Handle With Care: Supreme Court Of Canada Affirms “Severe” Penalties For Spoliation Of Evidence

On July 31, 2026, the Supreme Court of Canada provided comprehensive guidance in SS&C Technologies Canada Corp. v. Bank of New York Mellon Corp. on the doctrine of spoliation of evidence. The Supreme Court held that “severe” penalties should be imposed on a party found to have intentionally destroyed, altered, mutilated or concealed evidence when litigation was ongoing or reasonably contemplated. The decision highlights the importance of preserving evidence as soon as litigation is reasonably contemplated — and of notifying a counterparty of the documents it should preserve.

Background

In 1999, the plaintiff data provider began providing market pricing data to the defendant bank under a licence agreement (Agreement). In 2016, the plaintiff discovered that the defendant had shared the data with at least one of its affiliated entities, which the plaintiff asserted was contrary to the terms of the Agreement. The plaintiff very soon after demanded a full accounting of data usage by the defendant and its affiliates, and further demanded that the defendant preserve all communications, documents and files related to the parties’ relationship and the provision or sharing of data with third parties.

Lower Court Decisions

The trial judge found that the defendant breached the Agreement by sharing the licensed data with affiliates. However, because the defendant had failed to preserve data, it could account for only 44.6% of the licensed data. The trial judge did not expressly find spoliation, but he drew adverse inferences that the remaining data had been used by unauthorized affiliates, and that the use was more than minimal. He awarded damages of nearly US$5.7-million.

The Court of Appeal for Ontario reversed the decision in part. It expressly found spoliation and held that the remedy for spoliation is not limited to damages, and that adverse inferences are available remedies where spoliation is proved. The Court of Appeal did not interfere with the adverse inferences drawn by the trial judge and largely affirmed the damages award.

The Supreme Court of Canada Decision

The Supreme Court of Canada allowed the plaintiff’s appeal, set aside the damages award and remitted the matter to the trial court for a new assessment of damages. In doing so, it substantively addressed the doctrine of spoliation of evidence for the first time since 1896.

The Supreme Court explained that spoliation — a form of an abuse of process — is the intentional destruction, alteration, mutilation or concealment of evidence with a view to subverting the truth-finding process in litigation. Spoliation is egregious conduct that flies in the face of respect for the courts and the rule of law. The penalty should be “severe” and may include striking a claim or defence, adverse findings of credibility, substantial indemnity costs or punitive damages, excluding expert reports, injunctions, and a finding of contempt.

To prove spoliation, the alleging party must show on a balance of probabilities that:

1. 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
4. It is reasonable to infer that the evidence was destroyed to affect the litigation

If the alleging party proves these elements, the court presumes that the destroyed evidence was unfavourable to the spoliator’s case. The burden then shifts to the spoliator to rebut this presumption by showing that the destroyed evidence was not harmful to its case. If the spoliator cannot rebut the presumption, then it becomes mandatory and adverse inferences must be drawn. At this stage, the spoliator may bring evidence to potentially narrow the scope of any adverse inferences drawn.

Once spoliation is established, the court must draw an adverse inference capable of meaningfully filling the evidentiary gap left by the spoliation. The scope of that inference depends on the circumstances and prejudice caused to the non-spoliating party.

The Supreme Court expressly declined to address whether negligent destruction of evidence may qualify as spoliation, or whether spoliation should be recognized as an independent tort in Canada.

In the case at hand, the Supreme Court concluded that the plaintiff’s preservation demand “removed any doubt that [the defendant] was under an obligation to preserve the data as relevant evidence,” and that the defendant had committed spoliation. It also found that the adverse inferences drawn by the trial judge were weak, incomplete and failed to plug the evidentiary gap left by the spoliation. The Supreme Court therefore remitted the quantification of damages to the trial court, which will be required to draw adverse inferences that should result in concrete factual findings about the scope of unauthorized data usage and the value of that data.

Key Takeaways

• Implement litigation holds early and proactively. Preservation obligations arise once litigation is reasonably contemplated — not only after a claim is filed or served.
• Consider sending and responding to preservation demands early. A document preservation demand may remove doubt that a party is under an obligation to preserve evidence.
• Document and monitor preservation efforts. Maintain records of litigation holds and preservation steps taken. Record retention and litigation hold policies and practices should be sufficiently robust to prevent spoliation.