Copyright 2008, Blake, Cassels & Graydon LLP
Originally published in Blakes Bulletin on Litigation, April, 2008
In 2004, amendments to the Criminal Code were enacted to permit law enforcement agencies to issue production orders compelling innocent third parties to produce documents and data for use in criminal investigations. The financial burden imposed on the third party to comply with these orders can be tremendous, particularly for companies in the financial services and communications sectors who may be called upon to respond to several orders in a particular fiscal year.
On March 28, 2008, in Tele-Mobile Co. v. Ontario, 2008 SCC 12, the Supreme Court of Canada ruled that a judge cannot award compensation to a third party for the reasonable costs of complying with such an order. The Court, however, confirmed that in particularly onerous circumstances, the third party may be relieved of its production obligations.
The Statutory Scheme
Sections 487.012 to 487.017 of the Criminal Code permit law enforcement agencies to obtain orders requiring third parties to produce or generate documents and data. These orders are granted on an ex parte basis, upon the judge being satisfied that there are reasonable grounds to believe that the third party has possession or control of documents or data that will afford evidence respecting the commission of an offence. The judge has power to impose terms or conditions as he or she considers advisable in the circumstances.
After an order is issued, the third party may apply for an exemption from the order's requirement to produce any document, data or information. The judge may grant the exemption if he or she is satisfied that:
(a) the document, data or information would disclose information that is privileged or otherwise protected from disclosure by law;
(b) it is unreasonable to require the applicant to produce the document, data or information; or
(c) the document, data or information is not in the possession or control of the applicant.
A third party who does not comply with a production order is guilty of a criminal offence punishable by a fine not exceeding C$250,000 and/or imprisonment for a term not exceeding six months.
On September 30, 2004 and October 5, 2004, two production orders were issued compelling the Appellant, the Tele-Mobile Company, to produce reports setting out all information regarding every incoming and outgoing call on its cellular network from August 1, 2003 to January 12, 2004, and March 10, 2004 to March 24, 2004. The information sought had already been archived and shipped off site. Accordingly, substantial labour and equipment costs were engaged by these orders.
The Appellant sought exemptions from each of the two production orders on the basis that the financial burden of compliance would be unreasonable without compensation. On first instance, these applications for exemption were dismissed. The Appellant appealed directly to the Supreme Court of Canada, where the issue before the Court was whether a judge has the power to impose a term or condition that the police compensate a third party for expenses incurred in complying with the order, and whether ordering production without compensation was unreasonable.
The Supreme Court's Decision
On appeal, the unanimous Supreme Court held that there was no jurisdiction for a judge to order compensation for complying with production orders. While acknowledging the concern that certain types of business, such as the financial services and communications sectors, will necessarily be the object of repeated production orders, the Court held that the cost and burden of such requests are incidental to normal operations in these areas and part of the civic duties that Canadian citizens and business must incur as part of the overall responsibility of society as a whole to bring offenders to justice.
The Court, however, recognized that unreasonable production orders are not without remedy; where a production order is unreasonable, a full or partial exemption may be obtained. Where the financial consequences are so burdensome that it would be unreasonable in the circumstances to expect compliance, an exemption may be granted. The consideration of whether financial consequences render compliance unreasonable will be informed by a variety of factors, including:
(a) the breadth of the order being sought,
(b) the size and economic viability of the third party, and
(c) the extent of the order's financial impact on the third party.
Where the third party is a repeated target of production orders, the cumulative impact of multiple orders may also be relevant.
Finally, the Court recognized that, although a judge cannot make compensation a term of the order, the parties are free to negotiate their own arrangements regarding compensation in the face of a likely finding of unreasonableness.
While this decision exposes third parties, particularly those in the financial services and communications sectors, to the costs associated with responding to production orders, there is an ability to exert a degree of control over these costs. Where the production order is overly broad, or unduly onerous, it may be appropriate to negotiate with the law enforcement agency to reduce the scope of the order, or to make arrangements for compensation. Should this approach fail, the courts have jurisdiction to grant relief from unreasonable orders. Finally, as the cumulative impact of multiple orders may be taken into consideration, the costs of compliance for every production order should be tracked in order to increase the prospects of resisting future unreasonable orders. With this proactive approach, the costs associated with unreasonable production orders may be managed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.