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                                                 SUPREME COURT OF CANADA

 

 

Citation:  Celanese Canada Inc. v. Murray Demolition Corp., [2006] 2 S.C.R. 189, 2006 SCC 36

 

Date:  20060727

Docket:  30652

 

Between:

Canadian Bearings Ltd.,

Farrokh Khalili, Hossein Banijamali and

Canadian Petroleum Processing & Equipment Inc.

Appellants

and

Celanese Canada Inc. and

Celanese Ltd.

Respondents

‑ and ‑

Advocates’ Society and

Canadian Bar Association

Interveners

 

Coram: McLachlin C.J. and Bastarache, Binnie, LeBel, Deschamps, Fish and Charron JJ.

 

 

Reasons for Judgment:

(paras. 1 to 71)

 

 

Binnie J. (McLachlin C.J. and Bastarache, LeBel, Deschamps, Fish and Charron JJ. concurring)

 

 

______________________________


Celanese Canada Inc. v. Murray Demolition Corp., [2006] 2 S.C.R. 189, 2006 SCC 36

 

Canadian Bearings Ltd.,

Farrokh Khalili, Hossein Banijamali and

Canadian Petroleum Processing & Equipment Inc.                                      Appellants

 

v.

 

Celanese Canada Inc. and

Celanese Ltd.                                                                                               Respondents

 

and

 

Advocates’ Society and

Canadian Bar Association                                                                             Interveners

 

Indexed as:  Celanese Canada Inc. v. Murray Demolition Corp.

 

Neutral citation:  2006 SCC 36.

 

File No.:  30652.

 

2005:  December 12; 2006:  July 27.

 

Present:  McLachlin C.J. and Bastarache, Binnie, LeBel, Deschamps, Fish and Charron JJ.

 

on appeal from the court of appeal for ontario

 


Civil procedure — Removal of counsel — Plaintiffs’ lawyers seizing electronic documents from defendants’ premises pursuant to Anton Piller order later found to include documents subject to solicitor‑client privilege — Plaintiffs’ lawyers conducting partial review of documents — Defendants seeking to remove plaintiffs’ lawyers as solicitors of record — Whether onus on plaintiffs to rebut presumption of prejudice — Whether plaintiffs’ lawyers should be removed.

 

Civil procedure — Anton Piller order — Requirements for order — Guidelines for preparation and execution of order.

 


Celanese sued Canadian Bearings for alleged industrial espionage.  Following an ex parte application, a motions judge granted Celanese an Anton Piller order against Canadian Bearings.  The order did not contain a provision dealing with privileged documents.  It  was  executed by an accounting firm.  The search was overseen by an independent supervising solicitor.  The solicitors for Canadian Bearings, BLG, were also present at the search, but given the volume of electronic materials and the pace at which the search proceeded, BLG lawyers later complained that they were not given time to review the material adequately.  Frequently, entire folders would be copied electronically without examination of individual documents.  However, material that could be identified as potentially privileged was segregated into an electronic folder which was labelled “Borden Ladner Gervais”.  In the course of the search, about 1,400 electronic documents thought to be relevant, but not then screened for potential solicitor‑client privilege claims, were downloaded by the accounting firm onto a portable hard drive and copied onto CD‑ROMs.  These were placed in a plastic envelope and sealed.  The seal was initialled by a BLG lawyer and by the supervising solicitor.  The envelope was then given to the accounting firm.  Contrary to the express provision in the Anton Piller order, no complete list of the seized documents was made prior to their removal from the searched premises.  A lawyer from the law firm of CBB, representing Celanese, later directed the accounting firm to copy the envelope’s contents.  The seal was broken without the knowledge or consent of BLG or Canadian Bearings, and the contents copied onto CBB’s computer.  A copy was also provided to Celanese’s U.S. counsel, KBTF.  When BLG became aware that privileged documents had been transferred to CBB and KBTF, it dispatched a letter requesting their immediate return.  CBB and KBTF, rather than returning the documents as requested, advised BLG that the documents subject to the privilege claim had been deleted from their respective systems.  Canadian Bearings then brought this motion to disqualify CBB and KBTF from continuing to act for Celanese, but this was dismissed by the motions judge.  The Divisional Court allowed Canadian Bearings’ appeal and ordered that CBB and KBTF be removed.  The Court of Appeal set aside that decision, finding that neither of the courts below had applied the correct test for removal.  In its view, Canadian Bearings bore the onus of demonstrating that there is a real risk that opposing counsel will use information obtained from privileged documents to the prejudice of Canadian Bearings and that such prejudice cannot realistically be overcome by a remedy short of disqualification.  The matter was therefore remitted back to the motions judge for further consideration.

 

Held:  The appeal should be allowed.

 

This dispute presents a clash between two competing values — solicitor‑client privilege and the right of a party to select counsel of choice.  The conflict here must be resolved on the basis that no one has the right to be represented by counsel who has had access to relevant solicitor‑client confidences in circumstances where such access ought to have been anticipated and, without great difficulty, avoided and where the searching party has failed to rebut the presumption of a resulting risk of prejudice to the party against whom the Anton Piller order was made.  [2]


It is procedurally unfair not only to subject the defendant to the intrusion of a surprise search under the exceptional remedy of an Anton Piller order in the course of which its solicitor‑client confidences are disclosed to its opponent, but then to throw on it the onus of clearing up the problem created by Celanese’s carelessness.  The principal source of the present difficulty lies in the post‑search conduct of Celanese’s solicitors.  Having created the problem, it should bear the burden of resolving it.  [51]

 

An Anton Piller order is not placed in the hands of a public authority for execution, but authorizes a private party to insist on entrance to the premises of its opponent to seize and preserve evidence to further its claim in a private dispute.  The only justification for such an extraordinary remedy is that the plaintiff has a strong prima facie case and can demonstrate that on the facts, absent such an order, there is a real possibility relevant evidence will be destroyed or otherwise made to disappear.  The protection of the party against which an Anton Piller order is issued ought to be threefold:  (1) a carefully drawn order which identifies the material to be seized and sets out safeguards to deal, amongst other things, with privileged documents; (2) a vigilant court‑appointed supervising solicitor who is independent of the parties; and (3) a sense of responsible self‑restraint on the part of those executing the order with a focus on its limited purpose namely to preserve relevant evidence not to rush to exploit it.  [1] [31]

 


Under a properly executed Anton Piller order, the searching solicitors should be able to show with some precision what they have seized, what they have seen, who has seen it and the steps taken to contain the wrongful disclosure of confidences.  If Celanese’s solicitors, who were in frequent telephone contact with the supervising solicitor during the search, had insisted on a proper listing at the site of all the materials seized, the universe of potential confidences would as a starting point have been established.  Nevertheless, since the disputed electronic documents had been isolated on a hard drive and on CD‑ROMs and placed in a sealed envelope in the custody of the accounting firm, a complete listing could have been made in the days following the search with BLG counsel present.  This too was foreclosed by the precipitous and unilateral conduct of CBB.  There was no pressing need to open the envelope.  Neither CBB nor KBTF set out to obtain access to, or to gain some advantage from privileged material.  Their problem stems from carelessness and an excessively adversarial approach in circumstances that called for careful restraint in recognition of the exceptional position of responsibility imposed by the unilateral and intrusive nature of an Anton Piller order.  Remedial action in cases such as this is intended to be curative not punitive.  [34] [52‑54]

 

