An Update on SPOLIATION in Canada

1. An Update on SPOLIATION in Canada Seventh Annual Conference – Evidence Law for the Civil Litigator Panel October 8, 2010 Duncan Boswell (Gowlings)Edmund Huang (Attorney General (Ontario))Andrew Bernstein (Torys)

2. What is Spoliation? • Traditionally, “spoliation” refers to the intentional destruction or alteration of relevant documents when litigation is existing or pending. • When spoliation is found, the principal remedy is the imposition of a rebuttable presumption of fact that the lost or destroyed evidence would not assist the party who lost or destroyed it, although other sanctions can be imposed • Because of the obligations placed on litigants to preserve evidence, the unintentional or negligent destruction of evidence can also give rise to sanctions

3. Duty to Preserve Document and Relevant Evidence • Courts have the power to sanction parties for the destruction of relevant documents and evidence. These powers arise from the courts’ respective rules of civil procedure, through the court’s ability to impose cost sanctions, or the court’s inherent jurisdiction to control their own process • “Document” under our rules includes electronic documents (Rule 30.01(1)) • Electronic documents can include many forms of media and other storage formats

4. Rules of Civil Procedure Overriding principle • Proportionality • 1.04(1.1)  In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.

5. Rules of Civil Procedure • Also in Rule 29.2 - Proportionality in Discovery • CONSIDERATIONS - Rule 29.2.03  (1) • In making a determination as to whether a party or other person must answer a question or produce a document, the court shall consider whether, • (a) the TIME required would be (b) the EXPENSE associated; unreasonable • (c) whether it would cause him or her (d) whether it would UNDULY INTERFERE with UNDUE PREJUDICE the orderly progress of the action; and • (e) whether the information or the document is READILY AVAILABLE to the party requesting it from another source. • Overall Volume of Documents • the court shall consider whether such an order would result in an EXCESSIVE VOLUME of documents required to be produced by the party or other person.

6. Rules of Civil Procedure - Sanctions • Courts power to sanction: • Cost sanctions (Rule 57 and 58) • Inherent power to control an abuse of process: • Cheung v. Toyota Canada Inc. (2003), 29 C.P.C. (5th) 267 (ON SCJ), para. 23; the court’s power to control an abuse of process is broad enough to address the destruction of relevant documents

7. Rules of Civil Procedure - Sanctions • Other sanctions available under the Ontario Rules include: • directing the delivery of a further and better affidavit of documents (R. 30.06); • permitting a cross-examination in respect of an affidavit of documents (R. 30.06); • barring the party from using those documents at trial, if favourable to that party’s case (R. 30.08(1)(a));

8. Rules of Civil Procedure - Sanctions • revoking or suspending a party’s right, if any, to initiate or continue an examination for discovery (R. 30.08(2)(a)); • dismissing the action or striking out a statement of defence (R. 30.08(1)(b)); • exercising the court’s broader power to make any order as is just (R. 30.08, see also R. 2.01 (non–compliance with the rules); • Also, contempt for failing to comply with orders

9. Rules of Civil Procedure - Sanctions • Principles re Electronic Discovery • DISCOVERY PLAN • Requirement for Plan • 29.1.03  (4)  In preparing the discovery plan, the parties shall consult and have regard to the document titled “The Sedona Canada Principles Addressing Electronic Discovery” developed by and available from The Sedona Conference.

10. Sedona Canada Principles on E-Discovery • 12 Principles arising from Sedona Canada • Annotated on-line edition at: http://www.lexum.org/e-discovery-web/law.do?id=1&lang=en see also www.thesedonaconference.org • 1. Electronically stored information is discoverable • Broad definition of electronic document • Rules – every document relating to any matter in question in the action be disclosed

11. Sedona Canada Principles • 3. As soon as litigation is reasonably anticipated, parties must consider their obligation to take reasonable and good faith steps to preserve potentially relevant electronically stored information. • Scope of Preservation • Preparation Reduces Risks • Record Retention Policy • Response Regarding Litigation Preservation

12. No. 3 Continued • Notice to Affected Persons in Common Law Jurisdiction • Extreme Preservation Measures Not Necessarily Required • Preservation Orders • All Data need not be Frozen • Disaster Recovery Backup Media • Potential Preservation of Shared Data

13. Legal Hold Notices and Preservation Letters • Upon determining that litigation has triggered a preservation obligation, the party should communicate to affected persons the need for and scope of preserving relevant information in both paper and electronic form • The notice should also mention the volatility of electronically stored information and that particular care must be taken not to alter, delete or destroy it.

