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					Document Retention Policies
Document Retention Policies and Practices



This booklet is intended as a basic guide for best
practices and policies concerning the retention and
destruction of documents. This guide should not be
regarded as substitute for specific legal advice. Persons
who require legal advice should consult with legal
counsel. The lawyers at Bennett Jones LLP would be
pleased to provide such advice.




            Second Edition October 2004
1. Introduction
The principle behind any document retention practice or program is
that only useful records should be preserved, and only for the limited
period of time during which their retention is useful or required by
law.

While easily stated, the application of this principle is much more
difficult as it involves a risk assessment based on a variety of legal,
technical and business considerations. The difficulty is particularly acute
in Canada, where no cohesive body of law on the legal issues concerning
the creation and destruction of records has been developed.

An active document retention and destruction policy is critical for any
business. Firstly, the retention of an infinite number of documents may
become prohibitively expensive, as well as impractical. One obvious
expense relates to the cost of storing records. Another expense, perhaps
less apparent but no less important, relates to the fi nancial and human
resources that may have to be expended in order to locate a specific
record amongst thousands of paper and computer fi les, hundreds of
electronic mailboxes and box upon box of back-up tapes. Secondly,
the random destruction or elimination of documents can lead to an
appearance of impropriety or to the eradication of documents that
could found a claim against others or serve to defend against claims.
Thirdly, federal and provincial laws and regulatory requirements
mandate the retention of certain documents for minimum periods of
time and the destruction of certain documents once their purpose has
been fulfi lled.

Creation of a sound document retention and destruction program
requires extensive knowledge about the specific workings of the
organization concerned. The rationale for retaining any given document
or class of documents will in turn dictate the proper time period for
the document’s retention or destruction. Further, the location where
operations are carried out will also be important as this ought to
determine the laws governing the document retention program.
The considerations outlined below highlight some of the minimum
requirements or considerations in respect of document retention.
Beyond those considerations, it is a matter of business judgment what
documents are retained and for how long. Each organization will have
its own history of incidences and views as to the premature destruction
and unnecessary retention of documents.


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This booklet refers variously to “documents” and “records” and uses
these two terms interchangeably. In both cases, we are speaking not
only of paper records but also of any record of information however
recorded. Th is includes computerized or electronic records, including
email and information stored in personal digital assistants (“PDAs”
such as PalmPilots, Blackberries and the like), as well as video and
audio recordings.


2. Statutory Document Retention Requirements
Numerous statutes, regulations and regulatory instruments impose
record keeping requirements on business entities. Some requirements
may arise from general laws applicable to all types of business entities.
Others may arise from laws that are specific to a particular profession
or industry. In either case, these requirements are generally applicable
to specific categories of records. The sanctions for failing to retain
documents for the period of time required by law or regulation vary.

In some cases, the legislation will set out a specific retention period,
or state a minimum retention period in respect of particular types of
records. Some of the requirements also specify the location at which
the records at issue are required to be kept. Special obligations to
preserve records may apply to certain types of government data, such as
the obligations under the National Archives Act of Canada. Additional
obligations to preserve or destroy information may also arise under
privacy legislation.

Set out below are references to some of the federal and provincial laws
and regulations that may have an impact on document retention and
destruction issues. The list is by no means exhaustive; however, it should
provide a useful sampling as to some of the statutory requirements that
exist. Reference is made below to the laws of Canada, Ontario and
Alberta. Other or different requirements may apply in other provinces
or territories.




                                                    Bennett Jones LLP 3
3. Legislation Applicable To Corporations In General


    (a) Corporate Records
    The books and records required to be kept by a corporation are
    set out in the statutes of the applicable jurisdiction referred to in
    the corporation’s articles of incorporation. By way of example, the
    Canada Business Corporations Act, the Business Corporations Act
    (Ontario) and the Business Corporations Act (Alberta) all require
    that certain corporate records be prepared and maintained. These
    include records such as the corporation’s articles and by-laws,
    minutes of meetings of shareholders and directors and resolutions
    of shareholders and directors. The retention period for these
    records varies from one jurisdiction to the next.
    (b) Tax Records
    Each of the federal Income Tax Act, the Corporations Tax Act
    (Ontario) and the Alberta Corporate Tax Act contain requirements
    as to record retention. As a general rule, the retention period is six
    years, calculated from the end of the taxation year to which the
    record relates. Similarly, the federal Excise Tax Act and the Retail
    Sales Tax Act (Ontario) require that certain records relating to
    goods and services tax or retail sales tax, respectively, be retained
    for a minimum period of time.
    (c) “Personal Information”
    The federal Personal Information Protection and Electronic Documents
    Act (“PIPEDA”) applies to the federally regulated private sector
    and to the provincially regulated private sector in those provinces
    (such as Ontario) that have not enacted “substantially similar”
    legislation. PIPEDA contains provisions that address both the
    retention and the destruction of personal information. Personal
    information is required to be retained “only as long as necessary
    for the fulfi llment of those purposes [for which it was collected]”
    and must generally be destroyed, erased or made anonymous when
    it is no longer required to fulfi ll the identified purposes. PIPEDA
    expressly encourages organizations to develop guidelines that
    include minimum and maximum retention periods.



