Sch 2Trust money and trust accounts

Schedule 2—Trust money and trust accounts approved ADI means an ADI approved under clause 41 by the Society; barrister means a legal practitioner who practises the profession of the law solely as a barrister; controlled money means money received or held by a law practice in respect of which the practice has a written direction to deposit the money in an account (other than a general trust account) over which the practice has or will have exclusive control; See clause 15(6), which prevents pooling of controlled money. controlled money account means an account maintained by a law practice with an ADI for the holding of controlled money received by the practice; deposit record includes a deposit slip or duplicate deposit slip; external examination means an external examination under Part 3 Division 2 of a law practice's trust records; external examiner means a person holding an appointment as an external examiner under Part 3 Division 2; general trust account means an account maintained by a law practice with an approved ADI for the holding of trust money received by the practice, other than controlled money or transit money; investigation means an investigation under Part 3 Division 1 of the affairs of a law practice; investigator means a person holding an appointment as an investigator under Part 3 Division 1; (b) a partnership consisting of 1 or more Australian-registered foreign lawyers or 1 or more Australian legal practitioners, or both; permanent form, in relation to a trust record, means printed or, on request, capable of being printed, in English on paper or other material; power includes authority; transit money means money received by a law practice subject to instructions to pay or deliver it to a third party, other than an associate of the practice; trust account means an account maintained by a law practice with an approved ADI to hold trust money; trust money means money entrusted to a law practice in the course of or in connection with the provision of legal services by the practice to which the practice is not wholly entitled, and includes— (a) money received by the practice on account of legal costs in advance of providing the services (other than money paid to the practice as a retainer); and (b) controlled money received by the practice; and (c) transit money received by the practice; and (d) money received by the practice, that is the subject of a power, exercisable by the practice or an associate of the practice, to deal with the money for or on behalf of another person, but does not include money received by a practitioner in the course of mortgage financing; trust records includes the following documents: (a) receipts; (b) cheque butts or cheque requisitions; (c) records of authorities to withdraw by electronic funds transfer; (d) deposit records; (e) trust account ADI statements; (f) trust account receipts and payments cash books; (g) trust ledger accounts; (h) records of monthly trial balances; (i) records of monthly reconciliations; (j) trust transfer journals; (k) statements of account as required to be furnished under the regulations; (l) registers required to be kept under the regulations; (m) monthly statements required to be kept under the regulations; (n) files relating to trust transactions or bills of costs or both; (o) written directions, authorities or other documents required to be kept under this Act or the regulations; (p) supporting information required to be kept under the regulations in relation to powers to deal with trust money. (2) A reference in this Schedule to a law practice's trust account or trust records includes a reference to an associate's trust account or trust records. (3) A reference in this Schedule to a power given to a law practice or an associate of the practice to deal with money for or on behalf of another person is a reference to a power given to the practice or associate that is exercisable by— (a) the practice alone; or (b) an associate of the practice alone (otherwise than in a private and personal capacity); or (c) the practice or an associate of the practice jointly or severally, or jointly and severally, with either or both of the following: (i) 1 or more associates of the practice; (ii) the person, or 1 or more nominees of the person, for whom or on whose behalf the money may or is to be dealt with under the power. 2—Money granted or provided under contract to community legal centre Money granted, or provided under contract, to a community legal centre to enable the centre to deliver legal services to the community or a section of the community is not trust money or controlled money for the purposes of this Act. 3—Determinations about status of money (1) This clause applies to money received by a law practice if the Society considers that there is doubt or a dispute as to whether the money is trust money. (2) The Society may determine that the money is or is not trust money. (3) The Society may revoke or modify a determination under this clause. (4) While a determination under this clause is in force that money is trust money, the money is taken to be trust money for the purposes of this Act. (5) While a determination under this clause is in force that money is not trust money, the money is taken not to be trust money for the purposes of this Act. (6) This clause has effect subject to a decision of a court made in relation to the money concerned. 