Solicitors Accounts Rules 24-27
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What interest must be paid on money in a separate designated client account for a client, or for a person funding all or part of the solicitor's fees, or for a trust
ALL the interest earned on the account (Rule 24(1) and note (i))
What must be paid on money in a general client account for a client, or for a person funding all or part of the solicitor's fees, or for a trust (or if money should have been held for a client or such other person or trust in a client account but was not)?
In accordance with which rule must this be calculated?
What can be done with any extra that remains after the interest payable is paid?
A sum in lieu of interest (Rule 24(2))
Calculated in accordance with Rule 25
It can be retained by the solicitor (Rule 24 - note 1, referring to Solicitors Act 1974 s33(3))
In what 7 situations is a solicitor not required to pay the sum in lieu of interest normally payable under Rule 24(2)?
- 1. If the amount calculated is £20 or less (Rule 24(3)(a)) - f sums of money are held in relation to separate matters for the same client, other person or trust, it is normally appropriate to treat the money relating to the different matters separately, so that, if any of the sums calculated is £20 or less, no sum in lieu of interest is payable. There will, however, be cases when the matters are so closely related that they ought to be considered together – for example, when a solicitor is acting for a client in connection with numerous debt collection matters - Rule 24 note v
- 2. If the solicitor holds a sum of money below for a time not exceeding the length below (Rule 24(3)(b)(i)):
- £1000 - 8 weeks
- £2000 - 4 weeks
- £10 000 - 2 weeks
- £20 000 - 1 week
- 3. If the solicitor holds an amount over £20000 for less than one week unless it is fair and reasonable given all circumstances to pay interest (Rule 24(3)(b)(ii))
- 4. On money held on counsel's fees once counsel has requested a delay in settlement (Rule 24(3)(c))
- 5. On money held for the legal services commission (Rule 24(3)(d))
- 6. On an advance from the solicitor under rule 15(2)(b) to fund a payment on behalf of the client or trust in excess of funds held for that client or trust (Rule 24(3)(e))
- 7. if there is an agreement to contract out of the provisions of this rule under rule 27 (Rule 24(3)(f))
If sums of money are held intermittently during the course of acting, and the sum in lieu of interest calculated under rule 25 for any period is £20 should this still be paid?
Yes if it is fair and reasonable in the circumstances to aggregate the sums in respect of the individual periods (Rule 24(4)).
If money is held for a continuous period, and for part of that period it is held in a separate designated client account, the sum in lieu of interest for the rest of the period when the money was held in a general client account may as a result be £20 or less, should a sum in lieu of interest still be paid?
Yes, if it is fair and reasonable in all the circumstances (Rule 24(5))
If the solicitor holds money for a client in an account opened on the instructions of that client/person paying solicitor's fees under Rule 16(1)(a)), is interest payable?
Yes, all the interest, to the client/relevant person (Rule 24(6)(a))
If a solicitor-trustee (of any kind) holds money for a trust in an account of the solicitor-trustee which is not a client account under Rule 17(ca), is interest payable?
Yes, all the interest, to the trust (Rule 24(6)(aa))
If a solicitor has failed to comply with instructions to open an account under rule 16(1)(a) is interest payable on this money?
No -as there will be no interest. A sum in lieu of any net loss of interest suffered by the client (or that person) as a result is payable instead (Rule 24(6)(b))
Is a sum in lieu of interest payable on money held under instructions given under rule 16(1) in a manner which attracts no interest?
No. Rule 24 - note ii
Are accounts opened in the client's name under rule 16(1)(b) (whether operated by the solicitor or not) subject to rule 24?
- Because the money is not held by the solicitor. All interest earned belongs to the client. The same applies to any
- account in the client's own name operated by the solicitor as signatory
- under rule 11.
Rule 24 - note iii
Does rule 24 apply to money held subject to a trust?
Yes. Because it is client money
Rule 24 - note iv
When can an administrative fee be charged?
How much can be charged?
- - when handling client money and transaction is out of the ordinary.
- - A reasonable administrative fee can be charged.
Rule 24 note vi
What happens if a client fails to present a cheque to his/her bank payable to him/her from the Solicitors?
Should the interest be recalculted?
Should a fee be charged?
- - Whether interest should be recalculated depends on all the circumstances
- - A reasonable charge may be made for any extra work carried out if the solicitor is legally entitled to make such a charge
Rule 24 note vii
Who does part C (interest) of the rules not generally apply to?
What else does part C not apply to? What happens in this situation?
Solicitors who are Liquidators, trustees in bankruptcy, Court of Protection deputies and trustees of occupational pension schemes.
Rule 24 note viii refers to Rule 9
Part C also does not apply to joint accounts (Rule 24 note ix). If a solicitor holds money jointly with a client, interest earned on the account will be for the benefit of the client unless otherwise agreed. If money is held jointly with another solicitors' practice, the allocation of interest earned will depend on the agreement reached.
What can a client (including one of joint clients) do if he or she believes that interest, or a sum in lieu of interest, was due and has not been paid, or that the amount paid was insufficient?
What should they do first?
Complain to the legal complaints service (Rule 24 note xa)
Try to resolve the matter with the solicitor
What rate of interest must be obtained on money held in a separate designated client account?
