Categories

costs of settlement vs cost of litigation when separating

We often advise on the benefits of settlement. Initial costs of settlement may seem high in the scheme of day-to-day expenses. However, these costs are dwarfed in comparison to the costs of litigation.

With a separation, when looking to settle what exactly are the costs associated with settlement?

A large portion of your costs will be associated with the drafting of a relationship property agreement. This agreement will provide a background of the relationship and separation. It will also outline the relationship property and how this is to be divided upon execution of the agreement. These costs can obviously increase if there is a lot of correspondence required. This might be if information is not forthcoming or if the parties are having a difficult time coming to an agreement.

It may not always be practical for parties to discuss matters between themselves and unfortunately this will add to legal costs. On agreement and completion of the relationship property agreement the parties will each receive independent legal advice. This is what makes the agreement legally binding.

It is crucial that this is done properly. From time to time we deal with people who have come to an informal agreement regarding the division of their property only to face litigation years later when their ex changes their mind or perhaps they themselves realise the deal wasn’t a good one. This usually comes as a shock – and an expensive one regardless of the eventual result.

There may also be additional costs of conveyancing if real estate is involved and needs to be sold or transferred to one of the parties. If one party is buying out the other, your bank will generally insist upon seeing evidence of a legally binding relationship property agreement. It is also generally suggested to get a new will drafted, although this is a good idea regardless of whether you settle or have a Judge decide on division in Court.


In the event you cannot agree, and settlement is not an option, applications can be made to the Court seeking determination by a Judge. Litigation is very rarely recommended given the significant cost involved as lawyer charge for their time and attendances. It also tends to take a long time, as the Courts are overburdened.


There is also a risk with litigation that the Judge may not agree with you on the day and as a result you may be unsuccessful. This is called “litigation risk” and is always something both sides need to keep in mind.


There is also the issue of costs awards. Costs awards may be made against you if the Judge’s decision does not go your way. You may have already spent tens of thousands of dollars on your own legal fees and then be ordered to pay a portion of the other parties’ costs. It is worth noting that you do not need to “lose” to be required to pay costs. If one party is willing to settle and they propose a generous offer and the court awards you the same or less than this, you could be ordered to pay costs.


Even in the event you are awarded costs in your favour, you should assume the award will only cover a fraction of your actual costs.


We suggest that the legal fees should always be considered when you are considering whether to settle or if you think you should “fight to the bitter end”.

Recent Posts