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What is an external examiner?

An external examiner (EE) is a person who is qualified to be appointed to examine the trust records of a law practice or approved barristers’ clerk.

Who can be an EE?

The criteria that a person must meet before they may qualify to be appointed as an EE are specified in sections 155 – 156 of the Legal Profession Uniform Law (Victoria) and Rule 65 of the Legal Profession Uniform General Rules 2015. An EE must complete the Legal Services Council approved External Examiners trust course conducted by the Law Institute of Victoria or NSW Law Society as part of these qualification requirements, and be a member of an approved accounting body.

Appointing an EE

If a law practice or barristers’ clerk holds a trust account, they must appoint an EE to examine the records of that trust account annually. The appointment gives the EE statutory powers to examine their trust records and report those findings to us.

A law practice or barristers’ clerk must notify the Board of the appointment of their EE using the notification of appointment of External Examiner form within a month of receiving trust money (other than transit money). New EEs filling out the form must provide a copy of their completed EE course certificate.

Please note that it is the responsibility of the law practice or barristers’ clerk, not the EE, to lodge the appointment form with the Board.

A register of EEs qualified to examine the records of a law practice or barristers’ clerk is available and is updated monthly.

Termination or changing of an EE

A law practice or barristers clerk can terminate the appointment of an EE at any time with their consent or our prior approval. We may give approval if satisfied that it is reasonable in the circumstances for the practice or clerk to terminate the appointment. We may require the law practice or approved clerk to supply satisfactory evidence as to those circumstances, for example there are no outstanding fees to the EE. A law practice or barristers’ clerk must notify the Board of the termination of an EE within 7 days of the termination using the Request for approval of termination of External Examiner form.

An EE can terminate an appointment with the law practice or approved barristers’ clerk at any time by notifying that entity and us.

Annual Trust Examination reporting

All parts of the annual trust examination reporting is conducted via LSB Online. Parts A and B are completed by the law practice. The External Examiner can then submit their report. If you are having any difficulties in submitting any part of the annual reporting, please contact edp@lsbc.vic.gov.au.

External examiner enquiry form

If you are an external examiner looking to upload a trust account report, please log in to LSB Online. You can find instructional videos for how to complete reports here.

If you are an external examiner and have a query about any of the following issues, please complete our EE enquiry form via the button below:

• Registration as an external examiner
• Enquiring about an interstate accounting firm
• Clarify something on an examination report or end of trust year report
• Transfer an external examiner to a new entity
• Notify us of a change of your address or other details
• Issues with LSB Online
• Any other enquiry.

Submit your enquiry

External examiner newsletter

Our EE newsletter is sent to all external examiners who are registered with us. We use it to share important reminders, tips and resources that can help EEs work with law practices and meet their annual reporting obligations. You can read the latest issue here.

 

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What is a statutory deposit account?

Law practices and approved clerks that are required to maintain a trust account in Victoria must deposit a specified amount of money with the Victorian Legal Services Board, out of any trust money that has been received by the law practice or approved clerk. The money is held by the Board and is repayable on demand.

The Board is required to maintain a statutory deposit account (SDA) into which it must deposit the monies. The account is maintained within the Public Purpose Fund held by the Board.

Opening a statutory deposit account

When the Board receives a notification of a new trust account, it will request Commonwealth Bank of Australia to open an SDA to be linked to the trust account of the law practice or approved clerk.

Depositing money into the SDA

A law practice or approved clerk that is required to maintain a trust account must deposit money into the SDA out of the trust money received by the law practice or approved clerk.

The amount required to be deposited is calculated by the Board for each quarter, in accordance with a formula detailed in section 79 of the Legal Profession Uniform Law Application Act 2014.

How to deposit

Online deposit

The easiest way to make the quarterly deposit is via our online portal LSB Online. You can only do this if you have completed the Direct Debit Request form and returned it to the Board. To make the transfer online, log in to LSB Online and follow the prompts.

Cheque deposit

1. Write out a cheque from your trust account payable to the ‘Victorian Legal Services Board – <name of your law practice> statutory deposit account’.
2. Hand your cheque to the Commonwealth Bank of Australia (there may be a fee if a deposit is made at any other bank). Ensuring you have written on the back of the cheque the SDA BSB and Account number.
3. The bank will give you a receipt of your deposit.
4. Your deposit will be credited to the SDA.
5. The Board will send you an email or post statement the following business day confirming the deposit and the total amount that you hold in the SDA.
6. Please contact the Board if you have not received an email or post statement by noon the following business day after your deposit.

Repayment by the Board

Amounts deposited with the Board into the SDA are repayable on demand to the practice’s or clerk’s trust account.

