professionalism roundtable: winding up your law …...professionalism roundtable: winding up your...

Professionalism Roundtable:

Winding Up Your Law Practice

CORPORATE COMMERCIAL LAW

SEMINAR

presented by:

The Hamilton Law Association

October 6th, 2016

Presented by: Caterina Galati

Law Society of Upper Canada

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The Law Society of Upper CanadaOsgoode Hall, 130 Queen Street West, Toronto, Ontario, M5H 2N6Tel: 4169473300Toll Free: 18006687380Fax: 4169475263Web: http://www.lsuc.on.ca

Guide To Closing Your Practice for Lawyers

The information contained in this guide is not a substitute for the lawyer’s own research, analysisand judgment. The Law Society of Upper Canada does not provide substantive legal advice oropinions.

Introduction to the Guide Active or Open Client Files Closed Client Files Outstanding Undertakings, Trust Conditions, Obligations, Reporting to the Client Client Funds, Accounting, Books and Records Other Client Property Estate Trustee or Attorney, Other Appointments Office Premises, Equipment, Employees, and Public Notice Notice to the Law Society of Upper Canada Notice to LawPRO® Practice Closure or Transfer Due to Illness, Disability, or Death List of Resources

Appendices

Appendix 1 Sample Notices Appendix 2 Active File Tracking Chart Appendix 3 Letter to Client Advising of Law Practice Closure or Transfer Appendix 4 Clause in Letter Re: Client Funds, Documents or Property in Trust Appendix 5 Direction To Transfer Client File, Funds or Other Property Appendix 6 Client Request For File, Funds or Other Property Appendix 7 Client Acknowledgement Of Receipt Of File, Funds or Other Property Appendix 8 Transfer Memo To File Or New Lawyer Appendix 9 Closed File Tracking Chart Appendix 10 Reporting Letter to Client: Matter Complete Appendix 11 Reporting Letter to Client: Matter Not Complete Appendix 12 Law Office Inventory Checklist Appendix 13 Law Office List Of Contacts Appendix 14 Letter To Service Provider or Supplier Appendix 15 Letter To Law Society Of Upper Canada Appendix 16 Letter To LawPRO® Appendix 17 Letter From Replacement Lawyer to Client

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Appendix 18 Letter From Replacement Lawyer to Law Society and LawPRO®

Introduction to the Guide

There are many circumstances in which you or those acting on your behalf may have to deal withthe transfer or closing of your practice: the sale of a practice, a change in career, joining a firm,judicial or other appointment, formal retirement, or sudden illness or death. Where the practiceinvolved is a sole proprietorship or a small firm the impact is greater than it would be on a largerfirm, as there may be no one available to immediately continue, transfer, or close the practice in anorderly manner.

Your duty of competent representation includes the obligation to take appropriate steps tosafeguard your clients’ interests in all circumstances. Ideally, you should prepare for the closure ofyour practice well before it is required and should have in place contingency plans that deal withthe unexpected need to have someone else continue, transfer, or close your practice on your behalf.Lawyers often underestimate the time and effort required to effectively conclude a law practice.Failure to properly plan or prepare for both anticipated and unexpected departures from yourpractice may expose your clients to significant damages or prejudice, and subject colleagues orfamily members to financial and emotional stresses associated with the transfer or closing process.

The Law Society of Upper Canada and LawPRO® have created this Guide to help you plan forand fulfill your professional conduct responsibilities when transferring or closing your lawpractice. Whether the decision to conclude your practice has been made or you are planning aheadfor such time, the Guide outlines the various issues that you will need to address. These mayinclude transferring active or open files; custody or destruction of closed files; maintaining firmbooks and records; satisfying outstanding undertakings and ongoing obligations; honouring alltrust conditions; addressing accounting and filing requirements; handling client property; dealingappropriately with personnel and office matters; and satisfying all change of status noticerequirements.

The Guide is divided into sections that deal with the different aspects of closing or transferring alaw practice, some of which may not apply to all practices or in all situations. Each sectionprovides a brief overview, a checklist, and references to relevant articles and sample documentsthat are contained in the appendices to the Guide. All sample documents should be reviewed and, ifneeded, modified appropriately for your individual use. Where relevant, links and/or contactinformation for outside organizations have been included, which are accurate at the date listed onthis Guide.

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Active or Open Client Files

When closing or transferring a practice, you must determine which ongoing client matters you cancomplete before the practice is concluded. Even where you have planned in advance for the closingof your practice, it is likely that there will be some active files that you are unable to completebefore the scheduled date of closure and you may need to transfer them to another lawyer or to theclient. Often, in the event of an unexpected practice closure, all active and ongoing files may needto be transferred elsewhere.


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You should prioritize by initially working on matters that can be completed promptly. If you areleaving the practice of law, you should decline new matters or only accept matters that will beresolved prior to the scheduled closing date. Clients whose matters you cannot complete should benotified as soon as possible that your practice will be closing, so that they have sufficient time tofind and retain a new legal representative. Where you are selling or transferring your practice toanother lawyer or are closing your practice to join a firm, you may advise clients of the newcontact information for the lawyer purchasing or taking over your practice but, ultimately, thechoice of lawyer rests with the client. If you are transferring active files to another lawyer, checkfor conflicts to ensure the receiving lawyer does not have a disqualifying conflict of interest asoutlined in Section 3.4 of the Rules of Professional Conduct.

If you have outstanding client matters that will not be completed before the closure of yourpractice, you are effectively withdrawing from representation and must comply with Section 3.7 ofthe Rules of Professional Conduct. A lawyer may only withdraw service if there is good cause andon reasonable notice to the client.

Checklist

Consider placing a notice in the local newspaper and/or the Ontario Reports to announce thepractice closure. See Sample Notices.Review your active file list and note important dates, scheduled appearances, deadlines, andlimitation periods for each matter.Identify files that may be completed prior to closing and files that cannot and must betransferred. See Active File Tracking Chart.Complete work on all open files that you have retained before the office is closed.Prior to contacting clients whose matters you cannot complete, confirm that you can providethe client with reasonable notice of withdrawal, also ensuring

the client’s interests are protected to the best of your abilitythe client is not deserted at a critical stage of the matter or when withdrawal would putthe client in a position of disadvantagegoverning statutory provisions or rules of court are followed, if applicable

In matters that cannot be completed, contact clients to seek instructions regarding thetransfer of their matter (Letter to Client Advising of Law Practice Closure or Transfer)and provide written notice that advises

the law practice is closing or being transferred, and when this will occuryou will no longer be able to continue acting on the clients’ behalfthe contact information of the firm or lawyer that has agreed to continue with the file,if applicableclients may direct their files to the lawyer of their choice, if they preferclients may attend at the office to pick up their file

Where client files are to be transferred to another lawyer, whether arranged by you orselected by the client, obtain a written direction from the client directing you to transfer thefile and any applicable funds held in trust to the new lawyer. See Direction to TransferClient File, Funds or Other Property.Where the client would like the file, obtain a written request confirming the address to whichthe file and other client property are to be delivered. See Client Request for File, Funds orOther Property.Where the client is to pick up the file and other client property, obtain a writtenacknowledgement of receipt from the client. See Client Acknowledgement of Receipt ofFile, Funds or Other Property.

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Consider whether you should make and retain copies of file documents, for your own benefitand at your own cost, before transferring the file to the client or another lawyer.More information on managing closed client files can be found in the Guide to Retentionand Destruction of Closed Client Files.Where, after making reasonable efforts, the client cannot be located and you do not haveinstructions from the client regarding transfer of his or her ongoing matter, consider sendinga written notice by registered mail to the client’s last known address to advise that thepractice is closing and retain a copy of the notice and the delivery receipt for your file.For files to be transferred, either to a new lawyer or the client, prepare a transfer memo (seeTransfer Memo to File or New Lawyer) to the new lawyer or the file that includes

a summary of the fileimportant datesimportant tasksimportant issuesimportant factslimitation periods

If required, you may remove yourself as lawyer of record by

filing a Notice of Change of Lawyer that appoints new counsel to whom the file hasbeen transferredfiling on the client’s behalf a Notice of Intention to Act in Person, orbringing a motion for an Order that removes you as lawyer of record

Notify the Law Society’s Administrative Compliance department in writing to advise whatlawyer will be taking over active or open files and closed files, if applicable. See Letter toLaw Society of Upper Canada.

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Closed Client Files

Lawyers leaving or closing a practice are often unsure of what to do with closed client files.Determining what to do with closed files will depend on who owns the file or, more accurately,who owns the documents stored in the closed file.

