Darwin lawyer blasted by judge over bid to ‘squeeze’ extra $20k from ex-husband after $6m divorce settlement

A Northern Territory Supreme Court judge has delivered a scathing rebuke to a Darwin lawyer who pursued another $20,000 linked to her former husband despite the disputed money already being accounted for in the couple’s multimillion-dollar divorce settlement.

Lucy Zhao has been personally ordered to pay $40,000 in legal costs after pursuing the claim through three unsuccessful legal proceedings, with the judge suggesting she may have been trying to “squeeze” more money from her ex-husband’s share of a property settlement involving assets worth about $6 million.

Justice Dean Hiley found the property lawyer should have known her Supreme Court appeal was hopeless, particularly after her arguments had twice been rejected by the Northern Territory Civil and Administrative Tribunal.

“Ms Zhao, herself a lawyer and the guiding force of the appellant, should have appreciated this before embarking on it, having being unsuccessful on two occasions in the NTCAT,” he said.

“By then she should have realised and accepted that the $20,000 had formed part of the $6M or so that was involved in the property settlement.

“It may be that she was hoping to squeeze this further small amount of $20,000 out of her previous husband’s share of the settlement proceeds.”

The extraordinary judicial dressing-down came in the latest chapter of a bitter financial dispute arising from the breakdown of Ms Zhao’s 23-year marriage to Trevor Dalton.

Ms Zhao, an associate at Darwin law firm Cozens Johansen Lawyers, specialises in property conveyancing and commercial matters, including family trusts, debt recovery and litigation.

During their marriage, the couple accumulated substantial wealth, including real estate, cash, shares, superannuation and interests in several trusts.

At the centre of the dispute were three payments totalling $20,000 made by the Civitas Unit Trust to Mr Dalton between October 2023 and March 2024.

The payments – $10,000 followed by two instalments of $5000 – should instead have been made to the Zhao Family Trust, controlled by Ms Zhao.

That was not in dispute.

But while Ms Zhao maintained the money remained owing to her family trust, Civitas Properties argued the payments had already been taken into account when the couple’s assets were divided.

In November 2024, Ms Zhao’s company, Lucy Zhao Pty Ltd, acting as trustee for her family trust, launched a claim against Civitas Properties Pty Ltd in NTCAT.

The tribunal dismissed the claim in May 2025, finding the disputed payments had already been considered in the divorce settlement.

Ms Zhao sought an internal review, but NTCAT president Mark O’Reilly upheld the decision in September 2025.

He accepted the payments had originally been made incorrectly but found the financial loss had already been addressed.

Undeterred, Ms Zhao took the matter to the NT Supreme Court, arguing the tribunal had made legal errors and the money remained recoverable.

But Justice Hiley rejected her arguments, finding the tribunal had correctly concluded the disputed money was already accounted for in the divorce settlement.

On July 1 he dismissed the appeal.

In a decision published this month, he granted an application by Civitas Properties seeking indemnity costs and an order making Ms Zhao personally responsible for the bill.

The court heard that in February, while the Supreme Court appeal was still underway, Civitas Properties had offered Ms Zhao’s company $2500 to settle the dispute.

The offer would have allowed her company to recover a small portion of the disputed money while avoiding the risk of having to pay the opposing party’s legal costs.

Despite having 14 days to consider it, Ms Zhao rejected the offer within an hour.

Justice Hiley noted that Ms Zhao had responded with a detailed explanation focusing on her proposed grounds of appeal and her “optimistic prospects” of winning.

But Justice Hiley found her appeal was “clearly without merit”.

“It seems that Ms Zhao was hoping for a more generous offer,” he said.

“As matters transpired the Offer was very generous, not only allowing the appellant a small part of the $20,000 claimed ... but also removing the risk of the appellant having to pay the respondent’s costs.”

Justice Hiley found Ms Zhao had made no attempt to negotiate a settlement before or after the offer was made.

“The Offer was peremptorily, imprudently and quite unreasonably rejected by Ms Zhao on behalf of the appellant,” he said.

The judge also found that Ms Zhao, who controlled the family trust company and personally conducted the litigation, should be held responsible for the legal costs rather than leaving Civitas Properties to pursue payment from the company alone.

The court heard Civitas Properties’ total legal costs were estimated at more than $44,000.

Rather than prolonging the dispute with another costly legal process, Justice Hiley fixed the bill at $40,000 and ordered Ms Zhao to pay it personally, alongside her company.

The bruising ruling leaves the Darwin lawyer facing a legal bill twice the value of the $20,000 her company had spent almost two years chasing.

When contacted by The Nightly, Ms Zhao declined to address the judge’s criticisms or explain why she had continued pursuing the claim.

“The Court has delivered its judgments and the proceedings have concluded,” she said.

“I respect the Court’s decisions and do not propose to comment further on the judgement.”