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Ethics and Professional Responsibility Task 3, Activity 1 Email and events INDEX Email from Min Nguyen ...................................................................................................................... 2 Events occurring during Min Nguyen’s absence ................................................................................ 4 Appendix 1 ....................................................................................................................................... 10 Appendix 2 ....................................................................................................................................... 11 Appendix 3 ....................................................................................................................................... 12 Appendix 4 ....................................................................................................................................... 13 fbb77040b7797da6f863a7f06b6f8eedc9e7aaa9.docx Page 1 of 15 © The College of Law Limited
Email from Min Nguyen EMAIL From: Min Nguyen (Principal) To: (Student Lawyer) CC: Alex Green (Law practice bookkeeper) Subject : Arrangements during my week leave Date: Today I’ll be on leave in Indonesia next week. I’ll get a sim card when I arrive at the airport and let you and Alex know what the number is. Telephone and internet access will be problematic for most of the week as I’ll be in some remote parts of Lombok. Do what you can to help Alex and attend to any queries that might arise. Asher Zheng the manager of our local College Bank branch where our trust and office accounts are kept is very helpful if there is any problem. Alex has his phone number. I’ve appointed you signatory on the office and trust accounts. Just in case you are ill or for any other reason can’t operate the accounts I’ve also appointed my brother Lawrence as signatory to operate both accounts. Some of the things that you will need to attend to while I’m away (there may be others) are listed below. Tina Hudson sale to Li This matter is scheduled to settle on Friday of next week. Tina has authorised Nguyen Solicitors to do anything necessary to complete the electronic conveyancing transaction. Tina’s property at Seabreeze is unencumbered so when settlement takes place the whole of the proceeds of sale will be paid into Tina’s personal bank account rather than into our trust account. Our costs agreement with Tina provides that Tina will pay a fixed fee of $1,800 for our costs and disbursements of completing the settlement. I have sent a bill in advance to Tina for $1,800 on account of our costs for this matter but note the matter isn’t concluded until settlement has taken place. Dino Demarco ats Police (ledger/matter ref 13099) Demarco’s sentencing following his guilty plea to the charge for supply of methamphetamine is about two months away. I‘ve given him an indication as to the likely sentence which includes a term of imprisonment and a substantial fine. He might want to discuss his situation with you but all legal work has been completed. He still owes Karen Assi, the barrister who we briefed to appear for him at his trial, $1,200. See if you can extract that from him if he comes in. Sprowle v Davis Peaches Pty Limited This is a claim by our clients Lou and Jill Sprowle for damages for false and misleading conduct under the Australian Consumer Law. We agreed to act and to obtain an advice as to prospects of success. Our clients agreed to pay $2000 for our costs and an estimated $3,500 for a barrister, Mark Richards, to provide his advice. The advice has been received and a copy sent to our clients a few days ago. We also sent our bill of costs as agreed. We have not yet received Mark Richards’ account. Our clients may well want to discuss the advice with you next week. If they do, please check the trust and office ledgers and the file to establish if Mark Richards’ account has been received. Lou and Jill are good clients and usually pay our bills immediately. If any amount is outstanding please ask them to settle the account. If Mark Richards’ account has been received, arrange for that to be paid. fbb77040b7797da6f863a7f06b6f8eedc9e7aaa9.docx Page 2 of 15 © The College of Law Limited
Sonal Singh v Taylor Merdec This is a new matter involving a dispute between our client and her neighbour Taylor Merdec. One of the issues in dispute is the location of the boundary between our client’s property and her neighbour. We are awaiting receipt of a survey report from Ivana Measure. The report is due to be received on Wednesday. In anticipation of its receipt I’ve made an appointment for Sonal to come in to discuss the report with you on Wednesday afternoon. Ivana’s fees were agreed at $800. Patel and Sandhu – proposed purchase of newsagency As you know, Arun and Mala made offers to purchase the Seabreeze newsagency but were outbid by someone else. We advised them on the contract and incorporated a company to be the purchaser. We had money in trust and billed them and were fully paid. There remains a balance in trust which they said we should retain as they were still looking for a small business to buy. Arun has just let me know they’ve given up on the idea of buying a business. He will drop in sometime next week to pick up what’s left in trust. Say hello for me. Action required Consider the events on the following pages that occur during Min Nguyen’s absence. Answer the questions (referring to the relevant legislation) that arise from each of the events in the space provided. fbb77040b7797da6f863a7f06b6f8eedc9e7aaa9.docx Page 3 of 15 © The College of Law Limited