Ideally, lawyers should have a file closing procedure in place such that all client documents arereturned to the client before or when the file is closed. If this procedure is followed for every file,the only documents remaining in closed files at the time of a practice closure or transfer will bedocuments that belong to the lawyer. These may include copies of original client documents,copies of draft and final agreements, the lawyer’s personal notes, copies of correspondence(including emails, memos or notes relating to client communications), all of which are kept for thelawyer’s benefit and at the lawyer’s expense.

Where closed files have already been purged of all documents or property belonging to the client,you may wish to preserve the file for a period after your practice has been closed or transferred todefend against any future claims or complaints against you. The retention period for closed files isat the lawyer’s discretion and depends on a number of factors, such as the limitation period foractions against lawyers, the nature of the original matter, and the outcome. For issues to considersee the Law Society’s Guide to Retention and Destruction of Closed Client Files.

If you not have followed the recommended procedure and a closed file contains documents thatbelong to or are the property of a client or former client, you have an obligation to preserve these



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in accordance with ByLaw 9 and Section 3.5 of the Rules of Professional Conduct. You mustdeliver the documents to the client (or to his or her direction), continue to preserve the documents(either personally or by transferring to another lawyer) and, in some cases, you may decide toreturn the entire closed file to your client. Prior to transferring a closed file to another lawyer ordelivering it to a client, you should consider the potential consequences of doing so.

A review of your closed file list will assist you to determine which files contain client documents,which files may be destroyed in a manner that maintains client confidentiality, and which filesshould continue to be preserved, and for how long.

Checklist

Closed Files Containing Clients’ Documents or Property

Review closed files list to determine which files may still contain documents or property thatbelong to the client.Deliver documents or property from the file to the client by registered mail or have the clientretrieve them from the office, signing an acknowledgment of receipt.If the client cannot be located for the return of documents you must

continue to preserve and maintain the client’s documents indefinitely or until the clientprovides you with instructions, ortransfer the file to another lawyer for continued preservation and safekeeping

If there is any dispute as to who is entitled to client documents or property or you are unsureas to the proper person to receive them, you must make application to a tribunal ofcompetent jurisdiction for direction as required by Rule 3.57.

Closed Files Containing Only Lawyer’s Copies of Documents

Once closed files have been purged of client documents or property and they contain onlydocuments that belong to you, review your files to determine whether you will

destroy the closed file, in a manner that preserves client confidentialityretain all or part of the closed file, for how long and in what mediumtransfer the closed file to another lawyerdeliver the closed file to the client

Note that your obligations to maintain certain records, financial and otherwise, will continueafter you close or transfer your practice. See the Client Funds, Accounting, Books andRecords section of this Guide.

Destruction of Closed Files

Review your closed file list to determine which files may be destroyed upon the closure ortransfer of your practice and which should continue to be retained for a period beforedestruction. See Closed File Tracking Chart.Even where you decide to continue retaining closed files, you may first reduce the bulk orsize of them by destroying certain contents, such as multiple or excess copies of individualdocuments or copies of documents that came from an outside source and can easily bereacquired.If you choose to destroy closed client files or certain file contents you must do so in amanner that preserves client confidentiality in accordance with Section 3.3 of the Rules ofProfessional Conduct, such as shredding or incineration. Where closed files or file contentsare in nonpaper or electronic format, special steps may need to be taken to ensure properdeletion and physical destruction.






If you choose to outsource the destruction of closed client files, regardless of the medium,ensure that the thirdparty provider is reputable and will ensure that the files remain secureuntil they are destroyed.

Retention of Closed Files

Review your closed file list to determine which files should continue to be retained and forhow long. See Closed File Tracking Chart.Determine what file contents you wish to retain, considering

potential complaints against you or claims for errors or omissionsthe length of the limitation period for actions against lawyersthe nature of legal work performed (e.g. real estate files should be kept longer thancriminal files involving expired appeal periods)the period during which the legal documents created for the client may impact theclient’s interestswhether the client had diminished capacity or was a minor at the time legal serviceswere performedthe results you obtained for the client in the matterthe client’s attitude or character towards you and the outcome of the matter

Determine if any contents of the closed paper file may be converted to electronic or othernonpaper form, considering legal and regulatory requirements as well as thetrustworthiness, readability and accessibility of the converted form.Create a retention schedule outlining how long files will be retained, at what interval(s) theywill be reviewed, and when eventual destruction may occur.Where closed file information is in electronic format and that information is to be preserved,determine where and how the data and its backup media will be stored, archived andretrieved after the practice closure or transfer.Determine where to physically store your closed files, paper or electronic, to maintainconfidentiality in accordance with Section 3.3 of the Rules of Professional Conduct and toprotect file contents from damage or destruction.If you choose to store closed client files with a thirdparty provider, whether they are inpaper or electronic form, ensure that the thirdparty provider is reputable and will ensure thatyour files remain secure and confidential.

Transfer of Closed Files to Another Lawyer

Consider the potential consequences prior to transferring closed files to another lawyer.Closed files should only be transferred after you have determined

the receiving lawyer has agreed to retain the files for a certain period and to allow youaccess to those files for the duration of that period, oryou no longer require access to the documents contained in the closed file

For your records, maintain a list of the closed files that were transferred, to whom and when,with a summary of the file contents.

Delivery of Closed Files to Client

Consider the potential consequences prior to delivering a closed file to the client. A closedfile should only be delivered to the client where you have determined you no longer requireaccess to the documents contained in the closed file.Remove all your personal notes made to, or stored in, the file.Obtain the client’s written acknowledgement indicating receipt of the only remaining copyof the client’s documents in the closed client file. Retain this for your records.




Notice to Law Society of Upper Canada

Notify the Law Society’s Administrative Compliance department to advise what lawyer willbe taking over active or open files and closed files, if applicable. See Letter to Law Societyof Upper Canada.

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Outstanding Undertakings, Trust Conditions, Obligations, Reporting to the Client

Rule 7.211 of the Rules of Professional Conduct states that lawyers must fulfill every undertakinggiven and honour every trust condition once accepted. The commentary to the Rules ofProfessional Conduct provides that the person receiving the undertaking is entitled to expect thatthe lawyer giving the undertaking will honour it personally, unless the undertaking clearlyindicated otherwise at the time it was given. Likewise, trust conditions are obligations on theaccepting lawyer that the lawyer must honour personally.

As such, all undertakings, trust conditions, and ongoing obligations must be satisfied before yourpractice is closed or transferred to another lawyer. If this is not possible or practical, you mustadvise the client and the successor lawyer of the nature of the undertaking, trust condition, orobligation. You must determine whether the successor lawyer will honour your given undertaking,trust condition, or obligation, whether you must satisfy these, or whether you may be relieved fromstrict compliance by the person to whom you gave the undertaking, the trust condition, or to whomyou owe the obligation. If you cannot honour a trust condition before you close or transfer yourpractice and its terms cannot be amended in writing on a mutually agreeable basis, the subject ofthe trust condition should be immediately returned to the person imposing the trust condition.

Finally, you must deliver a reporting letter to every client with outstanding issues, whether or not afinal bill will be rendered for any outstanding fees and/or disbursements. See the section on OtherClient Property for the special obligations that exist when you hold client property other thanfunds, including valuable items, original wills or powers of attorney, or corporate records.

Checklist

Review each file to determine whether you have any outstanding undertakings, trustconditions, or other obligations.Satisfy outstanding undertakings, trust conditions, or obligations before you close or transferthe practice, where possible.If you cannot satisfy the undertaking, trust condition, or obligation prior to the practiceclosure or transfer, obtain

the successor lawyer’s commitment, in writing, to honour the undertaking or trustcondition, or to meet the obligationa release from strict compliance with the undertaking, trust condition, or otherobligation in writing, from the person to whom it was originally given

If you cannot honour a trust condition before you close or transfer your practice and its termscannot be amended in writing on a mutually agreeable basis, the subject of the trustcondition should be immediately returned to the person imposing the trust conditionIf you are delivering the file to the client, ensure that the reporting letter clearly outlines anyunfulfilled undertakings given on behalf of the client, pending trust conditions, outstanding






obligations, and/or other issues and provides an explanation as to how these are to be dealtwith and by whom. See Reporting Letter(s) to Client.Complete all reporting letters before the practice is closed or transferred and while you haveprofessional liability insurance coverage (as this is considered providing legal advice,opinions or services).If, at the time of transfer of the file to another lawyer, the reporting letter to the client is notcomplete, specifically bring this to the successor lawyer’s attention.

