Records retention poses an increasing risk to businesses
from the perspective of management and operations. The
explosion in the frequency of use and amount of electronic
records, including e-mail, has created a need to carefully
manage records of all types, lest a company run afoul of the
growing number of statutory requirements being enacted, as well
as the evolving common law standards. Obviously the risks
associated with the increasingly informal use of e-mail
communication can create exposure for companies where it did
not exist before.
To be prudent, each company should assess applicable
statutory requirements. These include time, form and location
of records, which may be prescribed by statutes specific to a
company's business lines or generally in the context of
company's business type (e.g., corporation, partnership,
trust, etc.). This says nothing of requirements that will cut
across many boundaries, such as those imposed by the Income
Tax Act. Most statutes provide for sanctions for failure
to comply with the requirements.
One of the most typical common law doctrines that arises
regarding records retention is the doctrine of spoliation. In
short, spoliation is "the destruction or material
alteration of evidence, or potentially the failure to preserve
property for another's use as evidence in litigation that
is pending or reasonably foreseeable." This doctrine can
apply to anyone who knows or ought to know of the significance
of the evidence. It may apply to deliberate acts of
destruction, as well as to unintentional acts of
A finding of spoliation may result in an adverse inference
against the party who destroyed the evidence. Such a finding
may also increase damages and could even potentially render the
spoiler's pleadings to being struck, not to mention the
possibility of a contempt of court finding if the records were
subject to an active process before the courts.
Courts in the United States have gone the furthest in this
respect, including suggesting:
significant damage awards may be appropriate for the
destruction of potentially relevant evidence;
the duty to preserve arises before litigation
counsel (both in-house and external litigation counsel)
have a duty to ensure documents are preserved;
counsel have a duty to ensure the client has a document
retention and filing plan; and
counsel may be personally sanctioned for failure to
follow the foregoing.
McCarthy Tétrault Notes:
The key to minimizing the risk is to develop a company-wide
records retention policy. Without an effective records
retention policy, an organization faces numerous risks, such
destroying records that it is required by law to
keeping records that it is required by law to
destroying records that should be kept, based on sound
exposing itself to allegations of spoliation, potential
adverse inferences and costs penalties in litigation;
exposing itself to litigation costs associated with
recovering 'destroyed' electronic information;
exposing itself to unnecessarily high costs associated
with document production during a lawsuit.
When preparing a firm-wide policy for records retention, key
specific retention periods that affect your
general application statutes and industry-specific
form and location for maintaining records, as well as the
offence prosecution times;
classification of documents included to assist in
asserting the protection of privilege;
breadth of policy (necessary documents are retained, and
unnecessary ones are not);
a cost/benefit analysis;
clear identification of who will be responsible for
ensuring compliance with and enforcement of the policy;
how the employees will be informed;
what discretion an employee will have; and
how this will integrate with other company policies (IT,
privacy, security, etc.).
Finally, the policy should address when and how to implement
a 'litigation hold' to stop any automated destruction
of records that the policy would otherwise permit when
litigation is anticipated, or is active.
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.
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