If an amount is repaid from the SDA to a law practice or an approved clerk and subsequently there is a sufficient amount in the practice’s or clerk’s trust account to cover the required deposit amount, the law practice or approved clerk must deposit the required deposit amount back with the Board.

How to withdraw from a statutory deposit account

You will be given your LSB Online login details and instructions for using the online service when you notify the Board of the opening of a new trust account. Please email edp@lsbc.vic.gov.au if you did not receive the login details. Only authorised users can withdraw funds from a statutory deposit account.

Withdrawals from the statutory deposit account must be made through LSB Online. All withdrawals must be made online.

Confirmation of transactions

After any statutory deposit or withdrawal is made, we will send a statement via email to the trust account holder the following business day confirming the total amount held in the SDA.

All trust account holders will receive SDA statements annually, regardless of whether a statutory deposit or withdrawal has been made.

Failure to adjust statutory deposit account

We monitor trust account balances and will advise a law practice or an approved clerk when an adjustment to the required deposit amount into the SDA is necessary.

If there is a particular reason why an additional deposit cannot be made (e.g. insufficient funds, unpresented cheques), a law practice or approved clerk must nonetheless obtain an exemption from the Board.

Failure by a law practice to deposit the required deposit amount may constitute unsatisfactory professional conduct or professional misconduct on the part of any principal of the law practice.

Exemptions from statutory deposit provisions

If you are unable to deposit the required deposit amount into the SDA, you may apply for an exemption by completing an online application through LSB Online.

Improvements to the application process have recently been made. It is now more user-friendly, providing clear guidance so that we get the information we need to make a prompt decision about an application.

Improvements include:

• In most cases a decision about the application will be provided immediately
• If a recalculation of the amount to be deposited is required, notification will occur immediately
• It’s expected 90 per cent of applications will be given an immediate response - meaning SDA obligations are completed in one session
• If an application needs to be assessed by a decision maker, that option is still available.

View the Board’s policy on statutory deposit account exemptions below.

Prevent cybercrime

Guiding information to assist law practices prevent and deal with cybercrime is available on our dedicated preventing cybercrime page. This covers common types of cybercrime, what you can do to protect your business and what you should do if you experience cybercrime. There is also detailed information on multi-factor authentication, considerations around insurance and links to other agencies who can help.

Managing trust money

A law practice or an approved clerk that receives trust money must maintain a general trust account in Victoria. Penalties apply for failing to comply.

This requirement does not apply 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. 

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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 General Rules and any applicable regulations.

Who can receive trust money?

A law practice must not receive trust money unless a principal or legal director holds a practising certificate authorising the receipt of trust money.

An approved clerk may also receive trust money for legal costs for one or more barristers.

The Board has released a Grant of Trust Authorisation policy outlining the skills, experience and competency criteria it requires before granting trust authorisation to applicants with an Australian practising certificate. Applications for a practicing certificate authorising receipt of trust money are made through LSB Online.

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 isn't trust money?

Any money that is not trust money must not be deposited in a trust account. It also does not include the categories described below.

Money received for payment of invoices

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

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.

Trust money for approved clerks does not include

• money for barristers’ fees that have been invoiced;
• 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.

Information for foreign lawyers

Australian-registered foreign lawyers who practise foreign law in Victoria must comply with trust money and trust account requirements. The provisions relating to trust money and trust accounts apply to Australian-registered foreign lawyers in the same way as they apply to Australian legal practitioners. Foreign currency trust accounts are not available.

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Recovering your costs

If your client, or an associated third party, does not pay for the work you did for them, you can take legal action to recover your costs under certain conditions.

Costs disclosure and bills

You can only seek to recover your legal costs if you gave your client full costs disclosure when you were first retained (for matters above $750). If you did not, you will need to wait until the costs are assessed, or we have determined any costs dispute your client may raise with us.

You must also have given your client a bill for your work. If you have not properly billed your client, you cannot pursue them for costs.

Time limits

You cannot take legal action immediately after your bill is due. You must wait until at least the later of:

• 30 days after the bill's due date, or 
• 30 days after you gave your client an itemised bill.

Your client may dispute your bill with our office. If they do, you cannot begin to recover the costs until we have either resolved or finalised the dispute.
 

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Making a costs agreement

Your client has the right to negotiate the way costs are charged to them by you; and you may make them a written offer as part of a costs agreement.

You can only charge costs that are fair and reasonable for the work involved in the legal matter. Your costs must also be reasonable and proportionate to the work involved.

A costs agreement is a formal agreement between your legal practice and your client covering how you will structure the costs of your work.

