Practice Resources

Closing Client Files

If the work that you were retained to do has come to an end, you have been discharged by your client or you have withdrawn your services, you can close the client’s file. Closing a file properly is just as important as opening it properly. The goal is to balance having a small footprint for storage against keeping everything to be as prepared as possible to defend against a complaint or negligence claim.

Some lawyers keep their files and figure that someday they’ll get around to deciding what they should do with them. This is generally a bad idea – it is much better to take the steps to properly close the file at the time when the details of the file are still fresh in your mind.

A file closing policy and checklist will go a long way in making the process easier and is recommended as part of a good succession plan.

Here is a list of the essential steps to take when closing a client file:

1. Make sure the file is complete.

Before a file is closed, it is important to make sure that documents or items aren’t missing from the file. This task is made easier if the file is organized while it is active.

Don’t forget about electronic files if you generally keep a paper file and vice versa. With respect to scanned documents, make sure scanning errors have not been made (e.g. only one side of a document was scanned).

2. Cull the file.

Given that a closed file is generally stored for a period of time before it is disposed of, it is a good idea to remove any unnecessary items to save on storage costs. There are two categories of documents that can be culled from a file: duplicates and reproducible documents. It is obvious why duplicate documents can be destroyed but be sure they are true duplicates and don’t contain notes or instructions in the margins or on the reverse side. Don’t forget to discard both electronic and paper duplicates.

Reproducible documents are generally public or easily accessible documents such as court records, land titles documents, case law, bank records, etc. Although it would be easy to simply cull all public or easily accessible items in the file, give some thought to how easy they are to replace, the cost of replacing them and consider whether they will be available in the future. Documents created or held by an outside person or organization may not be kept forever (e.g. bank records) or may be destroyed by a disaster such as fire or flooding. As such, it may be wise to keep them in the file.

If you decide to cull reproducible documents, it is recommended that you create a list of the culled documents and keep it in the closed file.

Culled documents can be destroyed but be sure that client confidentiality is maintained at all times. For more information on destroying files, see Disposing of Client Files.

3. Copy precedents.

If you prepared documents for the file that will be useful as precedents, be sure to make a copy and remove any personal information in accordance with the Personal Information Protection and Electronic Documents Act and any other applicable legislation before filing it with your other precedents.

4. Return client property.

In general, all client property should be promptly returned at the conclusion of your retainer (see commentary [3] to section 3.5-2 of the Code of Professional Conduct). Section 3.5-1 of the Code of Professional Conduct provides a definition of property, which includes

“a client’s money, securities as defined in the Securities Act, RSNL 1990, c S-13, original documents such as wills, title deeds, minute books, licences, certificates and the like, and all other papers such as client’s correspondence, files, reports, invoices and other such documents, as well as personal property including precious and semi-precious metals, jewellery and the like.”

Further information about your obligations and responsibilities with respect to client property can be found in section 3.5 of the Code of Professional Conduct.

If there is a question with respect to who owns any part of a file, the following resources may be helpful in determining the answer: Aggio v. Rosenberg (1981), 24 C.P.C. 7 (Ont. Sup. Ct.); J. Morris, F. Folk and J. Vamplew, “Whose File is it Anyway?” (1994) 52 The Advocate 87; and McInerney v. MacDonald, [1992] 2 S.C.R. 138.

Before you return property to your client, consider whether you are required by legislation, the Law Society or otherwise to keep a copy. Also consider whether you want to keep a copy in the closed file for yourself. At a minimum, it’s a good idea to keep a copy of the following documents that may be helpful if a complaint or negligence claim is brought against you:

retainer agreement;
correspondence, notes from meetings and communications with the client and especially any documents in which the client gives instructions or instructions are confirmed;
time entries, dockets and accounting records;
records required by the Rules;
documents you prepared for the client;
drafts of documents that show client instructions or changes to a document; and
list of case law consulted and relied on.

When returning property to your client, it is a good idea to:

make a list of the property returned to the client and give a copy of that list to the client when you return the property; and
depending on the nature of the client property, ask the client to provide an acknowledgment of receipt.

