Guide to Retention and Destruction of Closed Client Files, For Paralegals

Introduction
Reasons for File Retention
The Client File
Closing Client Files
Retention of Client Files
Destruction of Client Files  

Appendices

 

This guide is not intended to replace a paralegal’s professional judgment or to establish a one-size-fits-all approach to the provision of legal services and the retention and destruction of closed files. Subject to the guide provisions that incorporate legal, by-law or Paralegal Rules of Conduct requirements, a decision not to follow the provisions will not, in and of itself, indicate that a paralegal has failed to provide quality service. Whether a paralegal has provided quality service will depend upon the circumstances of each case.

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Introduction

One of the challenges for paralegal firms is how to deal with the increasing volume of retained records such as closed client files and other administrative records. Records include both paper and electronic records.

The Law Society has developed this guide to assist paralegals to develop policies for the closure, retention and destruction of client files. Such policies assist paralegals to control the volume and type of records retained, manage risk and meet professional responsibilities.

Paralegals establishing such policies might also want to consider adopting policies for the retention and destruction of other administrative records generated or obtained by the firm such as business records, contracts with suppliers and other correspondence or documents.

Appendix 1 contains a sample file retention policy for paralegal firms. No one policy can cover all situations relating to the provision of legal services or practice areas. This sample policy is not intended to replace the paralegal’s professional judgment. When establishing a file retention policy a paralegal should consider both the circumstances of the paralegal’s practice as well as the Law Society Guide on Retention and Destruction of Closed Client Files.

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Reasons for File Retention

There are a number of reasons why paralegals retain client files for a period of time or sometimes indefinitely after completion of the client matter. Some of these reasons are for the benefit of the client, while others are for the benefit of the paralegal.

Defend Against Claims and Allegations of Misconduct

One of the key reasons paralegals retain files is to respond to negligence or other claims made against them. A well- documented file may contain the evidence necessary to successfully defend such claims. This is particularly important in situations where the evidence necessary to successfully defend a claim cannot be obtained from any other source.

Claims founded in negligence and/or breach of contract against a paralegal can be made well after the alleged negligence or breach of contract has occurred. The Limitations Act, 2002 establishes some deadlines for commencing such proceedings. The Act contains a basic limitation period of two years running from the day that the claim is discovered and an ultimate limitation period of fifteen years running from the date that the act or omission on which the claim is based took place.

Both of these limitation periods are subject to provisions in the Act that operate to extend the limitation periods. For example, subsection 15(4) provides that the ultimate limitation period does not run during any time that a person with a claim is a minor and is not represented by a litigation guardian in relation to the claim. This section also indicates that the ultimate limitation period does not run if the person against whom the claim is made willfully conceals certain information from the person with the claim or willfully misleads that person as to the appropriateness of a proceeding as a way of remedying the injury, loss or damage. With respect to the basic two year limitation period, section 5 of the Act contains a discoverability principle and provides that there is a rebuttable presumption that a claim is discovered on the day that the act or omission on which the claim is based took place. In addition, Section 19 incorporates into the Act specific limitation periods contained in other statutes and these limitation periods prevail over the basic two year limitation period.[1]

Paralegals should check with their individual insurance provider with respect to any requirements or recommendations regarding the retention and destruction of closed client files.

Legal Requirements

A paralegal may choose to retain client documents in a file to assist the client to meet statutory obligations. The Income Tax Act, R.S.C. 1985, c.1 (5th Supp.), sets out certain minimum time periods in which accounting records, including supporting vouchers and cheques, must be kept.

Generally, when a matter is completed the paralegal should return to the client all original documents belonging to the client unless previously provided to the client or otherwise agreed with the client. It is generally not recommended that the paralegal retain original client documents after the matter has been completed.

Comply With Regulatory Requirements

By-Law 9 made pursuant to the LawSociety Actr equires paralegals to maintain specific books or records as part of their law office accounting system.  Paralegals are required to maintain trust accounting records or documents for ten years immediately preceding the paralegal’s most recent fiscal year end. All other accounting records or documents are to be maintained for six years immediately preceding the paralegal’s most recent fiscal year end.

Future Use

Finally, the paralegal may retain the file for future use by the paralegal or may agree with the client to retain the file so that it is available for future use by the client.

