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Torts - Spoliation. SS&C Technologies Canada Corp. v. The Bank of New York Mellon Corporation
In SS&C Technologies Canada Corp. v. The Bank of New York Mellon Corporation (Ont CA, 2024) the Ontario Court of Appeal dismissed a contractual appeal, and here considers the evidentiary doctrine of spoliation as it may form the basis of a spoliation tort:(ii) Spoliation and Adverse Inference
[154] SS&C asserted a claim of spoliation regarding the missing usage data. Spoliation is a common law doctrine, which finds its origins in the legal system of ancient Rome. It was first developed in Canada in 1896 by the Supreme Court in St. Louis v. The Queen, 1896 CanLII 65 (SCC), [1896] 25 S.C.R. 649, and has not changed much in the past 128 years: Gideon Christian, “A ‘Century’ Overdue: Revisiting the Doctrine of Spoliation in the Age of Electronic Documents” (2022) 59:4 Alta. L. Rev. 901. It is an evidentiary rule that allows the court to remedy abuses of its process, although whether it is also a free-standing tort claim remains unresolved: Trillium Power Wind Corporation v. Ontario, 2023 ONCA 412, 167 O.R. (3d) 321, at paras. 21-22, 24, leave to appeal refused, [2023] S.C.C.A. No. 363.
[155] In St. Louis, the court found that the doctrine creates a rebuttable presumption that evidence destroyed would have been unfavourable to the party who destroyed it: at pp. 652-665. More recently, the constituent elements of spoliation have been described as follows: “to prove spoliation, a party must prove: (i) that relevant evidence was destroyed; (ii) that legal proceedings existed or were pending; and (iii) that the destruction was an intentional act indicative of fraud or intent to suppress the truth”: Stamatopoulos v. The Regional Municipality of Durham, 2019 ONSC 603, 85 M.P.L.R. (5th) 31, at para. 606, aff’d, 2022 ONCA 179, 26 M.P.L.R. (6th) 1, leave to appeal refused, [2022] S.C.C.A. No. 12. Thus, the unintentional destruction of documents is not spoliation, although it may still attract sanctions or remedies: Christian, at p. 912; McDougall v. Black & Decker Canada Inc., 2008 ABCA 353, 302 D.L.R. (4th) 661, at paras. 24-25.
[156] Intent has two elements. It is not enough that the destruction of the document be proven to be intentional. In addition, the claimant must also prove “a mala fides desire to prevent the use of the document in litigation, to suppress the truth, and hence impact the outcome of the litigation”: Christian, at pp. 911-12.
[157] An important factor relevant to the issues of intent and whether litigation is contemplated, is whether a party is served with a preservation notice. Such a notice demands that the served party preserve documentation relevant to active litigation or anticipated litigation. In the present case, counsel for SS&C, Chris Paliare, wrote to senior executives of BNY asserting his client’s position regarding the anticipated litigation. In that letter, Mr. Paliare stated “We trust that you will ensure preservation of all communications, documents, and files related in any way to BNY’s relationship with SS&C and BNY’s provision or sharing of Data to any third-parties.” This was a sensible approach because it removed any doubt that BNY understood that it had an obligation to preserve relevant documents.
[158] BNY’s then counsel, a lawyer then at McCarthy Tétrault (who did not appear on this appeal), responded to Mr. Paliare’s letter. He stated that “SS&C’s management has also known that CIBC Mellon has been by far the largest user of the Data. In fact, the usage by the other Mellon Trust business lines over the years was such that, but for CIBC Mellon’s need for the Data, the Agreement would never have been signed…In sum, BNY Mellon categorically denies that a breach of the Agreement has occurred. Accordingly, BNY Mellon declines to accede to the demands set forth in your letter.”
[159] As we know, the trial judge rejected BNY’s position that the use of the data by entities other than CIBC Mellon was de minimis. Therefore, the basis for the rejection of the preservation and production of the data was invalid. What is more concerning is that the obligation to preserve relevant documents was eschewed on the basis of BNY’s views about SS&C’s claim. It is not open to lawyers or parties to ignore their obligations under the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and at common law based on their opinion of the merits of a potential claim. As found by the trial judge, BNY knew or ought to have known that the data was required for the litigation, yet it was never produced, and no explanation was ever proffered by BNY or its counsel regarding why it was not preserved.
[160] SS&C complains that the trial judge drew an adverse inference against BNY but made no factual findings about the extent of the unauthorized use of data. Instead, all he found was: “that the unaccounted for data was used by unauthorized entities within the BNY group other than CIBC Mellon”, and that he could not find that “non-CIBC Mellon users made only de minimis use of the data.”
