The process for paying for Barrister fees can sometimes cause confusion, but as a general rule it should either be wholly paid from Trust of wholly paid from practice - not a combination of both.
There are a number of methods you can employ when paying Barrister Fees, however for simplicity purposes we believe the below two methods are the simplest.
Before delving into the methods, it is important to note that a lot of the confusion from a clients and sometimes a firm's perspective occurs when the firm pays the Barrister directly from trust funds but still puts the Barrister fees as a disbursement on their invoices. This can be confusing for the client and sometimes leads to double payments, causing extra work for everyone involved. In addition, this causes confusion for the firm as then the disbursement remains unpaid in the practice accounts within SILQ as the funds were paid direct from trust.
For that reason, we believe as a general rule that the fees should either be paid from the practice account and only then should it be on the invoice or paid directly from trust in which case they should not be on the firm invoice at all.
Method 1:
As stated by the NSW Law Society in their 'Working with Barristers' third edition, 2017 document: "When briefing a barrister as your client’s instructing solicitor, you are responsible for the payment of fees incurred by the barrister as a ‘third party’".
Based on the above, the first method involves the Solicitor paying the Barrister from their practice account and then reimbursing themselves from the trust account.
It is important to note that the solicitor should only be reimbursed after the invoice has been paid from the practice account. The fees should not be transferred from the trust account before the barrister has been paid.
An example of how this would work is:
1. The Barrister invoice has been received by the Firm / Solicitor for $5,000
2. The Firm / Solicitor pays the Barrister fees from their practice account (not their trust account)
3. The Firm / Solicitor adds the Barrister fees as a matter disbursement on the clients matter
4. The Firm / Solicitor generates an invoice for the matter including their fees, barrister fees and any other disbursements for $10,000
5. The client has previously put $8,000 into the Firm's trust account
6. The $8,000 is applied towards the $10,000 invoice (see section 12d of the invoice template article for information on how to show this on the invoice)
7. The invoice will show $2,000 outstanding that the client will need to pay into the practice account
8. The Firm / Solicitor should create a trust to office transfer for the $8,000 in SILQ and also do the bank transfer from their bank trust account to their practice account
9. The trust to office transfer will generate a Trust Account Withdrawal Request PDF which should be included with the invoice to the client
As you can see, in this method, the Barrister fees have not 'touched' the trust account. This method means that the Barrister fees have been dealt with solely in the practice side of the accounts.
Pros: The invoice is transparent and avoids any confusion for the client.
Cons: Unless specifically accounted for using pseudo trust accounts, this method technically inflates the earnings for the firm which does have a direct correlation in the way professional indemnity insurance costs are calculated.
Possible variation:
Some clients prefer to create a disbursement invoice with only the Barrister fees, then do a trust to office transfer for that $5,000 only.
Then they create a separate invoice for their fees and any other disbursements.
Method 2:
This method means that the Barrister fees are dealt with solely in the trust account and does not 'touch' the practice account.
An example of how this would work is:
1. The Barrister invoice has been received by Firm / Solicitor for $5,000
2. The Firm / Solicitor has prior authority from the client and therefore pays the Barrister fees directly from the trust account on behalf of the client. This is done as a trust withdrawal
3. The trust withdrawal will generate a Trust Account Withdrawal Request PDF which should be included with the Barrister invoice and sent to the client.
There are no further steps to this method.
Do not add the Barrister fees as a disbursement to the Firm's invoice.
When invoicing the client for the Firm's fees and any other disbursements, you could add the Barrister Invoice and the Trust Withdrawal PDF as an attachment with a paragraph to remind them that these fees were already paid on their behalf using trust funds - however this step is optional given you have previously notified the client, as it does have the potential to cause confusion.
Pro's: There are less steps in this scenario and it does avoid confusion from the client by providing a clear separation from the firm fee's. It also ensures that the firm's earning are not inflated.
Con's: As a matter of preference, some practitioners like to have all disbursements included on the one invoice. In this case, the Barrister fees are not mentioned at all on the Firm's invoice.