4—Application of Schedule to law practices and trust money (1) This Schedule applies to the following law practices in respect of trust money received by them in this jurisdiction: (a) a law practice that has an office in this jurisdiction, whether or not the practice has an office in another jurisdiction; (b) a law practice that does not have an office in any jurisdiction at all. It is intended that a law practice that receives trust money in this jurisdiction, that does not have an office in this jurisdiction, but that has an office in another jurisdiction, must deal with the money in accordance with the corresponding law of the other jurisdiction. (2) This Schedule applies to the following law practices in respect of trust money received by them in another jurisdiction: (a) a law practice that has an office in this jurisdiction and in no other jurisdiction; (b) a law practice that has an office in this jurisdiction and in 1 or more other jurisdictions but not in the jurisdiction in which the trust money was received, unless the money is dealt with in accordance with the corresponding law of another jurisdiction. (3) However, this Schedule does not apply to— (a) prescribed law practices or classes of law practices; or (b) prescribed law practices, or classes of law practices, in prescribed circumstances; or (c) prescribed kinds of trust money; or (d) prescribed kinds of trust money in prescribed circumstances. (4) A reference in this clause to having an office in a jurisdiction is a reference to having, or engaging in legal practice from, an office or business address in the jurisdiction. The requirements of this Schedule will not apply in relation to a law practice that is a legal practitioner practising solely in the manner of a barrister because a legal practitioner may not, in the course of practising as a barrister, receive trust money—see clause 10. 5—Protocols for determining where trust money is received (1) The Society may enter into arrangements (referred to in this Schedule as protocols) with corresponding authorities about any or all of the following: (a) determining the jurisdiction where a law practice receives trust money; (b) sharing information about whether, and (if so) how, trust money is being dealt with under this Act or a corresponding law. (2) For the purposes of this Act, to the extent that the protocols are relevant, the jurisdiction where a law practice receives trust money is to be determined in accordance with the protocols. (3) The Society may enter into arrangements that amend, revoke or replace a protocol. 6—When money is received (1) For the purposes of this Act, a law practice receives money when— (a) the practice obtains possession or control of it directly; or (b) the practice obtains possession or control of it indirectly as a result of its delivery to an associate of the practice; or (c) the practice, or an associate of the practice (otherwise than in a private and personal capacity), is given a power to deal with the money for or on behalf of another person. (2) For the purposes of this Act, a law practice or associate is taken to have received money if the money is available to the practice or associate by means of an instrument or other way of authorising an ADI to credit or debit an amount to an account with the ADI, including, for example, an electronic funds transfer, credit card transaction or telegraphic transfer. 7—Discharge by legal practitioner associate of obligations of law practice (1) The following actions, if taken by a legal practitioner associate of a law practice on behalf of the practice in relation to trust money received by the practice, discharge the corresponding obligations of the practice in relation to the money: (a) the establishment of a trust account; (b) the maintenance of a trust account; (c) the payment of trust money into and out of a trust account and other dealings with trust money; (d) the maintenance of trust records; (e) engaging an external examiner to examine trust records; (f) the payment of an amount into an ADI account as referred to in section 53; (g) the obtaining of a Supreme Court approval in relation to trust money or a trust account; (h) an action of a kind prescribed by the regulations. (2) If the legal practitioner associate maintains a trust account in relation to trust money received by the law practice, the provisions of this Schedule and the regulations made for the purposes of this Schedule apply to the associate in the same way as they apply to a law practice. (3) Subclause (1) does not apply to the extent that the associate is prevented by the regulations from taking any action referred to in that subclause. 8—Liability of principals of law practice (1) A provision of this Schedule or the regulations made for the purposes of this Schedule expressed as imposing an obligation on a law practice imposes the same obligation on the principals of the law practice jointly and severally, but discharge of the practice's obligation also discharges the corresponding obligation imposed on the principals. (2) References in this Schedule and the regulations made for the purposes of this Schedule to a law practice include references to the principals of the law practice. 