14. Legal Hold Notices and Preservation Letters • The notice should seek the preservation of all information affected by the preservation obligation; however, it typically should not require the suspension of all routine records management policies and procedures • The notice does not need to reach all employees, only those reasonably likely to maintain documents potentially relevant to the litigation or investigation

15. Legal Hold Notices and Preservation Letters • When preservation obligations apply to documents and data spanning a significant or continuing time period, organizations should determine how to deal with systems, hardware or media containing unique relevant material that might be retired as part of a technology upgrade.

16. Legal Hold Notices and Preservation Letters • The basic principle which defines the scope of the obligation to preserve relevant information can be found in the common law. • A reasonable inquiry based on good faith to identify and preserve active and archival data should be sufficient. • A party should not be required to search for or preserve information that is deleted, fragmented or overwritten unless the party is aware of relevant information that can only be obtained from such sources or there is a specific agreement or court order

17. Sedona Canada Principles • ONTARIO E-DISCOVERY IMPLEMENTATION COMMITTEE • Model Documents: • Annotated E-Discovery Checklist • Sample Memoranda to clients • Model Preservation Orders • Model Preservation Letters • Model Preservation Agrement • Model Discovery Agreement http://www.oba.org/en/publicaffairs_en/e-discovery/model_precedents.aspx

18. Sedona Canada Principles • Principle 4 : Counsel and parties should meet and confer as soon as practicable, and on an ongoing basis, regarding the identification, preservation, collection, review and production of electronically stored information. • Meet early and often • Who should attend? • Preparation for Meet and Confer

19. Sedona Canada Principles • Principle 5 - The parties should be prepared to produce relevant electronically stored information that is reasonably accessible in terms of cost and burden. • Determination of accessibility does not strictly depend on convenience, but rather on the concept of marginal utility. Does it justify the cost of acquisition? • Defences: • No relevant data in record, relevant data but available on other more accessible location(s), some relevant data but cost to obtain is not worth the value the data would provide; • Case law suggests that the burden of showing that another party’s productions are inadequate lies with the party alleging deficiencies (Rhodia UK Ltd. v. Jarvis Imports (2000) Ltd., 2005 FC 1628, 45 CPR (4th) 161)

20. Sedona Canada Principles • Principle 6 A party should not be required, absent agreement or a court order based on demonstrated need and relevance, to search for or collect deleted or residual electronically stored information.

21. Sedona Canada Principles • Principle 7 - A party may satisfy its obligation to preserve, collect, review and produce electronically stored information in good faith by using electronic tools and processes such as data sampling, searching or by using selection criteria to collect potentially relevant electronically stored information. • Use of Targeted Selection to Focus Discovery • Techniques to Reduce Volume • Review • Keep records of steps taken to justify procedure

22. Sedona Canada Principles • Principle 9 - During the discovery process parties should agree to or, if necessary, seek judicial direction on measures to protect privileges, privacy, trade secrets and other confidential information relating to the production of electronic documents and data. • Counsel should obtain agreement, with court approval, of how to deal with inadvertent disclosure of privileged or confidential documents

23. Sedona Canada Principles • Principle 11 Sanctions should be considered by the court where a party will be materially prejudiced by another party’s failure to meet any obligation to preserve, collect, review or produce electronically stored information. The party in default may avoid sanctions if it demonstrates the failure was not intentional or reckless. • Wide discretion of the Courts to sanction a party who fails to meet its obligations

24. Sedona Canada Principles • The role of the court is to weigh the scope and impact of non-disclosure and to impose appropriate sanctions proportional to the culpability of the non-producing party, the prejudice to the opposing litigant and the impact that the loss of evidence may have on the court’s ability to fairly dispose of the issues in dispute

25. Sedona Canada Principles • Principle 12 The reasonable costs of preserving, collecting and reviewing electronically stored information will generally be borne by the party producing it. In limited circumstances, it may be appropriate for the parties to arrive at a different allocation of costs on an interim basis, by either agreement or court order.

