All About Information

The Ontario Superior Court of Justice issued an order setting aside an Anton Piller order on April 8^th. The judgement is another stressing the extreme burden on parties who seek such orders.

The Anton Piller was initially granted in 2006 in support of a departing employee claim that included allegations of fraud and breach of confidence. The Court it aside because the plaintiff failed to fully and frankly disclose material facts and failed to make reasonable inquiries into material facts. More specifically, it held the plaintiff:

• failed to ask customers whose business it claimed was lost or threatened due to the individual defendant’s actions whether they had been approached by the individual defendant;
• failed to disclose that a customer relationship on which it relied was responsible for only a 2% portion of its gross profit; and
• despite raising the difficulty in seeking production of the individual defendant’s MS Hotmail (which resided in the United States), failed to disclose that it had launched an action in Texas against the individual defendant’s new employer concurrently with its Ontario action, that it had sent a preservation letter to the new employer in conjunction with the action and that it had an agreement from Microsoft to retain the individual defendant’s MS Hotmail e-mails indefinitely.

The Court also criticized the execution of the order and, in particular, a search conducted of the purse of the individual defendant’s wife (also named). The Court said:

[The plaintiffs] were authorized to search for paper documents and electronic data related to Factor’s business, the business of Lanxess and Jean’s potential use of documents from Factor to promote his own and Bigler’s business interests. I question whether any of this material was reasonably likely to be found in Margaret Jean’s purse.

Also interesting, though it was neither challenged nor part of the Court’s consideration: the plaintiff discovered significant evidence of wrongdoing and determined the relevance of the individual defendant’s MS Hotmail account by installing spyware on his computer while he was employed.

Factor Gas Liquids Inc. v. Jean, 2008 CanLII 15900 (ON S.C.).

On March 25th, the Ontario Superior Court of Justice dismissed a motion brought by defendants after their documents and things seized under an Anton Piller order were lost by the supervising solicitor.

The disposition of the motion was strongly-driven by the defendants’ intent. The Court noted that their main reason for bringing a motion was not to attack the Anton Piller but, rather, was to seek a dismissal and damages for the plaintiffs’ role in the alleged unreasonable retention of evidence. This intent was highlighted by the defendants’ failure to attend the hearing at which the Anton Piller order was confirmed. As for the plaintiffs’, their approach was to implicate an individual defendant in the loss of evidence by blaming him, for example, for failing to copy documents in accordance with an alleged agreement between the parties.

The Court held that the plaintiffs’ had not established any basis for modifying or setting aside the Anton Piller order and provision in it that enjoined the defendants from continuing to engage in allegedly infringing business activities. It also held that the claim for damages and a dismissal of the action were premature and best resolved after a trial, except that the defendants could bring a summary judgement motion to forward their argument that the loss of evidence prejudiced their defence. On this point, it said:

The defendants therefore rely solely on the loss of the Evidence and their allegations that the plaintiffs are responsible for the loss in support of their request for a dismissal of the action. I think this is insufficient to succeed on such a motion. The loss of the Evidence by itself is not determinative of the issue of prejudice and the ultimate responsibility for the loss is irrelevant (unless the loss were due to the defendants’ actions). The important point is that there is no reason or evidence put forward by the defendants that suggests that the Evidence would have provided a defence to the plaintiffs’ allegations regarding the defendants’ business. Accordingly, the evidence before the Court on the issue of prejudice is not sufficient at this time to demonstrate prejudice that would entitle the defendants to the requested relief.

Bell ExpressVu Limited Partnership v. Echostar Satellite LLC, 2008 CanLII 12837 (ON S.C.).

On February 4th, the Alberta Court of Appeal dismissed an appeal of an order that allowed a plaintiff in a departing employee case full access to hard drives it had seized earlier in executing an Anton Piller order.

The defendants were initially ordered to produce a further and better affidavit of documents, failing which the plaintiffs would be given direct access to the seized hard drives (subject to confidentiality terms to be agreed upon or ordered). The defendants did not appeal the order and went ahead and negotiated a confidentiality order. The Court later held them to be in breach of the previous order, and confirmed the production order after rejecting arguments that it would be overly burdensome.

The Court of Appeal said, “…the chambers judge’s order is plainly supported by ample evidence. The law as to orders for a further and better affidavit of records also supports the order, as does the earlier order of the case management judge.”

See here for my post on the chambers judge’s decision.

Spar Aerospace v. Aerowerks Engineering Ltd., 2008 ABCA 47.

On November 23rd, the Ontario Superior Court of Justice set aside an Anton Piller order in favour of a preservation order.

The Court held that the plaintiff had failed to prove a real possibility that the defendant would destroy incriminating documents or things and, alternatively, that the scope and quality of the electronic records seized weighed against the order. There are significant parts to both findings.

On the possibility of destruction finding, the Court rejected the plaintiff’s argument that the impermanent nature of arguably relevant electronic evidence justified the Anton Piller. Although not entirely clear from the award, the plaintiff appears to have argued that records of web-browsing were relevant and that the search was necessary because web pages and IP log files stored in memory and swap files would be subject to loss in the ordinary course. The Court said:

This evidence does not support an allegation of intentional destruction of evidence, to justify the court’s interference. It does not tell the court when evidence may be lost by use of computers in the ordinary course of business. Inadvertent over-writing of files by on-going use of computers could be addressed by a demand to preserve evidence.

