Practice Watch

Unclaimed trust money

by Barbara Buchanan, Practice Advisor

Unclaimed trust money
Mortgage discharge payout statements
Matrimonial debt collection scam ubiquitous
Retainer overpayment and refund scam
Elder law clinic – services for abused adults ages 55 years and older


Do you have trust money in your account that has been unclaimed for more than two years? If you have made reasonable and adequate efforts to locate the owner of the funds without success, you may consider applying to pay the funds to the Law Society. A lawyer must make the application to the Executive Director in writing containing the following information:

  • the full name and last known mailing address of each person on whose behalf the funds were held;
  • the exact amount to be paid to the Society in respect of each such person;
  • the efforts made by the lawyer to locate each such person;
  • any unfulfilled undertakings given by the lawyer in relation to the funds;
  • the details of the transaction in respect of which the funds were deposited with the lawyer.

If the Executive Director is satisfied that the lawyer has made appropriate efforts to locate the owner, the Executive Director may accept the funds under section 34 of the Legal Profession Act.

It has come to the Law Society’s attention that some lawyers may be inappropriately billing legal fees to client files in respect of efforts to locate clients. Consider whether your retainer allows you to bill for such efforts; likely it will not. It may be appropriate to bill for small disbursements, such as a registered letter or courier, but it may be inappropriate to bill for your assistant to perform Internet searches to attempt to locate a client.

If you are unable to locate your client, you are nevertheless permitted to bill for unbilled fees for services previously performed by you on the client’s instruction. Assuming the client does not dispute your right to receive payment from trust, you may take funds from trust to satisfy your account (Rule 3-57). A bill or letter is considered delivered to the client if it is:

  • mailed by regular or registered mail to the client at the client’s last known address;
  • delivered personally to the client;
  • transmitted by electronic facsimile to the client at the client’s last known facsimile number; or
  • transmitted by electronic mail to the client at the client’s last known electronic mail address.

Regular communication with your client as well as regular review of your trust account balances and monthly trust reconciliations can help reduce the likelihood of carrying unclaimed trust funds.

See section 34 of the Legal Profession Act and Law Society Rules 3-81 to 3-84 for more details about paying unclaimed trust money to the Law Society. See Rule 3-57 for the circumstances in which lawyers are permitted to take fees from trust.

Mortgage discharge payout statements

I have received calls from vendors’ lawyers who say that institutional lenders have refused to provide mortgage discharges, even though they have received payment of the amount owing according to the lenders’ payout statements. It can happen that, unbeknownst to the lawyer, the vendor has drawn on a line of credit or other instrument that is secured by the mortgage for which the lender has provided the statement. In some cases, it is simply the lender that has missed or failed to include an additional credit facility that is secured by the mortgage.

If you are relying on the payout statement to obtain a discharge, consider the following suggestions:

  • Check that the mortgage registration number on the payout statement matches the mortgage registration number in your request to the lender for the payout statement.
  • Check whether the wording of the payout statement puts conditions on the payout.
  • Check whether the payout statement has an expiry date.
  • If the statement refers to an amount that must be re-confirmed on the date of payout, follow up with the lender to obtain an updated payout figure.
  • If the statement assumes that certain payments are made by the borrower, follow up to see if the payments were made.
  • Require the lender to provide you with a registrable discharge of mortgage as a condition of accepting or negotiating the payout funds.

And of course, only give undertakings that are within your control.

Matrimonial debt collection scam ubiquitous

If you haven’t already received a phony debt collection email, you likely will in the near future. In the last Practice Watch, I wrote about the matrimonial debt collection scam, really just the same as the phony debt collection scam that we have seen for the past couple of years, but this time in a matrimonial context rather than a business context. Since December, this scam is widespread in BC. Because the scamsters are now frequently using collaborative law terminology and sometimes providing documents from collaborative law websites, their requests for help may sometimes have a certain ring of credibility.

Below is the typical scenario:

