LEGAL
PRACTITIONERS’ ACCOUNTS RULES
Under section 15(1) of the Legal Practitioners Act 1962, the General
Council of the Bar was empowered to make rules with respect to accounts and
records for client’s moneys. This section was re-enacted by section 20, of the Legal Practitioners Act
1975.
Section 20 of the Act
empowers the Bar Council to make rules in respect of the following –
(a)
The
opening and keeping by legal practitioners of accounts at banks for clients’
money;
(b)
The
keeping by legal practitioners of records containing particulars and
information as to money received, held or paid by them for or on account of
their clients;
(c)
The
opening and keeping by a legal practitioner who is sole trustee, or who is
co-trustee only with one or more of his partners, clerks or servants, of an
account at a bank for moneys of any trust of which he is the sole trustee or
such a co-trustee as aforesaid;
(d)
The
keeping by such a practitioner as is mentioned in the last forgoing paragraph
of records containing particulars and information as to moneys received, held
or paid by him for, or on account of, any such trust as is so mentioned; and
(e)
Empowering
the Bar Council to take such action as it thinks necessary to enable it to
ascertain whether the rules are being complied with.
It was due to the above rules,
that the Bar Council made the Legal Practitioners’ Account Rules 1964.
The current rules under the
Legal Practitioners’ Account Rules 1964 were made to safeguard the interests of
clients by preventing a legal practitioner from dealing with clients’ money or
trust money in a way he will intentionally or inadvertently deal with it
improperly. And where there is a breach by a legal practitioner, it will
constitute misconduct which may be used as a basis for disciplinary proceedings
– rule 21(1) of the Legal Practitioners’
Account Rules.
Apart from Rules 21 and 22
which relates to the enforcement of the Rules, the Rules may be sub-divided
into three parts viz:
1. Those which deal with the client account as
regards to (i) payment into client’s account – Rules 3, 4, 5, 6 and 9; and (ii) withdrawals from a client account
– Rules 7 and 8.
2. Those which deal with trust accounts as
regards to (i) payments into a trust account – Rules 13, 14, 15, 16 and 19; and (ii) withdrawals from a trust
account – Rules 21 and 22.
3. Those which deal with the books of account
which are required to be kept by the legal practitioner – Rules 10, 11 and 20.
TYPES OF ACCOUNTS OR OBLIGATORY ACCOUNTS
The types of accounts we have
are two namely:
1. Client Account; and
2. Trust Account.
CLIENT ACCOUNT
This is sub-divided into –
1. Payment into the client account;
2. Withdrawals from the client account; and
3. Special provisions as to client accounts with
the bank.
It should be noted that two
things are required to be kept by Legal Practitioners according to the Rules
which are – Books of Accounts; and Separate Bank Accounts.
PAYMENT INTO THE CLIENT ACCOUNT
The general rule is that all
clients’ money must, without delay, be paid into a clients’ account and must
not be mixed with that of the legal practitioner’s nor should the client’s
money be paid into the legal practitioner’s account – Rule 3 of Legal Practitioners’ Account Rules.
This means that a legal
practitioner is expected to keep two separate accounts namely –
1. His personal account; and
2. His clients’ account which must be separate
from his.
It should be noted that the
above does not mean that every client should have a separate account rather
there should be a general account strictly for all clients.
CLIENT’S MONEY
The definition of this can be
seen in rule 2(1) of the Rules. It
provides thus –
Rule 2(1) – In
these Rules, unless the context otherwise requires:
Clients
shall include any person on whose account a legal practitioner holds or
receives client’s money.
Client’s
money shall mean money held or received by a legal practitioner on account of a
person for whom he is acting in relation to the holding or receipt of such
money either as a legal practitioner or, in connection with his practice as a
legal practitioner, as agent, bailee, stakeholder or in any other capacity;
provided that the expression client’s money shall not include:
(a)
Money held or received on account of
the trustees of a trust of which the legal practitioner is a solicitor-trustee,
or
(b)
Money to which the only person entitled
is the legal practitioner himself, or, in the case of a firm of legal
practitioners, one or more of the partners in the firm.
