Guide to Retention and Destruction of Closed Client Files, For Lawyers - Appendix 6

Area of Practice Specific Guidance on File Retention and Destruction

One of the factors that lawyers should consider when setting a file destruction date for a client file is the nature of the matter and the likelihood of the file being required to defend against allegations of malpractice.

The following best practices and recommendations based on specific practice areas may be of assistance to lawyers in determining the appropriate file destruction date. With the exception of those requirements contained in the Law Society Rules of Professional Conduct or By-laws, these recommendations and best practices are not intended to replace the lawyer’s own personal judgment or establish a rigid approach to the retention and destruction of closed client files. When setting a file destruction date, lawyers should consider the individual circumstances of the file, their own needs and the needs of their clients and deviate from these recommendations where appropriate.

LawPRO® has published the following chart based on practice areas which may be of assistance to lawyers when setting a file destruction date for client files. The chart shows by practice area the years between the error date (the date that the work was done) and the reporting date (the date the error was reported to LawPRO®) for 24,221 claims reported to LawPRO® between 1997 and 2009. While most claims against lawyers tend to arise within 15 years of the date that the work was completed, some claims do arise later.

  Under 10 10 to 15 Over 15 Oldest Claim
Real Estate
90.2
5.7
4.1
42 years
Plaintiff Litigation
98.3
1.3
0.4
31 years
Corporate
96.3
2.5
1.2
41 years
Family
92.5
4.8
2.7
26 years
Defence Iititgation
98.5
1.1
0.4
24 years
Wills
91.0
5.5
3.5
39 years
Labour
98.8
1.2
0.0
14 years
IP
98.6
0.9
0.5
18 years
Tax
95.9
3.4
0.7
24 years
Criminal
96.0
1.6
2.5
24 years
Securities
98.7
1.3
0.0
13 years
Bankruptcy
96.2
3.8
0.0
14years

 

Estates and Trusts

How long should a lawyer retain a file involving an estate or trust matter? A will does not take effect until the testator dies and a will file may contain evidence of testamentary capacity or intention and may be required more than 15 years after the
date that the file is closed. Similarly a trust may be operative for more than 15 years after the lawyer’s file is closed. For these reasons it is recommended that a lawyer retain a file involving the administration of an estate or trust for a period of at least 15 years after the date that the estate has been finally distributed or the trust fully administered. Files containing a copy of a signed will, power of attorney document or trust document where final distribution of the estate has not occurred or where the trust has not been fully administered should be retained indefinitely.

In addition, when setting a file destruction date, the lawyer should consider the individual circumstances of the file and in this regard may wish to consider the deadline for bringing a claim in negligence and/or contract against the lawyer.[1]

Should lawyers retain original estate and trust documents such as wills? Generally, it is recommended that when acting for a client in respect of estate litigation, planning, or trust matters, a full discussion should be undertaken with the client to determine whether or not original documents, notarial copies or copies of the following documents should be retained by the lawyer or the client:

  1. wills;
  2. trusts;
  3. powers of attorney;
  4. beneficiary designations;
  5. holograph wills;
  6. passing of accounts vouchers;
  7. precatory memoranda and directions to executors;
  8. family agreements or contracts;
  9. mutual will contracts;
  10. court orders;
  11. Certificates of Appointment of Estate Trustee; and
  12. other relevant documents

There are three important questions for a lawyer to consider with respect to the retention of these documents:

  1. Should the lawyer keep the originals?
  2. If so, how long should the originals be kept?
  3. If the lawyer is not keeping the originals, what steps should the lawyer take to ensure that the originals are returned to the client?

A longstanding debate exists within the Ontario bar of whether or not a lawyer should retain custody of original documents such as wills and trusts. Retaining custody of original documents can impose onerous obligations on a lawyer with respect to the safe storage and retention of these documents. If a lawyer undertakes to retain custody of these documents, the lawyer may wish to consider the length of time that the documents will be stored and how best to maintain contact with the client in the event that the lawyer requires instructions from the client at a future date. Furthermore, it is recommended that lawyers and law firms undertake a careful risk management analysis when considering the issue of whether the lawyer or law firm will store original client documents.