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The Client File

Contents of the File
Client files will usually consist of some or all of the following:

  • Paper documents contained in the paper file folder;
  • Electronic documents and electronic data and information contained in the electronic document or file;[2]  

Documents and or property relating to the client matter but not kept in the paper or electronic file folder.

File Organization

A client file should be organized in a way that will facilitate its eventual closing.

Files may contain only one copy of each document unless there is a reason for retaining additional copies of the same document.

Depending on the complexity of the file, a paralegal should consider using folders and subfolders to organize the contents of the file.

If files are maintained electronically in order to help simplify organization, file management and retrieval, the paralegal may consider naming the file with as much detail as possible. If electronic files are being retained in multiple locations such as in the paralegal’s e-mail box, computer file system and the firm’s practice management software, the paralegal may consider using software that creates a single point of access or using a file and folder system that is similar across all locations. For example, if the paralegal uses main folders based on a client and subfolders based on matters, the paralegal may consider implementing a similar structure wherever electronic information is stored.

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Closing Client Files  

In order to simplify the task of closing files, a paralegal should establish a file closure policy addressing when and how files should be closed.

Establishing When to Close a File

A file should be closed only after all matters relating to the file have been completed and, in particular after all undertakings have been satisfied.

Prior to closing a file, the paralegal should ensure that:

  • all of the work that the paralegal was retained to complete has been completed;
  • the paralegal has reported to the client;
  • the client has paid the final account or the firm has written off any balance owing on the final account;
  • all undertakings have been satisfied and all trust conditions have been honoured; and
  • the paralegal has dealt with any balances to the credit of the client in the paralegal’s trust account.

Preparing the File to be closed

The following steps should be taken before closing a file.

1. Dealing with Client Property

A paralegal has an ethical obligation to care for a client’s property as a careful and prudent owner would when dealing with like property and must observe all relevant rules and law about the preservation of a client’s property entrusted to the paralegal.[3]  

The documents that must or should be handed over to a client upon the termination of a retainer is a matter of law. The following cases and materials have dealt with the issue of document ownership and may be of assistance to paralegals in determining issues relating to document ownership:

Aggio v. Rosenberg, 24 C.P.C. 7, 1981

Alexandra Marks,ed., Cordery on Solicitors, 9th ed. (London: Lexis Nexis Butterworths, 1995) at 4/661

McInerney v. Macdonald, [1992] 2 S.C.R. 138

Unless previously provided to the client or otherwise agreed with the client, prior to closing the file, paralegals should return to the client all property that the client provided to the paralegal during the course of the matter together with all documents or other property that the paralegal was retained to produce in connection with the matter.
Generally, it is not recommended that the paralegal retain documents belonging to the client after termination of the retainer. In the event that the paralegal and client agree that the paralegal will retain such documents, it would be prudent for the paralegal to clarify in writing with the client the nature of the paralegal’s responsibilities and who is responsible for storage and retrieval costs.

Before returning documents to the client, the paralegal should determine whether to retain copies of these documents. In making this determination, the paralegal might consider such factors as any legal requirement to preserve the document, the likelihood of the paralegal requiring the document in the future, the provisions of the retainer agreement, whether the client has its own records retention policy, and if so, the length of time that a document is preserved under that policy and the client’s wishes.

When a paralegal transfers a file upon discharge or withdrawal from representation additional considerations apply. In this regard, subject to the paralegal’s right to a lien, the paralegal must deliver to or to the order of the client all papers and property to which the client is entitled and, subject to any applicable trust conditions, must give the client all information that may be required in connection with the case or matter. In addition the paralegal must cooperate with the successor licensee so as to minimize expense and avoid prejudice to the client. Rule 3.08 of the Paralegal Rules of Conduct sets out the paralegal’s obligations in this regard.

Appendix 2 contains a summary of some of the documents contained in a file and how a paralegal should deal with these documents.

2. Purging the File

The paralegal should ensure that the file is organized prior to closing the file. A paralegal may wish to remove from the file any unnecessary materials. While staff may assist the paralegal in this task, the paralegal primarily responsible for the file should approve the removal, deletion and destruction of materials from the file. If files are maintained electronically, paralegals should use care not to purge electronic information contained
in the file that may be required in the future such as information required for conflicts checking.

