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Paper Trail What documents should a business keep? |
In a well-publicised court case, a tobacco company was told by the judge that its destruction of documents had made a fair trial impossible. The judge's decision against the company was overturned on appeal, but it alerted the business world to be very careful about its obligations for document retention. |
All businesses are governed by strict rules for retention of financial records for taxation purposes, and some have particular legal requirements or codes of conduct that determine how long they have to keep other documents. Beyond this, before destroying any document a business should assess whether it could be required for any possible future litigation and whether its destruction could lead a court to draw an adverse inference. |
Some businesses are more liable to face litigation than others. A business should consider the relevant statutory limitation period. If you are a manufacturer, establish the life expectancy of a product, determining how late a personal injury could occur, then add the appropriate limitation period, with a couple of additional years for unforeseeable events. Keep documents for that length of time. |
Statutory limitation periods are only a guide. Some documents should be held longer. For instance, the Australian Standard on document retention recommends that documents of simple contracts should be kept for at least seven years from the date the contract terminates. Only if no notice for breach of contract is served within the seven years should records be destroyed. If there is a dispute, records should be retained for a further seven years beyond settlement, or longer if a judgment is necessary to settle the dispute. Similarly, documents about the design, development, or materials in goods manufactured for sale, should be retained. |
Any destruction of records will 'look better' should a business become involved in litigation, if it results from a consistent policy rather than ad hoc decisions. |
david.palmer@cmlawyers.com.au
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