Operational Risk Management at the end of a retainer


In this webinar and article we take at what needs to be done to bring a retainer to an orderly conclusion, which includes the completion of sometimes mundane but important tasks.

About the presenter: Tim Prior, is a director of PNCR Legal and a Quality Assurance Risk Management Consultant. I've been a solicitor since 1986 and am a Certified Fellow of the Institute of Risk Management. Since the late 1980s, he has specialised in Professional Indemnity work and is a regulatory inspector for the Council of Licensed Conveyancers, is contributed to Frances Silverman’s Conveyancing Handbook and wrote the Lexcel risk management toolkit.



If you look at a typical file, it is often hard to tell whether the retainer has come to an end. Instead of a definitive full stop, there are dribs and drabs of activity, with ever longer gaps between each, making it more like some garbled morse code.  This article takes a look at best practice in this important but sometimes neglected area.

Human nature being what it is, it is invariably more interesting getting your teeth into new instructions than dotting the I’s and crossing the T’s on files that are almost finished.  It can be very tempting to put them to one side: on the floor, on the windowsill, or beside your chair. But not near the bin because too many files disappear in such cases, as happened to a firm just the other day.  Files had been retrieved from archive for an SRA inspector. When the SRA wanted to review them again, the directors had to admit that the files had been disposed of with the rubbish.

It is an important part of the retainer that you bring matters to an orderly conclusion, which includes the completion of sometimes mundane but important tasks before the matter becomes stale.

Not all the tasks are purely routine though.  Perhaps the most important question you can ask is: have I done everything that was agreed with the client? 

Some matters are very clear-cut and can be concluded within a matter of days or weeks, making the review very straightforward.  Others can take years to complete.  You may need to look at earlier files to find what was agreed at the outset.  This review is essential as many a potential negligence claim could have been averted if this process is followed diligently.

If it’s your file, it shouldn’t take much time at all.  If it’s one you inherited, its more problematic.  But it’s still time well spent.  If it’s a property purchase, check the title when registration is complete including the title plan.  Ensure that everything has been properly registered including new easements, restrictive covenants, or an alternative address for service (if the new owner will not be occupying it, making it vulnerable to fraud).  On this, see the joint guidance on property and fraud issued by the Land Registry and Law Society in September 2017.  Remember to advise the buyer and the lender that registration has been completed.  It is important to do this now as discovering an error in the register when your clients come to sell will be more difficult to resolve, particularly if your clients are pressing for an early exchange.

If it’s a Will file, double check that the will has been properly executed and that the file has been properly documented in case you are later asked to produce a Larke v Nugus statement explaining the circumstances surrounding the drafting and execution of the Will.  Consider also whether to register the will with Certainty, as to which see guidance by the Law Society or your professional indemnity insurer.

It’s a good time to review any obligations that arise beyond the retainer. If you are Lexcel accredited, check the requirements at paragraph 7.6 of the standard.  If there’s a break clause in a commercial lease, for example, make it clear whose duty it is to serve notice.  Consider advising clients that if they want you to serve the notice, you need to be instructed at least one month beforehand, or as the case may be, so that you can obtain your file from storage and take the appropriate steps. 

Warranties might have been given in relation to a corporate transaction.  Often, they will have a short limitation period of six months or a year.  Who is responsible for monitoring whether there are any warranty claims?  Where does the obligation lie?  Make sure it is clearly recorded on file.

One of the most important administrative tasks is clearing ledger balances.  Funds should be returned promptly to clients when you no longer need them.  If it’s not dealt with when the retainer ends, it will only become more difficult as the months go by.  Note that sums below £500 no longer need SRA approval although the procedures in the Accounts Rules 2011 must still be followed.

When you are ready to close the file, archiving requires some thought.  If your firm faces a negligence claim, the file is likely to hold the key if it is alleged that you did something badly or didn’t advise at all, particularly if you clearly recall doing so.  Your word against the clients will usually end badly without documentary evidence to support your view.  Firms facing an allegation that they didn’t advise on an escalating ground rent have responded by pointing to the report on title. Archiving the file is therefore essential. 

The Solicitors Regulation Authority (SRA) asks firms to think carefully about archiving and file destruction.  One firm archived its files in its basement together with a file register which worked well until an infestation of rats ate numerous files.  And the register.  Similar problems can arise from a flooded basement.

An increasing challenge is getting the right balance between the archiving of electronic and paper records.  Should you archive both or scan the paper file?  There is no right answer.  Each firm will have different issues which need to be considered, balancing duties to clients against the cost of storage.

How long you keep records before destroying them may be influenced by the limitation period of six years for contract and tort.  For proceedings issued at limitation, which can be served up to four months later, storage for six and a half years makes sense. 

But it is only a starting point.  If you are act for minors, that limitation period doesn’t start until they reach eighteen.  Wills speaks from death, so time only starts to run when the testator dies.  The Will file should not be destroyed until after the Will has been admitted to probate. 

The Latent Damage Act provides a long-stop limitation period of fifteen years for those cases where the client was unaware of the circumstances that might give rise to a cause of action, although the client only has three years from the date of discovery up to the maximum of 15 years.  If you have the luxury of unlimited space, then keep files for fifteen years but there are very few claims that come in at or near fifteen years.  The Law Society and SRA do not issue definitive guidance, but the Council of Licensed Conveyancers requires the firms it regulates to keep purchase files for 15 years.

Obviously whatever archiving and file destruction processes you adopt need to have been explained to your clients either in your Terms of Business or in a file closing letter (or both). 

If, in your closing review, you discover an act or omission which could give rise to a claim, remember that you need to inform the client of that fact.  The requirement is set out in Outcome 1.16 in the SRA Code of Conduct. 

If the retainer has ended, it is important to tie up any loose ends promptly and ready the file for closure.  If it hasn’t, identify what needs to be done, and by when.  Make sure that your client knows what is going on.  Then, when you are ready to close the file, send a closing letter that confirms what you have done and the period for which the file will be archived.  Apply as much discipline to closing the file as you would to file opening.  Ensure that loose ends have no place on your matter files.

This webinar forms one of a series of webinars available on our Quality Assurance and Risk Management portal for client.  Topics range from operational risk management to matter opening procedures and anti-money laundering. To learn more visit our solicitors webpage

Whilst care has been taken in the production of this article and the information contained within it has been obtained from sources that Aon UK Limited believes to be reliable, Aon UK Limited does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the article or any part of it and can accept no liability for any loss incurred in any way whatsoever by any person who may rely on it. In any case any recipient shall be entirely responsible for the use to which it puts this article.

This article has been compiled using information available to us up to 16/06/22.

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