Legal Aid Files

Submit completed accounts to the appropriate Legal Aid Office.Bill and report to Legal Aid any matters where work on the file is incomplete.Advise the Legal Aid office in writing that you are closing or transferring your practice andthe date the closure or transfer becomes effective.In your written notice to the client advising that you are closing or transferring your practice,inform the client that he or she must contact the Legal Aid Office to apply for a change oflawyer.If the client has directed that the file be transferred to another lawyer, advise the Legal Aidoffice in writing of the closure or transfer of your practice and of the transfer of the file tothe successor lawyer.Contact the Legal Aid Office or Director in your area for information on what further stepsyou may need to take.

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Client Funds, Accounting, Books and Records

Section 3.5 of the Rules of Professional Conduct provide that a lawyer has the obligation tosafeguard all client property, including money, as a careful prudent owner would. Where funds arebeing held on the client’s behalf, the lawyer must also comply with the money handling andbookkeeping requirements of ByLaw 9. Upon leaving practice, all client funds held in trust mustbe accounted for and all accounting records and filings must be accurate and current as of the dateyou close or transfer your practice. If you have unclaimed funds in trust, you may apply to transferthese funds to the Law Society of Upper Canada for continued safekeeping, in accordance withByLaw 10. Your obligations to maintain certain records, financial and otherwise, will continueafter you close or transfer your practice. You must continue to comply with the Law Society’s ByLaws and other legislation relating to your firm’s records.

Checklist

Client Funds

Contact clients to seek instructions regarding any funds you hold in trust (see Letter toClient Advising of Law Practice Closure or Transfer and Clause in Letter Re: ClientFunds, Documents or Property in Trust).If you hold client funds in trust on the date you close or transfer your practice, you may

apply them to the outstanding account in accordance with ByLaw 9, where anaccount has been delivered to the client for fees and disbursements that remainoutstanding and there is no other right or claim to the fundsreturn the funds to the client, or








obtain a written direction from the client to transfer the funds to the client’s newlawyer (see Direction to Transfer Client File, Funds or Other Property)

If the client does not claim the funds in trust, does not provide direction regarding the fundsor cannot be located

you must retain the funds in your trust account in accordance with the requirementsunder Section 3.5 of the Rules of Professional Conduct and s. 59.6 of the Law SocietyAct, ordepending on the circumstance, you may make an application under ByLaw 10 todeliver the funds to the Law Society of Upper Canada, Unclaimed Trust Fund

To transfer funds to the Unclaimed Trust Fund pursuant to ByLaw 10

you must be unable to determine who is entitled to the funds or you have been unableto locate the person entitled to the funds after reasonable efforts over a period of atleast two yearsan application form must be submitted by the lawyer responsible for the trust accountand a separate application must be made for each file or matter (see Unclaimed TrustFunds Licensee Application Form)once you are approved to deposit to the Unclaimed Trust Fund, a cheque is madepayable to the Law Society of Upper Canada in trust in the amount permittedyou must inform the Law Society if any new information relating to the person who isor may be entitled to the funds comes to your attention

For more information contact the Unclaimed Trust Fund voice mail at 4169473300extension 3312 or tollfree at 18006687380 extension 3312.

Trust Accounts

If you maintain trust funds in your account after your practice has been closed, you mustcontinue to comply with the Law Society’s trust accounting and annual filing requirementsset out in ByLaws 9 and 8, respectively.Close the trust account only when the balance is zero and all funds have been distributed andaccounted for.Notify the bank to request that the trust account be closed and ask for confirmation inwriting or a final bank statement showing that the trust account has been closed.Upon closing any mixed trust account, complete and remit to the Law Society of UpperCanada the Report on Opening or Closing a Trust Account. This information will be sharedwith the Law Foundation of Ontario.

General Accounts

Consider whether you will need to continue to operate these accounts for a period of timeafter the practice is closed, for either accounts payable or accounts receivable.

Collecting Accounts Receivable

Prepare and deliver final bills or accounts.Continue to collect accounts receivable after the closure or transfer of your practice.Consider selling your accounts receivable if you sell or transfer your practice.

Books and Records

Review books and records requirements in ByLaw 9 or see the Bookkeeping Guide forLawyers.Retain books and records for trust accounts for the ten full fiscal years immediatelypreceding the most recent fiscal year end [sections 18 and 23(2) of ByLaw 9].


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If applicable, retain valuable property records for other client property held in trust for theten full fiscal years immediately preceding the most recent fiscal year end [sections 18.9 and23(2) of ByLaw 9].If applicable, retain records for mortgages or other charges on real property held in trust forthe ten full fiscal years immediately preceding the most recent fiscal year end [section 23(2)of ByLaw 9]. Retain books and records for general accounts for the six full fiscal years immediatelypreceding the most recent fiscal year end [section 23(1) of ByLaw 9].Retain client identification and verification of identity information and records for minimumof six years from [section 23(14) of ByLaw 7.1]

the date you completed the work done for clients on matters that were concluded priorto closing or transferring your practicethe date you transferred the file to another lawyer or to the client on matters that wereactive or ongoing at the time of closing or transferring your practice

Review the requirements in the Income Tax Act (Canada), to determine any legalrequirements to maintain financial or other records relating to your practice.

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Other Client Property

As with client funds, upon leaving practice, the lawyer must return to the client (or per the client’sdirection) any other client property that may be in the lawyer’s custody. Such property may includeitems of value, original wills or power of attorney documents, corporate books or seals, and mayhave been stored by you in a fireproof safe or safety deposit box. You must continue to care forsuch client property until you have obtained from its rightful owner instructions regarding itsdelivery or, if that is unavailable, an order of a tribunal of competent jurisdiction that directs youhow to deal with the property.

Though it may be common for a lawyer to hold original wills, powers of attorney or corporatedocuments and items in trust after initial services have been completed for the client, ideally, clientfunds and valuable property held in trust should be returned to the client as soon as the lawyer hascompleted the services that he or she was retained to provide.

Whether or not you hold original wills or powers of attorney, where you have been named as anestate trustee or an attorney, there are special obligations that may continue after you have closedor transferred your practice. You may have similar obligations where you have been named asdirector of a corporation that you also represented as a client. These and other obligations related tospecial appointments are discussed in further detail in the Estate Trustee or Attorney, OtherAppointments section of this Guide.

Checklist

Review your files and records, including those that relate to items stored both offsite and atyour office, to identify those clients for whom you hold

original willsoriginal power of attorney documentscorporate books, seals and recordsvaluable client propertyaccess key(s) to safety deposit box(es) rented by the client





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Prepare a current contact list for such clients (or in the case of a corporate client, theprincipals or agents of the corporation), making reasonable efforts to locate those for whomyou do not have a current address.Contact clients (or corporate principals or agents) to seek instructions regarding any propertyyou hold in trust (see Letter to Client Advising of Law Practice Closure or Transfer andClause in Letter Re: Client Funds, Documents or Property in Trust) and provide writtennotice that advises

the law practice is closing, and whenthe contact information of the firm or lawyer that has agreed to take over safekeepingof the client’s property, if applicableclients may direct their property to the lawyer of their choice, if they preferclients may attend the office to retrieve their property

Where you have been named as estate trustee, attorney or corporate director, there arespecial obligations that may continue after you have closed or transferred your practice,whether or not you hold the original will, power of attorney document or corporate records.If you do not intend to act in any of these additional roles, you must advise the client of thisin your written notice.Where client property is to be transferred to another lawyer, whether arranged by you orselected by the client, obtain a written direction from the client directing you to transfer theproperty to the new lawyer. See Direction to Transfer Client File, Funds or OtherProperty.Where, after making adequate inquiries, the client (or corporate principals or agents) cannotbe located and you do not have instructions regarding transfer or return of client property,send a written notice to the client’s last known address by registered mail to confirm that thepractice is closing and how the property will continue to be preserved, and retain a copy foryour file. Per Section 3.5 of the Rules of Professional Conduct, you must

continue to preserve and maintain the client’s property indefinitely or until the clientprovides you with instructions, ortransfer the property to another lawyer for continued preservation and safekeeping

Advise the Law Society’s Administrative Compliance department whether you will continueto hold client property described above or provide the name and contact information of thelawyer who has agreed to take over safekeeping of original wills, powers of attorney or otherclient property after closing or transferring your practice. See Letter to Law Society ofUpper Canada.

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Estate Trustee or Attorney, Other Appointments

A lawyer who has been appointed to or has taken on a role that is beyond the scope of a lawyermay have special obligations that do not necessarily end with the closure or transfer of the lawpractice. Such special obligations or considerations may arise where you have been named as anestate trustee of a will or attorney under a power of attorney, where you have been appointed as acorporate director or as a notary public, or have acted as a commissioner for taking affidavits.

