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Ethics and Professional Responsibility Task 3, Activity 1 Email and events INDEX Email from Min Nguyen ...................................................................................................................... 2 Events occurring during Min Nguyen’s absence ................................................................................ 4 Appendix 1 ....................................................................................................................................... 10 Appendix 2 ....................................................................................................................................... 11 Appendix 3 ....................................................................................................................................... 12 Appendix 4 ....................................................................................................................................... 13 fbb77040b7797da6f863a7f06b6f8eedc9e7aaa9.docx Page 1 of 15 © The College of Law Limited

Email from Min Nguyen EMAIL From: Min Nguyen (Principal) To: (Student Lawyer) CC: Alex Green (Law practice bookkeeper) Subject : Arrangements during my week leave Date: Today I’ll be on leave in Indonesia next week. I’ll get a sim card when I arrive at the airport and let you and Alex know what the number is. Telephone and internet access will be problematic for most of the week as I’ll be in some remote parts of Lombok. Do what you can to help Alex and attend to any queries that might arise. Asher Zheng the manager of our local College Bank branch where our trust and office accounts are kept is very helpful if there is any problem. Alex has his phone number. I’ve appointed you signatory on the office and trust accounts. Just in case you are ill or for any other reason can’t operate the accounts I’ve also appointed my brother Lawrence as signatory to operate both accounts. Some of the things that you will need to attend to while I’m away (there may be others) are listed below. Tina Hudson sale to Li This matter is scheduled to settle on Friday of next week. Tina has authorised Nguyen Solicitors to do anything necessary to complete the electronic conveyancing transaction. Tina’s property at Seabreeze is unencumbered so when settlement takes place the whole of the proceeds of sale will be paid into Tina’s personal bank account rather than into our trust account. Our costs agreement with Tina provides that Tina will pay a fixed fee of $1,800 for our costs and disbursements of completing the settlement. I have sent a bill in advance to Tina for $1,800 on account of our costs for this matter but note the matter isn’t concluded until settlement has taken place. Dino Demarco ats Police (ledger/matter ref 13099) Demarco’s sentencing following his guilty plea to the charge for supply of methamphetamine is about two months away. I‘ve given him an indication as to the likely sentence which includes a term of imprisonment and a substantial fine. He might want to discuss his situation with you but all legal work has been completed. He still owes Karen Assi, the barrister who we briefed to appear for him at his trial, $1,200. See if you can extract that from him if he comes in. Sprowle v Davis Peaches Pty Limited This is a claim by our clients Lou and Jill Sprowle for damages for false and misleading conduct under the Australian Consumer Law. We agreed to act and to obtain an advice as to prospects of success. Our clients agreed to pay $2000 for our costs and an estimated $3,500 for a barrister, Mark Richards, to provide his advice. The advice has been received and a copy sent to our clients a few days ago. We also sent our bill of costs as agreed. We have not yet received Mark Richards’ account. Our clients may well want to discuss the advice with you next week. If they do, please check the trust and office ledgers and the file to establish if Mark Richards’ account has been received. Lou and Jill are good clients and usually pay our bills immediately. If any amount is outstanding please ask them to settle the account. If Mark Richards’ account has been received, arrange for that to be paid. fbb77040b7797da6f863a7f06b6f8eedc9e7aaa9.docx Page 2 of 15 © The College of Law Limited

Events occurring during Min Nguyen’s absence Events Monday Tina Hudson attends the office. She advises she has moved out of her house and the keys have been left with the agent on sale. All is ready for Friday’s settlement. She will electronically transfer the amount of $1,800 drawn from her personal account with Westpac in the next day or so, on account of our agreed costs and disbursements to complete the settlement. Q1 (a) Should Tina’s EFT of $1,800 be deposited into the firm’s trust account or office account? (b) In accordance with your answer to question 1(a), identify all the accounting steps to be completed assuming a bookkeeping system is used. (a) Tina’s transaction of $1800 falls under the definition of trust money as defined in Legal Practitioners Act 1981(“ LPA”) Sch 2 cl 1. We have billed Tina in advance for the $1,800 on account of our costs for the settlement matter which has not yet been completed. LPA cl 1(a) outlines that trust money includes “money received by the practice on account of legal costs in advance of providing the services”. Thus, the $1800 transaction shall be deposited into the firm’s trust account. (b) Firstly, ensure that the correct details are sent to Tina to ensure the funds are sent to our trust account. Once the money is received, it must be ensured the trust money is separate from office money. According to Schedule 2 of the LPA, we must maintain permanent records of the trust funds received. We must maintain the records in a manner that both enables the data to be easily accessible and discloses the genuine position of Tina’s $1800 account. Once the settlement has been completed, Tina’s fees can be paid with the $1800 from the trust account into the office account. After the final entry in our records, the law firm is required to keep these records for at least seven years (reg 46 of the Legal Practitioners Regulations 2014 (SA)). fbb77040b7797da6f863a7f06b6f8eedc9e7aaa9.docx Page 4 of 15 © The College of Law Limited

