Preserve First, Think Later

On July 31st, the Supreme Court of Canada (“SCC”) revisited the doctrine of spoliation and offered guidance on “spoliation” in the modern era in SS&C Technologies Canada Corp. v. Bank of New York Mellon Corp.¹ Prior to this decision, it had been 130 years since the SCC weighed in on the doctrine of spoliation in St. Louis v. The Queen.²

What is spoliation and how does it affect you?

Spoliation is when one party intentionally destroys, mutilates, alters, or conceals evidence when there is an actual or contemplated threat of litigation.³ If you are, or could be, involved in litigation, then you have an obligation to preserve evidence. More importantly, if you have been asked to preserve documents, or if you are unsure preservation is necessary, then it is a good idea to implement a preservation hold (worst case scenario you can release the document hold later).

It is much easier to preserve documents at the first sign of a potential lawsuit than it is to face the consequences of not having preserved evidence. The SCC just reinforced this sentiment because “once the court makes a finding of spoliation, a rebuttable presumption arises that the destroyed evidence would be unfavourable to the case of the party that destroyed it.”⁴

A rebuttable presumption arises that the destroyed evidence would be unfavourable to the case of the party that destroyed it.

The Case

In short, SS&C Technologies Canada Corporation (“SS&C”) was contracted to generate pricing information for the Bank of New York Mellon Corporation (“BNY”). The contract included a clause that prohibited BNY from sharing, redistributing, or selling SS&C’s data to any other party, including its subsidiaries and affiliates.⁵

In October 2016, there was a system malfunction that led to BNY’s Canadian-affiliated company to write to SS&C complaining about the glitch.⁶ This inadvertently alerted SS&C that BNY has been sharing and/or redistributing data with its affiliates, and this sparked the litigation.⁷ In February of 2017, SS&C wrote to BNY and asked them to preserve documents relating to the sharing and redistributing data with its affiliates.⁸ BNY’s data retention policy was to destroy this type of data after 30 days, and at trial they offered no explanation for their failure to preserve this evidence “in the face of reasonably contemplated litigation.”⁹

SS&C is seeking $890 million in damages, and both sides appealed an award of roughly $5.7 million.¹⁰ Only time will tell what the award ends up being, but it is reasonable to assume that the ultimate amount awarded will be somewhere between those two amounts. That’s a lot of dough for ignoring the request to preserve!

The Important Legal Stuff

The SCC has now confirmed the four-part test to make out spoliation. The accuser must show that on the balance of probabilities:

1. the evidence was intentionally destroyed, altered, mutilated, or concealed;
2. at the time of destruction, litigation was ongoing or reasonably contemplated;
3. the evidence was relevant to said litigation; and
4. it is reasonable to infer that evidence was destroyed to affect the litigation.¹¹

Once these elements are made out, there is a rebuttable presumption of spoliation.¹² To rebut, the accused may bring evidence to show the destroyed evidence was not harmful to its case.¹³ Failing to rebut this presumption means that the court must draw an adverse inference.¹⁴

Consequences

In crafting a remedy, courts can consider mitigating factors, such as the level of culpability behind the spoliation, the intention or reason behind the destruction, the prejudice to the non-spoliating party, and the impact of spoliation on the court’s ability to fairly dispose of the issues.¹⁵ Ultimately, the SCC has provided a non-exhaustive list of remedies as a guide for the courts to apply upon a finding of spoliation, which includes striking out a claim or defence and ordering punitive damages.

Final Thoughts

If you’re worried about your retention policies, then please contact us!