The demise of the daybook and keeping records

To see the article as it appears in The Baltic, please click here. The article can be found on page 116:

One aspect of handling claims for ITIC is that you get to read a fair number of transcripts from arbitrations. A common exchange goes something like this:

Barrister: …..and you recorded this conversation in your daybook?

Broker giving evidence: no

Barrister: …………do you keep a daybook?

Broker:  not really……….just a diary.

The Baltic Code provides that a day book “should always be used by brokers”. This is a quotation that the barrister will put to our broker in the witness box as evidence of his professional shortcomings.

The reality is, however, that the broker’s response that he doesn’t keep a daybook appears to reflect the modern practice of many brokers. This is not an attack on a perceived failing by newcomers to fixing. A great many senior brokers do not keep a day book in the traditional manner. To draw a negative inference from the lack of such a book has become unfair in respect of many established professional brokers.

It is important that brokers maintain proper records to safeguard their position. Cases can turn on such records. A few years ago ITIC was involved in a trial in which the judge was faced with two brokers who had a very different recollection of a telephone conversation. The judge commented that both had struck him as giving their honest recollection but one of the brokers had a contemporaneous note so his evidence would be preferred. There is much to be said for the traditional approach. Legible, timed and dated entries can be invaluable in reconstructing events. It is just that these days the evidence is unlikely to be found in the pages of a notebook

When there are handwritten notes of conversations these are more often made directly on to copies of emails containing the relevant offer or counter to which the note refers.

The way business is conducted has developed and a large number of fixtures are, at least in part, negotiated via MSN exchanges. Often the fixture negotiation can be seen from a combination of MSN exchanges and e mails. These are of course direct evidence of the exchanges rather than a person’s note of what they think they said. Making sure these are retained has become vital in the event of a dispute.

A central feature of English proceedings whether arbitration or litigation is the obligation of Disclosure. In essence the parties will be required to disclose to each other all documents that bear any relevance to the issues in dispute. It is not open to the parties to pick and choose – they have to include both the documents which assist their case, but also those documents to their detriment. The concept of a document is not limited to something printed but also includes something stored electronically.

In the past few months ITIC has seen a number of cases where electronic records have been inadvertently lost. One company found that the messages had only been stored on the broker’s individual PC. When the broker had changed desks the company’s IT department had simply wiped the machine. In another case the company had lost all messages when the company moved offices and changed computers.  Obviously records should be archived centrally and preserved.

In both cases the brokers had received requests for their “files” and had received aggressive messages from the parties’ lawyers alleging that the disclosure made was incomplete. Obviously you can not produce what no longer exists but clearly the broker is vulnerable to suggestions that their failure is convenient.

In Earles v Barclays Bank the position in relation to litigation was summarised as being that before proceedings are commenced there is a duty not to destroy documents deliberately, but no duty to preserve documents, whereas after the proceedings have been commenced documents must be preserved. If they are not preserved, adverse inferences may be drawn.The obligations of brokers are likely to be more extensive. Agency law imposes a duty to keep records of transactions done on behalf a principal.
 
ITIC is often asked how long charterparty documentation should be kept. There is no absolutely correct answer. A common retention policy for those subject to English law is not to destroy documentation until seven years from the completion of a transaction. The rationale for this policy is that the standard limitation period for actions in contract and tort is six years from the date on which the cause of action arose. A claim form must be issued within that time for it to be valid. It may not, however, be served until after the limitation period has expired and it is for this reason that the extra year gives a safety margin.