Preservation of documents – from hoarders to heroes

“The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency” (Bill Gates)

The modern trend of paperless offices is now well instilled in business.  The direct effect of this is more dependency on technology.  Often, this dependency creeps up quickly and silently, resulting in too much information held haphazardly on systems not built to sustain that much data. Without proper systems in place (centralised server, archiving, back-ups), technology quickly becomes a hindrance to the efficiency of the business.  Businesses will either invest in new document management systems to address this issue or they will not.  Both routes can create unintended and unforeseen difficulties for the business should it be unlucky enough to be embroiled in litigation. 

When business is good, it is easy to ignore the bad.  The paradox of court litigation is that it is undesirable to most but avoided by the few.  That means businesses are likely to face legal action at some stage in their life.  So it pays to be prepared, as you never know what is around the corner.  

For every new contract entered into by the company, whether it be an agency or distributorship agreement (or any other contract arising out of the business), each has the potential to result in a dispute.  Less foreseeable disputes are the ones that do not necessarily arise out of a contract – negligence, fraud, breach of health and safety and other compliance issues (bribery, regulatory).  But all of these disputes will have one thing in common: the need to produce evidence to substantiate your case.  Whether you are bringing the claim or defending it, you will need contemporaneous documentary evidence to back you up.  This is where reliable IT systems and organised archiving / storage come in.  If you cannot produce the documents to support what you say, you face an uphill struggle to (pretty much) nowhere. 

So, it may seem excessive now, but your future litigious self will thank you for taking heed of the following tips: 

1. Invest in an efficient document management system.  Whilst costly upfront, your business will reap the benefits with an IT system which allows for central electronic filing, proper recovery systems in the event of crashes, is searchable (across the entire system or sections of it), can be organised in whatever format suits your business and has sufficient capacity to hold data without slowing or crashing the system.  In addition, in the event you do face litigation, the relevant contemporaneous documents and emails will be available and easily accessible.
2. Do not delete, remove or destroy your old IT system in the update process.  All businesses need to keep costs down, which includes not storing data unnecessarily.  The Courts understand that, so there is no requirement on businesses to hoard absolutely every document created.  But it is advisable to store (such as by archiving) emails and documents that are connected to a particular contract or event that could result in litigation being commenced.  Of course, you cannot be expected to know what might turn litigious, particularly when the Commercial Agents Regulations apply.  This is where document management systems help: you can transfer the documents and emails from the old system to the new system, and store them in the relevant files or archiving, where they can be accessed if needed.  If your system can only hold so much, a limitation period on archiving helps, but it should be a period of years rather than months.  
3. Have efficient back up and archiving systems.  As explained above, electronic archiving will assist with capacity and storage issues, so you do not put strain upon the ‘live’ data capacity. Back-ups are also extremely useful in litigation: it means a document can never really be deleted.  Cases can be won and lost on emails recovered from back-ups that the employee, consultant or agent thought they had deleted.  
4. IT policies.  It is useful to create an IT policy for employees so they understand how the IT system works, how to make best use of it from a business perspective (e-filing, organised folders).  But once created it is important to ensure that the policy is operated in practice. 
5. If a dispute does arise, before commencing a claim make sure you can produce the goods: the disclosure exercise (where parties exchange relevant documents) does not take place until well into court proceedings, but it is always a good idea to do the exercise before you take the leap into litigation.  This means running searches across your IT system and retrieving all documents and emails relating to the dispute, to satisfy yourself you can produce documents to support your case. 

If you cannot produce the documents, think very carefully about whether to proceed.  It is always tempting to press ahead when you consider the other party has caused you loss, but without evidence, you risk losing far more – you face having to pay the other side’s costs if you lose or have to abandon the litigation. 

What is the worst that can happen?

Failure to preserve documents can also lead to more serious consequences.  If you have not preserved documents but have given the opposite impression to your opponent, or you have removed or destroyed documents during litigation and have not informed the other side (and do not have a good reason for it), you risk being faced with contempt of court proceedings for the destruction of evidence.  These are criminal proceedings and if found guilty can result in a fine or even a prison sentence. 

Where there are gaps in documents because of failures to preserve documents (unintentional or otherwise), there may be a temptation to re-create documents that you knew once existed or even to create documents that never existed but plug a hole in documentary evidence and support witness evidence.  It sounds obvious, but the creation of evidence, even if it replicates what might have previously existed, is unlawful and again risks contempt of court proceedings in the same way that the destruction of evidence does.