If a lawyer retains such original documents, the lawyer should store these documents in a safe, fire proof and locked facility. Secondly, the lawyer should maintain an accurate and current record of the property stored for the client.[2]

Where the lawyer delivers the original document to the client for safekeeping, it is recommended that the lawyer send to the client a clear and concise reporting letter when the file is closed identifying the original document being returned. A lawyer should consider obtaining a receipt from the client acknowledging the client’s receipt of these original documents. The lawyer may also wish to keep copies of documents returned to a client for future reference.

What should lawyers do with original wills/powers of attorney in their custody upon retirement or closing down their practice?

If the lawyer is able to locate the client or former client, the lawyer should advise the client in writing that the practice is closing down and seek instructions from the client as to whether the will/power of attorney should be transferred to another lawyer or delivered to the client.

If the lawyer is unable to obtain instructions from the client such as in situations where the client cannot be located, the lawyer may, subject to any legal requirement to the contrary, transfer the documents to another lawyer who must preserve the documents in accordance with Section 3.5 or the lawyer may retain custody of the clients’ documents in compliance with Section 3.5.[3] In addition, the lawyer should notify the Law Society in writing as to the location of the documents and send a letter to the client’s last known address advising the client where their documents are to be located in light of the practice closing down.

In certain situations, original wills may be deposited for safekeeping with the Superior Court of Justice. For example this option may be available to:

  • a lawyer who has custody of a will or codicil at the time of retirement from practice;
  • a  lawyer’s estate trustee if the lawyer had custody of the will or codicil at the time of the lawyer’s death; or
  • a person who is authorized by the testator in writing to deposit the will or codicil.[4]
Lawyers should plan for death or disability. In this regard, they may consider having a  will that appoints a lawyer as a special executor/estate trustee with a will to deal with the law practice in the event of the lawyer’s death and a power of attorney granting a successor lawyer the ability to access the lawyer’s trust and general accounts and continue with the practice in the event of the lawyer’s disability. Upon ceasing practice, lawyers should advise their estate trustees/special executors of the location of their file list and files and should also advise the Law Society of the location of client property such as wills and powers of attorney. Furthermore, they should consider any wills under which they have been named estate trustee. If a lawyer is acting as an estate trustee when the lawyer ceases to practice, the lawyer should review the will to determine if a replacement should be appointed. Similarly, where an appointment has been made in the will, but the testator is still alive, it may be necessary to contact the client to discuss a Codicil changing the appointment, especially if no alternative is named.

Real Estate

How long should a lawyer retain a file involving a real estate matter?

The majority of claims against lawyers involving real estate matters tend to arise within a period of fifteen years after the lawyer has completed the work. Based on this, it is recommended that lawyers retain most real estate files for a period of fifteen years after the date that the file is closed.

In setting a file destruction date for a real estate file, lawyers should consider the individual circumstances of the file. For example, where a lawyer has acted for a client with respect to both the purchase and the sale of a property, the likelihood of the lawyer requiring the file more than 15 years after the sale of the property is minimal. By contrast, if the client is a continuous client of the lawyer or law firm and the file is likely to be required for the representation of the client at a future date more than 15 years after the file is closed, the lawyer may wish to retain the file for a longer period.

When establishing a file destruction date, lawyers may also wish to consider the deadline for bringing claims against the lawyer.  As a result of the judgment of the Ontario Court of Appeal in York Condominium Corp. No.382 v. Jay-M Holdings, 2007 ONCA 49 Canlii, it appears that undiscovered claims based on legal services rendered on or before January 1, 2004 will be barred only as of January 2, 2019.

What documents should the lawyer retain in the file when a real estate file is closed?

Prior to closing the file and to facilitate the eventual destruction of the file, it is recommended that lawyers deliver to the client all original documents belonging to the client such as the survey of the property. Lawyers should keep copies of these documents having regard to the considerations set out in the Law Society Guide to Retention and Destruction of Closed Client Files. When lawyers deliver original documents to their clients, it is recommended that they confirm in writing with the client the documents being delivered. They may also wish to alert the client that the documents should be maintained in a safe place as the lawyer’s file will eventually be destroyed in accordance with the lawyer’s file retention and destruction policy and copies of documents will no longer be available thereafter.

