW operate under a different, more flexible framework. The Court has a wide discretion under the Succession Act 2006 (NSW) to make orders that it thinks are just and fair.
The Discretionary Power of the Court
In a Family Provision Claim, the Court's primary focus is on whether the deceased person failed to make adequate provision for the proper maintenance, education, or advancement in life of an eligible claimant. The issue of costs is considered separately and is ultimately decided on a case-by-case basis.
Section 99 of the Succession Act 2006 (NSW) gives the Court the power to order that the costs of the proceedings be paid out of the estate or the notional estate, in a manner the Court thinks fit. This power allows the Court to depart from the usual rule of "loser pays."
When the Claimant is Successful
If the Court finds that the claimant was not adequately provided for and makes a Family Provision Order in their favour, the general trend is that the claimant's reasonable legal costs will be paid out of the estate.
The Rationale
The reasoning is straightforward: if the Court has to correct an injustice caused by the deceased's will, the successful claimant should not have their rightful provision diminished by having to pay their own legal costs. In these scenarios:
- Claimant's Costs: Usually paid from the estate.
- Executor's Costs: The executor, in defending the estate, is typically entitled to have their costs (usually on an indemnity basis, which covers a larger portion of the costs incurred) paid from the estate as well, provided they acted reasonably and prudently.
The provision awarded to the claimant, and the legal costs for all parties, will then reduce the amount available for the other beneficiaries named in the Will.
When the Claimant is Unsuccessful
This is where the financial risk is highest for a claimant.
The General Principle
If the claim is unsuccessful, the claimant will almost certainly have to pay their own legal costs. Furthermore, the Court may order the claimant to pay the estate’s legal costs (or a portion of them).
Departure from the Rule: No Order as to Costs
However, in Family Provision Claims, judges often recognise that claimants are often financially vulnerable. Therefore, it is not uncommon for an unsuccessful claimant to receive no adverse costs order against them, meaning they only have to pay their own legal costs. The estate, in this scenario, still bears the cost of its own defence.
The High-Risk Scenario: Adverse Costs Order
The Court is more likely to order an unsuccessful claimant to pay the estate’s costs if the claim was deemed to be:
- Unreasonable Rejection of a Settlement Offer: The claimant unreasonably rejected a genuine, reasonable, and commercially sensible settlement offer made by the estate (such as an offer made pursuant to Reg 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) or accordance with the principles set out in Calderbank v Calderbank [1975] 3 All ER 333).
- Frivolous or Vexatious: The claimant had little or no reasonable prospects of success or was brought in bad faith for an improper purpose.
- Ineligible to Contest: The claimant is not eligible to contest the Will as defined in section 57 of the Succession Act 2006 (NSW).
Addressing Financial Risk: Our Full No Win, No Fee Service
A significant concern for potential claimants is the need to fund a complex legal case upfront. To make justice accessible, we offer a powerful Conditional Costs Agreement, known as our Full No Win, No Fee arrangement, for eligible Family Provision Claims.
How Our Full "No Win, No Fee" Works
Our unique arrangement is designed to minimise your financial exposure:
- Professional Fees: You will not be charged for our professional legal services (time, advice, negotiation, and court preparation) unless your case is successfully resolved (you receive a settlement or a court order).
- Disbursements Funded: We pay all necessary disbursements (out-of-pocket expenses such as court filing fees, expert report costs, and search fees) as the case progresses.
- Leading Barristers: We partner with leading barristers who also agree to act on a conditional basis, meaning their substantial fees are also not payable unless your case is successful.
- If We Lose: If your claim is unsuccessful, you pay nothing for our professional fees or the disbursements we have funded. You would only be responsible for any adverse costs order made by the Court (e.g., being ordered to pay the estate’s legal fees, which is rare for genuinely needy claimants).
The Role of Mediation and Settlement
The vast majority of Family Provision Claims in Sydney settle out of court at mediation. This is always the preferred outcome, as it reduces legal fees and offers certainty for all parties.
In a negotiated settlement, the matter of legal costs is an integral part of the agreement. Typically:
- The claimant receives a lump sum settlement amount inclusive of their costs. They then pay their lawyer from that lump sum.
- The executor’s costs are paid from the estate.
The key advantage of settling is that the parties maintain control over the cost outcome, rather than leaving the decision to the discretion of a judge.
The NSW Supreme Court's Focus on Proportionality
A major trend in the NSW Supreme Court is the increasing emphasis on proportionality and costs capping. Judges are becoming more scrutinising of legal fees, especially in smaller estates.
The court aims to ensure that the legal costs incurred do not consume an unreasonable proportion of the estate’s value. If the costs are disproportionate to the amount in dispute, the Court may intervene to limit the amount of costs a party can recover, even if they are successful.
Get Specialist Advice Before You Act
The rules surrounding legal costs in Family Provision Claims are complex, and the outcome always depends on the unique facts of the case. Never assume your costs will be paid by the estate.
Before taking any action, it is essential to get specialist legal advice to:
- Assess the Merits of Your Claim: A strong claim with a high likelihood of success is essential for proceeding.
- Understand the Risks: Be fully informed of the worst-case scenario for adverse costs.
- Discuss Funding Options: Clearly understand the terms and benefits of our Full No Win, No Fee arrangement.
Are you an eligible person who feels they has been left without adequate provision from an estate? Contact us today for a confidential assessment of your Family Provision Claim and a clear understanding of the potential costs and funding options involved.