  • A new client, usually female, contacts you by email, typically using one of the many free web-based email addresses, such as Hotmail, Yahoo or Gmail. The salutation is often “Dear Counsel,” “Hi Counsel” or “Attn: Counsel,” but occasionally contains your actual name.
  • The new client asks you to collect money owed to her by her former spouse from an out-of-court settlement following a collaborative law process.
  • She says that she is currently residing in a foreign jurisdiction (often China, Japan, Malaysia or England), but that her husband resides “in your jurisdiction.” Often she says that she is away on a teaching contract.
  • She may email her cellphone number, an address and sometimes a scan of her driver’s licence.
  • She may attach a Collaborative Law Participation Agreement purportedly signed by the spouses and their lawyers. The named lawyers may actually be lawyers.
  • The dollar amount of the settlement is high, ranging from about $350,000 to $2.6 million. She says that her husband has only made one payment (usually $44,000 but sometimes as much as $400,000).
  • Usually the scamster disappears when you ask for a retainer and attempt to arrange for your agent to verify the client’s identity in the foreign jurisdiction, pursuant to the client identification and verification rules. She may urge you to take your fees out of the money she will receive from her husband rather than providing a retainer.
  • Sometimes a certified cheque or bank draft from the husband made out to your firm in trust for the new client arrives in the mail quickly, even before sending a demand letter or completing due diligence. The client calls and says she understands that you received the money and wants you to pay her right away.
  • The bank draft is a well-made fake or, if it’s a cheque, it is either fake or stolen and has a forged signature.

Retainer overpayment and refund scam

We have seen the overpayment and electronic transfer refund scam before (see Fall 2009 Practice Watch); however, recently this has resurfaced in the retainer context. A new client contacts you by email and provides you with a retainer in excess of the amount required. You deposit her phony cheque or bank draft. She presses you to issue her a refund of the excess amount by wire transfer before you learn that the cheque or bank draft is no good. You may see this in conjunction with the phony matrimonial debt collection scam if you press for a retainer from the new client.

Take precautions so that you do not pay out on the basis of depositing a phony instrument in your trust account.

What can you do to protect yourself from the phony debt collection scam and the phony retainer scam? Some steps that you can take include:

1. Abide by the client identification and verification rules (Rules 3-91 to 3-102).

2. Be cautious about clients who contact you via the Internet. Use telephone books, the Internet and other resources to cross-check names, addresses and telephone numbers to see if they correspond to the information the client gave you.

3. Ask yourself why the new client chose you to act. If she says that she was referred to you by someone, ask if you can let that person know in order to thank them for the referral.

4. If you receive a certified cheque or bank draft, ask your financial institution to confirm with the financial institution issuing the instrument that the funds have cleared.

5. Wait for the funds to clear before paying out. This reduces the risk, but may not eliminate it completely.

6. If the new client is a business that provides a link to its website, check that the business name is an exact match with the name used in the website. We’re aware of situations in which a client provided a website address that actually belonged to a business with a similar, but not identical name.

7. For more tips on protecting yourself from fraudsters who seek to use your trust account, see Practice Watch (May, July, October and December 2008, and April, Summer and Winter 2009), as well as Notices to the Profession. A further list of Law Society publications on these and other scams is available in the Insurance / Risk Management section of the website.

8. Two Canadian websites that you might view to inform yourself about scams are fraudcast.ca and phonebusters.com, the Canadian Anti-fraud Call Centre. PhoneBusters (a form of partnership between the Ontario Provincial Police, RCMP and Competition Bureau) identifies new trends in scams, gathers evidence and alerts law enforcement officials both inside and outside of Canada.

9. Contact me if you suspect a new client may be a scamster and you would like to discuss the matter confidentially. If someone has attempted to scam you, report it to the RCMP or your municipal police force. You can ask the police to report the matter to PhoneBusters or you can do it yourself (info@phonebusters.com or 1-888-495-8501).

Elder Law Clinic – Services for abused adults ages 55 years and older

If you are aware of an adult aged 55 or older who is being abused or has been abused and does not have access to legal assistance because of financial or other barriers, consider referring the person to the Elder Law Clinic. The Clinic gives the highest priority to situations of physical, emotional or sexual abuse where legal intervention is needed; however, in some cases help may be available with respect to financial abuse, government benefits and housing. Older adults can access services by phoning the Seniors Help and Information Line at 604-437-1040 or 1-866-437-1940.

Young woman assisting an older womanThe Elder Law Clinic is part of the BC Centre for Elder Advocacy and Support. The BCCEAS provides other services as well, including workshops and print materials about elder abuse. Phone them at 604-688-1927 or visit their website at bcceas.ca.

For more information about the Elder Law Clinic, contact Joan Braun, Executive Director, at jbraun@bcceas.ca or 604-688-1927.

Would you like to volunteer in a community legal clinic or provide workshops on preventing financial abuse? The organization is looking for volunteer lawyers to either conduct workshops or provide summary advice to clients. Elder law experience is welcomed but not required. If you are interested in becoming a volunteer, contact Grace Balbutin at 604-688-1827 or gbalbutin@bcceas.ca.

Further information

Contact Practice Advisor Barbara Buchanan at 604-697-5816 or bbuchanan@lsbc.org for confidential advice or more information regarding any items in Practice Watch.