Tuesday Lou Sprowle arranges to meet with you later that day. You recall that Lou was sent a bill for $2,000 two days ago via email. You obtain a printout of the trust and general account ledgers in the matter of Sprowle v Davis Peaches Pty Limited as set out at Appendix 1 . Q2 In relation to the $2,000 bill: (a) What action should you take to pay the bill from trust? (b ) Identify the bookkeeping steps you will take to pay the bill, assuming a manual bookkeeping system is used. (a) Currently, the firm’s trust account hold’s $2500 of funds provided by Sprowle 4 months ago for “initial advice”. In handling the bill of costs, the firm will pay $2000 from the trust account to the office account, leaving $500 remaining in the trust account in the interest of Spowle. In doing this the firm must comply with Legal Practitioners Regulations 2014 (“LPR”) reg 45. (b) Trust account debited $2000 for payment of costs (leaving $500 balance remaining) Office account credited $2000 for payment of costs, balancing the account at 0. You also check the Sprowle v Davis Peaches Pty Limited file and find that the barrister, Mark Richards, has sent his memo of fees in the sum of $3,500. It came in this morning and you recall that Min asked you to arrange for it to be paid. Q3 Assuming that Lou has paid the $2,000 bill of costs from the money held on trust, what will you say to Lou in relation to the $3,500 payment now due for barrister’s fees? Firstly, since Sprowle is a reputable client it is important to approach the meeting first ensuring that their needs have been met. Secondly, confirm with the accounts team that any payments towards the barrister’s fees have been received. If they have not been received, Sprowle can be advised that a remaining balance of $500 exists in the trust account and that this can be used to contribute towards barrister’s fees (in compliance with LPR reg 45). The remaining amount payable for Sprowle will be $3000. This money must be received into the office account and not the trust account. fbb77040b7797da6f863a7f06b6f8eedc9e7aaa9.docx Page 5 of 15 © The College of Law Limited

(d) See Appendix 2 and Appendix 3. Thursday Sonal Singh attends her appointment. Ivana Measure’s survey report has been received with her invoice for $800. After discussion, Sonal instructs us to send a letter of demand to Taylor Merdec requiring part of a fence between the two properties to be removed. Sonal hands you a cheque drawn on her personal bank account in favour of Ivana Measure for the $800 due. Q5 (a) What should you do with the cheque received from Sonal? (b) What accounting steps, if any, are required to be completed? (a) The money is controlled money under LPA Sch 2 cl 1 (a). Sonal’s cheque is to be considered trust money but will not be deposited into to firm’s trust account as there is instruction from Sonal to use this to pay off the invoice from Ivana measure as per Sch 2 cl 12 of the LPA. (b) Since the money will not be deposited into the firm’s trust account, there is no need to lodge a deposit record. Alex Green tells you that Arun Patel and Mala Sandhu have called and asked for the balance in their account to be transferred to them this afternoon. There is a nil balance in the office account. A copy of the trust ledger in respect of the matter of their proposed purchase of the Seabreeze newsagency and the electronic funds transfer awaiting your signature is at Appendix 4 . Q6 (a) Assuming you are authorised to approve the payment of trust money, should you sign the electronic funds transfer in its present form? (b) If the electronic funds transfer is signed and the transfer is completed, identify any consequences. (a) We must maintain a record detailing the electronic funds and the transfer of them under LPR reg 25, this includes a transfer request as in Appendix 4. The Transfer Request in Appendix 4 shows an incorrect balance. This must be amended to $2000 instead of $2455. (b) An incorrect balance will be sent electronically to Patel and Sandu’s accounts. It is unprofessional to ask for this money back after the transfer has been completed. Also, the firm will see accounting issues and an imbalance in the trust account (-455). fbb77040b7797da6f863a7f06b6f8eedc9e7aaa9.docx Page 7 of 15 © The College of Law Limited

Assume your first practising certificate was issued to you three months ago. You therefore have a restricted practising certificate as you are required to be supervised. Assume also that Min’s brother, Lawrence, has been admitted but has never engaged in legal practice and Lawrence is not employed in the law practice and has no other connection with it. Min has directed you and Lawrence to sign any trust account cheques in Min’s absence. Q7 (a) Does the legislation entitle Min to direct you or Lawrence to sign any trust account cheques in Min’s absence? (b) Is this appropriate? (a) Since the payment is being made from the firm’s trust account through cheque, the cheque must satisfy the formalities of LPR reg 24. Sub-regulation 3 outlines who the cheque must be signed by. Lawrence or I must “(i) by an authorised legal practitioner associate; or (ii) by an authorised legal practitioner who holds a practising certificate that does not prohibit the receipt of trust money.” Authorised and associate are defined in (12). Lawrence does not fall into this category; thus, he cannot sign the cheques. It is still unclear whether I fall into this category, I will be urgently contacting Law Society SA to ensure my ability to sign these cheques will be restricted by my qualification level. (b) It is questionable whether Min is upholding their duty to act in the best interests of the client by not overseeing the signing of these cheques. Min must ensure their ethical responsibility and accountability is upheld. Additionally, allowing an unauthorized person to sign the cheques on behalf of Min breaches the provisions of the LPR. Friday Tina Hudson’s sale settled this morning. The balance sale proceeds that were paid into the PEXA environment by the purchaser of Tina’s house was disbursed directly into Tina’s personal bank account by PEXA in accordance with our direction. Previously, Tina provided written instructions authorising the payment of our costs and disbursements from the money held in trust on her behalf Q8 Even though Tina has authorised payment and indicated that she has transferred the funds, before Tina’s trust money can be withdrawn from trust and transferred to the office account to pay the bill of costs, what must you check in relation to the funds deposited? fbb77040b7797da6f863a7f06b6f8eedc9e7aaa9.docx Page 8 of 15 © The College of Law Limited

