Escrow accounts for barristers’ fees
Rule 14.10 Lawyers Conduct and Client Care Rules enables a law firm to hold in an escrow account moneys in advance of fees for work to be carried out by a barrister for a client with no instructing solicitor.
The rule provides that the moneys must be held and dealt with in accordance with terms prescribed by the Law Society. The Law Society has adopted a prescribed form of escrow agreement for use by barristers and escrow agents.
Set out below are various matters which are relevant for a law firm (‘firm’) which provides an escrow service:
- An escrow agreement in the prescribed form must be signed and dated in relation to each escrow account.
- A global trust account must be opened for all barristers’ escrow moneys held by the firm. This account must be separate from other trust funds held by the firm.
- This is necessary for the escrow moneys to be exempt from Foreign Account Tax Compliance Act (FATCA) requirements. Where the firm is a Non-Financial Foreign Entities (NFFE), it should advise its bank that the escrow account is exempt.
- There is no requirement for the firm to provide client care information either to the barrister or to the barrister’s client. The escrow agreement provides that it does not create a lawyer/client relationship between the firm and the barrister’s client.
- A trust account ledger should be opened in the name of the barrister’s client and stylised in a manner such as: Tom Jones on behalf of barrister Ed Long – leaky home litigation – escrow agreement.
- When escrow moneys are placed on interest-bearing deposit with a bank, as the firm is entitled to the interest, arrangements should be made with the bank for RWT certificates to be directed to the firm and not to the barrister’s client.
- A copy of the barrister’s bill of costs addressed to the client and copied to the firm is necessary in respect of each payment made to the barrister. An authority from the barrister’s client to make payments to the barrister is unnecessary as this is authorised in the agreement.
- A bill of costs for the administration fee must be sent to the barrister prior to deduction of the fee from the account.
- The firm must report to the barrister’s client on completion of the escrow arrangement, or annually if the arrangement extends over a longer period than one year.
Last updated on the 22nd July 2015