Queensland Law Society

Trust accounting FAQs

Pursuant to s37(2)(a) of the Legal Profession Regulation 2017 (LPR) a trust account cheque form must be made payable to or to the order of a stated person or persons and not to bearer or cash.

Therefore law practices should ensure that their trust account cheque forms are pre-printed with a direction to pay to order (of a stated person) and that they should be crossed `not negotiable' [s37(2)(b) of the LPR].

No — law practices only need to notify the Society within 14 days that they have authorised another legal practitioner or employee as signatories to their general trust account/controlled money accounts.

Note: Employees who are non-legal practitioners must sign jointly with another employee.

Each jurisdiction has agreed that a "relevant account" means the law practice's general office bank account or law practice credit card.

There currently is no specific requirement for external examiners to hold professional indemnity insurance under the Legal Profession Act 2007 or Legal Profession Regulation 2017.

Currently an external examiner needs to be a registered auditor under the Corporations Act, member of CPA, CAANZ, IPA or approved by Chief Executive. Individuals who are a registered auditor under the Corporations Act, member of CPA, CAANZ, IPA and meets the requirements of one of those bodies to practise as a public accountant are required to maintain professional indemnity insurance as part of their public accountant practice certificate.

Chief Executive of the Department of Justice and Attorney-General's department.

Trust money is defined in s237 of the Legal Profession Act 2007 ('LPA') as being money entrusted to a law practice in the course of or in connection with the provision of legal services by the practice and includes money received on account of legal costs.

Legal services are more than legal costs and are defined in Schedule 2 (end of LPA) as being work done or business transacted in the ordinary course of legal practice.

Note that legal costs are defined at s346 of the LPA and specifically exclude disbursements.

Disbursements are defined in s300 of the LPA as including outlays.

s257 Intermixing Money [LPA] provides:

A law practice must not mix trust money with other money.

Therefore, as the funds received by the law practice for unexpended outlays, e.g. barrister fees, is received in connection with the provision of legal services by the practice, the law practice does not have an entitlement to receive those funds to its general account as reimbursement [s58(4)(a) of Legal Profession Regulation 2017 (LPR)] as the law practice has not paid that outlay e.g. the general bank account/law practice credit card has not been debited [s58(7) of LPR].

The regulations do not require a law practice to maintain a register of trust account receipt forms. However, it is recommended, as a form of internal control that a register of receipt forms be kept to record the serial numbers of all trust account receipt forms supplied to the law practice by the law practice's printer. The serial numbers of trust account receipt forms issued to office staff for normal daily requirements should also be recorded in the register. Trust account receipt forms not issued to office staff should be kept in a secure location. A suggested register of receipt forms follows:

Register of receipt forms
Date received from printer Numbers received from printer Numbers issued to office staff Balance on hand
1-7-XX 1001-1500 500
1-7-XX 1001-1100 400
1-10-XX 1101-1200 300

Interpretation of s37(3) and s38(2) of Legal Profession Regulation 2017 (LPR) is as follows:

  1. An authorised principal of the law practice may solely sign trust account cheques drawn on the law practice general trust account.
  2. If the principal mentioned in 1 is not available:
    1. An authorised Australian legal practitioner (employed solicitor), irrespective of whether the employed solicitor holds an Unrestricted Practising Certificate or a Restricted Practising Certificate, can be authorised solely as a signatory to the law practice general trust account.

    2. An authorised Australian legal practitioner holding an Unrestricted Practising Certificate can be authorised solely as a signatory to the law practice general trust account irrespective of whether he/she is employed by the law practice.
    3. Any two (2) or more authorised associates (including non-solicitors) can be authorised jointly to sign trust account cheques drawn on the law practice general trust account
    4. The holder of a Restricted Practising Certificate can only be authorised as a signatory to a law practice general trust account if they are employed by the law practice and cannot be appointed jointly with another person as a signatory.

No, there is no provision that requires a law practice to issue general account receipts in respect to funds received to the general account.

