Solicitors' Accounts Regulations - April 30 1995
Costs Received - Lodgment Procedures
On a number of occasions in the past, the Society's Compensation Fund has been exposed to risk because solicitors' practices have lodged monies received in respect of undischarged outlays to office account, and subsequently have had difficulty because of working capital constraints, effecting payments to the third parties to whom the monies were due.
In order to protect the Compensation Fund and to ensure compliance by practitioners with the Solicitors' Accounts Regulations, the Compensation Fund Committee on behalf of the Council of the Society have issued the following practice note, which emphasises that monies received in respect of undischarged outlay should be lodged to client account.
Practice Note - Costs Received - Undischarged outlay
Where a solicitor receives monies for undischarged outlay due to third parties (e.g. stamp duty, counsel's fees, doctor's fees, engineer's fees etc) such monies - whether solicitor and client costs, or party and party costs - represent "client's money" as defined in Regulation 1 of the Solicitors' Accounts Regulations No 2 of 1984 and should be lodged to client account pursuant to Regulation 3 thereof. The relevant payments to third parties should be effected on an expeditious basis from the client account.
Where items of outlay are paid for by a solicitor who has not as yet been put in funds by the client in respect thereof, the payments advanced to third parties shall be effected from the office account.
Recommended procedure for lodgments
Where a remittance received by a solicitor includes payment both in respect of (i)
undischarged outlay and (ii) solicitors fees and/or costs already paid out by the solicitor the recommended treatment is to lodge the entirety of the remittance intact to the client account. Then, (where a bill of costs or other written intimation of the amount of costs has been delivered to the client) a transfer may be effected from the client account to the office account to cover the amount of the solicitor's fee received, and any outlay which was discharged on behalf of the client from the office account and which has been recovered from the other side, or from the client. Payment to third parties for items of outlay which then remain due may be effected from the balance of monies held in the client account in respect thereof.