26. Court Sanctions • Zelenski v. Jamz and Brandon Heating*: • Motions to dismiss a claim. The Court identified factors to take into account when determining appropriate sanctions for the failure to comply with the obligation to disclose documents: • 1) the quantity and quality of the abusive acts; • 2) whether the abusive acts flow from neglect or intent; • 3) prejudice generally, and specifically the impact of the abuse on the opposing party’s ability to prosecute or defend the action; *Zelenski v. Janz et al; Zelenski v. Houston, 2004 MBQB 256, 189 Man R. (2d) 151, Brandon Heating and Plumbing(1972)Ltd.Et al. v. Max Systems Inc. 2006 MBQB at paras. 23-24, 202 Man.R. (2d) 278.

27. Court Sanctions • Zelenski v. Jamz and Brandon Heating • 4) the merits of the abusive party’s claim or defence; • 5) the availability of sanctions short of dismissal that will address past prejudice to the opposing party; and • 6) the likelihood that a sanction short of dismissal will end the abusive behaviour.

28. Court Sanctions • Compliance with a reasonable records management policy, or justifiable inadvertent destruction or non-production of relevant documents should not, in the ordinary course, constitute sanctionable conduct

29. Recent Case Law • Spoliation and Rebuttable Presumption St. Louis v. Canada (1895) S.C.R. 649: 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

30. Spoliation and Rebuttable Presumption • McDougall v. Black & Decker Canada Inc. (2008) (Alta. C.A.) : Black & Decker moved for a dismissal of the action based on spoliation • Allowed the appeal and restored the claim • the Court made a distinction between the intention and unintentional destruction of evidence. • it was not appropriate to presume that missing evidence would tell against the person who destroyed it where the destruction was not intentional. Tort of spoliation had not been made out. • The Court also noted that spoliation should generally be left for trial and that full pre-trial determinations of this issue should not be encouraged

31. Rebuttable Presumption • The court summarized the law of spoliation as follows: • 1. Spoliation currently refers to the intentional destruction of relevant evidence when litigation is existing or pending. • 2. The principal remedy for spoliation is the imposition of a rebuttable presumption of fact that the lost or destroyed evidence would not assist the spoliator. The presumption can be rebutted by evidence showing the spoliator did not intend, by destroying the evidence, to affect the litigation, or by other evidence to prove or repel the case. • 3. Outside this general framework other remedies may be available -even where evidence has been unintentionally destroyed. Remedial authority for these remedies is found in the court's rules of procedure and its inherent ability to prevent abuse of process, and remedies may include such relief as the exclusion of expert reports and the denial of costs.

32. Rebuttable Presumption • 4. The courts have not yet found that the intentional destruction of evidence gives rise to an intentional tort, nor that there is a duty to preserve evidence for the purposes of the law of negligence, although these issues, in most jurisdictions, remain open. • 5. Generally, the issues of whether spoliation has occurred, and what remedy should be given if it has, are matters best left for trial where the trial judge can consider all of the facts and fashion the most appropriate remedy. • 6. Pre-trial relief may be available in the exceptional case where a party is particularly disadvantaged by the destruction of evidence. But generally this is accomplished through the applicable rules of court, or the court's general discretion with respect to costs and the control of abuse of process.

33. Striking of Action or Defence • The Court of Appeal in McDougall addressed under what circumstances the dismissal of an action would be an appropriate remedy for spoliation. • a high threshold • the court should not exercise its inherent jurisdiction to strike an action unless: • (a) it is beyond doubt that the destruction of loss of evidence was a deliberate act done with the clear intention of gaining an advantage in litigation; and • (b) the prejudice is so obviously profound that it prevents the innocent party from mounting a defence • As stated above, the court noted that the determination of spoliation and appropriate sanctions are matters generally best left to the trial judge. This is a popular approach.

34. Striking of Action or Defence • Jay v. DHL Express (Canada), Ltd. (2008) PEI Trial Div- statement of defence was struck after the defendant failed to comply with a production order. • The Court of Appeal, however, reinstated DHL’s Statement of Defence because it found that the motions judge had not taken into account or given sufficient weight to the following considerations: • DHL’s intention, especially in the absence of any finding of bad faith, or contumacious or contemptuous conduct; • The documents sought being relevant to only one segment of the proceeding, namely the assessment of damages, and regarding only one of two claims for breach of contract; • The relative prejudice to the plaintiff and to the defendants. • The Court held that the preferred course was to leave the matter for the trial judge to consider in the context of the overall proceeding, with the benefit of all of the evidence. In this way the trial judge could consider alternative remedies.

