A law practice or approved clerk that receives trust money must maintain a general trust account. The trust account must be maintained in accordance with the Legal Profession Uniform Law, the Uniform Rules and any applicable regulations.
Who is entitled to receive trust money?
The Board has released a Grant of Trust Authorisation policy (137KB PDF) outlining the skills, experience and competency criteria it requires before granting trust authorisation to applicants for an Australian practising certificate. (See also further information about applying for a practising certificate with authorisation to receive trust money.)
A law practice must not receive trust money unless a principal holds an Australian practising certificate authorising the receipt of trust money. An ILP must not receive trust money unless at least one principal holds an Australian practising certificate authorising the receipt of trust money. T
An approved clerk may also receive trust money for legal costs for one or more barristers.
What is trust money?
Trust money for law practices
For a law practice, trust money means money entrusted to the law practice in the course of, or in connection with, legal services provided by the practice. It includes:
- money received for legal costs in advance of providing the services;
- controlled money received by the practice (i.e. money subject to written direction to deposit into an account controlled by the law practice other than the general trust account);
- transit money received by the practice (i.e. money received by a law practice subject to instructions to pay or deliver to a third party, other than an associate of the law practice); and
- money received by the law practice subject to a power exercisable by the practice or an associate of the practice, to deal with money for or on behalf of another person.
Trust money for approved clerks
For an approved clerk, trust money means money received by the approved clerk for the legal costs of a barrister in advance of the legal services to which those costs relate.
What is not trust money?
Trust money does not include fees paid by a client for legal services, where the law practice has issued the client with a bill for those services. It also does not include the categories described below.
Money for financial services
Trust money does not include money that is entrusted to or held by a law practice for, or in connection with, financial services provided by the practice or an associate of the practice in circumstances where the practice or associate:
- is required to hold an Australian financial services licence covering the provision of the service (whether or not such a licence is held at any relevant time); or
- provides the service as a representative of another person who carries on a financial services business (whether or not the practice or associate is an authorised representative at any relevant time).
Money for managed investment schemes and mortgage financing
Trust money does not include money that is entrusted to or held by a law practice for, or in connection with, a managed investment scheme or mortgage financing undertaken by the practice.
Money for investment purposes
Money that is entrusted to or held by a law practice for investment purposes is not trust money unless:
- the money was entrusted to or held by the practice in the ordinary course of legal practice, and primarily in connection with the provision of legal services to or at the direction of the client; and
- the investment is or is to be made in the ordinary course of legal practice, and for the ancillary purpose of maintaining or enhancing the value of the money or property pending the completion of the matter or further stages of the matter or pending payment or delivery of the money or property to or at the direction of the client.
The Board may also determine that money held by a law practice is or is not trust money if it considers there is doubt or a dispute about its status. The Uniform Rules may also declare money that is not trust money.
Trust money for approved clerks does not include:
- money for barristers’ fees for past services;
- money directed to a third person such as a party in proceedings;
- money on loan or ‘parked’ by a solicitor; and
- mixed funds used to run a clerking business.
How must trust money be dealt with?
A law practice or an approved clerk that receives trust money to which Part 4.2 of the Uniform Law applies, must maintain a general trust account in Victoria. Penalties apply for failing to comply. This requirement does not apply to a law practice or an approved clerk in respect of any period in which only controlled money or transit money (or both) are received, except where it is received in the form of cash. The trust account must be established and maintained in accordance with the Uniform Law, Uniform Rules and applicable regulations. For further information, see Trust accounts.