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What is a statutory deposit account?

Law practices and approved clerks that are required to maintain a trust account in Victoria must deposit a specified amount of money with the Victorian Legal Services Board, out of any trust money that has been received by the law practice or approved clerk. The money is held by the Board and is repayable on demand.

The Board is required to maintain a statutory deposit account (SDA) into which it must deposit the monies. The account is maintained within the Public Purpose Fund held by the Board.

Opening a statutory deposit account

When the Board receives a notification of a new trust account, it will request Commonwealth Bank of Australia to open an SDA to be linked to the trust account of the law practice or approved clerk.

Depositing money into the SDA

A law practice or approved clerk that is required to maintain a trust account must deposit money into the SDA out of the trust money received by the law practice or approved clerk.

The amount required to be deposited is calculated by the Board for each quarter, in accordance with a formula detailed in section 79 of the Legal Profession Uniform Law Application Act 2014.

How to deposit

Online deposit

The easiest way to make the quarterly deposit is via our online portal LSB Online. You can only do this if you have completed the Direct Debit Request form and returned it to the Board. To make the transfer online, log in to LSB Online and follow the prompts.

Cheque deposit

1. Write out a cheque from your trust account payable to the ‘Victorian Legal Services Board – <name of your law practice> statutory deposit account’.
2. Hand your cheque to the Commonwealth Bank of Australia (there may be a fee if a deposit is made at any other bank). Ensuring you have written on the back of the cheque the SDA BSB and Account number.
3. The bank will give you a receipt of your deposit.
4. Your deposit will be credited to the SDA.
5. The Board will send you an email or post statement the following business day confirming the deposit and the total amount that you hold in the SDA.
6. Please contact the Board if you have not received an email or post statement by noon the following business day after your deposit.

Repayment by the Board

Amounts deposited with the Board into the SDA are repayable on demand to the practice’s or clerk’s trust account.

If an amount is repaid from the SDA to a law practice or an approved clerk and subsequently there is a sufficient amount in the practice’s or clerk’s trust account to cover the required deposit amount, the law practice or approved clerk must deposit the required deposit amount back with the Board.

How to withdraw from a statutory deposit account

You will be given your LSB Online login details and instructions for using the online service when you notify the Board of the opening of a new trust account. Please email edp@lsbc.vic.gov.au if you did not receive the login details. Only authorised users can withdraw funds from a statutory deposit account.

Withdrawals from the statutory deposit account must be made through LSB Online. All withdrawals must be made online.

Confirmation of transactions

After any statutory deposit or withdrawal is made, we will send a statement via email to the trust account holder the following business day confirming the total amount held in the SDA.

All trust account holders will receive SDA statements annually, regardless of whether a statutory deposit or withdrawal has been made.

Failure to adjust statutory deposit account

We monitor trust account balances and will advise a law practice or an approved clerk when an adjustment to the required deposit amount into the SDA is necessary.

If there is a particular reason why an additional deposit cannot be made (e.g. insufficient funds, unpresented cheques), a law practice or approved clerk must nonetheless obtain an exemption from the Board.

Failure by a law practice to deposit the required deposit amount may constitute unsatisfactory professional conduct or professional misconduct on the part of any principal of the law practice.

Exemptions from statutory deposit provisions

If you are unable to deposit the required deposit amount into the SDA, you may apply for an exemption by completing an online application through LSB Online.

Improvements to the application process have recently been made. It is now more user-friendly, providing clear guidance so that we get the information we need to make a prompt decision about an application.

Improvements include:

• In most cases a decision about the application will be provided immediately
• If a recalculation of the amount to be deposited is required, notification will occur immediately
• It’s expected 90 per cent of applications will be given an immediate response - meaning SDA obligations are completed in one session
• If an application needs to be assessed by a decision maker, that option is still available.

View the Board’s policy on statutory deposit account exemptions below.

