Review

In Victoria the Crimes (Document Destruction) Act 2006 creates a new criminal offence of destroying documents that are, or are reasonably likely to be, required as evidence in existing or potential legal proceedings. The new offence extends liability beyond the current common law. Corporations can be potentially criminally liable if a “corporate culture” existed within the organisation that encouraged or tolerated destruction of relevant documents. For a statute that imposes severe criminal penalties, the Act uses a surprising number of vague expressions.

The Act amends the Crimes Act 1958 (Vic) to create a new offence (section 254) of destroying documents. The amendment will take effect on 1 September 2006 unless the Act is proclaimed earlier.

Steps to minimise risk

The introduction of the Act presents an opportune time for corporations to review and update their document retention and destruction policies with the following objectives.

• The policy should ensure that documents are retained for mandatory periods set out in legislation, for such periods as is required to comply with formal information gathering notices (such as a subpoena), contractual obligations or professional rules, and for as long as is required for the actual or prospective litigation.
• The policy should clearly provide that where litigation is commenced, or may be commenced, all documents potentially relevant to the litigation must be retained and all document destruction processes in respect of those documents must be suspended automatically pending the documents being reviewed and legal advice being obtained as to what is to happen to them.
• The policy should be managed and applied consistently across the organisation.
• Compliance with the policy should be regularly monitored and reviewed.
• The policy should be disseminated widely throughout the corporation. Directors, officers and employees should receive information and, where appropriate, training in the practices and processes set out in the policy and, particularly, on the legal obligation to keep documents relevant to actual or prospective litigation or are required for other legal purposes.
• The policy should require business unit managers to notify in-house counsel once there is a real prospect that litigation may arise. This will allow in-house counsel to take steps to preserve documents.
• The policy should provide for clear “do not destroy” notices to be distributed to relevant personnel as soon as there is a real prospect of litigation.
• The policy should emphasise that the corporation’s philosophy is to destroy documents only where this is legally permitted and that if an employee is unsure whether it is proper to destroy a document, he or she should seek advice from in-house counsel.

These steps will assist in establishing that document destruction has occurred in the normal course of business in compliance with the corporation’s objective document retention policies and practices. They also help to establish that the documents were not destroyed for some improper purpose such as the destruction of evidence. Furthermore they assist in establishing a “due diligence” defence under the Act and refuting allegations that the organisation’s corporate culture encouraged or tolerated improper document destruction.

New offence of document destruction

The Act was specifically introduced to overcome what the government perceived as shortcomings in the common law. Thus, the Act sets out to catch a wider range of conduct than currently falls within the common law. The existing common law focuses on the crimes of attempting to pervert the course of justice and criminal contempt of court: British American Tobacco Australia Services Ltd v Cowell (2002) 7 VR 542 (commonly referred to as the McCabe case). The government is especially keen to ensure corporations have the same obligations as individuals.

The Act applies to all types of documents, including emails, and other “things” which can constitute evidence.

Both individuals and companies can be prosecuted. As the offence is criminal, it must be proved by the prosecution beyond a reasonable doubt. If convicted, the penalties are severe: individuals face up to five year’s imprisonment and/or a maximum fine of $62,886, and companies face a maximum fine of $314,430.

Offence applies to proceedings which “may be” commenced

Significantly, for the purposes of the offence, a legal proceeding is defined not only to include a proceeding that is in progress, but also a proceeding that is to be or may be, commenced in the future.

The use of the words “may be” is of concern. The point at which a party is put on notice as to potential proceedings for the purposes of the Act is pushed back in time. Proceedings need not be probable. A real possibility of proceedings, as distinct from a hypothetical possibility, may now be sufficient.

A legal proceeding includes any civil, criminal or mixed proceeding and any inquiry in which evidence is or may be given before any Court or person acting judicially.

The offence for an individual

Under section 254, it is an offence if a person knows that a document is, or is reasonably likely to be required in evidence in a legal proceeding and:

• he or she either:

• he or she acts as described above with the intention of preventing the document from being used in evidence in a legal proceeding.

Corporate criminal responsibility

For the purposes of a proceeding against a corporation for an offence against section 254:

• The relevant conduct engaged in by an associate (officers, employees and agents acting within the scope of their actual or apparent authority) of the corporation must also be attributed to the corporation.
• Knowledge of an associate must also be attributed to the corporation.
• Intention of one of the following must also be attributed to the corporation:

• If an officer of a corporation contravenes section 254, the corporation must be taken to have also contravened the section and proceedings for an offence may be taken against the corporation regardless of whether proceedings are taken against the officer involved and irrespective whether the officer has been found guilty of the offence. Where an officer contravenes section 254 and proceedings for an offence are taken against the corporation on the basis of the officer’s contravention, the corporation has a defence if it proves that it exercised “due diligence” to prevent the contravention by the officer. There is no guidance in section 254 as to what due diligence might involve.
• Authorisation or permission to destroy, conceal etc evidence can be established by proving that:

Corporate culture

A corporate culture is defined to mean an attitude, policy, rule, course of conduct or practice existing within the corporation generally or in the part of the corporation in which the relevant conduct is carried out or the relevant intention formed. In proving a corporate culture existed, the Act states that it will be relevant to take into account:

• whether authority to commit an offence against section 254 or an offence of a similar character had been given by an officer of the corporation; and
• whether the associate of the corporation who carried out the relevant conduct or formed the relevant intention believed on reasonable grounds, or entertained a reasonable expectation, that an officer of the corporation would have authorised or permitted the conduct being carried out with the relevant intention.