Here, the Court of Appeal erred in placing on Canadian Bearings’ lawyers the onus of establishing a real risk of prejudice.  Celanese’s lawyers who undertook a search under the authority of an Anton Piller order and thereby took possession of relevant confidential information attributable to a solicitor‑client relationship, bear the onus of showing there is no real risk such confidences will be used to the prejudice of Canadian Bearings.  Difficulties of proof compounded by errors in the conduct of the search and its aftermath should fall on the heads of those responsible for the search, not of the party being searched.  The onus was not met by the searching party in this case. [55]

 


The right of a plaintiff to continue to be represented by counsel of its choice is an important element of our adversarial system of litigation.  In modern commercial litigation, mountains of paper are sometimes exchanged.  Mistakes will be made.  There is no such thing, in these circumstances, as automatic disqualification.  If a remedy short of removing the searching solicitors will cure the problem, it should be considered.  In this respect, a number of factors should be taken into account:  (i) how the documents came into the possession of the plaintiff or its counsel; (ii) what the plaintiff and its counsel did upon recognition that the documents were potentially subject to solicitor‑client privilege; (iii) the extent of review made of the privileged documents; (iv) the contents of the solicitor‑client communications and the degree to which they are prejudicial; (v) the stage of the litigation; (vi) the potential effectiveness of a firewall or other precautionary steps to avoid mischief. [56‑59]

 


As to the first factor, the privileged documents came into the hands of CBB and KBTF under the Anton Piller order in a way that was unintended but avoidable.  Inadequate precautions were taken and those who fail to take precautions must bear the responsibility.  As to the second factor, CBB failed to have the electronic documents listed at the search site as required by the order, ignored the obvious significance of BLG’s initials on the sealed envelope containing the electronic documents and declined to return to BLG the material over which privilege was claimed as requested.  Although, CBB did take steps, as did KBTF, to contain the resulting damage, as a result of their errors the Court does not know, and Canadian Bearings cannot know, the potential scale of that damage.  As to the third factor, CBB and KBTF deny any substantive review of the privileged documents, but their review must have been sufficiently thorough for one of KBTF’s lawyers to classify documents as “Relevant, Irrelevant, Proprietary, and Hot”. Moreover, some of the documents initially read and classified as “Relevant” turned out (on a second reading) to be potentially subject to a claim of privilege.  As to the fourth factor, CBB and KBTF failed to discharge the onus of identifying the contents of the solicitor‑client communications which they accessed in the course of classifying the material.  It is therefore not possible to determine the degree to which they are prejudicial.  Again, Celanese’s solicitors created this problem by their failure to proceed with prudence.  As to the fifth factor, the litigation is at an early stage, and notice of the removal application was made near the outset.  Lastly, while CBB advised the court of a number of measures taken, it seems apparent that appropriate firewalls were not in place prior to the occurrence of the mischief.  In view of all the circumstances, the searching party did not produce sufficient evidence to demonstrate that the public represented by the reasonably informed person would be satisfied that no use of confidential information would occur. [60‑66]

 

Cases Cited

 


Applied:  MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235; distinguished:  Tilley v. Hails (1993), 12 O.R. (3d) 306; Aviaco International Leasing Inc. v. Boeing Canada Inc. (2000), 9 B.L.R. (3d) 99; Coulombe v. Beard (1993), 16 O.R. (3d) 627; Nova Growth Corp. c. Kepinski, [2001] O.J. No. 5993 (QL), leave to appeal refused, [2002] O.J. No. 2522 (QL), leave to appeal refused, [2003] 1 S.C.R. xiv; Michel v. Lafrentz (1992), 12 C.P.C. (3d) 119; referred to: Grenzservice Speditions Ges.m.b.H. v. Jans (1995), 15 B.C.L.R. (3d) 370; Ridgewood Electric Ltd. (1990) v. Robbie (2005), 74 O.R. (3d) 514; Netbored Inc. v. Avery Holdings Inc. (2005), 48 C.P.R. (4th) 240, 2005 FC 1405; Neumeyer v. Neumeyer (2005), 47 B.C.L.R. (4th) 162, 2005 BCSC 1259; Anton Piller KG v. Manufacturing Processes Ltd., [1976] 1 Ch. 55; Nintendo of America, Inc. v. Coinex Video Games Inc., [1983] 2 F.C. 189; Indian Manufacturing Ltd. v. Lo (1997), 75 C.P.R. (3d) 338; Netsmart Inc. v. Poelzer, [2003] 1 W.W.R. 698, 2002 ABQB 800; Pulse Microsystems Ltd. v. SafeSoft Systems Inc. (1996), 67 C.P.R. (3d) 202; Ontario Realty Corp. v. P. Gabriele & Sons Ltd. (2000), 50 O.R. (3d) 539; Proctor & Gamble Inc. v. John Doe (c.o.b. Clarion Trading International), [2000] F.C.J. No. 61 (QL); Adobe Systems Inc. v. KLJ Computer Solutions Inc., [1999] 3 F.C. 621; Lavallee, Rackel & Heintz v. Canada (Attorney General), [2002] 3 S.C.R. 209, 2002 SCC 61; Thermax Ltd. v. Schott Industrial Glass Ltd., [1981] F.S.R. 289; Descôteaux v. Mierzwinski, [1982] 1 S.C.R. 860; Havana House Cigar & Tobacco Merchants Ltd. v. Jane Doe (2000), 199 F.T.R. 12, aff’d (2002), 288 N.R. 198, 2002 FCA 75; Columbia Picture Industries Inc. v. Robinson, [1987] Ch. 38; Universal Thermosensors Ltd. v. Hibben, [1992] 1 W.L.R. 840; Sulphur Experts Inc. v. O’Connell (2000), 279 A.R. 246, 2000 ABQB 875.

 

Statutes and Regulations Cited

 

Civil Procedure Act 1997 (U.K.), 1997, c. 12, s. 7.

 

Civil Procedure Rules 1998, S.I. 1998/3132, r. 25.1(1)(h).

 

Criminal Code, R.S.C. 1985, c. C‑46 .

 

Federal Court Rules (Cth.), Order 25B.

 

Federal Courts Rules, SOR/98‑106, r. 374(1).

 

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 40.02.

 

Authors Cited

 

Australia.  Federal Court.  Practice Note No. 24, May 5, 2006.

 

Great Britain.  Civil Procedure, vol. 1, 2nd Supp., Part 25, Practice Direction — Interim Injunctions.  London: Sweet & Maxwell, 2005.

 

Sharpe, Robert J.  Injunctions and Specific Performance, loose‑leaf ed.  Aurora, Ont.:  Canada Law Book, 1998 (updated 2005, release 13).

 


APPEAL from a judgment of the Ontario Court of Appeal (Abella, Moldaver and Goudge JJ.A.) (2004), 73 O.R. (3d) 64, 244 D.L.R. (4th) 33, 190 O.A.C. 329, 1 C.P.C. (6th) 254, [2004] O.J. No. 3983 (QL), setting aside a decision of the Divisional Court (MacFarland, Macdonald and Campbell JJ.) (2004), 69 O.R. (3d) 632, 237 D.L.R. (4th) 516, 183 O.A.C. 296, 46 C.P.C. (5th) 285, [2004] O.J. No. 372 (QL), setting aside a decision of Nordheimer J. (2003), 69 O.R. (3d) 618, [2003] O.J. No. 4211 (QL).  Appeal allowed.

 

Robert B. Bell, Douglas M. Worndl and Benjamin T. Glustein, for the appellants.

 

Gavin MacKenzie and Michelle Vaillancourt, for the respondent Celanese Canada Inc.

 

Alan J. Lenczner, for the respondent Celanese Ltd.

