Data retention and destruction of paper and electronic files

Technology Committee, Guidance and Ethics Committee 05/02/2019

This note provides general guidance for solicitors on the retention and destruction of client paper and electronic files. As an update to the last retention practice note published in 2005, it repeats and, where required, revises the position in relation to adequate periods of retention following the completion of a transaction on behalf of the client as well as the effective deletion of a file.

While this note offers general guidance, it may not be suitable for particular situations. It is always a matter for individual solicitors to make their own professional judgment with regard to ongoing retention of files and documents following the expiry of the statutory periods for retention.

Updated guidance

Data security is of paramount importance to solicitors, their clients and third party institutions. Cyber breaches together with the implementation of the General Data Protection Regulation (GDPR) in May 2018 has raised the profile of data storage. Clients are now actively concerned with how long their data is held. Banks are reluctant to maintain custody arrangements. As a result, solicitors need to implement retention policies to establish how long each category of file should remain open.

A solicitor is not required to retain a file indefinitely. At the start of a matter it is worth explaining to your client that you operate a retention policy; this can be set out in your written terms and conditions. Clients can also be notified about a retention policy via an online privacy policy. Clients should be advised if they will be charged a search/retrieval fee for taking up files from storage.

In all situations documentation being retained or stored solely in an electronic storage format should be retained for at least the same period as a paper version would. Where documentation is properly stored in an electronic format (and subject to any specific statutory or regulatory limitations on storage or retention in electronic format), the paper version (if one existed) need not be retained.  Conversely, where documentation is retained or stored in a paper format then the electronic version need not be retained.   It should be noted that hard copy files will need to be retained to comply with some legislation; for example the Solicitors Accounts Regulations requires originals of documents to be held (see below).

Retention periods 

The Law Society’s Guide to Good Professional Conduct for Solicitors (3rd Edition) provides that:

In order to protect the interests of clients who may be sued by third parties and also to protect the interests of a solicitor’s firm which may be sued by former clients or by third parties, a solicitor should ensure that all files, documents and other records are retained for appropriate periods.

Appropriate periods refer to the relevant statutory period for the issue of legal proceedings. The table below is intended to provide general guidance to solicitors in assessing appropriate periods for retention.

Statute of Limitation requirements (not less than appropriate limitation period)

It is recommended that files should be retained for at least the duration of the appropriate limitation period as set out for specific actions under the Statutes of Limitation 1957 (as amended). The purpose of this file retention is twofold:

  1. Protection of solicitor – period of limitation within which clients can bring proceedings relating to the solicitor/client contract. Files should remain available for the solicitor’s professional indemnity insurers.
  2. Protection of the client- periods of limitation within which the client can be sued by third parties arising out of a transaction. Clients may require that files are placed on litigation hold, in these circumstances files are preserved at the client’s request.

It should be borne in mind that a summons remains valid for 6 months after it is issued (whether or not it has been served) and may be renewed for a further 6 months prior to service.

Conveyancing files (not less than 13 years)

Solicitors should retain conveyancing files for 13 years; as a rule time should run from the time the file is closed. Pending further clarification from the PRA with regard to the obligation to provide an indemnity in circumstances where an error on a Form 3 comes to light, solicitors are advised to indefinitely retain copies of relevant title documentation pursuant to a first registration application by way of Land Registry Form 3.   This caveat does not apply to applications for first registration by way of Land Registry Form 1 or Land Registry Form 2, as all title documents underpinning such applications will have been provided to the Land Registry.

Infant cases

Time does not begin to run against infants until they reach the age of majority, accordingly infant files must be identified and retained for the appropriate period.

Mentally incapacitated persons

A solicitor cannot accept instructions from a mentally incapacitated person. Occasionally, following the completion of a matter there may be a suggestion by third parties that instructions should not have been accepted. In any such case, the file should be retained indefinitely.

Probate files

Prior wills should be kept in the probate file and destroyed when the file itself is being destroyed.

Drafting of wills

When a solicitor drafts a will for a client the solicitor should consider whether the attendance notes from the file should be retained with the original will and then be retained indefinitely.

Investigation of complaints

The Solicitors (Amendment) Act, 1994 as amended by the Legal Services Regulation Act 2015 provides that the Law Society may not investigate complaints of inadequate services or excessive fees which relate to matters arising more than five years previously.

