A detailed contemporaneous file note should be made of all verbal discussions with clients.  Contemporaneous file notes can be one of the most important documents in the event of a dispute with a client.  A typical client complaint will involve some element of dispute in relation to the verbal discussions between the adviser and the client.  A file note may be the only record made of a conversation and will assist with proving what happened.

An example of the importance of file notes occurred in a NSW Supreme Court Case, Symond v Gadens Lawyers Sydney Pty Ltd [2013] NSWSC 955.  The case involved John Symond of Aussie Home Loans and his former solicitors, Gadens Lawyers Sydney Pty Ltd ("Gadens").  Mr Symond sued Gadens for advice given in respect of certain restructuring arrangements and loans from the business to Mr Symond.  Mr Symond argued that Gadens failed to advise him that the loans from his business would not be tax free.

Gadens argued that they informed Mr Symond verbally that the anti-avoidance provisions of the Income Tax Assessment Act 1936 may apply to the loans.

It was held that Gadens had not provided the advice to Mr Symond.  Gadens did not have any record of the advice being provided.  There were no contemporaneous file notes or written documents containing the advice.  Whilst some file notes were maintained by Gadens in respect of some verbal discussions with Mr Symond, not all discussions were noted.  The judge also found that if the advice had been provided by Gadens it was of a subject matter that should have been noted.

The lesson from this case is that careful file notes should be kept in relation to all advice provided to clients.  File notes are an essential risk management tool that is often overlooked.