9—Former practices, principals and associates (1) This Schedule applies in relation to former law practices and former principals and associates of law practices in relation to conduct occurring while they were respectively law practices, principals and associates in the same way as it applies to law practices, principals and associates, and so applies with any necessary modifications. (2) For the purposes of this Schedule, a law practice that is a sole practitioner does not cease to be a law practice solely because of the cancellation or suspension of the practitioner's practising certificate. 10—Barristers not to receive trust money A barrister is not, in the course of practising as a barrister, to receive trust money. Part 2—Trust accounts and trust money 11—Maintenance of general trust account (1) A law practice that receives trust money to which this Schedule applies must maintain a general trust account in this jurisdiction. (2) A law practice that is required to maintain a general trust account in this jurisdiction must establish and maintain the account in accordance with the regulations. (3) Subclause (1) does not apply to a law practice in respect of any period during which the practice receives or holds only either or both of the following: (a) controlled money; (b) transit money received in a form other than cash. (4) Subject to any requirements of the regulations, a requirement of this clause for a law practice to maintain, or establish and maintain, a general trust account in this jurisdiction does not prevent the practice from maintaining, or establishing and maintaining, more than 1 general trust account in this jurisdiction, whether during the same period or during different periods. (5) Without limiting the other provisions of this clause, the regulations may provide that a law practice must not close a general trust account except as permitted by the regulations, either generally or in any prescribed circumstances. 12—Certain trust money to be deposited in general trust account (1) Subject to clause 19, as soon as practicable after receiving trust money, a law practice must deposit the money in a general trust account of the practice unless— (a) the practice has a written direction by an appropriate person to deal with it otherwise than by depositing it in the account; or (b) the money is controlled money; or (c) the money is transit money; or (d) the money is the subject of a power given to the practice or an associate of the practice to deal with the money for or on behalf of another person. (2) Subject to clause 19, a law practice that has received money that is the subject of a written direction mentioned in subclause (1)(a) must deal with the money in accordance with the direction— (a) within the period (if any) specified in the direction; or (b) subject to paragraph (a), as soon as practicable after it is received. (3) The law practice must keep a written direction mentioned in subclause (1)(a) for the period prescribed by the regulations. (4) A person is an appropriate person for the purposes of this clause if the person is legally entitled to give the law practice directions in respect of dealings with the trust money. 13—Holding, disbursing and accounting for trust money (1) A law practice must— (a) hold trust money deposited in a general trust account of the practice exclusively for the person on whose behalf it is received; and (b) disburse the trust money only in accordance with a direction given by the person. (2) Subclause (1) applies subject to an order of a court of competent jurisdiction or as authorised by law. (3) The law practice must account for the trust money as required by the regulations. 14—Manner of withdrawal of trust money from general trust account (1) A law practice must not withdraw trust money from a general trust account otherwise than by cheque or electronic funds transfer. (2) Without limiting subclause (1), the following are specifically prohibited: (a) cash withdrawals; (b) ATM withdrawals or transfers; (c) telephone banking withdrawals or transfers. (3) The regulations may make provision for or with respect to withdrawals by cheque or electronic funds transfer. (4) This clause has effect despite anything to the contrary in any directions given to the law practice concerned, even if the directions are given by a person who is otherwise legally entitled to give the law practice directions in respect of dealings with the trust money. 