Transcript File Transfer Issues

File Transfer Issues
Melanie Hodges Neufeld
Jody Martin
Webinar Summary
Issues arising with open file if account paid
1.
Who is entitled to documents
A.
i.
ii.
Coming into existence before retainer
Coming into existence during retainer
File Transfer Fees
B.
i.
ii.
Photocopy Fees
Time spent preparing file for transfer
Webinar Summary
2.
Issues Arising with closed file
A.
3.
4.
File Retention
Issues arising when a lawyer leaves a firm
Issues arising with open file if account unpaid
A.
Solicitor’s Liens
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.
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.
“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
File Open & Account Paid
Who Owns the Document?
Factors to Consider When Determining Ownership:
1.
When did the document come into existence?
2.
For whose benefit was the document
prepared?
3.
Who paid for or is properly liable to pay for
the document’s preparation?
Before the Retainer
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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
During the Retainer
Lawyer Can show ownership by meeting three criteria:
1.
2.
3.
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
During the Retainer
Client ownership is proven by showing:
1. The document was a necessary part of the
business transacted
2. The client has in fact paid (or is liable to pay)
in one form or another for the document’s
preparation
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)
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
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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
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)
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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
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
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
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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
Lawyer’s Notes
Traditional view:
All notes, including notes of
interviews and preparations for
trial, and tape recordings, are the
property of the lawyer.
Lawyer’s Notes
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Current View:
Ownership of most notes and tape recordings
of conversations are the property of the lawyer,
as they are made to aid 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
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Provide important information for new counsel in
preparing the case
Original Documents Not Found in the File
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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
File Transfer Fees
1.
2.
Photocopy Fees
Time Spent Preparing File for
Transfer
Photocopy Costs
Considerations when determining who bears
cost of photocopies:
1.
2.
Who Owns the Document to be Copied?
For Whose Benefit the Copy is Being Made?
Photocopy Costs
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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.
Photocopy Costs
Correspondence 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?
Photocopy Costs
Correspondence 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.
Photocopy Costs
Correspondence 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?
Photocopy Costs
Correspondence Example 2.
Yes, the lawyer can charge a reasonable
amount for making any additional
copies for the client.
2007 SKLSPC 13
Facts
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.
2007 SKLSPC 13
Ruling
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.
Time Spent Preparing File for Transfer
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1.
2.
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
Factors to Consider if Appropriate to Recover Transfer Fees:
1.
2.
3.
4.
5.
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
McNeil v. Kansa General
International Insurance Co
1.
Preparation Time, Complexity of the Case,
and Benefit to the Client
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complex insurance matters
the preparation time required to put the file in
order was a direct benefit to the new solicitor
and the client
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McNeil v. Kansa General
International Insurance Co
2.
Number of files to be transferred and the time
taken away to attend to other client matters
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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
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McNeil v. Kansa General
International Insurance Co
3.
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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 repreparation
McNeil v. Kansa General
International Insurance Co
4.
Absence of Advance Notice of
Termination by the client
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No advance notice was given
McNeil v. Kansa General
International Insurance Co
5.
Reasonableness of the Amount Charged
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Amount charged not excessive
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Between $50 - $625 per file
On many files no transfer fee sought
File Retention
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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
Disposition Streams
1.
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Retain File 7 years
Simple files when there is no comeback
outside the limitation periods and the tax
considerations
Examples:
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Simple real estate files
Simple files related to criminal prosecution and
defence work
Disposition Streams
2.
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Retain file 10 years
Use for great majority of files
Disposition Streams
3.
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Retain file in Permanent Collection
Where the consequences of the work are longlasting for both client and lawyer
Examples:
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Will instructions
Estate files with ongoing trust implications
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.
Primary Consideration
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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.
All three Codes (BC, Alberta, and
Manitoba) indicate:
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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.
The notification to the client should advise the
client that they have the following options:
1.
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3.
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.
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…”
Who Owns What?
The Departing Lawyer v. The Firm
1.
The client is a client of the firm, not the
lawyer;
2.
The firm is entitled to possession of the file;
and
3.
Work in progress and accounts receivable on a
file belong to the firm and not the lawyer.
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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.
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.
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.”
An Important Business Issue
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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.
An Important Business Issue
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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.
In Summary:
1.
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4.
It is the client’s right to be informed that a
lawyer with whom they are working is leaving
firm and to decide who will represent them.
The client is a client of the firm, not the
lawyer.
The firm is entitled to possession of the file.
Work in progress and accounts receivable on a
file belong to the firm and not the lawyer.
