LSUC spot audits – Common errors - #4 of 7

Number 4 on the LSUC’s spot audit list of common errors is “Client trust ledger accounts with no activity in over one year”.

Why is this of concern for the Law Society?

Firstly, reviewing the client’s trust ledger may reveal unpaid disbursements or invoices.  Maybe funds were held back to register a document, which has never been done.  Maybe you were waiting for a disbursement invoice to arrive, which has been to posted, but the client’s invoice was never generated.  Maybe you held funds because you knew docketed time was outstanding, but again, the client’s invoice has never been generated.  All of these should be acted upon forthwith.

When a court case settles or a transaction has been completed, the paper file is set aside to be archived.  As often happens in a busy office, nobody logs-in to PCLaw to confirm that all of the trust funds have been paid out.  If the matter is no longer active, the trust funds should immediately be refunded to the client.  If the client can no longer be located, the funds should be remitted to the Law Society.

Another big issue is the complaints received by the Law Society regarding lack of communication from the lawyer handling his/her file.  Since lawyers typically bill clients for phone calls and correspondence, there should be some activity by the end of a year that can be billed to a client.  A small invoice will produce the required trust activity.  This invoice, together with a short cover letter, keeps the client informed that you are actively pursuing the matter for them.

But what if there is nothing to bill?  Well there should be.  If the file is completely inactive, should it be closed?  Write the client: “Do you still want to pursue this?”  Follow up with opposing counsel – is their client proceeding?  Call the court – has a date been set?  All of these actions will by themselves produce fees to be billed out.

This is where reviewing your monthly trust comparison reports (see #2 of 7) becomes important.  Your bookkeeper should be drawing your attention to matters with extended inactivity, so that you can take corrective action.

As always, I invite your comments and suggestions for future posts.  Next posting will be January 2, 2011 – error #5 – Unreconciled items.

Clyde