ARCTIC OBITER

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10 | <strong>ARCTIC</strong> <strong>OBITER</strong> SUCCESSION PLANNING Taking Care of Business by John Rafferty, QC, Burchell MacDougall CAROL’S HUSBAND, BRIAN, WAS A SENIOR LAWYER OPERATING A SOLE PRACTICE WHEN HE SUDDENLY AND UNEXPECTEDLY DIED OF A HEART ATTACK. CAROL AND BRIAN HAD BEEN HAPPILY MARRIED FOR OVER 35 YEARS. NOT ONLY DID CAROL HAVE TO COPE WITH THE GRIEF OF LOSING HER LIFE PARTNER, SHE ALSO HAD TO DEAL WITH HER HUSBAND’S LEGAL PRACTICE. Unfortunately, like so many lawyers, Brian had made no succession plans for his practice. That is, he had made no arrangements for another lawyer to handle the closure of his office, the transition of his files and the realization of the value of the practice. The task facing Carol was a daunting one. There were active files, some of them urgent, that needed to be transferred to new lawyers. There were thousands of closed files. A plan had to be developed for staff during the transition. The office landlord, equipment lessees and suppliers needed to be dealt with. If things were not handled quickly, the value of the practice would quickly erode as clients drifted away. When news of Brian’s death spread, chaos quickly followed at the office. Clients were calling for their files and staff were looking to their own future employment prospects. Files were unbilled. There were accounts receivable to collect and trust funds to deal with. In addition to the tremendous stress these practice issues visited on Carol, clients are likewise stressed. Many of them develop a personal relationship with their lawyer over the years, are saddened by his death, but are also confused as to their proper course of action. Sometimes the lawyer’s spouse or other family members are employed in the office. This can provide helpful continuity for the lawyer taking over the practice, but undoubtedly brings an additional level of stress to the family member. In a larger law firm, transitioning is usually not a serious problem. The firm has other lawyers who can take on the work of the deceased partner. Sometimes, other lawyers have already been working on the files. Even if not, they are prepared to work longer hours for the good of the firm and of the clients. Chaos is controlled, clients are serviced, file value is maintained, and the deceased’s family is protected from additional stress. With proper planning, sole practitioners can achieve the same result. It is not just death that creates the need for a succession plan. Disability, suspension, incompetency or other factors may also result in the need for one. If a proper succession plan is not in place, the Society may appoint a custodian or receiver to manage the practice and protect the public interest, may assist with transitioning the practice to another lawyer, or may work with the estate to ensure client interests are protected. Immediately after appointment, the custodian will secure the lawyer’s files and records and become the signing authority on the trust and general accounts. Whether the successor lawyer is appointed by the Bar Society or the estate, the deceased lawyer’s calendar will be checked for upcoming hearing dates and meetings. Files will be reviewed to identify urgent matters and impending limitation dates. Clients and opposing counsel will be contacted on the urgent matters first and, eventually, on all active files. One of the most significant tasks facing a custodian or successor is disposition of the lawyer’s trust funds. On active files, this is usually relatively straightforward, with a replacement lawyer obtaining authorization from the client and committing to honour the undertakings of the former lawyer. However, many client trust balances are quite stale. There may be sums retained to record releases that have never been obtained. This may sometimes occur due to difficulty with the mortgagee or as a result of a failure to vigorously follow up requests for releases. When the release is eventually obtained, the recording fee may have changed so that the available funds are now inadequate.
JUNE 2009 | 11 In some cases, trust funds should go back to the client. With stale transactions, the client may be difficult or impossible to find and a court application may become necessary. There is often money in trust for the lawyer’s retainer or from which the lawyer’s account can be paid. If the money has been there for a long time, it may be difficult to create a proper bill or to fend off client arguments or complaints because time records or retainer agreements may not be available. Value will be lost to the family. All of us have a tendency to ignore difficult or tedious tasks and push them to the back of our desks. Unfortunately, the longer they sit, the more difficult they are to resurrect and resolve. When the task falls to a successor lawyer or custodian, valuable time will be spent in getting up to speed on the file and doggedly pursuing the resolution. Again, this expense subtracts from the value of the practice to the lawyer’s family. Studies indicate that lawyers are remaining in practice longer now than in the past. This may be the result of better health, longer life span, a desire to remain employed, an inability to sell the practice, an inadequate requirement plan or a combination of these factors. Because of this, we can expect an increase in the number of lawyers ceasing practice because of death, disability or incompetency rather than planned retirement. To protect yourself and your family, every lawyer should have a succession plan. Trust accounts should be kept up-todate by rendering accounts promptly, by returning money to clients quickly and by regularly following up on outstanding documents such as mortgage releases. Files should be culled to their essentials to reduce storage needs both now and in the future. Ensure that original documents are given to the client with a notation or receipt in the file. Keep an up-to-date file list and store files numerically or alphabetically for easy retrieval. Keep clear records of time or billing arrangements so that appropriate fees can be charged and justified. One of the lawyer’s biggest assets is the value of his practice - both on an ongoing basis and in the work invested in existing files. Be sure not to deprive your family of this asset by sloppy record keeping, poor file administration, or the lack of a succession plan. John Rafferty, Q.C., is a partner at the Nova Scotia-based firm Burchell MacDougall. He is a Former Director of the CLIA and a Former Director and Past Chair of the Nova Scotia Barristers’ Liability Claims Fund. This article was originally seen in the Society Record (July 2008, Nova Scotia Barristers’ Society) PRE-REGISTER NOW! For more information, or to add your name to the pre-registration list, contact the Law Society today! September 30 - October 3
Page 1 and 2: ARCTIC OBITER J UNE 2009 V OLUME XI
Page 3 and 4: JUNE 2009 | 3 PRESIDENT’S MESSAGE
Page 5 and 6: JUNE 2009 | 5 REMINDER A call for n
Page 7 and 8: JUNE 2009 | 7 AFTER HOURS Court of
Page 9: JUNE 2009 | 9 member may be found t
Page 13 and 14: JUNE 2009 | 13 A contribution towar
Page 15 and 16: JUNE 2009 | 15 life. More law firms
Page 17 and 18: JUNE 2009 | 17 LEGISLATIVE NEWS by
Page 19 and 20: JUNE 2009 | 19 further, in default
Page 21 and 22: JUNE 2009 | 21 consistent statement
Page 23: JUNE 2009 | 23 RESOURCES The Law So

ARCTIC OBITER

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