In Summary:
5.
6.
7.
It is advisable for the firm and the departing lawyer to send
the clients a joint letter advising of the departure and of their
choice to stay with the firm, follow the departing lawyer, or
seek new counsel.
It is advisable for law firms to have lawyer/firm agreements in
place to deal with issues which may arise upon a lawyer’s
departure, which include issues around the transfer of the file,
including work in progress and accounts receivable.
When considering transferring files, the departing lawyer must
not only consider the client’s interests in transferring the file
but should consider whether the type of work is going to be at
odds with the business plan of the new practice.
Solicitor Liens and File Transfer
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From a complaint perspective, we often receive
inquiries with respect to solicitor’s liens in relation to
the refusal of a lawyer to transfer the client’s file.
We often will advise the complainants that if the lawyer
is maintaining a solicitor’s lien on the file that the Law
Society of Saskatchewan Complaints Process has no
jurisdiction to become involved in such and the
complainant has other remedies to address payment of
their account and transfer of their file.
When a firm receives a written authorization
from the client to transfer the file, either to a
departing lawyer or a new firm, the firm should
in all cases transfer the file subject only to its
right to render an account and exercise a
solicitor’s lien on the file for unpaid fees and
disbursements.
Types of Liens:
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The obligation to transfer the file, and to deliver
papers and property is subject to the lawyer's
right of lien. A solicitor’s lien my be pursued
through 3 separate avenues
See Merchant Law Group v. McLeod & Co,
2005 ABQB 875, for thorough discussion on the
3 types of solicitors liens available
When Does the lien Arise?
In most cases the lawyer’s authority to hold
clients documents terminates upon
termination of the retainer. The lawyer’s
authority to hold back client documents
arises when at the termination of the
retainer some or all of the lawyer’s
accounts remain unpaid.
Retaining Lien
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The most common type of lien is the “retaining lien”
Enables a lawyer to retain a clients file and refuse to
transfer it to a subsequent lawyer until satisfactory
arrangements have been made for payment of the
prior lawyer’s account.
The transfer is often achieved through trust
conditions agreed to between the new and the prior
lawyer.
It is this type of lien we will be dealing with today as
it is most relevant to the issue of file transfer.
Charging Order
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The “charging order”, which is encoded in the
following excerpt of The Legal Profession Act, 1990:
66(1) A member who is employed to prosecute or defend a proceeding in a court or
tribunal may apply to the court for an order granting the member a lien or charge
against any personal property not in the member’s possession that is recovered or
preserved as a result of the member’s services for the proper fees and expenses of or
in relation to the proceedings, including counsel fees.
(2) On an application pursuant to subsection (1) or for the enforcement of an order
made pursuant to subsection (1), a judge may make any order that the judge considers
appropriate for payment of the lien or charge out of the property recovered or
preserved.
(3) A member has a lien or charge for the member’s proper fees and expenses in
relation to all legal services performed by the member for a client against any property
owned by the client that is in the member’s possession.
(4) Nothing in subsection (3) overrides the exceptions to a solicitor’s lien at common
law.
(5) On application by a client, the court may, on any terms and conditions that the
court considers appropriate, order the delivery of any of the client’s property in a
member’s possession that is held pursuant to subsection (3).
Common Law “Charging Lien”
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Prior to the creation of the statutory charging
order, lawyers could rely upon a common law
“charging lien”.
This has been described as “a claim to the
equitable interference of the court to have a
judgment held as security for the solicitor’s
debt”.
Often the charging lien and charging order are
used interchangeably though they are two
distinct types of liens.
Professional Code of Conduct
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When considering whether a lien is appropriate, the
firm must ensure that the retention of the file does not
prejudice the client.
Chapter 12 Commentary 11 of the Code, though
specifically addressing withdrawal, applies equally to the
refusal to transfer a file and provides:
11. Where upon the discharge or withdrawal of the
lawyer the question of a right of lien for unpaid fees
and disbursements arises, the lawyer should have due
regard to the effect of its enforcement upon the client's
position. Generally speaking, the lawyer should not
enforce such a lien if the result would be to prejudice
materially the client's position in any uncompleted
matter.
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An enshrined in the Code, the lawyers right to enforce
the lien on client documents may be restricted if to
enforce the lien would prejudice the client. The courts
have looked to the client’s interest and note that the
client’s interests must be given “great weight”.
Specifically, where the client’s interests can be preserved
by allowing access to the file, courts have upheld the
lien subject the clients right to inspect the documents at
the lawyers office. (see for example Appleton v.