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    Alberta’s legislation, in the form of the Personal Information
    Protection Act, simply states that “an organization may for legal
    or business purposes retain personal information as long as
    is reasonable”. Although not stated in affi rmative terms, the
    implication is that once it is no longer “reasonable” to retain
    personal information, it must be destroyed or deleted, or at least
    made anonymous.
    In addition the federal and Alberta private sector privacy
    legislation include specific provisions dealing with the destruction
    of personal information where a request to access such information
    has been made. Alberta’s PIPA provides that a person commits an
    offence if the person disposes of or alters, falsifies, conceals or
    destroys personal information or any record relating to personal
    information, or directs another person to do so, with an intent to
    evade a request for access to the information or the record. At the
    federal level, the organization is obliged, where the organization
    has personal information that is the subject of an access request
    to retain such information for as long as is necessary to allow the
    individual to exhaust any recourse under the federal legislation.
    In each case, a person who breaches such provisions commits
    an offence and is liable, if an individual, to a fine of not more
    than $10,000 and, if not an individual, to a fine of not more than
    $100,000.
    (d) Other
    Other records that are subject to retention requirements at either
    the federal or the provincial level include employment records,
    records relating to workplace safety and pension and benefits
    records.


4. Contractual Obligations
Regard will have to be had to any contractual restrictions on the
ability to destroy documents. One aspect is assessing whether or not
the documents are even your property. Confidentiality provisions in
particular may also affect how documents are handled.




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5. Limitation Issues
Another important consideration in establishing a document retention
and destruction policy is the effect of various limitation periods.
Limitation periods are the periods of time during which persons may
initiate legal proceedings as established by statutes of limitations as
well as by other statutes in each jurisdiction. Business records may be
relevant to the pursuit of, or defence of, a claim. As such, the types of
actions that could be brought and their applicable limitation periods
should be considered before records are destroyed. If relevant business
records are destroyed before the limitation period, the loss may
adversely affect either the pursuit or defence of a lawsuit (considered
more fully below).

Limitation periods vary significantly, depending on both the type
of action and the applicable jurisdiction. The general rule in Alberta
under the new Limitations Act is that most actions are governed by a
two/ten year limitation period. That is, an action for what is described
as a remedial order must be commenced within either two years after
the person making the claim knew or ought to have known of the
claim, or ten years after the claim arose, whichever period fi rst expires
(see our booklet Alberta’s New Limitation Law).

A new Limitations Act also came into force in Ontario on January 1,
2004 that has a similar formula, with the ultimate limitation period
being fi fteen years rather than ten years. Different jurisdictions have
very different rules concerning limitation periods. Further, litigation
can be governed by the limitation legislation of more than one
jurisdiction.

The new Alberta and Ontario legislation suggests that there are few
cases in which there would be any need to retain documents beyond
ten and fi fteen years, respectively, after any relevant cause of action
might have arisen. However, there is no legal requirement that
documents be kept for the length of any particular limitation period,
including a maximum limitation period. Prior to the introduction of
the new limitations statutes and the concept of ultimate limitation
periods, the prospect was for certain actions being commenced decades
after the cause of action fi rst arose, and that remains the case in some
jurisdictions. The period of retention is simply a matter of judgment,
subject to the other considerations discussed in this booklet.




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6. Evidentiary Considerations
Documents may be required in future litigation and the development
of a retention program needs to address the form in which documents
are kept. Paper and electronic records are considered functionally
equivalent under some legislation such as the Electronic Transactions
Act (Alberta), the Electronic Commerce Act (Ontario) and Part II of
PIPEDA but not other legislation.


