When money is allowed to leave a trust account

Five permitted reasons, and nothing else

Most trust rules are about record-keeping. This one is about permission. By-Law 9 sets out an exhaustive list of the money a licensee may withdraw from a trust account, and anything outside it requires the Law Society's authorization:

• Money properly required for payment to a client, or to someone else on the client's behalf.
• Money reimbursing the licensee for funds properly expended, or expenses properly incurred, on the client's behalf.
• Money for or toward fees for services already performed — and only where a billing has been delivered.
• Money transferred directly into another trust account and still held for the client.
• Money that should never have been paid into trust and got there through inadvertence.

The list reads better as a closed set than as examples. A withdrawal that feels obviously reasonable but does not fit one of the five is not permitted merely because it is reasonable.

The billing comes before the money

The fees ground carries a condition that is easy to read past: fees may be taken for services performed and for which a billing has been delivered. Delivered, not drafted. The order of events is part of the rule rather than administrative preference.

A provision of the Solicitors Act points the same way from the other end — a bill has to be delivered before an action to recover fees can be brought. Both treat the account rendered to the client as the event that turns held money into earned money.

Never more than that client is holding

A licensee may not withdraw more for a client than is held for that client at that moment. Note what the limit is measured against: the individual client's balance, not the account's.

That distinction is the reason per-client ledgers exist at all. A trust account with a healthy bank balance can still be in breach, because taking more than one client's balance means the shortfall is being covered by other clients' money. A bank statement cannot detect this; only the client ledgers can, which is why the monthly comparison involves three figures rather than two.

How the money is permitted to move

The method is prescribed as well. Money withdrawn for reimbursement or for fees may leave only by a cheque drawn in favour of the licensee, by transfer to a non-trust account kept in the licensee's name, or by electronic transfer. Cash is not among them, and neither is a cheque payable to bearer.

Electronic transfer carries the most conditions, because it is the fastest way to move money and therefore the easiest way to move it wrongly. In outline:

• Every user of the transfer system has their own login or access code — no shared credentials.
• The system must produce a confirmation immediately after the transfer, carrying prescribed details including both accounts, the institution, and the times involved.
• A trust transfer requisition in Form 9A is signed before the system is accessed, and the data entered has to match what the requisition says.
• The transfer is made either by a single licensee, or by two people under a dual-authentication process where one enters the details and the other authorizes the institution to carry it out.

Then comes a step that is frequently skipped. By the close of the next banking day, a licensee prints the confirmation, compares it against the signed requisition to check the money actually moved as specified, notes the client, the subject matter and any file number on it, and signs and dates it. The comparison is the control — without it, the requisition is a form nobody ever checked.

What this looks like when it is working

A firm that finds this area uneventful usually runs a short, invariant sequence: the work is done, the bill goes to the client, the client's ledger is checked to confirm the balance covers it, the transfer is made by a permitted method, and the confirmation is matched and signed the following day.

None of that is difficult. It goes wrong when the steps get reordered under time pressure — and the record keeps the order faithfully.