EXCEPTION TO THE RULE OF CLIENT’S PRIVATE ACCOUNT
The exception to the general
rule of a legal practitioner paying money into the client’s account is provided
for under Rule 9 of the Rules. The
rule provides thus –
Rule 9(1) –
Notwithstanding the provisions of these Rules, a legal practitioner shall not
be under obligation to pay into a client account, client’s money held or
received by him:
(a)
which is received by him in the from of
cash and is without delay paid in cash in the ordinary course of business to
the client or a third party; or
(b)
which is received by him in the form of
a cheque or draft which is endorsed over in the ordinary course of business to
the client or a third party and is not passed by the legal practitioner through
a bank account; or
(c)
which he pays into a separate banking
account opened or to be opened in the name of the client or of some person
named by the client.
However,
such transactions must be recorded in proper books of accounts kept by the
practitioner even though they do not pass through the client’s bank account.
(2) – Notwithstanding the
provisions of these Rules, a legal practitioner shall not pay into a client
account client's money held or received by him:
(a)
which the client for his own
convenience by notification in writing requests the legal practitioner to
withhold from such account; or
(b)
which is received by him for or towards
payment of a debt due to the legal practitioner from the client which debt the
client has acknowledged in writing or in reimbursement of money expended by the
legal practitioner on behalf of the client particulars of which have been
notified in writing to the client; or
(c)
which is paid to him expressly on
account of costs incurred, in respect of which a bill of costs or other written
intimation of the amount of the costs has been delivered, or as an agreed fee,
or an account of an agreed fee, for business undertaken or to be undertaken.
It is obvious from the above
provisions that in any of such cases, a legal practitioner needs not pay money
into the client’s account.
NON-CLIENT MONEY TO BE PAID IN
This has to do with money paid
into a client’s account other than that of the client. Rule 4 makes provision
for this rule.
Rule 4 – There
may be paid into a client account --
(a)
trust money, that is, money which is
held or received by the legal practitioner as a trustee;
(b)
such money belonging to the legal
practitioner as may be necessary for the purpose of opening or maintaining the
account.
(c)
money to replace any sum which may by
mistake or accident have been drawn from the account; and
(d)
a cheque or draft received by the legal
practitioner, which includes client’s money or trust money that the legal
practitioner is entitled to split but which he does not split.
Also, Rule 6 went further to
state that “no money other than money which, a legal practitioner is required
or permitted to pay into a client account shall be paid into a client account.
WITHDRAWALS FROM THE CLIENT ACCOUNT
The rule also provides for withdrawals from client’s
account.
Rule 7 – There
may be drawn from a client account:
(a) in the case of a client’s money:
i.
money properly required for a payment
to or on behalf of the client;
ii.
money properly required for or towards
payment of a debt due to the legal practitioner from the client which the
client has acknowledged in writing or any reimbursement of money expended by
the legal practitioner on behalf of the client of which notification in writing
has been given to the client;
iii.
money withdrawn on the client's
authority; and
iv.
money properly required for or towards
payment of the legal practitioner’s costs where a bill of costs or other
written intimation of the amount of the costs incurred has been delivered to
the client and the client has been notified in writing that money held for him
will be applied towards or in satisfaction of such costs;
(b) in the case of
trust money:
i.
money properly required for a payment
in the execution of the particular trust, and
ii.
money to be transferred to a separate
bank account kept solely for the money of the particular trust;
(c) such money, not being money to which either
(a) or (b) above may have been paid into the account for the purpose of
maintaining the account and also money in respect of a cheque entitled to split
but which did not split rather paid into a client account; and
(d) money which may
by mistake or accident have been paid into the account;
LIMIT OF WITHDRAWAL
The
money so drawn shall not exceed the total of the money held for the time being
in such account on account of such clients’ money or trust money.
