Trust money

In Australia, Trust money is held by a law firm on a client's behalf in a trust account with a bank. Trust money is held in connection with the provision of legal services and is highly regulated. A lawyer or law firm should not appropriate a client's trust money until certain regulations are met, which are different for each State in Australia. The Australian system regulating lawyers and their trust accounts has been labeled by the Rudd Government as an "unwieldy monster".

Trust money is held to cover the practitioner’s fees and disbursements over a period of time and may be required to be topped up as a matter progresses.

The accounting of trust money is highly regulated and even though the money is controlled by the law practice the money still belongs to the client until such time as it is applied to an invoice or disbursement. The exact regulations in Australia are different for each State, in everything from cost disclosure to trust accounting, which lawyers say cause inefficiencies and cost clients millions of dollars every year.

Prior to 1976 it was not uncommon for solicitors to pay their costs and disbursements from trust money without obtaining the clients instructions to do so. The profession at large now accepts that this practice is unlawful and that prior instructions must be obtained.

After a 1976 New South Wales Supreme Court Decision it appeared that withdrawals by a lawyer from a trust account could only be made in two situations:

In 1978 the law societies in Victoria and South Australia advised their members that they should "issue a bill of costs to the client wherever costs are taken from the trust account and not take such costs until the client has had proper opportunity to object".

In 1984 the New South Wales Law Reform Commission published the "Fourth Report on the Legal Profession: Solicitors' Trust Accounts". Chapter five of that report was titled "Handling Trust Money: Issues Relating to Costs and Disbursements" and discussed many issues relating to trust accounts in NSW and around Australia.

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