Can your firm claim interest on legal fees? – by Dipal Prasad
INTEREST RECOVERABLE ON A SOLICITOR/CLIENT BASIS
Solicitors can only recover interest on unpaid legal costs if their bill contains a statement specifying that interest is payable and specifying the applicable rate of interest.
If the costs agreement does not contain a clause providing for charging interest on unpaid legal costs, then interest is only chargeable if the costs are unpaid 30 days or more after the law practice has given a bill.
In Queensland, the maximum rate of interest rate applicable to unpaid solicitor/client bills issued between 1 January 2020 and 30 June 2020 is 6.75%.
The Supreme Court of Queensland Practice Direction in relation to interest currently allows law practices to charge interest at a rate six (6) percent above the Cash Rate last published by the Reserve Bank of Australia before a 1 January to 30 June period commenced or a 1 July to 31 December period commenced in any year, depending on when the bill was issued.
See Legal Profession Act 2007 (Qld) s 321; Legal Profession Regulation 2017 (Qld) s 72; Civil Proceedings Act 2011 (Qld) s 59 (3); Supreme Court of Queensland, Practice Direction Number 7 of 2013, Interest Rates, cl 4, https://www.courts.qld.gov.au/courts-calculator/interest-rates#money.
New South Wales & Victoria
In NSW and Victoria, the maximum rate of interest rate applicable to unpaid solicitor/client invoices issued between 20 March 2020 and 7 May 2020 is 2.25%.
The relevant regulation provides that the maximum rate of interest is the rate that is equal to the Cash Rate Target as at the date the bill was issued by the law practice, increased by two (2) percentage points.
This is significantly lower than the amount of interest chargeable in Queensland.
See Legal Profession Uniform Law (NSW) s 195 and Legal Profession Uniform General Rules 2015 r 75.
INTEREST RECOVERABLE ON AN INTER PARTES BASIS
New South Wales allows interest to be recovered on an inter partes basis from the date on which an order as to costs, entitling one party to recover costs from another party, is made. This means interest is recoverable from a period before party/party costs are quantified.
The receiving party can recover interest from the paying party at a rate six (6) percent above the Cash Rate last published by the Reserve Bank of Australia before a 1 January to 30 June period commenced or a 1 July to 31 December period commenced in any year, depending on the date of a costs order.
See Civil Procedure Act 2005 (NSW) s 101 and Uniform Civil Procedure Rules 2005 (NSW) r 36.7.