Copies of documents that can be used as precedents or in handling other matters, such as copies of legal memoranda, may be removed from the file or copied and stored in a central repository for future use. The paralegal should ensure that such copies are stripped of all personal information within the meaning of The Personal Information Protection and Electronic Documents Act (PIPEDA) and that client confidentiality, in accordance with the Paralegal Rules of Conduct, is maintained with respect to any other information that identifies the client.

Copies of documents (electronic and paper) or documents that are available from another source such as documents that are permanent records of the court or government office may be removed from the file and destroyed when the file is closed unless there is any legal or other reason for retaining the document. In determining whether to remove and destroy such documents paralegals may wish to consider the likelihood of the document being required in the future and the expense of retrieving it and whether the entity retaining the document has a document destruction policy in place which may result in the document not being available at a future date.

A paralegal should retain draft copies of documents where the draft copies document the history of the matter or confirm client instructions and where the paralegal reasonably believes that these factors might become an issue in the future.

Appendix 3 contains suggestions and recommendations for dealing with the contents of a file when preparing to close the file.

Depending upon the complexity or nature of the matter, the paralegal may wish to maintain a list of the documents removed from the file together with the date of their removal and the method of disposal (e.g. destruction, return to the client).

3. Communicating with the Client

A paralegal should consider advising the client of the file closure, retention and destruction policy at the outset of the retainer. The paralegal should consider advising the client how documents will be handled and maintained during the course of the retainer and after completion of the matter. A summary of the file retention and destruction policy may be included in the written retainer agreement or in the final report to the client.

Appendix 4 contains a sample clause that may be included in the retainer agreement and a sample letter to the client upon termination of the retainer.

4. Determining the File Destruction Date

A paralegal is not required to retain all client files permanently.

When a file is closed, the paralegal primarily responsible for the file should review the file and establish a file destruction date.

Circumstances may arise during the file retention period that would postpone the destruction of the file. The paralegal should implement a system to ensure that such circumstances are identified and the destruction date is changed if necessary.

Paralegals may consider establishing a file review date preceding the destruction date. The paralegal could then check to determine whether circumstances have changed and the file destruction date should be changed.

Both the file destruction date and the file review date should be entered into the firm’s tickler or file tracking system.

A paralegal should be guided by ethical, legal and professional considerations as well as economic and practical factors when determining how long to retain a file. It is not recommended that a paralegal adopt a single retention period for all files. Rather, the paralegal should consider each file individually and determine the file destruction date in light of the nature and circumstances of the matter, the client’s needs, the applicable limitation period, the paralegal’s file retention policy and any other issue that might be relevant.

Generally, based on the provisions of the Limitations Act, 2002, an appropriate retention period for client files is 15 years after the file is closed. This guide is not a rule and this suggested time period may not be appropriate for all client files. Paralegals should use their own judgment when establishing destruction dates for client files based

on the circumstances of the individual client matter and their own needs and the needs of their firm and clients. For example, factors such as the nature and complexity of the matter may require a longer retention period than the suggested 15 years.

The following are some of the factors that a paralegal must or should consider when determining the length of time to retain a file.

  1. Legal and Regulatory Requirements
    In establishing a destruction date, the paralegal must comply with any legal or regulatory requirements.
  2. Client’s Need
    The paralegal should consider whether the file might support future representation of the client or other clients.
  3. Defend against Claims of Professional Negligence or Complaints of Professional Misconduct
    The paralegal should also consider the likelihood of the file being needed to defend against claims, allegations of misconduct and the applicable limitation periods for such claims or complaints. Complaints to the Law Society against the paralegal may be made after the matter has been completed or when a file has been transferred to another paralegal. Each file should be considered independently in order to assess the risk of future complaints.
  4. Nature of the Matter
    Depending upon the nature of the matter, different considerations might apply when establishing a destruction date.
  5. Clients under a Disability: Minors and Incapable Persons
    The client’s age and capacity might be a relevant factor in determining the length of time that a file is retained. The Limitations Act, 2002 contains special provisions for minors and the mentally incapable. For example, under the Limitations Act, 2002 no limitation period runs during any time that the claimant is either an unrepresented minor or is incapable of commencing a proceeding in respect of the claim because of his or her physical, mental or psychological condition and is not represented by a litigation guardian in relation to the claim.[4]   

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Retention of Client Files

System for Organizing Closed Files
A paralegal should have a system for organizing and retrieving closed files. When a file is closed, the file should be classified as closed. The law firm’s data base should contain a list of all closed files, the file name, the original file number and the closed file number if different, the location of the stored file including where applicable, the box or carton number and the file destruction date.