35. Striking of Action or Defence • Muskoka Fuels v. Hassan Steel Fabricators Ltd. (2009) (ON SCJ) • Court refused to strike pleadings • Issue left for the trial judge • Carleton v. Beaverton Hotel (2009) (ON SCJ) • Same result

36. Striking of Pleadings • Brandon Heating & Plumbing (1972) Ltd. v. Max Systems Inc.(2006) (Man. Q.B.) • Pleading struck • serious prejudice suffered as a result of the destruction of evidence

37. Other Sanctions • Werner v. Warner Auto-Marine Inc. (1996) • Court of Appeal for Ontario ordered that certain parties were prohibited from using or relying on an expert report that was obtained as a result of a “blatant contempt of the preservation order”. • The court had found that there had been clear prejudice to the responding parties in the action because of the wilful destruction of tanks which were highly material to any investigation of the cause of a fire. • The prohibition order against those same parties who breached the preservation order was extended beyond the expert report to also include a prohibition from using any evidence obtained directly or indirectly as a result of the breach[1].

38. Spoliation as an Independent Tort? • Law remains unsettled in Canada • Spasic Estate v. Imperial Tobacco Ltd. (2000) (ON CA) • refused to foreclose the possibility that one of the possible remedies for the intentional destruction of evidence might be the imposition of an obligation in tort

39. Independent Tort? • “If it is established that the conduct of the respondents resulted in harm to the plaintiff by making it impossible for her to prove her claim, then it will be for the trial judge, in the context of a complete record, to determine whether the plaintiff should have a remedy. This is how the progress of the common law is marked in cases of first impression, where the court has created a new cause of action where none had been recognized before. I need refer only to Donoghue v. Stevenson, [1932] A.C. 562 (H.L.), as but one example. ... I can see no reason why the trial judge should be precluded from considering all possible remedies, including a separate tort, on the basis of the record that will be developed “

40. Independent Tort? • Zahab v. Salvation Army (2008) Master MacLeod • Allowed amendment of pleadings to include a claim for spoliation; • “For the purpose of this motion it is therefore important to understand that while spoliation could be an independent cause of action in circumstances that are yet to be defined, it is not necessarily a separate cause of action”

41. Independent Tort? British Columbia • British Columbia cases do not consider spoliation as an independent tort • Endean v. Canadian Red Cross Society(1998) BCA • Relied on St. Louis v. HMQ • the spoliation or destruction of documents is an evidentiary rule which raises a presumption – not an independent tort

42. British Columbia • The Court of Appeal held that “…an action for damages – being punitive or otherwise – is not an appropriate response to the destruction of document”. The Court stated: • To put it another way, a rebuttable presumption cannot give rise to a separate and completed tort. The fact of the destruction of evidence is only part of the evidence in the case and standing alone may very well be incomplete. To formulate this as a separate tort may very well be premature in many cases… • [f]or the flexible remedy of the presumption, the effect of which may be suited to the circumstances of the case in question, there would be substituted an inflexible rule of law which could have consequences disproportionate to the particular act of spoliation.

43. British Columbia • Patzer v. Hastings Entertainment Inc. (March 2010) (BCSC) • spoliation is not recognized in Canada as an independent tort. • Relied on Endean • The court held that there is no common law duty to preserve property which may possibly be required for evidentiary purposes. The court did, however, recognize that such an obligation can be imposed by court order pursuant to the Rules of Court

44. British Columbia • June 28, 2010 decision of Sangha v. Reliance Investment Group Ltd. • B.C. Court of Appeal also relied on Endean in holding that spoliation is not an independent tort. • The plaintiff sought to amend his claim to include the tort of spoliation. The court agreed with the finding of the chambers judge that he was bound by the Court's decision in Endean which holds that spoliation is not an independent tort. As a result, the application for leave to appeal was dismissed

45. Considerations • American jurisprudence • Purpose of Damages