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Alice sued Bob and won.

Bob filed an appeal and a motion/application for a stay of the payment he now owed to Alice pending the appeal.

The stay was declined. Alice's lawyer demanded payment into his trust account, and Bob paid. The lawyer then paid out to Alice.

However, Bob then won the appeal, and now Alice owes back to Bob.

Question: Was the Alice's lawyer under any obligation to hold the money in his trust account pending the appeal to avoid the need for Bob to claw the money back from Alice?

My understanding has been that Alice's lawyer owes no duty to Bob. He owes duties to Alice. He collects money from Bob for Alice, and can pay out to her right away. And if later Bob wins the appeal, it will be Bob's headache to claw the money back from Alice.

It would be nice if I was wrong, but citations would be nice too. Is it indeed so that if an account is a lawyer's trust account, anyone can trust it not just the lawyer's clients?

Greendrake
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2 Answers2

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The more common arrangement is for the amount of the judgment with some additional amount to be paid into the registry of the court as a supersedeas bond which stays enforcement of Alice's money judgment pending appeal.

If a satisfactory bond is not posted, Alice can enforce her money judgment while the appeal is pending, which greatly disrupts Bob's life. If Bob had not posted a bond, Alice could seize Bob's assets and garnish his wages during the pendency of the appeal.

In the scenario of the question, we can presume that Alice accepted having funds in the trust account of Alice's lawyer, rather than in the registry of the court, because both ways of securing Alice's ability to recover in exchange for staying enforcement of the judgment pending appeal, are equally secure.

ohwilleke
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It appears that my understanding (as given in the question) is probably correct. Section 110 of the Lawyers and Conveyancers Act 2006 says:

A practitioner who, in the course of his or her practice, receives money for, or on behalf of, any person ... must hold the money, or ensure that the money is held, exclusively for that person, to be paid to that person or as that person directs.

Alice's lawyer holds the money in his trust account for Alice, and Alice directs him to pay to her, so he does. There is no suggestion that the trust account can be used to provide security for Bob in the event he wins the appeal.

There is also appears to be no equivalent in New Zealand law for the Colorado's Rule 1.15A(c):

(c) When in connection with a representation a lawyer is in possession of property in which two or more persons (one of whom may be the lawyer) claim interests, the property shall be kept separate by the lawyer until there is a resolution of the claims and, when necessary, a severance of their interests. If a dispute arises concerning their respective interests, the portion in dispute shall be kept separate by the lawyer until the dispute is resolved.

— as there is no mention of any dependency on whether there are ongoing claims/disputes (let alone appeals) in relation to the money held in trust account.

Greendrake
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