5. Address funds remaining in trust and any outstanding accounts.

If trust funds to the credit of the client still exist, review why the funds remain and deal with them accordingly. There should not be any trust funds in the account when the file is closed.

Similar to trust funds, if there is work that has yet to be billed or has been billed and not yet paid, bill the client or write off the outstanding amount.

6. Ensure that all obligations are fulfilled.

All undertakings and trust conditions must be completed before the file is closed.

7. Communicate with your client.

Although your clients might already be aware, you should clearly communicate in writing that you are closing their file and let them know if there will be a fee to retrieve the file from storage in the future. If you intend to destroy the file, let your client know the anticipated date of destruction.

8. Assign a closed file number.

It is important that closed files are kept separate from open files and that they are assigned a closed file number. These steps help to prevent files from being mixed up, current documents being misfiled into closed files and open files being destroyed accidentally.

Closed file numbers can take whatever form you want – just make sure they are distinct from the file numbers given to open files.

9. Assign a retention period, disposal date and review date.

The file retention period is the time that you will hold on to the file and it is presumed that you will dispose of the file at the end of that period. For more information on how long you should keep your closed files and the disposal of files, see File Retention Periods and Disposing of Client Files.

The disposal date is the earliest date on which the file should be destroyed or sent to the client. This date should be after the file retention period ends.

The review date is the date on which you will review the closed file to make sure the file retention period is still appropriate and it can be destroyed or sent to the client. Reviewing the file is important because information may have come to light since the file was closed (e.g. a negligence claim is pending or the client has indicated that a complaint is forthcoming) that makes it necessary to keep the file for a longer period of time.

Both the review date and the disposal date should be entered into your calendaring or bring forward system.

10. Enter the file into your closed file list and update your client list.

You should maintain a closed file list that includes the client name, file number, closed file number, storage location in detail, review date and disposal date. Your open file list and accounting records should also be updated.

11. Ensure the conflicts system is up-to-date.

Best practices dictate that your conflicts system should be updated with the names of persons who are involved in a file as the file progresses. It’s a good idea when you are closing your file to ensure that this has been done and names have not been missed.

12. Decide on the method of storing your file and send it to storage.

There are generally three ways of storing your closed files: on paper, electronically or a combination of both. There are factors to consider when determining how to store your closed files – see Storing Closed Files for more information.

It is recommended that you use a checklist when closing files to ensure that steps are not missed and the completed checklist should be added to the file. You can create your own checklist or adapt the one prepared by the Law Society entitled “Sample Checklist for Closing Client Files”. You can find other examples of file closing checklists on the websites of other Law Societies in Canada.
If you have questions about closing your files, feel free to contact the Director of Practice Management.

Links:

Preservation of Clients’ Property: sections 3.5-1 to 3.5-2 (Code of Professional Conduct)

Identifying Clients’ Property: sections 3.5-4 to 3.5-5 (Code of Professional Conduct)

Accounting and Delivery: sections 3.5-6 to 3.5-7 (Code of Professional Conduct)

File Retention Periods

In its most basic terms, a file retention period is the amount of time that you determine is appropriate to keep a file. For many files, when the file retention period expires, the file is destroyed.

Advantages and Disadvantages of Keeping Your Closed Files

Retention periods can be any length of time you choose and there are advantages and disadvantages to keeping your closed client files:

Advantages: The ability to respond fully to complaints and negligence claims is the biggest advantage to keeping your closed files. Having your complete file will be helpful because it may clearly show why the work was done and when. As such, there may be an inclination to keep the file as long as possible.
Disadvantages: There are several disadvantages to keeping your closed files. The first is its impact on good practice management. The likelihood of files getting mixed up and documents being mis-filed increases with the more files you keep. The second is that if you move offices, having more files results in more money spent on moving them. And speaking of costs, keeping your files for extended periods of time can be expensive. Another disadvantage is its effect on succession planning – down the road you may wish to sell your practice or retire and having fewer files to deal with at that time will make the transition easier.

