10.1 Definitions
10.1.1 In this Part:
a. “data source” means an electronic file which can be used to generate books of original entry, client ledger cards, and other source documents and which maintains an audit trail of changes;
b. “financial institution” means a chartered Canadian Schedule I bank, credit union or Caisse Populaire legally entitled to carry on business in the Province;
c. “general account” means a deposit account in a financial institution maintained by a practising lawyer or law firm in connection with the practice of law, other than a trust account;
d. “general trust account” means a deposit account in a financial institution maintained by a practising lawyer or law firm and designated as a trust account into which the practising lawyer or law firm deposits trust money;
e. “money” includes cash, cheques, drafts, credit card transactions, post office orders, express and bank money orders and electronic transfer of deposits at financial institutions;
f. “overdraft” means an amount below that which is required to meet the practising lawyer’s or law firm’s obligations, whether or not the trust account is overdrawn;
g. “specific trust account” means a deposit account or instrument in a financial institution, maintained by a practising lawyer or law firm on behalf of a specific client, and designated as a trust account on behalf of that client, into which a practising lawyer deposits money received in trust.
Acting in a Representative Capacity
10.1.2 A lawyer is acting in a representative capacity if the lawyer is not providing legal services and is:
a. the personal representative, executor or administrator, or one of the personal representatives, executors or administrators, of the estate of a deceased person;
b. a trustee, or one of the trustees, of a trust under an appointment made pursuant to a trust instrument creating the trust;
c. a trustee, or one of the trustees, of the property of another person under an appointment by a court; or
d. an attorney, or one of the attorneys, of a person under a power of attorney, whether general or special, enduring or otherwise.
Receipt of Money
10.1.3 When a lawyer receives money in a representative capacity, the money must not be paid into the lawyer’s or law firm’s trust account but must be paid into a separate trustee account that has been established by the lawyer for that purpose.
Obligations
10.1.4 Where a lawyer is appointed to act in a representative capacity, the lawyer must:
a. notify the Executive Director, in writing, that the lawyer is acting in a representative capacity within 14 days of receiving any money or property;
b. maintain a record of all appointments or assumptions of a representative capacity and a list of the beneficiaries of the estate or trust together with their last known address;
c. maintain the books, records, accounts and documentation of the estate or trust in a form sufficient to accommodate an examination, review, audit or investigation ordered by the Executive Director or Complaints Investigation Committee; and
d. cooperate with the Society’s auditor or investigator in the conduct of any examination, review, audit or investigation so ordered.
Solicitor-Client Relationship
10.1.5 Where a lawyer acts in a representative capacity that arises outside of a solicitor and client relationship, the lawyer must provide notice in writing to the beneficiaries of the trust and, where possible, the party making the appointment that the Lawyers’ Insurance Association of Nova Scotia and the Lawyers’ Fund for Client Compensation Fund may not respond to claims in relation to the lawyer’s handling of any money or property of the estate or trust.
10.2 Receipt of Trust Property
10.2.1 A practising lawyer or law firm is responsible for:
a. all trust money and property received from or on behalf of a client; and
b. the timely deposit of trust money into a trust account; and
c. identifying the person on whose behalf the money is deposited.
When Money Received
10.2.2 Money is not considered to be received until its receipt is confirmed by the practising lawyer or law firm.
Deposit Without Delay
10.2.3 A practising lawyer or law firm who receives money in trust for a client must deposit the money into the practising lawyer’s or law firm’s trust account without delay, but not later than the first day after receipt.
Requirements for Trust Account
10.2.4 A trust account must:
a. be designated as a trust account;
b. be kept at a financial institution; and
c. bear interest which is computed and payable in accordance with Section 30 of the Act.
Confirmation of Third Party Deposit
10.2.5 A practising lawyer or law firm must obtain written confirmation from the financial institution of any third party deposit in a trust account without delay and must retain such confirmation.
Money to be Put into Trust Account
10.2.6 Only the following may be paid into a trust account:
a. trust money;
b. money which has been drawn inadvertently from the trust account in contravention of this subregulation; and
c. money received by the practising lawyer or law firm representing, in part, money belonging to a client, and in part money belonging to the practising lawyer or law firm if it is not practicable to divide the payment.
No Mixing of Personal Funds
10.2.7 Money that belongs to the practising lawyer or law firm may not be paid into the practising lawyer’s or law firm’s trust account unless it is for a transaction in which the practising lawyer or law firm is a client of the practising lawyer or law firm.