 

C. Clifford Lax, Q.C., and M. Paul Michell, for the intervener Advocates’ Society.

 

Mahmud Jamal and Derek Leschinsky, for the intervener Canadian Bar Association.

 

The judgment of the Court was delivered by

 


1                                   Binnie J. — An Anton Piller order bears an uncomfortable resemblance to a private search warrant.  No notice is given to the party against whom it is issued.  Indeed, defendants usually first learn of them when they are served and executed, without having had an opportunity to challenge them or the evidence on which they were granted.  The defendant may have no idea a claim is even pending.  The order is not placed in the hands of a public authority for execution, but authorizes a private party to insist on entrance to the premises of its opponent to conduct a surprise search, the purpose of which is to seize and preserve evidence to further its claim in a private dispute.  The only justification for such an extraordinary remedy is that the plaintiff has a strong prima facie case and can demonstrate that on the facts, absent such an order, there is a real possibility relevant evidence will be destroyed or otherwise made to disappear.  The protection of the party against whom an Anton Piller order is issued ought to be threefold:  a carefully drawn order which identifies the material to be seized and sets out safeguards to deal, amongst other things, with privileged documents; a vigilant court-appointed supervising solicitor who is independent of the parties; and a sense of responsible self-restraint on the part of those executing the order.  In this case, unfortunately, none of these protections proved to be adequate to protect against the disclosure of relevant solicitor-client confidences.  Inadequate protections had been written into the order.  Those which had been provided were not properly respected.  The vigilance of the supervising solicitor appears to have fallen short.  Celanese’s solicitors in the aftermath of the search seem to have lost sight of the fact that the limited purpose of the order was to preserve evidence not to rush to exploit it.  In the result, the party searched (Canadian Bearings) now seeks the removal of Celanese’s solicitors (Cassels Brock & Blackwell LLP (“Cassels Brock”)) and to bar Celanese from making further use of their U.S. counsel (Kasowitz, Benson, Torres & Friedman LLP (“Kasowitz”)).

 


2                                   This appeal thus presents a clash between two competing values — solicitor-client privilege and the right to select counsel of one’s choice.  The conflict must be resolved, it seems to me, on the basis that no one has the right to be represented by counsel who has had access to relevant solicitor-client confidences in circumstances where such access ought to have been anticipated and, without great difficulty, avoided and where such counsel has failed to rebut the presumption of a resulting risk of prejudice to the party against whom the Anton Piller order was made.

 

3                                   This Court’s decision in MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235, makes it clear that prejudice will be presumed to flow from an opponent’s access to relevant solicitor-client confidences.  The major difference between the minority and majority in that case is that while the majority considered the presumption of risk of prejudice open to rebuttal in some circumstances (pp. 1260-61), the minority would not have permitted even the opportunity of rebuttal (p. 1266).  In the MacDonald Estate situation, the difficulty of dealing with the moving solicitor was compounded by the fact the precise extent of solicitor-client confidences she acquired over a period of years, was unknown, possibly unknowable, and in any event not something that in fairness to her former client should be revealed.  Thus Sopinka J. wrote that “once it is shown by the client that there existed a previous relationship which is sufficiently related to the retainer from which it is sought to remove the solicitor, the court should infer that confidential information was imparted unless the solicitor satisfies the court that no information was imparted which could be relevant.  This will be a difficult burden to discharge” (p. 1260).

 


4                                   The Anton Piller situation is somewhat different because the searching solicitors ought to have a record of exactly what was seized and what material, for which confidentiality is claimed, they subsequently looked at.  Here again, rebuttal should be permitted, but the rebuttal evidence should require the party who obtained access to disclose to the court what has been learned and the measures taken to avoid the presumed resulting prejudice.  While all solicitor confidences are not of the same order of importance, the party who obtained the wrongful access is not entitled to have the court assume in its favour that such disclosure carried no risk of prejudice to its opponent, and therefore does not justify the removal of the solicitors.  For the reasons that follow, I conclude, contrary to the view taken by the Court of Appeal, with respect, that Celanese and its lawyers did have the onus to rebut the presumption of a risk of prejudice and they failed to do so.  Accordingly, the appeal is allowed, the order of the Ontario Court of Appeal is set aside and the order of the Divisional Court is restored removing Cassels Brock as solicitors for Celanese and precluding the latter from continuing to seek the advice of Kasowitz, in connection with any Canadian litigation arising out of the facts alleged in the amended statement of claim.

 

I.       Facts

 

5                                   The underlying litigation in this case, which does not directly affect the disposition of this appeal, involves alleged industrial espionage.  Celanese operated a plant for the production of vinyl acetate in Edmonton.  It decided for business reasons to demolish the facility rather than sell it.  Celanese eventually retained the defendant, Murray Demolition, to undertake the demolition.  Precautions were put in place to prevent the unauthorized disclosure during demolition of valuable proprietary information evident in the plant’s design and processes.  Celanese discovered in April 2003 that certain of the defendants, including Canadian Bearings, were engaged in what appeared to be an attempt, under the cover of the demolition, to copy in various ways proprietary processes and equipment.  As a consequence, Canadian Bearings and others who had been given access to the site by Murray Demolition, were ordered off the property.  Celanese is now suing Canadian Bearings, among others, for allegedly stealing technology discovered during the demolition and making unauthorized use of it in the construction of a vinyl acetate facility in Iran.

 


6                                   On June 19, 2003, the motions judge granted Celanese’s ex parte application for an Anton Piller order against Canadian Bearings and others.  The issue of how to deal with privileged documents was not considered in the draft order placed before the motions judge and his formal order did not contain such a provision.  Nevertheless, all parties recognize that an Anton Piller order provides no authority whatsoever for access to a defendant’s privileged documents.

 

7                                   The order was executed on June 20 and 21, 2003, in the presence of two police officers by an independent accounting firm, BDO Hayes Smith (“BDO”), and was overseen by an independent supervising solicitor, Bernard Eastman, Q.C.  At the outset, Mr. Eastman spoke at the search site with a senior executive of Canadian Bearings.  He gave the executive a copy of the order and related documents, and explained its terms.  Mr. Eastman advised the executive that, pursuant to the terms of the order, he would have one hour to seek legal advice.  Shortly thereafter, the solicitors for Canadian Bearings, Borden Ladner Gervais LLP (“BLG”), arrived at the scene. The search was conducted over a period of 18 hours in circumstances that could be described as mildly chaotic.  Cassels Brock was not present at the search, but members of the firm were in frequent telephone communication with Mr. Eastman.

 

8                                   In the course of the search, privilege was claimed for certain paper documents which were then placed in a sealed folder in the custody of BDO until the merits of the claim could be resolved.  The issue of privilege arises at this stage only in connection with the electronic documents seized.

 


9                                   When it became apparent that some of the electronic documents might be subject to solicitor-client privilege, the BDO representative enlisted the help of BLG lawyers to facilitate their identification.  The process was rushed.  Given the volume of electronic materials and the pace at which the search proceeded, BLG lawyers later complained that they were not given time to review the material adequately.  Frequently, entire folders would be copied electronically without examination of individual documents.  However, material that could be identified as potentially privileged was segregated into an electronic folder which was labelled “Borden Ladner Gervais”.

 

10                               In the course of the search, approximately 1,400 electronic documents thought to be relevant, but not as yet effectively screened for potential solicitor-client privilege claims, were downloaded by BDO onto a portable hard drive and “burned” onto CD-ROMs.  These were placed in a plastic envelope and sealed.  The seal was initialled by a BLG lawyer and by Mr. Eastman.  The envelope was given to BDO.  Contrary to the express provision in the Anton Piller order, no complete list of the seized records was made prior to their removal from the searched premises.