7. Criminal Law
There are at least three provisions in the Criminal Code (Canada)
that could apply to the intentional destruction of documents or data.
Sections 139(2), 341 and 430 (1) and (1.1) all specify offences that
could apply to such destruction. These relate to the obstruction of
justice, to the fraudulent removal or concealment of anything, and
to mischief in relation to property or data. “Mischief ” is defined as
the destruction, damaging or alteration of property or data, making
data meaningless, useless or ineffective, obstructing, interrupting or
interfering with the lawful use of property or data or denying lawful
access to data. Subsection 430 (1.1) was added to deal with hackers
and others who attack the integrity of computer and computer related
communications.

All of these offences are indictable offences. It appears that none
of these sections have been considered in respect of the destruction
of documents that might have a bearing on a civil – as opposed to
a criminal – action. Commentators express doubt that there would
be much interest in prosecution if only civil litigation is concerned.
Where, as in the recent examples in the United States concerning the
alleged destruction of documents by employees of Arthur Anderson or
Enron, the intent may have been to destroy documents that might give
rise to a criminal or quasi-criminal prosecution, these provisions are
more likely to come into play.

The absence of prosecutions in connection with document destruction
or mischief, beyond those related to public mischief or interference
with criminal justice, may be viewed as evidence of an insufficient
state interest to warrant prosecution. In addition, there are practical
limitations with any criminal prosecution:



                                                  Bennett Jones LLP 7
    (i) the alleged document destroyer cannot be compelled to testify,
    and
    (ii) the standard of proof is beyond a reasonable doubt.


8. Tortious Conduct
A tort of spoliation has been recognized in some American jurisdictions.
Where recognized, the tort is concerned with the intentional spoliation
of evidence, not usually negligent destruction, although there are cases
that would go so far as to include reckless or even negligent destruction.
A good representative case is Coleman v. Eddy Potash Inc. 905 P.2d 185
(1995) in which the elements of this tort were said to be as follows:

    (1) the existence of a potential lawsuit;
    (2) the defendant’s knowledge of the potential lawsuit;
    (3) the destruction, mutilation or significant alteration of potential
    evidence;
    (4) intent on the part of the defendant to disrupt or defeat the
    lawsuit;
    (5) a causal relationship between the act of spoliation and the
    inability to prove the lawsuit; and
    (6) damages.
There does not yet appear to be any acceptance of the tort of spoliation in
any other common law jurisdiction outside the United States. However,
it has been considered in several recent Canadian and Australian cases.
These decisions recognize the possibility that tort law may extend now
to include a tort of spoliation.

In light of this and other civil consequences, the prudent course is
to assume that, wherever there is a potential lawsuit, investigation
or audit, related documents should not be destroyed, at least until a
careful review is conducted. Once the potential has arisen, the possible
adverse civil consequences as well as one’s own interest in retaining
helpful evidence and materials are likely to dictate retention.




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9. Civil Litigation Consequences


    (a) Striking out Defence/Stay of Proceedings
    Short of recognizing a distinct tort of spoliation, the courts can
    go a long way to achieving a very effective remedy in extreme
    cases by striking out a statement of defence or giving similar
    relief in favour of a person severely prejudiced by the opposing
    side’s destruction of evidence. The comparable remedy, where the
    injured party is the defendant, would be to either strike out the
    claim or stay proceedings.
    The court has discretion to grant a remedy in such cases based
    upon the underlying principles of abuse of process. Such principles
    include an inherent jurisdiction to control the conduct of parties
    before the court and to ensure full and frank compliance with the
    applicable rules of court. Where a defendant has denied a plaintiff
    a fair trial because it has destroyed relevant evidence, particularly
    where such conduct was deliberate, the court could go so far as to
    strike out a defence. In at least one Australian case, a court went
    so far as finding that the destruction of documents, undertaken
    prior to the commencement of proceedings, amounted to an abuse
    of process since it had the effect of denying a fair trial.


    (b) Reverse Onus of Proof
    It seems to be accepted that, whatever remedies are available,
    where significant documents are missing, adverse inferences can
    be drawn from their absence. An alternative to the extreme of
    striking out a claim or defence is to allow an action to proceed
    and address the unfairness through adverse inferences and
    presumptions against the party that has destroyed documents and
    other evidence.


    (c) Contempt of Court
    The deliberate destruction of documents and other evidence may
    also give rise to civil contempt and provide a basis for compensation
    (although this may be questionable). The following excerpt from


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     Spasic v. Imperial Tobacco (November 25, 1998: unreported – Ont.
     Gen. Div.) illustrates the point:
          I see nothing to prevent a motion for contempt claiming
          private compensation where a party, with the intent of
          frustrating a claimant in an action of which he or she
          has notice, intentionally destroys evidence material to
          the claimant’s case. Spoliation may constitute a common
          law civil contempt of court not in the face of the court.
     If contempt can otherwise be proven, it appears to be no answer
     that the destruction of documents, tampering with evidence
     or other like conduct occurred prior to the commencement of
     proceedings.


