ETHOS . LAW SOCIETY OF THE ACT JOURNAL
Issues arising out of complaints Case Study: Secure express instructions when dealing with trust money
When acting for more than one client in relation to a common fund held in trust on behalf of those joint clients, a law practice must obtain express instructions (and more prudently in writing) from all clients in the matter before dealing with the funds held in trust. This is particularly relevant when a government agency issues a demand notice on a portion or all those funds held in trust.
Background In a family law matter involving property, the Court made orders dealing with the sale and distribution of the proceeds of sale of the matrimonial home. The parties to the family law matter were both legally represented. Another law practice was appointed to act on behalf of the ex-husband and ex-wife on the sale of the matrimonial home. The net proceeds of the sale (after conveyancing expenses) were to be divided as follows: 1. $75,000 to each of the ex-husband and ex-wife by way of an interim partial settlement. 2. The balance to be held in the trust account of the law practice
that was appointed to act on the conveyance of the matrimonial home. This residue would be subject to further Court orders or agreement between the parties as to its distribution. The sale of the matrimonial home proceeded and duly settled, with the net proceeds deposited to the law practice’s trust account. Prior to settlement of the sale, the law practice received a garnishee notice from the Child Support Agency (CSA) for the sum of approximately $25,000 relating to a debt owed to CSA. The notice warned that a person who without reasonable excuse refused or failed to comply with the notice was guilty of a strict liability offence, and liable to pay a penalty.
On the same day that the notice was received by the law practice, the law practice emailed the ex-husband telling him to inform his family law solicitor of the notice, and keep the law practice informed as the notice had to be resolved before settlement. Two days later the law practice emailed both the ex-husband and ex-wife informing them that the law practice would require confirmation from their respective lawyers about disbursement of the net sale funds. There were further email communications between the law practice and the ex-husband prior to settlement of the sale, but no specific instructions about how the law practice should respond to the CSA garnishee order.