From when can solicitors claim interest on an unpaid bill?

Under s. 95 the Legal Practice Act, 1996, interest was chargeable on bills of costs from the period from 30 days after payment is demanded until the bill is paid.  But what does it mean?  Does interest start to run 3o days after (i) the date of the bill, (ii) the day it was posted, (iii) the day it was received, (iv) the day at the end of the period which the costs agreement says payment is to be made within, or (v) the due date for payment stated on the bill?  In this post, I hazard an answer, and note the different provision now to be found in the Legal Profession Act, 2004, following its amendment which I posted about here.

As a solicitor, I always took a conservative approach and started to count interest on basis (iv) or (v), which usually produced the same result.  I noticed when reading Horesh v Cyngler [2007] VCAT 527 that Senior Member Howell, who might be expected to know this kind of thing, awarded interest from 30 days after the date of receipt of the bill. What the reasons do not disclose is whether the costs agreement or bill specified payment forthwith, or, as is more usual, within 7, 14 or 30 days.  If forthwith, then the decision only reveals that (iii) is the correct choice out of (i) to (iii), a most unsurprising result.  If within X days, though, the interpretation accords with the most natural meaning of ‘after payment is demanded’.  The demand is made on the date the bill is given.  Payment is ‘demanded by’ the due date on the bill, which is a different thing.  On the other hand, if the bill specified 90 day terms, the result would be that a client who paid on time would be theoretically liable to pay 60 days’ penalty interest nonetheless, which would be surprising unless the interest regime is conceived of not as a penalty for late payment but as a statutory counterbalance to clients’ frequent tardiness in paying their lawyers.  The problem with the ‘it’s not a penalty’ is that the penalty rate is in fact punitive, like its name suggests.

Section 3.4.21 of the Legal Profession Act, 2004 now says in relation to bills issued after 6 December 2007 that interest may be charged in accordance with a costs agreement, or ‘if the costs are unpaid 30 days or more after the practice has given a bill’.  That is both clearer and less clear than s. 95.  Clearly, a client who pays within 30 days after the deemed receipt by post of a bill will not have to pay interest.  But how much interest must a client who pays on the 40th day after the deemed receipt of the bill in the post?  Thirty-nine days’ interest or nine?  In the absence of agreement, the maximum rate of interest chargeable is ascertained by reference to the cash target rate published by the government on the date of the bill, not the date 3o days afterwards.  But it would be surprising if a client who paid a bill a day after the lawyer asked her to was required to pay a month’s interest, and you can bet that the provision will not be interpreted to achieve that result.

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