Canada: Critical Ontario Appeal Decision On Preservation Of Property

Preservation of property during litigation is dealt with under rule 45 of the Ontario Rules of Civil Procedure. The traditional test under rule 45 was designed for situations where the thing being preserved was the subject of the litigation, such as an asset over which ownership was disputed. This test was not appropriate for all of the situations when rule 45 motions might arise. The Ontario Court of Appeal recently determined that a single test for rule 45 motions does not exist. The governing test will vary depending on the purpose of the motion. Accordingly, the test on a rule 45 motion for preservation of an asset at issue in the claim will not apply to a rule 45 motion seeking to preserve evidence for trial and inspection. Moreover, the Court also confirmed, without providing detail, that litigants have an obligation to preserve evidence pending trial.

A. Background

In BMW Canada v Autoport Limited,¹ the plaintiff sued the defendant after nearly 3,000 vehicles belonging to the plaintiff (the “Vehicles”) were allegedly damaged under the defendant's care. The plaintiff claimed a total loss for all of the Vehicles, which it claimed could not be sold or scrapped for parts. The plaintiff intended to destroy them on the basis that they were not required to prove the plaintiff's claim or theory of damages. The plaintiff had already inspected and tested the Vehicles but refused to share this information or its testing procedure with the defendant.

The defendant sought an interim preservation order under rule 45.01. The plaintiff did not oppose the preservation order, but the dispute was over who had to store the Vehicles and pay for the storage which, given the number of vehicles, was going to be very expensive.

B. Lower Court Decisions

At the initial motion, the Master applied the traditional test under rule 45 and determined it was not met. As a result, the Master ordered the defendant to take custody of the Vehicles or pay for their storage costs. On appeal to a judge of the Superior Court, the Judge reversed the Master's decision, ordered the preservation of the Vehicles and held that the plaintiff was responsible for the preservation costs. With leave, the plaintiff appealed to the Divisional Court, which restored the Master's order and held that there was no obligation for the plaintiff to preserve the evidence. With leave, the defendant appealed to the Ontario Court of Appeal.

C. The Ontario Court of Appeal's Decision

The Court of Appeal held that there should not be a single test for rule 45 motions. The lower courts erred by applying the traditional test, which only applies when the moving party is claiming a specific interest in the property or funds at issue in the litigation.

When the motion is seeking to preserve property as evidence for inspection, the goal of any order is to ensure trial fairness. Accordingly, a court should consider: (1) the issues in dispute in the litigation; (2) the relevance and materiality of the property as evidence; (3) the purpose for which interim preservation is sought and its proposed duration; and (4) the benefits and harm or prejudice to the interests of each party in the litigation.

The Vehicles were clearly evidence because the defendant was denying liability for damage to the Vehicles. Although the plaintiff may not have required the Vehicles, the defendant needed to test and inspect them for its defence. The defendant could not do this until the plaintiff provided information about how it tested and inspected the Vehicles. Accordingly, the plaintiff would not be prejudiced if it was responsible for the cost of preserving the Vehicles. These costs could have been avoided if the plaintiff had agreed to develop a joint testing procedure with the defendant or provided the defendant with the information that it was seeking. This was also not a case where the cost of preservation was disproportionate to the value of the evidence to the party seeking preservation.

A preservation order would not interfere with the plaintiff's duty to mitigate as the plaintiff was not seeking to repair the Vehicles or otherwise obtain value from them. In fact, because the plaintiff was claiming a total loss, the defendant was entitled to inspect the Vehicles to show the plaintiff did not mitigate its damages. The plaintiff could recover the preservation costs if it was successful at trial.

The Court ordered the plaintiff to preserve the Vehicles and pay the costs of doing so until the defendant received information about the plaintiff's testing procedure and was able to determine which Vehicles it wanted to take into custody.

Although the decision primarily focused on rule 45 motions, the Court also confirmed the duty of litigants to preserve evidence, contrary to what the Divisional Court held. This determination is consistent with previous cases that have recognized the tort of spoliation, a claim in relation to the destruction of evidence, in Ontario and throughout the rest of common law Canada. It is also consistent with common sense to ensure that parties do not try to destroy evidence. Questions remain, such as how far the duty extends.

D. Conclusion

While litigation may be adversarial, this decision confirms that courts expect a basic level of cooperation between the parties. If a party wants to rely on certain evidence, it cannot destroy that evidence before the other party can meaningfully examine it. To do so would be manifestly unfair. Moreover, when parties bring a motion to preserve evidence, the test will reflect the fundamental concerns with trial fairness, as opposed to the application of a test that is more appropriate for a different context.

Footnotes

1 2021 ONCA 42; 2019 ONSC 4299 (Div. Crt); 2018 ONSC 4208 (Ont. S.C.).

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