A reasonable rate (Rule 25 (1))
What sum in lieu of interest should be given on money held in a general client account?
A fair sum.
It need not necessarily reflect the highest rate of interest obtainable but it is not acceptable to look only at the lowest rate of interest obtainable.
Rule 25 (1))
How must a sum in lieu of interest for money held in a general client account be calculated?
What if it is held successively or concurrently in accounts at different banks or building societies?
When is this sum payable?
- - on the balance or balances held over the whole period for which cleared funds are held
- - at a rate not less than (whichever is the higher of) the following
- (i) the rate of interest payable on a separate designated client account for the amount or amounts held, or
- (ii) the rate of interest payable on the relevant amount or amounts if placed on deposit on similar terms by a member of the business community
- - at the bank or building society where the money is held.
If held successively or concurrently in accounts at different banks or building societies the relevant bank or building society for the purpose of paragraph (2) will be whichever of those banks or building societies offered the best rate on the date when the money was first held.
Generally payable at the conclusion of the client's matter, but might in some cases consider it appropriate to account to the client at intervals throughout - Rule 25 note i
What if, contrary to the rules the money held for a client or other person is not held in a client account? How is the sum in lieu of interest calculated?
The "relevant bank or building society for the purpose of paragraph" will be a clearing bank or building society nominated by the client (or other person).
What if, contrary to the rules, money held by a solicitor–trustee is not held in a client account?
The solicitor-trustee has a particular obligation to comply with the requirement in paragraph (1) to account for a fair sum in lieu of interest.
Rule 25 (5))
When calculating the period over which the sum in lieu of interest must be calculated is it necessary to check on clearance dates when the money is both paid in and paid out by cheque?
Usually no - usually they will cancel each other out (when money is recieved and paid by cheque).
It will be satisfactory to look at the period between the dates when the incoming cheque is banked and the outgoing cheque is drawn. Rule 25 note ii
When calculating the period over which the sum in lieu of interest must be calculated is it necessary to check on clearance dates when the money is NOT both paid in and paid out by cheque?
- The relevant periods would normally be:
- - From the date when a solicitor receives incoming money in cash until the date when the outgoing cheque is sent;
- - From the date when an incoming telegraphic transfer begins to earn interest until the date when the outgoing cheque is sent
- - From the date when an incoming cheque or banker's draft is or would normally be cleared until the date when the outgoing telegraphic transfer is made or banker's draft is obtained.
Rule 25 note iii
What are the 2 exceptions to this:
Money held in a client account must be immediately available, even at the sacrifice of interest.
What can be taken into account in assessing the appropriate rate for calculating the sum to be paid in lieu ofinterest, or in assessing whether a reasonable rate of interest has been obtained for a separate designated client account?
- - When the client expressly says otherwise
- - when the circumstances clearly indicate otherwise
- The need for immediate access (Rule 25 note v)
When a solicitor holds money as stakeholder, what interest is payable?
- - The same as calculated by rule 24
- - Payable to the person to whom the stake is paid
When can rule 27 (contracting out) be used?
What information should be given to the client when using this rule?
In appropriate circumstances (Rule 27(1))
- Whether it is appropriate to contract out depends on all the
- circumstances, for example, the size of the sum involved or the nature,
- status or bargaining position of the client. It might, for instance, be
- appropriate to contract out by standard terms of business if the client
- is a substantial commercial entity and the interest involved is modest
- in relation to the size of the transaction. The larger the sum of
- interest involved, the more there would be an onus on the solicitor to
- show that a client who had accepted a contracting out provision was
- properly informed and had been treated fairly. Contracting out is never
- appropriate if it is against the client's interests - Rule 27 note i
- Solicitors should act fairly towards their clients and provide sufficient information to enable them to give
- informed consent if it is felt appropriate to depart from the interest provisions - Rule 27 note i
When may a solicitor acting as stakeholder use Rule 27 (contracting out)
- When there is WRITTEN agreement by BOTH his/her client and the other party (Rule 27(2))
Can a solicitor charge for acting as a stakeholder in a client's matter?
What else might it be appropriate to do?
In principle yes
A reasonable amount
Rule 27 - note ii
- It might also be appropriate to include a special provision in the contract that the solicitor–stakeholder retains the interest on the deposit to cover his or her charges for acting as stakeholder. This is only acceptable if it
- will provide a fair and reasonable payment for the work and risk involved in holding a stake. The contract could stipulate a maximum charge, with any interest earned above that figure being paid to the recipient of the stake. (Rule 27 note iii)
Under Rule 27 when might any right to charge the client, or to stipulate for a charge which may fall on the client be excluded?
- If, for instance, a prior agreement with the client for a fixed fee for the client's matter, or for an estimated fee which cannot be varied upwards in the absence of special circumstances. It is therefore not normal practice
- for a stakeholder in conveyancing transactions to receive a separate payment for holding the stake.
Rule 27 note iv
What should the solicitor-stakeholder who seeks an agreement to exclude the operation of rule 26 be particularly careful of avoiding? And particularly when?
- Taking unfair advantage either of the client or the other party if unrepresented (Rule 27 note v)
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