Prevent cybercrime

Guiding information to assist law practices prevent and deal with cybercrime is available on our dedicated preventing cybercrime page. This covers common types of cybercrime, what you can do to protect your business and what you should do if you experience cybercrime. There is also detailed information on multi-factor authentication, considerations around insurance and links to other agencies who can help.

Managing trust money

A law practice or an approved clerk that receives trust money must maintain a general trust account in Victoria. Penalties apply for failing to comply.

This requirement does not apply in which only controlled money or transit money (or both) are received, except where it is received in the form of cash. The trust account must be established and maintained in accordance with the Uniform Law, Uniform Rules and applicable regulations. 

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A law practice or approved clerk that receives trust money must maintain a general trust account. The trust account must be maintained in accordance with the Legal Profession Uniform Law, the Uniform General Rules and any applicable regulations.

Who can receive trust money?

A law practice must not receive trust money unless a principal or legal director holds a practising certificate authorising the receipt of trust money.

An approved clerk may also receive trust money for legal costs for one or more barristers.

The Board has released a Grant of Trust Authorisation policy outlining the skills, experience and competency criteria it requires before granting trust authorisation to applicants with an Australian practising certificate. Applications for a practicing certificate authorising receipt of trust money are made through LSB Online.

What is trust money?

Trust money for law practices

For a law practice, trust money means money entrusted to the law practice in the course of, or in connection with, legal services provided by the practice. It includes:

• money received for legal costs in advance of providing the services;
• controlled money received by the practice (i.e. money subject to written direction to deposit into an account controlled by the law practice other than the general trust account);
• transit money received by the practice (i.e. money received by a law practice subject to instructions to pay or deliver to a third party, other than an associate of the law practice); and
• money received by the law practice subject to a power exercisable by the practice or an associate of the practice, to deal with money for or on behalf of another person.

Trust money for approved clerks

For an approved clerk, trust money means money received by the approved clerk for the legal costs of a barrister in advance of the legal services to which those costs relate.

What isn't trust money?

Any money that is not trust money must not be deposited in a trust account. It also does not include the categories described below.

Money received for payment of invoices

Trust money does not include fees paid by a client for legal services, where the law practice has issued the client with a bill for those services

Money for financial services

Trust money does not include money that is entrusted to or held by a law practice for, or in connection with, financial services provided by the practice or an associate of the practice in circumstances where the practice or associate:

• is required to hold an Australian financial services licence covering the provision of the service (whether or not such a licence is held at any relevant time); or
• provides the service as a representative of another person who carries on a financial services business (whether or not the practice or associate is an authorised representative at any relevant time).

Money for managed investment schemes and mortgage financing

Trust money does not include money that is entrusted to or held by a law practice for, or in connection with, a managed investment scheme or mortgage financing undertaken by the practice

Money for investment purposes

Money that is entrusted to or held by a law practice for investment purposes is not trust money unless:

• the money was entrusted to or held by the practice in the ordinary course of legal practice, and primarily in connection with the provision of legal services to or at the direction of the client; and
• the investment is or is to be made in the ordinary course of legal practice, and for the ancillary purpose of maintaining or enhancing the value of the money or property pending the completion of the matter or further stages of the matter or pending payment or delivery of the money or property to or at the direction of the client.

The Board may also determine that money held by a law practice is or is not trust money if it considers there is doubt or a dispute about its status.

Trust money for approved clerks does not include

• money for barristers’ fees that have been invoiced;
• money directed to a third person such as a party in proceedings;
• money on loan or ‘parked’ by a solicitor; and
• mixed funds used to run a clerking business.

Information for foreign lawyers

Australian-registered foreign lawyers who practise foreign law in Victoria must comply with trust money and trust account requirements. The provisions relating to trust money and trust accounts apply to Australian-registered foreign lawyers in the same way as they apply to Australian legal practitioners. Foreign currency trust accounts are not available.

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Recovering your costs

If your client, or an associated third party, does not pay for the work you did for them, you can take legal action to recover your costs under certain conditions.

Costs disclosure and bills

You can only seek to recover your legal costs if you gave your client full costs disclosure when you were first retained (for matters above $750). If you did not, you will need to wait until the costs are assessed, or we have determined any costs dispute your client may raise with us.