Prior to 1 July 2007, law practices were required to issue general account receipts in respect of all money received via proper serially machine numbered receipts pursuant to Rule 91 of Legal Profession (Solicitor) Rules 2006. The Legal Profession (Solicitor) Rules 2006 were repealed on 30 June 2007.

No, you are required pursuant to s46 of the Legal Profession Regulation 2017 (LPR) to notify the Society within 14 days of opening a new trust bank account. The notification should include the name of the ADI, branch, account number and account name of the new trust account.

All new trust accounts opened after 1 July 2007 (pursuant to s33(2) of the LPR must:

  1. be kept with an approved ADI
  2. be kept within this jurisdiction (Queensland)
  3. include within the name of the account the name of the law practice or business name under which the law practice engages in legal practice
  4. include within the name the expression “law practice trust account” or “law practice trust a/c”.

An ADI is defined (Schedule 2 Dictionary - Legal Profession Act 2007) as an authorised deposit-taking institution within the meaning of the Banking Act 1959 (Cwlth).

An approved ADI is an ADI that has entered into an arrangement with the Chief Executive in respect to the payment of interest to the Department of Justice and Attorney-General.

A list of Approved ADI can be located on the Society's website on the trust account page.

No, the position is rather different under the LPA. The monetary limit now relates to the requirement to give disclosure to the client, rather than to the costs agreement. Section 311(1)(a) states that disclosure under sections 308 or 309(1) of the LPA is not required to be made if the total legal costs in the matter, excluding disbursements, are not likely to exceed $1,500 (exclusive of GST). Prior to 18 July 2008 this amount was $750.

Also, section 311(2) of the LPA requires that if you do not give that disclosure in reliance on the exemption, but then become aware that the total legal costs are likely to exceed $1,500 you must give disclosure under sections 308 and 309 of the LPA as soon as practicable.

Pursuant to s249 Legal Profession Act 2007(LPA) a law practice must disburse the trust money only under a direction given by the person on whose behalf it is held.

Therefore if a dispute as to the ownership of funds held in your trust account arises the suggested approach to be taken is as follows:

  1. If you believe that one of the parties is entitled to the money held in your trust account, issue a letter to the other party advising them that you propose to pay the money to that person upon the expiry of a stipulated period (say - 1 month) and if they wish to prevent you from doing that, they should make an application to the Court seeking an Order.
  2. If you are not sure who is entitled to the money, you should advise all parties that you will continue to retain the money in your trust account until they instruct you how to disburse the money (in writing) or an order is made by the Court directing you how to disburse the money.
  3. If there is no agreement (in writing) or Court order within 2 years, you can lodge a return with the Public Trustee seeking a direction to pay the money to the Public Trustee pursuant to s713(2) of the LPA. If you do that, you should advise all parties that you have lodged a return and if you receive instructions from the Public Trustee to pay the money to them, all parties will have to liaise with the Public Trustee to recover the money.

It should be noted that option (iii) above does not result in the possibility of trust funds being paid to an incorrect party. The previous provisions under the Trust Accounts Act 1973 could have resulted in a law practice disbursing funds from the trust account to an incorrect party, which may have resulted in civil proceedings against the law practice.

There are three options for doing this.

The first option is that a law practice may withdraw trust money held in the general trust account or controlled money account for the payment of legal costs owing to the law practice, if the law practice has given the person a bill relating to the money [s58(2) of the Legal Profession Regulation 2017 (LPR) AND; 

  • the person has not objected to the withdrawal of the money within 7 days after being given the bill, or
  • the person has objected within 7 days after the bill was given, however has not applied for a costs assessment within 60 days after being given the bill, or
  • the money otherwise becomes legally payable.

The second option is that the law practice may also withdraw trust money in accordance with [s58(3)(a) of the (LPR)],:

  • a costs agreement that complies with the legislation and that authorises the withdrawal, or
  • instructions that have been received by the law practice and that authorise the withdrawal. If written, they must be retained as a permanent record. If not written, they must be put in writing within five days after effecting the withdrawal and retained as a permanent record, AND

before effecting the withdrawal the law practice gives or sends to the person a request for payment, referring to the proposed withdrawal or a written notice of withdrawal [s58(3)(b) of the LPR].

