File Transfer Issues

1. File Transfer Issues Melanie Hodges Neufeld Jody Martin

2. Webinar Summary • Issues arising with open file if account paid • Who is entitled to documents • Coming into existence before retainer • Coming into existence during retainer • File Transfer Fees • Photocopy Fees • Time spent preparing file for transfer

3. Webinar Summary • Issues Arising with closed file • File Retention • Issues arising when a lawyer leaves a firm • Issues arising with open file if account unpaid • Solicitor’s Liens

4. Duty Following Withdrawal/Discharge Code of Professional Conduct, Chapter XII, Commentary 2: 2. The lawyer who withdraws from employment should act so as to minimize expense and avoid prejudice to the client, doing everything reasonably possible to facilitate the expeditious and orderly transfer of the matter to the successor lawyer.

5. Duty Following Withdrawal/Discharge Code of Professional Conduct, Chapter XII, Commentary 2: 8. Upon discharge or withdrawal the lawyer should: (a) deliver in an orderly and expeditious manner to or to the order of the client all papers and property to which the client is entitled; (b) give the client all information that may be required about the case or matter; (c) account for all funds of the client on hand or previously dealt with and refund any remuneration not earned during the employment; (d) promptly render an account for outstanding fees and disbursements; (e) co-operate with the successor lawyer for the purposes outlined in paragraph 2.

6. “The documents that should be handed over to a client...is a matter of law and not professional conduct.” • Who owns what is answered by reference to legal principles of ownership and possession, not by consideration of legal ethics. • Aggio v. Rosenberg

7. File Open & Account PaidWho Owns the Document? Factors to Consider When Determining Ownership: • When did the document come into existence? • For whose benefit was the document prepared? • Who paid for or is properly liable to pay for the document’s preparation?

8. Before the Retainer • Clearly belong to the client • Lawyer holds documents as agent for and on behalf of the client or third party • On termination of retainer, originals must be returned to appropriate party

9. During the Retainer Lawyer Canshow ownership by meeting three criteria: • The lawyer was under no duty to prepare them, • The document was not prepared for the benefit of the client, and • The client cannot be regarded as being liable to pay for them

10. During the Retainer Client ownership is proven by showing: • The document was a necessary part of the business transacted • The client has in fact paid (or is liable to pay) in one form or another for the document’s preparation

11. Four Categories of Ownership Client’s Documents 1. Documents prepared by the lawyer for the benefit of the client and for which the client has paid 2. Documents prepared by third parties during the course of the retainer and sent to the lawyer (other than at the lawyer’s own expense)

12. Four Categories of Ownership Lawyer’s Documents 3. Documents prepared by the lawyer for the lawyer’s benefit and for which the client was not charged 4. Documents sent by the client to the lawyer during the course of the retainer with the intention that, at the time of delivery, ownership of the document would pass to the lawyer

13. 1. Documents prepared by the lawyer for the benefit of the client and for which the client has paid • Copies of case law • Briefs • Document drafts and copies • Originals of all documents prepared for client • Copies of letters received by the lawyer (if paid for by the client) • Copies of letters from the lawyer to third parties kept in the client’s file • Originals of letters from the lawyer to client • Memoranda of law (prep paid for by client) • Pre-trial notes and tapes of conversations with witnesses • Trial preparation documents (chambers and trial briefs, documents book, trial books, etc.) • Copies of any other documents prepared by the lawyer for which the client has paid

14. 2. Documents prepared by third parties during the course of the retainer and sent to the lawyer (other than at the lawyer’s own expense) • Letters received by the lawyer from third parties • Vouchers and receipts for disbursements made by the lawyer on behalf of the client • Experts’ reports • Discovery and trial transcripts

15. 3. Documents prepared by the lawyer for the lawyer’s benefit and for which the client was not charged • Copies of letters • Copies of letters from the lawyer to third parties kept in filing system of all letters written in the lawyer’s office • Entries of attendance • Working notes, summaries of evidence and submissions to the court • Pre-trial notes and tape recordings of conversations (other than with witnesses) • Inter-office memoranda • Entries in diaries • Time sheets • Office journals • Books of account • Computerized records • Notes and documents prepared for the lawyer’s own benefit/protection at the lawyer’s own expense

16. 4. Documents sent by the client to the lawyer during the course of the retainer with the intention that, at the time of delivery, ownership of the document would pass to the lawyer • Originals of letters from client to lawyer • Instructions from client to lawyer • Authorization from client to lawyer • Documents sent by client to lawyer with the intention that they become the solicitor’s property

17. Lawyer’s Notes Traditional view: All notes, including notes of interviews and preparations for trial, and tape recordings, are the property of the lawyer.