Checklist

Estate Trustee or Attorney Under Power of Attorney





Whether or not you hold the original will or power of attorney document, your appointmentas estate trustee (subject to the specific provisions of the will) or attorney (subject to thespecific provisions of the power of attorney) remains in full force or effect regardless ofwhether you continue to practise law.If you intend to act as estate trustee or attorney, confirm this in your written notice to theclient advising of the closure or transfer of your practice.Note that, if you act as estate trustee or attorney at the time of closing or transferring yourpractice, depending on whether you are doing so for clients or for related persons as definedby section 251 of the Income Tax Act (Canada), you may be limited in your ability to applyto surrender your licence to practise law or to apply for an exemption from annual fees andfilings. For details, see the Notice to the Law Society of Upper Canada section of thisGuide.If you do not wish to act as estate trustee or attorney and can reach the client

advise the client of this in your written notice regarding the closure or transfer of yourpracticeif you are unable to assist the client with any required amendments to the will orpower of attorney documents, recommend that he or she seek legal advice fromanother lawyer for this purposeobtain the client’s written direction for the return of the original will or power ofattorney document to him or her, or for its transfer to another lawyer

If you do not wish to act as estate trustee or attorney and, after reasonable efforts, cannotlocate the client obtain instructions regarding the return or transfer of the original will orpower of attorney document

prepare a Renunciation of Right to a Certificate of Appointment of Estate Trustee (orSucceeding Estate Trustee) with a Will in compliance with the Rules of CivilProcedure, if applicable, and attach it to the original willprepare a letter of resignation as attorney in compliance with the Substitute DecisionsAct, 1992, if applicable, and attach it to the original power of attorney documentsend a written notice to the client’s last known address by registered mail to confirmthat the practice is closing and that you do not intend to act as estate trustee or attorneyand to provide the contact information for the lawyer who will continue to preservethe original will or power of attorney document (you or otherwise), and retain a copyof the notice and delivery receipt for your file

Director of Corporation

Whether or not you hold corporate books, seals or records, your appointment as a corporatedirector (subject to the specific provisions of the original appointment) remain in full forceregardless of whether you continue to practise law.If you intend to continue to act as a corporate director, confirm this in your written notice tothe client (or its principal or agents) advising of the closure or transfer of your practice.If you do not wish to continue to act as corporate director you should

advise the client (or its principal or agents) of this in your written notice regarding theclosure or transfer of your practicedetermine whether any additional notices of resignation are required (e.g. byprovincial or federal statute) and who will file themobtain the client’s written direction for the return of the original corporate documentsand property or for its transfer to another lawyer

Commissioner For Taking Affidavits, Notary Public


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Review the Commissioners for Taking Affidavits Act and the Notaries Act, as the ability tocommission affidavits or notarize documents is not regulated by the Law Society. Thesestatutes apply where you have exercised your powers as a commissioner for taking affidavitsand where you have been previously appointed as a notary public.Where your Law Society status has changed (e.g. you are now in a nonpractising status,have been exempted from the requirement to pay annual fees or submit annual filings orhave surrendered your licence to practice law), ensure that the relevant statute permits you tocontinue to commission affidavits or notarize documents.Regardless of your status, when you cease to be a practising lawyer who carries professionalliability insurance, you should ensure that you do not provide any legal advice whenexercising your powers as a commissioner or a notary public.

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Office Premises, Equipment, Employees, and Public Notice

Apart from client matters, when you close or transfer a practice you may be required to deal with anumber of administrative or business matters that relate to office premises, equipment, andemployees and to posting public notice about the closure or transfer of your practice.

Checklist

Office Premises

Where you own office space, determine whether you should sell, rent or use the premises forsome other purpose.Where you rent office space, review your lease or contact the landlord to determine whetheryou may cancel the lease, assign the lease or sublet the premises. If none of these is possible,set aside funds to continue lease payments or to pay out the lease completely.Where you share office space, review the joint lease or agreement with colleagues orofficemates to determine your responsibilities, if any.Remove firm name from building exterior, building directory, office door and window.Return building security entrance cards, door and mail keys, and parking passes.Provide contact information to property manager or building superintendent where you maybe reached for any outstanding issues.Cancel all maintenance or cleaning services.

Office Inventory

Compile an inventory of the systems, equipment, furniture, law library and supplies of yourlaw office. See Law Office Inventory Checklist and Law Office List of Contacts.Inventory communications equipment, noting whether you own or lease

desktop and cellular or smart phoneshandsets, headsets, earpiecesanswering machinesfacsimile machinesaccessories (e.g. cables, wires, batteries, chargers)call routing, management or voicemail system

Inventory computer equipment, noting whether you own or lease

desktop and laptop models, personal digital assistants (PDAs)

http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90c17_e.htm

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peripherals (e.g. keyboard, monitor, mouse, printer, scanner, webcam, microphone,speakers, external modem or router)hard drives, backup drives, portable drives and serversportable memory storage (e.g. memory stick, USB flash drive)accessories (e.g. monitor or tower stands, cables, wires, batteries, chargers, powerbars, surge protectors)

Inventory other office equipment, noting whether you own or lease

photocopierspaper shreddersdictation equipmentdebit/credit imprint or pointofsale machines

Inventory office furniture (e.g. desks, tables, seating, filing, shelving and storage) andaccessories (e.g. coat racks, décor, small appliances), law library and office supplies.

Disposal of Office Inventory

Where you own equipment, furniture or other items inventoried above, determine whetheryou should sell, donate, discard or retain for another use.Note that it is almost impossible to completely erase the information stored on a hard drive.To comply with Section 3.3 of the Rules of Professional Conduct, consider using a programthat wipes or erases information from your computer to ensure that no confidential clientinformation remains before disposing of the hard drives or destroying the hard drives.Where you wish to sell or donate equipment, furniture or other items, consider posting thisinformation with your public notice of practice closure or transfer (mentioned below).Where you rent equipment or furniture inventoried above, review your lease to determinewhether you may cancel or assign the lease. If neither termination nor assignment ispossible, set aside funds to continue lease payments or to pay out the lease completely.Review equipment maintenance or service contracts to determine whether to terminate,assign, or pay out.

Service Providers and Suppliers

Notify all service providers and suppliers of the practice closure or transfer and providecontact information where you may be reached for any outstanding issues. See Letter toService Provider or Supplier.Cancel service for telephone, facsimile and Internet access. Cancel any other utilities, ifapplicable.Cancel listings in general directories (e.g. Yellow Pages), legal directories (e.g. OntarioLawyers Phone Book, Canada Law List, Martindale and Hubbell) and referral services, bothpaper and online versions. Ensure that links to your website are removed.Consider changing your voicemail greeting and website for a limited time to advise thepractice is closed and to provide contact information of the lawyer who has taken over orpurchased your practice, if applicable. Consider creating an automatic email reply thatadvises of the same.Where you have contracted offsite storage space (e.g. for closed files), determine whether itis still required. If not, review contract to determine cancellation terms.Where you have rented a safety deposit box that has been emptied of its contents, cancel therental and return any access key(s) to the bank. Where you have been given an access key toa safety deposit box rented by a client, return that to the client.Where you have a secure document box for the exchange or service of legal documents,cancel the subscription or membership with the document exchange service provider.




Provide change of address to post office and arrange for mail forwarding service. Cancel anyarrangements with thirdparty mailing or other business services.Review memberships in local law associations and other professional organizations todetermine whether you will retain or cancel. Provide new contact information to those youwill retain.Review your subscriptions to reports or journals to determine whether you will retain orcancel. Provide new contact information for those you will retain.Review your nontrust bank accounts, lines of credit, and credit cards to determine whetheryou still require any of these accounts, may use them for another purpose or will close orcancel. Provide new contact information for those that will remain open.Cancel business or commercial insurance policies related to your practice.

Employees

Provide sufficient notice of termination or compensation in lieu of notice, in compliancewith applicable law.Prepare a Record of Employment for each staff member. Obtain necessary forms fromEmployment and Social Development Canada.Pay employees accrued benefits, such as vacation pay, if applicable.Submit income tax withheld to Canada Revenue Agency.Prepare and deliver T4 slips.Submit Canada Pension Plan and Employment Insurance payments withheld.Submit any other employer contributions (e.g. group benefits, group retirement savings orprivate pension plan), if applicable.Ensure that articling students have their articles assigned to another qualified principal. Ifyou are transferring or selling your practice, the student may consider continuing articleswith the lawyer who is taking over or purchasing the practice.

