Singapore: unclaimed Money Fund to fund pro bono services

Recent amendments to the Legal Profession Act, passed in Parliament on 20 March, have provided a practical solution to unclaimed client money. Currently, if a client becomes uncontactable, the legislation does not provide for what happens to unclaimed client money, and a law practice would have to continue to hold such money. The amendments to the Legal Profession Act introduces a new framework to deal with unclaimed client money – a practitioner or law practice may transfer such money to a new Unclaimed Money Fund, maintained and administered by the Law Society.

The Law Society may invest or use the money in the Unclaimed Money Fund to fund pro bono services provided by the Law Society or through Law Society Pro Bono Services (a registered charity and Institution of a Public Character), which is a wholly-owned subsidiary of the Law Society.

Currently, law practices in Singapore are required to hold client money in a separate account, known as a client account, until money is returned or paid out according to the client’s instructions. A practitioner who holds or receives client money is required to submit an accountant’s report to the Law Society together with his application for a practising certificate on a yearly basis.

If a client becomes uncontactable, the law practice concerned would have no other option but to continue to hold any unclaimed money. In respect of practitioners wishing to retire or cease practice (in particular sole proprietors), unclaimed client money has caused inconvenience as only a practitioner with a practising certificate is permitted to operate a client account of a law practice. The only direction the Law Society has been able to give to retiring practitioners is to find another practitioner in practice willing to act as legal manager to hold the unclaimed client money. The legal manager would have to account to the Law Society for such moneys with an accountant’s report on a yearly basis.

With the recent amendments to the Legal Profession Act, practitioners and Singapore law practices will now be able to transfer unclaimed client money into the Unclaimed Money Fund, provided that they satisfy certain requirements (prescribed by the Law Society) and the Law Society approves the transfer. These requirements would include making reasonable efforts to return the money to the client.

Should the lawful owner of the unclaimed client money resurface, there is a mechanism for such persons to apply to the Law Society for the transferred money to be returned. Such applications must be made within a six-year limitation period. Nevertheless, Law Society will have a discretion to make ex gratia payments from the Unclaimed Money Fund to claimants who apply after the limitation period.

The new framework covers unclaimed intervention money as well. The Law Society has the power to intervene in a law practice in specified circumstances, including where a sole proprietor has died. As part of the intervention, the Law Society may take over the administration of the client account. Client money in these client accounts is called intervention money.

Intervention money is transferred into a special account held by the Law Society. If the intervention money is unclaimed after six years, it is credited to the Law Society’s Compensation Fund, which is a fund to compensate those who suffer financial losses due to a practitioner’s misconduct.

The amendments to the Legal Profession Act provide for intervention money that has been unclaimed for 6 years in the special account to be transferred to the Unclaimed Money Fund instead of the Compensation Fund.

Article first published on the Law Society of Singapore website.