Form or Medium of Storing Retained Files

Paralegals may store files electronically and/or in paper form. In some instances, it may be advantageous to store documents electronically rather than in paper files. In making such decisions, the paralegal must ensure compliance with all legal and regulatory obligations. By-law 9 made pursuant to the Law Society Act provides that if records are entered and posted by mechanical or electronic means, paralegals must ensure that a paper copy of the record may be produced promptly on the Society’s request. Other legislation such as the IncomeTaxActmay have different requirements.

If the record or document is to serve as documentary evidence, paralegals should ensure that proper steps are taken to comply with any evidentiary rules governing the admissibility of such documents. To qualify as evidence, imaging and microfilm including microfiche reproductions may have to be produced, controlled and maintained according to certain specifications.

Documents should remain trustworthy, readable, and accessible for the applicable retention periods. In order to ensure the accessibility and readability of documents, the appropriate hardware and software should be maintained during the retention period.

Storage of Retained Files

Closed files should be stored either on site or in an off-site location. Regardless of the location, paralegals must ensure that confidentiality is maintained. The storage facility must be secure to maintain confidentiality and to protect the files from damage or loss. If files are stored electronically, paralegals may wish to consider whether to encrypt stored files.

When storing files electronically, paralegals should consider both the physical location and the medium (e.g. backup tape, disk or external drive) on which they are stored. Paralegals should have a system for backing up closed files.

The paralegal should also ensure that documents, data and information in the file can be accessed during the file retention period. The paralegal should be prepared to convert older electronic formats to new formats so that they continue to be accessible. In addition, it may be useful to include on any list of electronic files, the file format in which the documents are saved so as to facilitate conversion of
the document at a future date.

Review Status of Closed File

As part of the file closing procedure, the paralegal primarily responsible for the file or if this is not possible another paralegal in the firm, should consider reviewing the file again prior to destruction to ensure that circumstances have not changed since the establishment of the destruction date and that the file destruction should proceed.
Alternatively, the firm might implement a system to ensure that where there is a change in circumstances prior to the destruction date, the file is reviewed and the destruction date is changed if necessary.

Files that are to be retained indefinitely may be reviewed periodically, perhaps 10 or 20 year intervals, to determine whether there has been any change in circumstances that would now allow for the destruction of the file.

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Destruction of Client Files

Maintaining Confidentiality
A paralegal’s obligation to maintain confidentiality survives the retainer. Paralegals must ensure that they maintain confidentiality when disposing of files. If paper documents are shredded or incinerated, the paralegal must ensure that confidentiality is maintained both during the destruction process and the disposal.

Destruction of Documents and Information
When destroying a file, a paralegal should ensure that all of the contents of the file are destroyed. This includes both paper and electronic documents and electronic information contained in the electronic document such as metadata.

Maintaining a Record of Destruction

The paralegal should keep a record of all files destroyed or returned to the client in accordance with the paralegal’s file destruction policy. The record at a minimum should contain the client’s name, address, file number, a brief description of the nature of the matter, the file closure date, the file destruction date or date that the file was delivered to the client, and the name of the paralegal who authorized the destruction or delivery. This will assist a paralegal to counter allegations that a file was destroyed indiscriminately.

Appendix 5 contains suggested steps for closing, retaining and destroying a file.


 

1 Section 24 of The Limitations Act, 2002 contains transition provisions. Where a claim against a paralegal in negligence and/or for breach of contract is discovered prior to the effective date of the Limitations Act, 2002 (January 1, 2004) the former limitation period of six years under the Limitations Act, 1990 continues to apply.

 

2 Electronic data and information may include email, draft versions of documents on a server or document management system, scanned/imaged documents, faxes (where there are no paper copies),voicemail, metadata and any other information or data relating to a matter saved and stored in electronic form (e.g. on servers, magnetic media, magneto-optical systems, compact discs, DVDs).

3 Paralegal Rules of Conduct, Rule 3.07.

4 Limitations Act, 2002, S.O. 2002, c. 24, ss. 6, 7, and 15.