Executive Summary: Key Legal and Evidentiary Issues

• The Supreme Court of Canada clarified the four-part test for establishing spoliation of evidence in civil litigation.
   
• BNY's failure to preserve data usage records after receiving a preservation notice from SS&C formed the basis of the spoliation finding.
   
• Trial judges retain discretion over the remedy for spoliation rather than being bound to impose the maximum possible adverse inference.
   
• A rateable approach to calculating damages was found to be untethered from the evidence and unconnected to the scope of BNY's breaches.
   
• Courts must draw adverse inferences capable of filling the evidentiary gap left by a spoliator, not inferences that merely restate existing evidence.
   
• Remittal to the Superior Court was ordered solely on the issue of quantifying SS&C's damages.
   

Facts of the case

SS&C Technologies Canada Corporation, a Canadian data provider, licensed specialized pricing data to the Bank of New York Mellon Corporation ("BNY") under an agreement known as the Mellon Trust Agreement. The agreement was volume-based and operated on a per-security basis, meaning BNY paid SS&C once for data pertaining to a specific security, while prohibiting BNY from sharing, redistributing, or selling the data to other parties, including subsidiaries and affiliates. SS&C's predecessor, Securities Valuation Company Inc., had also entered into a separate agreement with CIBC Mellon Global Securities Services Company, a Canadian joint venture through which BNY serviced its Canadian clients. CIBC Mellon terminated its own agreement with SS&C in 2011, citing a claim that it no longer required the services, but continued receiving SS&C's data for free through BNY without disclosing this arrangement. SS&C discovered this in October 2016 after a system glitch inadvertently revealed that CIBC Mellon had been receiving its data through BNY. SS&C then demanded that BNY preserve records showing how its data had been redistributed, to which affiliates, and how much revenue BNY had earned from the redistribution. BNY refused to comply and gave no justification for its non-production. SS&C terminated the Mellon Trust Agreement in February 2017 and commenced litigation for breach of contract.

Policy and legislative provisions at issue

The dispute centred on the proper interpretation of the Mellon Trust Agreement, specifically whether the contractual term "Client" referred only to BNY or extended to BNY's broader corporate family of affiliates and subsidiaries. The trial judge found that "Client" referred to a single entity, though he initially held that a subset of Mellon Financial Corporation entities existing at the time of contracting was captured under the agreement; this finding was later overturned on appeal, with the Court of Appeal concluding that only BNY itself, not its affiliated entities, was entitled to access the data. The case also engaged the common law doctrine of spoliation, which the trial judge and Court of Appeal analyzed under differing frameworks: the trial judge declined to determine whether spoliation as an independent tort applied and instead drew adverse inferences based on BNY's failure to produce documents, while the Court of Appeal applied a three-part spoliation test and made an express finding of spoliation. Rule 30.08(1) of the Ontario Rules of Civil Procedure, which provides remedies for failure to produce a document, was referenced as part of the broader framework governing document destruction, though the courts primarily relied on their inherent jurisdiction over abuse of process.

Reasoning and analysis

The Supreme Court held that establishing spoliation requires proof, on a balance of probabilities, of four elements: that evidence was intentionally destroyed, altered, mutilated, or concealed; that litigation was ongoing or reasonably contemplated at the time; that the evidence was relevant to that litigation; and that it is reasonable to infer the evidence was destroyed to affect the litigation. Applying this test, the Court found that BNY's failure to preserve usage data after receiving SS&C's preservation notice, combined with its refusal to explain that failure, satisfied each element and warranted a finding of spoliation. The Court rejected SS&C's argument that a finding of spoliation should attract a mandatory, maximum-penalty remedy, holding instead that the content of the remedy remains discretionary and context-specific, to be determined by the trial judge based on the surrounding facts. However, the Court found that the trial judge's two adverse inferences—that unaccounted-for data was used by unauthorized entities other than CIBC Mellon, and that such use was not de minimis—were weak and incomplete because they merely restated what the existing evidence already showed rather than filling the evidentiary gap created by the spoliation. The Court further found that the trial judge's "rateable approach" to damages, which valued the unaccounted-for 55.4 percent of data by reference to the price BNY paid for the 44.6 percent it could account for, was untethered from the record. This approach failed to account for the number of unauthorized entities that may have accessed the data (up to 65) or the number of times the data may have been shared, relied on an arbitrary and unsupported understanding of centralized pricing, and was internally inconsistent with the trial judge's own stated rationale.

Ruling and overall outcome

The Supreme Court allowed the appeal brought by SS&C. The Court set aside the damage award made by the Superior Court and portions of the Court of Appeal's order, and remitted the matter to the Superior Court solely on the issue of quantifying SS&C's damages. The Court directed that the trial judge must draw mandatory adverse inferences that properly account for the context, scope, and impact of BNY's spoliation, resulting in concrete findings of fact regarding the number of unauthorized entities that accessed the data, the number of times each entity accessed it, and the value of that data, which findings are then to be used to arrive at a damages figure. The matter is to proceed on the existing record, though the trial judge retains discretion to permit additional evidence, including expert evidence, on the issue of pricing. Costs were awarded to SS&C in the Supreme Court and in the Court of Appeal.