Lawyers should consider retaining in their closed files the following documents as these documents are of particular assistance to lawyers when defending themselves against allegations of malpractice:

  • title search including notes and off-title searches;
  • the lender’s instructions;
  • a copy of the survey;
  • the requisition letter and answer including any exchange of correspondence on a contentious issue;
  • the title insurance policy;
  • reporting letters;
  • documents confirming the client’s instructions such as the lawyer’s contemporaneous notes to the file regarding discussions with the client or staff and decisions made on issues and letters to the client confirming instructions;
  • documents in support of compliance with law statements made by the lawyer;
  • copies of clients’ identification;
  • certificates of independent legal advice if any; and
  • the client’s authorization (e.g acknowledgment and direction) to the lawyer to submit documents for electronic registration and to release the authorization to the Director of Land Registration if requested by the Director in the event of an investigation regarding suspected fraudulent or unlawful activity.[5]

Given the fact that real estate files tend to be paper intensive and costly to store in paper form, real estate lawyers may wish to consider implementing procedures within their firms to store newly closed files electronically.

Prior to closing a real estate file, lawyers should ensure that all undertakings given by lawyers in the matter have been satisfied and all trust conditions have been honoured.

What are some of the considerations for real estate lawyers regarding closed files when closing down their practices or upon retirement?

Lawyers in determining whether to destroy closed files upon retirement or closing down one’s practice should be guided by the same considerations as for real estate files closed during the course of the practice. Generally, a period of fifteen years after the date that the file was closed will be an appropriate retention period. However, in setting a destruction date for such files, lawyers should consider the individual circumstances of the file and the likelihood of the lawyer requiring the file at a future date. Claims against the lawyer may arise after the lawyer has retired or left private practice. (e.g. become employed in government, education or as in-house counsel).

Depending on the nature of the lawyer’s practice and the types of matters handled by the lawyer, lawyers upon retirement or leaving private practice may wish to consider purchasing increased run-off liability insurance coverage protection. The standard LawPRO® Run-Off Insurance Coverage in the amount of $250,000 per claim/in the aggregate limit provides some limited protection, but it may not adequately protect the lawyer for any claims that may arise after the lawyer has retired or left private practice . Once the $250,000 limit is used up, the lawyer is personally liable for any additional costs. See the LawPRO® website for more information on Run-off coverage (www.lawpro.ca).

 


 1        There are some provisions in the Limitations Act, 2002 that operate to extend the basic limitation period of two years and the ultimate limitation period of 15 years. For example, section 15(4) of the Act provides that the ultimate limitation period does not run if the person with a claim is a minor or is incapable and is not represented by a litigation guardian in relation to that claim. In addition as a result of the judgment of the Court of Appeal in York Condominium Corp. No.382 Jay-M Holdings, 2007 ONCA 49, it appears that undiscovered claims based on legal services rendered on or before January 1, 2004 will be barred only as of January 2, 2019.

 

2        Rule 3.5-2 of the Rules of Professional Conduct provides that lawyers are required to care for a client’s property as a careful and prudent owner would when dealing with like property and to observe all relevant rules and law about the preservation of a client’s property entrusted to a lawyer.

3        Ibid.

4        Section 2 of the Estates Act, R.S.O.1990, Chapter E.21 and Rule 74.02(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg.194. Lawyers should be mindful of the duty of confidentiality which survives death and is set out in Section 3.3 of the Rules of Professional Conduct. Consideration should be given to including in the lawyer’s initial reporting letter the necessary authorization to address the issue of the duty of confidentiality in respect of the release of the client's information "before death and after death".

5        The Electronic Land Registration Agreement that lawyers who are account holders are required to enter into with the Ontario government for authorization to submit documents for registration in the electronic land registration system provides that prior to submitting a Transfer, Charge, Discharge or Power of Attorney for electronic registration, the account holder must ensure that users under the account have obtained evidence of proper authorization from the owner of the land or holder of an interest in the land that has directed the registration. In addition they must be in a position to provide evidence of that person’s explicit consent to release their authorization for the registration to the Director of Land Registration upon request by the Director in the event of an investigation regarding suspected fraudulent or unlawful activity or registration.