The last Techlaw column (Email fertile ground for legal disputes) explored some of the issues relating to email as a source of evidence in legal disputes.
Increased awareness of email as evidence has resulted in many companies issuing directives to staff that all emails are to be deleted after a nominated time.
While this practice may be thought to reduce exposure to inadvertently keeping dangerous material, this article explores why that approach may be worse than misunderstanding the problem, and in fact may expose executives giving such directives to criminal prosecution.
While a company has every right to destroy any documents, paper or computer based, that are not required to be kept by law, in reality that class of document, documents that may be destroyed at whim, is hard to define.
There are many laws that require the retention of records. The most obvious is tax legislation.
Further easy examples include:
- OSH records
- records relating to any official business with a branch of government that has investigatory and punitive powers (Customs and quota managing authorities spring to mind)
- records that are necessary to prove discharge of a legal obligation.
An increasingly important example of where laws require records to be kept to prove discharge of an obligation is consumer complaints. The burden imposed by the Consumer Guarantees Act requires vigilance and tracking of complaints, if awards of consequential damages are to be avoided.
Simply, in today’s world email is often the complete record of a company’s internal and external communications and decision-making processes.
An example of this proposition, where email is the only record of importance, is in large projects. The proposition that all email should be automatically destroyed where large projects are involved demonstrates the folly of a blanket email deletion policy. This is because, increasingly the most common basis for issuing court proceedings in complex projects, is on the grounds of misleading conduct in performing the contract.
“In contract” performance claims are popular (see Who's liable when complex projects go wrong?) because misleading and deceptive conduct claims under Section 9 of the Fair Trading Act are easy to make and are seen as inflicting reputation damage on the defendant. While it is relatively easy to defeat un-meritious claims, often damage is done with the mere issuing of proceedings.
That damage is hard to rebut if exculpatory emails have been deleted while the other side has retained all emails that it thinks suit its case. In this situation, if the other plaintiff party knows that your company automatically deletes all email, it opens the door to that plaintiff selectively tampering with the evidence. This will result in a criminal offence being committed because on discovery a false affidavit will be filed. However that is not the point. The point is, by destroying your own records you cripple your company’s ability to fight back and prove the claims made are nonsense.
A further point is that being unable to produce the history of dealings on an issue through email, may also have a bearing on whether a claim is indemnified under insurance. Simply, if you make a claim your insurer may decline the claim on the basis that the company has destroyed evidence which might provide a defence to the claim. Similarly, the loss of events captured in email may result in a failure to notify a claim event, leading to a loss of cover.
Finally, premature deletion may also cost a company the opportunity of a counterclaim, for example helpdesk emails showing ongoing problems with a vendor’s system.
The duties in regard to preserving and discovering evidence when on notice are clear and the courts or the authorities do not view destruction of evidence lightly. Accordingly, it is likely that automatic deletion of email by document management software will expose a company and its executives to liability for destruction of evidence. In particular shareholders could argue that such a policy has resulted in, say, loss of insurance cover or extra penalties, and was patently foolhardy and negligent on the part of the executives concerned.
If an email destruction policy is to be implemented it needs to be tailored to ensure that:
- Emails are never deleted in situations of a pending or possible dispute. It pays to remember that any document can be explained or put into context but missing documents can never be explained. If a company does not have a retention policy and suddenly deletes a group of emails on the eve of a dispute, at best a court or mediator is open to draw an adverse inference from such conduct, at worst criminal charges may follow for falsifying evidence. If the company was on notice that a dispute was imminent or underway, destruction of evidence may also expose the company to civil liability for that act alone, as well as the risk of further conduct allegations.
- Emails are never deleted in dealings with consumers.
- Emails are never deleted if there is a requirement at law to keep all communications. Tax, financial reporting, employee matters, product safety, anti-trust dealings and sharemarket dealings are just a few of the obvious areas here.
- Emails are never deleted if the content is exculpatory and the business risk is insured as this may result in a loss of cover.
- Emails are never deleted if the email goes to an external party as that party may keep a copy and the loss of your ability to refer to the communication will put you at a disadvantage.
Email has inverted the traditional pattern of document retention. While paper documents are not ordinarily retained unless they are deliberately put in a file, the storage paradigms with email tend to do the opposite – keep everything unless it is deliberately deleted.
Companies should look to strike a balance by:
- Developing a policy that distinguishes between the various classes of communication.
- Issuing guidelines so that staff can determine which emails belong to which class.
- Emails that must be retained should be stored in a manner that indicates the value and importance of the communication. For example emails with tax authorities should be stored in a public folder and never deleted.
The folly of creating a blanket email destruction regime should be obvious. What is not so obvious is that the real problem is due to the ease with which the reply button can be pressed. There are emails that should not exist. Once the comment is made, it cannot be retracted. Pretending that it does not exist will not stop the damage from flowing.
Craig Horrocks is a partner and Guy Burgess is a graduate in Clendon Feeney’s technology law team. This article, together with further background comments and links to other websites, can be downloaded from www.clendons.co.nz. Questions and comments are welcome to firstname.lastname@example.org.