Legal Research

Beware the Common Law Duty to Retain a Record

By Dan Michaluk

Last weekend I finally got down to perusing David Wotherspoon and Alex Cameron’s Electronic Evidence and E-Discovery, recently published by LexisNexis. It looks like a great book, but thanks to David and Alex I’m just writing to pass on some useful case citations that deal with the extent to which a court will examine the reasonableness of a record retention rule.

First, in Ontario v. Johnson Controls Ltd., 2002 CanLII 14053 (ON S.C.), Cameron J. of the Ontario Superior Court of Justice said:

There is no evidence of any document retention or destruction policy. A policy with a short retention period might offer some justification to dispose of “smoking guns” and other prejudicial evidence. Any such policy that permits destruction within much less than ten years after an event probably fails to take reasonable account of the standard six year limitation period under the Limitations Act for actions in tort or contract, plus some period to allow for a discoverability period, which allows for discovery of the damage and those responsible prior to the commencement of the limitation period. A short retention period would also ignore the extended period under s. 8 of the [Negligence Act].

Cameron J. made this comment in response to a laches/delay argument brought by a custodian who was caught empty handed in light of the delay. In this context it makes sense: when a party seeks a special remedy based on a loss of evidence once in its custody or control, why not probe at the reason for loss?

So this special context limits the weight of Johnson Controls, but Cameron J. later made a very similar statement in assessing a cause case asserted by an employer who had disposed of employment-related records sometime after the relevant statutory retention period had expired but before the plaintiff signaled its intention to sue. In Alvi v. YM Inc. (Sales) (c.o.b. Stitches), [2003] O.J. No. 3467 (S.C.J.), he said:

I am left with some question as to why Mr. Alvi’s employment records and payroll records prior to December 15, 1995 were not produced. Counsel for YM advised that they cannot be found. The Employment Standards Act (“ESA”) s. 16, requires retention of employment records for only three years after the employee ceases to be employed by the employer. Notwithstanding this provision, a properly run company should have a documents retention policy requiring retention of files for a reasonable period extending beyond the limitation period for civil cause of action in contract or tort and the limitation period for a reassessment under the Income Tax Act. Failure to do so risks a court making an adverse inference on the absence of evidence.

Both statements I’ve quoted above are pretty radical, but should be understood as made in response to apparently poor record-keeping practices. Had either custodian facing Cameron J. destroyed records pursuant to a short retention rule that complied with applicable statutory minima, Cameron J. might have had a better evidentiary basis for drawing conclusions about retention rules, limitation periods and reasonableness. In short, he had no manifestation of business judgment to judge.

Still, Johnson Controls and Alvi are reminiscent of Lewy v. Remington Arms, 836 F.2d 1104 (8 Cir. 1988), a well-known American case that invites a kind of common law duty to retain records even in advance of anticipated litigation. Lewy is about a firearm manufacturer?s policy of destroying complaints and gun examination reports after three years from the date of their creation. This policy was challenged in a suit brought by a woman who was shot after the manufacturer?s firearm accidentally discharged. In dealing with these two kinds of records that are bound to raise questions about manufacturer due diligence, the Court suggested that records which, by their very nature, are likely to be relevant to future litigation should be retained so not to deprive a party from obtaining evidence.

The same duty has not been clearly recognized in Canada, but Johnson Controls and Alvi suggest that a right-thinking Canadian judge would not hesitate to impose consequences for an unreasonably short retention rule. Beware the common law duty to retain a record.

Full post as published by Slaw.ca on June 02, 2010 (boomark / email).