You are Responsible for Setting File Retention Periods

The lawyer responsible for the file is the one that should determine how long a closed file should be kept because that lawyer is in the best position to know the risks relating to the file. In addition, the amount of time the closed file is kept may come with risks to the responsible lawyer and therefore the responsibility to determine the file retention period should not be delegated.

Factors to Consider

Aside from the advantages and disadvantages, there are specific factors to consider when deciding the retention period for your closed client files.

Knowledge of the Client and the File: Sometimes complaints and negligence claims are brought long after the retainer has come to an end so it’s important to assess the likelihood of one being brought in the future. Were there any red flags in the file? Did the client give instructions against your recommendations? Were there signs that the client might bring a complaint or negligence claim? If you have concerns, consider a longer retention period because having copies of documents that provide context or background to the decisions that were made or advice that was given may be helpful down the road.
Applicable Limitation Periods: What is the limitation period for a negligence claim against you? Are there other limitation periods which may be relevant? Ensure that the retention period you set exceeds the limitation period and keep in mind that the commencement of a limitation period may be delayed in certain situations (e.g. the plaintiff is a minor or under a disability).
Future Use: Consider whether you or your client are likely to want access to the closed file in the future.
Legal and Regulatory Requirements: You are required by the Law Society to keep some documents and information. For example, rule 5.02(2) requires accounting records such as your trust receipts and disbursements journals, client trust ledgers, monthly trust reconciliations and billings book to be kept for at least seven years from your most recent fiscal year end. Rule 16.07(3) requires you to keep a copy of every document used to verify the identity of your client for the longer of: (a) your relationship with the client and for as long as is necessary for the purpose of providing service to the client; and (b) at least six years following completion of the work for which you were retained.

Aside from the Rules of the Law Society, there is also legislation that requires you to keep records for particular periods of time, for example, the Income Tax Act and the Corporations Act.

Working Life of the File: The working life of a file is not the same as the time it is active and does not necessarily end when the file is closed. The working life of the file is determined by the type of services you provide your client and when disputes or issues are likely to arise or be discovered. Here are some examples:

Wills: If you prepare a will for a client, you may close your file after the client signs the will but the working life of the file continues throughout the life of your client and on until the estate is distributed because disputes about the services that you provided may only start to appear at this time.

Civil Litigation: The working life of the file generally comes to an end in civil litigation at the time the file is settled or a judgment is rendered and the appeal periods have passed. Similarly, for criminal defence files, the working life of the file continues until a decision on sentencing has been issued and appeals periods have expired.

Leases: Another area where the working life of the file may not be intuitive is with respect to long-term leases. If you negotiate a 15-year lease today, the working life of the file continues to the point where the lease expires.

Calculating the File Retention Period

A file retention period can be any length of time you choose. The key to calculating the file retention period is to consider the factors outlined above and use your professional judgment to determine the best retention date for your files. It is recommended, however, that you keep your files for at least 10 years after the later of:

) the end of the working life of the file; and
) the expiry of any relevant limitation periods.

If you are unsure as to how long the file retention period should be, keep in mind that you can (and should) review your file at the end of the retention period before you destroy the file or send it to the client. You may decide at that time that you should keep the file for a longer period of time and you can set a new retention period then.

Different Retention Periods for Different Types of Files

You may choose different retention periods for different types of files. This approach is especially worthwhile if you practice in more than one area of law because it may make more sense to keep some files longer than others given that the working life of the file and limitation periods often vary between areas of law and types of transactions.

Create a Policy

Creating a policy and retention schedule will take some time at the outset but will save you time down the road and is very helpful in terms of succession planning. Be sure that your policy:

Clearly indicates the retention period for each area of law in which you practice. If there are exceptions to those retention periods, outline them and state when they will apply.
Includes a requirement that the closed file must be reviewed before it is destroyed or sent to the client and guidance as to when that review must take place. Reviewing the file ensures that if a complaint or negligence claim has been filed or there has been correspondence from your client about an issue, you can retain your file. Keep in mind that the retention period simply sets the amount of time you will keep a file before it is destroyed or sent to the client. So, if you are in doubt about whether you should continue to keep the file, set a new retention period and review the file again then.
Addresses how files will be stored – for more guidance on considerations in relation to storing closed client files, see Storing Client Files.