 

11                               On June 23, 2003, lawyers from Cassels Brock and Kasowitz went to BDO to retrieve the seized documents. The Cassels Brock lawyer called the supervising solicitor, Mr. Eastman, to enquire about the sealed envelope containing the hard drive and CD-ROMs. Apparently satisfied there was no agreement that Cassels Brock would have to deal directly with BLG on the issue, he opened the envelope and directed BDO to copy the contents. After some delay, a CD containing copies of various e-mails was copied onto Cassels Brock’s computer.  A copy of the CD was not sent to BLG.  Subsequently, a Cassels Brock lawyer e-mailed colleagues:  “On June 24, 2003 representatives of Celanese, counsel from Kasowitz . . . and I attended at the offices of BDO . . . and reviewed all of the electronic documents seized from all of the defendants.”

 


12                               The CD turned out to contain privileged communications.  The Cassels Brock lawyer admitted to having reviewed “a few dozen e-mail[s] in full”, but said he did not recall reviewing “any e-mail that originated from or were sent to BLG”.

 

13                               A copy of the CD was also provided to Kasowitz and was reviewed by Todd Colvard, a Kasowitz lawyer based in Houston.  He was directed to classify the electronic documents as “Relevant, Irrelevant, Proprietary, and Hot”.  Colvard noticed that some of the e-mails were addressed to or from BLG, and so saved these in a separate fifth electronic folder which he marked “Privileged”.  He later found additional privileged documents in the folder marked “Relevant”, thus evidencing a measure of misclassification.  Other than for purposes of segregation, Colvard says he did not review “the substance of those messages”.

 

14                               When BLG discovered, on June 24, 2003, that the sealed envelope had been opened, some heated correspondence ensued.  Cassels Brock declined to provide BLG with copies of the seized Canadian Bearings electronic documents until late Friday, June 27, 2003, after the motions judge so ordered.

 

15                               On July 11 or 12, 2003, BLG became aware that privileged documents had been transferred to Cassels Brock and Kasowitz.  BLG dispatched a letter dated July 14, 2003, enclosing a list of some 82 “privileged documents which were among those documents removed from my clients’ computer system and deleted from my clients’ computer system by those individuals executing the order of [Nordheimer J.] dated June 19, 2003” (emphasis added) and requesting the immediate return of the privileged documents “whether in print form or electronic” and identification of all individuals who may have reviewed them.


 

16                               Eventually, Cassels Brock and Kasowitz, rather than returning the privileged electronic material as requested, advised BLG that the documents had been deleted from their respective systems.  The Court of Appeal noted that “it is common ground that 13 lawyers, 3 clerks and 2 law students from Cassels [Brock] and 12 lawyers from Kasowitz would have been able to access the privileged electronic documents in the two to three week period that they remained in the possession of the law firms following the search”.

 

17                               Canadian Bearings brought a motion to disqualify Cassels Brock and Kasowitz from continuing to act for Celanese, which was dismissed by the motions judge.  Canadian Bearings appealed to the Divisional Court, which allowed the appeal and ordered that Cassels Brock and Kasowitz be removed. Celanese, Cassels Brock and Kasowitz appealed to the Ontario Court of Appeal, which allowed the appeal, finding that neither of the courts below had applied the correct test for removal and remitted the matter back to the motions judge to be reconsidered on the basis of the appeal court’s reasons.  The appeal thus comes to this Court to determine the proper test and, in particular, which of the parties bears the onus to show (or rebut) the prejudice arising from disclosure of solicitor and client privileged documents.

 

II.      Judicial History

 

A.     Superior Court of Justice (2003), 69 O.R. (3d) 618

 


18                               The motions judge concluded that Cassels Brock had acted inappropriately in failing to obtain the consent of Canadian Bearings’ counsel before opening the sealed envelope.  He was also critical of the supervising solicitor for failing to fulfill his “important responsibility regarding this extraordinary remedy”,  a responsibility which continues beyond the actual removal of documents from the defendant’s premises.  Finally, he found that there had been no pressing need to examine the documents in advance of sorting out the privilege claims, since the order’s purpose of preserving the evidence had been fulfilled.

 

19                               Nordheimer J. held that while the documents were “forced” out of Canadian Bearings’ hands through the execution of the Anton Piller order, Cassels Brock’s possession of privileged documents nevertheless was “unintended and inadvertent”.  The failure of the formal order to contain a provision regarding how claims of privilege were to be dealt with was a “defect”.

 

20                               As to the remedy of disqualification, Nordheimer J. held that an affidavit from one of Canadian Bearings’ solicitors “deposing to the nature and significance of the privileged material and its potential for prejudice” was necessary.  He rejected the submission that disclosure of privileged material was itself sufficient to remove Cassels Brock and Kasowitz as counsel for Celanese.  Although acknowledging the “dilemma” faced by the moving party being obliged to reveal the very information sought to be protected in order to fulfill the affidavit requirement, the motions judge countered that

 

[n]evertheless, given the impact of the remedy sought, and the fact that the motion is based on the contention that such information has already found its way into the possession, and by implication the knowledge, of the responding parties, it does not strike me as [an] unfair burden to place on the moving parties. [para. 29]

 


21                               Given his finding that the “serious mishandling” of the sealed envelope was not “done deliberately to get at privileged documents” and “absent evidence . . . [of] . . . a pressing and substantial prejudice”, Nordheimer J. concluded that removal of Cassels Brock and Kasowitz was not warranted.

 

B.      Divisional Court (MacFarland J. (now J.A.), Macdonald and Campbell JJ.) (2004), 69 O.R. (3d) 632

 

22                               The Divisional Court held that it was unnecessary for Canadian Bearings to present evidence regarding the nature of the privileged material disclosed.  Here, “it is clear on the record that relevant privileged solicitor and client documents were accessed, copied and reviewed” by lawyers at Cassels Brock and Kasowitz.  Counsel who obtain Anton Piller orders for their clients “are obliged in all circumstances relating to such an order to conduct themselves in a manner that is beyond reproach” and “[w]hen they do not, the court must act swiftly and decisively where the terms and spirit of its order have not been complied with”.  The Divisional Court concluded that “where it is clear that documents are relevant and privileged and they have been reviewed by counsel and others, opposite prejudice should be assumed”.  Citing MacDonald Estate, the Divisional Court held that it would be inappropriate to require the moving party to demonstrate prejudice, since this would defeat entirely the purpose of the privilege.

 

23                               Noting that the lawsuit was in its early stages, and in light of Cassels Brock’s concession that in terms of the potential for prejudice to Celanese, “other counsel could do the work”, the Divisional Court concluded that, in the circumstances, the right to choose counsel had to yield, and the “only appropriate remedy” was the removal of Cassels Brock and Kasowitz.  Otherwise, the “reasonable perception of the integrity of the administration of justice would be adversely affected”.

 

C.     Court of Appeal (Abella, Moldaver and Goudge JJ.A.) (2004), 73 O.R. (3d) 64


24                               The Court of Appeal described the key difference between the decisions of the motions judge and the Divisional Court as a disagreement about which party bears the onus of establishing relevance and prejudice. In its opinion, the correct test is whether “upon consideration of the whole of the evidence, the moving party satisfies the court that there is a real risk that opposing counsel will use information obtained from privileged documents to the prejudice of the moving party and the prejudice cannot realistically be overcome by a remedy short of disqualification”.

