Australia: Courts And Electronic Disclosure!

Have you ever considered the number of emails and other electronic documents generated each day by each employee in your organisation? Today, the relatively low cost of storing documents in electronic form compared to the cost of storing paper copies has resulted in a tendency for companies to store more documents and for longer. Many organisations now measure the quantity of electronic data stored in terabytes – a terabyte being the terrifyingly large 1 million megabytes.

Consider also that documents might be stored in various locations, for example on the hard drive of an employee’s computer, the company's central file server, back-up discs, PDAs, USB keys, an employee’s home computer, or other locations. A document may have been deleted from the central file server but a copy retained in another location such as the hard drive of an employee’s computer.

So what happens if your company is compelled to produce electronic versions of its documents in Court? With greater quantities of documents being produced and stored by companies, the time and cost involved in searching for those documents is potentially greater than ever before, particularly if more than one location needs to be searched.

All companies are exposed to the risk of being compelled to search their electronic records and produce documents recovered from those records. If your organisation is already involved in litigation, the Court can order it to produce electronic records and other documents which are relevant to the litigation. However, an organisation can also be compelled to produce electronic records which are relevant to proceedings even though the company is not a party to those proceedings or for proceedings which have not yet commenced.

A Court Order requiring production of documents may not specifically identify the documents. Rather, usually the documents are identified by a description of the type of document required. This means that searching for documents may involve inspecting large numbers of documents in order to identify which documents are relevant. In some instances, some of the costs of searching and producing documents can be recovered from the party seeking the documents, but this is not always the case.

However, in determining whether to compel a company to produce documents, a Court will weigh the time and expense of searching and producing the documents against the value of the documents to the party seeking them. For example, in a recent Federal Court case, the Court refused to order production of various electronic documents because there was evidence that the cost of searching and producing those documents would be in excess of $1 million, which outweighed the value of those documents to the party seeking production. However, the circumstances of each case will be different, and there is no rule as to what amount will be considered excessive. In an American example, a court ordered production of email records in spite of evidence that it would take more than six months and cost more than US$6 million to produce those documents. The prospect of having to incur such costs in litigation can strongly influence a company's attitude in relation to settling or prosecuting or defending a claim.

It is not possible to completely avoid the costs of having to search electronic records if ordered to do so by a Court. However, there are steps which can and should be taken by organisations to minimise those costs. The starting point is that each company must have a proper document management and destruction policy. It is equally important that the policy is understood and effectively implemented by each person in the organisation. To illustrate, if a document relevant to litigation has been deleted from the company's central file server and back up discs in accordance with the company's document destruction policy, but a copy has been retained on the hard drive of an employee’s computer, the document will need to be produced. If a company has a proper document management and destruction policy, and effectively implements that policy across the company, the costs of being involved in litigation can be significantly reduced.

For further information on developing and implementing an effective document management and destruction policy or the process of searching and producing documents please contact James Orr.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.