(a) Firstly, there is a strict duty that our trust account is dealt with so that deficiencies are avoided, the penalties for a breach are outlined in LPA Sch 2 cl 23. So, Min being responsible for this deficiency, depending on whether her actions are considered unreasonable, could be liable for this breach. In beginning the process, I will alert the firm and Min immediately and arrange for funds to be deposited to the credit of the trust account from our office account. (b) Heavy emphasis is place on the importance accounting in the LPA. A duty to report irregularities exists in Schedule 2 of the LPA. Under Sch 2 cl 24(1), If we become “aware that there is an irregularity in any of the practice’s trust accounts or trust ledger accounts” we must provide the Law Society SA with written notice of the deficiency. (c) A trust accounting software may have eliminated the human error involved in writing and issuing the cheque. It must be noted that changing the procedures inside the firm is a large process and involve ongoing education of the new software and changes in reporting standards. fbb77040b7797da6f863a7f06b6f8eedc9e7aaa9.docx Page 10 of 15 © The College of Law Limited

Appendix 1 Appendix 1 Trust Account Ledger ACCOUNT NAME: Sprowle, Lou and Jill v Davis Peaches Pty Limited ADDRESS: 6/6 Conclave Avenue, Seaside MATTER: Damages claim in Federal Court DATE 20XX RECEIVED FROM OR PAID TO PURPOSE REC/CH Q/ JNL NO. DR CR DR/C R BAL (Four months ago) Fr L. Sprowle On a/c c/d – initial advice R231 2,500 00 CR 2,500 00 Office Account Ledger ACCOUNT NAME: Sprowle, Lou and Jill v Davis Peaches Pty Limited ADDRESS: 6/6 Conclave Avenue, Seaside MATTER: Damages claim in Federal Court DATE 20XX RECEIVED FROM OR PAID TO PURPOSE REC/CH Q/ JNL NO. DR CR DR/C R BAL (Two days ago) Costs rendered – advice re prospects of success CJ213 2,000 00 DR 2,000 00 fbb77040b7797da6f863a7f06b6f8eedc9e7aaa9.docx Page 11 of 15 © The College of Law Limited

Appendix 3 Appendix 3 Trust Account Deposit Slip COLLEGE BANK 20xx THE SUM OF Fifteen-Thousand and Zero Dollars NOTES 150 $100 COIN TELLER COMM NO. ITEMS PAID IN BY J Lucas CHEQUES as herein 1 1 1 (signature) FOR CREDIT OF Nguyen Solicitors Law Practice TOTAL $ 15,00 0 Account No 123 456 789 TRUST ACCOUNT Proceeds of Cheques etc. will not be available until cleared PARTICULARS OF CHEQUES, ETC. DRAWER BANK PLACE AMOUNT 1. 2. 3. 4. 5. fbb77040b7797da6f863a7f06b6f8eedc9e7aaa9.docx Page 13 of 15 © The College of Law Limited

Appendix 4 Appendix 4 Trust Account Ledger ACCOUNT NAME: A Patel and M Sandhu purchase of Seabreeze newsagency ADDRESS: 10 Amy Street Seabreeze ACCOUNT NUMBER/ MATTER REFERENCE: 2022/XX DATE 20XX RECEIVED FROM OR PAID TO PURPOSE REC/CHQ / JNL NO. DR CR DR/CR BAL (Three months ago) Fr Patel & Sandhu On a/c c/d R231 5,000 00 CR 5,000 00 (Two months ago) To ASIC Incorporation fees C231 545 00 CR 4,455 00 Two months ago) to Nguyen Office account For costs C233 2,455 00 CR 2,000 00 NGUYEN SOLICITORS Law Practice Electronic Funds Transfer Request Date: (today) Client Name: A Patel and M Sandhu Matter Number: 2022/XX Matter Name: A Patel and M Sandhu purchase of Seabreeze newsagency Bank details of the payee have been verbally validated and confirmed: Confirmed Amount to be transferred: $2,455.00 Payee/Account Name: A Patel and M Sandhu BSB: 312 -876 Account Number: 3456787 Reason for Transfer refund of balance of moneys held in trust on completion of matter TRANSFER AUTHORISED BY: ……………………………… PRINT NAME: ………………………………………………… fbb77040b7797da6f863a7f06b6f8eedc9e7aaa9.docx Page 14 of 15 © The College of Law Limited