Fund proposed for legal clients' unclaimed money

Law Society to handle funds, which will be invested or used for pro bono legal services

A new fund for legal services may be set up to handle client money that is left unclaimed - for instance, if the sole proprietor of a law firm dies and his clients do not come forward to claim their money.

If the proposal is passed in Parliament, the money in this fund will be invested or used to fund pro bono legal services.

The fund will be managed by the Law Society.

Should the clients later surface, they can make a claim within six years for their money, although the society also has the discretion to make ex-gratia payments after the limitation period.

The Legal Profession (Amendment) Bill, to introduce the framework for the Unclaimed Money Fund, was tabled in Parliament yesterday.

Under the existing Legal Profession Act, lawyers are required to hold clients' money in a separate account until the money is returned or paid out according to the clients' instructions.

Also, in specified circumstances - such as when a sole proprietor dies, is made bankrupt or becomes incapacitated - the Law Society has powers to intervene in client accounts.

The money in such a situation - known as "intervention money" - is paid into a special account for the society to administer and, where possible, return to the lawful owners.

As of March 31 last year, the society held in trust $379,131 in intervention money.

Currently, intervention money unclaimed after six years will be transferred to the Compensation Fund, which was set up to compensate those who suffer financial losses because of dishonest lawyers.

With the proposed changes, intervention money will be channelled to the Unclaimed Money Fund instead.

The proposed framework also provides a fix for another set of circumstances, currently not provided for in the Act.

There have been cases where lawyers are unable to retire or close their firms because they are holding money from a client who has gone incommunicado.

With the proposed changes, lawyers will have the option of transferring unclaimed client money to the new fund. This will relieve them of the burden and expense of maintaining the client account, allow lawyers who wish to retire to do so, and allow the unclaimed money to be used for a public good, said the Law Ministry.

Law Society president Gregory Vijayendran said: "Increasingly, with cross-border work and foreign clients, we're talking about a few situations - for example, refunding balances in the client account - in which you may not be able to trace the individual concerned, even with the best efforts."

The society said sums tend to be small, residual amounts, with a five-figure sum in one case.

Also in the Bill are new measures in the disciplinary process for lawyers.

Those who commit relatively minor breaches of professional conduct may now be sent for specified training or counselling, adding to the available measures that can be used to discipline errant members of the profession.

Currently, the Law Society council can sanction errant lawyers by imposing a financial penalty or issuing a warning or a reprimand.

The new remedial measures, which focus on rehabilitation, can be imposed in lieu of, or in addition to, existing sanctions, allowing a more nuanced approach.

A version of this article appeared in the print edition of The Straits Times on March 03, 2018, with the headline 'Fund proposed for legal clients' unclaimed money'. Print Edition | Subscribe