At its meeting on 2 November 2010, the Reserve Bank Board decided to increase the cash rate by 25 basis points to 4.75%, effective 3 November 2010. Accordingly the rate of interest on unpaid legal costs, prescribed by clause 110A(3) of the Legal Profession Regulation 2005, as of 3 November, is 6.75%.
Section 321 of the Legal Profession Act 2004 âInterest on unpaid legal costsâ provides:
(1) A law practice may charge interest on unpaid legal costs if the costs are unpaid 30 days or more after the practice has given a bill for the costs in accordance with this Part.
(2) A law practice may also charge interest on unpaid legal costs in accordance with a costs agreement.
(3) A law practice must not charge interest under subsection (1) or (2) on unpaid legal costs unless the bill for those costs contains a statement that interest is payable and of the rate of interest.
(4) A law practice may not charge interest under this section or under a costs agreement at a rate that exceeds the rate prescribed by the regulations.
Clause 110A of the Legal Profession Regulation 2005 prescribes the relevant rate of interest. It provides:
110A Interest on unpaid legal costsâsection 321 (4) (b) of the Act
(1) This clause is made for the purposes of section 321 (4) of the Act and prescribes the rate of interest in excess of which a law practice may not charge interest under section 321 of the Act or under a costs agreement.
(2) The rate for the period commencing with 1 October 2005 and ending immediately before the date of commencement of subclause (3) is 9.0%.
(3) The rate for the period commencing with the date of commencement of this subclause is the rate that is equal to the Cash Rate Target as at the relevant date, increased by 2 percentage points.
(4) In this clause:
Cash Rate Target means the percentage (or maximum percentage) specified by the Reserve Bank of Australia as the Cash Rate Target.
Relevant date means the date the bill was issued by the law practice concerned.
The Cash Rate Target increases to 4.75% from 3 November 2010 (visit the Reserve Bank web site)
Accordingly the rate of interest prescribed by clause 110A(3) as of 3 November 2010 is 6.75%.
2 November 2010