Escrow to be in Writing
10.2.8 Escrow conditions requiring trust property to be held without deposit must be in writing and clearly require that the money be held without deposit.
Requirement for Trust Relationship
10.2.9 A practising lawyer must not use a trust account where there is no trust relationship.
10.2.9.1 A practising lawyer must pay into and withdraw from, or permit the payment into or withdrawal from, a trust account only money that is directly related to legal services that the practising lawyer or law firm is providing.
10.2.9.2 A practising lawyer must pay out money held in a trust account as soon as practicable upon completion of the legal services to which the money relates.
Proper Delegation Allowed
10.2.10 The tasks required to be performed by the practising lawyer or law firm pursuant to Regulation 10.2 may be performed by a person other than a lawyer if that person is working under the supervision of a lawyer in a manner authorized by the Code of Professional Conduct.
CDIC Compliance
10.2.11 Where a general trust account or specific trust account is maintained by a practicing lawyer or law firm in a financial institution which is insured by the Canada Deposit Insurance Corporation (“CDIC”), the practicing lawyer or law firm must comply with the reporting and disclosure obligations set forth in the Canada Deposit Insurance Corporation Act.
10.3 Withdrawal from a Trust Account
10.3.1 A practising lawyer is responsible for all withdrawals or transfers from a trust account and may delegate accounting tasks but not responsibility.
Records of Withdrawals
10.3.2 A practising lawyer or law firm must maintain a record of all withdrawals from a trust account.
Prompt Withdrawal of Money Due to Lawyer
10.3.3 Money belonging to the practising lawyer or law firm must be withdrawn from the trust account without delay.
Proper Withdrawal from Trust Account
10.3.4 Money must not be withdrawn or transferred from a trust account except:
a. for payment on behalf of a client or another person;
b. to remove funds inadvertently deposited to the trust account;
c. money properly required for or toward payment of the practising lawyer’s or law firm’s fees that have been disclosed to the client;
d. as authorized in writing by a person designated by the Society; or
e. as directed by a Court of competent jurisdiction.
Requirements for all Withdrawals
10.3.5 Any withdrawal of funds from a trust account must:
a. be made to a named payee;
b. be made by a practising lawyer who has received approval to operate a trust account pursuant to subregulation 4.10.4;
c. identify the trust account from which the funds are withdrawn and the date on which the funds are withdrawn;
d. not be released or effected until the practising lawyer or law firm is in possession of sufficient funds for the credit of the client on whose behalf the withdrawal is made; and
e. not be released or effected until the practising lawyer has sufficient knowledge of the withdrawal to ensure that the client’s interests are protected.
10.3.6 Notwithstanding subregulation 10.3.5(b), all practising lawyers who have signing authority on a trust account as of December 31, 2018 may continue as signatories even if they have not received approval pursuant to subregulation 4.10.4.
No Cash or Debit Card Withdrawal
10.3.7 Any withdrawal of funds from a trust account must not be made payable to cash or bearer and must not be made by way of a cash withdrawal or by debit card or similar instrument, unless a cash refund is required pursuant to subregulation 4.12.5 (d).
Maintain Signed Directions
10.3.8 Signed directions to the financial institution for the withdrawal of funds must be stored in such manner that they may be cross referenced to the withdrawal from the trust account as shown on the monthly statement from the financial institution.
10.4 Maintenance of Records
Lawyers’ Requirements
10.4.1 A practising lawyer or law firm is responsible:
a. to maintain accounting records which will allow for the accurate identification of trust money and property;
b. for the timely posting of transactions in the accounting records; and
c. to maintain accounting records, including source documents, for at least seven (7) years.
