Transcript Document

T.C. BEIRNE SCHOOL OF LAW
FACULTY OF BUSINESS, ECONOMICS AND LAW
Robin Hood and Spite Rights –
Interest on Lawyers’ Trust
Accounts (IOLTA)
Reid Mortensen
Outline
1 Australian IOLTA schemes
2 Usage of IOLTA in Australia
3 The public ethics of IOLTA in Australia
4 The possibilities for the moral salvage of
IOLTA in Australia
T.C. BEIRNE SCHOOL OF LAW
FACULTY OF BUSINESS, ECONOMICS AND LAW
Australian IOLTA Schemes (5-6)
1 Statutory deposit schemes
2 Residual balances schemes
T.C. BEIRNE SCHOOL OF LAW
FACULTY OF BUSINESS, ECONOMICS AND LAW
Australian IOLTA Schemes
Statutory deposit schemes (6-17)
Clients and
other beneficiaries
Solicitor1
Trust Account
$
Clients and
other beneficiaries
2/3 previous year
Solicitor2
Trust Account
$
Clients and
other beneficiaries
2/3 previous year
Solicitor3
Trust Account
$
T.C. BEIRNE SCHOOL OF LAW
FACULTY OF BUSINESS, ECONOMICS AND LAW
2/3 previous year
Australian IOLTA Schemes
Statutory deposit schemes (6-17)
Clients and
other beneficiaries
Solicitor1
Trust Account
IOLTA Trustee [QLS]
Statutory deposit account
$
Clients and
other beneficiaries
Solicitor2
Trust Account
$
Clients and
other beneficiaries
Solicitor3
Trust Account
$
T.C. BEIRNE SCHOOL OF LAW
FACULTY OF BUSINESS, ECONOMICS AND LAW
Interest
Australian IOLTA Schemes
Residual balances schemes (17-20)
Clients and
other beneficiaries
Solicitor1
Trust Account
$
Clients and
other beneficiaries
2/3 previous year
Solicitor2
Trust Account
$
Clients and
other beneficiaries
Agreement
IOLTA Trustee [QLS] & Banks
2/3 previous year
Solicitor3
Trust Account
$
T.C. BEIRNE SCHOOL OF LAW
FACULTY OF BUSINESS, ECONOMICS AND LAW
2/3 previous year
Interest
Usage of IOLTA in Australia
Two patterns of allocation (26):
1 Legislated proportions to be allocated to various
programs (eg, Qld to 2004)
2 IOLTA Trustee (with government control or input)
has discretion as to how IOLTA is allocated (eg, Qld from 2004)
Common uses – why IOLTA is ‘a Robin Hood taking’ (25-34):
1 Legal aid in State matters (over $30 million per annum) (31-2)
2 Fidelity funds: administration, and maintenance of corpus
3 Community legal centres, PLT, CLE, law reform, etc - Supreme
Court Library (Qld only)
T.C. BEIRNE SCHOOL OF LAW
FACULTY OF BUSINESS, ECONOMICS AND LAW
The public ethics of IOLTA
Two misconceptions –
1
Trust account deposits are sterile; IOLTA creates value (20-1)
T.C. BEIRNE SCHOOL OF LAW
FACULTY OF BUSINESS, ECONOMICS AND LAW
The public ethics of IOLTA
Two misconceptions –
1
2
Trust account deposits are sterile; IOLTA creates value (20-1)
Claims to interest are uncoupled from claims to capital (36-7); eg –
‘I, for one, wholeheartedly support that application of interest …
which at present is not of any benefit to anyone – client, solicitor, or
the owner of the money’
Percy Smith MLA, Queensland Legislative Assembly, 2 December
1964
T.C. BEIRNE SCHOOL OF LAW
FACULTY OF BUSINESS, ECONOMICS AND LAW
The public ethics of IOLTA
Two misconceptions –
1
2
Trust account deposits are sterile; IOLTA creates value (20-1)
Claims to interest are uncoupled from claims to capital (36-9); cf –
Phillips v Washington Legal Foundation, 524 US 156 (1998)
Brown v Legal Foundation of Washington, 123 S Ct 1406 (2003)
Brown v Inland Revenue Commissioners [1965] AC 244
T.C. BEIRNE SCHOOL OF LAW
FACULTY OF BUSINESS, ECONOMICS AND LAW
The public ethics of IOLTA (39-41)
‘Lord Justice [sic] Upjohn said …
”A practice whereby the solicitor uses his clients’ money, too small
in individual amounts or held for too short a time to make
individual investment worthwhile on behalf of the individual client
but which, in the aggregate, amounts to a large floating sum, to
earn interest for him is an entirely innocent and commonsense
practice which harms no one and probably indirectly benefits the
general body of clients.”
