Division B: The Ownership and Destruction of Files
All outsourcing providers should be made aware of these provisions and required to comply with them.
The following information is based on an Opinion from the Dean of Faculty provided to the Society in June 2000.
Who Owns What in Files?
The answer is not entirely straightforward and drawing on the opinion of Counsel the Society has produced this guidance which we hope will deal with the main queries which arise:
Finished Documents or Drafts/Notes
Material Ordinarily Owned by Client:
Documents produced by the client or produced by the solicitor for the client.
Written Opinions (whether principals or copies) but not preparatory personal notes prepared for the solicitor's benefit.
Draft formal documents and deeds. (These may be of evidential importance to the client in the event of the loss or destruction of the principals.)
Written submissions tendered in Court, but not detailed research notes and other documents generated for the solicitor's own personal use. Precognitions taken by the solicitor or obtained from other parties but see Article 11 of the Code of Conduct for Criminal Work where they may contain sensitive material and where it might be inappropriate to pass this information to clients. See Swift v. Bannigan 1991 S.C.L.R. 604, although the Dean had reservations about this case.
Original letters received from and copy letters to third parties.
Copies of letters written to the client, although if these have been retained by the solicitor as part of a private record or if the contents relate exclusively to the contractual relationship between the solicitor and the client, the solicitor may own them.
Notes of meetings and telephone calls, which constitute the solicitor's work on behalf of the client.
Files and documents received under a mandate.
Material Ordinarily Owned by Solicitor:
Original letters received by the solicitor from the client.
Notes of meetings and telephone calls, which form part of the solicitor's preparatory work.
Sensitive material and precognitions in criminal cases should be dealt with in accordance with Article 11 of the Code of Conduct for Criminal Work.
It is matter of judgment whether a file should be copied, but copying is prudent. The costs should be borne by the solicitor.
If a mandate is received from one of two or more clients and the consent of the other cannot be obtained the file can be exhibited or copies offered at the client's expense, provided that nothing is disclosed or copied which is confidential to the other party.-see also the next paragraph ''Multiple Clients'' and Guidance on Charging for Lending or Delivery of Files
Issues of confidentiality, duties of disclosure and informed consent of multiple clients must be borne in mind.
Where a matter develops to the extent that a solicitor cannot continue acting for multiple clients due to a conflict of interest arising or developing, care must be taken with the nature of the material copied or delivered.
Any release of correspondence or documents must either be with the consent of all or the file should be divided into parts relevant to each client, e.g. in the lender/borrower situation the file should be divided into those parts belonging to the lender and borrower respectively.
Where there are common documents they can be copied to all clients.
If a lien is to be exercised, the solicitor cannot prejudice one client, e.g. a lender if that client has no liability for fees. If one client requests a file where fees are due by the other, the file should be forwarded under reservation of the lien so that it cannot be passed on to new agents.
A file can be delivered subject to an undertaking to produce it to ''the other side'' if called upon.
Each client has the right to inspect documents in which he or she has a proprietary interest and also to receive copies at his or her own expense.
Destruction of Files
The Terms of Business letter should include information about the intention to destroy files and/or papers after conclusion of a transaction after a certain period to provide evidence of consent to destruction.
The following points should be noted:
(1) The client's informed consent should be obtained before the files and papers may be safely destroyed. The client's documents may be returned, by agreement. However, it may be prudent to retain copies.
(2) Documents that may be relevant to a claim should prima facie be kept for at least the period of long negative prescription if the claim has not previously been disposed of.
(3) Documents containing client's tax or VAT affairs must be retained for at least the relevant statutory subscribed period.
(4) There is no specific date beyond which the obligation to hold a client's own documents can be said to expire. Deeds or other documents constituting or evidencing rights should be preserved indefinitely but it is virtually impossible to predict when they might turn out to be of value. There is therefore a risk attached to destroying them.
(5) In storing and insuring files and papers, solicitors are providing clients with a continuing service for which they can properly charge.
(6) The client might be advised in writing again prior to the file being destroyed, that this is about to happen in accordance with the agreed Terms of Business letter. This is a matter of judgment.
