When talking about legal costs, and the recovery of legal costs from an opponent if you win a case and are awarded costs, the word disbursements is often used.
The exact dividing line between disbursements and other costs is not entirely rigid and can depend, to a degree, on the context but the following explanation aims to give you the general idea.
The rules of courts and tribunals which award costs often provide that a party which has no solicitor can claim the same disbursements which their solicitor would have made if they had had a solicitor. The rules might or might not allow some additional items to be claimed, and often these rules are complex, involving fine distinctions, but disbursements represent a kind of expenditure which is (relatively) easy to recognise and which is normally claimable whether a party has a solicitor or not. If a judge has a discretion whether to carry out a fast summary assessment of costs or, alternatively, order costs to be assessed at a later date by the long and expensive process of detailed assessment the judge is more likely (all other things being equal) to be prepared to carry out a summary assessment (which is what most people awarded costs want) if only disbursement are claimed and the complex special rules for other items do not therefore need to be considered.
A very clear example of a disbursement is the fee charged by most courts and tribunals when you start a case. Money paid out (or owed) to a barrister or expert witness is also a disbursement, but not everything paid out will automatically be an disbursement. To understand why, it is necessary to consider the working practices of solicitors' firms.
These days a lot of civil litigation is carried out without solicitors as the parties can now engage barristers directly without a solicitor, but because the idea of a disbursement originated with the assessment of solicitors' bills, in order to understand why some expenditure is regarded as a disbursement and other expenditure is not, it can be useful to think about what a solicitor would have done if a solicitor had been involved.
When a solicitor is engaged the solicitor will manage the clients' money asking the client to pay an initial lump sum (and asking for further lump sums as the litigation proceeds) and using the money to pay the costs of the litigation as it proceeds. When a solicitor is spending a client's money in this way there is obviously a need for the client to be protected and the courts have for a long time provided protection to clients of solicitors by allowing the client to ask the court to assess the solicitors' bill. This procedure is still available but assessment these days more often occurs in the context of one party being ordered to pay the other's costs so the question is not so much whether a solicitor' charges to his own client are reasonable but whether it is reasonable for the other side to be ordered to pay them in whole or in part.
Protection is needed when a solicitor's firm chooses, negotiates with, and pays out money to, an external supplier such as a expert witness or mediator but control is especially needed when a solicitor's firm decides to spend the client's money on services it provides internally and which contribute to its profits. In order to distinguish between the two situations the former are called disbursements and the latter are called profit costs. So disbursements are always external payments but it does not follow that all external payments are necessarily disbursements. Take this example.
In the above example the purchase of printer ink was not made on behalf of a specific client and for that reason alone would not be a disbursement but items which could be attributed to a specific client are also often not treated as disbursements by solicitor's firms if they are small. For example postage costs of letters are treated as part of the running costs of the solicitor's firm and not as disbursements, but a charge by a courier for delivery, or the postage cost of a large parcel, would be disbursement.
It can be seen from the example of postage that at the margin it is not always clear whether smaller items are disbursements or not. The courts/tribunals tend to use the general practices of solicitors as a guide but practices vary between solicitors' firms and change over time often due to technological changes - no doubt when the telephone was first invented any solicitors' firm deciding to use this new-fangled invention for a call would have charged it as a disbursement but now that telephone calls are so cheap nobody would think of directly charging for the costs of the call itself: the cost is simply recovered, along with other overheads, as part of the hourly rate charged for the solicitor making the call.
Because of the origin of the distinction between disbursements and other costs (i.e. in the court protecting the client) any payment which is not at arms length is not treated as a disbursement. For example if a solicitor's firm were to set up a separate company to provide printing services then payments by the solicitor's firm to that company for printing services would not be treated as disbursements because they are not at arm's length.
In fact any payment by one solicitors' firm to another is not treated as a disbursement even if there is no connection between the firms.
This page was lasted updated in March 2017 Disclaimer