L.  Inactive Matters

As part of reviewing the monthly trust reconciliation, the client trust listing should be reviewed to identify matters for which there has been no trust activity for some time – a warning sign that the matter may be becoming inactive. There are a number of professional obligations in the Law Society rules and the Code of Professional Conduct that arise when a matter becomes inactive. Your obligations will vary based on whether or not the matter is concluded and if you still have contact with the client.

If the matter has been concluded and you still have money in trust for the client, prepare your final statement of account for unbilled fees and disbursements and send it to your client. If there is a reasonable expectation that the client will receive the statement of account, then you can write a trust cheque to your general bank account to pay it. Refund any extra money to the client. Send your report to the client and close the client trust ledger and the file. The rules require that trust funds are paid out swiftly once a matter is concluded – Rule 5-44(1)(l) requires the related trust money to be paid out expeditiously unless exceptional circumstances apply and the chief executive officer has provided permission for the money to remain in trust.

Specifically, Rule 3.2-1 of the Code sets out a lawyer’s duty to provide courteous, thorough and prompt service to the client. Under related Commentaries [4] and [5](m), the lawyer also has a duty to:

  • ensure that matters are attended to within a reasonable time frame;
  • provide an interim report where one might reasonably be expected; and
  • provide a prompt and complete report when the work is finished.

The lawyer must maintain contact with the client from time to time whether the matter has been inactive at the client’s own choosing or due to other reasons such as the lawyer’s delay or other pending proceedings. This contact and interim reporting to the client should include details of any monies that have remained in trust for the client. It would be prudent for the lawyer to request that the client confirm his or her instructions about how to proceed with the matter and to advise of any change to his or her contact information.

Pursuant to Rule 3.2-2C of the Code and related Commentary [6], if the lawyer has lost contact with the client or the lawyer cannot obtain instructions from the client and the matter has not been concluded, the lawyer must take reasonable steps to locate the client. If those efforts fail, the lawyer should consider withdrawing in accordance with Rule 3.7 of the Code.

For any matters for which a client cannot be located, whether or not the matter has been concluded, the lawyer may be permitted to remit trust money to the Law Society pursuant to Section 51(1) of The Legal Profession Act if:

  • the lawyer has lost contact with the client;
  • all reasonable efforts to locate the client have failed; and
  • three years have passed without trust activity.

However, prior to making the remittance, you must first have taken additional steps to locate the client over and above trying the last contact information in law firm records. Steps to consider include an internet, Queen’s Bench, or Property Registry search. You should also document the details of additional steps taken.

If you are still unable to locate the client, there is a form on the Law Society website which can be used when making the remittance, and your correspondence should be addressed to the audit department.

You should also bear in mind that matters with outstanding trust conditions or estates with personal representatives or beneficiaries that cannot be located after reasonable effort on your part have unique considerations and may involve additional steps. For such matters, it may be best to contact a member of the audit department to discuss the situation prior to making any remittance.

CAUTION:

Stale-dated cheques can become essentially a second storage area in your trust account records for inactive matters.  Stale-dated cheques must also be addressed on a timely basis.