Public Notice

Consider posting notice of the practice closure or transfer (see Sample Notices) inthe lobby of your office building or your office doorlocal law association offices, law libraries, barristers’ or courthouse loungeslegal publications (e.g. Ontario Reports, legal magazines), both paper and onlineversionsother publications (e.g. local or regional newspapers, community magazines), bothpaper and online versionsonline bulletin boards or websites

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Notice to the Law Society of Upper Canada

It is likely that closing or transferring your practice will result in a change of your status with theLaw Society of Upper Canada. Notice of the closure or transfer and your changing status must beprovided to the Law Society and should be given as far in advance as possible to ensure that yourrecords are accurate and, where you are leaving the practice of law, your annual fees may beadjusted.

There are special considerations where you are leaving practice for a judicial appointment, youintend to apply to surrender your licence to practice law or for an exemption from further Law




Society fees or filings, or you wish to subsequently return to the private practice of law. For moreinformation regarding these, refer to the Status Changes and Fees, Filings, Insurance pages online.

Also, where your law practice was a limited liability partnership, you have practiced law through aprofessional corporation or you did so in connection with nonlicensees, there may be additionalLaw Society reports or notices required. These are apart from any legally required notices orreports. To discuss any additional Law Society requirement related to the business structure of yourpractice contact the Law Society’s Administrative Compliance department via the Resource Centreat 4169473315 or tollfree at 18006687380 extension 3315.

Checklist

Change in Status

Notify the Law Society in writing of your intention to close or transfer your practice.Provide the effective date, any change in your status, and your new contact information. SeeLaw Society of Upper Canada Notice of Change of Information.If applicable, notify the Law Society’s Administrative Compliance department in writingabout your practice closure or transfer and provide the location of closed files, original willsand power of attorney documents, corporate records and property, status of trust accountsand new contact information. See Letter to Law Society of Upper Canada.If you are no longer practising law but are still providing services that are often, but notexclusively, provided by lawyers, ensure that you make it clear to clients and others that youare not acting as a lawyer. Examples may include acting as estate trustee, corporate director,commissioner, notary public or as a mediator.If you are maintaining your licence but changing to a nonpractising status, there may be areduction in your annual fees and you may be entitled to request a refund of any creditbalance resulting from the prorated adjustment of your fees.Note that, if you are leaving the practice of law and subsequently wish to return to practice,you may change your status but there may be private practice reentry requirements that youmust fulfill.

Appointment to Judicial Office

Pursuant to section 31(1) of the Law Society Act, if you have been appointed to judicialoffice, you may have your licence to practise law placed in abeyance, thereby exempting youfrom the requirements to pay the annual fee and submit annual filings.If applicable, notify the Law Society’s Administrative Compliance department in writingabout your practice closure or transfer and provide them with the location of closed files,original wills and power of attorney documents, corporate records and property, status oftrust accounts and new contact information. See Letter to Law Society of Upper Canada.Lawyers eligible for abeyance are those appointed fulltime as

judges of any federal, provincial or territorial courtmasters or case management masters of the Superior Court of Justiceprothonotaries of the Federal Court of Canadamembers of the Ontario Municipal Boardmembers of a tribunal that has a judicial or quasijudicial function and that is named inthe regulations for the purpose of section 31(1) of the Law Society Act

Where you have been appointed to judicial office and wish to request abeyance, you mustprovide a copy of the Order in Council as proof of the judicial appointment with your writtenrequest to the Law Society.

http://www.lsuc.on.ca/For-Paralegals/About-Your-Licence/Status-Changes/

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Upon abeyance of your licence, you will be exempt from the payment of the annual fee andwill be entitled to request a refund of any credit balance resulting from the proratedadjustment of your fees.Note that, if you cease to hold office as described above and you later wish to resume thepractice of law, you may request in writing to restore your licence, after which you will berequired to pay the annual fee and file the Lawyer Annual Report. There may also be privatepractice reentry requirements that you must fulfill. If you do not intend to return to practice(and you are eligible), you may request to be placed directly into an exempted status,wherein you will remain exempted from the annual fees and filings.

Surrender of Licence to Practice Law

If you wish to surrender your licence to practise law you must submit to the Law Society aformal application accompanied by supporting documentation, in accordance with ByLaw4. See Application to Surrender Licence to Practise Law.Note that separate notice to the Administrative Compliance department about the location ofclosed files, original wills and power of attorney documents, corporate records and property,status of trust accounts and new contact information is not required because this informationwill be captured in your application for surrender.To be eligible to surrender your licence to practice law you must be in good standing and nolonger practicing law. By surrendering your licence, you relinquish your entitlement topractise law in Ontario.If you are acting as estate trustee or attorney only for related persons, as defined by section251 of the Income Tax Act (Canada), you may be eligible to apply to surrender your licenceto practise law. If you act as estate trustee or attorney for nonrelated persons, you may notsurrender your licence.Upon surrendering your licence you are no longer required to pay the annual fee and will beentitled to request a refund of any credit balance resulting from the prorated adjustment ofyour fees.Note that if you surrender your licence and later wish to resume the practice of law you mayapply to be relicensed to practise law. You must submit the required documents andapplication fee and, after relicensing, you will be required to pay the annual fee and file theLawyer Annual Report. Also, there may be private practice reentry requirements that youmust fulfill.

Exemption From Annual Fees and Filings

If you wish to permanently retire from the practice of law you must submit to the LawSociety a formal application accompanied by supporting documentation, in accordance withByLaw 5. See Application for Exemption From the Requirement to Pay Annual Feeand to Submit an Annual Report.Note that separate notice to Administrative Compliance about the location of closed files,original wills and power of attorney documents, corporate records and property, status oftrust accounts and new contact information is not required because this information will becaptured in your application for exemption.To be eligible for exemption from the annual fees and filings you must be in good standingand be either over 65 years of age and no longer practicing law, or be permanentlyincapacitated and unable to practise law. Once exempted, you are formally retired from thepractise of law in Ontario, though you may continue to practise law through a programapproved by Pro Bono Law Ontario (PBLO).If you are acting as estate trustee or attorney only for related persons, as defined by section251 of the Income Tax Act (Canada), you may be eligible to apply for the exemption fromboth the annual fees and filings. If you act as estate trustee or attorney for nonrelated







persons, you may be eligible to apply for an exemption from the requirement to pay theannual fee, however, you must still

declare the trusteeship to the Law Society, via your application for exemptioncontinue to file the Lawyer Annual Reportcontinue to be subject to the Spot Audit program, andfile the appropriate exemption forms each year with LAWPRO® to confirm yourstatus as exempt from payment of insurance premium levies

Upon exemption you are no longer required to pay the annual fee and will be entitled torequest a refund of any credit balance resulting from the prorated adjustment of your fees.Note that if you are granted an exemption and later wish to resume the practice of law,outside of a program approved by Pro Bono Law Ontario (PBLO), you may do so uponwritten request to the Law Society. If the exemption application was based on incapacity, anoriginal letter from a qualified medical practitioner that states you are fit to return to practiceis also required. After your status change you will be required to pay the annual fee and filethe Lawyer Annual Report. Also, there may be private practice reentry requirements thatyou must fulfill.

Additional Notices

Where you practiced law through a professional corporation that will no longer be used, youmust surrender the Certificate of Authorization in compliance with ByLaw 7. SeeApplication for Permission to Surrender Certificate of Authorization. For assistance,contact the Law Society’s Administrative Compliance department via the Resource Centre at4169473315 or tollfree at 18006687380 extension 3315.Where the Law Society has received notice of or approved the practice arrangement, includein your letter to the Law Society that the closure or transfer of your practice will result in thedissolving of the arrangement. Arrangements may include

a limited liability partnershipa multidiscipline practice or partnershipan affiliation

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Notice to LawPRO®

Because closing or transferring your practice is also likely to result in a change to your insurancecoverage requirements, notice of the closure or transfer must be provided to LawPRO® and shouldbe done as soon as possible to ensure appropriate and seamless coverage. Contact LAWPRO®for all inquiries regarding professional liability insurance matters at 4165985899 or tollfreeat 18004101013, or visit their website at www.lawpro.ca.

Checklist

Assess your insurance coverage needs once the practice is closed and contact LawPRO®directly to discuss the insurance options that will work best for you.Notify LawPRO® at least 60 days prior to closing or transferring your practice and advisewhether you will still be practising law (e.g. with a firm, as inhouse counsel or through aprogram approved by Pro Bono Law Ontario) or changing to a nonpractising status.