You must also have given your client a bill for your work. If you have not properly billed your client, you cannot pursue them for costs.

Time limits

You cannot take legal action immediately after your bill is due. You must wait until at least the later of:

• 30 days after the bill's due date, or 
• 30 days after you gave your client an itemised bill.

Your client may dispute your bill with our office. If they do, you cannot begin to recover the costs until we have either resolved or finalised the dispute.
 

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Making a costs agreement

Your client has the right to negotiate the way costs are charged to them by you; and you may make them a written offer as part of a costs agreement.

You can only charge costs that are fair and reasonable for the work involved in the legal matter. Your costs must also be reasonable and proportionate to the work involved.

A costs agreement is a formal agreement between your legal practice and your client covering how you will structure the costs of your work.

Under the Uniform Law you must provide your client with a written costs disclosure (or estimate) if the cost of your professional services is likely to be more than $750 in total. The only exception to this is that a costs disclosure is not required to be given to a commercial or government client. 

A costs agreement is a more detailed legal document. It is enforceable in the same way as a contract. 

A client has the right to ask for a costs agreement if they wish to engage your legal services and you also have the right to require one. 

The Legal Services Council has produced an information sheet on costs agreements which is available on their website.

How can your client accept your offer?

You cannot bill your client if they have not accepted your costs agreement. Some cost agreements can be accepted either in writing or by some other way that clearly indicates they accept it. If you are offering a ‘conditional costs agreement’ (such as no win no fee agreement), this can only be accepted in writing.

There are strict rules around how you must deal with costs agreements. If you don’t follow those rules, the agreement may become void, even if your client has accepted it.

Who can a costs agreement be between?

A costs agreement may be between:

• your client and your law practice;
• your client and another law practice that you have engaged on their behalf;
• your law practice and another law practice that you will do work for your client; or
• your law practice and a third-party, such as a guarantor or a litigation funder, who will be liable for your client’s legal fees.

Conditional costs agreements

You can put a condition in your cost agreement that you will only be paid for your work if you reach a successful outcome. An example of this is a ‘no win no-fee’ agreement.

These ‘conditional costs agreements’ must be made in writing, and be in plain language. They must include all the conditions that you define as a successful outcome, and they must be accepted in writing or they cannot be enforced.

It is also important to ensure that you explain to your client that you are entitled to charge your legal fees under certain other circumstances where the client does not win their case, such as if you or the client terminates the retainer before the matter has concluded.

If you believe that your client has a good chance of success, you may also include a condition to be paid an ‘uplift fee’. This is an additional payment for a successful outcome, that cannot exceed 25% of the legal costs (excluding disbursements). Your costs agreement must be clear on how the fee will be calculated, what you expect the fee to be, and what factors may change the final fee calculation.

You cannot have a conditional costs agreement in a criminal or a family law matter.

Contingency fees

Victorian law does not currently allow you to bill your client a ‘contingency fee’. This is where your fees are calculated based on how much money you might get for your client from a payout or a settlement. 
 

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Your client has rights when it comes to their legal costs. For most matters, you must give your client a ‘costs disclosure statement’ in writing as soon as possible after your client engages you. In it you must explain:

• what you estimate the total legal costs will be for their matter, including disbursements;
• how you will calculate their legal costs (e.g. billed by time or task) and that they can negotiate this with you;
• that they are entitled to receive a bill; 
• that they can request that you give them an itemised bill; and
• that they can contact us if they want to dispute your bill.

(For relevant legislation see Legal Profession Uniform Law schedule 1 section 174).

With a complex matter, you don’t have to provide one estimate for the whole matter. You can provide a costs estimate for each of the different stages of the matter instead.

Exceptions to costs disclosure

The only times you don't have to provide a costs disclosure statement to your client are:

• where the total legal costs (excluding GST & disbursements) are not likely to be more than $750; or
• if you are dealing with a commercial or government client.