18. Lawyer’s Notes Current View: • Ownership of most notes and tape recordings of conversations are the property of the lawyer, as they are made toaid the lawyer’s memory • Notes and tape recordings of conversations of witnesses, when the trial has not been held or the matter settled, belong to the client • Provide important information for new counsel in preparing the case

19. Original Documents Not Found in the File • Example: Original of Chambers brief in possession of the Court • Original represented in the file by a copy of the original • At termination of the retainer, the client entitled to the copy just as would be entitled to the original • As client has been billed for the expense of producing the original and the copy

20. File Transfer Fees • Photocopy Fees • Time Spent Preparing File for Transfer

21. Photocopy Costs Considerations when determining who bears cost of photocopies: • Who Owns the Document to be Copied? • For Whose Benefit the Copy is Being Made?

22. Photocopy Costs • Once a lawyer’s authority to retain documents is terminated, the lawyer should return all documents belonging to the client without charge. • Lawyers are entitled to keep file copies of documents to protect themselves against allegations of negligence or misconduct. • The cost of copying the file (documents owned by the client) for the lawyer’s benefit is borne by the lawyer.

23. Photocopy CostsCorrespondence Example 1. Our firm sends clients copies of all letters written and received on the client’s behalf during the course of the retainer. Now that the retainer has ended, can we charge the client for copies of these letters?

24. Photocopy CostsCorrespondence Example 1. Since copies of letters received and sent out to the client are normally charged to the client, the lawyer is not entitled to charge the client again for the letter on the file if the lawyer is copying it for his or her own purpose.

25. Photocopy CostsCorrespondence Example 2. When the retainer was terminated, our firm gave the file to the client, including all correspondence, without charge. The client is now requesting additional copies of this correspondence. Can we charge the client for these photocopies?

26. Photocopy CostsCorrespondence Example 2. Yes, the lawyer can charge a reasonable amount for making any additional copies for the client.

27. 2007 SKLSPC 13Facts Lawyer K requested a ruling with respect to file transfers. Lawyer K and Lawyer B were in the same Firm and Lawyer B left to open her own firm. Lawyer K was of the view that he was entitled to charge clients asking to transfer their files to Lawyer B, for copying and maintaining a copy of that client’s file at his Firm. Lawyer K argued that it was for the client’s own benefit that he maintain a copy of the client’s file.

28. 2007 SKLSPC 13Ruling The Ethics Committee would like to confirm that prior rulings in Chapter XII of the Rulings section of the Law Society of Saskatchewan Handbook. The file is the property of the client as long as accounts are paid or secured. If a lawyer wishes to retain a copy of a file for his or her own records, it is at his or her own cost. The Ethics Committee indicated that it is clear in this situation that Lawyer K is not entitled to charge clients for transferring files to Lawyer B’s office or for maintaining his own copy of said files.

29. Time Spent Preparing File for Transfer • If the labour involved in going through the file or preparing it for transfer is minimal, no charge • In certain situations, reasonable fees may be charged for example: • Time spent on determining which file documents belonged to the client and which belonged to the lawyer • Preparing transfer memoranda for new counsel

30. Factors to Consider if Appropriate to Recover Transfer Fees: • Preparation Time, Complexity of the Case, and Benefit to the Client • Number of files to be transferred and the time taken away to attend to other client matters • Reasonableness in facilitating transfer and shortening up ‘Start up Time’ (re-preparation time) • Absence of Advance Notice of Termination by the client • Reasonableness of the Amount Charged

31. McNeil v. Kansa General International Insurance Co • Preparation Time, Complexity of the Case, and Benefit to the Client • complex insurance matters • the preparation time required to put the file in order was a direct benefit to the new solicitor and the client

32. McNeil v. Kansa General International Insurance Co • Number of files to be transferred and the time taken away to attend to other client matters • Involved approximately 150 active files • Comprised a significant portion of the firm’s work • Very large task of preparing the files for transfer • Took up time that would otherwise be available to service needs of other clients

33. McNeil v. Kansa General International Insurance Co • Reasonableness in facilitating transfer and shortening up ‘Start up Time’ • Former counsel prepared transfer memoranda for new counsel • Was reasonable for former counsel to facilitate the transfer and to shorten ‘start up’ or re-preparation

34. McNeil v. Kansa General International Insurance Co • Absence of Advance Notice of Termination by the client • No advance notice was given

35. McNeil v. Kansa General International Insurance Co • Reasonableness of the Amount Charged • Amount charged not excessive • Between $50 - $625 per file • On many files no transfer fee sought

