CLIENT FILES: GUIDELINES TO ASSIST IN OBLIGATIONS REGARDING CLOSURE, STORAGE AND DESTRUCTION

Preliminary

A firm should determine policies for closure, storage and destruction of files. These guidelines are designed to assist in that determination. Among the matters to be considered are:

1. What is to be stored?
2. How long must a file be stored before it can be destroyed?

Regarding "what is to be stored", the firm must decide if it is prepared to retain original documents such as wills and executed copies of agreements, etc. If the decision is to store such documents, a safe and secure means of storage must be obtained, such as a vault or fireproof cabinets. If original documents are retained in the file, some kind of "flag" on the file should so indicate.

The firm must also decide if it is prepared to retain preliminary drafts of ultimately executed documents. It is a good idea to do so, if only as a loss prevention measure. (e.g. It enables a firm to better face a former client over a disagreement regarding instructions.)

There will always be a business risk associated with file destruction. In Central Trust v. Rafuse (1987) 31 D.L.R. (4th) 481, the Supreme Court of Canada held that an action based on a lawyer's negligence can be pursued in tort or contract, and the plaintiff gets to choose which limitation period applies. Other cases have held lawyers liable to non-clients (such as beneficiaries of wills) for negligence or breach of fiduciary duty. Such claims may have extremely long or non-existent limitation periods.

There are some minimum retention periods that must be complied with. Records must be retained for 6 years from the last taxation year when the record may be required for a determination under the Income Tax Act [see sections 230(4)(a) and (b) and 230(8), Income Tax Regulation 5800 and Information Circular 78-1OR2]. As well, The Law Society Rules prescribe a minimum retention period of 9 years following the fiscal year of a law firm for certain financial records and the file material necessary to support those records.

In view of the foregoing, The Law Society recommends a policy of not destroying the file before at least ten years after a matter is complete. This policy will provide a reasonably safe retention period for most potential E&O claims. Any file that has a potential claim that is not statute-barred should be retained longer. In the end, sound business judgment will be needed in relation to all decisions to destroy files, whether at or after the 10-year period.

In this context, "file" means the file material that is left after the closing process, described herein, has been completed, and does not include client-owned documents.

Closure

1. When all work for a client is completed, the file should be closed. The check-list on the following page is a good model for establishing your own file closure practices. See also page I-15 of the Practice Guide.

2. The closing process should include:

1. Stripping the file. Items 8- l l in the check-list deal with this. Generally, all multiple copies of individual documents, letters, etc., should be discarded, leaving only a single copy;
2. Returning to the client
   1. documents which belong to or were provided by the client;
   2. documents, reports, etc., which reasonably relate to final reporting to the client.
3. Notifying the client that the file is to be closed and will eventually be destroyed.
4. Where such notice is sent, obtaining the client's acknowledgment, or instructions regarding the closed file.
5. Making a copy of the file contents where the client removes or is sent all or part of the file. Copies are made at the cost of the firm - not the client.

FILE CLOSURE CHECKLIST

DATE:	CHECKED BY:
FILE NAME:	APPROVED BY:
FILE #:	CLOSED FILE #:
DESTRUCTION DATE:

ITEMS	YES	NO	DONE
1. Reporting letters done?
2. All trust conditions met, all undertakings completed?
3. File reviewed for any loose ends? Noted for action?
4. Unnecessary limitation dates removed from Limitation Diary?
5. No balances in accounts: (a) Trust (b) Unbilled time (c) Unbilled disbursements (d) Unpaid accounts
6. All amounts payable to third parties paid?
7. Does client owe overdue bills on other files?
8. Anything on file which should be sent to clients or others? (e.g. executed documents, borrowed documents)?
9. Anything on file useful for other files?
10. Any notes or copies of briefs, opinions, memos of law, etc., to be preserved?
11. Anything else to take off file? (e.g. drafts of documents; bulky, repetitive, useless items, including those stored elsewhere, not including correspondence or notes or messages)?
12. (a) Client notified re closure and eventual destruction? (b) Client acknowledgment or instructions received?
13. Destruction date marked on file cover? (not less than ten years from file closure)?
14. Current accounting and file records moved to closed accounting and file records?
15. Closed file renumbered and entered in closed file index?
16. Closed file physically removed to closed file location? (including all sub-files, ancillary loose leafs, notebooks, rolls of plans, etc.)

OWNERSHIP OF FILE CONTENTS

The client is entitled to:

1. all documents existing before the lawyer was retained;
2. originals of deeds and other legal documents;
3. draft copies of legal documents that the lawyer prepared for the client;
4. cases, briefs, expert reports and other papers which the client actually or impliedly paid for;
5. originals of letters, depositions or documents submitted by third parties on behalf of the client;
6. originals of other letters received (other than letters from the client);
7. copies of letters to third parties on behalf of the client;
8. copies (only) of receipts and disbursement invoices; and,
9. personal property, such as jewellery, artwork, corporate seals.

All of the foregoing are subject to a solicitor's lien where appropriate.

