Introduction: Let us not forget
“Also, let us not forget that the monies in a clients’ account are trust money. Thus, with the clients’ account being a trust account, the defendant bank assumes a fiduciary obligation towards the beneficiaries of the account (ie, third parties) and is required to act in a manner that safeguards their rights and interests.”
(Yeoh Jin Aik v Tan Jin Keat & Anor [2026] 4 CLJ [61])
A recent Malaysian High Court case reiterated what I am sure the Bar Council would want us pupils and junior lawyers to remember by now: that money in the clients’ account is trust money.
Three Rejected Remittances
This dispute arose from three separate attempts by the plaintiff to remit funds from the foreign currency client’s account, all of which were refused by CIMB.
Law firms need to maintain two accounts: an office account and clients’ account. This obligation is grounded in Sections 78 and 79 of the Legal Profession Act 1976 (LPA), which empower the Bar Council to make rules governing the receipt, holding, and disbursement of clients’ money by solicitors. Pursuant to this enabling power, the Bar Council enacted the Solicitors’ Account Rules 1990 (SAR).
According to Rule 2 of the SAR, a “client account” is a current or deposit account at a bank in the name of the solicitor in the title of which the word “client” appears, while “client’s money” encompasses all money held or received by a solicitor on account of any person for whom he is acting — whether as solicitor, agent, bailee, stakeholder, or in any other capacity.
The Foreign Currency Dimension and the Bank’s True Mandate
A critical aspect of the case was that the account was a foreign currency clients’ account, not an ordinary local currency account. The court highlighted that this distinction made the case significantly different from general SAR principles.
As the court noted at paragraph [59]-[60],
[59]…the case before this court involves a foreign currency clients’ account which are governed by additional foreign currency rules and regulations imposed and enforced by Bank Negara Malaysia (BNM) as well as r. 8.02 of the Rules and Rulings of the Bar Council which states as follows:
8.02 Not to operate client account in foreign currency
No law firm is permitted to operate a general client account in any foreign currency in a local bank, unless specific written instructions for the same are given by a client, subject however to the provisions of any applicable exchange control legislation (repealed by Financial Services Act 2013) or Exchange Controls Notices of Malaysia (now Foreign Exchange Policy Notices).
[60]…As such, in addition to the general banking law, the foreign currency clients’ accounts which is the subject matter of the dispute herein is further governed by foreign currency account terms and conditions (“FCA’s T&C”), the remittance’s terms and conditions (“remittance’s T&C”), the minimum due diligence guide for foreign exchange rules (“MDD guide”) and Foreign Exchange Policy Notices (“FEPN”). FEPN is a directive issued by the BNM pursuant to ss. 214 and 261 of the Financial Services Act 2013 (“FSA 2013”) and ss. 225 and 272 of the Islamic Financial Services Act 2013 (“IFSA 2013”).
The foreign currency dimension is critical to notice because the plaintiff tried to rely on general banking law principles (including Plunkett v. Barclays Bank and s. 141 of the Legal Profession Act 1976 (on interests of third parties)) to argue that the bank was simply bound to honour his mandate once the account was in credit. The court rejected this because those principles apply to ordinary local currency accounts (see paragraphs [52]-[54]).
Arguments hold water for ordinary local currency clients’ accounts
To be fair to the plaintiff, he genuinely held the beliefs regarding CIMB’s mandate on the foreign currency account and his prior position over third parties rights. This is why at paragraph [58] the court acknowledged:
[58] Granted that in disputes pertaining to non-foreign currency clients’ account, for instance, ordinary local currency clients’ accounts, the plaintiff’s arguments on jus tertii and s. 141 of the LPA 1976 hold water.
The plaintiff’s efforts thus gave the legal profession a welcome clarification on how to manage foreign client accounts, as Malaysia hopes to internationalize its legal services market. Specifically, the lesson is that where a lawyer/law firm seeks to open a foreign currency client account, specific instruction from the client is needed as per 8.02 of the Rules and Rulings of the Bar Council. The fiduciary duty is stricter.
In addition, the lawyer/law firm must then provide the requested information to the banks to verify the identity of the beneficiaries of the foreign remittance, even when the law/law firm’s intentions are genuine and there is no foul play. From one perspective, the requirement of the Rules and Rulings of the Bar Council and its harmonious interpretation and support of the banking regulations issued by Bank Negara is a joint effort to maintain the trustworthiness of the legal profession alongside the trustworthiness of Malaysia’s financial institutions.