The Director of Practice Management is available to discuss any questions you may have about file retention.

Links:

Maintenance of Records: rule 5.02 (Law Society Rules)

Record Keeping and Retention: rule 16.07 (Law Society Rules)

Related Topics:

Closing Your Practice

Succession Planning

Storing Closed Files

There are three ways to store files: hard copy, electronically or a combination of hard copy and electronically. There are both general and specific considerations for each method, but no matter which method you choose, closed files should be stored away from open files to reduce confusion and the possibility of an open file accidentally being destroyed.

When considering how you will store your files, keep in mind your obligations under section 3.5-2 of the Code of Professional Conduct:

A lawyer must:

) care for a client’s property as a careful and prudent owner would when dealing with like property; and
) observe all relevant rules and law about the preservation of a client’s property entrusted to a lawyer.

You should also keep in mind the following considerations:

Confidentiality and Security

Your obligation to maintain client confidentiality continues after the retainer comes to an end. Whether you decide to store your closed client files as a paper copy or electronically, ensure that information is kept confidential – consider who has access to the files and whether that access should be restricted. If your physical files are kept off-site, be sure to ask the storage company who has access to the area in which your files are kept. If you store your files electronically, ask who has access to the drives, storage devices and cloud computing services. Consider encryption for your electronic files to prevent unauthorized access.

With respect to electronic files, make sure that you understand the technology you are using and its limitations in accordance with commentaries [4A] and [4B] of section 3.1-2 of the Code of Professional Conduct relating to technological competence. Data sovereignty, accessibility and security of data, especially with respect to cloud-based services, are becoming larger issues so it is important to research your options.

In addition, if you are planning to store some or all of your files on a cloud-based service, it is recommended that you speak with your client about the risks and get their consent to do so in advance.

Building and Environmental Concerns

There are many environmental factors that can affect the integrity of your files. Conditions of storage, such as temperature and moisture levels, can affect how quickly both physical files and electronic files degrade and become unreadable.

Also consider whether the location in which your closed files are being stored is prone to flooding, has adequate fire protection or has issues with insects and other pests.

You may not have control of the building itself if you are storing files in a location other than your office but you may have more control over how the files are stored within that building. Consider whether your closed files should be stored off the floor to mitigate damage if there is a flood or in fire-proof cabinets to protect against a fire. In the end the goal is to ensure that your files are in good condition until the end of their retention period.

Accessibility

Your closed files must still be accessible and easily retrievable. Keeping a detailed list of where each file is stored is helpful when you need to retrieve a file.

With respect to electronic documents and files, also consider whether the technology used to store and read them will be accessible in the future. Technology changes rapidly and becomes obsolete faster than ever before. It is recommended that you review the way you store your electronic documents and files at regular intervals to ensure that you can still easily access everything.

Insurance

Review any insurance policies you might have to determine coverage against losses to your client files – this is especially important if you are storing files in a location other than your office.

Custody and Control

If you decide to store your files off-site, make sure that you retain ownership and control of your files at all times. To that end, be sure to understand what would happen if the storage company were to go bankrupt or close – would you be able to access your files? It is important that you can fulfill your obligations to produce your files within a reasonable time.

Reporting to the Law Society

If you cease practising law or there is a change in your association of practice, you are required to advise the Law Society about the storage and custody of your client files on forms 2.19A and 2.20A. Keep that requirement in mind and ensure that you maintain good records of the location of all your closed files.

Admissibility

Consider reviewing legislation and case law with respect to the admissibility of documents, especially electronic versions of paper documents, to ensure that you are comfortable with any risks in relation to the method in which you store your files.

Policy

Creating a policy with respect to the storage of your closed files is a great way to ensure that you contemplate the issues that may arise and choose the best option for you and your practice. It should set out where closed files will be kept and how they are organized. It should also address who has access to the files and how they can be accessed.

If you have questions about storing your closed client files, contact the Director of Practice Management.

