New Zealand Law Society - Practice without a trust account

Practice without a trust account

Any lawyer or incorporated law firm who does not:

  • receive or hold money or other valuable property in trust for any other person; or
  • invest money for any other person; or
  • have a trust bank account; or
  • receive fees or disbursements in advance of an invoice being issued... not obligated to keep trust account records (s 112(2)(b) Lawyers and Conveyancers Act (LCA)).

To be exempted from the obligations to keep trust accounts, lawyers must give written notice under regulation 4 of the LCA (Trust Account) Regulations 2008 before 31 March each year that they:

  • have not done any of the things specified in s 112(2)(b) of the Act during the preceding 12 months; and
  • do not intend to do any of those things during the following 12 months.

If a lawyer who has given notice is no longer entitled to rely on s 112(2), the lawyer or firm must notify the Law Society immediately.

All lawyers will continue to be liable to contribute to the Lawyers’ Fidelity Fund unless they make an election (not to receive money or other valuable property in trust) under s 317(1) of the Act. The election and certification must be on the approved form and lodged with the Law Society no later than 31 March in the year to which the certification relates.

The form must be signed by one of the following who is authorised to sign on behalf of the practice:

  • the sole practitioner
  • a partner in the law firm; or
  • where the election is made by an incorporated law firm, a director of the incorporated law firm

The election under s 317(1) ceases to be in force if all the persons who signed the election cease to hold practising certificates or the election is revoked. A revocation of the election must be in the approved form and signed by the authorised person (sole practitioner, partner or director or shareholder).

These requirements do not apply to barristers, who are not permitted to have a trust account.

Deemed receipt of money

All lawyers need to read the provisions of ss 110 and 112 carefully before they make the certification. A lawyer will be deemed to have received money belonging to another person if:

  • that person, or a bank or other agency acting for or on behalf of that person, deposits funds by telegraphic or electronic transfer into the bank account of the lawyer or firm; or a person or body related to the lawyer; or
  • a lawyer takes control of money belonging to that person.

The provisions will catch lawyers using third party trust accounts or dealing with funds electronically or otherwise in situations where they might, under previous legislation, have claimed they were not "handling" funds.