Commercial Litigation Lawyers NSW

There is no doubt that cloud technology is changing the way we do business. After a sluggish start throughout 2012 and 2013, businesses around the world are now rapidly adopting cloud-based technologies, primarily for communication purposes. A recent US survey conducted by Microsoft revealed that while 86 percent of small business owners understand the importance of using cloud technology to improve their business processes, only 30 percent are actually “in the cloud”.

So while the adoption rate is rapid, there are still a number of business owners who are hesitant to use the technology because they have concerns about the security risks, costs and accessibility.

Because this is still new and uncharted territory for a lot of people, we’d like to clear up whether you can legally use cloud technology to serve documents online and explore the risks and benefits of cloud technology.

Will my documents get lost in the cloud?

A recent Queensland Supreme Court case, Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltd [2014] QSC 3, demonstrates that there are still a number of risks involved in relying on cloud technology to serve documents in legal proceedings. The Court found that using Dropbox, a large and popular cloud-based file hosting service, was an ineffective way of serving documents, which resulted in the entire adjudication process being set aside.

Facts of the case

The main facts in the case were as follows:

  • Basetec Services Pty Ltd (BS) sent an email to Conveyor & General Engineering (CGE)’s solicitors attaching an adjudication application form and a copy of another email that BS had previously sent to the Authorised Nominating Authority (ANA). This attached email included a Dropbox link to BS’s submission and documents for the adjudication application. A few days later, BS sent a similar email directly to CGE.
  • Both CGE and CGE’s solicitors read the emails and attachments on the same day they received them but failed to click on the Dropbox link and access the other documents until well over a week later.
  • Upon finally accessing the other documents, CGE reacted and sought to make submissions to the adjudicator challenging service. The adjudicator found that he could not consider CGE’s submissions regarding service because they were too late under legislative timeframes. The adjudicator proceeded to judgment and made an award in favour of BS.
  • CGE applied to the Supreme Court to set aside the adjudication decision on the ground that CGE was denied the opportunity to provide a proper response because the adjudicator started the timer on the day CGE received the email instead of the day they actually clicked the Dropbox link to access the documents.
  • The Court had to consider whether BS’s email, inclusive of the Dropbox link, constituted valid service. The Court ultimately held that section 11 of the Electronic Transactions (Queensland) Act 2001 (ETA) did not allow for serving the adjudication application using Dropbox. Specifically, the Court stated that the files saved on Dropbox did not form part of the actual electronic communication as defined. Furthermore, section 11 of the ETA also stated that both parties must agree to electronic service, and there was no such agreement in place.

Head in the Clouds: The Pros and Cons of Cloud Technology

Cost, value and accessibility are often cited as the primary ‘pros’ of cloud technology. Cloud-based technology involves significantly less outlay than equipping an office with an email server, IT system and other software and licensing needs and the information can be accessed from anywhere (not just in the office location). The ‘cons’ involve the potential for data to be hacked online and other general security concerns around the potential for unauthorised or fraudulent access to personal information.

For the most part, it appears that the benefits outweigh the risks. For example, the program, Dropbox (referred to in the Queensland case) is used by businesses all over the world to store and share files that are too large for email. It represents a versatile, efficient and cost-effective form of communication. To use the service, a business owner simply saves a file in Dropbox, receives a link to that file on Dropbox and sends that link on to another party in an email. The recipient then clicks on the link and downloads the file.

The benefits of services such as DropBox and Google Docs are clear they represent a low cost method of saving, sharing and accessing documents which are immune to physical factors such as floods and fires and include multiple layers of backup and protection. As far as service of legal documents are concerned, however, unless you have an agreement in place to cover service of legal documents by DropBox or a similar technology, we recommend that you refrain from using cloud technology to serve legal documents on third parties.

This does not mean you should refrain from using electronic communication in a business and legal context; it just means you shouldn’t rely on cloud technology to serve documents legally.

Considerations for Business Owners

  1. To err on the side of caution, you should still deliver a hard copy version, in addition to an electronic copy.
  2. If you plan to use cloud technology in a business or legal context, ensure you have provisions in your agreements that specifically address this. Both parties need to consent to this form of communication. In these provisions it is also recommended that you actually name the service, i.e. ‘Dropbox’, as opposed to simply stating ‘cloud technology’.
  3. For now, avoid using cloud technology for service altogether until the laws are clearer.
  4. When serving any legal document, always seek proper advice beforehand about what type of communication is valid in that particular jurisdiction, especially when dealing with international matters and litigants. For example, in some jurisdictions, it is legal to serve a document by sending it as an attachment to a Facebook message.

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