Are you planning to retire? Sell your practice? Perhaps you are moving from private practice to become in-house counsel or work within government. In all of these cases, you need to consider what will happen with your files and your practice.
Aside from the business aspects of closing your practice (advising staff, terminating agreements, disposing of equipment, etc.) and specific considerations if you are selling your practice, there are other requirements that stem from your professional obligations to your clients and the Law Society. Fulfilling these obligations may take some time so please bear this in mind when contemplating leaving or closing your practice.
This article is a short overview of some of your obligations when closing your practice. You may also wish to consult resources and sample documents with respect to succession planning and closing your practice prepared by Law Societies in other jurisdictions, such as the Law Society of British Columbia, the Law Society of Alberta and the Law Society of Ontario.
You should also be aware that, if you suddenly become unable to practice as a result of illness, disability or death, and have no succession plan in place, the Law Society will be required to have a custodian appointed to take possession of your clients’ property and ensure the protection of their interests. In such circumstances, the Law Society’s focus will be on the protection of the public and not on maximizing value for your practice or estate. For more information on how to prepare for an unplanned interruption in your practice, please see the resource entitled Succession Planning.
If you decide to close your practice or stop practising altogether, keep in mind that you must:
1. Notify Clients
Your clients will be greatly affected when you close your practice so let them know as soon as you can. A client’s file may be only one of many for you, but it is likely the only matter that they have with a lawyer so, wherever possible, don’t let the closure of your practice take them by surprise.
2. Deal with Open Files
You may, of course, wish to finalize and close as many open files as possible before you close your practice. This approach maximizes your billings before your practice closes but be sure you do not compromise your clients’ interests in the process.
Files that will still be open when you close your practice must either be transferred to another lawyer or personally collected by the client so that the client can retain another lawyer. Don’t forget to get written permission in advance from your client to release your file to another lawyer and, if your client picks up his or her file, get an acknowledgment of receipt. You should also remind your clients and their new lawyer of important deadlines and consider keeping a copy of the file for yourself.
Also be mindful that a conflicts check should be completed before a file is transferred to another lawyer. It is also a good practice to include a transfer memo outlining the progress of the file and any deadlines and limitation periods.
If there are court dates pending, make sure that both your client and the new lawyer are made aware of them. You may also want to consider whether you should file a notice of change of solicitor.
Keep in mind that you should try to minimize expense and prejudice for the client and do what you can to facilitate the orderly transfer of the client’s file.
3. Fulfill Responsibilities to Clients
Be sure to review your files to determine whether you have any ongoing obligations, such as undertakings or trust conditions. Unless explicitly stated otherwise when the undertaking or trust condition is given, they are given personally and must be honoured. In order to fulfill your obligations to your clients, be sure to either fulfill your undertakings and trust conditions or arrange to have them transferred to another lawyer.
4. Return or Transfer Trust Funds
As indicated above, lawyers must be mindful when closing a law practice that all trust funds must be accounted for and (i) used for the intended purpose (such as completion of undertakings), (ii) transferred to another lawyer or (iii) returned to clients, if requested and appropriate.
If a client wishes to have his or her file and remaining trust monies transferred to another lawyer, you are required to follow the client’s instructions. If a client wishes to have his or her file and remaining trust monies returned, you are also required to follow the client’s instructions, pending any unresolved disputes related to the monies. In some cases, trust monies may have to be paid into court pending resolution of any dispute. You should also keep in mind that final statements of account rendered to your clients can be subject to taxation.
5. Complete a Closing Audit
There should be no funds remaining in your account at the time your practice is closed. Monies should be returned to clients or transferred to the lawyer who is taking over the file. This also means that all outstanding undertakings that involve monies in trust should be fulfilled.
The Law Society will conduct a closing audit to ensure that all of the funds in your trust account have been dealt with appropriately and none remain in your account. For more information on closing audits and to schedule one, please contact the Law Society’s Professional Responsibility Administrator. Please allow for a reasonable amount of time to schedule and complete the audit.
6. Return or Store Closed Files
With respect to your closed files, they should be reviewed to determine whether it is appropriate to return the file to the client, transfer it to another lawyer, continue storing it or destroy it. Into which category your closed files will fall will depend on a number of factors, including the type of matter and how long it has been closed. Consideration should also be given to whether documents in a file that belong to the client (e.g. an original will) should be returned to the client.
If files will remain in storage, you must ensure that they are accessible and safely stored in way that does not violate your ongoing professional responsibility with respect to confidentiality. In addition, you must advise the Law Society where they will be stored and who is responsible for them. The goal is to ensure that your clients will have easy access to their files into the future.
For more information, see Closing, Storing and Disposing of Client Files.
7. Advise the Law Society
Under rules 2.19 and 2.20 of the Rules of the Law Society, when you close your practice you are required to file Form 2.20A (Notice of Change in Association of Practice) or Form 2.19A (Application for Non-Practising Status or to Resign Membership) with the Law Society.
If you have any questions about closing your practice, please contact the Director of Practice Management.
Links:
Closing, Storing and Disposing of Client Files
Non-Practising Membership: rule 2.19 (Law Society Rules)
Changes in Association of Practice: rule 2.20 (Law Society Rules)
Related Topics:
Unclaimed Trust Funds: section 70.1 (Law Society Act, 1999)
Confidentiality: section 3.3-1 [5] (Code of Professional Conduct)
Preservation of Clients Property: section 3.5-1 to 3.5-7 (Code of Professional Conduct)
Client’s Property: Part III (Law Society Act, 1999)
(Posted: June 12, 2020)