When that first bill comes in from your solicitor, how do you pay it? When you are in a relationship money is joint and bank accounts are joint. Where does that money come from to pay your first solicitor bill after separation? It is very tempting to take that $20,000 from the joint savings account to pay your solicitor fees.
The legislation provides a starting point for parties to consider where the money comes from to pay your solicitor bills. Section 117 provides that each party to a proceeding is to bear their own costs. Meaning that the money to pay your solicitor shouldn’t come from the property pool that needs to be divided. ie, your solicitor costs can’t come from the joint bank account.
But what happens when it is taken from the property pool (say that $20,000 sitting in a joint savings account), the case law says that money needs to be added back into the property pool.
- In Chorn & Hopkins (2004) FLC ¶93-204, the Full Court of the Family Court at [57] said “If the funds used existed at separation, and are such that both parties can be seen as having an interest in them (on account, for example, of contributions), then such funds should be added back as a notional asset of the party, who has had the benefit of them.”
- In Farnell & Farnell (1996) FLC ¶92-681 the husband used $20,000 he withdrew from a joint account at separation on legal fees. The wife gave no evidence as to her legal costs. The trial judge treated the $20,000 as a notional asset which he added back to the total property pool. The Full Court dismissed the husband’s appeal.
What if you choose to take a loan out to pay your solicitor bills. Can that be included in the balance sheet as a liability? The case law very clearly says no. It cannot be included as a liability in the property pool:
- In Chorn & Hopkins (2004) FLC ¶93-204, the Full Court of the Family Court said, “nor would any borrowing undertaken by a party post-separation to pay legal fees be taken into account as a liability in the calculation of the net property of the parties.”
The simple answer is legal fees cannot come from the property pool, or you risk having to account for them as an add back to your detriment.
