EPR VidLec11 - Solicitors' Account Rules PDF

00:01 I\'m Kenneth Perera, Managing Director of Allgate Chambers. Today I\'ll be covering Professional Fees and Solicitor\'s Account Rules, short form known as SAR. 00:17 My lecture will deal with the following five topics. The topics of client\'s money and the prevention of money laundering and...

00:01 I\'m Kenneth Perera, Managing Director of Allgate Chambers. Today I\'ll be covering Professional Fees and Solicitor\'s Account Rules, short form known as SAR. 00:17 My lecture will deal with the following five topics. The topics of client\'s money and the prevention of money laundering and financing of terrorism rules will be addressed in this set of slides. The last three topics will be addressed in the next set of slides. 00:39 There are four categories of accounts. Client account, which is the focus of this lecture, Conveying account, Office account, and Trust account. Of the four categories, only three are defined in legislation. An office account is not defined in legislation and is indirectly referred to in the relevant legislation as the SAR. 01:09 In practice, an office account means an account of the law firm for holding office money. As mentioned earlier, this lecture is only concerned with client\'s money held in client\'s accounts, which is regulated by the SAR. 01:29 There are six categories of money. The convincing regime, which came into effect in 2011, introduced three categories of money. Convincing money, anticipatory convincing money and unclaimed convincing money. 01:48 Convincing money and anticipatory convincing money are defined in the Convincing and Law of Property bracket convincing rules 2011. 02:00 Unclaimed Conveying Money is defined in Rule 7 of the SAR. It is the only type of Conveying Money that can still be held in a Client Account. 02:16 Client account is defined in Rule 2 of the SAR as a current or deposit account maintained in the name of a solicitor at a bank or a deposit account maintained in the name of a solicitor with an approved finance company. In the title of which account, the word client appears. 02:39 The client\'s money is also defined in Rule 2 of the SAR. It is money held or received by the solicitor on account of a person from whom he is acting in various capacities such as a solicitor. It does not include money held or received on account of the trustees of a trust, which the solicitor is a trustee. 03:07 This is addressed by the legal profession bracket solicitor\'s trust accounts close bracket rules. It also does not include money to which the only person entitled is the solicitor himself, or in the case of a firm, one or more partners of the firm. 03:28 This is because the solicitor\'s or the firm\'s money is not considered client\'s money. Client money also excludes convincing money or anticipatory convincing money which is regulated by the Conveying and Law of Property bracket convincing rules 2011. 03:49 Take note that a solicitor\'s ethical obligations are not confined to the SAR. Bear in mind Rule 16 of the Legal Professional Professional Conduct Rules 2015. Please note that the old PCR has been updated and replaced with the Legal Professional Conduct Rules 2015. The principles are the same, except that the new PCR 04:17 delineates the applicable principles more clearly and extends certain rules to all practising lawyers in Singapore, not just Singapore qualified lawyers. The principle guiding the interpretation of Rule 16 on client\'s money is as such. 04:35 A legal practitioner has a duty to ensure that any money or other property which a client with the agreement of the legal practitioner has entrusted with him or has made him responsible for is held in a way that protects the interests of the client. This duty also applies to a law practice. 05:00 Under Rule 16 of the PCR, a legal practitioner is accountable to the client, must promptly notify the client whenever he receives money or securities to be held on behalf of the client, and must expeditiously render Statement of Counts when requested by the client. 