[161] The trial judge rejected SS&C’s spoliation claim on the grounds that “spoliation as a standalone tort is one for which the wrongdoer can be liable for damages. The applicant seeks no such remedy here. The applicant seeks an adverse inference.” He also stated that “adverse inferences of that sort have nothing to do with spoliation but have to do with party’s failure to produce evidence to support a proposition that it is advancing.” The trial judge proceeded to draw the adverse inference noted above.
[162] If the trial judge meant that the remedy for spoliation was limited to damages or that an adverse inference is not an available remedy where spoliation is established, he erred in law. Regardless of whether spoliation is only an evidentiary rule or is also a standalone tort claim, an adverse inference is an available remedy where spoliation has been established: Doust v. Schatz, 2002 SKCA 129, 227 Sask. R. 1, at para. 29; Trillium Power Wind, at para. 24. Indeed, in St. Louis, the Supreme Court held that where spoliation has been established, a rebuttable presumption is created that the evidence destroyed would have been unfavourable to the party who destroyed it. As the trial judge found, BNY has not explained why the data was not preserved. Therefore, it has not rebutted that presumption. On this appeal, SS&C asserts that the trial judge erred in not drawing a more comprehensive adverse inference. As I will explain, I am not persuaded that there is any basis for this court to interfere with the adverse inference found by the trial judge. Moreover, in my view, SS&C’s adverse inference ground of appeal amounts to nothing more than an alternative attack on the trial judge’s damages theory.
[163] As for the merits of SS&C’s spoliation argument, although the trial judge did not offer a view regarding whether SS&C had established spoliation in this case, I have no doubt that it did. Having been warned to preserve data and with full knowledge that litigation was going to be commenced, BNY refused to do so on the basis that it rejected the allegations made against it. The reasonable inference is that it did so to suppress the truth in the litigation. In short, it failed to preserve important data that was highly relevant to the issue of data sharing, and it chose to ensure that the data would not be available in any legal proceeding. BNY has offered no compelling evidence to rebut this inference.
[164] It is evident that the trial judge was troubled by BNY’s conduct in the litigation. His concerns were well founded. The failure to preserve and produce relevant documents is conduct worthy of censure and the drawing of an adverse inference was appropriate in the circumstances of this case. Our civil justice system cannot function when parties do not comply with their disclosure obligations. That said: “whether to draw an adverse inference is a highly discretionary fact-based assessment which must be accorded deference”: The Cambie Malone’s Corporation v. British Columbia (Liquor Control and Licensing Branch), 2016 BCCA 165, 87 B.C.L.R. (5th) 219, at para. 40. See also: Parris v. Laidley, 2012 ONCA 755, at para. 2.
[165] A different judge may have drawn another adverse inference or ordered a different remedy. For example, where spoliation has been established, it is open to a judge to strike a pleading, including a statement of defence. Thus, the tactical decision to ignore production obligations is fraught with danger. Moreover, I am troubled by the position taken by BNY in this litigation. It smacks of contempt for the justice system. I hasten to add that my criticism is not directed at BNY’s former counsel. He is an experienced litigator, and I must assume he advised his client that its position was unsustainable.
[166] SS&C submits that the finding that the non-CIBC Mellon entities usage was not de minimis is not a positive finding about who used the data, how much, or over what period. Further, it argues that the findings leave open an array of possibilities when there is actually only one reasonable conclusion. Once the trial judge rejected BNY’s theory that the other entities only made minimal use of the data, he had to conclude that they all made widespread use of the data. It says that the trial judge should have presumed that the destroyed and non-produced records would reveal widespread usage by the unauthorized entities and applied the negotiated fee schedule under the Mellon Trust Agreement. Accordingly, he is alleged to have erred by stopping short of deciding the ultimate factual issue before him.
[167] I reject this argument. In the circumstances of this case, BNY’s conduct and the trial judge’s errors regarding the law of spoliation make no difference to the ultimate result. Instead, SS&C’s argument regarding the scope of the adverse inference is a red herring. The trial judge’s calculation of damages was based on data use and his conclusion that whatever data that was unaccounted for should be deemed to have been wrongfully shared. Therefore, the complaint on appeal that the trial judge should have gone farther and provided a detailed calculation of the extent of the sharing is unavailing. The real gravamen of SS&C’s argument is not that a different data calculation should have been made, but that the trial judge failed to impose a series of agreements with substantially the same terms as the Mellon Trust Agreement. As discussed above, the trial judge correctly rejected this argument on the basis that there was insufficient evidence supporting the notion that a multi-enterprise entity would enter into a series of agreements. . Trillium Power Wind Corporation v. Ontario
In Trillium Power Wind Corporation v. Ontario (Ont CA, 2023) the Court of Appeal considers (and applies) the evidentiary doctrine of 'spoliation', and here discusses it's consideration of advancement as a new tort:(a) Governing principles
[20] Spoliation arises out of the destruction of potentially relevant evidence. It "occurs where a party has intentionally destroyed evidence relevant to ongoing or contemplated litigation in circumstances where a reasonable inference can be drawn that the evidence was destroyed to affect the litigation”: McDougall v. Black & Decker Canada Inc., 2008 ABCA 353, 440 A.R. 253, at para. 18.
