Other client money withheld from a client account

Version 19 of the Handbook was published on 1 October 2017. For more information, please click "History" above.

Rule 16: Other client money withheld from a client account

16.1

The following categories of client money may be withheld from a client account:

(a)

cash received and without delay paid in cash in the ordinary course of business to the client or, on the client's behalf, to a third party, or paid in cash in the execution of a trust to a beneficiary or third party;

(b)

a cheque or draft received and endorsed over in the ordinary course of business to the client or, on the client's behalf, to a third party, or without delay endorsed over in the execution of a trust to a beneficiary or third party;

(c)

money withheld from a client account on instructions under rule 15;

(d)

money which, in accordance with a trustee's powers, is paid into or retained in an account of the trustee which is not a client account (for example, an account outside England and Wales), or properly retained in cash in the performance of the trustee's duties;

(e)

unpaid professional disbursements included in a payment of costs dealt with under rule 17.1(b);

(f)

in respect of payments from the Legal Aid Agency:

(i)

advance payments from the Legal Aid Agency withheld from client account (see rule 19.1(a)); and

(ii)

unpaid professional disbursements included in a payment of costs from the Legal Aid Agency (see rule 19.1(b)); and

(g)

money withheld from a client account on the written authorisation of the SRA. The SRA may impose a condition that the money is paid to a charity which gives an indemnity against any legitimate claim subsequently made for the sum received.

Guidance notes

(i)

If money is withheld from a client account under rule 16.1(a) or (b), rule 29 requires records to be kept of the receipt of the money and the payment out.

(ii)

If money is withheld from a client account under rule 16.1(d), rule 29 requires a record to be kept of the receipt of the money, and requires the inclusion of the money in the monthly reconciliations. (Money held by a trustee jointly with another party is subject only to the limited requirements of rule 9.)

(iii)

It makes no difference, for the purpose of the rules, whether an endorsement is effected by signature in the normal way or by some other arrangement with the bank.

(iv)

The circumstances in which authorisation would be given under rule 16.1(g) must be extremely rare. Applications for authorisation should be made to the Professional Ethics Guidance Team.