law firm blog post

A solicitor or law practice may destroy client documents after a period of 7 years has elapsed since the completion or termination of the engagement, except where there are client instructions or legislation to the contrary.[1]

Another information management challenge for law firms is in compliance, where a conflict emerges in the interplay between a firm’s aversion to having claims made against it for destroying client documents, general retention and destruction requirements, and the cost of ongoing document storage.

The strategy employed by many law firms in Australia is to simply keep everything. This eliminates the risk of documents being unavailable for future cases, and of a client (should they wish to take custody of the documents created for their case and which are therefore legally their property) launching a malpractice claim. The problem with the practice of “infinite retention”, however, is that it costs shelf space and is generally correlated with highly chaotic indexing.

Not only does this have obvious implications for the discovery process and recovery rates, but for compliance with the Privacy Act. Where it may have once been optional to discard client documents that had no primary purpose, failure to do so can now constitute a legal violation.

And yet, to ensure this compliance, firms are faced with having to spend a vast amount of money on audit, which can realistically take years. The time- and money-consuming task of going through the archives would require a financial investment equivalent to the cost of decades of static storage.

Minimal as they are, however, storage costs can still reach unacceptable levels. Author Paul Wilkinson cites the 2004 example of Arup, a multi-disciplinary consultancy that, over 70 years of project work, “had accumulated more than 100,000 archive boxes,”[2] much of which was likely no longer legally relevant nor of any historical interest. If the company was storing their boxes in-house, they would have been paying for it through poorly optimised real estate. If they were using a third-party storage solution, they would have been committed to an unnecessarily large storage contract.

Firms that are already using digital systems can also suffer from these problems. The practically infinite storage capacity of cloud-based systems has the potential to encourage an “out of sight, out of mind” approach to information management, which preserves the infinite retention paradigm of paper archives without the conspicuous use of floor space. Without space restraints, information is more likely to be over-collected, redundantly duplicated, and poorly indexed – all of which can make it difficult to set up proper lifecycles for documents.

Neglecting sentencing schedules for digital information also unnecessarily elevates liability in the event of a breach. According to a Ponemon Institute study released in 2016, the average cost to a company per record breached is AU$142.[3] This amount merely represents the direct cost of resolving the breach and indirect cost of customer churn – it does not include the cost of dealing with any resulting legal action. Because of their duty of confidence to their clients, law firms that redundantly retain electronic information are courting reputational disaster along with serious financial consequences.

Engaging a good third-party information management solution immediately simplifies compliance by making documents easier to find. These companies are conscious of the evolving legislative environment and can keep track of stored information over time, setting up retention and sentencing schedules that ensure destruction occurs when documents reach the end of their lifespan. They can also assist with proof of compliance by providing certificates of destruction. Even when documents must be retained beyond their strict period of usefulness, transforming from a paper-reliant firm into highly digital business reduces or entirely eliminates the inefficiencies associated with hard copies. Company archives can be audited for content, then digitised using existing indexing systems for rapid searching and retrieval, and easy removal of over-collected or duplicate content. Alternatively, paper documents can simply be directly indexed, stored until they are needed, and then directly delivered or scanned.

Having an information management partner paying close attention to sentencing schedules means that documents are less likely to occupy costly shelf space, allowing for a dramatic reduction in information storage overheads. Healthy sentencing schedules also help ensure all of a firm’s records comply with the Privacy Act and other relevant legislation without significantly driving up costs. With greater compliance also comes less exposure to risk in the event of a security breach, with potential savings in the millions of dollars.

Find out more in Grace’s FREE in-depth information management report for government agencies – available exclusively at www.grace.com.au/information/legal

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[1] Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015
[http://www.legislation.nsw.gov.au/~/view/regulation/2015/244/part2/divrelationsw/rule.14]

[2] Wilkinson, P., Construction Collaboration Technologies: The Extranet Evolution, Taylor & Francis, Oxford, United Kingdom (2005) p. 122.

[3] Ponemon Institute, 2016 Cost of Data Breach Study: Australia, p. 1.