05:24 It is important to note that client\'s money must be paid without delay. Even an erroneous deposit into an office account is a breach. That said, if the solicitor can show that he is not obliged to pay client\'s money under the specific situations in Rule 9 of the SAR, the solicitor would not breach Rule 3. The raison d\'etre of the solicitor\'s account rules 05:53 is to protect the public against any unauthorized use of client\'s money held by solicitors. Furthermore, the need for the legal profession to maintain standards and values such as honour, integrity and honesty is also of great importance. Carefully calibrated procedures and processes are therefore imposed by statute on the handling of client\'s money. 06:21 The solicitor cannot contract part of his duties and processes. 06:27 Other than client\'s money, Rule 4 also provides for other types of money to be paid into the client account. 06:38 Other than rules 3, 4 and 5, no other money can be paid into a client account. If money has been paid in breach of this rule, the solicitor must withdraw the money without delay on discovery. 06:56 Rule 5 deals with the situation when a solicitor receives mixed monies. Firstly, a solicitor cannot hold or receive money which consists of both convincing money and any other money. If a sum of money subsequently becomes mixed, the solicitor must split convincing money from any other money. Secondly, a solicitor cannot hold or receive money which consists of both client\'s money 07:26 or trust money or both and any other money. 07:32 He must split the money and deal with each separately. 07:38 It is also important to note that a solicitous recourse or write, whether by way of lien, set off, counterclaim charge or otherwise, is not affected. 07:53 We have examined when and how monies can be paid into a client account. Now we will have a look at how withdrawals may be made. The situation where monies can be withdrawn are set out in Rule 7. For example, where money is properly required for payment to or behalf of the client or reimbursed the solicitor of payments made on behalf of the client. 08:21 Rule 7.1b to d also sets out various situations where money can be withdrawn from the client account. 08:32 A point to note is that while withdrawals from client\'s account are allowed in certain circumstances, the solicitor has a duty under Rule 7.2 to ensure that client account is not overdrawn. 08:50 Note also that except as provided under Rule 7, no withdrawal is allowed without the Council\'s approval. 09:00 Rule 8 sets out the methods for withdrawing money. As you can see, withdrawals can be done by drawing a cheque in favour of the solicitor or making a transfer to another bank account in the name of the solicitor with various restrictions for different types of withdrawals. 09:21 Please also read Rule 84 and 4a in detail. 09:28 Rule 8 also provides for the two-signatory rule. For withdrawals more than \$5,000 but less than \$30,000, the two-signatory rule applies unless the firm has an independent bookcase. 09:45 In cases of withdrawal more than 30,000, the two-signatory rule applies. 09:54 The duties and responsibilities of a second signatory are also set out in the practice directions. Please have a look at it. 10:05 Rule 10 of the SAR is concerned with transfers between accounts. No sum can be transferred from Client A\'s client account to Client B\'s client account unless permitted under the rules. 10:21 Lastly, Rule 11 sets out various requirements for solicitors to maintain accounting records. Please read the rules in detail. Please note that under Rule 12, the Council has the power to require production of books of accounts. 10:41 As mentioned earlier, for sums between 5,000 and 30,000, the two-signatory rule doesn\'t apply if the firm has an independent bookkeeper. 10:55 The requirements for and duties of an independent bookkeeper are prescribed in Rule 11A. I will now illustrate the application of the rules in a few cases. 11:09 In Law Society of Singapore and Cheong Chin-mei Selina, the solicitor did not prepare and maintain any financial records or documents for 6 months, and was found to be in breach of Rule 11 of the SAR. 11:30 The solicitor\'s mistakes were attributed to an illness, such that she was unable to cope with the demands of her sole proprietorship. 