36. File Retention • No universal agreement on how long files should be retained • Law Society has no set policy requirements of guidelines • Likely should be at least 7 years • Each lawyer and each firm must assess and be responsible for identifying a retention period that is appropriate for each particular file

37. Disposition Streams • Retain File 7 years • Simple files when there is no comeback outside the limitation periods and the tax considerations • Examples: • Simple real estate files • Simple files related to criminal prosecution and defence work

38. Disposition Streams • Retain file 10 years • Use for great majority of files

39. Disposition Streams • Retain file in Permanent Collection • Where the consequences of the work are long-lasting for both client and lawyer • Examples: • Will instructions • Estate files with ongoing trust implications

40. When a Lawyer Leaves a Firm The Law Societies of British Columbia, Alberta and Manitoba all have a section in their respective Codes of Professional Conduct dealing with lawyers leaving a firm. The Law Society of Saskatchewan addresses the issues related to when a lawyer leaves a firm in various chapters of the Code.

41. Primary Consideration • The client has the right to terminate the lawyer client relationship at will and to be represented by a lawyer of their choosing. • When a client has terminated the retainer, much like when a lawyer withdraws, the lawyer should act so as to minimize expense and avoid prejudice to the client doing everything reasonably possible to facilitate the expeditious and orderly transfer of the matter to the successor lawyer. • Chapter XII of the Saskatchewan Code of Professional Conduct, Commentaries 9 through 13 indicate that lawyers should behave civilly and avoid “unseemly rivalry” as it is the client’s choice as to the lawyer who will represent them. • In addition, it would be unethical for the firm to fail or refuse to provide the client with the departing lawyer’s new contact information.

42. All three Codes (BC, Alberta, and Manitoba) indicate: • It is the client’s decision whether to stay with the law firm or go with the departing lawyer. • There is a duty on the departing lawyers to inform all clients for whom they were the responsible lawyer, of the client’s right to choose who will continue to represent them. • It is preferable that a letter to the clients be sent jointly by the departing lawyer and the law firm, however, in the absence of a joint announcement, the announcement or notification should be provided by both.

43. The notification to the client should advise the client that they have the following options: • The client may have the departing lawyer continue to act; • The client may have the firm which the lawyer is leaving continue to act; or • The client may retain other counsel. In each of these cases, file transfer issues will be raised and must be addressed by the lawyer and the firm.

44. Notification and distribution of files: The Law Society of Alberta suggests, and we agree that: “the approach taken should be moderate, reasonable, and free of efforts by either the departing lawyer or the firm to unduly influence a client’s instructions regarding disposition of a current matter. An optimum solution would be mutual review of the client list and agreement as to a fair and appropriate manner of contacting clients and obtaining written authorizations for the transfer of files moving with the lawyer…”

45. Who Owns What? The Departing Lawyer v. The Firm • The client is a client of the firm, not the lawyer; • The firm is entitled to possession of the file; and • Work in progress and accounts receivable on a file belong to the firm and not the lawyer.

46. The above 3 points apply whether or not the client came to the firm only to see that lawyer and never saw another lawyer of the firm. • It is also not relevant if the lawyer is partner or an associate of the firm. If the firm is an association of independent practitioners, subject to any agreements between the practitioners, then it would not be likely to be considered a “firm” for the purpose of ownership of files, work in progress or accounts receivable.

47. Financial Issues The negotiation of financial settlement between the departing lawyer and the firm should include a negotiation with respect to fees and disbursements owing on files going with the departing lawyer.

48. Financial Issues The Law Society of Alberta provides that: “The lawyer and firm must come to a mutually acceptable arrangement respecting work in progress and disbursements outstanding on files that are to be transferred with the lawyer. The transfer of a file and, consequently, the progress of a client matter should not be unduly delayed.”

49. An Important Business Issue • Some departing lawyers make the mistake of ensuring that as many files as possible are transferred to them when they leave the firm. • This is especially relevant to those departing lawyers who are opening their own practice. • This mistake may occur because of concerns that the new practice will not generate enough cash flow on the up-start and the lawyer may think that any work will be better than no work.

50. An Important Business Issue • However, when considering transferring files, the departing lawyer must not only consider the clients interests in transferring the file but should put thought to whether the type of work is going to be at odds with the business plan of the new practice. • Transferring the wrong type of files can result in the practice being taken in an unplanned direction and divert attention from the many organizational tasks involved with starting a new practice. • One of the greatest threats to a new practice is too much legal work that overwhelms the management of the practice and the necessary infrastructure of the new practice is not properly established.