Put Your House in Order (Part II) – Keep Your Records Straight
Often the steps taken prior to litigation commencing, or even disputes arising, can assist in mitigating potential damages.
Preservation, contemporaneous recording, and organization of records is not only important during the litigation process but is an integral part of any strategy to successfully defend all possible claims and minimize overall liability.
How documentation is preserved and organized is partially dependent on what type of claims may be expected arising from a dispute. Regardless of the dispute, the importance of contemporaneous record keeping cannot be stressed enough.
Construction projects can come with a litany of potential issues, including delays, defaults, deficiencies, and disputes. Besides the necessity of adhering to contract requirements, it is essential that these issues are papered contemporaneously when they are occurring.
The key component to a successful claim (or defence of a claim) is strong documentary evidence taken during the period during which these issues were occurring. For termination of a contractor or subcontractor, for example, the various defaults, responses, notices, correspondence, reports, and essentially all indicators that termination was warranted will need to be preserved.
Recording and preserving evidence in real time is not only advantageous, but necessary.
In Alberta, a trial of a claim may not occur until several years after the litigation commences. By that point in time, memories have faded, employees and contractors may have moved on, and the task of gathering evidence to prove (or defend) claims becomes much more difficult.
Without documentation, there is a risk that you are unable to fully support (or defend) a claim and leave yourself open to being offside contractual requirements. Your record keeping and document management system should also clearly set out the contractually required timelines for notices, responses, and other communications for each project.
Categories of Documents
The following is a list of the types of documents that should be categorized, recorded, and organized on all construction projects.
- All pre-contract documents, including quotes, estimates, and plans.
- All contract documents, including change orders, change requests, RFIs, and other indicia that have the possibility of impacting your scope of work or the price of the contract.
- Emails and other forms of internal communication. If these are not automatically saved to an appropriate folder or file for each project or sub-task within a project, this could create substantial additional work in organizing and collecting these records at a later date.
- Minutes and notes from site meetings, meetings between parties, and notes from calls. Anytime there is something project related that is discussed over the phone or in person with an owner, contractor, supplier, or subcontractor, those discussions should be memorialized in some fashion immediately after the meeting or call. This could be in a memo to file, an email, or some other form of written documentation. Your notes or memo should circulated to the other parties who were in attendance that same day to help create an objective documentary record;
- Invoices, purchase orders, and other documentation demonstrating hard costs that have been incurred.
- All schedules including original and updated schedules, including emails or other correspondence that reference, modify, or update existing schedules.
- Direct and indirect costs on a project, such as equipment, financing, overhead or loss of opportunity/disruption to other projects.
- All reporting, whether it be a third party report on progress, internal reporting, or monthly status reports.
- Photographs of conditions, work, or progress.
Not only is the preservation of these documents essential in case of litigation, but it can provide useful ammunition to try to resolve a dispute in advance of a complex litigation scenario. Knowing the types of documents that are important to preserve (and file/organize throughout a project) will provide you cost savings during the document production stage.
General tips on reducing risk BEFORE litigation arises:
- Records keeping processes/naming conventions should be utilized – there should be a clear policy for how information is collected/stored, used, and disclosed.
- Processes should indicate how records are saved and stored (paper, electronic).
- Identify problem areas early and often.
- Record keeping and creation of records should be done contemporaneously with events.
- Record organization should be contemplated and implemented at the start of every project – not when litigation is imminent.
- Implement dispute resolution processes that reduce exposure and serve as alternatives to litigation – i.e. draft and review your contracts with this in mind.
- Ensure that you have a handle on notice periods – this includes contractual notices, as well as statutory limitations (i.e. filing a claim, registering a lien).
- Ensure you have a system in place to identify, classify, and store privileged records.