The only organization or individual to lose anything by reason of
this legislation will be the bankers.’
McCaw AG, NSW Legislative Assembly, 15 March 1967
T.C. BEIRNE SCHOOL OF LAW
FACULTY OF BUSINESS, ECONOMICS AND LAW
The public ethics of IOLTA (39-41)
Lord Upjohn said …
”A practice whereby the solicitor uses his clients’ money, too small
in individual amounts or held for too short a time to make
individual investment worthwhile on behalf of the individual client
but which, in the aggregate, amounts to a large floating sum, to
earn interest for him is an entirely innocent and commonsense
practice which harms no one and probably indirectly benefits the
general body of clients. But 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 to such strict rules of conduct that its retention by the
solicitor cannot be justified in law without the client’s consent. So
the solicitor must explain the matter to his client and obtain his
consent thereto.”
T.C. BEIRNE SCHOOL OF LAW
FACULTY OF BUSINESS, ECONOMICS AND LAW
The public ethics of IOLTA
Three further issues:
1
The assumption that the trust account does not hold ‘investable
amounts’ (41-4)
•
No duty in Australia to advise a client to have investable amounts
placed in controlled money (ie, savings) accounts
cf Brown v Legal Foundation of Washington, 123 S Ct 1406 (2003)
•
Ample evidence that investable amounts are routinely held in trust
accounts
T.C. BEIRNE SCHOOL OF LAW
FACULTY OF BUSINESS, ECONOMICS AND LAW
The public ethics of IOLTA
Three further issues:
1
The assumption that the trust account does not hold ‘investable
amounts’ (41-4)
2
The absence of a duty to disclose that the trust account does not
earn the client any interest, and that interest is used to fund public
programs - the client’s consequential ‘spite right’ (44-6)
T.C. BEIRNE SCHOOL OF LAW
FACULTY OF BUSINESS, ECONOMICS AND LAW
The public ethics of IOLTA
Three further issues:
1
The assumption that the trust account does not hold ‘investable
amounts’ (41-4)
2
The absence of a duty to disclose that the trust account does not
earn the client any interest, and that interest is used to fund public
programs - the client’s consequential ‘spite right’ (44-6)
3
Interested, private associations as agents of distributive justice
(47-8)
T.C. BEIRNE SCHOOL OF LAW
FACULTY OF BUSINESS, ECONOMICS AND LAW
The possibilities for moral salvage
Three reforms (50):
1
An expressed solicitor's duty to advise clients that amounts capable
of earning net interest be placed in controlled money accounts
2
An expressed solicitor’s duty to disclose that money in the trust
account does not earn the client any interest, and that interest is
used to fund public programs
3
The transfer of IOLTA trusteeship to the Government
T.C. BEIRNE SCHOOL OF LAW
FACULTY OF BUSINESS, ECONOMICS AND LAW
T.C. BEIRNE SCHOOL OF LAW
FACULTY OF BUSINESS, ECONOMICS AND LAW
Robin Hood and Spite Rights –
Interest on Lawyers’ Trust
Accounts (IOLTA)
Reid Mortensen