Short form costs disclosure for smaller matters

If your client’s legal matter is likely to be between $750 and $3,000, you can use the standard short-form costs disclosure template. This will save you time and effort, and meet your disclosure requirements. If your estimate will exceed $3,000, you must provide a full costs disclosure statement. 

Informed consent is the goal

You need to be sure your client understands how you plan to handle their matter and what their legal costs will be. This will help them make an informed choice about their options and the associated costs. You must also give your client an updated disclosure statement in writing if there are any significant changes to your last estimate. 

Litigation settlement disclosures

If you have negotiated a settlement for your client, you must give your client an estimate of the costs they will have to pay before you finalise the settlement. This must include any legal costs payable for another party.

What happens if you fail to disclose costs?

If you don’t properly disclose your costs to your client, or you fail to give them any disclosure at all, your costs agreement (if any) will be void. You won't be able to try to recover the costs until they are assessed, or we have determined any costs dispute . You may also face disciplinary action for breaching your obligations to your clients.

Dos and don'ts

Do:

• Give your client a genuine estimate of what you believe their total legal costs will be.
• Check that your client understands what you intend to do for them, and how this will affect their costs.
• Provide an update if there are major changes to your last estimate, and check they understand what the new costs will be.
• Use the short form costs disclosure if the matter will cost between $750 and $3,000.

Don’t:

• Rely on an old or outdated costs disclosure if the matter has changed significantly.

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Billing

You can give your client either:

• a lump sum bill covering their entire legal matter, or 
• an itemised bill identifying the different fees incurred.

You don’t have to wait until your client’s matter has finished. You can give them an interim bill (in either a lump sum or in itemised format), which covers part of your legal services.

You cannot charge for preparing or giving your client a bill.

Your client has rights

Itemised bills

If you give your client a lump sum bill, they are entitled to ask you to itemise that bill. They have 30 days after your initial bill becomes payable to ask for the itemised bill, and you must provide it within 21 days of their request.

If the itemised bill is higher than the lump sum bill, you can recover the additional costs only if:

• you told your client in writing before you had the file costed that the itemised costs may be higher than the original lump sum bill; and 
• a costs assessment or a binding determination determines they are payable.

Progress reports of legal expenses

Your client has the right to ask you for an update on the legal costs they have incurred to date, or for the period since the last bill. You must prepare an update for them in writing , without charge and within a reasonable timeframe.

Disputing your bill

Your bill must include:

• a written statement explaining that your client can dispute your bill with us;
• the time limits for disputing your bill (see Disputing your bill for further information on time limits); and
• that they can apply for a costs assessment.

Who is responsible for the bill?

Your client has the right to know who to speak to about the bill. A principal of the law practice must sign either the bill itself, or a letter accompanying the bill. Alternatively, the accompanying letter should indicate which of the law practice’s principals is responsible for the bill.

Practitioner Remuneration Order

The Practitioner Remuneration Order, which commences on 1 January 2023, is available at no cost.

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Setting up a new law practice

In Victoria there are several different types of law practices. While they must all abide by the same legal profession rules and regulations, some must take further steps to meet our requirements. Some of these steps must be done before the practice can open for business.

If you’re looking to set up your own sole practice, you must hold a principal practising certificate. If you have not held this type of certificate before, you must first show us you have the skills and experience needed to run a law practice before we will grant you a principal certificate. See our New principals page for further information.

In order to register a law practice in Victoria, you must undertake the following steps:

1. Satisfy the Principal Practising Certificate Policy
2. Complete and return the relevant registration form via the Lawyer Enquiry Form. You can find out more information about the various law practice structures below
3. Upon confirmation of registration of the entity, you will be issued with an entity ID
4. Provide the entity ID to the Legal Practitioners Liability Committee (LPLC) in order to obtain a certificate of Insurance (COI)
5. Once the COI has been issued by the LPLC, you must provide us with a copy via the Lawyer Enquiry Form to complete the registration process.

Note if you are an interstate entity seeking to be registered in Victoria, please include your current COI to accompany the registration form.

