The high court also outlined a modern approach for determining whether spoliation has occurred
An Ontario trial court must reassess the damages it awarded to a Canadian data provider from the Bank of New York Mellon, the Supreme Court of Canada ruled in a unanimous decision Friday, ruling that the trial court “failed to consider the scope and impact” of evidence the bank had destroyed and refused to hand over ahead of litigation between the two parties.
The high court also upheld a finding by the Ontario Court of Appeal that BNY had committed spoliation, which occurs when a party intentionally destroys, changes, hides, or fails to preserve evidence to influence a lawsuit’s outcome.
Noting that the SCC has not addressed the doctrine of spoliation since the 19th century, Justices Suzanne Côté and Mary Moreau, who co-authored Friday’s ruling in SS&C Technologies Canada Corp. v. Bank of New York Mellon Corp., also outlined a modern approach for determining whether spoliation has occurred.
Since the high court decided St. Louis v. The Queen in 1896, “technology has become ubiquitous and demands on the civil justice system have evolved. Electronic document management is now the primary mechanism for record-keeping,” Côté and Moreau wrote. “Where once spoliation took the form of physical destruction of documents, in the digital age, spoliation is far more inconspicuous, occurring instantaneously at the click of a button.”
Chris Paliare of Paliare Roland, who represented the data provider, SS&C Technologies Canada Corporation, told Canadian Lawyer that in his view, the case involves “injustice and total abuse by the Bank of New York Mellon with respect to our client.”
“We’re thrilled with the result,” he added.
A spokesperson for BNY and counsel for the bank did not immediately respond to requests for comment.
SS&C’s relationship with BNY dates back to 1999, when SS&C’s predecessor entered two separate agreements to provide market pricing data to Mellon Financial Corporation and CIBC Mellon, which CIBC and Mellon Bank jointly owned. Mellon Financial Corporation and the Bank of New York later merged to form BNY.
Under each agreement, only the client party to the contract – that is, either Mellon Financial or CIBC Mellon – was licensed to use the data it received.
In 2011, CIBC Mellon ended its agreement with SS&C. Five years later, SS&C discovered, through a technical glitch, that CIBC Mellon had continued to receive SS&C data from BNY for free. SS&C asked BNY to preserve information about how its data had been distributed, whom the bank had distributed the data to, and how much the bank had earned from this conduct. BNY refused, and SS&C sued the bank.
In 2021, the Ontario Superior Court sided with SS&C, ruling that BNY had breached its contract with the company when it shared data with CIBC Mellon. At a second trial on damages, SS&C argued that BNY had committed spoliation by refusing to preserve evidence regarding the data it distributed. Because this data was not available, the company asked the court to calculate damages based on the inference that “each of BNY’s 65 asset servicing entities” received SS&C data.
In the end, the trial court concluded that BNY owed US$5.69 million in damages to SS&C, based on two inferences: that the bank had distributed SS&C data to other entities within the BNY family other than CIBC Mellon, and that these other entities did not make de minimis use of the data. However, the court declined to rule on the spoliation allegation.
The Ontario Court of Appeal agreed with the inferences drawn by the trial court, but ruled that BNY had committed spoliation. It largely upheld the damages calculated by the trial court. SS&C appealed the decision, arguing it was entitled to more damages.
In the SCC’s decision, Côté and Moreau wrote that the two inferences the trial court drew failed to account for BNY’s conduct adequately. This resulted in the trial court calculating damages incorrectly.
To explain their position, the justices first outlined a four-part test for establishing spoliation. On a balance of probabilities, courts must find that evidence was intentionally destroyed, altered, or concealed; that litigation was ongoing or expected at the time of the destruction; that the evidence was relevant to the litigation; and that the evidence was destroyed, altered, or hidden to influence the litigation.
When a court makes a finding of spoliation, there is a rebuttable presumption that the destroyed evidence would harm the spoliator’s case. The alleged spoliator can then challenge the finding that they destroyed evidence. If they are unable to do so, the court must proceed on the inference that the destroyed evidence was unfavourable to the spoliator.
The justices clarified, however, that courts have the discretion to decide the extent to which the destroyed evidence would have been unfavourable to the spoliator. “This is a discretionary and context-specific determination, usually in the form of an adverse inference, that is ‘best left to the trial judge who can consider all of the surrounding facts,’” Côté and Moreau wrote.
In this case, the trial court’s inferences did not reflect the finding that BNY had committed spoliation, the justices said. In other words, the inferences that the trial court used to assess damages against BNY needed to be more unfavourable to the bank.
Because the trial judge’s inferences were incorrect, the justices found he failed to “usefully [plug] the evidentiary gap left by the spoliation,” leading him to award damages “that are untethered from the facts of the case, unconnected to the incomplete inferences that he did draw, and inconsistent with his own rationale for the award.”
Côté and Moreau sent the case back to the trial court to reassess the damages award, writing that “the trial judge will be required to properly draw mandatory adverse inferences that remedy the effects of BNY’s spoliation.”
