See also: Law Office Management Committee Standard #1 – Record Retention
Well-developed and well-implemented records management systems and file retention policies should be part of your succession planning.
When you open a file, and as the matter progresses, you should put thought into how you manage and document the file and consideration into what information should be retained when the file will be closed. Having well-organized and well-managed records increases your profitability, reduces your risk and makes your practice more attractive to a potential purchaser.
A well documented file plays a significant role in managing your risk and defending against a negligence claim. Documentation confirming advice given and instructions received, as well as notes of conversations and meetings, and copies of other relevant documentation and correspondence, should be maintained in your closed files.
When developing a succession plan, a lawyer or law firm should decide what criteria will be followed in determining what is retained in a closed file, as well as when, if ever, the file should be destroyed. As well, the lawyer and/or law firm should address what happens to a lawyer’s closed files if a lawyer dies, leaves the firm or the firm dissolves.
Consider the following when addressing these issues:
- What will be maintained in a closed file?
- Where will closed files be stored and for how long?
- Who will pay for storage?
- How will these files be accessed?
- Will there be a destruction date set for each file as it is closed? If so, who sets it and what criteria are used?
- If a lawyer leaves a firm, what happens to the files he or she was responsible for? Will the firm continue to store the files indefinitely; will the departing lawyer take responsibility for the ongoing storage of the files?
- If the firm retains the file, will the firm give the responsible lawyer advance notice of an intended destruction and give that lawyer the option of storing closed files himself/herself, instead of the firm destroying it?
- If closed files still exist on the death of the lawyer, who will assume responsibility for the ongoing storage of these files?
Lawyers frequently ask how long they must keep a closed file. There is no magic or easy answer to this question. It is ultimately a professional judgment that the lawyer and law firm has to make after considering the type of file at hand, the particular matter and the particular client especially, when that client has ignored your advice, or when the client has limited the scope of your retainer.
Without a file, it is almost impossible to defend against a negligence claim. Property, family, commercial, and wills and estates files may be needed long after the file is closed. LIANS has seen negligence claims in family and real estate matters made more than 20 years after representation has ended. Having access to the lawyer’s well-documented closed files was critical in the successful defense of these claims.
While many files should be kept indefinitely, it does not mean that everything in the file has to be kept when the file is closed. Spend time culling a file as the matter progresses, and when it is being closed. Duplicate or unnecessary information can be removed from the file before it is sent to storage. Return client records to the client. Do not keep a client’s original documentation. If retaining your files in digital form, be mindful of the need for backup and of the possibility that future changes in technology might render this data inaccessible. Maintain a copy of whatever technology you will need to be able to read this data and/or have it reformatted as technology changes.
Time spent planning now will reap many future rewards, including reduced storage costs.
What to Consider When Retaining Records
It is important to recognize that when deciding which files to keep, and for how long, it is the contents of the file, not its date, which should dictate the length of time a file is to be retained.
For instance, where a client has not followed your advice and you have documentation supporting the advice given and not accepted, it is prudent to keep that documentation indefinitely to protect you in the event that a negligence claim or a professional responsibility complaint is made against you. In general the lawyer responsible for the file should be the one to approve the documentation that is being culled, before it goes to storage and to determine the ultimate destruction date for the file (in accordance with your firm’s established policy).
We strongly recommend that in all files, when culling file contents you maintain all of your file notes. They are frequently a very important part of the advice you gave and the instructions you received from your client.
File management: closing files
Good file management includes proper file closure at the end of the retainer. Here are some tips to ensure you terminate the retainer and close your file effectively:
- Establish a procedure in your office manual that will ensure that files are closed in a consistent manner.
- Write a final letter to the client, outlining the outcome. Ensure you document that your retainer has concluded.
- Return to the client all original documentation and any other property that belongs to the client.
- Cull the file. Get rid of duplicates and case law, scan what you can and keep copies of the retainer agreement, advice and instruction and notes to file as well as any documentation you are required by regulation to keep, such as foundation documents.
- Outline your file retention policy.
- Ensure that all balances are paid and that there are sufficient funds remaining in your trust account to pay for any outstanding items, such as withholding funds for tax purposes or recording releases, if required.
- Make sure you put any outstanding items in your tickler system such as following up on undertakings, and recording releases.
- Do a final risk assessment. Ask yourself whether the final outcome differs significantly from the initial assessment and if so, clearly document why that occurred in case there is a claim or complaint.
Properly closing your file will ensure that your client understands the final outcome of the file and that your representation has concluded.
Legal Profession Act Regulations
When closing property files, also ensure that all foundation documents been dealt with according to the Legal Profession Act Regulations. These Regulations can be found here.
For real estate lawyers the new obligations created include the obligation to maintain foundation documents, even when a lawyer leaves a firm, or a firm is dissolved. Foundation documents include more than the abstract.
The definition of foundation documents, certificate of legal effect and opinion of title are defined in Part 1 of the regulations. See:
- (da) certificate of legal effect
- (ma) definition of foundation documents
- (ua) opinion of title defined
- Regulation 4.13.22 (Record keeping and retention) – requirement to retain record of the information and documentation obtained to verify identify; and
- Regulation 10.4 (Maintenance of records) – requirement to preserve accounting records
The CRA has their own requirements on how long accounting records should be maintained. Consult your accountant on these requirements.