The lawyer is entitled to:

1. originals of letters from the client;
2. copies of letters to the client;
3. copies of all other letters received;
4. original receipts and disbursement invoices;
5. entries of attendances;
6. tape recordings or notes of conversations;
7. proofs of evidence;
8. inter-office memos;
9. diary entries, time records, computerized records, office journals, books of account;
10. any notes, documents or copies made for the lawyer's own protection or benefit and for which the client was not billed; and,
11. documents not solely owned or for the benefit of the client, including those sent by the client to the lawyer during the course of the retainer with the intention that they become the lawyer's property.

Per Cordery on Solicitors, Eighth Edition, p 89-90.

On delivery of documents to the client on the termination of his retainer, the solicitor may charge for preparing a schedule of them if the schedule is required for the client's benefit. It will be deemed to be required for his benefit if it is accepted by the client or by his new solicitor, but if the client states he does not require a schedule and does not accept it, the solicitor cannot charge for preparing it.

Retrieval

A closed file has to be readily retrievable. Accordingly there must be developed as part of a storage program, an effective file index or some record clearly indicating where the file is located. Some commercial storage companies offer this service.

Leaving practice?

You must advise The Law Society of Alberta where closed files will be located and who will have access to them.

Wherever files are stored, whether on-site, commercially, or elsewhere, preservation of their confidentiality and their physical safety must be assured.

After Closure

There are three options for handling files once they are closed.

1. The obvious - continue to store them indefinitely. If you have the space or are prepared to pay for space, this is a simple solution. However, as the years go by and the size of the firm increases, retention usually creates a logistical and space/cost burden.
   
   

2. Micro-film or scan the contents and then destroy them. This preserves the entire file and requires relatively little storage space. However, original documents such as wills, titles and originally signed agreements must be preserved in paper form.

   Micro-filming and scanning are usually considered too costly for most firms. Costs may be within reach if a policy of systematically and regularly micro-filming or scanning a properly "stripped down" closed file is followed. A new practice can begin this way, or an established practice can introduce such a policy for all files closed after a given current date. The costs, however, involved in sorting, stripping and micro-filming or scanning the contents of a large accumulated store of files is usually prohibitive and rarely, if ever, justifiable. Scanning is becoming more affordable. Inquiries should be made and estimates received from people in the micro-filming and scanning business.

   You should be satisfied that the technology needed to read scanned files will continue to be available for the duration of the storage period.

3. Destroy them over time in accordance with a predetermined policy.

Archives

Consider preserving appropriate firm records as archives. This involves identifying which records are of longer term legal or historical value, and then transferring these records for preservation to an archives, under appropriate conditions. When considering whether to transfer file contents to an archive, make sure you carefully address the issues of privilege and confidentiality. The Legal Archives Society of Alberta has developed selection guidelines and services for this purpose and should be contacted for more information at: 5th Floor, 919 - 11th Avenue S.W., Calgary, Alberta, T2R 1P3, (403) 244-5510, Fax (403) 228-1728.

Destruction Policy

1. Timing

The closed files should be entered for subsequent recall into a separate diary or index set up for that specific purpose. A separate numbering system whereby the closed files are numbered and filed in numerical order is a good idea. The system might include the year of closing as a prefix to the closed file number. By filing numerically, closed files can be brought forward in order for review for destruction, and it would be apparent if a file is missing. As indicated above, it is recommended that no less than ten years elapse between the time of closure and the date of destruction.

A final "check" should be made before actual destruction. At a minimum, a list of the names of the files to be destroyed should be examined to ascertain if one or more should be preserved. Something might have occurred since the original decision to destroy to justify removal from the destruction process.

As a matter of office procedure, the actual destruction might be done on a quarterly or semi-annual basis, de pending on the quantity of files involved. The entries in the diary or index should be made using these time limits.

Destruction should be secure and complete. If you don't have the means e.g. shredder, consider using commercial services. If you use a commercial service, investigate what will happen to the files and satisfy yourself that the service understands the importance of maintaining client confidentiality and takes steps to preserve it during the file destruction process.

2. Notification

Notwithstanding that notifications may have been given to the client at the time of closure (see "Closure" 2 (c) and (d) above), some firms may wish to adopt the policy of notifying the client 60 or 90 days prior to destruction. Such further notification would be to the effect that the file will be destroyed unless the client advises to the contrary, in which case the entire file will be sent to the client. Any copying of file contents is at the cost of the firm. If the client cannot be located, the destruction would simply go ahead.

3. Files to be Retained

Needless to say, there are certain files that should not be destroyed. A will file should not be destroyed until after the estate has been fully administered. In Whittingham v. Crease & Co. (1978), 88 D.L.R. (3d) 353 (B.C.S.C.), a lawyer was found liable to a beneficiary who lost a bequest because of the lawyer's negligence at the time a will was executed. An estate file which is still under administration, even though no further legal work is being done, ought to be retained. Files involving children who have not reached majority should not be destroyed.

If the essential elements of a file can be found at a public place, e.g. records at Land Titles office, Surrogate Court or with the Clerk of the Court, the decision to actually destroy becomes easier.

4. Permanent Record of Destroyed Files

A record should be kept of all files destroyed in accordance with a file destruction policy. This will provide evidence to counter any allegation of having destroyed a file indiscriminately.

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