the accounts clerk is correct in banking the funds (transit monies received in cash must first be deposited to the trust account: LPA s 255) but drawing a cheque from trust and then waiting a few days to bank the cash risks overdrawing the trust account. (Keefe go to sanctions and liability)

**EFT received month before but Bank advised the receipt on the month after

Example: XX deposited $2,000.00 for the cost of XX for XX matter into XX’s Trust Account by EFT on 31^st July. On 01. Aug Bank advised that the deposit of $2,000 had been received by EFT from XX.

This transaction was EFT and because it is EFT and the EFT deposits are not received until the bank advises receipt, therefore, even though the EFT deposited on 31. July, it will not be entered until the bank advises until Bank advises. Here the XX Bank Advised on 01.08 that

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the EFT has been received and therefore it will be entered in Cash Receipt book and ledger on 01.08.

Comment – this payment is receipted in August, because the Bank did not advise receipt of the funds until August. Remember that cheques are receipted on the day they are received but **EFT deposits are not received until the bank advises receipt**

**Cash receipts

Transit monies defined in LPA 237 received in cash must be deposited to the trust account (LPA s255)

Example: A delivered $4,000.00 in cash, with instructions that this be paid to a builder who had recently done some work at his property. The receptionist issued a receipt to A and called the builder, who collected the cash that afternoon.

Here the receptionist has done a wrong thing not to deposit money into trust account.

Monies received under instructions to pay to someone else (transit monies) when received in cash must be deposited to the trust account as per s 255 LPA

Paying money from trust account (to third party)

The payment of money must be recorded in the accounts within five working days of the payment being made: Legal Profession Act 2007 (QLD) s 40(1). This is by an entry (effectively credit) in the cash payment book and a debit entry in the relevant individual trust ledger.

Before making withdrawal of money received into trust, solicitor should ensure that the money is: 1) according to that beneficiary’s trust ledger, available to the beneficiary: QLD Law Society v Wakeling and 2) represented by cleared funds.

Where the money is received by personal cheque or EFT, the solicitor should ensure that the cheque is cleared or EFT is advised by the bank that is received.

Example. on 3 May XLawyers issued a cheque to the Council for rates search fees for A’s sale to XX. This was recorded as a debit in the cash payments book and a credit in the client’s ledger.

The payment has been misrecorded. It should have been recorded as a debit in the client’s ledger and a credit in the cash payments book

Example: a cheque has been drawn

the cheque has been drawn, this should be a credit in the cash receipts book and a debit in the client’s ledger

Example: $1,200.00 was paid from Percival Sykes’ ledger for rates search fees. This was recorded as a debit in the cash payments book.

Rates search fees recorded as a debit in the cash payments book – ought to have been recorded as a credit. Would need to be reversed. Outlay paid and invoice drawn. No issue

**Draw a cheque

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Example: XLawyer drew a cheque for $1,000.00 to the X Council for rates search fees for A’s Purchase from XX. This was recorded as a debit in the cash payments book, and a credit in the ledger for A’s matter. A has $1000 in his ledger

there is nothing wrong with drawing the cheque assuming the funds are there for costs and outlays. The credit/debit entries are around the wrong way and should be reversed and re- done

** Overdrawing

Example. on 01.May XLawyers asked A to deposit an additional $2,000.00 to their trust account for rates search fees. A brought in a cheque for $2,000.00 later that day. on 3 May XLawyers issued a cheque to the Council for rates search fees for A’s sale to XX.

We do not yet know whether the cheque has cleared. This could lead to the trust account becoming overdrawn (see below**).

**Overdrawn uncleared Funds

The practice of overdrawing on uncleared funds can expose the solicitor to professional discipline. In Legal Services Commissioner v Denevish the solicitors treated the cheque as cleared and the cheque was dishonoured and the solicitor’s account was withdrawn. The court found unsatisfactory professional conduct on the part of solicitor. Each partner was ordered to pay $750 fine

Example1: On 10 June A brought in $500.00 in cash for her X Matter. The accounts clerk issued receipt to A, but accidentally recorded the receipt against B’s ledger in the books of account. (B’s ledger $5000)

Deposit has been misrecorded. Should be reversed and credited to A’s ledger once discovered – increases risk of overdrawing against B’s account

On 15 June X lawyers received an invoice for $10,000.00 from the barrister who had appeared for B in his Criminal Law Matter. Seeing cleared funds of $5,500.00 in the ledger, Xlsawyers drew a cheque to the barrister for $5,500.00, and asked B to deposit $4,500.00 to cover the remainder of the invoice.

B’s ledger has effectively been overdrawn, because $500.00 of the funds in that ledger really belong to A. B has not lost anything, but A has, and would be entitled to

compensation under s456, 458, 466 LPA

Jnr solicitor realised the error that had been made in recording A’s payment against B’s ledger. He deposited $500.00 of his own funds into the trust account (without telling anyone and without recording the payment in the books of account).

