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Ethics Committee rulings: Money in trust

Ethics Committee rulings: Money in trust

By Ethics Committee

Ethics Guardianship Management 


Ethical dilemmas are part of everyday practice for solicitors. The LIV Ethics Committee is available to help. Legal practice management R4894: March 2016 — Disbursing monies held in trust Section 138 of the Legal Profession Uniform Law requires that a solicitor must hold money in a trust account exclusively for the person on whose behalf it is received and disburse the trust money only in accordance with a direction given by the person or an order of a court of competent jurisdiction. A firm acted for a cabinet maker (the client) in a commercial dispute with its customer regarding alleged defects in the construction and installation of kitchen cabinetry at the customer’s home. The firm was retained to assist with recovering a debt of $9750 from the customer. The firm was successful in arranging for $5000 to be paid by the customer direct to the client. However, the balance of $4750 remained outstanding. As a result of several communications (both written and verbal) between the firm and the customer (who was unrepresented), it was agreed that the remaining $4750 would be paid by the customer to the firm by way of two payments. It was unclear whether one or both payments would be held pending the works being completed to the reasonable satisfaction of the customer. In the end, only one payment of $2500 was made. It has been two years and the matter has still not been resolved. The client stated that the customer had not cooperated with any attempts made by the client to complete the works. The customer had not responded to correspondence sent to him by the firm. Ruling In the opinion of the Ethics Committee and on the information presented: The firm is required to comply with s138 of the Legal Profession Uniform Law. The $2500 is held on trust subject to an undertaking, the terms of which are unclear. The undertaking is likely to be read as prohibiting the release of the $2500 until the client’s customer is reasonably satisfied with the work. Accordingly, the funds should not be released until: the undertaking is satisfied or consent of the client’s customer is obtained or an order of a court of competent jurisdiction is obtained. Guardianship R4896: April 2016 — Former client conflict Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 – Rule 10. Conflicts concerning former clients: “A solicitor and law practice must avoid conflicts between the duties owed to current and former clients, except as permitted by Rule 10.2”. Firm A acted for a client in several matters. The client’s brother-in-law applied to VCAT for a guardianship order in respect of the client on the grounds that he was drug dependent, lacked insight into his problems, and refused to remain on medication. Firm A acted for the applicant in the VCAT proceedings. The former client retained Firm B who argued that Firm A was conflicted and should cease acting in the VCAT proceedings. Ruling In the opinion of the Ethics Committee and on the information presented: Firm A is conflicted on the basis of the appearance of justice ground, a breach of the duty of loyalty owed to a client after the end of the retainer, and potentially the possible misuse of confidential information. Firm A should cease acting for the applicant in the VCAT proceedings. 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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