11:40 The solicitor was suspended for a year with an undertaking not to resume practice as a sole practitioner without leave of court. 11:51 Similarly, in Law Society of Singapore and Tay Eng Kui Edwin, the solicitor failed to maintain any of the books or accounts required by Rule 11 of the SAR. However, in this case, the omission was deliberate and the solicitor had tried to conceal his transgressions. He was struck off the rolls. 12:17 Finally, let\'s examine the case of Law Society of Singapore and Zulki Fi bin Muhammad Amin. 12:26 The facts are as such. There were 3 partners in the firm. 2 were equity partners, 1 was a salaried partner. The managing partner managed the firm\'s office and client\'s account. Subsequently, he absconded with the client\'s money. The other 2 partners were charged with breaches of Rule 11.1.2 and 4 of the SAR. 12:56 The first charge under Rule 11.4 was made out as a contemporaneous reconciliation statement when not prepared. Only reconstructed statements were produced as evidence. 13:12 On the second charge under Rule 11.1 and 2, the Court found that this charge was made out as the partners could not produce the firm\'s ledger. The two partners were also charged with failing to supervise the firm\'s client account. The Court found that this charge was established because the equity partner failed to adequately supervise the firm\'s client account. 13:42 may not abdicate this responsibility. However, the salary partner has no such responsibility as he was in fact an employee of the firm, and his undertaking of responsibilities to supervise was merely a voluntary one. 14:02 Now, let us proceed to the second subtopic regarding an advocate in solicitor\'s duties in relation to the prevention of money laundering and financing of terrorism. 14:15 The Prevention of Money Laundering and Financing of Terrorism rules requires the legal practitioner or law practice to perform certain customer due diligence measures. Rules 6-10 largely involve taking steps to verify the client\'s identity and where applicable, understanding his business and source of funds. 14:38 Under the risk-based approach set out in the rules, where there are high risk factors, the legal practitioner or law practice has to undertake enhanced measures such as obtaining senior management\'s approval before establishing or continuing the business relationship with the client, taking steps to establish the client\'s source of wealth and funds, and conduct enhanced ongoing monitoring of the business relationship. 15:09 If customer due diligence cannot be completed because it will disrupt normal business operations, the legal practitioner or law practice must adopt internal risk management policies and procedures governing the conditions when a business relationship can be established with a client before the completion of customer due diligence. 15:32 and complete the customer due diligence as soon as reasonably practical. 15:40 A law form of practice must not establish a new business relationship or undertake a new matter if the client is suspected of engaging in money laundering or the financing of terrorism. It must file a suspicious transaction report with a relevant officer. 16:01 Other notable issues are tipping off. If the law firm or practice has reasonable grounds to believe that the performance of any customer due diligence measures will tip the client off, it need not perform the measures, but must file a suspicious transaction report. The law practitioner or law practice must maintain a record for at least five years relating to the following two issues. First. 16:30 A document or record obtained by the legal practitioner through customer due diligence measures. Second, a document or record regarding a matter in which the legal practitioner acted for and the record must be sufficient to permit a reconstruction of the matter and transaction. 16:49 The court stated that the legal profession is vulnerable to be made use of by money launderers due to factors such as law firms often holding large sums of money for commercial transaction and the money launderers\' preference for the cloak afforded by legal privilege. The court noted there was a real risk that proceeds of crime could flow in through local law firms to be cleansed. This would cast a shadow over Singapore\'s standing as a country. 