The Supreme Court of Canada Affirms Mandatory Adverse Inference for Spoliation

After more than a century, the Supreme Court of Canada has revisited the evidentiary doctrine of spoliation and the available remedies in SS&C Technologies Canada Corporation v. Bank of New York Mellon Corporation, 2026 SCC 29 (SS&C). The Court described spoliation as “the intentional destruction, alteration, mutilation or concealment of evidence with a view to subverting the truth-finding process during litigation”. In a unanimous decision, the Court held that, upon establishing spoliation, a trial judge must presume that the evidence would have been unfavourable to the spoliating party. The precise contours of any adverse inference that a judge draws are discretionary (like any other remedy that the judge may award), but the inference must be “capable of filling the gap left in the evidence”.

Background and Procedural History of SS&C

The case involves a dispute between the Canadian affiliate of the world’s largest hedge fund and private equity administrator (SS&C), and the world’s largest custodial bank (BNY). Their agreement contemplated that SS&C’s client would be Mellon Trust—SS&C interpreted the reference to Mellon Trust to solely refer to BNY. SS&C alleged that BNY breached their agreement by distributing data that SS&C provided to BNY affiliates. BNY, however, alleged that SS&C’s client included BNY and its affiliates.

SS&C succeeded in its allegation that BNY breached the agreement by distributing data to some or all of its affiliates at all levels of court.

While much of the case before the trial court and the Court of Appeal for Ontario focus on the interpretation of the contract as between the parties, the appeal focused on SS&C’s allegation of spoliation against BNY. On the facts, shortly after the unauthorized data sharing was first discovered, SS&C wrote to BNY asking it to preserve relevant records. BNY declined to preserve and produce those records because, as the Supreme Court of Canada summarized, “it rejected the allegations that SS&C had made against it”. The destruction of evidence led the trial judge to infer that the unaccounted for data was used by unauthorized entities and to decline to conclude that BNY’s affiliates made only de minimis use of the data as BNY requested. At the same time, the trial judge declined to find that BNY had spoliated evidence, and stated that adverse inferences “have nothing to do with spoliation”.

In assessing damages at US$5,696,850 of SS&C’s alleged damages of US$889,752,087, the trial judge applied a “rateable approach”, whereby he inferred that only the data for which BNY could not account had been shared with unauthorized entities, and that it was only shared once. SS&C appealed the trial judge’s damages assessment.

The Court of Appeal upheld the trial judge’s inferences, while clarifying that a finding of spoliation may result in an adverse inference, and that SS&C had established that BNY spoliated – the Court of Appeal held that BNY’s conduct “smacked of contempt for the justice system”. At the same time, the Court of Appeal acknowledged that the scope of any adverse inference (whether based on spoliation or otherwise) is “a highly discretionary fact-based assessment which must be accorded deference”, and largely upheld the trial judge’s damages assessment on that basis.

The Supreme Court of Canada’s Approach to Spoliation

Upon reviewing the history of the doctrine of spoliation, the Supreme Court identified the following four elements that a party must prove on a balance of probabilities:

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 said litigation; and
4. It is reasonable to infer that the evidence was destroyed to affect the litigation.

Element 4 appears to present a lower threshold when compared to the corresponding articulation applied by the Court of Appeal, namely that “the alleging party must prove a mala fides desire to prevent the use of the document in litigation, suppress the truth and thus impact the outcome of the litigation”.

This test arises from what the Supreme Court of Canada described as the parties’ duty “to preserve, disclose and produce documents relevant to litigation”. The Court further grounded its approach in the need to sanction “egregious conduct” that is contrary to the rule of law.

If the test for spoliation is made out, the court presumes that the destroyed evidence was unfavourable to the spoliator and, if the presumption is not rebutted, the court must draw an adverse inference. The scope of the adverse inference varies with the facts, and the spoliator can bring evidence to narrow the scope of the inference. But the inference drawn should be proportional to the wrongdoing.

The Court also identified that other remedies for spoliation may be available, including striking a claim or defence, making adverse credibility findings, ordering substantial indemnity costs or punitive damages, excluding expert reports, issuing an interlocutory injunction or making a finding of contempt.

The Court declined to decide if spoliation constitutes an independent tort, or only a rule of evidence. The Court also declined to decide whether “negligent destruction of evidence”, unlike BNY’s intentional destruction of evidence, may constitute spoliation.

Application to SS&C

The Supreme Court of Canada maintained the Court of Appeal’s conclusion that BNY spoliated, holding that BNY’s refusal to store data based on its rejection of SS&C’s allegations established that “the only possible inference is that the evidence was destroyed or not produced in order to affect this litigation”. The Supreme Court of Canada noted in particular the importance of BNY’s express refusal to comply with SS&C’s preservation notice.

The Supreme Court of Canada concluded, however, that the adverse inferences that the trial judge drew were “weak and incomplete”, which “improperly burden SS&C with the uncertainty and gaps in the evidence caused by BNY’s spoliation”.

The Court noted that BNY wrongly shared data with 65 unauthorized entities over 17 years—in other words “millions of data points tracking BNY’s use of SS&C’s proprietary data were spoliated”. By only inferring that at least one unauthorized entity used the data and the use was “more than trifling”, the trial judge left the “practical impact of the spoliation… unremedied”. While the Supreme Court of Canada did not identify what inferences the trial judge should have drawn, they provided an example: “the trial judge could have inferred that the missing evidence was as damaging to BNY’s case as reasonably possible. That would mean that each of the 65 entities that could have accessed the data did so and that they each used all of the data that they could access”.

The wanting adverse inferences also led the Supreme Court of Canada to conclude that the trial judge’s rateable approach to quantifying damages was erroneous. The Supreme Court of Canada, therefore, remitted the case back to the Ontario Superior Court of Justice for the trial judge “to properly draw mandatory adverse inferences that remedy the effects of BNY’s spoliation”. The Court held that the inference must result “in a concrete finding of fact relating to the unauthorized data usage… and a concrete finding of fact about the value of the data”.

Conclusion

SS&C provides courts and litigants with clear direction to mandate adverse inferences when spoliation is established, and that the inferences drawn must lead to factual findings that meaningfully bridge the gap resulting from the intentionally destroyed evidence. SS&C also provides the following takeaways for litigants:

1. Take preservation notices seriously. A party may do serious damage to its litigation position by ignoring preservation notices, even if it disagrees with the merits of the allegations underlying those requests.
2. While it remains to be seen how courts will interpret and apply the SS&C test for spoliation, the Supreme Court of Canada appears to have lowered the threshold. As articulated, a party that intentionally destroys relevant evidence when litigation is active or contemplated will be found to have spoliated if it is reasonable to infer that the party intended to affect the litigation.
3. Whether spoliation may constitute a tort, and whether negligent destruction of evidence may constitute spoliation, remain open questions in Canada.