There are many circumstances in which you, or others, may have to deal with the transfer or wrap-up of your practice: a transfer between firms, retirement, sudden illness or accidental death. Leaving a law firm will have a greater impact on the solo or small firm where, unlike larger firms, there may be no one available to immediately carry on with, or to wind-up the practice in an orderly fashion.
Your duty of competent representation includes an obligation to take appropriate steps to safeguard your clients’ interests in all circumstances. A failure to properly plan or prepare for both anticipated and unexpected departures from your practice may expose your clients to significant damages or prejudice, and subject law partners and family members to financial and emotional stresses associated with the winding-up process.
Do not underestimate the time and effort it will take to properly wind-up a law practice. Do not delay your preparations.
The time to plan for retirement is when you are in good health with sufficient time to allow you to thoroughly prepare. If possible, start planning 10 to 15 years before your anticipated retirement date. Prior to your retirement, you will have to deal with a myriad of issues: transferring active or open files; custody or destruction of closed files; maintaining firm books and records; satisfying outstanding undertakings and ongoing obligations; addressing accounting and banking requirements; dealing appropriately with personnel and office matters; and satisfying all change of status notice requirements. Make sure your partners, staff and family are aware of the plans you have put in place.
Active or open files
Review your active file list to identify files that can be resolved (and closed quickly), and files that are to be transferred to new counsel or delivered to the client. First work on matters that can be completed promptly. In the meantime, notify clients of your intention to leave the practice. Clients with ongoing matters will require time to retain new counsel. You may wish to practice and to provide contact information for clients who may wish to pick up their files.
If you are leaving private practice, stop taking on new matters or only accept matters that will be resolved prior to your departure.
If you are transferring active files to new counsel, conduct conflicts checks before the transfer to ensure the receiving lawyer does not have a disqualifying conflict of interest.
Prepare a transfer memo or letter summarizing the file. Flag outstanding tasks, anticipated problems, deadlines, or limitation periods. Confirm transfer of the file in writing by way of direction to transfer the file or an acknowledgement of receipt of the file signed by the client. If the file is to be sent to the client, confirm in writing the request and address.
Closed files
Lawyers leaving private practice are often unsure of what to do with closed files relating to client matters. Determining what to do with closed files will depend on who owns the file, or more accurately, who owns the documents stored in the closed file.
If the closed file contains documents that belong to, or are the property of a client (“client” herein includes “former client”), then you have an obligation to preserve the client’s documents in accordance with the Rules of Professional Conduct.
If at the time the practice is wound up, you have custody of client documents in closed files, you should deliver the documents to the client. If the client cannot be found, then you must preserve the closed file, or transfer the file to other counsel for safekeeping and storage. If there is a dispute as to who is entitled to client property (or documents) and you are not sure as to the proper person to receive the client’s property, you must make application to a tribunal of competent jurisdiction for directions as required by the Rules.
Ideally, you should have had a file closing procedure in place, such that all client documents would have been returned to the client before the file was closed.
If at the time the practice is wound up, you have already purged the file of all documents or property belonging to the client, you may nevertheless want to preserve the file for some time after closing. You may require copies of client documents to assist in defending against potential claims launched after the practice is shut down. The determination of how long to keep copies of client documents will depend on a number of factors, such as the limitation period for actions against lawyers, the nature of the original matter, and the outcome.
In some instances you may decide to return the entire closed file to your client. This should only be done in cases where you are sure that you will no longer require access to copies of client documents and only after the file has been stripped of your personal notes. You should obtain a written acknowledgement from the client confirming receipt of all remaining documents relating to the retainer.
A review of your closed file list will assist you in determining which files may be destroyed and which should be preserved.
Excerpted from The Guide to Closing Your Practice, a publication created by the Law Society of Upper Canada and LAWPRO®.