METHOD OF WITHDRAWING
Where
a legal practitioner wishes to withdraw money from a client’s account for or
towards –
(i)
payment of sum due to him in respect of
a debt;
(ii)
costs;
(iii)
money paid into the account by mistake
or accident; or
(iv)
a cheque or draft received by the legal
practitioner, which includes client’s money or trust money that the legal
practitioner is entitled to split but which he does not split.
In any
of the above circumstances, he must do so by either drawing a cheque in favour
of himself or by a transfer to a banking account in his own name not being a
client account. Thus, he cannot draw a cheque in favour of a creditor from a
client’s account.
WITHDRAWAL WITH THE APPROVAL OF THE BAR
COUNCIL
Rule 8(2) provides
that no money other than money permitted by Rule 7 to be drawn from a client
account without the authority of the Bar Council upon an application made to
them by the legal practitioner specifically authorise in writing its
withdrawal. That is, where a clients’ money has been in a clients’ account for a
long period, the legal practitioner can obtain the consent of the Bar Council
through writing.
SPECIAL PROVISIONS AS TO CLIENT
ACCOUNTS WITH THE BANK
The Act
makes special provisions in respect of clients account with the bank. This can
be seen under in Section 20 of the Act.
Section 20 (1) – A bank
at which a legal practitioner keeps an account for client’s money shall not, in
respect of any liability of the practitioner to the bank which does not arise
in connection with that account, have or obtain any recourse or right, whether
by way of set-off, counter-claim, charge or otherwise, against moneys standing
to the credit of that account.
(2) A
bank shall not, in connection with any transaction in respect of an account of
a legal practitioner kept for clients’ moneys with that or with any other bank
(other than account kept by him as trustee for a specified beneficiary) incur
any liability, or be under any obligation to make any inquiry or be deemed to
have any knowledge or any right of any person to any money paid or credited to
the account, which it would not incur or be deemed to have in the case of an
account kept by a person entitled absolutely to all the money paid or credited
to the account.
The
reason for this section 20 is to ensure full protection for the client account
and money against any irrelevant or unauthorized depletion.
TRUST ACCOUNT
This
is sub-divided into –
1. payment
into a trust bank account; and
2. withdrawals
from a trust bank account.
PAYMENT INTO A TRUST BANK ACCOUNT
Rule 2(1)(b) defines
“Trust Bank Account” to mean a current or deposit account in the title of which
the word "trustee" or "executor" appears, kept at a bank in
the name of the trustees of the trust.
The
general rule is that all money held by the legal practitioner as a
solicitor-trustee who holds or receives money other than money which is paid
into a client account shall without delay pay such money into the trust bank
account of the particular trust – Rule
13.
MEANING OF TRUST MONEY
Trust money is money held and received by a legal practitioner which is not client’s money but held in trust where the legal practitioner is
a trustee whether or not he is solicitor-trustee of such trust – Rule 2(1)(b).
The
general rule as stated above is that a legal practitioner shall pay all trust
money into a trust bank account. The exception to this rule is that the legal
practitioner is not obliged to pay into the account money held or received by
him which is subject to a trust of which he is solicitor-trustee if it is
received as cash and it is without delay paid in case in the execution of the
trust to a third party, and is not passed by the legal practitioner to a bank
account – Rule 19.
In
addition to the money held by the legal practitioner as solicitor-trustee, Rule 14 makes further provision in
which money may be paid into a trust bank account.
Rule
14 – There may be paid into a trust bank account:
(a)
money subject to the particular trust;
(b)
such money belonging to solicitor
trustee or to a co-trustee of his as may be necessary for the purpose of
opening or maintaining the account; or
(c)
money to replace any sum which may by
mistake or accident have been drawn from the account by mistake or accident.
Where
a legal practitioner holds or receives a cheque or draft which includes money subject
to a trust or trusts of which the solicitor is solicitor-trustee:
(a)
he shall where practicable split such
cheque or draft and, if he does so, shall deal with each part thereof as if he
has received a separate cheque or draft in respect of that part; or
(b)
if he does not split the cheque or
draft, he may pay it into a client account – Rule 15.