[21] The motion judge correctly stated that “while spoliation as a self-standing cause of action is still open to question, Ontario courts have recognized spoliation as an evidentiary rule where there has been destruction of evidence by a party who reasonably anticipated litigation in which that evidence would play a part” and that this rule of evidence gives rise to a rebuttable presumption that the evidence destroyed would have been unfavourable to the party who destroyed it. He also rightly determined that he would not dismiss the spoliation claim at that stage on the basis that the cause of action is somewhat novel. While this court has not yet definitively resolved whether spoliation is a cause of action, it has permitted it to proceed to trial as a novel cause of action: Spasic Estate v. Imperial Tobacco Ltd. (2000), 2000 CanLII 17170 (ON CA), 49 O.R. (3d) 699 (C.A.), at paras. 12 and 22, leave to appeal refused, [2000] S.C.C.A. No. 547. It is unnecessary for the purposes of this appeal to resolve the issue.
[22] While a novel standalone cause of action, spoliation is not a novel issue. It arises out of a party’s breach of the well-established obligation to preserve and produce relevant documents in civil proceedings. The court’s intervention is required because spoliation undermines a fair trial process and interferes with the quest for the truth in judicial proceedings: Casbohm v. Winacott Spring Western Star Trucks, 2021 SKCA 21, at para. 36. As such, it amounts to an abuse of process.
[23] In St. Louis v. Canada (1896), 1896 CanLII 65 (SCC), 25 S.C.R. 649, at pp. 652-653, the Supreme Court established that the destruction of evidence carries a rebuttable presumption that “the evidence destroyed would have been unfavourable to the party who destroyed it”. The Court of Appeal of Alberta described the Supreme Court’s conclusion from St. Louis as follows, in McDougall, at para. 19:Spoliation in law does not occur merely because evidence has been destroyed. Rather, it occurs where a party has intentionally destroyed evidence relevant to ongoing or contemplated litigation in circumstances where a reasonable inference can be drawn that the evidence was destroyed to affect the litigation. Once this is demonstrated, a presumption arises that the evidence would have been unfavourable to the party destroying it. This presumption is rebuttable by other evidence through which the alleged spoliator proves that his actions, although intentional, were not aimed at affecting the litigation, or through which the party either proves his case or repels the case against him. [24] The court’s jurisdiction to grant remedies in response to spoliation springs from rules of civil procedure, its inherent power to control an abuse of its process, and its inherent discretion with respect to costs: McDougall, at para. 22. Remedies granted have mostly included but are not limited to the application of the adverse presumption referenced above in St. Louis, and costs: McDougall, at para. 29. Whether damages, including punitive damages, may be awarded if spoliation is treated as a standalone cause of action is an issue for another day and need not be resolved in this appeal: Armstrong v. Moore, 2020 ONCA 49, 15 R.P.R. (6th) 200, at para. 37.
(b) Principles applied
[25] Respectfully, the motion judge erred in dismissing the claim by holding that the evidentiary basis for the appellant’s claim was absent and by concluding that the unfavourable presumption against Ontario because of its destruction of documents was rebutted by the implementation of a government policy that the motion judge acknowledged was improper.
[26] First, there was an ample evidentiary basis to support spoliation by Ontario.
[27] Based on the motion judge’s own findings, there can be no question that the destruction in issue was deliberate and in accordance with an improper government policy. The motion judge found, based on an investigative report by the Information and Privacy Commission of Ontario, that the improper destruction of hand-held devices, emails and documents by the Premier’s Office under former Premier Dalton McGuinty was a notorious violation of record-keeping obligations and raised serious issues of political accountability.
[28] Moreover, there is no dispute that the impugned destruction occurred subsequent to the commencement of the appellant’s claim and concerned likely relevant documents in the possession of individuals who, as the motion judge found, were intimately involved in the relevant events and who were aware of the appellant’s claim. These individuals included Messrs. Mullin, Chris Morley, former Chief of Staff, and Jamison Steeve, among others, who were so engaged in the events giving rise to the wind farm moratorium and the appellant’s claim that they provided affidavits in support of Ontario’s summary judgment motion.
