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Interest Earned On Lawyers Trust Accounts

1622 words - 6 pages

Lawyers in Australian Society – Assignment 1.The following essay will discuss the ethical use of trust accounts and the interest that these accounts earn. It will examine who this interest belongs to. Two ethical theories will be employed to analyse this moral and ethical dilemma, the theories being the teleological and deontological approaches to moral decision making as discussed by moral philosopher Thomas Aquinas.Any money solicitor’s receive on a client’s behalf is held separately from the solicitors’ general office account and will be deposited in a general trust account and held under trust . A scheme was set up within Australia to ensure that the interest earned on the trust accounts’ went to worthwhile causes. Australian Interest on Lawyers Trust Fund Accounts (IOLTA) schemes is now fundamental in the funding base for legal aid and the legal profession infrastructure.The IOLTA fund a range of programs, which are related to the practice or administration of law. The programs include: community legal centres; university and community legal education; practical legal training programs; continuing legal education for practitioners; law reform; legal research; promotion of access to justice; legal profession regulation; law society objections in admission proceedings; investigations into practitioners’ conduct and disciplinary proceedings; maintenance of law libraries; and publication of legal works.In addition to these programs the Solicitor’s Fidelity Fund was established by The Legal Practitioners Act 1898 (Cth). Fidelity Funds are funds set up to reimburse those who have lost money as a result of a solicitor’s misappropriation of funds . Fidelity fund contributions are compulsory as outlined in the Model Bill and the Legal Professions Act 2004 (NSW). Fidelity Funds remain the major recipients of IOLTA; however IOLTA also goes towards, legal aid and legal programmes.Many legal professionals are under the belief that the removal of a client’s interest is quiet legal, the removal is no different in principle to taxation, and that the funds are used for good purposes. It is not disputed that the funds are not used for good purposes , but to say that because the funds are legal makes them ethical misses the point. It is not the transferring that is questionable but the decision to permit the transfer.In Brown [1965] the Lords unanimously regarded the interest earned as the property of the clients. Lord Donovan was the most vocal in saying that ‘none of the interest is his income at all, but that of his clients to whom the capital, upon which the interest was paid, belongs’ .In relation to using the client’s interest without their knowledge Lord Upjohn stated the following In the case of Brown‘this interest belongs collectively to the clients and not to the solicitor and equity has always regarded, and rightly regarded, the fiduciary relationship of client and adviser as subject...

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