Presentation on theme: "Melanie Hodges Neufeld Jody Martin"— Presentation transcript:
1Melanie Hodges Neufeld Jody Martin File Transfer IssuesMelanie Hodges NeufeldJody Martin
2Webinar Summary Issues arising with open file if account paid Who is entitled to documentsComing into existence before retainerComing into existence during retainerFile Transfer FeesPhotocopy FeesTime spent preparing file for transfer
3Webinar Summary Issues Arising with closed file File RetentionIssues arising when a lawyer leaves a firmIssues arising with open file if account unpaidSolicitor’s Liens
4Duty 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.
5Duty 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 “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
7File Open & Account Paid Who 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?
8Before the Retainer Clearly belong to the client Lawyer holds documents as agent for and on behalf of the client or third partyOn termination of retainer, originals must be returned to appropriate party
9During the Retainer The lawyer was under no duty to prepare them, Lawyer Can show 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, andThe client cannot be regarded as being liable to pay for them
10During the Retainer Client ownership is proven by showing: The document was a necessary part of the business transactedThe client has in fact paid (or is liable to pay) in one form or another for the document’s preparation
11Four Categories of Ownership Client’s Documents1. Documents prepared by the lawyer for the benefit of the client and for which the client has paid2. Documents prepared by third parties during the course of the retainer and sent to the lawyer (other than at the lawyer’s own expense)
12Four Categories of Ownership Lawyer’s Documents3. Documents prepared by the lawyer for the lawyer’s benefit and for which the client was not charged4. 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
13Document drafts and copies 1. Documents prepared by the lawyer for the benefit of the client and for which the client has paidCopies of case lawBriefsDocument drafts and copiesOriginals of all documents prepared for clientCopies 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 fileOriginals of letters from the lawyer to clientMemoranda of law (prep paid for by client)Pre-trial notes and tapes of conversations with witnessesTrial 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
14Letters received by the lawyer from third parties 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 partiesVouchers and receipts for disbursements made by the lawyer on behalf of the clientExperts’ reportsDiscovery and trial transcripts
153. Documents prepared by the lawyer for the lawyer’s benefit and for which the client was not chargedCopies of lettersCopies of letters from the lawyer to third parties kept in filing system of all letters written in the lawyer’s officeEntries of attendanceWorking notes, summaries of evidence and submissions to the courtPre-trial notes and tape recordings of conversations (other than with witnesses)Inter-office memorandaEntries in diariesTime sheetsOffice journalsBooks of accountComputerized recordsNotes and documents prepared for the lawyer’s own benefit/protection at the lawyer’s own expense
16Originals of letters from client to lawyer 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 lawyerOriginals of letters from client to lawyerInstructions from client to lawyerAuthorization from client to lawyerDocuments sent by client to lawyer with the intention that they become the solicitor’s property
17Lawyer’s Notes Traditional view: All notes, including notes of interviews and preparations for trial, and tape recordings, are the property of the lawyer.
18Lawyer’s Notes 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 memoryNotes and tape recordings of conversations of witnesses, when the trial has not been held or the matter settled, belong to the clientProvide important information for new counsel in preparing the case
19Original Documents Not Found in the File Example: Original of Chambers brief in possession of the CourtOriginal represented in the file by a copy of the originalAt termination of the retainer, the client entitled to the copy just as would be entitled to the originalAs client has been billed for the expense of producing the original and the copy
20File Transfer Fees Photocopy Fees Time Spent Preparing File for Transfer
21Photocopy CostsConsiderations when determining who bears cost of photocopies:Who Owns the Document to be Copied?For Whose Benefit the Copy is Being Made?
22Photocopy CostsOnce 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.
23Photocopy 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?
24Photocopy 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.
25Photocopy 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?
26Photocopy Costs Correspondence Example 2. Yes, the lawyer can charge a reasonable amount for making any additional copies for the client.