[29] The motion judge also discussed how the destruction of this evidence may have affected the litigation of this case, at para. 21:The parties have engaged in documentary exchange, examinations for discovery, etc. During this time, it has become apparent that, among other things, the Ontario government is unable to locate and produce any emails from the email servers of any former [Office of the Premier] personnel. This lack of documentation is significant as [Office of the Premier] personnel were centrally involved in considering the offshore wind decisions in issue here, including both the decision to put a stop to offshore projects and the decision to announce that policy change on February 11, 2011. [30] It is no answer to the appellant’s allegation of spoliation that Ontario’s right hand did not know what the left hand was doing. Ontario is a party to these proceedings and knew about the appellant’s claim prior to its destruction of documents, emails and devices. As a party to these proceedings, Ontario was required to preserve any potentially relevant documents in order to fulfill its disclosure obligations. Such documents included any potentially relevant emails, including those in the possession of departing employees who Ontario knew had relevant evidence – so relevant that Ontario put them forward as its own affiants in support of its motion for summary judgment. That these documents were potentially relevant to the issues in these proceedings is obvious from the gaps in the email exchanges that have been produced. Ontario’s deliberate destruction of evidence is clear.
[31] Importantly, whether Ontario’s intention was to destroy relevant evidence for use in simply this litigation or in all litigation is a distinction without a difference. As the motion judge referenced, it is a matter of public record that the subsequent inquiry into Ontario’s destruction policy in 2013 and related criminal proceedings against Mr. Morley’s successor as Chief of Staff demonstrated that the intention of the spoliators was to destroy any incriminating documents, at paras. 23-25:It is a matter of public record that during the McGuinty period the practice within the [Office of the Premier] was for the email accounts of departed personnel to be “decommissioned” – i.e. deleted in their entirety. Furthermore, there is evidence that the handheld devices used by the [Office of the Premier] personnel at the time were, after their departures from the [Office of the Premier], either reset or, in the case of former Chief of Staff Morley, physically destroyed.
Evidence of this practice was canvassed before the Legislative Committee investigating the deletion of documents in the context of the McGuinty government’s gas plant cancellation: Standing Committee on Justice Policy, Legislative Assembly of Ontario, 2nd Sess., 40th Parl., June 18, 2013. It was likewise the subject of an investigative report by the Information and Privacy Commission of Ontario, which concluded that the email destruction practice was a violation of the Archives and Recordkeeping Act, 2006, SO 2006, c. 34 and raised serious issues of political accountability: IPC, Deleting Accountability: Records Management Practices of Political Staff, June 5, 2013, at 32.Most notably, the device destruction and email deletion policy was also thoroughly canvassed during the course of the criminal trial of Chris Morley’s successor as chief of staff, David Livingston. It was there described by the court in rather scathing terms as a “plan to eliminate sensitive and confidential work-related data…[which] amounted to a ‘scorched earth’ strategy, where information that could be potentially useful to adversaries, both within and outside of the Liberal Party, would be destroyed”: R. v. Livingston, 2018 ONCJ 25, at para 176. [Emphasis added.] [32] The motion judge failed to look at the question of spoliation in the broader context of Ontario’s obligations to preserve and produce relevant documents. He therefore applied a very narrow construction to the meaning and effect of Ontario’s intentional destruction of evidence that Ontario knew it had to preserve and produce. Allowing Ontario to by-pass its clear documentary obligations in this way would amount to an abuse of process. Applying the correct analytical lens leads to the conclusion that spoliation occurred: there was a deliberate destruction of potentially relevant evidence from which the reasonable inference can be drawn that the destruction was done to affect litigation, including the present litigation.
[33] As a result, the motion judge’s dismissal of the spoliation claim must be set aside.
[34] The appellant submits that in the event that the motion judge’s dismissal of its spoliation claim is set aside, this court should remit the case to trial for a determination of the appropriate quantum of damages arising from the spoliation.
[35] I would not do so. The appellant’s spoliation claim is inextricably tied up with its misfeasance claim. The setting aside of the motion judge’s dismissal of the spoliation claim does not affect the dismissal of its claim for misfeasance in public office, including any claim for damages. Even if an adverse inference were drawn against Ontario that the destroyed evidence would have been unhelpful to its position in this litigation, the appellant could not have compelled Ontario to reverse its moratorium or fund its wind farm project and therefore suffered no damages, even if Ontario’s timing of the announcement of its moratorium had targeted the timing of the appellant’s financing. Moreover, the timing of the announcement even proved beneficial in that the appellant did not incur the cost of funding the cancelled project. As the appellant would not be able to demonstrate that it suffered any damages as a result of Ontario’s spoliation, there is no purpose in remitting it to the Superior Court for a trial on damages.
[36] This does not mean, however, that the appellant is left without any remedy flowing from Ontario’s deliberate spoliation. In my opinion, the circumstances of Ontario’s spoliation amount to an abuse of process: McDougall, at paras. 22, 29. As such, the appropriate remedy is to deprive Ontario of its costs below and grant the appellant its costs of the appeal.
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