10. Maintaining Privilege
In developing a document retention policy, one should also review what
steps can be taken to reduce the possibility of privileged documents
being ordered released or being inadvertently released to another party.
This is more a matter of labeling and controlling the dissemination
of documents than determining what and when to destroy. Privileged
documents, by their very nature, are likely to be ones that are retained
for longer periods than usual.

Two types of privilege may be applicable to protect sensitive documents
from disclosure in legal proceedings. The fi rst type of privilege is referred
to as “legal professional” privilege and applies to communications
between lawyer and client for the purpose of the client obtaining legal
advice. This type of privilege has the following three requirements:

     (1) there must be a written or oral communication passing between
     a lawyer and one or more client representatives;
     (2) the communication must concern legal advice; and
     (3) the communication must be made in confidence (i.e., that there
     be no disclosure outside of the lawyer and client relationship).
The second type of privilege, referred to as “litigation” or “work
product” privilege, allows parties to investigate and assess facts and
issues related to litigation or prospective litigation. Litigation privilege



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protects communications with third parties and is not restricted to
communications directly between lawyer and client. To claim litigation
privilege the following three factors must exist:

     (1) litigation must be in progress or must be reasonably
     anticipated;
     (2) the dominant purpose of the communication must be to obtain
     advice or to assess or otherwise prepare for litigation; and
     (3) the communication must be made in confidence.
Litigation privilege may be used to protect reports prepared by
employees and consultants provided such reports are prepared for
the purpose of providing legal advice relating to actual or anticipated
litigation. However, it is preferable that the request for information
be made by the client’s lawyer, rather than coming directly from
management. If documents are prepared in response to requests from
management which are made directly to consultants, accountants or
risk management advisors, the documents may not be accorded the
same protection.


11. Preserving Confidentiality
Another consideration in the treatment of documents that are being
retained is ensuring adequate safeguards to protect confidential
material. Th is includes commercially sensitive information belonging
to the organization, confidential information of a third party that the
organization is bound by contract to protect and personal information
that the organization is bound by contract, law or practice to treat as
confidential. In terms of the latter, the implications of privacy legislation
have already been discussed above. In addition, employees may have
a legitimate expectation of privacy regarding certain documents that
they create, particularly in terms of email and other e-documents.
Organizations should consider clarifying for employees whether, and
in what circumstances, employees can expect their documents to be
regarded as private.




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12. Creating a Document Retention Program
At the outset, one needs to analyze the organization’s current business
activities in respect of the legislative and regulatory constraints,
contractual and similar obligations and the general operational
environment. That leads to identification of any “gaps” between the
organization’s practices and the obligations which exist. The document
retention and destruction program has to close those gaps at a
minimum.

Many other factors should be taken into consideration when developing
a document retention and destruction program. In addition to the
above legal obligations and other considerations, there are a number
of practical document management considerations. While it is difficult
to set definite parameters for the retention and destruction of records,
it is possible to identify some of the procedural factors that should be
taken into consideration.

In establishing a program, one needs to identify categories of
documents, to ascertain what copies may be in existence and to confi rm
the medium or media in which the copies exist. Organizations should
also consider whether records are the property of the organization or
the property of the employee. Consider also whether privileged and
confidential documents should be identified and separately addressed
at this stage. The following provides further pointers in respect of
developing a document retention and destruction program:

     • Having identified the categories of documents, the documents
       should be catalogued.

     • As part of the cataloguing process, one needs to identify any
       applicable statutory and regulatory retention requirements,
       limitation periods and other considerations identified above. Based
       on the above and other practical considerations, document retention
       periods should then be established. Where no clear guidance is
       provided, some authorities in the United States have suggested
       a three-year retention period. Anecdotal evidence suggests that
       seven years may also be a popular retention period for documents
       that are not subject to specific retention requirements. Where
       there appear to be several possible retention periods applicable to
       the same record or class of records, the prudent course is to select
       the longer period.



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• The program should ensure that the organization can properly
  identify and discharge its obligations to third parties, including
  governments and regulators.

• The record management system must be appropriately staffed
  and the individuals in charge of the document retention system
  given appropriate authority to control the document cataloguing
  process, conduct audits as required and carry out the destruction
  policies.