No
money, other than money which is required or permitted to pay into a trust bank
account, shall be paid into a trust bank account by a legal practitioner – Rule 16.
WITHDRAWALS FROM A TRUST BANK ACCOUNT
The
following may be withdrawn from a trust bank account –
(a)
money
properly required for a payment in the execution of the particular trust;
(b)
money
to be transferred to a client account;
(c)
such
money, not being money subject to the particular trust, as may have been paid
into the account for the purpose of opening or maintaining the account; or
(d)
money
which may by mistake or accident have been paid into the account – Rule 17.
Apart
from the above cases, no
money to be drawn from a trust bank account shall be so drawn unless the legal
practitioner makes an application to the Bar Council in writing seeking
approval – Rule 18.
BOOKS OF ACCOUNT
The Rules provide for the
keeping and maintaining of proper books of account to show all dealings by the
legal practitioner with client’s money and other moneys which pass through the
client account.
In addition to the above rule,
it is required that a legal practitioner should keep ledger accounts in order
to distinguish the different amounts kept in the client account in respect of
each client. Rule 20 is more
specific as to the reason why there is a need to distinguish books of account.
Rule
20(1) – Every
solicitor-trustee shall at all times keep properly written up such books and accounts
as may be necessary:
(a)
to
show separately all his dealings with money held, received or paid by him on
account of each trust of which he is solicitor-trustee; or
(b)
to
distinguish the same from money held, received or paid by him on any other
account.
OBJECTIVES
FOR BOOKS OF ACCOUNTS
1.
Books for clients’ money – The transactions involving
clients’ money are recorded in –
(a)
A
clients’ cash book, or a clients’ column on the debit an credit sides of the
office cash book; and
(b)
A
clients’ ledger book.
Both account
books, that is, client’s cash book and clients’ ledger book are essential in
order to comply with the rules.
2.
Ledger for practitioner’s own
money – Dealings
with the legal practitioner’s own money should be recorded in the following
books –
(a)
Cash
book which records the receipts and payments of the office;
(b)
Petty
cash book which is really a part of the cash book and is used for petty items
of expenditure;
(c)
General
ledger which records the income, expenses, fixed assets, capital and drawings
of the business;
(d)
Fees
or costs delivered book which must contain a record of all bills of costs and
of all written intimations delivered by the legal practitioner to his client.
Under the rules,
the above is not strictly required but it is sufficient if such bills and intimations
are kept in a file.
3.
Trust money – Rule 20 provides that every
solicitor-trustee shall at all times keep and maintain books and accounts as
may be necessary showing separately all his dealings with money held, received
or paid by him on account of each trust or to distinguish the same from money
held, received or paid by him on any other account. This is also related to Rule 10(3).
4.
Preservation of books and
records of accounts – All
books, accounts and records which are required to be kept by the Legal
Practitioner’s Accounts Rules in respect of client’s money, trust money and his
own (that is, the legal pratitioner’s) money, must be preserved for, at least,
six years from the date of the last entry – Rules 10(5) and 20(2).
ENFORCEMENT
OF THE RULES
Rule 21 has to do with
inspection and enforcement of the rules.
In order to ensure compliance
with the Rules, the Bar Council is empowered to order “an inspection of the accounts” of a legal practitioner. The Bar
Council may do this by either –
1.
On
its own motion, that is, voluntarily; or
2.
On
a written statement or request by any branch of the Nigerian Bar Association;
or
3.
On
a written complaint lodged with the Bar Council by a third party, provided that
there is prima facie ground for
complaint.
The procedure is to order the
legal practitioner involved to produce his books and records of accounts for
inspection and report by an accountant appointed by the Bar Council.
Alternatively, it may require the legal practitioner to deliver a Certificate
of Accountant in the form specified in the schedule to the rules. Despite the
fact that an accountant will be appointed or nominated, it will be the Bar
Council that will carry out the examination of the books.
SOURCES
OF CLIENTS MONEY
The sources of clients’ money are varied but will
include among others:
1. Conveyancing
– This is a
major source of clients’ money for most firms of legal practitioners.
