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If you or your business has a legal case or proceeding in New Zealand, it is important to understand how costs and disbursements work so you can try to recoup at least some of your costs. Legal fees and other costs can add up when you are in court. Therefore, costs and disbursements offer the ability to get part of your money back in some circumstances. This article explains what: 

  • costs and disbursements are; 
  • you need to know about them if you are in a legal case; and 
  • ‘security for costs’ is and when you may need to provide it. 

What Are Costs and Disbursements?

Costs and disbursements are the two main kinds of costs you incur as part of a legal case. ‘Costs’ refers specifically to legal fees: the direct cost of hiring a lawyer to represent you. Disbursements, by contrast, refers to the administrative and other expenses you will have to pay as part of the proceeding, such as court filing fees and other court expenses. These tend to be ‘indirect’ expenses compared to legal fees, but you still need to pay them as part of the proceeding.  

At the end of a case, the court (i.e., the judge) can decide whether to order the unsuccessful party to pay costs and disbursements. Costs and disbursements are calculated differently in terms of what amount that party will have to pay. 

Calculation of Costs

The court will calculate costs on a particular scale, such as this one set out in law. These scales set out how much of a lawyer’s time is reasonable to incur for different activities (such as inspecting documents or appearing at a hearing). The aim is to provide a relatively objective metric for calculating costs. 

Calculation of Disbursements

However, disbursements work differently. As they are usually court-related expenses, they will usually be fixed by the registrar (an administrative official in the court). The registrar will look at the disbursements claimed by the successful (winning) party in a legal proceeding. They will then confirm the amount to pay by the unsuccessful party if there are no issues with how it has been calculated.

What Do You Need to Know About Costs and Disbursements?

There are multiple types of orders a court can make at the end of a case regarding costs and disbursements. The most common orders a judge will make include:

  • ordering the unsuccessful party to pay the costs and disbursements of the successful party; 
  • ordering that “costs lie where they fall”. This is a legal expression that means that the judge will order neither side to pay for the costs of the other. They just pay their own costs (i.e., where they have ‘fallen’ already); and 
  • ‘reserving’ (or holding) an order for costs until the final determination in a case has been made. This can occur when there has been a judgment on an interlocutory application, but there has not yet been a final decision. 

The most important thing to do in terms of costs and disbursements is to record whatever costs you incur in bringing or defending a proceeding. In order to claim payment for them later, you may have to show evidence of both costs and disbursements.

What is ‘Security for Costs’ and When Do You Have to Provide It?

You may be asked for ‘security for costs’ as part of a legal proceeding. Security for costs is a payment of money by one party to the court. It acts as a guarantee that if they are unsuccessful in the proceeding or otherwise lose the case, they will still be able to pay the costs of the other party. This security amount is kept safely in the court’s trust account until the final outcome of the proceeding.

You need to provide security for costs if the other party makes a successful application to the court that you should have to put up an amount of money in advance for costs.

It is a good idea to get legal advice if you are asked to provide security for costs and discuss the potential liability of a legal proceeding.

Key Takeaways

Costs and disbursements are types of costs you may incur as part of a legal proceeding in New Zealand. Costs refer to legal fees (that a lawyer charges for their time) and disbursements refer to other expenses involved in a proceeding (such as court fees). In New Zealand, courts can and do order that the unsuccessful party pay for at least some of the costs and disbursements incurred by the winning party. You should make sure to carefully record your costs and expenses throughout the process of a legal proceeding to maximise your chances of successfully applying to have them paid by the other party at the end of the proceeding. If you want to know more about costs and disbursements in New Zealand, contact LegalVision’s disputes and litigation lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What are costs?

Costs are legal fees you or your business may incur in a legal proceeding, i.e. the cost of hiring a lawyer to represent you in a case. The winning party can claim ‘costs’ from the unsuccessful party in the case. In other words, sometimes the losing party in a case has to pay for part of the winner’s legal fees.

What are disbursements and how do they work?

Disbursements are other fees you or your business may incur in a legal proceeding, such as the filing fees and other expenses you have to pay as part of a legal proceeding. Again, the winning party can request that the unsuccessful party pays for their disbursements. 

What is security for costs?

Security for costs is when a party to a court proceeding must pay a sum of money to the court’s trust fund. This guarantees that if they are unsuccessful in the proceeding, they will be able to pay costs to the other party if a judge orders them to do so.

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