The Court was also not impressed with the plaintiff’s execution of the order. For one, it seized a home computer belonging to a personal defendant without authorization. More fundamentally, the Court took issue with scope of the order itself (citing Celanese for the proposition that the scope of the order should be as narrow as possible) and the fact that it enabled the plaintiff to seize virtually all of the defendant’s records. It said:

The scope of documents seized under the order is breathtaking. It includes documents that are personal in nature, such as private e-mails unrelated to the Wasaya workplace, individual banking records, income tax returns, personnel files, patient’s medical records, and other materials that have no relevance whatever to the allegations NAC makes in this litigation. It also includes confidential business records such as financial statements for Wasaya, marketing plans, restructuring plans and other documents bearing on Wasaya’s market position as NAC’s competitor. Documents related to other litigation involving Wasaya, and protected by solicitor-client privilege, were also caught in the net.

In the result, the Court substituted a non-specific order to, “preserve documents relevant to the issues in this litigation and to produce such documents as may be required in accordance with the Rules of Civil Procedure.”

NAC Air, LP v. Wasaya Airways Limited, 2007 CanLII 51168 (Ont. S.C.J.).

On November 21st, the Ontario Superior Court of Justice dismissed a motion to set aside an Anton Piller order granted to the plaintiff on evidence that the defendants had been involved in the sale and acquisition of satellite piracy hardware.

Motions to set aside Anton Piller orders are often granted for failure to meet the very high standard of disclosure (”full and frank”) or the equally high standard of conduct in execution. In this case, the defendant raised ten bases for setting aside the order, all of which were rejected by Madam Justice Pepall. Of greatest significance:

• Pepall J. refused to set aside the order because it was not executed by a peace officer. She stated that an Anton Piller need not be executed by a police officer despite the Court’s earlier statement in Ridgewood v. Robbie. She noted that the Supreme Court of Canada’s subsequent decision in Celanese did not endorse such a requirement.
• Pepall J. followed Ferenczy to excuse the fact that the computer forensics specialist whose evidence was adduced in support of the Anton Piller ought to have been licensed under the now-repealed Private Investigators and Security Guards Act.

In one sense, this award demonstrates effective use of an important and powerful civil remedy. In another, it may highlight how a defendant’s response to an Anton Piller can work to its prejudice. The defendant initially denied entry to his premises and, though he permitted entry later the same day, two computers subject to the search were missing hard drives. One wonders whether this misconduct (found earlier to be done in contempt) tempered Pepall J.’s inclination to apply the extremely unforgiving approach typically applied when persons who have executed Anton Piller orders are brought back before the court.

Bell ExpressVu Limited Partnership v. Rodgers (Tomico Industries), 2007 CanLII 50595 (Ont. S.C.J.).

On August 31, the Alberta Court of Queen’s Bench declared that the plaintiff in a departing employee case was entitled to enforce a default order that allowed it direct access to a number of hard drives it had seized earlier in executing an Anton Piller order.

The plaintiff was granted an Anton Piller order at the outset of litigation. It seized hard drives but did not inspect them.

As the litigation proceeded, a case management judge ordered the defendants to serve and file an affidavit of records by a certain date, failing which the plaintiffs would have direct access to the hard drives (subject to confidentiality terms to be agreed upon or ordered). The parties subsequently consented to a joint confidentiality order.

The Court held that the defendants did not provide an adequate affidavit of records because they did not disclose a number of records related to their involvement in a consortium that had bid successfully for a contract formerly held by the plaintiff and did not disclose all relevant e-mails and deleted files. It also held that the defendants should have produced the passwords, systems files and software necessary to access files in their native format and should have processed the electronic records for export into a litigation support software program.

The Court also rejected the defendants’ justifications. It held that the records pertaining to the consortium would be adequately protected by the implied undertaking rule and the joint confidentiality order. It also held that the defendants had not shown that electronic production (as ordered) would be unduly burdensome. On this point, the Court said:

The unusually high level of disclosure imposed in this case is justified by: the underlying fact that the defendants were employees of the plaintiff when they began working in competition with the plaintiff, the judicial determination that this was an appropriate case in which to issue an Anton Piller order, the size of the claim, which exceeds $50 million, and the great IT expertise of the parties which presupposes that at least some of the work required to provide the required level of disclosure can be done in-house.

Spar Aerospace Limited v. Aerowerks Engineering Inc., 2007 ABQB 543 (CanLII).

On July 31st the British Columbia Court of Appeal held that a plaintiff who was granted an Anton Piller order based on a material non-disclosure should not be prohibited from using an e-mail obtained in the search.

The plaintiff (who was unrepresented) obtained an ex parte order requiring the defendant to disgorge computer hardware and electronic and physical records related to his claim.  At the same time he, was denied an Anton Piller order and granted leave to re-apply if he served a notice of application on the plaintiff the same day.  The plaintiff executed the disgorgement order but did not serve the notice.  When the defendant did not comply, the plaintiff applied for an Anton Piller order before a different judge and did not disclose service condition imposed by the first judge.  He also drafted and entered an order broader than disclosed in the transcript of the proceeding (in that it allowed for both seizure and copying and not just seizure).

Although the Court acknowledged the high standard on a party seeking an Anton Piller and noted that the plaintiff deliberately mis-drafted the order, it held that enjoining use of the e-mail would do too great an injustice to the plaintiff.  In balancing interests, it relied on (1) the fact that the motion to discharge the search order that was under appeal was brought over a year after the search, (2) that the defendant did not have clean hands in that the search was ordered after his failure to comply with the disgorgement order (in which the e-mail ought to have been produced) and (3) that the e-mail was central to the dispute.  The Court also held that the chambers judge erred in excluding a single e-mail because of its relevance to the dispute.

Solara Technologies Inc. v. Beard, 2007 BCCA 402.