 

25                               Given the motions judge’s finding that the material at issue came into the possession of Cassels Brock and Kasowitz through “inadvertence”, Moldaver J.A. stated that the risk of prejudice must be “real”, i.e. there must be a “realistic possibility” that the information will be used to the moving party’s prejudice or “detriment”.  The onus is on the moving party to establish: (i) that opposing counsel received confidential information protected by solicitor-client privilege; (ii) that the information is relevant to the matter at hand; and (iii) that it is potentially prejudicial.  Once these requirements have been established, the onus shifts to the opposing side to rebut.

 


26                               Moldaver J.A. found that the motions judge had erred in finding that the moving party had failed to show that the information was relevant and potentially prejudicial, since it would have had to meet a relevance test to fall within the scope of the Anton Piller order.  He also disagreed with the motions judge’s view that the conduct of Cassels Brock and the supervising solicitor “evidence[d] a lack of concern” to protect the confidentiality interests of Canadian Bearings.  In Moldaver J.A.’s view, on the contrary, “the evidence shows that [Cassels Brock and Kasowitz] were mindful of [Canadian Bearings’] confidentiality rights and concerned throughout that they be respected”.  Moldaver J.A. held that the motions judge had failed to make the necessary findings with respect to whether the privileged documents had been reviewed and if so, to what extent.

 

27                               Moldaver J.A. also disagreed with the approach adopted by the Divisional Court. First, he noted that the court appeared unwilling to accept Nordheimer J.’s finding that the documents came into Celanese’s counsel’s possession through inadvertence, and that this led it to introduce a “punitive element” into the test. Second, he disagreed with the Divisional Court’s statement that the extent of any review of the documents was irrelevant.  Third, unlike the Divisional Court, it considered the risk of prejudice would be greatly alleviated if appropriate steps were taken to ensure that Colvard did not taint others.  In the result the appeal was allowed and the matter remitted to the motions judge to make the additional factual determinations and to apply the test laid down by the Court of Appeal.

 

III.    Analysis

 

28                               Anton Piller orders have been available in Canada for close to 30 years. Unlike a search warrant they do not authorize forcible entry, but expose the target to contempt proceedings unless permission to enter is given.  To the ordinary citizen faced on his or her doorstep with an Anton Piller order this may be seen as a distinction without a meaningful difference.

 


29                               Originally developed as an “exceptional remedy” in the context of trade secrets and intellectual property disputes, such orders are now fairly routinely issued in ordinary civil disputes, Grenzservice Speditions Ges.m.b.H. v. Jans (1995), 15 B.C.L.R. (3d) 370 (S.C.), in employment law, Ridgewood Electric Ltd. (1990) v. Robbie (2005), 74 O.R. (3d) 514 (S.C.J.), and Netbored Inc. v. Avery Holdings Inc. (2005), 48 C.P.R. (4th) 240, 2005 FC 1405, and even in matrimonial litigation, Neumeyer v. Neumeyer (2005), 47 B.C.L.R. (4th) 162, 2005 BCSC 1259.  In one egregious case, a designated search team attempted to execute an Anton Piller order on the 10-year-old son of the defendant at a time when his parents were not at home:  Ridgewood Electric.

 

30                               With easier access to such orders, there has emerged a tendency on the part of some counsel to take too lightly the very serious responsibilities imposed by such a draconian order.  It should truly be exceptional for a court to authorize the massive intrusion, without advance notice, of a privately orchestrated search on the privacy of a business competitor or other target party.  As it was put by Lord Denning, M.R., in the original Anton Piller case:

 

We are prepared, therefore, to sanction its continuance [i.e. of the order], but only in an extreme case where there is grave danger of property being smuggled away or of vital evidence being destroyed. [Emphasis added.]

 

(Anton Piller KG v. Manufacturing Processes Ltd., [1976] 1 Ch. 55 (C.A.), at p. 61)

 

Anton Piller orders, obtained ex parte, now regularly permit searches and seizures not only from places of business but from residential premises.  While most Anton Piller orders are executed properly, they are capable of giving rise to serious abuse, as in Ridgewood Electric, mentioned earlier, where Corbett J. of the Ontario Superior Court of Justice protested the unacceptable conduct of those executing the order:

 

Nigel Robbie arrived home on April 14, 2004, to find a neighbour barricading his front door.  His ten-year-old son had been taken to another neighbour’s house, distraught.  The neighbourhood was in an uproar.  A cadre in suits stood at the front of his house brandishing a thick wad of papers, demanding to be let in.


. . .

 

While everyone is taken to know the law, the Robbies and their neighbours might be excused for not knowing about Anton Piller orders.  And so the Robbies and their neighbours were left to wonder what kind of country we live in, where one’s former employer, acting secretly, may obtain a court order and then enter and search one’s private residence. [paras. 1 and 4]

 

As Sharpe J.A., writing in a scholarly mode, has pointed out, “excessive zeal in this area is apt to attract criticism which will impair the ability of the courts to use injunctions in innovative ways in other areas” (R. J. Sharpe, Injunctions and Specific Performance (loose-leaf ed.), at para. 2:1300).

 

31                               The search in the present case was conducted by reputable and responsible people, under the supervision of a senior member of the Ontario bar.  The disclosure of solicitor-client confidences came about not by egregious misconduct, but through a combination of carelessness, overzealousness, a lack of appreciation of the potential dangers of an Anton Piller order and a failure to focus on its limited purpose, namely the preservation of relevant evidence.

 


32                               Experience has shown that despite their draconian nature, there is a proper role for Anton Piller orders to ensure that unscrupulous defendants are not able to circumvent the court’s processes by, on being forewarned, making relevant evidence disappear.  Their usefulness is especially important in the modern era of heavy dependence on computer technology, where documents are easily deleted, moved or destroyed.  The utility of this equitable tool in the correct circumstances should not be diminished.  However, such orders should only be granted in the clear recognition of their exceptional and highly intrusive character and, where granted, the terms should be carefully spelled out and limited to what the circumstances show to be necessary.  Those responsible for their implementation should conform to a very high standard of professional diligence.  Otherwise, the moving party, not its target, may have to shoulder the consequences of a botched search.

 

33                               Much of the argument before us about privileged documents turned on a supposed “spectrum” of situations.  At one end of the spectrum, it was said, lie the “inadvertent disclosure” cases, where one party’s counsel receives a privileged document due to an error of opposing counsel, for example a letter is faxed or e-mailed to the wrong party.  In such cases, the remedy is often limited to an order requiring the document, which is clearly identified, to be deleted or returned and a direction that no use is to be made of it.  At the other end of the spectrum is said to be the “moving solicitor” or “merging firm” cases, where counsel who has acted for a client ends up at a law firm that is acting for an opposing party — as in MacDonald Estate itself.  In the latter cases, the precise confidences seen or heard by the moving solicitor may not be readily determined.  Unless adequate measures have been taken (usually in advance) to avoid “tainting” the new firm, the remedy is frequently disqualification.  I agree with the intervener Advocates’ Society that the emphasis on “inadvertence” is overly simplistic.  As the Society submits:

 

The notion of “inadvertence” is also analytically unhelpful because it conflates two questions that should be distinct: (a) how did the documents come into the possession of [Celanese] or its counsel; and (b) what did [Celanese] and its counsel do upon recognition that the documents were potentially subject to solicitor-client privilege.