15—Controlled money (1) As soon as practicable after receiving controlled money, a law practice must deposit the money in the account specified in the written direction relating to the money. (2) The law practice must hold controlled money deposited in a controlled money account in accordance with subclause (1) exclusively for the person on whose behalf it was received. (3) The law practice that holds controlled money deposited in a controlled money account in accordance with subclause (1) must not disburse the money except in accordance with— (a) the written direction mentioned in that subclause; or (b) a later written direction given by or on behalf of the person on whose behalf the money was received. (4) The law practice must maintain the controlled money account, and account for the controlled money, as required by the regulations. (5) The law practice must keep a written direction mentioned in this clause for the period prescribed by the regulations. (6) The law practice must ensure that the controlled money account is used for the deposit of controlled money received on behalf of the person referred to in subclause (2), and not for the deposit of controlled money received on behalf of any other person, except to the extent that the regulations otherwise permit. (7) Subclause (3) applies subject to an order of a court of competent jurisdiction or as authorised by law. 16—Manner of withdrawal of controlled money from controlled money account (1) A law practice must not withdraw controlled money from a controlled money account otherwise than by cheque or electronic funds transfer. (2) Without limiting subclause (1), the following are specifically prohibited: (a) cash withdrawals; (b) ATM withdrawals or transfers; (c) telephone banking withdrawals or transfers. (3) The regulations may make provision for or with respect to withdrawals by cheque or electronic funds transfer. (4) This clause has effect despite anything to the contrary in any directions given to the law practice concerned, even if the directions are given by a person who is otherwise legally entitled to give the law practice directions in respect of dealings with the controlled money. 17—Transit money (1) Subject to clause 19, a law practice that has received transit money must pay or deliver the money as required by the instructions relating to the money— (a) within the period (if any) specified in the instructions; or (b) subject to paragraph (a), as soon as practicable after it is received. (2) The law practice must account for the money as required by the regulations. 18—Trust money subject to specific powers (1) Subject to clause 19, a law practice must ensure that trust money that is the subject of a power given to the practice or an associate of the practice is dealt with by the practice or associate only in accordance with the power relating to the money. (2) The law practice must account for the money in the way prescribed by the regulations. 19—Trust money received in form of cash (1) General trust money A law practice must deposit general trust money received in the form of cash in a general trust account of the practice. (2) If the law practice has a written direction by an appropriate person to deal with general trust money received in the form of cash otherwise than by first depositing it in a general trust account of the practice— (a) the money must nevertheless be deposited in the general trust account of the practice in accordance with subclause (1); and (b) the money is thereafter to be dealt with in accordance with any applicable terms of the direction so far as those terms are not inconsistent with paragraph (a). (3) Controlled money Controlled money received in the form of cash must be deposited in a controlled money account in accordance with clause 15. (4) Transit money A law practice must deposit transit money received in the form of cash in a general trust account of the practice before the money is otherwise dealt with in accordance with the instructions relating to the money. (5) Trust money subject of a power A law practice must deposit trust money that is received in the form of cash and is the subject of a power in a general trust account (or a controlled money account in the case of controlled money) of the practice before the money is otherwise dealt with in accordance with the power. (6) Paramount operation of this clause This clause has effect despite anything to the contrary in any relevant direction, instruction or power. (7) Definitions In this clause— appropriate person, in relation to trust money, means a person who is legally entitled to give the law practice concerned directions in respect of dealings with the money; general trust money means trust money, other than— (a) controlled money; and (b) transit money; and (c) money that is the subject of a power. 20—Protection of trust money (1) Money standing to the credit of a trust account maintained by a law practice is not available for the payment of debts of the practice or any of its associates. (2) Money standing to the credit of a trust account maintained by a law practice is not liable to be attached or taken in execution for satisfying a judgment against the practice or any of its associates. (3) This clause does not apply to money to which a law practice or associate is entitled. 21—Intermixing money (1) A law practice must not, otherwise than as permitted by subclause (2), mix trust money with other money. (2) A law practice is permitted to mix trust money with other money to the extent only that is authorised by the Society and in accordance with any conditions imposed by the Society in relation to the authorisation. 