Legal development

From Bytes to Backfire: The Perils of Digital Communication

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    This article was written by partner Michael Weatherley and senior associate Julian Lim and was first published in the October – December 2023 issue of Corporate Disputes Magazine.

    Online forms of communication are now ubiquitous in a digitalised world. The widespread adoption of smartphones, high-speed internet and cloud computing has facilitated seamless connectivity and access to information, changing the way in which we live, work and do business.

    The coronavirus (COVID-19) pandemic also moved much of the world online as employers and employees adopted work from home measures, accelerating the trend of companies conducting more of their business virtually. It is therefore unsurprising that an increasing number of communications are being handled by business organisations through a wide variety of digital communication channels such as WhatsApp, Microsoft Teams, and Skype for Business. This has allowed business organisations to communicate more quickly and efficiently.

    At the same time, however, the availability and increased use of instantaneous means of communication, and the informality of many of the channels used, has inevitably led to an increase in the volume of communications recorded digitally and, in many cases, a decrease in the level of care taken in those communications, even in the context of very significant business transactions.

    That might not matter 99 percent of the time. However, companies cannot forget about the 1 percent of instances when a business transaction goes sour, when there is a clash between contractual counterparties or when parties need to bring formal legal proceedings to enforce their rights. Businesspeople very often communicate without appreciation of that 1 percent, and without awareness that what they write online will often form the most fertile source of evidence in any legal proceedings.

    This article explores how the use of digital communications can have unintended yet significant legal consequences in a commercial dispute context and highlights the importance of taking steps within organisations to ensure that these tools and platforms can be used effectively and in a manner which minimises risk.

    In a disputes context, most of your digital communications are fair game

    As the majority of commercial communications are conducted electronically, it is expected that the body of relevant and material documents to commercial disputes will exist substantially, or even entirely, in the form of electronically stored information.

    It is presumed in most arbitration and litigation proceedings that a search for electronic documents would be conducted to identify documents relevant to the issues in dispute. For example, the International Bar Association (IBA) Rules on Taking of Evidence in International Commercial Arbitration, which are frequently adopted as guidelines in most arbitrations, expressly empower arbitral tribunals to order parties to search for and produce electronic documents. Likewise, in litigation proceedings across many jurisdictions, there is a duty on parties to identify, preserve, collect, filter, review and disclose electronic documents.

    That is not limited to emails. Everything recorded electronically is potentially fair game including all types of messaging, such as text, WhatsApp and Microsoft Teams, among others, and all electronic notetaking, whether on Apple Notes, voice memos or Microsoft OneNote. Even disappearing messaging systems could leave a digital trail that may become disclosable in any formal legal proceedings.

    Digital communications can have unintended yet significant legal consequences

    In that context, great care clearly needs to be taken with digital business communications. In our experience, however, the instantaneous and informal nature of modern digital communications often means users are less thoughtful in their correspondence – both in terms of when written communication rather oral communication is appropriate, and the content of those written communications. The brevity of online communications can obfuscate meaning or increase the risk of misinterpretation and misunderstanding. Abrupt text or emoji-based conversations often lack the nuances of oral communication.

    In the recent Canadian case of South West Terminal Ltd v. Achter Land & Cattle Ltd, a farmer received a photo of the contract that was accompanied by the text message: “Please confirm flax contract”. The Canadian court ruled that the farmer’s response to the text message with a ‘thumbs up’ emoji constituted acceptance of the contract, and ordered the farmer to pay over C$82,000 in damages for failing to deliver the crop after accepting the contract.

    The farmer argued that his use of the ‘thumbs-up’ emoji merely indicated the receipt of the flax contract, rather than his acceptance of the outlined terms. The court rejected this argument given that parties’ subjective intentions are irrelevant to determining the validity of a contract, and a reasonable bystander appraised of all the relevant facts would come to the objective understanding that the parties had reached an agreement on the contract.

    Another issue is the well-documented ‘online disinhibition effect’ where people feel less-restrained and more open to self-expression in digital communications than they would in face-to-face communications. This is particularly pronounced over certain messaging platforms, which are often (mistakenly) perceived as entirely ‘private’. In our experience, on a recent $100m arbitration, a party was able to benefit from WhatsApp messages sent by its counterparty’s business director, which contradicted that counterparty’s position expressed in meetings and formal correspondence. These messages formed a critical piece of evidence that helped the party disprove its counterparty’s case and, in the process, allowed the party to secure a favourable arbitration award.

    Tips for businesses on navigating digital communication pitfalls

    These types of cases serve as a timely reminder that all forms of digital communication, including text messages comprising of emojis, can have significant legal consequences. So how do you guard against the pitfalls involved? 

    Detailed policies and procedures about appropriate use of digital platforms are a must but can only move the dial so far. Business teams really need to be equipped with an understanding, at least at a basic level, of how their communications might be used in subsequent legal proceedings involving the company and what, at a practical level, they should and should not be doing to preserve the company’s rights.

    Annual or bi-annual training led by in-house or external legal teams is often a good starting point. This need not and should not be overly detailed or time consuming. It can be as simple as: (i) reminding business teams that any documents created in the course of their work are potentially disclosable in a dispute context, while at the same time encouraging robust record-keeping in compliance with their legal obligations and with a view to supporting their version of events should the matter escalate to a dispute; (ii) encouraging business teams to consider whether it would be more helpful to communicate over a phone call or meeting in the first instance before following up in writing to avoid any misunderstanding; (iii) ensuring that business teams have a basic understanding of the concept of privilege and what steps can be taken to ensure their communications benefit from it; (iv) reminding business teams to consult in-house lawyers or external counsel if they are in doubt about the content of their communications, and certainly when they feel that an issue or matter may be turning contentious; and (v) providing case studies to sharpen minds as to the potential consequences of getting it wrong.

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.


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