The third option is that the law practice may also withdraw trust money if

  • the money is owed to the law practice by way of reimbursement of money already paid by the law practice on behalf of the person [s58(4)(a) of the LPR], AND

before effecting the withdrawal the law practice gives or sends to the person a request for payment, referring to the proposed withdrawal or a written notice of withdrawal [s58(4)(b) of the LPR]

A law practice must provide to the person (the entitled beneficiary, the client) a written Request for Payment or a Notice of Withdrawal.

The Regulation requires a law practice to give or send the Request/Notice to the person. 

The Society's interpretation of s58(3)(b) and s58(4)(b) of the LPR is that the Request/Notice is provided in the normal course, e.g. hand delivered or posted to the client and is beyond the recall of the law practice. It should be noted that s58(3)(b) and s58(4)(b) only applies when a law practice is withdrawing funds:

  1. in accordance with a costs agreements;
  2. in accordance with instructions received by the law practice that authorise the withdrawal (e.g. trust account authority); and 
  3. that is owed to the law practice by way of reimbursement of money already paid by the law practice on behalf of the person.

In relation to s58(3)(a) and (b) and s58(4)(a) and (b) of the LPR. Every time a law practice wishes to withdraw money from the trust account for legal costs, the law practice must before effecting the withdrawal send to the person, either a request for payment [s58(3)(b)(i) and s58(4)(b)(i)], referring to the proposed withdrawal, OR a written notice of withdrawal [s58(3)(b)(ii) and s58(4)(b)(ii)].

This applies to s58(3)(a)(i),(ii) and s58(4)(a) as there is an "and" at the end of the subsection. The law practice should also refer to subsections s58(6) and s58(7) of the LPR.

If none of the conditions in s58(3)(a) or s58(4)(a) apply, then s58(2) is appropriate and relies on the forwarding of a Bill of Costs.

Practices may choose either procedure covered by s58(2) or s58(3) or s58(4) of the LPR. If using s58(2), then a notice of withdrawal is not required, but there is a minimum seven (7) day waiting period before costs may be appropriated from trust funds held.

Schedule 2 of the Legal Profession Act 2007 defines ADI to mean an authorised deposit -taking institution within the meaning of the Banking Act 1959 (Cwlth)

Below is an extract from the Trust Account Guide (which can be downloaded from the Society's website at www.qls.com.au ) - item 3.1 Establishing a General Trust Account.

An "approved ADI" is an ADI (Authorised deposit-taking institution) approved under section 280 by the Chief Executive of the Department of Justice & Attorney General [Legal Profession Act 2007 s.237]. A list of approved ADI’s can be found on the Society’s website at  www.qls.com.au.

Below is an extract from the Trust Account Guide (which can be downloaded from the Society's website at www.qls.com.au ) - item 4.3.11 Register of receipt form

The new regulations do not require a law practice to maintain a register of trust account receipt forms. However, it is recommended, as a form of internal control, that a register of receipt forms be kept to record the serial numbers of all trust account receipt forms supplied to the law practice by the law practice's printer. The serial numbers of trust account receipt forms issued to office staff for normal daily requirements should also be recorded in the register. Trust account receipt forms not issued to office staff should be kept in a secure location.

It should be noted that the Law Practice Statutory Declaration & Trust Money Statement (QLS Form 4 LPR) (which is to be completed by law practices and provided to external examiners at the commencement of the final examination does require law practices to state whether funds were disbursed by EFT and whether they have complied with the Society's EFT Guidelines). 

If an External Examiner noted during his examination that trust funds were disbursed by a law practice and the law practice's statement stated that it had not disbursed funds by EFT, then the External Examiner would report this at Item 2 of the External Examiner's Report (QLS Form 5 (LPR))

The decision as to whether the External Examiner should sight the letter of approval from QLS is a decision to be made by the External Examiner.