Required Records
10.4.2 The following accounting records must be maintained by a practising lawyer or law firm:
a. a book of original entry or data source showing the date of receipt and source of trust money for each client and identifying the client on whose behalf the trust money is received;
b. a book of original entry or data source showing all payments out of trust money for each client, the date of each payment, the name of each recipient, and identifying the client on whose behalf each payment is made out of trust money;
c. a clients’ trust ledger showing separately for each person on whose behalf trust money has been received all such money received and paid and any unexpended balance;
d. a record showing all trust property held in trust, and identifying the client on whose behalf the property is held;
e. a book of original entry or data source showing the date of receipt and source of all money received other than trust money;
f. a book of original entry or data source showing all payments of money other than trust money, the date of each payment and the name of each recipient;
g. a book, data source or chronological file of copies of billings showing all fees charged and other billings to clients, the dates such charges are made and identifying the clients so charged;
h. bank statements, cashed cheques, which may include a digital image provided by the practising lawyer’s financial institution showing both the front and back of the cheque, and detailed deposit slips for all trust and general accounts;
i. a record showing a comparison made monthly of the total of balances held in all trust accounts and the total of all unexpended balances of funds held in trust for clients as they appear from the books and records together with the reasons for any differences between the totals and supported by
i. a detailed listing made monthly showing the amount of trust money held for each client and identifying each client for whom trust money is held, and
ii. a detailed reconciliation made monthly of each trust account in a financial institution,
j. a record showing all transfers of trust money between clients’ trust ledger accounts and explaining the purpose for which each transfer is made.
10.5 Service Nova Scotia Trust Account
10.5.1 A practising lawyer or law firm may establish a general trust account for the purpose of paying document registration fees and deed transfer tax to the Government of Nova Scotia.
Name of Account
10.5.2 The trust account referred to in subregulation 10.5.1 must be named “[The Name of the Practising Lawyer (or Law Firm)] In Trust for Service Nova Scotia.”
Use of Account
10.5.3 The trust account established under this Regulation must be an account into which the practising lawyer or law firm deposits only money:
a. received in trust for a client for the purpose of paying document registration fees and deed transfer tax, if any, related to a client’s real estate transaction;
b. properly withdrawn or transferred from another trust account for the purposes of paying the document registration fees and the deed transfer tax, if any, related to a client’s real estate transaction; and
c. transferred from the practising lawyer’s or law firm’s general operating account as a disbursement to be charged to the client in connect with the client’s real estate transaction.
Only Enough Money for Transactions
10.5.4 For greater certainty, a practising lawyer or law firm must not pay into the trust account established under this Regulation more money than the practising lawyer or law firm expects to be required to pay the document registration fees and deed transfer tax, if any, related to a client’s real estate transaction.
Government May Withdraw Funds
10.5.5 Subject to subregulation 10.5.6, the practising lawyer or law firm may give permission to the Government of Nova Scotia to withdraw those funds from the account established under this Regulation by electronic funds transfer.
Notification of Withdrawal Required
10.5.6 A practising lawyer or law firm shall not authorize the Government of Nova Scotia to withdraw from the trust account established under this Regulation money required to pay registration fees and deed transfer tax unless the Government of Nova Scotia agrees to provide to the practising lawyer or law firm advance notification of the amount to be withdrawn in the form of the Notification of E-Submission Receipt and E-Submission Pre-Authorized Payment Notice.
No Disclosure of Passwords
10.5.7 A practising lawyer authorized by the Government of Nova Scotia to electronically submit documents to the land registration office and to authorize payment of registration fees and deed transfer tax to the Government of Nova Scotia must retain control and confidentiality over his or her personal password used for this purpose and must not disclose such password to any other person.
Content of Notification
10.5.8 The Notification of E-Submission Receipt referred to in subregulation 10.5.6 must:
a. be provided to the practising lawyer or law firm at or before the time of withdrawal;
b. include a statement of the amount of money to be withdrawn from the trust account;
c. provide sufficient details of the nature of the transaction so that the practising lawyer may identify the client for whom the transaction is being processed; and
d. provide a unique identifier for the transaction.
E-Submission Pre-Authorized Payment Notice
10.5.9 The E-Submission Pre-Authorized Payment Notice referred to in subregulation 10.5.6 must:
a. be provided to the practising lawyer or law firm at or before the time of withdrawal;
b. include a statement of the amount of money to be withdrawn from the trust account;
c. provide sufficient details of the nature of the transaction so that the lawyer may identify the client for whom the transaction is being processed; and
d. provide the date and time the notification is sent to the practising lawyer or law firm.
Requirements on Receipt of Notification
10.5.10 No later than the close of the banking day immediately following the day on which the Notification of E-Submission Receipt is sent to the practising lawyer or law firm, the practising lawyer or law firm must:
a. produce a printed copy of the notification;
b. confirm the amount shown on the notification is the correct amount to be withdrawn from the account and, in the event of any discrepancy, immediately notify the Government of Nova Scotia of the discrepancy; and
c. indicate on the printed copy of the notification the date the notification is received, the name of the client, and any file number in respect of which trust money is to be withdrawn from the trust account.
