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Ethics Committee rulings: Trust dilemma

Every Issue

Cite as: December 2015 89 (12) LIJ, p.69

Ethical dilemmas are part of everyday practice for solicitors. The LIV Ethics Committee is available to help.

Family law
R4876: June 2015 — Disbursing money held in trust account Section 3.3.14 of the Legal Profession Act 2004 – now s138 of the Legal Profession Uniform Law 2015 (Vic) – requires a law firm to hold trust money deposited in a general trust account exclusively for the person on whose behalf it is received and to disburse the money only in accordance with a direction given by the person. This statutory requirement is subject to an order of a court of competent jurisdiction.

A law firm received from a client funds on account of legal fees and disbursements to be incurred in her family law matter. Those funds were paid into the law firm’s general trust account. It was discovered subsequently by the law firm that the client had sourced the funds from her father’s bank account pursuant to an enduring power of attorney (financial) which she held on her father’s behalf as sole attorney. The client terminated the law firm’s retainer in her family law matter and requested the return of the funds to her.

Ruling

In the opinion of the Ethics Committee and on the information presented:

The law firm must comply with s3.3.14 of the Legal Profession Act 2004.

The law firm should seek a direction from the client for payment of the monies by the law firm to the father (either by payee-only cheque or direct electronic funds transfer to his bank account).

If that direction is not forthcoming the law firm should apply to a court of competent jurisdiction for directions regarding the money.

Wills and estates
R4878: July 2015 — Release of original will to one of two executors A law firm that holds the last will of a deceased person in safe custody does so on behalf of all executors named in the will and cannot release the document without the authority of all of them. If there is disagreement between named executors, then, pursuant to s15 of the Administration and Probate Act 1958 any one or more of them may apply for an order requiring the will to be brought into court.

A law firm held the original wills for a deceased couple. A son and a daughter of the deceased were appointed executors of the wills. A request was made by a solicitor acting for one of the executors to release the original will to that solicitor for the purposes of applying for a grant of probate (with leave being reserved to the other executor). The law firm queried whether it was able to release the will to the law firm acting for only the one executor without the authority of the other executor on the basis that executors may act jointly and severally, and whether the law firm was obliged to notify the other executor that they intend to do so. At common law, personal representatives may act jointly or severally in administering the estate. Notwithstanding this, it is generally expected that the permission of both executors will be sought before a third party custodian may release an original will. If this cannot be achieved, then s15 of the Administration and Probate Act 1958 (Vic) may be resorted to, as it provides the appropriate process to be followed in circumstances in which a person neglects to bring a will into court.

Ruling

In the opinion of the Ethics Committee and on the information presented:

The law firm should first seek the authority of the second executor before releasing the will to the solicitor for the first executor. Both executors have an equal entitlement to the will. Therefore a solicitor cannot release it to one without the consent of the other.

If an authority cannot be obtained from the second executor, then the first executor should consider making an application to the court pursuant to s15 of the Administration and Probate Act 1958 (Vic).

The Ethics Committee is drawn from experienced past and present LIV Council members who serve in an honorary capacity. Ethics Committee rulings are non-binding. However, as the considered view of a respected group of experienced practitioners, the rulings carry substantial weight. It is considered prudent to follow them. The LIV Ethics website, www.liv.asn.au/For-Lawyers/Ethics, is regularly updated and, among other services, offers a searchable database of the rulings, a “common ethical dilemmas” section and information about the Ethics Committee and Ethics Liaison Group. For further information, contact the ethics solicitor on 9607 9336.

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