Part A – question (d)(6) – Written Direction Money – Section 137(a)
If at the time a law practice or an approved clerk receives trust money (other than cash), and it also receives a written direction from a person legally entitled to provide it, directing it to deal with the money otherwise than by depositing it into the general trust account, the law practice or the approved clerk is obliged to follow the person’s instructions.
’Written direction money’ is defined in Rule 34 for a law practice to mean trust money that is received or held by a law practice where the law practice has a written direction to deal with the money otherwise than by depositing it in a general trust account, and that is not controlled money. For approved clerks, written direction money is introduced in section 137 of the Legal Profession Uniform Law Application Act 2014 as ’unless the approved clerk has a written direction by a person legally entitled to provide it to deal with the money otherwise than by depositing it in the account’.
Person legally entitled to provide written direction
Although not defined in the Uniform Law, the operation of Section 137(a) provides for a person to give binding written directions to a law practice or approved clerk about trust money, provided that person is “legally entitled” to do so.
Example of Written Direction Money
An example of written direction money is where a cheque is received by, and made payable to, a law practice or approved clerk where the person legally entitled gives a written direction that the money be deposited into their bank account, rather than the law practice’s or approved clerk’s general trust account. The entitled person cannot give written direction to deposit the money into the law practice’s or approved clerk’s office or general account, or any other account in which other money is held by the law practice or approved clerk, as Section 146 precludes a law practice or approved clerk from mixing trust money with other money.
Examples of possible ’legally entitled’ persons
A person may become ‘legally entitled’ when a court gives written orders as to the way a person’s trust money is to be handled. Examples include
- a spouse in a Family Court Order;
- a trustee in bankruptcy with a Sequestration Order;
- a guardian with a Guardianship Order;
- or a statutory notice from a government department such as the Australian Taxation Office or Child Support Agency where the notice establishes that the department or agency has a “legal entitlement” to particular trust money not yet deposited into the general trust account or controlled money account.
Ensuring a person is ‘legally entitled’
A law practice or approved clerk faced with this particular situation must ensure that the person providing the direction is ‘legally entitled’ to do so. Additionally, the law practice or approved clerk should ensure that the person’s claim to ‘legal entitlement’ relates to the specific trust monies concerned. That is, that the trust money is not protected from a claim of legal entitlement, such as, protected money or assets listed in the Bankruptcy Act 1966 (Cth).