Sole practitioners

A sole practitioner is a principal lawyer who runs their own law practice. They may employ other lawyers and non-lawyer staff, but they are solely responsible for the operations of the practice itself.

Setting up a sole practice

You must also let us know at least 14 days before you commence legal work in your own sole practice.  We also ask you to let us know of any changes to your firm’s details (such as address, contact numbers etc) within 14 days. You can update your entity details by completing this form and submitting it via the Lawyer Enquiry Form.

Sole practitioners should also consider setting up a practice contingency plan to protect their business if they are unable to work for an extended period of time.

Law firms

A law firm is a legal practice that has two or more partners who are Australian legal practitioners that hold, or are eligible to hold, a principal practising certificate. Alternatively, a law firm may include at least one partner who must hold an Australian practising certificate, as well as an Australian-registered foreign lawyer.

Setting up a law firm

If you’re setting up a new law firm, you must tell us at least 14 days before your new law firm commences practising.

You must also give us 14 days' notice if:

• there is any change to the information that we have about your firm; or 
• you intend to end your legal practice in Victoria.

You can do this by completing one of these forms:

• Notification of new law practice (other than ILP or ULP)
• Notification of change of information – law practice
• Notice of termination of provision of legal services – law practice (not ILP)

Incorporated legal practices

An incorporated legal practice (or ILP) is a company that can provide legal services alongside non-legal services such as accounting, financial planning, mortgage brokering and others. 

ILPs are registered as a company under commonwealth corporations law, and are controlled by a Board of Directors. An ILP must have at least one legal director who holds a principal practising certificate. The legal director is ultimately responsible and liable for any misconduct by the ILP’s legal division.

Setting up an ILP

The legal director must ensure that the new ILP holds a professional indemnity insurance policy that covers it for the type of legal work it undertakes.

The legal director must also let us know at least 14 days before the ILP starts providing legal services by completing this form.

Similarly, if the ILP has ceased providing legal services, the legal director must also let us know within 14 days by completing this form.

Sole directors of an ILP should also consider setting up a practice contingency plan to protect their practice if they are unable to work for an extended period of time.

Unincorporated legal practices

An unincorporated legal practice (ULP) is another type of business that provides both legal and non-legal services, however it is controlled by the individual partners or directors, not by a Board. As with ILPs, there are some restrictions on the services that ULPs may offer.

Setting up a ULP

Professional indemnity insurance must be obtained by the principal to cover legal work undertaken by the individual lawyers who work for the ULP.

When setting up a ULP, the principal must let us know at least 14 days before the ULP starts providing legal services by completing this form.

Similarly, if the ULP has ceased providing legal services, the principal must also let us know within 14 days by completing this form.

Community legal service

A Community legal service (CLS) is an organisation that provides free or low cost legal services to the community. Some CLSs provide specialist support and advice on a particular issue or to a particular sector of the community. Others provide legal services to people who live and work in a local region.

A CLS must employ one or more supervising lawyers as the principal of the practice. It can be staffed by paid employees and volunteers. Any lawyer can volunteer at a CLS provided they hold a current practising certificate of any type.

Setting up a CLS

A CLS can be either incorporated or unincorporated and the CLS itself must be covered by a professional indemnity insurance policy.

Barristers and barristers’ clerks

Barristers are a type of sole practitioner. They specialise in one or more areas of law, and work independently as advocates and advisors in those areas. Most barristers are members of the Victorian Bar.

Becoming a barrister

If you’re looking to become a barrister, contact the Victorian Bar.

Barristers’ clerks

Most barristers engage a clerk to help them manage their practice, and to receive and handle trust money on their behalf. Barristers’ clerks are approved by the Victorian Bar.

Barrister’s clerks must pay an annual contribution to the fidelity fund, however they do not have to hold a practising certificate.

Some people are prohibited from working for a law practice

Some people have been disqualified by a court or tribunal from working in a law practice. Law practices who want to employ a prohibited person in any capacity must first seek our permission. For more information see our Lay Associates page.