Thursday, 27 February 2020
Changes to trust account irregularity notifications
Over the past 12 months there has been an increase in the trust account irregularity notifications received by the Society. Many relate to errors made by clients or third-parties who have deposited trust funds in the office account, even when the law firm has advised them of the trust account bank details.
Effective 17 February 2020, Council, pursuant to section 228(4) of the Legal Profession Act 2006, has authorised the limited mixing of trust money by law practices if the conditions listed in points 1 – 4 below are met.
- Where trust money is deposited to the office account in error by a client or third party and the value of the deposit is equal to or less than $10,000, the law practice is required to:
- remove the trust money from the office account;
- deposit the trust money into the appropriate trust account; and
- issue a trust receipt;
not later than 4 working days after the funds were received in the office account.
- Where non-trust money is deposited to a law practice trust account in error by a client or third party, and the law practice removes the non-trust money from the trust account not later than 4 working days after the funds were received in the trust account, and the value of the deposit is equal to or less than $10,000.
- During Christmas and New Year closure periods the 4-day removal requirement is extended to ten working days, including from 23 December in each year.
- Law practices should retain a note of the error for their own records and to satisfy the request of an external examiner.
Pursuant to section 81 of the Regulations, when the relevant conditions listed in points 1 - 4 are met, Council has agreed that a law firm is exempt from notifying the Society of these occurrences. At all other times a law firm must still provide trust account irregularity notifications to the Society pursuant to section 231 of the Legal Profession Act 2006.
