PROTECTION
PROTECTION
It may be soft copy, but it's still hard evidence
The two most important issues facing electronic commerce and electronic record retention is whether or not electronic records comply with legislative record keeping requirements, and whether they can be admitted into evidence.
Imagine that if, by accepting cheques as a method of payment or a telephone call as a method of placing an order, not only put you in breach of the Income Tax Assessment Act and other legislation but also that a court wouldn't allow you to get your money after you had sold your goods. It would be adding insult to injury. It would be outrageous. However, substitute "store documents electronically" above, don't do your homework properly and it will be you.
Much of the legislation that requires records to be kept was drafted in the dark ages. The terms they use are specific to hard copy documents. For example, "documents" must be kept and they must be kept in "writing". If you want to produce the document you must do so by producing the "original" or a "photocopy". Do these terms mean anything for an electronic document?
In an American case, a deleted email between executives of a large corporation was recovered in litigation. The email contained comments to the effect of "just do it, we know that we are in the wrong, but they never will".
This is more than just another question for the pixies of academe. We are all required to keep records of our activities by legislation. The Income Tax Assessment Act is the most obvious example. It touches us all, big and small, corporations and people alike. You need to know the answer before you can image your originals onto disk, and especially before you throw them out.
When your originals are electronic to start with (e-commerce or even faxes you receive through your PC), an even trickier question arises. What are the originals? How must they be kept? There are no easy answers to these questions. Separate requirements are created by separate Acts, and each Act requires a separate answer. Whether your storage methods are legal can only be determined on a case by case basis. As a rule of thumb, Commonwealth legislation is very good at permitting the retention of documents in electronic form, State legislation leaves something to be desired. However, that said, there are some circumstances in which the Income Tax Assessment Act does not permit documents to be retained electronically.
Even where legislation does permit documents to be held electronically, there may be serious obstacles to their retention in practice. Retention periods are characteristically extremely long in the scale of technology evolution. Three or five years is not unusual. Back in the real world few, of us have any experience with electronic documents more than one or two years old.
Email has a resilience unheard of in the world of paper documents.
This is especially the case where those documents have been stored on a specific medium. Will 3 1/2" disks be obsolete in five years time? What about your documents stored on those disks? You'll probably be in breach of the legislation.
Similar issues arise where documents have been encrypted or compressed. If the encryption, archival, or compression program is not available to recover the document then you're in breach. Therefore, great care must be taken when disposing of old archival utilities.
Even where the retrieval procedure is merely very difficult to implement, there will be a serious question as to breach. For example, records encrypted for security purposes which cannot be readily decrypted may be considered by the Tax Commissioner to be not "reducible to writing in English", in breach of the Act.
In order for a document to be admitted into evidence in a State court, you must comply with the requirements of the Evidence Act of that State. For example, a litigation conducted in the Supreme Court of New South Wales will need to comply with the New South Wales Evidence Act. By and large, the Evidence Acts around Australia take a similar approach to most issues, but not on the admissibility of electronic documents. Many have problems with admitting them into evidence.
The "Best Evidence" rule says that the original of a document must be produced, and only if this is impossible may a copy of that document be produced as evidence of its contents. In the electronic realm, the copy stored in the hard drive of a computer is the "best evidence". Even printouts are "copies" within the meaning of the best evidence rule. There is a problem.
Further, looking in more detail at some of the Evidence Acts around Australia shows that the means of producing a document to the court necessarily implies that the document itself is a hard copy rather than a soft copy. In this case, there is a further bar to the proof of the contents of an electronic document.
The level of confidence that you can have in relation to being able to produce your electronic documents is dependent upon a large number of factors. At a minimum a company storing records electronically will need to look at the Evidence Act of their own State to assess their own level of comfort.
STATES AND ACTS
Some States are particularly good - NSW, the ACT and courts of a Federal jurisdiction. Others, such as South Australia, aren't.
The South Australian legislation, while once progressive, imposes significant barriers to the admissibility of electronic evidence. It forces you to keep certain records of the operation of the computer during the whole period. It is not possible to contract out of these requirements or to otherwise negotiate them away with the other party to the litigation. This makes them doubly dangerous.
The South Australian Government has successfully lured a number of electronic businesses to locate their data processing centres within South Australia. If your business is one of them it is imperative that you review the provisions of the South Australian Evidence Act and ensure that you comply with them in respect of all computers in your data centre.
In litigation, as in life, it's often a case of Murphy's Law. If an electronic document is damaging you can expect it will be admitted. Indeed, email is routinely admitted into evidence in proceedings in Australia and there are a number of cases in the United States in which email has come back to haunt people, even long after it had been deleted.
This is because email has a resilience unheard of in the world of paper documents. An email itself can be deleted, the email program itself removed from a computer and yet the contents of the email can still be recovered.
Professionals can do a "low level" interrogation of the storage media and recreate the emails in near to their original form. This is because a hard drive is like library with a card system (can you remember them?). When you ask a computer to delete an email the computer doesn't do the equivalent of finding the book and chucking it in the bin. Instead, it just finds the card index of the book and chucks it in the bin. The email stays on the shelves (so to speak) until the space is actually used for something else.
Another aspect of email is the culture which is associated with it. Where a memo is put to paper the physical words in front of a person usually focuses their attention on the consequences of actually sending it. They actually think about it. However, the immediacy of email coupled with its apparent intimacy means that an equivalent email memo does not receive the same degree of thought and are usually much less formal. In an American case, a deleted email between executives of a large corporation was recovered in litigation. The email contained comments to the effect of "just do it, we know that we are in the wrong, but they never will".
Individuals also tend to guard email as their own. An organisation ends up with "information islands" - each person's PC. Email stored on a person's hard drive emails are not subject to ordinary back up procedures of the organisation. If their PC is assigned to someone else, or they leave the company, those emails will not be properly migrated to a central storage facility. In effect, a part of the corporate memory of the organisation is wiped clean.
If the lessons to be learnt from this article could be distilled into four points, they would be:
¡ Check the statutes - are your electronic documents legal?
¡ Check the Evidence Acts - can your electronic documents be admitted?
¡ Develop a communications policy (part a) -Loose lips sink ships;
¡ Develop a communications policy (part b) - email should be properly centralised, backed up, and migrated as necessary.
Brendan Scott is a senior lawyer with Sydney legal firm Gilbert & Tobin. He specialises in e-commerce and law covering electronic document management.