10.5.11 The notification must be maintained with the practising lawyer or law firm’s trust accounting records.
10.5.12 No later than the close of the banking day immediately following the day on which the E-Submission Pre-Authorized Payment Notice is sent to the practising lawyer or law firm, the practising lawyer or law firm must:
a. produce a printed copy of the notification; and
b. confirm the amount shown on the notification is the correct amount to be withdrawn from the account and, in the event of any discrepancy, immediately notify the Government of Nova Scotia of the discrepancy.
10.5.13 The E-Submission Pre-Authorized Payment Notice must be maintained with the practising lawyer’s or law firm’s trust accounting records.
Delegation of Authority
10.5.14 The tasks required to be performed by the practising lawyer or law firm pursuant to subregulations 10.5.10 and 10.5.11 may be performed by a person other than a practising lawyer if that person is working under the supervision of a practising lawyer in a manner authorized by the Code of Professional Conduct.
10.6 Reporting and Addressing Errors
No Overdraft Permitted
10.6.1 A practising lawyer or law firm must maintain sufficient balances on deposit in trust to meet the practising lawyer’s or law firm’s obligations with respect to money held in trust for clients, and all shortages must be restored immediately by the practising lawyer or law firm.
Correcting Errors without Delay
10.6.2 A practising lawyer or law firm must correct any errors in a trust account without delay.
Reporting and Explaining Overdrafts
10.6.3 Unless the overdraft is less than $50, a practising lawyer or law firm must, in the prescribed form, immediately report to the Executive Director any overdrafts in the practising lawyer’s or law firm’s trust account, including any relevant information regarding the reason for the overdraft if:
a. the overdraft was not corrected within seven (7) days of the time the shortage arose; or
b. the overdraft is an amount greater than $2,500, regardless of when it occurred.
Overdrafts Resulting from Errors
10.6.4 All overdrafts, regardless of dollar value or prior report pursuant to subregulation 10.6.3, must be reported on the practising lawyer or law firm’s annual trust account report filed pursuant to Regulation 4.11.
10.6.5 A practising lawyer or law firm is required to immediately report to the Executive Director any suspected or confirmed theft of money by any person from the practising lawyer’s or law firm’s trust accounts or general accounts.
10.7 Audit by the Executive Director
10.7.1 The Executive Director may initiate an audit of the books, records, accounts and transactions of a practising lawyer or law firm or former lawyer or law firm to determine compliance with these Regulations.
Unannounced Investigations
10.7.2 For the purpose of ensuring that all practising lawyers or law firms comply with these Regulations, the Executive Director may implement and direct a continuing program of unannounced audits of the books, records, accounts and transactions of practising lawyers and law firms, in accordance with the general directions of Council.
Process of Selection
10.7.3 The Executive Director may randomly select practising lawyers or law firms for audit.
Production to Investigator
10.7.4 Where an audit is conducted under this Regulation, the practising lawyer or law firm must produce to the person conducting the audit all evidence, books, records, papers, accounts, vouchers, files, clients’ files and explanations which may be required for the audit, and failure of the practising lawyer or law firm to cooperate constitutes professional misconduct.
Investigator’s Report to be Provided
10.7.5 The Executive Director must provide a copy of the audit report to the practising lawyer or law firm whose accounts have been audited.
Maintenance of Confidentiality
10.7.6 Before conducting an audit under this Regulation, an auditor must complete and file with the Executive Director an undertaking to maintain strict confidentiality with respect to all matters connected with the audit, including compliance with Section 77 of the Act.
Non-compliance with Regulations
10.7.7 If the auditor reports that these Regulations have not been complied with, the Executive Director may:
a. order the practising lawyer or law firm to take all necessary steps to comply with these Regulations as specified in the order and within the time fixed for doing so; and
b. initiate whatever action is appropriate under Part III of the Act, in which case the audit report may be used as the basis for the complaint as well as being used as evidence.
Preservation of Rights
10.7.8 Nothing in these Regulations deprives a practising lawyer or law firm of any recourse or right, whether by way of lien, set-off, counter-claim, charge or otherwise, against money standing to the credit of a client in the practising lawyer or law firm’s trust account or with respect to trust property.