It’s important for us to get full instructions from you when paying funds out of our trust account.

All lawyers must ensure that when paying money out of a client’s trust account, they have authority from the client to do so. This is particularly relevant for family trusts.

This year a complaint to the Law Society highlighted the risks associated with a family trust. In that complaint, there were three trustees; a husband, a wife, and an independent trustee. The wife, as one of the trustee’s, directed the law firm to pay funds to the trust’s bank account of which she was a signatory. She subsequently transferred the money from the trust’s bank account to her own private account and at that point the money was lost from the trust. The husband and wife were in the midst of an unhappy separation.

The complaint against the lawyer by the husband and independent trustee was upheld. It was ruled that the lawyer breached the duty owed to his client, being the trust. All trustees of the trust should have consented to the transfer of funds from the trust account to the trust’s own bank account.

The case is a timely reminder and also an explanation to you, our clients, as to why we ask for all trustees to consent or agree to do something, particularly the payment of money out of the trust account. We do this for good reason, to protect our obligations to you and to protect you, the client.

If you have questions regarding a trust, or our trust account, please contact Andrew Logan, Principal and our Trust Account Supervisor (03 377 2900 / andrew@mmlaw.co.nz).