• The document retention policy should be properly documented,
  published and communicated within the organization.

• Appropriate forms need to be created to allow persons to identify
  documents that ought not to be destroyed or at least not destroyed
  without further notice. A system for notification closer to the date
  of destruction might also be implemented, although that could
  prove to be cumbersome if it includes all documents.

• Procedures and appropriate forms ought to be developed for
  objections to destruction and appropriate decision-making for
  such determinations.

• Commentaries on document destruction repeatedly emphasize
  that documents should be destroyed only in accordance with
  the established destruction policy and procedures and, further,
  that all documents be destroyed on schedule. This is particularly
  important to avoid allegations of selective destruction, should it
  later appear that documents potentially harmful to one’s interests
  have been destroyed. For this same reason, documents should be
  destroyed as a class rather than on an individual basis.

• A policy for auditing the document retention system, both
  scheduled and random, should be implemented.

• Security issues and privacy issues must be addressed.

• For those records that are being retained, some consideration
  should be given to the form in which the documents will or can be
  stored. For example, scanning technology now allows conversion
  of paper documents to electronic or photographic form for storage
  purposes. In some cases, electronic copies or images are considered
  as functionally equivalent to their hard copy counterparts under


                                                Bennett Jones LLP 13
       legislation such as the Electronic Transactions Act (Alberta), the
       Electronic Commerce Act (Ontario) and Part II of PIPEDA. In
       other cases, they are not. It is also important to bear in mind that
       the use of electronic documents as evidence must meet certain
       criteria relating to authenticity and integrity as required by the
       Canada Evidence Act, the Alberta Evidence Act and the Evidence
       Act (Ontario).

     • The record retention policy should be supported with a policy that
        sensitizes employees to acceptable parameters for the creation
        of records. Since part of the battle in managing records lies in
        knowing what records to create in the first place, it is good practice
        for an organization to strive to limit the unnecessary proliferation
        of records beyond those that are required by law or for sound
        corporate or commercial reasons.

Lastly, some observation ought to be made with respect to those
documents that could or may be destroyed almost immediately. For
example, some American attorneys make a practice of destroying all
drafts of documents once a transaction has been concluded. The view is
that such documents are more likely to be harmful than helpful and that
before any prospect of a dispute has arisen, destruction can be safely
pursued. It is certainly true that the proliferation of documentation has
led, in part, to the inordinate amount of time now taken in Canada and
the United States in litigation. A century ago, trials would rarely have
lasted beyond one or two weeks. Now trials can last months or even
years. Subject to the considerations outlined above, there are good
practical reasons for an orderly and prompt destruction of documents
(rather than retention).




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13. Summary – Practical Considerations
The principal considerations are, in short:

  • Document, publish and communicate policy

  • Staff appropriately and give appropriate and sufficient authority

  • Start by categorizing

  • Identify documents that ought not to be destroyed

  • Identify objections to destruction

  • If destroying, notify appropriate authority close to destruction
    date

  • Audit, both on scheduled and random basis

  • Destroy only in accordance with the established destruction policy
    and procedures

  • Establish security and privacy controls

  • Store in appropriate storage medium

  • Play God – control creation




                                                 Bennett Jones LLP 15
Calgary                         Bennett Jones LLP

Stephen D. Burns                Calgary
Associate, Corporate
403.298.3050                    4500 Bankers Hall East
burnss@bennettjones.ca
                                855 2nd Street SW
Heather I. Forester             Calgary Alberta T2P 4K7
Associate, Research             Tel 403.298.3100
403.298.3240                    Fax 403.265.7219
foresterh@bennettjones.ca
                                Toronto
H. Martin Kay, Q.C.
Partner, Litigation, Research   3400 One First Canadian Place
403.298.3180
kaym@bennettjones.ca            PO Box 130
                                Toronto Ontario M5X 1A4
Toronto                         Tel 416.863.1200
                                Fax 416.863.1716
Mary Beth Currie
Partner, Employment
                                Edmonton
416.777.5767
curriemb@bennettjones.ca        1000 ATCO Centre
Sharon Duff y                    10035 105th Street
Associate, Employment           Edmonton Alberta T5J 3T2
416.777.4896                    Tel 780.421.8133
duff ys@bennettjones.ca
                                Fax 780.421.7951
Edmonton
Donald R. Cranston, Q.C.
                                www.bennettjones.ca
Partner, Litigation
780.917.4267
cranstond@bennettjones.ca

Jennifer A. Miller
Partner, Litigation
780.917.4261
millerj@bennettjones.ca



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