QLD Compensation: What is the 50:50 rule?

When considering whether to pursue a compensation matter, it’s natural to have questions about the rules around the charging of legal fees. It’s important that you understand your rights in relation to any Costs Agreement that you enter into with a lawyer, and how relevant laws can impact what you will recover from a compensation matter.

Relevant Legislation

The 50:50 rule is a rule that applies to claimants in Queensland in relation to the charging of professional fees. The rule places a cap on the professional fees that can be charged by a firm, ensuring that the firm does not walk away with more in professional fees than the claimant receives in their pocket. 

The Legal Profession Act 2007 (Qld) provides for the regulation of legal practice in Queensland. Section 347 of the Act outlines the 50:50 rule. Per Section 347 of the Act, a firm may not charge (including GST) more than 50% of the settlement amount after refunds (e.g. monies owing to Medicare or Centrelink) and outlays (e.g. monies paid by the firm for medical reports, records, etc.) have been deducted. Essentially, the 50:50 rule puts an upper-limit on the professional fees that a firm is permitted to charge in personal injury matters.  

Example

The 50:50 rule can therefore be expressed in accordance with the following formula:

[E – (R + D)]  x  0.5 

Where E is the gross settlement of the claim 

R is the refunds to the Commonwealth or other jurisdictional bodies 

D is disbursements and outlays 

The above formula can look complicated, so we’ll provide a couple of examples below on how the 50:50 rule is applied. These figures are for the purposes of providing an example only, and do not represent our opinion on the value of your existing claim, nor indicative figures that you may recover from any potential compensation matter.  

For this example, we will use the following figures:  

                                                                        Tb-1 

Settlement (E) 

$70,000.00 

 

Refunds (R) 

$4,000.00 

Disbursements and Outlays (D) 

$6,000.00 

Professional Fees, prior to the application of the 50:50 rule 

$40,000.00  

However, in the above example we would not be permitted to charge the full $40,000.00 due to the operation of the Legal Profession Act 2007 (Qld), as it would be contrary to the 50:50 rule. Therefore, in this circumstance, the following would instead occur: 

                                                                    Tb-2 

 

Settlement (E) 

$70,000.00 

 

 

 

Less: 

Refunds (R) 

$4,000.00 

 

Disbursements and Outlays (D) 

$6,000.00 

 

Professional Fees of $40,000.00, reduced in accordance with the 50:50 Rule  

$30,000.00  

 

Net recovery to Claimant 

$30,000.00 

As you can see, the firm’s professional fees are reduced by $10,000.00, so that the firm and the claimant walk away as equal partners in the available damages following the deduction of refunds and disbursements and outlays.  

It is important to note that the 50:50 rule only applies in circumstances where the gross settlement is not enough to cover all costs and does not mean that professional fees would always be 50% of the remaining pool of funds. By way of example, see the following figures:  

                                                                    Tb-3 

 

Settlement (E) 

$120,000.00 

 

 

 

Less: 

Refunds (R) 

$4,000.00 

 

Disbursements and Outlays (D) 

$6,000.00 

 

Professional Fees 

$40,000.00  

 

Net recovery to Claimant 

$70,000.00 

As such, the 50:50 rule does not permit a firm to always take 50% of the leftover pool in every matter, but rather, it acts as a protective rule to ensure that a law firm does not walk away with more in professional fees than the claimant receives in their pocket. 

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