Document Destruction May Result in Defence Strike Out

United Kingdom

Particular care should be taken in the creation and implementation of document retention and destruction policies in the light of the first instance decision of the Supreme Court of Victoria in Australia of McCabe v British American Tobacco Australia Services Limited [2002] VSC 73. This decision to strike out the Defence, which is currently under appeal, suggests that if you operate in a litigious industry, against a general background of litigation, 'anticipation' may extend beyond notification of a potential case and you may be criticised for destroying documents at any time. Genuine commercial reasons may exist to destroy documents on a 'good housekeeping' basis, however, this case also suggests that there may never be a 'good housekeeping' reason for the destruction of electronically stored data.

Facts of the case

The Plaintiff was seriously ill with lung cancer and brought a personal injury claim against British American Tobacco. The hearing was expedited due to the ill health of the Plaintiff. Because of non-disclosure the Plaintiff requested the strike out of the Defence, as she argued that the defence documents were clearly relevant to what was known by the Defendant at the time.

This case thus revolved around the Defendant’s document retention policy and in particular, destruction of documents by the Defendant. This appeared to have occurred in a period when no litigation was actually proceeding against it. The issues of the intention lying behind the policy and when litigation can be properly anticipated were key to the case.

The Plaintiff contended that the Defendant had followed a strategy designed to deny the Plaintiff access. The strategy employed in Australia was overseen by Australian, British and American lawyers employed or engaged by BAT. The Plaintiff alleged the strategy was to declare the documents in the public domain and to destroy or hide the existence of others. The Defendant denied the allegations, and, whilst admitting destruction took place, said this was pursuant to an appropriate document management policy and occurred at a time when no litigation was before the Court or anticipated.

In considering the matter Eames J looked in detail at the document retention policy.

In drawing up the policies, the Judge noted that the Defendant was assisted by “an army of litigation lawyers, from several countries, and being both retained private practitioners and in-house lawyers”. Various document retention policies were advised on and drafted for the Defendant. The first such document retention policy was dated 1985 and this was reviewed between 1990 and 1992. For several years due to ongoing litigation there were holding orders in place and the policies were not implemented. However, when the holding orders were lifted document shredding began.

It is therefore essential to look at the two main factors in deciding this case, which were:

1. The intention behind document retention policies; and
2. When litigation can properly be anticipated.

Also relevant was the waiver of legal privilege, which allowed detailed legal advice in respect of the policies to be reviewed by the Judge.

Intention

It was held that the 1985 document retention policy did have some "quite legitimate" management and administrative purposes and benefits, but that the "primary purpose" of the development of the new policy in 1985 and subsequent revisions was to provide "a means of destroying damaging documents under the cover of an apparently innocent housekeeping arrangement".

The motivation behind the policies' destruction of documents was stated by the Defendant to be threefold: cost efficiency, litigation support and sabotage prevention. However, the disclosure of advices from various lawyers were reviewed by the Court and the underlying primary intention was found to be to get rid of the documents and then to claim an innocent intention.

The review of the document retention policy from 1990 to 1992 further implicated both lawyers and the Defendant. Notes of a conference held on 2 April 1990 were recorded, which stated:

"Keep all research documents which become part of public domain and discover them."

"As to other documents, get rid of them, and let other side rely on verbal evidence of people who used to handle such documents."

In addition to this another hand written note stated "to shred all documents in aust more than 5 years old (docs will still be available offshore, though)".

This was particularly damning as, in conjunction with the fact that copies of shredded documents held offshore were not disclosed, this suggested that a policy was occurring of warehousing of documents so as to put them beyond reach for discovery but yet have them available if called upon by the defence.

The Court also found that in the light of these and similar documents, little evidence should be attached to self-serving statements contained in the document retention policy.

Advice given by the Defendant’s Australian solicitors was that, provided it was asserted that the intention behind the document retention policy was not the destruction of materials for the purpose of suppressing evidence and that it had other purposes, the Defendant would be able to destroy documents and the only likely consequence would be the drawing of adverse inferences in later proceedings.

The Judge took particular note of the critical role played by lawyers in the development of the policies: “Overwhelmingly, it was a policy designed by and implemented by lawyers, being driven by considerations relevant to future litigation”.

Anticipated Litigation

A lawyer’s note in 1985 wrote of an anticipated “wave of litigation”. However, once the hold order in respect of earlier proceedings, which had been discontinued, was lifted and advice had been received from lawyers, the destruction of documents under the document retention policy began. Advice was given that it would be “commercially unrealistic” for the law to require that a company could never destroy its own documents, and the definition of “anticipated litigation” referred to some identifiable piece of litigation of which they had actual knowledge. The Defendant stated that it had no such information. (However, in oral evidence it became clear that a letter threatening action had already been received at this stage). The Judge stated that, in his opinion, the reality of the situation was that at all times those that took the decisions about the implementation of the policy regarded future proceedings to be not merely likely, but to be a “near certainty”. He found that it was this certainty which meant that any opportunity to destroy documents which arose by virtue of the elimination of current proceedings was to be “seized upon”.

