Client Money: Amount Due to the Client and Amount Due by the Client

In one line

Money the client has sent and you have not spent is owed to him; work you have done and he has not paid for is owed by him; and rules 25 to 33 say how both are recorded.

In exam wording: rules 25 to 33 of Section II of Part VI Chapter II of the Bar Council of India Rules govern an advocate's dealings with a client's money, breach of which is professional misconduct under section 35 of the Advocates Act 1961.

The two directions

MU's topic 4.3(i) names both, and a student should be able to say what each means.

Amount due to the client. Money of his that the advocate holds: sums received for expenses and not yet spent, a decree amount collected on his behalf, compensation released to the advocate, a refund of court fee. In the balance sheet it is a liability; in the client's ledger it is a credit balance.

Amount due by the client. Money the client owes the advocate: fees billed and unpaid, and expenses the advocate has paid out of his own pocket. In the balance sheet it is a debtor, a current asset; in the client's ledger it is a debit balance.

They are not netted off casually. An advocate cannot simply set his unpaid fee against money he holds for a client, and the rules say when he may, which is the subject of rules 26, 28 and 29.

The rules, in the Bar Council's own words

Rule 25: keep the account

"An advocate should keep accounts of the client's money entrusted to him, and the accounts should show the amounts received from the client or on his behalf, the expenses incurred for him, and the debits made on account of fees with respective dates and all other necessary particulars."

Four requirements, and every one is examinable: amounts received from or on behalf of the client; expenses incurred for him; debits on account of fees; and dates and all other necessary particulars.

"Or on his behalf" is important. Money received from the court, from a judgment-debtor or from an insurer for the client is the client's money as much as money he himself sent.

Rule 26: fees or expenses, and no diverting

"Where moneys are received from or on account of a client, the entries in the accounts should contain a reference as to whether the amounts have been received for fees or expenses and during the course of the proceeding, no advocates shall, except with the consent in writing of the client concerned, be at liberty to divert any portion of the expenses towards fees."

Two obligations. The entry must say which it is; and during the proceeding the advocate may not divert expenses to fees except with the client's consent in writing.