272007 SKLSPC 13 FactsLawyer 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.
282007 SKLSPC 13 RulingThe 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.
29Time Spent Preparing File for Transfer If the labour involved in going through the file or preparing it for transfer is minimal, no chargeIn 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 lawyerPreparing transfer memoranda for new counsel
30Factors to Consider if Appropriate to Recover Transfer Fees: Preparation Time, Complexity of the Case, and Benefit to the ClientNumber of files to be transferred and the time taken away to attend to other client mattersReasonableness in facilitating transfer and shortening up ‘Start up Time’ (re-preparation time)Absence of Advance Notice of Termination by the clientReasonableness of the Amount Charged
31McNeil v. Kansa General International Insurance Co Preparation Time, Complexity of the Case, and Benefit to the Clientcomplex insurance mattersthe preparation time required to put the file in order was a direct benefit to the new solicitor and the client
32McNeil v. Kansa General International Insurance Co Number of files to be transferred and the time taken away to attend to other client mattersInvolved approximately 150 active filesComprised a significant portion of the firm’s workVery large task of preparing the files for transferTook up time that would otherwise be available to service needs of other clients
33McNeil v. Kansa General International Insurance Co Reasonableness in facilitating transfer and shortening up ‘Start up Time’Former counsel prepared transfer memoranda for new counselWas reasonable for former counsel to facilitate the transfer and to shorten ‘start up’ or re-preparation
34McNeil v. Kansa General International Insurance Co Absence of Advance Notice of Termination by the clientNo advance notice was given
35McNeil v. Kansa General International Insurance Co Reasonableness of the Amount ChargedAmount charged not excessiveBetween $50 - $625 per fileOn many files no transfer fee sought
36File RetentionNo universal agreement on how long files should be retainedLaw Society has no set policy requirements of guidelinesLikely should be at least 7 yearsEach lawyer and each firm must assess and be responsible for identifying a retention period that is appropriate for each particular file
37Disposition Streams Retain File 7 years Simple files when there is no comeback outside the limitation periods and the tax considerationsExamples:Simple real estate filesSimple files related to criminal prosecution and defence work
38Disposition Streams Retain file 10 years Use for great majority of files
39Disposition Streams Retain file in Permanent Collection Where the consequences of the work are long-lasting for both client and lawyerExamples:Will instructionsEstate files with ongoing trust implications
40When 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.
41Primary 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.
42All 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.
43The 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; orThe 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.
44Notification 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…”
45Who 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; andWork in progress and accounts receivable on a file belong to the firm and not the lawyer.
46The 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.
47Financial IssuesThe 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.
48Financial 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.”
49An 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.
50An 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.
51In Summary: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.
52In Summary: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.
53Solicitor Liens and File Transfer 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.
54When 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.
55Types of Liens: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 avenuesSee Merchant Law Group v. McLeod & Co, 2005 ABQB 875, for thorough discussion on the 3 types of solicitors liens available
56When 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.
57Retaining Lien 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.
58Charging OrderThe “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).
59Common Law “Charging Lien” 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.
60Professional Code of Conduct 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.
61An 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.
62File 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.
63File Transfer Procedure However, we suggest the following as a guideline: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.
64File Transfer Procedure 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.
65File Transfer Procedure 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.
66File Transfer Procedure 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.
67File Transfer Procedure 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.
68Note on Trust Conditions 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.
69Note on Trust Conditions 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.
70Chapter 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.
71Resources Law Society of Saskatchewan Law Society of British Columbia Retention, Storage and Disposition of Client Files by Rod MacDonald, Q.C.Law Society of British ColumbiaWhose File is it Anyway? Who Owns Client File Documents When the Retainer Ends by Jacqueline Morris, Felicia S. Folk & John VamplewGetting Paid: Asserting and Defending a Solicitor’s Lien by Jacqueline Morris & Felicia S. FolkCharging Liens – 2005 Update by Felicia S. FolkLaw Society of Upper CanadaFile Transfer on Termination of RetainerSolicitor’s LiensLaw Society of AlbertaWhen a Lawyer Leaves a Law Firm