 


34                               Whether through advertence or inadvertence the problem is that solicitor-client information has wound up in the wrong hands.  Even granting that solicitor-client privilege is an umbrella that covers confidences of differing centrality and importance, such possession by the opposing party affects the integrity of the administration of justice.  Parties should be free to litigate their disputes without fear that their opponent has obtained an unfair insight into secrets disclosed in confidence to their legal advisors.  The defendant’s witnesses ought not to have to worry in the course of being cross-examined that the cross-examiner’s questions are prompted by information that had earlier been passed in confidence to the defendant’s solicitors.  Such a possibility destroys the level playing field and creates a serious risk to the integrity of the administration of justice.  To prevent such a danger from arising, the courts must act “swiftly and decisively” as the Divisional Court emphasized.  Remedial action in cases such as this is intended to be curative not punitive.

 

A.     Requirements for an Anton Piller Order

 


35                               There are four essential conditions for the making of an Anton Piller order.  First, the plaintiff must demonstrate a strong prima facie case.  Second, the damage to the plaintiff of the defendant’s alleged misconduct, potential or actual, must be very serious.  Third, there must be convincing evidence that the defendant has in its possession incriminating documents or things, and fourthly it must be shown that there is a real possibility that the defendant may destroy such material before the discovery process can do its work:  Nintendo of America, Inc. v. Coinex Video Games Inc., [1983] 2 F.C. 189 (C.A.), at pp. 197-99; Indian Manufacturing Ltd. v. Lo (1997), 75 C.P.R. (3d) 338 (F.C.A.), at pp. 341-42; Netsmart Inc. v. Poelzer, [2003] 1 W.W.R. 698, 2002 ABQB 800, at para. 16; Anton Piller KG, at pp. 58-61; Ridgewood Electric, at para. 27; Grenzservice, at para. 39; Pulse Microsystems Ltd. v. SafeSoft Systems Inc. (1996), 67 C.P.R. (3d) 202 (Man. C.A.), at p. 208; Ontario Realty Corp. v.  P.  Gabriele & Sons Ltd. (2000), 50 O.R. (3d) 539 (S.C.J.), at para. 9; Proctor & Gamble Inc.  v. John Doe (c.o.b. Clarion Trading International), [2000] F.C.J. No.  61 (QL) (T.D.), at para. 45; Netbored, at para. 39; Adobe Systems Inc. v. KLJ Computer Solutions Inc., [1999] 3 F.C. 621 (T.D.), at para. 35.

 

36                               Both the strength and the weakness of an Anton Piller order is that it is made ex parte and interlocutory: there is thus no cross-examination on the supporting affidavits.  The motions judge necessarily reposes faith in the candour and complete disclosure of the affiants, and as much or more so on the professional responsibility of the lawyers participating in carrying out its terms.  We are advised that such orders are not available in the United States (Transcript, at p. 70).

 

37                               A troubling example in Canada is the Adobe Systems case, where a computer software company was tipped off that a small advertising firm in Halifax was using unlicensed versions of some of its software.  The affiant swore that, in his opinion, the firm was likely to destroy its unlicensed copies of the software if it became aware of the pending litigation against it.  The target firm was well established and its principals had an excellent reputation in the community.  On subsequent cross-examination it was revealed that the source of the informant’s opinion that the defendant was likely to destroy unlicensed copies was his “observation of human nature” and not any observation of that particular defendant.  Upon a review of the order, Richard A.C.J. (now C.J. of the Federal Court of Appeal) found that the plaintiffs had not made sufficient inquiries of the facts before obtaining the order.  Citing Adobe Systems, the Federal Court recently reiterated that “[i]n all proceedings taken ex parte, and particularly in Anton Piller situations, there is a heavy obligation upon the moving party to make full and frank disclosure of all relevant facts to the Court” (Netbored, at para. 41).

 


38                               At this stage, the challenge to the decision of Nordheimer J. to grant the Anton Piller order is not before the Court.

 

B.      Terms of the Anton Piller Order

 

39                               In Grenzservice, a case which dealt with an application to remove counsel who had seen privileged documents in the course of an Anton Piller execution, Huddart J. (later J.A.) observed: “This case suggests that safeguards cannot remain implicit in the supervision order.  They must be specified” (para. 84).  I agree.  In Lavallee, Rackel & Heintz v. Canada (Attorney General), [2002] 3 S.C.R. 209, 2002 SCC 61, Arbour J. for the majority set out at para. 49 a number of relevant concerns in the criminal law context, which may have some application by analogy.  Notwithstanding the general recognition of the need for standard terms, many safeguards which one would expect to have become customary (such as a provision dealing with claims of privilege) are frequently omitted.  Corbett J.  commented in Ridgewood Electric that the Anton Piller order “has been with us for nearly 30 years, [yet] its ‘standard terms’ still vary considerably across the province” (para. 3).  In the United Kingdom, a set of standardized rules and a model order have been developed.  In Australia, Order 25B of the Federal Court Rules and Practice Note No. 24 (May 5, 2006) set out a number of standard safeguards for Anton Piller orders.  See also Thermax Ltd. v. Schott Industrial Glass Ltd., [1981] F.S.R. 289 (Ch. D.).

 


40                               Anton Piller orders are often conceived of, obtained and implemented in circumstances of urgency.  They are generally time-limited (e.g., 10 days in Ontario under Rule 40.02 (Rules of Civil Procedure, R.R.O. 1990, Reg. 194) and 14 days in the Federal Court, under Rule 374(1) (Federal Courts Rules, SOR/98-106)).  Despite the urgency, the more detailed and standardized the terms of the order the less opportunity there will be for misunderstandings or mischief.  As noted by Lamer J. in Descôteaux v. Mierzwinski, [1982] 1 S.C.R. 860, at p. 889:

 

Searches are an exception to the oldest and most fundamental principles of the common law, and as such the power to search should be strictly controlled.

 

Unless and until model orders are developed by legislation or recommended by law societies pursuant to their responsibility for professional conduct, the following guidelines for preparation and execution of an Anton Piller order may be helpful, depending on the circumstances:

 

(1)               Basic Protection for the Rights of the Parties

 

(i)                The order should appoint a supervising solicitor who is independent of the plaintiff or its solicitors and is to be present at the search to ensure its integrity.  The key role of the independent supervising solicitor was noted by the motions judge in this case “to ensure that the execution of the Anton Piller order, and everything that flowed from it, was undertaken as carefully as possible and with due consideration for the rights and interests of all involved” (para. 20).  He or she is “an officer of the court charged with a very important responsibility regarding this extraordinary remedy” (para. 20).  See also Grenzservice, at para. 85.

 


(ii)               Absent unusual circumstances the plaintiff should be required to provide an undertaking and/or security to pay damages in the event that the order turns out to be unwarranted or wrongfully executed.  See Ontario Realty, at para. 40; Adobe Systems, at para. 43; Nintendo of America, at pp. 201-2; Grenzservice, at para. 85; Havana House Cigar & Tobacco Merchants Ltd. v. Jane Doe (2000), 199 F.T.R. 12, aff’d (2002), 288 N.R. 198, 2002 FCA 75.

 

(iii)               The scope of the order should be no wider than necessary and no material shall be removed from the site unless clearly covered by the terms of the order.  See Columbia Picture Industries Inc. v. Robinson, [1987] Ch. 38.