(7) At the end of each transaction a letter might be sent to the client to advise as to the location of title deeds and/or other important documents or confirmation of what is to happen to these.
(8) The Master Policy Insurers have clarified that destruction of the file will not affect the insurance position but clients could take issue with the fact that the file had been destroyed if their position was prejudiced.
(9) Destruction of the client's property without consent could expose the solicitor to liability and damages.
(10) Solicitors must ensure that sensitive or privileged documents and files are not disposed of in any way which might compromise them.
(11) Document shredding within the office or by a reliable specialist contractor would appear to be the safest option.
Fire, Flood etc
If clients' files and/or documents are destroyed by fire, flood or other disaster, you should inform the Society's Registrar Department of such an incident within a reasonable length of time. You will not be required to list the destroyed files and/or documents, but of course may do so if you wish.
Electronic Storage of Files
Electronic storage of files on CD or on a server may be a practical way of dealing with storage. Commercial firms provide these services and give the option of destroying paper files after calculating and assessing the risk.
Alistair Sim from Marsh has written an article about the scanning of files and the paperless office, see Journal March 2001, p.42.
Where it is not possible to store files electronically without time limit the Society has issued the following guidance for solicitors:
This is guidance only. The onus rests with the solicitor as to whether or not it is safe to dispose of a file in any particular case and, in considering that, the solicitor should always have regard to the nature of the transaction and the circumstances.
* Files should only be destroyed under the direct instructions of the manager of the practice unit.
* Consent of the clients should be obtained before files are destroyed.
* Information on this should be contained in a Terms of Business letter.
* Care must be taken to ensure that no important papers such as confirmations, decrees, etc., which should normally be kept separate from other correspondence are in any file being destroyed.
* So far as financial records are concerned regard should be had to the terms of rule B6 and the relative Guidance.
Suggested Timing in Different Categories
Simple Debt Collection
On completion-i.e. after the time for appeal has elapsed.
Divorce and Consistorial Matters
Five years after final completion, e.g. after maintenance, residence and contact orders, etc., have ceased to have effect, or children have reached majority.
Civil Court Cases
Ten years after completion.
Murder and other cases involving life imprisonment-the papers should be retained indefinitely.
Solemn cases-files should be kept for the duration of the sentence if more than three years.
Summary cases-the papers should be retained for three years. A copy of the complaint or indictment and a copy of the legal aid certificate should be kept indefinitely.
Ten years after completion although an executry may never be complete. Relevant documents and papers might be sent to the Executor for safekeeping since prior rights and legal rights only prescribe if not claimed in 20 years after becoming enforceable.
Ten years after the termination of the Trust.
Ten years after completion-although the file may be of use until the property is subsequently disposed of.
One year later after completion (i.e. after implementing Letter of Obligation; dealing with any funds retained; and after Missives have ceased to have effect).
Ten years after completion.
Endowment and Investment Business
Practice units should retain all files in relation to endowment investment business until such time as the policy in question has matured.
Other Correspondence Files
Five years after completion of the business.
See Rule B6.1.1 (“required retention period”) and Rules B6.7, B6.8 and B6.9.
Money Laundering - Customer Due Diligence Records
See Regulation 19 of The Money Laundering Regulations 2007. In addition it should be noted that the definition of accounting records in Rule B6.1.1 includes “client due diligence documents and client financial information obtained for the purposes of compliance with the Money Laundering Regulations” and that such accounting records should be kept for the “required retention period” which is defined in Rule 6.1.1. as being the “remainder of the financial year of the practice unit and a further six financial years”.
Note: Certain records need to be kept for different periods to comply with HMRC / Statutory requirements.
- When files, papers and/or documents are destroyed a separate record should be retained of the date of destruction to include a general description of what was destroyed.
- In all cases, important papers such as confirmations, decrees, etc., should be retained indefinitely and should be kept separately from the correspondence.
The whereabouts of these documents should be set out in a closing letter
once the transaction has been completed so that there is no dubiety about
who holds them. Documents containing client's tax and VAT affairs must
be retained for at least the relevant statutory periods.