Hawes(1990) 47 C.P.C.(2d)(Gen. Div.), additional
reasons at 2 W.D. C.P. (2d) 154.
The lawyer’s right to retain the liened documents is no
greater than the client’s rights. As such if a third party
has an interest or a right superior to that of the client
the lawyer’s ability to retain the documents is subject to
those superior rights or interests.
File Transfer Procedure
There are no rules that dictate what procedure
should be followed by lawyers when a client
moves a file from one lawyer to another and
there is considerable uncertainty about what is
appropriate or acceptable when the first lawyers
account is unpaid.
File Transfer Procedure
However, we suggest the following as a guideline:
1.
2.
3.
The new lawyer should request transfer of the file
from the prior lawyer;
If the prior lawyer has not been paid, then a retaining
lien may be asserted by refusing to hand over the file
unless arrangements can be made with the client of
the new lawyer to pay or secure the account.
If the prior lawyer has not already sent the client an
account, this should be done as soon as possible.
File Transfer Procedure
4.
5.
The lawyer wishing to assert the lien must consider,
pursuant to the Code, whether a lien is appropriate,
so as to not materially prejudice the client’s position.
Outstanding accounts can often be secured by (a) the
client providing other security for the account or (b)
the new lawyer providing an undertaking to pay the
account. However, where there is a valid solicitor’s
lien, there is no obligation on the prior lawyer to
accept an undertaking or security instead of payment
before giving up the file.
File Transfer Procedure
6.
As noted, the new lawyer and the prior lawyer can
agree that the file be transferred on undertakings.
These undertakings should be very carefully worded
and the wording will vary according to the
circumstances and to what is agreed to between the
client, the new lawyer and the prior lawyer. The new
lawyer should also realize that the arrangements made
with the prior lawyer may affect any retaining lien he
or she may wish to exercise against the client.
File Transfer Procedure
7.
8.
If there are outstanding disbursements in
addition to fees, the prior lawyer may insist
that the disbursements be paid. Otherwise the
prior lawyer would continue to finance the
case by agreeing to wait for payment until the
file is complete.
If the client does not consent to the prior
lawyer’s account, the account may be assessed.
File Transfer Procedure
9.
10.
If satisfactory arrangements cannot be made
to address the outstanding reviewed account,
the client my apply for a court order directing
the prior lawyer to deliver the file to the new
lawyer.
If the prior lawyer refuses to release the file or
if the court refuses to order delivery, then the
new lawyer may have to construct the file to
proceed with the case.
Note on Trust Conditions
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Where there is no right of lien either through the Act
or the common law, it would be improper to refuse to
deliver the file if the receiving lawyer is unwilling to
accept trust conditions requiring the receiving lawyer to
undertake to repay the outstanding fees and
disbursements owed to the first firm.
While the receiving lawyer may, as a matter of
professional courtesy, voluntarily agree to give such an
undertaking or seek directions from their client to
accept such trust conditions, the original firm cannot
insist upon this as a precondition to delivery of the file
if the firm is not in a position to assert a solicitor’s lien.
Note on Trust Conditions
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Even when the file is obtained without trust
conditions relating to unpaid fees and
disbursements, the receiving lawyer has an
ethical obligation to assist in collecting the
original lawyer’s account by urging the client to
attend to payment or otherwise securing what is
owed to the former lawyer.
Chapter XII Commentary 12, addresses the
duty of the successor lawyer in this regard:
12. Before accepting employment, the successor lawyer
should be satisfied that the former lawyer approves, or
has withdrawn or been discharged by the client. It is
quite proper for the successor lawyer to urge the client
to settle or take reasonable steps toward settling or
securing any account owed to the former lawyer,
especially if the latter withdrew for good cause or was
capriciously discharged. But if a trial or hearing is in
progress or imminent, or if the client would otherwise
be materially prejudiced, the existence of an
outstanding account should not be allowed to interfere
with the successor lawyer acting for the client.
Resources
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Law Society of Saskatchewan
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Law Society of British Columbia
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Whose File is it Anyway? Who Owns Client File
Documents When the Retainer Ends by Jacqueline Morris,
Felicia S. Folk & John Vamplew
Getting Paid: Asserting and Defending a Solicitor’s Lien by
Jacqueline Morris & Felicia S. Folk
Charging Liens – 2005 Update by Felicia S. Folk
Law Society of Upper Canada
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Retention, Storage and Disposition of Client Files by Rod
MacDonald, Q.C.
File Transfer on Termination of Retainer
Solicitor’s Liens
Law Society of Alberta
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When a Lawyer Leaves a Law Firm