“Far from it being the case that the programme of destruction of documents was undertaken from 6 March 1998 in anticipation that all litigation had concluded, in my opinion, it was conducted in anticipation that further litigation would soon arise.”

It was found that there was “an urgency in the task” and that a “window of opportunity” had been perceived, when the destruction of documents could take place.

It was noted particularly by the Judge that the destruction had included CD Roms, containing lists of the contents of the destroyed documents. He concluded that all of this, together with the advices of the lawyers showed there was a deliberate tactic to hide information.

Privilege

Since the Plaintiff was seriously ill, the Judge agreed the trial date could be expedited and set a date to resolve outstanding issues with respect to discovery and admissibility of documents, prior to the jury being empanelled. The Plaintiff indicated she wished to seek strike out at this hearing, listing documents which had apparently been located in depositories located in the USA. The Defendant, in its Affidavits, referred to other documents and tendered two letters of advice from firms of solicitors. The Judge then ruled that the Defendant had waived privilege as to the legal advice received by it from 1998 concerning the handling and destruction of documents. As a result, many letters and memoranda of advice from several firms of solicitors became exhibits on the application.

It is interesting to speculate whether a different result would have occurred had privilege not been waived and these documents had remained inadmissible. However, even if privilege had not been held to have been waived, in Australia, legal privilege may still be lost where the public interest in the preservation of the fundamental processes of justice demands that the privilege give away.

It was also alleged, that the Defendants’ strategy in envisaging an innocent motive for the policy, also contemplated the inappropriate application of privilege to many documents which had not been destroyed. External Australian lawyers had advised on the enhancement and expansion of claims of legal privilege in the context of the policy.

In his Judgment, the Judge commented that the notion of anticipated proceedings is well recognised in the laws of privilege. The question is whether, viewed objectively, litigation can be said to have been reasonably anticipated at the time when the document came into existence. He was of the view that similar principles should apply with respect to discovery. Since the rationale for legal professional privilege is that it promotes the public interest in that it facilitates the administration of justice by ensuring that a client’s full and frank disclosure to his solicitor. If he is to gain that protection when proceedings are merely apprehended then a decision not to make a full and frank acknowledgement to the Court as to relevant issues which occurred when proceedings were contemplated (and to do so for the purposes of denying a fair trial to the litigant) and at a time when the client was in receipt of legal advice, might be thought to also reasonably attract sanctions by reference to public policy considerations.

Fair trial

It was held that there was no doubt that prejudice had been caused to the Plaintiff by the destruction of these documents. The tactics adopted by the Defendant, including its deliberate obliteration of any records of what documents it had destroyed over the years, prevented there from being any certainty as to the current position and the extent of the prejudice therein.

However, the Court found that the problems were not insurmountable for the Plaintiff in that she could obtain copies of some missing documents from other sources (although these would be unlikely to contain handwritten comments or memos). Also, some benefit may be achieved, in that in addition to these copies she would still be entitled to ask the jury to draw an adverse inference from the fact of the destruction of the Defendant’s copy. Nevertheless, the real difficulty was that the Plaintiff could not know if internal research was conducted and reported on but had been destroyed without any record of its existence. Furthermore, the prejudice to the Plaintiff might be immense by virtue of the deliberate destruction of just one document, which might have been decisive in the case.

The Defendant submitted that there was no authority for the fact that a company is not entitled to destroy documents when there are no proceedings on foot against it, also that in an adversarial system there was no general obligation to “help” an opponent. In response to this, the Judge held that the civil litigation system is not only an adversarial process, but is a process governed by rules which the Judges must administer. Courts should seek to ensure a fair trial, conducted with reference to all relevant documents, which must be the guiding consideration when confronted by a party which has destroyed documents with the purpose of denying a fair trial. Eames J, having concluded that the Defendant’s actions caused prejudice to the Plaintiff and denied her a fair trial, concluded that this could only be corrected by striking out the Defence, the consideration of adverse inference being drawn already having been taken into account by the Defendant in the implementation of its policy.

It was found that the process of discovery of documents was central to the conduct of a fair trial in civil litigation and that in this instance the process of discovery was subverted by both the Defendant and its legal advisers, with the deliberate intention of denying a fair trial to the Plaintiff.

Conclusion

There is nothing improper in advising a client against creating new documents which would be embarrassing to disclose in proceedings. Nor, should a company have to preserve all documents ad infinitem. However, this decision, which is currently under appeal, suggests that if you operate in a litigious industry, against a general background of litigation, ‘anticipation’ may extend beyond specific notification of a potential case and you may be criticised for destroying documents at any time. Genuine commercial reasons may exist to destroy documents on a good house-keeping basis but any retention and destruction policy should be reviewed in the light of this case. It also suggests that if destruction takes place a record should be maintained of what was destroyed and that there may never be a ‘good house-keeping’ reason for the destruction of electronically stored data.

For further information, please contact Zelda Pickup at zelda.pickup@cms-cmck.com or on +44(0)20 7367 2043 or contact Jessica Burt at jessica.burt@cms-cmck.com or on +44(0)20 7367 3589.