 

(iv)              A term setting out the procedure for dealing with solicitor-client privilege or other confidential material should be included with a view to enabling defendants to advance claims of confidentiality over documents before they come into the possession of the plaintiff or its counsel, or to deal with disputes that arise.  See Grenzservice, at para. 85; Ontario Realty, at para. 40.  Procedures developed for use in connection with search warrants under the Criminal Code, R.S.C. 1985, c. C-46 , may provide helpful guidance.  The U.K. practice direction on this point provides as follows:

 

Before permitting entry to the premises by any person other than the Supervising Solicitor, the Respondent may, for a short time (not to exceed two hours, unless the Supervising Solicitor agrees to a longer period) — (a) gather together any documents he [or she] believes may be . . . privileged; and (b) hand them to the Supervising Solicitor for [an assessment of] whether they are . . . privileged as claimed. 

 

If the Supervising Solicitor decides that . . . any of the documents [may be] privileged or [is in any doubt as to their status, he or she] will exclude them from the search . . . and retain [them] . . . pending further order of the court [(if in doubt as to whether they are privileged), or return them to the Respondent and retain a list of the documents (if the documents are privileged)]. 

 


[A] Respondent [wishing] to take legal advice and gather documents as permitted . . . must first inform the Supervising Solicitor and keep him [or her] informed of the steps being taken.

 

(Civil Procedure, vol. 1 (2nd Supp. 2005), Part 25, Practice Direction — Interim Injunctions, p. 43, at paras. 11-12)

 

Experience has shown that in general this is a workable procedure.  Counsel supporting the appellants suggested the basic “two-hour” collection period permitted in the U.K. is too short.  This is a matter to be determined by the judge making the order, but it must be kept in mind that unnecessary delay may open the door to mischief.  In general, the search should proceed as expeditiously as circumstances permit.

 

(v)               The order should contain a limited use clause (i.e., items seized may only be used for the purposes of the pending litigation).  See Ontario Realty, at para. 40; Adobe Systems, at para. 43; Grenzservice, at para. 85.

 

(vi)              The order should state explicitly that the defendant is entitled to return to court on short notice to (a) discharge the order; or (b) vary the amount of security.  See Adobe Systems, at para. 43; Grenzservice, at para. 85; Nintendo of America, at pp. 201-2.

 

(vii)              The order should provide that the materials seized be returned to the defendants or their counsel as soon as practicable.

 

(2)               The Conduct of the Search

 


(i)                In general the order should provide that the search should be commenced during normal business hours when counsel for the party about to be searched is more likely to be available for consultation. See Grenzservice, at para. 85; Universal Thermosensors Ltd. v. Hibben, [1992] 1 W.L.R. 840 (Ch. D.).

 

(ii)               The premises should not be searched or items removed except in the presence of the defendant or a person who appears to be a responsible employee of the defendant.

 

(iii)               The persons who may conduct the search and seize evidence should be specified in the order or should specifically be limited in number. See Adobe Systems, at para. 43; Grenzservice, at para. 85; Nintendo of America, at pp. 201-2.

 

(iv)              On attending at the site of the authorized search, plaintiff’s counsel (or the supervising solicitor), acting as officers of the court should serve a copy of the statement of claim and the order and supporting affidavits and explain to the defendant or responsible corporate officer or employee in plain language the nature and effect of the order.  See Ontario Realty, at para. 40.

 

(v)               The defendant or its representatives should be given a reasonable time to consult with counsel prior to permitting entry to the premises.  See Ontario Realty, at para. 40; Adobe Systems, at para. 43; Grenzservice, at para. 85; Sulpher Experts Inc. v. O’Connell (2000), 279 A.R. 246, 2000 ABQB 875.

 


(vi)              A detailed list of all evidence seized should be made and the supervising solicitor should provide this list to the defendant for inspection and verification at the end of the search and before materials are removed from the site.  See Adobe Systems, at para. 43; Grenzservice, at para. 85; Ridgewood Electric, at para. 25.

 

(vii)              Where this is not practicable, documents seized should be placed in the custody of the independent supervising solicitor, and defendant’s counsel should be given a reasonable opportunity to review them to advance solicitor-client privilege claims prior to release of the documents to the plaintiff.

 

(viii)             Where ownership of material is disputed, it should be provided for safekeeping to the supervising solicitor or to the defendant’s solicitors.

 

(3)               Procedure Following the Search

 

(i)                The order should make it clear that the responsibilities of the supervising solicitor continue beyond the search itself to deal with matters arising out of the search, subject of course to any party wishing to take a matter back to the court for resolution.

 

(ii)               The supervising solicitor should be required to file a report with the court within a set time limit describing the execution, who was present and what was seized.  See Grenzservice, at para. 85.

 


(iii)               The court may wish to require the plaintiff to file and serve a motion for review of the execution of the search returnable within a set time limit such as 14 days to ensure that the court automatically reviews the supervising solicitor’s report and the implementation of its order even if the defendant does not request such a review.  See Grenszervice, at para. 85.

 

See also: Civil Procedure Act 1997 (U.K.), 1997, c. 12, s. 7; Civil Procedure Rules 1998, S.I. 1998/3132, r. 25.1(1)(h), and Part 25, Practice Direction — Interim Injunctions; Sharpe, at paras. 2:1100 et seq.

 

41                               It is evident that the draft order placed before the motions judge in this case was deficient in many respects.  At issue here is the absence of any provision to deal with solicitor-client confidences.  The absence of specific terms in the Anton Piller order does not relieve the searching solicitors from the consequences of gaining inappropriate access.  Such consequences may include removal.  A precisely drawn and clearly thought out order therefore will not only protect the defendant’s right to solicitor-client privilege, but also protect the plaintiff’s right to continue to be represented by counsel of choice by helping to ensure that such counsel do not stumble into possession of privileged information.

 

C.  The Governing Authority for Removal of Counsel for Possession of Confidential Information Is MacDonald Estate

 


42                               In MacDonald Estate, the Court held, in the context of a moving solicitor, that once the opposing firm of solicitors is shown to have received “confidential information attributable to a solicitor and client relationship relevant to the matter at hand” (p. 1260),  the court will infer “that lawyers who work together share confidences” (p. 1262) and that this will result in a risk that such confidences will be used to the prejudice of the client, unless the receiving solicitors can show “that the public represented by the reasonably informed person would be satisfied that no use of confidential information would occur” (p. 1260).  Only where there is “clear and convincing evidence” (p. 1262) to the contrary will the presumption be rebutted.  Thus “[a] fortiori undertakings and conclusory statements in affidavits without more” (p. 1263) will not suffice to rebut the presumption of dissemination.  For the purposes of the present case, it is important to note that Sopinka J.  imposed no onus on the moving party to adduce any further evidence as to the nature of the confidential information beyond that which was needed to establish that the receiving lawyer had obtained confidential information attributable to a solicitor and client relationship which was relevant to the matter at hand.

 

43                               There is no doubt Canadian Bearings has discharged this onus.  The motions judge noted “the admission by [Celanese] that some privileged material found its way into the possession of both the Cassels Brock and Kasowitz firms” (para. 3).  The material must be taken to be relevant to the pending claim, otherwise it would not have been within the scope of the seizure laid down in the Anton Piller order.

 

44                               We do not know, and the courts below were not told, the nature of the privileged information.  On this point, the motions judge stated:

 

The privileged information that found its way into the hands of the two firms here might be mundane, or may even be irrelevant to the underlying issues.  Conversely, of course, it might also be crucial to the defence of the claim.  I have no way of knowing. [Emphasis added; para. 28.]

 


45                               The courts below seemingly agreed that if the privileged confidences were “crucial to the defence of the claim” removal of the searching solicitors would be called for.  They also agreed (as I do) that on this record, as the motions judge said, we “have no way of knowing”.  The appeal, therefore, turns on whether Celanese had the onus of rebutting a presumption of prejudice (as MacDonald Estate held) or the onus should be shifted to Canadian Bearings to establish “a real risk of prejudice” (as required in this case by the Court of Appeal).

