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Law Society of Alberta News Law Society of Alberta

Monday, April 16, 2012

Printable Version

In this issue:
Commentary on Rule 119.17.1 of the Rules of the Law Society of Alberta
New Rule 119.17.1

Commentary on Rule 119.17.1 of the Rules of the Law Society of Alberta

Effective April 12, 2012, the Benchers of the Law Society passed a rule to prohibit a lawyer from receiving a benefit or permitting another person, other than the client for whose benefit the funds are held or the Alberta Law Foundation, to receive a benefit in any way calculated or determined as a consequence of depositing or maintain funds in a trust account.

The rule does not apply to an adjustment of trust account fees by the financial institution.

The rule applies to benefits related to trust money in a trust account

The basis for the rule originates in trust law, in particular, a lawyer must not benefit from a client's trust property.  If the lawyer obtains the informed consent of the client, the benefit is condoned by the law of fiduciary, but not by the Law Society, for lawyers making money from client trust money would tend to harm the standing and reputation of the legal profession and erode public confidence of the profession.  Moreover, receipt of money by the lawyer would be contrary to the public interest where the result is a reduction in the amount of funds available to the Alberta Law Foundation for funding programs which enhance the administration of justice in Alberta.

The rule does not apply to benefits received within acceptable business practices between lawyers/law firms and financial institutions, such as those enjoyed by other professions 

Like other businesses and professions, law firms and lawyers conduct business with financial institutions.  This business is conducted alongside their solicitor-client relationships within acceptable business practices and parameters which are not considered contrary to the public interest or in breach of fiduciary obligations owed by lawyers to clients. Thus, the profession has long accepted the reasonableness of such things as preferred rates on loans, mortgages and lines of credit and other banking services, invitations to marketing and promotional events, reasonable non-monetary gifts or expressions of appreciation which are not substantially a consequence of using a trust account or are merely in recognition of a business and/or solicitor/client relationship between the financial institution and a law firm or lawyer.

These other benefits are not related to the trust money in a trust account and are therefore not prohibited.

 

New Rule 119.17.1

A lawyer or law firm must not benefit from trust money in a trust account

119.17.1 (1)  A lawyer or law firm must not

(a)           receive, or

(b)           permit that any other person, other than the client for whose benefit the funds are held or the Alberta Law Foundation, receive,

a benefit in any way calculated or determined as a consequence of depositing or maintaining funds in a trust account.

           (2)        Subrule (1) does not apply to an adjustment of trust account fees charged by the deposit taking institution.

All lawyers and law firms in Alberta will be required to comply with the new rule.

 

Printable Version

www.lawsociety.ab.ca
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Calgary, Alberta T2R 1P3
Phone: 403-229-4700

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