Jnr Solicitor has done the right thing in reimbursing A, but also ought to have reported the error to the QLS: s260 LPA. Because the payment has overdrawn B’s ledger and B has suffered loss, and under the principle of Magarey, the firm is in breach of trust to B and would be entitled to compensation under s456, 458, 466 LPA

**Dishonoured Cheque

The fund should be revered when cheque is dishonoured. Cash receipt book should be inserted as negative and ledger of the client is also revered

Example. on 01.May XLawyers asked A to deposit an additional $2,000.00 to their trust account for rates search fees. A brought in a cheque for $2,000.00 later that day. on 3 May XLawyers issued a cheque to the Council for rates search fees for A’s sale to XX. BANK

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notified Xlawyers that A’s cheque had been dishonoured. The cheque was not banked until 10 May

A’s cheque has been dishonoured. A’s ledger is therefore overdrawn, as payment has already been made to the council. The cheque was not banked until 10 May, so it might have been possible to contact the council and cancel the cheque on 5 May. A reversing transaction needs to be recorded here (although the cheque has already been drawn against – this should be a credit in the cash receipts book and a debit in the client’s ledger). A’s Ledger would bear the loss as per Keefe

In Keefe there was severe discipline for solicitor who drew on funds that has not been cleared, and for which the supporting cheque was dishonoured. The principle of this case is that the misused money is attributable to all beneficiaries who, at the time of the misuse, had credit balances in their individual trust ledgers. If, under the principle of Keefe, a number of beneficiaries could be considered to have suffered as a result of an unaccounted shortfall in the trust account, then presumably each of those could be joined as a complainant in the disciplinary proceedings and as per Keefe a compensation must be paid to each of them.

Bill sent to client (Invoice issued to client)

If a solicitor gives the beneficiary a bill relating to the trust money, and the client does not object to the bill within seven days of receiving it, the solicitor can withdraw the money from trust to pay the bill: LPR 58(4)(a), 58(4)(b)(i). The 7 days period run from the date of the bill.

Example: client received the invoice for costs and outlays on XXX.

client received invoice. 7 days (following which funds can be transferred from trust) begins to run from this point on date of the bill

Example: The invoice to cleint was paid from the funds held in trust on client’ behalf.

Invoice paid. 7 days have passed so payment is authorised under S58 (4)(a), 58(4)(b)(i) LPR 07.

Issuing invoice to the client (below $1500)

The disclosure requirement under section 308 LPA is not required if the fees (excluding disbursements) are not likely to exceed $1,500.00: s 80(1) LPR

Example: XLawyers issued A with an invoice for $300.00 for professional fees for the preparation of her Will and Power of Attorney

No issue here. The invoice is under $1500, and the firm is entitled to present an invoice, even if there is no cost agreement

Director of the company asks solicitor to pay funds to himself

In Jalmoon Pty Ltd (in liq) v Bow, where director of company ordered Solicitor to pay money to himself personally. Solicitor then paid the money to director. It was held that solicitor had paid the money to director in breach of trust or at least in breach of Fiduciary duty. The solicitor was obliged to compensate the company.

Example. On 15 May A, in his capacity as a director of XX Pty Ltd, instructed XLawyers to deposit $X of the funds held in XFolio into a savings account in the name of his wife.

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This issue is arguably worse than Jalmoon Pty Ltd (in liq) v Bow,as solicitor have deposited funds to director’s wife, who (as far as we know), has no involvement with the company.

And Xlawyer should pay compensation to XX PTY LTD.

Bank error. Not rectified until next month

Example.: Bank debited $348.00 for bank charges from the trust account in error. This was not rectified until September 20XX.

This should be noted in reconciliation and be deducted

Example.: X Bank credited $35 to the trust account in error, which was not rectified until next month. The accounts clerk recorded this as a credit (increase in liabilities owed) against A’s Personal Injuries matter.

The credit in error should be reconciled at the end of the month – it should not be recorded against a client’s ledger

Interest on Controlled Money

This should be entered into as credit in client’s controlled Money Account and in our Controlled Money Control account list should be entered as debit as it shows our liability increased in trust account

Example. The XX client controlled money account was realised. At the date of realisation, the account had accrued $105.00 interest.

In the Client’s Controlled Money Account (ledger), $105 is entered into as credit however in our Controlled Money Control account list it will be entered as debit as it shows our liability increased in trust account

Example. A’s Investment Account accrued $10,000.00 in interest. The accounts clerk recorded this as a credit against A’s normal ledger account.

Funds were incorrectly credited against the client’s ordinary trust account ledger – the general trust account does not earn interest for clients and this should have been recorded against the client’s investment account (controlled money account ledger)

Transfer from control money to new ledger

the journal needs to be signed by the person/s from the firm with the authority to sign cheques drawn on the trust account.

Example: Pursuant to the terms of a written agreement between A and B, XX Laywers opened file number XX in the names of A and B and received and banked the funds (paid by bank cheque) from the controlled money account to that ledger. The funds cleared the following day.

In this case, the journal will be filled Transfer from XX client’s Controlled Money Account to the new ledger YY client pursuant to written agreement between A and B.

Internal transfer from ledger to Ledger

Internal transfer is only allowed where the solicitor has been authorised to make a payment out of trust account by beneficiaries: LPR s43(1)(a).

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