Interest on lawyers' trust accounts

Mortensen, Reid (2005) Interest on lawyers' trust accounts. Sydney Law Review, 27 (2). pp. 289-322. ISSN 0082-0512

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Abstract

[Introduction]: In 1963, around £79 million was held in solicitors' trust accounts in New South Wales, Queensland and Victoria. None of that earned interest. At the time, banking regulations prohibited the crediting of interest to 'current accounts' - bank accounts characterised by frequent deposits and withdrawals, the latter usually by cheque. In offering solicitors trust account facilities, the banks therefore got sizable sums by interest free loan: 'all the cream off the cake'. That was to change in the 1960s as the Law Institute of Victoria pioneered a scheme for getting banks indirectly to credit interest to trust account deposits and to direct that money to fidelity funds and, later, to legal aid. Interest on Lawyers' Trust Fund Accounts (IOLTA) schemes then spread to other parts of Australia, and were later exported, to New Zealand (NZ), Zimbabwe, South Africa, Canada and the United States(US). Slowly refilled and expanded, Australian IOLTA schemes are now entrenched in the funding base for legal aid and the legal profession infrastnicture. They now add well over $30 million every year to the budgets of the nation's legal aid commissions. IOLTA schemes evidently help the public good, so far as that is promoted by the work of the legal profession. However, despite the genesis of IOLTA schemes in Australia, they have, apart from Adrian Evans' pioneering work on the Victorian IOLTA arrangements, received no scholarly attention. In this article, I therefore explore and evaluate the structure, role and ethics of the present IOLTA schemes in Australia and, agreeing with Evans, conclude that they are, so far as public standards are concerned, structured unethically. I add, however, that the moral character of IOLTA schemes can be salvaged, if they are reformed. In this article, the means by which IOLTA is acquired by public agencies are therefore outlined (Part 2). Then, the different programs that are funded by IOLTA are discussed, with particular focus on legal aid (Part 3). This enables an analysis of the public ethics of IOLTA schemes, which is helped to a significant extent by the literature and adjudication on IOLTA that has emerged in the US and the Scottish case of Brown v Inland Revenue Commissioners. I nevertheless take the judicial reasoning in these cases as exemplifying and guiding moral reflection on the structure of rOLTA schemes, rather than giving them legal direction (Part 4). The discussion of the public ethics of these schemes then informs conclusions on the best form that restructured IOLTA schemes would take (part 5).


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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: Published Version deposited with permission of publisher.
Depositing User: Mrs Cynthia Douglass
Faculty / Department / School: Historic - Faculty of Business - Department of Law
Date Deposited: 25 May 2009 00:26
Last Modified: 02 Jul 2013 23:15
Uncontrolled Keywords: lawyers; solicitors; trust accounts; interest; IOLTA
Fields of Research (FOR2008): 18 Law and Legal Studies > 1801 Law > 180121 Legal Practice, Lawyering and the Legal Profession
URI: http://eprints.usq.edu.au/id/eprint/5020

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