PROFESSIONAL ETHICS
Guidance on reimbursements for disbursements ETHICS & PRACTICE UNIT
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thics and Practice has taken the opportunity to clarify the question of when it is appropriate for a practitioner to be reimbursed for a disbursement paid from the office account. Disbursements are defined as those payments which have been made in pursuance of the professional duty undertaken by the solicitor which he or she is bound to perform, or have been sanctioned as professional payments by the general practice and custom of the profession.1 The term refers to money which, for the purposes of the retainer or proceeding, has been actually paid out to other people, such as witnesses, counsel, professional advisers, and so can be distinguished from “costs” strictly speaking, which cover remuneration for the exercise of professional legal skill by a lawyer.2 Those payments made by a practitioner on behalf of a client which the practitioner is not obliged to pay, such as payment for stamp duty or LTO fees, while not true disbursements, are often classed by commentators as “nonprofessional” disbursements as compared with the “professional” disbursements referred to above. While the above distinction may have relevance in some regards (eg in whether GST may be payable), the principle in relation to reimbursement does not rely on any difference in categorisation. At all times money entrusted to a legal practice in the course of or in connection with the provision of legal services to which the practice is not wholly entitled is trust money (Schedule 2 Legal Practitioners Act 1981). In the case of a disbursement, whether professional or non-professional, a practitioner is not entitled to be reimbursed until the disbursement has been paid and the practice has issued a request for payment, (e.g., disbursement invoice) or a written notice of withdrawal
(Legal Practitioners Regulations 45(3)(a) (iii) and 45 (3)(b).) Money is taken to have been paid by the law practice when the relevant account of the practice has been debited (Regulation 45(6)). The critical issue is when payment occurs such that the practitioner is entitled to be reimbursed. Until the practitioner has paid for the disbursement in such a way as to have fully extinguished the liability incurred by him or her for that disbursement, he or she is not entitled to be reimbursed. “Payment” may take the form of cash, electronic funds transfer, credit/debit card, cheque or authority for electronic payment (such as for RevenueSA Online). Payment by cash or electronic funds transfer immediately extinguishes the liability of the practitioner, but payment by cheque or authority does no more than merely create a further liability that is discharged at a later date. A cheque drawn on a practitioner’s office account is not discharged until it is successfully presented (section 58 Cheques and Payment Orders Act CTH (1986). Similarly, the provision of an authority to withdraw funds electronically from the practitioner’s account does not extinguish the liability until the funds are actually withdrawn. You should not presume that an electronic payment has been successful just because it has been processed. We recommend that you verify that the payment has been made to the correct payee and debit has appeared on the bank statement before appropriating the reimbursement. Until that occurs, there is the potential in each case that sufficient funds may not be available for a successful discharge of that liability. In the case of a credit/debit card payment, reimbursement can only be actioned when a payment receipt or acknowledgement has been received. If the law practice credit/debit card attracts membership benefits or rewards
these must be disclosed in the retainer. In the absence of written disclosure, a conflict concerning a solicitor’s own interests will arise (see Rule 12 of the Australian Solicitors Conduct Rules). A practitioner who maintains an account with a supplier of services that may or may not be specifically billed as disbursements (eg Telstra) may not be reimbursed for a billed disbursement until the account that includes the particular client’s disbursement has been paid. However, where those services are not to be specifically billed as disbursements, but are essentially the costs of running a practice, the practitioner has a personal liability to the supplier unrelated to any particular client. Those costs may be included in the practitioner’s costs (eg as a component of his or her established hourly rate) and, in those circumstances, the practitioner is not required to have paid the accounts for those services prior to receiving payment or reimbursement for costs. Reimbursement by a practitioner prior to being wholly entitled to that money is not only a breach of the Legal Practitioners Act 1981 and Legal Practitioners Regulations 2014 but also a breach of the practitioner’s fiduciary duty not to make a profit (apart from a proper professional fee) from the solicitor/client relationship. B
Endnotes 1 https://advance.lexis.com/document/?pd mfid=1201008&crid=dc88a084-4f8a-4a04ba8f-35b7b344935a&pddocfullpath=%2Fsh ared%2Fdocument%2Fanalytical-materialsau%2Furn%3AcontentItem%3A59M3-1FX1F5KY-B0RW-00000-00&pddocid=urn%3Acon tentItem%3A59M3-1FX1-F5KY-B0RW-0000000&pdcontentcomponentid=120761&pdteaserk ey=sr0&pdicsfeatureid=1517127&pditab=allpo ds&ecomp=xpqxk&earg=sr0&prid=b55c8771713c-4634-8a93-7dcd20d79bbc 2 see LexisNexis Halsbury’s Laws of Australia (online at 22 October 2019) Practice and Procedure, ‘7 Judgment and Execution’ [325-9405].
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