17:18 clean and trusted global financial hub and undercut the substantial effort that Singapore has invested in maintaining its reputation. There was therefore an added imperative on lawyers to be particularly vigilant as to the provenance and objective of remittances made through their firms. 17:41 Thank you for attending this lecture. B24 EPR - VII\. Professional fees and Solicitors' Accounts Rules - \(1) Client money (**[Rule 16 PCR]**) - Duties to client in relation to client\'s monies (**[Rule 16 PCR]**) - Legal Profession (Solicitors' Accounts) Rules ("LPSAR") Client\'s money; client account (**[Rule 2 LPSAR]**); - GN 3.3.1 - Deposit of Moneys in the Client Account of a Law Practice 1. 2. 3. 4. 5. 6. 7. 8. - Payment **[without delay]** into client account (**[Rule 3 LPSAR]**) - Law Society of Singapore v Tan Chwee Wan Allan - **[Client\'s monies must be deposited into the client\'s account]** - Purpose and legislative intent of **[Rules 2]** and **[3 LPSAR]**: - Law Society of Singapore v Dhanwant Singh \[2019\] SGHC 290; - see also Law Society of Singapore v Yong Wei Kuen Paul \[2020\] SGHC 66 - What to pay (**[Rule 4 LPSAR]**) **[Splitting]** of moneys: **[Rule 5 LPSAR]** - What not to pay (**[Rule 6 LPSAR]**) - Exceptions: Rules 6 and 9 LPSAR; - Law Society of Singapore v Tay Choon Leng John \[2012\] 3 SLR 150 - Client Account: Rules 7-8, 10 LPSAR; PD 3.3.1 - Drawing Money for Legal Costs from Client Account - What can be withdrawn? (**[Rule 7 LPSAR]**) - How money may be drawn from the client account (**[Rule 8 LPSAR]**) - PDR 3.3.10 - Responsibilities of second signatory 1. 2. 3. 4. 5. - Transfers between accounts (Rule 10 LPSAR) - Keeping proper records: Rules 11, 11A, 12 LPSAR - Rule 11 LPSAR - Law Society of Singapore v Chiong Chin May Selena \[2005\] 4 SLR(R) 320 - Law Society of Singapore v Tay Eng Kwee Edwin \[2007\] 4 SLR(R) 171 - Law Society of Singapore v Zulkifli bin Mohd Amin and another matter \[2011\] 2 SLR 620 - Engagement of Book-keeper (**[Rule 11A LPSAR]** ) - Right of lien, set-off: Rule 15 LPSAR - \(2) Legal Profession (Prevention of Money Laundering and Financing of Terrorism) Rules 2015 - What measures to take - When should customer due diligence be undertaken? - In the event that suspicions are raised - other Issues - Lawyers to be vigilant: Law Society of Singapore v Chan Chun Hwee Allan \[2018\] SGHC 21 - \(3) Professional fees and costs (**[Rule 17 PCR]**) - Duties to client (**[Rule 17(2) PCR]**) - Ensure proper risk-benefit evaluation (Singapore Shotting Association v Singapore Rifle Association) - Inform client about fees (**[Rule 17(3) PCR]**) - Fees in contentious matters at the **[beginning]** (**[Rule 17(4) PCR]**) - Client\'s right to tax the bill (**[Rule 17(5) PCR]**) - Law Society of Singapore v Andre Ravindran Saravanapavan Arul \[2011\] 4 SLR 1184 - Inform client of consequences of taxation (**[Rule 17(6) PCR]**) - No overcharging (**[s17(7) PCR]**) - What constitutes overcharging (**[Rule 17(8) PCR]**) - Fees chargable in a conflict situation (**[Rule 17(9) PCR]**) - Law Society of Singapore v Syn Kok Kay \[2023\] SGHC 7 - Law Society of Singapore v Low Yong Sen \[2009\] 1 SLR(R) 802 - - - - Law Society of Singapore v Ang Chin Peng \[2013\] 1 SLR 946 - PD 5.2.2 - Non-Refundable Deposit or Retainer; - PD 5.2.1 - Fee Arrangements with Clients; - PD 5.2.3 - Two-Thirds Rule; - PD 5.1.1 - Equity in Lieu of Fees. - \(4) Contingency fees prohibited (**[Rule 18 PCR]**) - Contingency fees are prohibited (Section 107 LPA); - Rule 18 PCR - Law Society of Singapore v Kurubalan s/o Manickam Rengaraju \[2013\] 4 SLR 91 - **[Rationale]** behind s107 LPA and Rule 18 PCR - Exception to the rule against champerty - Law Society of Singapore v Lau See Jin Jeffrey \[2017\] SGHC 30 - C.f. Legis Point LLC v Tay Choon Ai \[2017\] SGHC 325 - \(5) Sharing fees with unauthorised persons (**[Rule 19 PCR]**) - PD 5.4.1 -- Use of Debt Collectors for the Recovery of Legal Fees and Expenses - Sharing fees with unauthorised person (expired practicing certificate) who held himself out as legal practitioner: - Law Society of Singapore v Tan See Leh Jonathan \[2020\] SGHC 102