Interest rate payable on fidelity fund claims: Consultation Paper

Date issued: 20 August 2020

Part 4.5 of the Uniform Law provides for a fidelity cover scheme, which is a system that provides a source of compensation for clients who have lost trust money or trust property as a result of a default of a law practice.

The interest rate on fidelity fund claims is fixed by section 243(2) of the Uniform Law in the absence of specific provision in the Uniform General Rules.

The Legal Services Council considers it appropriate to reduce the interest rate from the current rate of 5% for the following reasons: 

  • The current rate does not reflect the rate of return which can be achieved by investing the corpus of the fidelity fund.
  • Paying out disproportionately high amounts of interest, particularly on high-value claims, is problematic because it decreases the sustainability of the fidelity fund.
  • This would more closely represent the rate of return which claimants might have expected to achieve had the claim been allowed immediately after it was made.
  • Applying a formula to calculate the interest payable better reflects the policy reasons for paying interest irrespective of the economic conditions at the time. 

Submissions can be sent to the Council at submissions@legalservicescouncil.org.au on or before 18 September 2020, and will be published on the Council's website unless advised otherwise.

Click here for the Consultation Paper