2.
Executorship and Trusts – This is trust money which may be paid into a
client account, but if held in the capacity of Solicitor-trustee it should be paid
into a trust bank account.
3.
Investment Management – This is when
some legal practitioners act as family advisers on investment;
4.
Agency Work – This is a source through which
some legal practitioners acts as agents for property and estate companies and
insurance companies;
5.
Fees on Account – This is a source through receipts
in advance of professional work.
CASH BOOK
This is a
ledger account, being nothing more than the cash and bank accounts taken out of
the Ledger and bound separately for the sake of greater convenience.
When money is
received, receipts are debited in the cash book and outgoings are credited.
Particulars represent what one is spending money for. Any money received should
be taken as capital. After that, one should sum up the total of the credit and
debit and substract the total. Then you are to add the total to the lesser
amount to balance it.
It should be noted that
for ledger, it is the particular’s of the cash book that will be the heading of
the ledger, that is, where there is capital, it will be cash. A ledger is the
opposite of a cash book in that in a ledger, receipts will be put in the credit
box while outgoings will be in the debit box.
The principles
governing the entries into cash book is that receipts are debited while
outgoings are credited while with the ledger, receipts are credited and
outgoings are debited.
SAMPLE OF
CASH BOOK
|
DATE
|
PARTICULARS
|
DR
|
CR
|
|
1-9-84
|
Capital
|
28,000
|
|
|
2-9-84
|
Rent
|
|
2,400
|
|
3-9-84
|
Office Furniture
|
|
1,500
|
|
3-9-84
|
Electric Typewriter
|
|
5,000
|
|
3-9-84
|
Stationeries
|
|
800
|
|
3-9-84
|
Practice Books
|
|
5,000
|
|
4-9-84
|
Current Account
|
|
1,000
|
|
5-9-84
|
Peugeot 505 Car
|
|
12,000
|
|
5-9-84
|
Insurance Premium
|
|
1,500
|
|
5-9-84
|
Imprest Account
|
|
3,000
|
|
30-9-84
|
Balance c/d
|
4,200
|
|
|
|
|
|
.
|
|
30-9-84
|
Balance d/b
|
N32,200
|
N32,200
|
SAMPLE OF
CASH BOOK ENTRIES
|
Cash Receipts
|
||||||
|
Date
|
From
|
Reference
|
Amount
|
Sales
|
Other
|
Comment
|
|
October
|
|
|
£
|
|
|
|
|
1
|
Monday
|
sales 1
|
172.50
|
172.50
|
|
|
|
1
|
D Smith
|
receipt r1
|
|
5,000.00
|
5,000.00
|
Loan
|
|
2
|
Tuesday
|
sales 2
|
319.00
|
319.00
|
|
|
|
3
|
Wednesday
|
sales 3
|
368.75
|
368.75
|
|
|
|
3
|
Insurers plc
|
letter 3/ 10
|
600.00
|
|
600.00
|
refund of
premium
|
|
4
|
Thursday
|
sales 4
|
318.50
|
318.50
|
|
|
|
5
|
Friday
|
sales 5
|
399.00
|
399.00
|
|
|
|
6
|
Saturday
|
sales 6
|
523.60
|
523.60
|
|
|
|
|
Total
|
|
7,701.35
|
2,101.35
|
5,600.00
|
|
|
Cash Payments
|
||||
|
Date
|
Paid to
|
Reference
|
Amount
|
|
|
October
|
|
|
£
|
|
|
1
|
Landlords Ltd
|
1
|
4,000.00
|
3 months rent
|
|
2
|
Supplies & Co
|
2
|
1,750.00
|
goods purchased
|
|
2
|
W H Smith
|
3
|
35.00
|
stationery
|
|
3
|
Supplies & Co
|
4
|
600.00
|
goods purchased
|
|
5
|
PC Products
|
5
|
140.00
|
printer for PC
|
|
6
|
Acme Garage
|
6
|
25.00
|
petrol
|
|
|
Total
|
|
6,550.00
|
|
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