Trust account management

Authorised signatories

Rules 43 and 63 of the Legal Profession Uniform General Rules 2015 (LUPGR) provide that if the authorised principal of the law practice is not available to sign a general trust or controlled money cheque or effect an electronic funds transfer, then the law practice may authorise:

  1. an authorised legal practitioner associate
  2. an authorised Australian legal practitioner who holds an Australian practising certificate authorising the receipt of trust money
  3. two or more authorised associates jointly.1

Online payments

Before adopting the approved bank's  online transaction facilities, liability clauses should be clearly understood.

A transaction is authorised by a password. The system is built on the basis of password security. If an approved ADI receives a valid transaction, (one in which the correct password has been entered), the transaction will be processed without question. If there is a lack of control over the use of security passwords, it may be impossible to identify the person who entered the transaction. There is no such thing as a "forged cheque" in an online transaction.

The bank will only pay on an authenticated transaction. Authorised principal/s are expected to control passwords. It is not acceptable to entrust passwords to the bookkeeper/office manager. Authorised principals are the only persons who can authorise an online transfer unless another person is properly authorised by the law practice.

Reporting irregularities

Section 154 of the Legal Profession Uniform Law (WA) (LUPL) states that:

as soon as practicable after a legal practitioner associate of a law practice; or an ADI; or an external examiner; or another entity of a kind specified in the Uniform Rules for the purpose if this section becomes aware that there is an irregularity in any of the law practice’s trust accounts or trust ledger accounts, the associate, ADI (bank), examiner or entity must give written notice of the irregularity to the designated local regulatory authority.

Form of notification

Please report by e-mail to enquiries@lpbwa.com  without any annexures, in the format:

HEADING: Trust a/c Irregularity [Law Practice Name]

On [insert the date of the irregularity] Amount involved [$] Description [What happened].

Date [date error identified] Date [date error corrected] Description [How corrected].

Should we require further information on the irregularity reported, the Review and Audit Team will contact you directly.

NB: Supporting documentation and hard copy are not required unless the Board specifically requests such documentation.

Notifications are to be lodged by email to enquiries@lpbwa.com -- you will receive an immediate acknowledgment by the Board.

Trust account statements

Rule 52 of the LUPGR requires a law practice to furnish a trust account statement to each person for whom or on whose behalf trust money (other than transit money and written direction money) is held or controlled by the law practice.

The law practice must send a statement as soon as practicable after:

  1. completion of the matter to which the ledger account or record relates
  2. the person for whom or on whose behalf the money is held or controlled makes a reasonable request for the statement during the course of the matter
  3. except as provided by subrule (5) or (6), as soon as practicable after 30 June in each year.

Trust account withdrawals

Rule 43 of the LUPGR provides for withdrawals from the general trust account by cheque or electronic funds transfer (EFT).

Section 144 of the LPUL states that a law practice must not withdraw trust money from a general trust account other than by cheque or EFT.

Withdrawal by cheque

The Rules require that cheques:

  1. must be made payable to, or to the order of, a specified person or persons and must not be made payable to bearer or to cash
  2. must be crossed “not negotiable”
  3. must include:
    1. the name of the law practice or the business name under which the law practice engages in legal practice
    2. the expression “law practice trust account” or “law practice trust a/c”.

Cheques should be drawn in numeric and date order to ensure that all cheques are accounted for. It is recommended that a written record of payment is kept for both computer and manual withdrawals and the written record is filed in the order that the cheques were issued.

Trust accounting software systems

Manual trust accounting systems

Manual trust accounting systems may be used by law practices and these include:

  • traditional hand written journals records
  • records maintained in spreadsheet or table format.

Please note that trust records maintained in Microsoft Excel or Word do not constitute computerised accounting systems and are considered manual accounting systems.

Computerised trust accounting systems

If a law practice uses a computerised accounting system, it is recommended they contact their supplier/distributor to formally ascertain whether their software complies with the LPUGR. Existing software may need to be modified or further developed to meet the requirements in the LPUGR.

The Legal Practice Board does not recommend or routinely examine accounting software packages. However, the Law Society of New South Wales (LSNSW) examines software packages at the request of software suppliers and will issue a Certificate of Examination. The examination is not compulsory and a law practice can purchase a non-examined package if the practice is satisfied that the software complies with the LPUL and the LPUGR..

The Legal Practice Board will accept a Certificate issued by LSNSW. See the NSW Law Society website.

Forms

Notification of Closure of Trust Account (Law Practice Closing Down) (PDF Form)

Notification of Opening/Closing a Trust Account (PDF Form)

Trust account seminars

The Legal Practice Bard delivers regular annual seminars on Trust Account management. Email enquiries@lpbwa.com to register your interest.