Under the Uniform Law you must provide your client with a written costs disclosure (or estimate) if the cost of your professional services is likely to be more than $750 in total. The only exception to this is that a costs disclosure is not required to be given to a commercial or government client. 

A costs agreement is a more detailed legal document. It is enforceable in the same way as a contract. 

A client has the right to ask for a costs agreement if they wish to engage your legal services and you also have the right to require one. 

The Legal Services Council has produced an information sheet on costs agreements which is available on their website.

How can your client accept your offer?

You cannot bill your client if they have not accepted your costs agreement. Some cost agreements can be accepted either in writing or by some other way that clearly indicates they accept it. If you are offering a ‘conditional costs agreement’ (such as no win no fee agreement), this can only be accepted in writing.

There are strict rules around how you must deal with costs agreements. If you don’t follow those rules, the agreement may become void, even if your client has accepted it.

Who can a costs agreement be between?

A costs agreement may be between:

• your client and your law practice;
• your client and another law practice that you have engaged on their behalf;
• your law practice and another law practice that you will do work for your client; or
• your law practice and a third-party, such as a guarantor or a litigation funder, who will be liable for your client’s legal fees.

Conditional costs agreements

You can put a condition in your cost agreement that you will only be paid for your work if you reach a successful outcome. An example of this is a ‘no win no-fee’ agreement.

These ‘conditional costs agreements’ must be made in writing, and be in plain language. They must include all the conditions that you define as a successful outcome, and they must be accepted in writing or they cannot be enforced.

It is also important to ensure that you explain to your client that you are entitled to charge your legal fees under certain other circumstances where the client does not win their case, such as if you or the client terminates the retainer before the matter has concluded.

If you believe that your client has a good chance of success, you may also include a condition to be paid an ‘uplift fee’. This is an additional payment for a successful outcome, that cannot exceed 25% of the legal costs (excluding disbursements). Your costs agreement must be clear on how the fee will be calculated, what you expect the fee to be, and what factors may change the final fee calculation.

You cannot have a conditional costs agreement in a criminal or a family law matter.

Contingency fees

Victorian law does not currently allow you to bill your client a ‘contingency fee’. This is where your fees are calculated based on how much money you might get for your client from a payout or a settlement. 
 

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Costs disclosure

Your client has rights when it comes to their legal costs. For most matters, you must give your client a ‘costs disclosure statement’ in writing as soon as possible after your client engages you. In it you must explain:

• what you estimate the total legal costs will be for their matter, including disbursements;
• how you will calculate their legal costs (e.g. billed by time or task) and that they can negotiate this with you;
• that they are entitled to receive a bill; 
• that they can request that you give them an itemised bill; and
• that they can contact us if they want to dispute your bill.

(For relevant legislation see Legal Profession Uniform Law schedule 1 section 174).

With a complex matter, you don’t have to provide one estimate for the whole matter. You can provide a costs estimate for each of the different stages of the matter instead.

 

Exceptions to costs disclosure

The only times you don't have to provide a costs disclosure statement to your client are:

• where the total legal costs (excluding GST & disbursements) are not likely to be more than $750; or
• if you are dealing with a commercial or government client.

Short form costs disclosure for smaller matters

If your client’s legal matter is likely to be between $750 and $3,000, you can use the standard short-form costs disclosure template. This will save you time and effort, and meet your disclosure requirements. If your estimate will exceed $3,000, you must provide a full costs disclosure statement. 

Informed consent is the goal

You need to be sure your client understands how you plan to handle their matter and what their legal costs will be. This will help them make an informed choice about their options and the associated costs. You must also give your client an updated disclosure statement in writing if there are any significant changes to your last estimate. 

Litigation settlement disclosures

If you have negotiated a settlement for your client, you must give your client an estimate of the costs they will have to pay before you finalise the settlement. This must include any legal costs payable for another party.

What happens if you fail to disclose costs?

If you don’t properly disclose your costs to your client, or you fail to give them any disclosure at all, your costs agreement (if any) will be void. You won't be able to try to recover the costs until they are assessed, or we have determined any costs dispute . You may also face disciplinary action for breaching your obligations to your clients.

Dos and don'ts

Do:

• Give your client a genuine estimate of what you believe their total legal costs will be.
• Check that your client understands what you intend to do for them, and how this will affect their costs.
• Provide an update if there are major changes to your last estimate, and check they understand what the new costs will be.
• Use the short form costs disclosure if the matter will cost between $750 and $3,000.

Don’t:

• Give your client a range of possible fees (these are no longer allowed).
• Rely on an old or outdated costs disclosure if the matter has changed significantly.