Events occurring during Min Nguyen’s absence Events Monday Tina Hudson attends the office. She advises she has moved out of her house and the keys have been left with the agent on sale. All is ready for Friday’s settlement. She will electronically transfer the amount of $1,800 drawn from her personal account with Westpac in the next day or so, on account of our agreed costs and disbursements to complete the settlement. Q1 (a) Should Tina’s EFT of $1,800 be deposited into the firm’s trust account or office account? (b) In accordance with your answer to question 1(a), identify all the accounting steps to be completed assuming a bookkeeping system is used. (a) Tina’s transaction of $1800 falls under the definition of trust money as defined in Legal Practitioners Act 1981(“ LPA”) Sch 2 cl 1. We have billed Tina in advance for the $1,800 on account of our costs for the settlement matter which has not yet been completed. LPA cl 1(a) outlines that trust money includes “money received by the practice on account of legal costs in advance of providing the services”. Thus, the $1800 transaction shall be deposited into the firm’s trust account. (b) Firstly, ensure that the correct details are sent to Tina to ensure the funds are sent to our trust account. Once the money is received, it must be ensured the trust money is separate from office money. According to Schedule 2 of the LPA, we must maintain permanent records of the trust funds received. We must maintain the records in a manner that both enables the data to be easily accessible and discloses the genuine position of Tina’s $1800 account. Once the settlement has been completed, Tina’s fees can be paid with the $1800 from the trust account into the office account. After the final entry in our records, the law firm is required to keep these records for at least seven years (reg 46 of the Legal Practitioners Regulations 2014 (SA)). fbb77040b7797da6f863a7f06b6f8eedc9e7aaa9.docx Page 4 of 15 © The College of Law Limited
Tuesday Lou Sprowle arranges to meet with you later that day. You recall that Lou was sent a bill for $2,000 two days ago via email. You obtain a printout of the trust and general account ledgers in the matter of Sprowle v Davis Peaches Pty Limited as set out at Appendix 1 . Q2 In relation to the $2,000 bill: (a) What action should you take to pay the bill from trust? (b ) Identify the bookkeeping steps you will take to pay the bill, assuming a manual bookkeeping system is used. (a) Currently, the firm’s trust account hold’s $2500 of funds provided by Sprowle 4 months ago for “initial advice”. In handling the bill of costs, the firm will pay $2000 from the trust account to the office account, leaving $500 remaining in the trust account in the interest of Spowle. In doing this the firm must comply with Legal Practitioners Regulations 2014 (“LPR”) reg 45. (b) Trust account debited $2000 for payment of costs (leaving $500 balance remaining) Office account credited $2000 for payment of costs, balancing the account at 0. You also check the Sprowle v Davis Peaches Pty Limited file and find that the barrister, Mark Richards, has sent his memo of fees in the sum of $3,500. It came in this morning and you recall that Min asked you to arrange for it to be paid. Q3 Assuming that Lou has paid the $2,000 bill of costs from the money held on trust, what will you say to Lou in relation to the $3,500 payment now due for barrister’s fees? Firstly, since Sprowle is a reputable client it is important to approach the meeting first ensuring that their needs have been met. Secondly, confirm with the accounts team that any payments towards the barrister’s fees have been received. If they have not been received, Sprowle can be advised that a remaining balance of $500 exists in the trust account and that this can be used to contribute towards barrister’s fees (in compliance with LPR reg 45). The remaining amount payable for Sprowle will be $3000. This money must be received into the office account and not the trust account. fbb77040b7797da6f863a7f06b6f8eedc9e7aaa9.docx Page 5 of 15 © The College of Law Limited
Wednesday Dino Demarco attends on you unannounced. He says that he has sold his car as he will have no use for it if he is sentenced to imprisonment. He received $15,000 in cash for the car. He wants the money to be banked as soon as possible but he doesn’t want to be able to access or operate on the account, as he knows he’ll only spend it. Dino wants only you, Min or someone else from the law practice to be able to access the money. Dino doesn’t want you to bank the money into the firm’s general trust account; rather, he wants you to invest it for him in an interest-bearing account, pending his sentencing. After discussion, he gives you the cash together with a written direction to deposit the money in an interest-bearing account with Westpac for a 6-month term in the name of Nguyen Solicitors. Dino also hands you $1,200 in cash and asks you to give the cash to Karen Assi with his compliments and apologies for the delay in payment of her fees for appearing on his behalf at the trial. At Appendix 2 are forms for an Nguyen Solicitors Law Practice Trust Account receipt (X2) and at Appendix 3 is the form of a deposit slip of Nguyen Solicitors Law Practice Trust Account. Q4 (a) Identify the two types of money you received from Dino today and what you should do with both types of money. (b) Identify the accounting steps and bookkeeping steps that are required to be made and maintained regarding both types of money. (c) Are there any additional reporting obligations regarding the cash received from Dino? (d) If any money is required to be deposited to ‘Nguyen Solicitors trust account’, complete the trust account receipt in Appendix 2 and, in anticipation of banking that money into the trust account, complete the deposit slip in Appendix 3. [You are not required to complete receipts in duplicate.] (a) Today Dino has given us an amount of $15,000 in cash and a separate amount of $1200 in cash. The $15,000 shall be received in the trust money account of the firm. Since there is a written direction for us to deposit the funds into an interest-bearing account on behalf of Dino, it is considered controlled money. Controlled money is identified as trust money in LPA Sch 2 cl 1 (a). The $1,200 shall be received into the office money account as this money is paying for legal services already provided to Dino. (b) The $15,000 shall be handled by the firm as trust money and be kept separate from the office money. It also must be noted that Dino hands these funds in cash and wants it deposited in a bank account, this must also be handled by the firm. As this money is being paid into the trust account, it is required that we make out a trust account receipt. The receipt of trust money must follow the formalities set out in reg 20 (5) of the LPR. The $1,200 must be kept separate, it is crucial here that the sum of cash received by Dino today is not intermingled. (c) Dino’s payment is by cash, therefore it is to be deposited in the firm’s bank into the trust account as per LPA Sch 2 cl 19. fbb77040b7797da6f863a7f06b6f8eedc9e7aaa9.docx Page 6 of 15 © The College of Law Limited
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