Because there is a 60day waiting period on runoff buyup policies, notification should bemade as early as possible to avoid gaps in your coverage. See Letter to LawPRO®.Obtain prorated refund of insurance coverage to the day of any premium you have paid,noting that any refund will be backdated a maximum of 30 days.Consider purchasing runoff coverage in excess of the $250,000.00 automatically availableto protect against any future claims that may arise after the practice has been closed. Notethat runoff insurance coverage only covers work done before your change in status and doesnot cover work done after that.

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Practice Closure or Transfer Due to Illness, Disability, or Death

A lawyer’s duty of competent representation includes safeguarding client interests in the event ofhis or her death, disability, impairment, or incapacity. Ideally, as a sole practitioner or a lawyer in asmall firm you should make arrangements for a replacement lawyer to step into your practice in theevent that you are unable to continue. All critical information regarding client matters and theoperation of your practice should be stored in a location that can be easily and efficiently accessedso that your replacement lawyer can continue, close, or transfer your practice on your behalf.Ideally, such preparations for the unexpected should be made shortly after you opened your lawpractice or firm.

However, in the event that you are consulting this Guide because you have been asked to assist inmanaging or concluding the practice of a lawyer that has not put such contingency plans in place,review the Checklist for the Replacement Lawyer Who Takes Over the Law Practice of anotherLawyer contained in The Contingency Planning Guide for Lawyers and consider theinformation outlined below. For guidance, contact the Law Society’s Trustee Services departmentat 4169473315 or tollfree 18006687380 extension 3315.

Checklist

Depending on the situation, determine whether the lawyer has a power of attorney forproperty in place for his or her practice, trust account(s) and general account(s) or a will thatprovides instructions for these. If not, discuss with the financial institution what will berequired to continue to manage the trust and general funds until the lawyer can return topractice, or until the practice can be transferred to you or another lawyer.Determine whether the lawyer has an office manual outlining the procedures for theoperational aspect of the law practice that you may review. If not, meet with the lawyer’ssupport staff to discuss these procedures.Do an initial check for conflicts to ensure that you are not precluded from assisting with anyof the lawyer’s outstanding client matters, whether you ultimately take over the matters orrefer the clients to another lawyer.Review the lawyer’s reminder or calendaring system to determine immediate or impendingdeadlines and appearances that must be addressed on the lawyer’s behalf.Briefly review the lawyer’s open files to familiarize yourself with current client matters andto determine which matters you can assist with, and those you will refer out.Review the lawyer’s time and billing records to determine which clients can be billed forservices already rendered. Prepare and deliver invoices and ensure payment to manage theaccounts receivable until the lawyer can return to practice or the practice can be transferred.


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Review the lawyer’s accounts receivable to ensure that his or her financial obligationscontinue to be fulfilled until the lawyer can return to practice or the practice can betransferred.Ensure that you fulfill the lawyer’s obligations regarding his or her employed staff, includingpayroll, benefits and remittances for income tax, Employment Insurance and Canada PensionPlan.Advise the lawyer’s clients in writing of the lawyer’s inability to continue to act, and why.Indicate whether you are able to assist in the matter or the client must obtain another lawyer,and whether you can refer the clients to an appropriate lawyer. See Letter FromReplacement Lawyer to Client.Notify the Law Society of Upper Canada and LawPRO® to advise that the lawyer istemporarily or permanently unable to practise law, providing relevant dates and details. SeeLetter From Replacement Lawyer to Law Society and LawPRO®.

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List of Resources

Articles, Guides and Resources

Law Society of Upper Canada

Bookkeeping Guide for LawyersClient Service and Communication GuidelineFile Management GuidelineFinancial Management GuidelineGuide to Retention and Destruction of Closed Client FilesTrustee ServicesUnclaimed Trust Fund

LawPRO®

E&O InsuranceProfessional Liability Insurance for Retired Lawyers, Estate Trustees, Emeritus Lawyers, Judgesand Others No Longer Engaged in the Practice of Law

Websites

Canada Revenue AgencyEmployment and Social Development CanadaLegal Aid OntarioLawPRO®Law Society of Upper Canada

Telephone Numbers



http://www.lsuc.on.ca/For-Lawyers/Manage-Your-Practice/Representation/Client-Communication/Client-Service-and-Communication-Practice-Management-Guideline/

http://www.lsuc.on.ca/For-Lawyers/Manage-Your-Practice/File-Management/Document-Management/File-Management-Practice-Management-Guideline/

http://www.lsuc.on.ca/For-Lawyers/Manage-Your-Practice/Financial-Management/Financial-Management-Practice-Management-Guideline/




http://www.lawpro.ca/Insurance/default.asp

http://www.lawpro.ca/insurance/pdf/Retired_Lawyers_Policy.pdf

http://www.cra-arc.gc.ca/

http://www.esdc.gc.ca/eng/home.shtml

http://www.legalaid.on.ca/

http://www.lawpro.ca/




LawPRO® 18004101013 or 4165985899Law Society of Upper Canada 18006687380 ext. 3315 or 4169473315Unclaimed Trust Funds 18006687380 ext. 3312 or 4169473300 ext. 3312

Rules, Regulations, and Statutes

Law Society ActRules of Professional ConductBylaws pursuant to the Law Society Act

ByLaw 4: LicensingByLaw 5: Annual FeeByLaw 7: Business Entities ByLaw 7.1: Operational Obligations and Responsibilities ByLaw 9: Financial Transactions and Records ByLaw 10: Unclaimed Trust Funds

Commissioners for Taking Affidavits ActIncome Tax Act (Canada)Notaries ActSubstitute Decisions Act, 1992Rules of Civil Procedure

Forms

Application for Exemption from the Requirement to Pay the Annual Fee and to Submit the LawyerAnnual Report (under ByLaw 5 and 8)Application for Permission to Surrender a Certificate of Authorization (under Part II of ByLaw 7)Application for Surrender of Licence to Practise Law (under ByLaw 4)Report on Opening or Closing a Trust AccountNotice of Change of InformationUnclaimed Trust Fund Programme, Licensee Application Form

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http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90c17_e.htm


http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90n06_e.htm

http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_92s30_e.htm

http://www.e-laws.gov.on.ca/html/regs/english/elaws_regs_900194_e.htm

http://www.lsuc.on.ca/uploadedFiles/Client_Service_Centre/By-Law_Services/LAWYER%20Exemption%20APPLICATION(1).pdf

http://www.lsuc.on.ca/uploadedFiles/Client_Service_Centre/Administrative_Compliance/Application%20-%20Surrender%20PC%202013.pdf

http://www.lsuc.on.ca/uploadedFiles/Client_Service_Centre/Administrative_Compliance/(Lawyers)%20Application%20for%20Surrender%20of%20Licence%20to%20Practise%20Law.pdf

http://lsuc.on.ca/uploadedFiles/PDC/Practice_Management/Knowledge_Tree/Report-on-Opening-or-Closing-a-Trust-Account.pdf


http://www.lsuc.on.ca/uploadedFiles/Professional_Regulation/Trustee_Services/Application%20form%20Revised%20April%2017%202014.pdf


06/09/2016 lsuc.on.ca/printversion.aspx?id=2147499150

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The Law Society of Upper CanadaOsgoode Hall, 130 Queen Street West, Toronto, Ontario, M5H 2N6Tel: 4169473300Toll Free: 18006687380Fax: 4169475263Web: http://www.lsuc.on.ca

Guide to Retention and Destruction of Closed Client Files, ForLawyers

Introduction Reasons for File Retention The Client File Closing Client Files Retention of Client Files Destruction of Client Files

Appendices

Appendix 1 Sample Retention Policy Appendix 2 File Documents Appendix 3 Dealing with File Contents When Closing the File Appendix 4 Sample Provisions Appendix 5 Suggested Steps for Closing, Retaining and Destroying Files Appendix 6 Area of Practice Specific Guidance on File Retention and Destruction

This guide is not intended to replace a lawyer’s professional judgment or to establish a onesizefitsall approach to the practice of law and the retention and destruction of closed files. Subject tothe guide provisions that incorporate legal, bylaw or Rules of Professional Conduct requirements,a decision not to follow the provisions will not, in and of itself, indicate that a lawyer has failed toprovide quality service. Whether a lawyer has provided quality service will depend upon thecircumstances of each case.

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Introduction

One of the challenges for law firms is how to deal with the increasing volume of retained recordssuch as closed client files and other administrative records. Records include both paper andelectronic records.










The Law Society has developed this guide to assist lawyers to develop policies for the closure,retention and destruction of client files. Such policies assist lawyers to control the volume and typeof records retained, manage risk and meet professional responsibilities.

Lawyers establishing such policies might also want to consider adopting policies for the retentionand destruction of other administrative records generated or obtained by the firm such as businessrecords, contracts with suppliers and other correspondence or documents.

