File handling and safe custody

In the first article, we covered file ownership.  In this second article, we discuss file handling and safe custody.

File Handling and Storage

Solicitors are bailees of client documents.  File handling and storage is fundamentally determined by agreement between solicitor and client.  Solicitors should decide what is best for their practice and agree with the client, for example, through their cost agreement.  It may be best practice to deliver the file to the client at the conclusion or termination of the client’s retainer.

As we covered in the first article on file ownership, it would be prudent for a solicitor or law practice to keep a copy of a client’s file for their own protection or for record-keeping purposes.  The client cannot be charged for copying expenses.  In this way, the cost of copying a file should be considered as part of the practice’s business expenses.

If a client requires the solicitor to retrieve a file from storage, the solicitor may charge the retrieval costs if the client has agreed.[1]  Solicitors may also charge for storage costs, if the client has agreed.[2]  The charges should not contain an element of profit and be reasonable in the circumstances of the matter.

If the client has not consented to payment of retrieval and storage costs for files and documents, Rule 16 of the Legal Profession Uniform Law Australian Conduct Rules 2015 (Conduct Rules) prohibits the solicitor from charging them on clients.  Solicitors would have to absorb them as part of their business expenses.

If a solicitor holds client documents, they must follow the client’s instructions regarding the storage and delivery of the documents unless:

• a person (not the client) with better title to the documents requires the solicitor to take action which is inconsistent with the client’s instructions. An example is, where the client is an attorney under a Power of Attorney and the principal requires the document;
• the solicitor is obliged by law to take a different course of action, such as pursuant to a subpoena or an order made under section 472 of the Legal Profession Uniform Law (NSW); or
• the solicitor has a legal right enabling the solicitor to take a different course of action, such as a lien.

Relevant cases to consider are Clark Boyce v Mouat [1994] 1 AC 428 at 435-6, cited with approval in David Alan Thomson v Golden Destiny Investments Pty Limited [2015] NSWSC 1176, [83].

A solicitor or law practice may have the right to keep a client’s file if the client has not paid their legal fees.  In this situation, the solicitor or practice has a legal right to keep the file, referred to as a lien.  A lien cannot be exercised over wills or certificate of titles owned by a person who is not the client.  In certain circumstances, a court may waive a lien and can order a file to be handed over by a solicitor or law practice to the client.  The Law Society published an article last year which discusses how liens can assist practitioners in legal practice.

An original file may be electronic or paper. The client is entitled to any originals (whether paper or electronic) which should be available for pick up within a reasonable time of any request for the file.[3] If original documents are provided, the sender has complied with their obligation, even if the recipient IT system does not support the electronic file formats.

Once a law practice has returned original client documents to the client, any subsequent request made by the client for additional copies of the file can be dealt with on terms agreed by the parties.

What to do if a client file is lost or misplaced

Sometimes, documents and even files can be lost or misplaced.  Of course, the solicitor or law practice responsible for the file should make efforts, and at their costs, to reconstruct the client’s file as far as possible and contact their insurer for advice.

Safe custody documents

In respect of safe custody documents (including wills and deeds), these should be held securely, and separately, to client files. A centralised safe custody register should be kept and maintained in a secure place, separately from the safe custody documents themselves (see Rule 94 of the Legal Profession Uniform General Rules 2015).

Safe custody documents must be retained and cannot be destroyed. Rule 14.2 of the
Conduct Rules does not apply to safe custody documents.  Safe custody documents must either be:

• returned to the client;
• transferred to another law practice, in accordance with rule 6 of the Legal Profession Uniform Legal Practice (Solicitors) Rules 2015; or
• continue to be held in safe custody by the former principal/s of the former law practice.

The Law Society’s Compliance Review toolkit provides further guidance on management of safe custody documents, including the requirement to have a policy for carrying out an annual safe custody audit.

For further guidance on solicitor obligations when transferring client documents, including safe custody documents, refer to the Law Society’s Transfer checklist.

Resources 

The Law Society’s Professional Support Unit (PSU) provides free and confidential guidance to all solicitors regarding their obligations under the Legal Profession Uniform Law in the areas of costs, ethics and regulatory compliance.

Enquiries can be made to PSU by telephone, email, or in person.

PSU’s Ethics line handles solicitor questions about professional ethical obligations. Common topics include conflicts of interest, client instructions and confidentiality.

The Costs line handles enquiries related to billing, fees and other expenses a solicitor may charge a client. Common costs enquiries relate to costs disclosure, costs agreements and billing.

PSU’s Regulatory Compliance line provides guidance to solicitors on compliance issues related to the provision of legal services under the Uniform Law. Common questions handled by Regulatory Compliance are those regarding practising certificates, practice management and practice structures permitted by the Uniform Law, such as incorporated legal practices.

Costs: costs@lawsociety.com.au or (02) 9926 0116

Ethics: ethics@lawsociety.com.au or (02) 9926 0114

Regulatory Compliance: regulatory.compliance@lawsociety.com.au or (02) 9926 0115

Dora Chan is a Professional Support Solicitor at the Law Society of NSW. Dora assists members of the legal profession in relation to practising certificate conditions, regulatory obligations in legal practice management and legal costs. Carol Prasad is a Professional Support Solicitor (AML) at the Law Society of NSW.  She is an experienced banking and financial services lawyer with experience gained at a number of Australia’s premier financial institutions, leading law firms and a Big 4 accounting firm.  Her background includes experience in Anti-Money Laundering and Counter-Terrorism Financing, sanctions, consumer credit, privacy and alternative dispute resolution.  She brings with her over 15 years’ experience.

[1] Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015, rule 16.1

[2] Ibid.

[3] Ibid, rule 14.1.