Snapshot
In SS&C Technologies Canada Corp. v. Bank of New York Mellon Corp., 2026 SCC 29, the Supreme Court provided definitive guidance on the doctrine of “spoliation” which is the intentional destruction, alteration, mutilation or concealment of evidence with a view to subverting the truth-finding process during litigation. The court clarified the legal test for spoliation, the inferences that arise when it is made out, and the remedial options available to a court to address destruction of evidence.
The Supreme Court’s decision in SS&C Technologies affirms two key principles:
- Businesses and individuals must take immediate steps to preserve relevant documents and evidence on receiving reasonable notice of pending litigation.
- Failure of a party to preserve relevant documents and evidence after being put on notice may lead to serious consequences in litigation including an inference that the destroyed evidence would have been harmful to the party who destroyed it.
The Court left important questions for another day, including whether there is a cause of action in tort for spoliation and whether negligent or inadvertent destruction of evidence can lead to spoliation.
Background
The plaintiff SS&C provided Canadian securities pricing data to banks under licence. SS&C contended that Bank of New York was using its data in breach of the licence, including disclosing licensed data to affiliated entities not permitted under the terms of the licence. The data provider sent a litigation notice to the bank demanding the bank preserve records respecting how and to whom the data had been disclosed and how much the bank had earned from the disclosure. The data provider terminated its agreement with the bank and commenced litigation for breach of contract.
During the litigation it was determined that a subset of records about the distribution and use of the plaintiff’s data had been deleted by the bank despite the preservation notice. The plaintiff argued the court should find that the bank intentionally destroyed documents to gain an advantage in litigation and draw an inference that the destroyed documents would have proved the data was used improperly and established the plaintiff’s claimed damages ($150 million plus interest).
The trial judge found the bank breached its contract with the data provider, but declined to find spoliation. The judge drew two adverse inferences against the bank based on its failure to preserve relevant documents: (1) the data the bank could not account for was used by unauthorized affiliated entities; and (2) the unauthorized users used the data in their businesses. The judge awarded limited damages of $6 million. The Ontario Court of Appeal largely upheld the trial decision and went further by expressly finding the bank committed spoliation.
Supreme Court of Canada
Spoliation is a doctrine that protects fairness and the integrity of the justice system and therefore duties are imposed on all parties and potential parties to preserve documents where there is reasonably contemplated litigation.
For the first time in 130 years, the Supreme Court addressed the doctrine of “spoliation”, which has historically been applied in situations where a party destroyed evidence to presume “that the spoiled evidence was harmful to the spoliating litigant’s case”. Canadian courts have repeatedly held that spoliation is an “evidentiary presumption” and not a tort or cause of action.
The Supreme Court affirmed these historical applications of the doctrine and went further, finding that “a form of abuse of process, spoliation amounts to egregious conduct that flies in the face of respect for the courts and the rule of law generally.”
The Court confirmed that a party alleging spoliation must establish four things: (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 the litigation; and (4) it is reasonable to infer that the evidence was destroyed to affect the litigation. If the court finds spoliation is established, the court will presume the destroyed evidence was unfavourable to the spoliator’s case. The burden then shifts to the spoliator to rebut this presumption.
The Supreme Court left for another day whether spoliation alone can constitute a tort or ground a cause of action. It also declined to decide whether negligent or inadvertent destruction of evidence could lead to spoliation. Nor did it provide general principles on when the court should infer the evidence was destroyed to affect the litigation and when it should not. In the case before it, however, the Supreme Court of Canada found that the fact that the bank destroyed evidence, despite a request in a document preservation letter, was enough to draw such an inference in the absence of contrary evidence.
The Court set out a non-exhaustive list of remedies for spoliation, including procedural remedies, evidentiary presumptions, exclusion of expert reports, costs orders, orders striking pleadings or defences, adverse credibility findings, granting substantial indemnity costs or punitive damages, granting an interlocutory injunction, or making a finding of contempt. The question of the appropriate remedy is for the trial judge. In all cases, the court should be proportionate: “The penalty for this conduct should be severe, but it should not be blind. In the modern world, spoliation can occur in any number of ways and to varying degrees. To enforce a one-size-fits-all mandatory remedy that imposes the “maximum penalty” may create disproportionate consequences.”
Accordingly, the Supreme Court upheld the finding of spoliation but overturned the award of damages due to improper application of the inferences flowing from the spoliation and remitted the assessment of damages back to the trial court.
Why This Case Matters
The Supreme Court of Canada could not be clearer: destroying or otherwise suppressing documents is an attack on the justice system, its fairness and integrity. Courts will respond, sometimes harshly depending on the facts. The decision directly impacts how businesses involved in Canadian litigation need to address document preservation:
- There is a legal duty to preserve evidence even when litigation has not commenced. A party cannot intentionally destroy evidence that is relevant to “reasonably contemplated litigation”. This means that where a business or person is reasonably put on notice of pending litigation, or even circumstances which could give rise to litigation, the party must take steps to preserve all evidence that may be relevant to the pending litigation. A party cannot ignore a litigation notice letter and destroy evidence because litigation has not been formally commenced. Whether and when litigation is reasonably contemplated will be a highly contextual assessment but a litigation notice or document preservation demand will typically be sufficient to trigger the duty to preserve documents.
- The duty to preserve evidence is immediate and ongoing once reasonable notice is given. The SS&C decision makes clear there is no grace period for preservation of evidence once reasonable notice of pending litigation is triggered. This means that companies need to have in place systems to immediately create and implement litigation holds which reasonably identify the categories of documents that need to be preserved and the custodians who may possess such records. This exercise may require the involvement of in-house or external counsel to identify the scope of the hold, especially where the potential volume of documents is large or where the litigation notice does not clearly articulate the categories of documents that need to be preserved.
- All evidence must be preserved: paper records, electronic data and physical evidence. The duty of preservation makes no distinction between paper documents, electronic records or physical evidence (such as products or even buildings). It was not an excuse in SS&C that the bank had a document retention policy which automatically deleted data after a certain period, which operated despite the document demand and retention letter. Once a company is put on notice of litigation, it needs to immediately take steps to ensure records are not deleted, including by disabling or overriding document retention policies. Equally, in situations involving physical evidence, such as in product liability cases, parties must take steps to preserve physical evidence.