Appendix 1 contains some sample file retention policies for law firms. No one policy can cover allsituations relating to all law practices or practice areas. These sample policies are not intended toreplace the lawyer’s professional judgment or the views of a law firm’s professional standards orother practice management committees, risk management partners or general counsel. Whenestablishing a file retention policy a law firm should consider both the circumstances of the lawfirm’s individual and group practices as well as the Law Society Guide on Retention andDestruction of Closed Client Files.

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Reasons for File Retention

There are a number of reasons why lawyers retain client files for a period of time or sometimesindefinitely after completion of the client matter. Some of these reasons are for the benefit of theclient, while others are for the benefit of the lawyer.

Defend Against Allegations of Malpractice

One of the key reasons lawyers retain files is to respond to negligence or other claims made againstthem. A welldocumented file may contain the evidence necessary to successfully defend suchclaims. This is particularly important in situations where the evidence necessary to successfullydefend a claim cannot be obtained from any other source.

Claims founded in negligence and/or breach of contract against a lawyer can be made well after thealleged negligence or breach of contract has occurred. The Limitations Act, 2002 establishes somedeadlines for commencing such proceedings. The Act contains a basic limitation period of twoyears running from the day that the claim is discovered and an ultimate limitation period of fifteenyears running from the date that the act or omission on which the claim is based took place.

Both of these limitation periods are subject to provisions in the Act that operate to extend thelimitation periods. For example, subsection 15(4) provides that the ultimate limitation period doesnot run during any time that a person with a claim is a minor and is not represented by a litigationguardian in relation to the claim. This section also indicates that the ultimate limitation period doesnot run if the person against whom the claim is made willfully conceals certain information fromthe person with the claim or willfully misleads that person as to the appropriateness of aproceeding as a way of remedying the injury, loss or damage. With respect to the basic two yearlimitation period, section 5 of the Act contains a discoverability principle and provides that there isa rebuttable presumption that a claim is discovered on the day that the act or omission on which theclaim is based took place. In addition, Section 19 incorporates into the Act specific limitationperiods contained in other statutes and these limitation periods prevail over the basic two yearlimitation period.[1]

With regard to the Law Society’s professional liability insurance program, LawPRO® activelyencourages lawyers to ensure that files are well documented and handled in accordance with



appropriate file closure, retention and destruction procedures. However, there is no provision underthe LawPRO® mandatory insurance program that requires such. Rather the consequences ofhaving no file available in the event of a claim are as follows:

a reduced ability to defend the claim as there is no evidence to establish what work was doneon the matter;a reputational risk to the lawyer who may have to appear in open court to defend the claimwithout a file;a greater risk of exposure to payment of the deductible and claim history levy surcharge,depending on the outcome of the claim and the program options selected by the lawyer;ineligibility for the parttime practice option, as a result of an indemnity payment and/or costof repair being incurred; anda greater risk of exposure outside of policy coverage and above policy limits for the lawyer.

Of course, in reporting a claim matter under the program, the lawyer is obliged to cooperate withLawPRO® in the investigation and defence of the matter, including production of his or her file, tothe extent that it then exists. Lawyers with excess insurance are encouraged to check with theirexcess insurers to determine their requirements and/or applicable policy terms.

Legal Requirements

A lawyer may choose to retain client documents in a file to assist the client to meet statutoryobligations. For example, The Income Tax Act, R.S.C. 1985, c.1 (5th Supp.), sets out certainminimum time periods in which accounting records, including supporting vouchers and cheques,must be kept.

Generally when a matter is completed the lawyer should return to the client all original documentsbelonging to the client unless previously provided to the client or otherwise agreed with the client.It is generally not recommended that the lawyer retain original client documents after the matterhas been completed.

Comply With Regulatory Requirements

ByLaw 9 made pursuant to the Law Society Act requires lawyers to maintain specific books orrecords as part of their law office accounting system. Lawyers are required to maintain trustaccounting records or documents for ten years immediately preceding the lawyer’s most recentfiscal year end. All other accounting records or documents are to be maintained for six yearsimmediately preceding the lawyer’s most recent fiscal year end.

Future Use

Finally, the lawyer may retain the file for future use by the lawyer or may agree with the client toretain the file so that it is available for future use by the client.

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The Client File

Contents of the File Client files will usually consist of some or all of the following:

Paper documents contained in the paper file folder;



Electronic documents and electronic data and information contained in the electronicdocument or file.[2] Documents and or property relating to the client matter but not kept in the paper orelectronic file folder.

File Organization

A client file should be organized in a way that will facilitate its eventual closing.

Files may contain only one copy of each document unless there is a reason for retaining additionalcopies of the same document.

Depending on the complexity of the file, a lawyer should consider using folders and subfolders toorganize the contents of the file.

If files are maintained electronically in order to help simplify organization, file management andretrieval, the lawyer may consider naming the file with as much detail as possible. If electronicfiles are being retained in multiple locations such as in the lawyer’s email box, computer filesystem and the firm’s practice management software, the lawyer may consider using software thatcreates a single point of access or using a file and folder system that is similar across all locations.For example, if the lawyer uses main folders based on a client and subfolders based on matters, thelawyer may consider implementing a similar structure wherever electronic information is stored.

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Closing Client Files

In order to simplify the task of closing files, a lawyer should establish a file closure policyaddressing when and how files should be closed.

Establishing When to Close a File

A file should be closed only after all matters relating to the file have been completed and, inparticular, after all undertakings have been satisfied.

Prior to closing a file, the lawyer should ensure that:

all of the work that the lawyer was retained to complete has been completed;the lawyer has reported to the client;the client has paid the final account or the firm has written off any balance owing on the finalaccount;all undertakings have been satisfied and all trust conditions have been honoured; andthe lawyer has dealt with any balances to the credit of the client in the lawyer’s trust account.

Preparing the File to be closed

The following steps should be taken before closing a file.

1. Dealing with Client Property

A lawyer has an ethical obligation to care for a client’s property as a careful and prudent ownerwould when dealing with like property and must observe all relevant rules and law about the



preservation of a client’s property entrusted to the lawyer.[3] The documents that must or should be handed over to a client upon the termination of a retainer isa matter of law. The following cases and materials have dealt with the issue of documentownership and may be of assistance to lawyers in determining issues relating to documentownership:

Aggio v. Rosenberg, 24 C.P.C. 7, 1981

Alexandra Marks,ed., Cordery on Solicitors, 9th ed. (London: Lexis Nexis Butterworths, 1995) at4/661.

McInerney v. Macdonald, [1992] 2 S.C.R. 138

Unless previously provided to the client or otherwise agreed with the client, prior to closing thefile, lawyers should return to the client all property that the client provided to the law firm duringthe course of the matter together with all documents or other property that the lawyer was retainedto produce in connection with the matter. Generally, it is not recommended that the lawyer retaindocuments belonging to the client after termination of the retainer. In the event that the lawyer andclient agree that the lawyer will retain such documents, it would be prudent for the lawyer toclarify in writing with the client the nature of the lawyer’s responsibilities and who is responsiblefor storage and retrieval costs.

Before returning documents to the client, the lawyer should determine whether to retain copies ofthese documents. In making this determination, the lawyer might consider such factors as any legalrequirement to preserve the document, the likelihood of the lawyer requiring the document in thefuture, the provisions of the retainer agreement, whether the client has its own records retentionpolicy, and if so, the length of time that a document is preserved under that policy and the client’swishes.

When a lawyer transfers a file upon discharge or withdrawal from representation additionalconsiderations apply. In this regard, subject to the lawyer’s right to a lien, the lawyer must deliverto or to the order of the client all papers and property to which the client is entitled and, subject toany applicable trust conditions, must give the client all information that may be required inconnection with the case or matter. In addition, the lawyer must cooperate with the successorlawyer or paralegal so as to minimize expense and avoid prejudice to the client. Section 3.7 of theRules of Professional Conduct sets out the lawyer’s obligations in this regard.

Appendix 2 contains a summary of some of the documents contained in a file and how a lawyershould deal with these documents.

2. Purging the File

Prior to closing a file, a lawyer should ensure that the file is organized. A lawyer may wish toremove from the file any unnecessary materials. While staff may assist the lawyer in this task, thelawyer primarily responsible for the file should approve the removal, deletion and destruction ofmaterials from the file. If files are maintained electronically, lawyers should use care not to purgeelectronic information contained in the file that may be required in the future such as informationrequired for conflicts checking.