22—Dealing with trust money—legal costs and unclaimed money (1) A law practice may do any of the following in relation to trust money held in a general trust account or controlled money account of the practice for a person: (a) exercise a lien, including a general retaining lien, for the amount of legal costs reasonably due and owing by the person to the practice; (b) withdraw money for payment to the practice's account for legal costs owing to the practice if the relevant procedures or requirements prescribed by this Act and the regulations are complied with; (c) after deducting any legal costs properly owing to the practice, deal with the balance as unclaimed money under the Unclaimed Moneys Act 1891. (2) Subclause (1) applies despite any other provision of this Schedule but has effect subject to Schedule 3. 23—Deficiency in trust account (1) A legal practitioner is guilty of an offence if he or she, without reasonable excuse, causes— (a) a deficiency in any trust account or trust ledger account; or (b) a failure to pay or deliver any trust money. (2) A reference in subclause (1) to an account includes a reference to an account of the practitioner or of the law practice of which the practitioner is an associate. cause includes be responsible for; deficiency in a trust account or trust ledger includes the non‑inclusion or exclusion of the whole or any part of an amount that is required to be included in the account. 24—Reporting certain irregularities and suspected irregularities (1) As soon as practicable after a legal practitioner associate of a law practice becomes aware that there is an irregularity in any of the practice's trust accounts or trust ledger accounts, the associate must give written notice of the irregularity to— (a) the Society; and (b) if a corresponding authority is responsible for the regulation of the accounts concerned—the corresponding authority. (2) If a legal practitioner believes on reasonable grounds that there is an irregularity in connection with the receipt, recording or disbursement of any trust money received by a law practice of which the practitioner is not a legal practitioner associate, the practitioner must, as soon as practicable after forming the belief, give written notice of it to— (a) the Society; and (b) if a corresponding authority is responsible for the regulation of the accounts relating to the trust money concerned—the corresponding authority. (3) The validity of a requirement imposed on a legal practitioner under subclause (1) or (2) is not affected, and the practitioner is not excused from complying with subclause (1) or (2), on the ground that giving the notice may tend to incriminate the practitioner. (4) A legal practitioner is not liable for any loss or damage suffered by another person as a result of the practitioner's compliance with subclause (1) or (2). 25—Keeping trust records (1) A law practice must keep in permanent form trust records in relation to trust money received by the practice. (2) The law practice must keep the trust records— (a) in accordance with the regulations; and (b) in a way that at all times discloses the true position in relation to trust money received for or on behalf of any person; and (c) in a way that enables the trust records to be conveniently and properly investigated or externally examined; and (d) for a period determined in accordance with the regulations. 26—False names (1) A law practice must not knowingly receive money or record receipt of money in the practice's trust records under a false name. (2) If a person on whose behalf trust money is received by a law practice is commonly known by more than 1 name, the practice must ensure that the practice's trust records record all names by which the person is known. 27—Interest payable if law practice fails to deposit trust money (1) A law practice that fails to deposit trust money in a trust account as required by this Part is liable to pay the Society interest on the amount of the trust money at the prescribed rate for the period of the default. (2) The Society may, for proper reasons, remit interest payable under subclause (1) wholly or in part. (3) Any interest received or recovered by the Society under subclause (1) must be paid into the statutory interest account. Part 3—Investigations and external examinations Division 1—Investigations 28—Appointment of investigators (1) The Society may, in writing, appoint a suitably qualified person to investigate the affairs or specified affairs of a law practice. (2) The appointment may be made generally or for the law practice specified in the instrument of appointment. 29—Investigations (1) The instrument of appointment may authorise the investigator to conduct either or both of the following: (a) routine investigations on a regular or other basis; (b) investigations in relation to particular allegations or suspicions regarding trust money, trust accounts or any other aspect of the affairs of the law practice. (2) The principal purposes of an investigation are to ascertain whether the law practice has complied with or is complying with the requirements of this Schedule and to detect and prevent fraud or defalcation, but this subclause does not limit the scope of the investigation or the powers of the investigator. 30—Application of Schedule 4