Links:

Preservation of Clients’ Property: sections 3.5-1 to 3.5-2 (Code of Professional Conduct)

Competence: section 3.1-2 (Code of Professional Conduct)

Non-Practising Membership: Form 2.19A (Law Society Rules)

Changes in Association of Practice: Form 2.20A (Law Society Rules)

Related Topics:

Closing Your Practice

Succession Planning

Disposing of Client Files

Disposing of client files generally means one of two things: sending your closed file to the client or destroying the closed file. You should not dispose of a client file before the retention period has passed – see File Retention Periods for more information.

Many lawyers are hesitant to dispose of their client files, but there are also reasons why it is part of good practice management. On the one hand, there may be business risks associated with disposing of your files. On the other hand, the cost of continued storage and good succession planning may outweigh those risks.

One of the best ways to mitigate the risks of disposing of files is to analyze your practice, note the relevant limitation periods and then create a policy on the retention and disposal of client files. Following an established policy when disposing of files is generally seen to be more reasonable than disposing of them on an ad hoc basis. As a bonus, this type of policy also forms part of a good succession plan and can be incredibly helpful when you sell or close down your practice.

Here are the steps to take before you dispose of a file:

Review the file.

It is important that a lawyer, preferably the lawyer responsible for the file, complete a review of the closed file before it is sent to the client or destroyed because that lawyer is in the best position to know whether the file is ready to be disposed of or if further retention of the file is necessary. As part of this review:

ensure that the file retention period assigned to the file has passed;
consider whether new information has come to light that would necessitate keeping the file for a longer period of time. For example, if a complaint or negligence claim has been made in relation to the file, the file should not be disposed of until all matters have concluded. If in doubt, extend the retention period and review the file again at that time; and
if you intend to destroy the file, make sure the client has all significant materials from the file and all property has been returned. If you complete this task as part of your file closing procedure, the time it takes to complete this step when you are ready to destroy your file will be severely reduced.

Keep lists of files that have been destroyed and sent to the client.

The list should contain the client’s name, address, both open and closed file numbers, a brief description of the matter, the date it was closed, the date it was destroyed or sent and the name of the lawyer who authorized destroying it or sending it to the client.
If your client agrees that the file can be destroyed, include a copy of that authorization with your list.
If you send a notice to the client that the file is scheduled to be destroyed, it is recommended that you keep a copy of that notice as well.

Update other documents.

Be sure to update your client list, closed file list and any other documents you use relating to your clients.

If you decide to destroy the file, ensure the method is appropriate.

Destroying paper documents in a file generally means shredding them – cross-cut or micro-cut shredding are preferred over strip cut shredding because they are more likely to protect your client’s confidential information.
Your obligation to your clients with respect to confidentiality also applies to the way in which you destroy their files. You should make sure that the method you choose will safeguard your client’s information. Ideally you or a person at your firm should supervise the documents being shredded. If you hire a document shredding company, ensure there is no opportunity for its employees to review or examine the documents before shredding them. If the documents are taken elsewhere to be shredded, you must satisfy yourself that sufficient steps are taken to ensure the security and confidentiality of the files during all stages of the process including handling and transit. It is extremely important to eliminate opportunities for confidential information to be disclosed during the process. You must exercise appropriate care, supervision and control when files are being shredded or custody is transferred to a shredding company.
It is never appropriate to put documents containing confidential client information in the garbage.
Ensure that both electronic and paper parts of the file are destroyed.
Hard drives should never be thrown away or sold without first ensuring that they do not contain client information.
Hard drives and storage devices may require more than simply deleting files. Investigate the best way to wipe storage devices and hard drives clean before disposing of them.

There are risks to destroying closed client files or sending them to the client such as reducing your ability to respond to complaints and negligence claims but there are also rewards such as decreased storage costs and better succession planning. You must weigh these risks and rewards and determine what is right for you and your practice. If you decide to dispose of a client file, using a checklist may be helpful to ensure you don’t miss any steps – you can create your own or adapt the one prepared by the Law Society entitled “Sample Checklist for Disposing of Client Files”. Feel free to contact the Director of Practice Management if you wish to discuss this topic further.

Related Topics:

Closing Your Practice

Succession Planning