Copies of documents that can be used as precedents or in handling other matters, such as copies oflegal memoranda, may be removed from the file or copied and stored in a central repository forfuture use. The lawyer should ensure that such copies are stripped of all personal informationwithin the meaning of The Personal Information Protection and Electronic Documents Act(PIPEDA) and that client confidentiality, in accordance with the Rules of Professional Conduct, ismaintained with respect to any other information that identifies the client.



Copies of documents (electronic and paper) or documents that are available from another sourcesuch as documents that are permanent records of the court, registry office or government officemay be removed from the file and destroyed when the file is closed unless there is any legal orother reason for retaining the document. In determining whether to remove and destroy suchdocuments, lawyers may wish to consider the likelihood of the document being required in thefuture and the expense of retrieving it and whether the entity retaining the document has adocument destruction policy in place which may result in the document not being available at afuture date.A lawyer should retain draft copies of documents where the draft copies document the history ofthe matter or confirm client instructions and where the lawyer reasonably believes that thesefactors might become an issue in the future.

Appendix 3 contains suggestions and recommendations for dealing with the contents of a file whenpreparing to close the file.

Depending upon the complexity or nature of the matter, the lawyer may wish to maintain a list ofthe documents removed from the file together with the date of their removal and the method ofdisposal (e.g. destruction, return to the client).

3. Communicating with the Client

A lawyer should consider advising the client of the file closure, retention and destruction policy atthe outset of the retainer. The lawyer should consider advising the client how documents will behandled and maintained during the course of the retainer and after completion of the matter. Asummary of the file retention and destruction policy may be included in the written retaineragreement or in the final report to the client.

Appendix 4 contains a sample clause that may be included in the retainer agreement and a sampleletter to the client upon termination of the retainer.

4. Determining the File Destruction Date

A lawyer is not required to retain all client files permanently.

When a file is closed, the lawyer primarily responsible for the file should review the file andestablish a file destruction date.Circumstances may arise during the file retention period that would postpone the destruction of thefile. The lawyer or law firm should implement a system to ensure that such circumstances areidentified and the destruction date is changed if necessary.

Lawyers may consider establishing a file review date preceding the destruction date. The lawyer orlaw firm could then check to determine whether circumstances have changed and the filedestruction date should be changed.

Both the file destruction date and the file review date should be entered into the firm’s tickler orfile tracking system.

A lawyer should be guided by ethical, legal and professional considerations as well as economicand practical factors when determining how long to retain a file. It is not recommended that alawyer adopt a single retention period for all files. Rather, the lawyer should consider each fileindividually and determine the file destruction date in light of the nature and circumstances of thematter, the client’s needs, the applicable limitation period, the lawyer’s file retention policy andany other issue that might be relevant.



Generally, based on the provisions of the Limitations Act, 2002, an appropriate retention period forclient files is 15 years after the file is closed. This guide is not a rule and this suggested time periodmay not be appropriate for all client files. Lawyers should use their own judgment whenestablishing destruction dates for client files based on the circumstances of the individual clientmatter and their own needs and the needs of their firm and clients. For example, factors such as thenature and complexity of the matter may require a longer retention period than the suggested 15years.

The following are some of the factors that a lawyer must or should consider when determining thelength of time to retain a file.

i. Legal and Regulatory RequirementsIn establishing a destruction date, the lawyer must comply with any legal or regulatoryrequirements.

ii. Client’s NeedIn certain areas of practice, the lawyer should consider whether the file might support futurerepresentation of the client or other clients.

iii. Defend against Allegations of Professional Negligence or MisconductThe lawyer should also consider the likelihood of the file being needed to defend againstallegations of malpractice, misconduct or for an assessment of an account and the applicablelimitation periods for such claims or complaints. Complaints to the Law Society against thelawyer may be made after the matter has been completed or when a file has been transferredto another lawyer. Each file should be considered independently in order to assess the risk offuture complaints.

iv. Nature of the MatterDepending upon the nature of the matter, different considerations might apply whenestablishing a destruction date.

v. Clients under a Disability: Minors and Incapable PersonsThe client’s age and capacity might be a relevant factor in determining the length of timethat a file is retained. The Limitations Act, 2002 contains special provisions for minors andthe mentally incapable. For example, under the Limitations Act, 2002, no limitation periodruns during any time that the claimant is either an unrepresented minor or is incapable ofcommencing a proceeding in respect of the claim because of his or her physical, mental orpsychological condition and is not represented by a litigation guardian in relation to theclaim.[4]

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Retention of Client Files

System for Organizing Closed Files A lawyer should have a system for organizing and retrieving closed files. When a file is closed, thefile should be classified as closed. The law firm’s database should contain a list of all closed files,the file name, the original file number and the closed file number if different, the location of thestored file including where applicable, the box or carton number and the file destruction date.

Form or Medium of Storing Retained Files

Lawyers may store files electronically and/or in paper form. In some instances, it may beadvantageous to store documents electronically rather than in paper files. In making suchdecisions, the lawyer must ensure compliance with all legal and regulatory obligations. Bylaw 9made pursuant to the Law Society Act provides that if records are entered and posted by



mechanical or electronic means, lawyers must ensure that a paper copy of the record may beproduced promptly on the Society’s request. Other legislation such as the IncomeTaxAct may havedifferent requirements.

If the record or document is to serve as documentary evidence, lawyers should ensure that propersteps are taken to comply with any evidentiary rules governing the admissibility of suchdocuments. To qualify as evidence, imaging and microfilm including microfiche reproductionsmay have to be produced, controlled and maintained according to certain specifications.

Documents should remain trustworthy, readable, and accessible for the applicable retentionperiods. In order to ensure the accessibility and readability of documents, the appropriate hardwareand software should be maintained during the retention period.

Storage of Retained Files

Closed files should be stored either on site or in an offsite location. Regardless of the location,lawyers must ensure that confidentiality is maintained. The storage facility must be secure tomaintain confidentiality and to protect the files from damage or loss. If files are storedelectronically, lawyers may wish to consider whether to encrypt stored files.

When storing files electronically lawyers should consider both the physical location and themedium (e.g. backup tape, disk, or external drive) on which they are stored. Lawyers should have asystem for backing up closed files.

In addition, the lawyer should ensure that documents, data and information in the file can beaccessed during the file retention period. The lawyer should be prepared to convert older electronicformats to new formats so that they continue to be accessible. In addition it may be useful toinclude on any list of electronic files, the file format in which the documents are saved so as tofacilitate conversion of the document at a future date.

Review Status of Closed File

As part of the file closing procedure, the lawyer primarily responsible for the file or if this is notpossible another lawyer in the firm, should consider reviewing the file again prior to destruction toensure that circumstances have not changed since the establishment of the destruction date and thatthe file destruction should proceed. Alternatively, the firm might implement a system to ensure thatwhere there is a change in circumstances prior to the destruction date, the file is reviewed and thedestruction date is changed if necessary.

Files that are to be retained indefinitely may be reviewed periodically, perhaps 10 or 20 yearintervals, to determine whether there has been any change in circumstances that would now allowfor the destruction of the file.

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Destruction of Client Files

Maintaining Confidentiality A lawyer’s obligation to maintain confidentiality survives the retainer. Lawyers must ensure thatthey maintain confidentiality when disposing of files. If paper documents are shredded orincinerated, the lawyer must ensure that confidentiality is maintained both during the destructionprocess and the disposal.



Destruction of Documents and Information

When destroying a file, a lawyer should ensure that all of the contents of the file are destroyed.This includes both paper and electronic documents and electronic information contained in theelectronic document such as metadata.

Maintaining a Record of Destruction

The lawyer should keep a record of all files destroyed or returned to the client in accordance withthe lawyer’s file destruction policy. The record at a minimum should contain the client’s name,address, file number, a brief description of the nature of the matter, the file closure date, the filedestruction date or date that the file was delivered to the client, and the name of the lawyer whoauthorized the destruction or delivery. This will assist a lawyer to counter allegations that a file wasdestroyed indiscriminately.

Appendix 5 contains suggested steps for closing, retaining and destroying a file.

1 Section 24 of The Limitations Act, 2002 contains transition provisions. Where a claim against a lawyer in negligence and/or forbreach of contract is discovered prior to the effective date of the Limitations Act, 2002 (January 1, 2004) the former limitation period ofsix years under the Limitations Act, 1990 continues to apply.

2 Electronic data and information may include email, draft versions of documents on a server or document management system,scanned/imaged documents, faxes (where there are no paper copies),voicemail, metadata and any other information or data relating to amatter saved and stored in electronic form (e.g. on servers, magnetic media, magnetooptical systems, compact discs, DVDs)

3 Rules of Professional Conduct, Section 3.5.

4 Limitations Act, 2002, S.O. 2002, c.24, ss. 6, 7, and 15.