What is the 50/50 Rule and how does it work?
The 50/50 Rule - s.347 of the Legal Profession Act 2007
In Queensland, a rule applies in cases where the award of damages or settlement sum is less than the legal professional fees that could be charged under the Costs Agreement between the parties, or the professional fees are so high that the claimant would be left with very little in-hand from their settlement sum. That rule is called the "50/50 Rule" and can be found at Section 347 of the Legal Profession Act 2007. The purpose of this rule is to ensure that an injured claimant or plaintiff always achieves a fair share of their recovered damages.
A No Win No Fee Personal Injury firm cannot breach this 50/50 Rule, no matter how much the damages recovered are, unless special circumstances apply.
How the 50/50 Rule works is as follows:
1. Firstly you take the total gross settlement amount to be received for your claim;
2. From this is deducted any Statutory Refunds to be paid from your settlement sum (Statutory Refunds are such things as Refunds due to Workcover Queensland, Medicare Australia, DEEWR (for vocational rehabilitation) and Centrelink), as well as all disbursements incurred in the running of your claim (eg. Medical report fees, barrister fees, court filing fees etc);
3. After these deductions are made, the resulting sum is then divided by two (2);
4. The end result is the total amount that you can only be charged for professional costs for your claim (including GST).
For example, if your claim only settled for $50,000, and fees under the Costs Agreement were, say $25,000, then professional costs could only be charged under the 50/50 Rule as follows:
½ X ($50,000 less (statutory refunds of say $5,000 in total, plus, disbursements of say $7,500) which is ½ X ($50,000 - $12,500) and equates to ½ of $37,500 = $18,750.
So the total of professional costs that could only be charged would be $18,750 despite legal fees really being $25,000.
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