Solicitors Accounts Regulations (not less than 6 years)

S.I. No. 516 2014- Solicitors Accounts Regulations 2014 sets out the minimum accounting records which a solicitor must maintain and keep in connection with his or her practice. Solicitors must retain accounting records for at least six years. “Accounting records” includes the original file. The Regulations require that the original of each paid cheque drawn on each client account must be retained (i.e. as opposed to a copy cheque) together with the corresponding cheque stubs or requisition dockets.

Anti-Money Laundering requirements

Section 55 of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 sets out the requirements for designated persons to keep records. Records evidencing the identity of a client together with the original documents, or admissible copies, relating to the relevant client should be retained for a period of at least five years following the date on which the practitioner ceases to provide any service to that client or the date of the last transaction (if any) with the client, whichever is the later,.

Data protection

The Data Protection Acts 1988 to 2018 (the DPA) provide that ‘personal data’ must only have been obtained for one or more specified, explicit and legitimate purpose(s). The DPA stipulates that personal data shall not be kept for longer than is necessary for that purpose or those purposes. In circumstances where data is being retained to comply with a statutory requirement then a solicitor may retain data beyond the closing of the client file as this would qualify as a legitimate purpose. To comply with the DPA clients should be advised at the outset:

  1. That their details or personal data may be held for such periods as required to comply with legislation and
  2. The purpose behind the retention of their data.
Revenue and tax requirements (not less than six years)

A general obligation to keep certain records for tax purposes is imposed by Section 886 of the Taxes Consolidation Act, 1997. Section 92 of the Finance Act 2014 amended the 6 year rule this section provides that where a transaction, act or operation is the subject of an investigation, inquiry, claim, assessment, appeal or proceedings which has already commenced within the 6-year period, then the relevant books or records must be retained until such time as the investigation, inquiry, claim, assessment, appeal or proceedings has been concluded.

Sufficient records must be kept as will enable full tax returns to be made and does not qualify the period for which they must be kept. While the definition of records is specifically related to accounts and books of accounts etc, certain other supporting documents must be retained by the person obliged to keep the records for six years after the completion of the transaction to which they relate. It appears that linking documents and returns do not have to be retained where an Inspector notifies the person concerned that retention is not required.

Companies Acts requirements

There are a number of requirements imposed under the Companies Acts 2014 relating to the retention of company books and records. It should be noted that these requirements are imposed on the company itself and are not considered directly relevant to this guidance note. Sections 112 of the Companies Act provides that companies should keep documents wherein it acquires its own shares until the expiration of 10 years after the date on which the contract has been fully performed. Section 285 of the Companies Act requires that accounting records should be kept for a period of 6 years after the end of the financial year containing the latest date to which the record, information or return relates.

Electronic storage

Electronic storage encompasses file data stored in practice management systems, in the cloud, in emails and on external devices such as USB keys and CD ROMs. It is important that documents on all forms of electronic storage be deleted, for example in a shared scan folder.

When a matter is complete, emails should be archived and where possible stored in a practice management system. Scan folders should be cleansed regularly.

Material in an electronic storage format should be secured and safeguarded against destruction or theft in the same way as that in paper format. It should also be stored in a secure physical location to ensure protection against fire, theft, destruction, etc. Electronic devices should be password protected and these passwords should be changed frequently.

As a further precautionary measure, solicitors should consider restricting access to client files. IT departments can arrange to silo file access through permissions, which should be reviewed regularly. It is recommended that files held on shared drives be password protected, especially when sensitive data is involved. .

Destruction of files

Electronic and paper files should be destroyed once the relevant statutory or regulatory periods for retention or periods of limitation have elapsed and the solicitor is satisfied that there is no further purpose in retaining them.  Firms should record the end of retention period (often called the “shred date”) in respect of each file in their file registers as part of the firm’s file closing procedure.   Where storage facilities are used, physical files should be grouped with files with similar shred dates to ensure that it is not unduly burdensome or costly to retrieve files for the purposes of destruction.

Care should be taken to dispose of electronically-stored material in a manner which preserves client confidentiality. Hard copy files should always be shredded. Practitioners should also implement a destruction policy with regard to PCs, hardware and electronic devices. Hardware should be physically destroyed to ensure data security. 

Conclusion

Key points:

  • Draft a retention policy: establish a protocol by which you manage the retention and destruction of data;
  • Restrict access to client files;
  • Use office management systems to diary dates for document destruction;
  • Consider each medium where data is stored.