 

46                               Kasowitz submits that “[t]he facts of this case do not raise the concerns whatsoever addressed by the Court in MacDonald Estate [because] Kasowitz had no relationship whatsoever with the Appellants.”  I do not agree.  The relevant elements of the MacDonald Estate analysis do not depend on a pre-existing solicitor-client relationship.  The gravamen of the problem here is the possession by opposing solicitors of relevant and confidential information attributable to a solicitor-client relationship to which they have no claim of right whatsoever.

 

D.     The Court of Appeal Erred in Placing the Onus of Proof on Canadian Bearings

 

47                               Moldaver J.A. and his colleagues took the view that MacDonald Estate must be read in the context of a moving solicitor who clearly had substantial exposure to important solicitor-client confidences, whereas the present context, in their view, can raise no such inference.  The privileged documents, while relevant, could be of such negligible significance that there is no real risk such privileged material could be used to the detriment of Canadian Bearings.

 


48                               I accept, as mentioned earlier, that a distinction may be drawn between the moving solicitor situations and the inadvertent disclosure situation on the basis that in the latter cases, but not the former, the content and extent of the confidential information at issue is (or ought to be) identifiable.  I do not agree that this distinction switches the onus to the defendant to prove the risk of significant prejudice, rather than leave the onus with Celanese to rebut a presumption of prejudice.

 

49                               Firstly, in an Anton Piller situation, as in MacDonald Estate, to “require the very confidential information for which protection is sought to be revealed . . . would have the effect of defeating the whole purpose of the application” (p. 1260).  Placing the onus on Celanese accords with the usual practice that the party best equipped to discharge a burden is generally required to do so.  Celanese’s lawyers know what they looked at.  Canadian Bearings’ lawyers do not.  The latter should not have to reveal the universe of potential confidences to the former who, at this point, refuse (or have rendered themselves  unable) to identify precisely what they have seen.

 

50                               Secondly, putting the onus on the party in receipt of the confidential information  rather than on the party being searched, increases the incentive on its part to take care to ensure that privileged information is not reviewed in the first place.

 

51                               Thirdly, it seems to me procedurally unfair not only to subject the defendant to the intrusion of a surprise search under an exceptional order in the course of which its solicitor-client confidences are disclosed to its opponent, but then to throw on it the onus of clearing up the problem created by the plaintiff’s carelessness.  The principal source of the present difficulty lies in the post-search conduct of Celanese’s solicitors.  Having created the problem, the searching party should bear the burden of resolving it.


 

52                               Celanese and its solicitors argue that they are ill-equipped to rebut any such presumption of prejudice.  If that is so they have only themselves to blame.  Under a properly executed Anton Piller order, the searching solicitors should be able to show with some precision what they have seized, what they have seen, who has seen it and the steps taken to contain the wrongful disclosure of confidences.  If Celanese’s solicitors, who were in frequent telephone contact with the supervising solicitor during the search, had insisted on a proper listing at the site of all the materials seized, the universe of potential confidences would as a starting point have been established.  The motions judge found this was not done.  Nevertheless, the parties sensibly isolated the hard drive and CD-ROMs containing the now disputed electronic documents in a sealed bag and gave it into the custody of BDO.  A complete listing could therefore have been made in the days following the search with BLG counsel present (as BLG had been present at the search site).  This too was foreclosed by the precipitous and unilateral conduct of Cassels Brock.  It is apparent, as the motions judge found, that “[t]here can be only one reason for seals to be applied to a container and signed by parties opposite in interest and that is to ensure that the container will not be opened except in the presence of both parties or, at a minimum, with the consent of both parties” (para. 19).  The motions judge also expressed his view, which goes to the heart of the appeal, that

 

[t]here was also no pressing need to open the envelopes such as would have justified the rather precipitous action which [Cassels Brock] directed be taken.  The fundamental purpose of an Anton Piller order is to preserve evidence, not to use it.  The material was in the safekeeping of BDO and was going to be available to [Celanese] in the fullness of time.  There was therefore no reason to rush to deal with the documents as opposed to taking a careful and considered approach to them.  In other words, there was plenty of time for inquiries to be made of Mr. Hendell, or others within Borden Ladner, regarding the handling of this material.  Had that cautious approach been taken, it is likely that the issue which I must resolve would never have arisen. [para. 21]


53                               It is quite possible that if Cassels Brock and Kasowitz had been able to show the court what privileged material they had seen, such material might on the face of it have appeared to the court mundane or insignificant.  A privileged document, for example, could be a lawyer’s letter to his or her own client simply enclosing a draft contract in terms virtually the same as a contract subsequently executed and publicly available.  Disclosure of the lawyer’s communication, while privileged, would in that case not likely be capable of creating prejudice.  Where the significance of the privileged documents accessed by the searching solicitors is more difficult to evaluate, the motions judge might properly call on the defendant (in the absence of the lawyers for the searching party if appropriate) to explain why such material could lead to significant prejudice.  That cannot be done, of course, unless the searching solicitors can indicate with some precision what they have looked at.  Because of the way the search was conducted in this case, Celanese’s solicitors could not do so and that stage was never reached.

 

54                               In my view, the present proceeding should not be seen as punitive in any way.  I accept, as did the courts below, that neither Cassels Brock nor Kasowitz set out to obtain access to, or to gain some advantage from privileged material.  Their problem stems from carelessness and an excessively adversarial approach in circumstances that called for careful restraint in recognition of the exceptional position of responsibility imposed by the unilateral and intrusive nature of an Anton Piller order.   The protection of solicitor-client confidences is a matter of high importance.  On the present state of the record, Canadian Bearings can have no confidence that the privileged material to which Cassels Brock and Kasowitz obtained access will not be used to their prejudice.

 


55                               In summary, I agree with the Divisional Court that lawyers who undertake a search under the authority of an Anton Piller order and thereby take possession of relevant confidential information attributable to a solicitor-client relationship, bear the onus of showing there is no real risk such confidences will be used to the prejudice of the defendant.  Difficulties of proof compounded by errors in the conduct of the search and its aftermath should fall on the heads of those responsible for the search, not of the party being searched.  The onus was not met by the respondents in this case.

 

E.      The Appropriate Remedy

 

56                               I agree with the courts below that if a remedy short of removing the searching solicitors will cure the problem, it should be considered.  As the intervener Canadian Bar Association (“CBA”) puts it in its factum, the task “is to determine whether the integrity of the justice system, viewed objectively, requires removal of counsel in order to address the violation of privilege, or whether a less drastic remedy would be effective”.  The right of the plaintiff to continue to be represented by counsel of its choice is an important element of our adversarial system of litigation.  In modern commercial litigation, mountains of paper are sometimes exchanged.  Mistakes will be made.  There is no such thing, in these circumstances, as automatic disqualification.

 


57                               Nordheimer J. cited a number of inadvertent disclosure cases which, in his view, leaned against removal.  The first, Tilley v. Hails (1993), 12 O.R. (3d) 306 (Gen.  Div.),  was not a motion to remove counsel, but rather an application for an injunction enjoining the respondents from using an inadvertently disclosed privileged document.  Similarly, Aviaco International Leasing Inc. v.  Boeing Canada Inc. (2000), 9 B.L.R. (3d) 99 (Ont. S.C.J.), was a motion to expunge from the record various privileged documents inadvertently faxed to the plaintiffs’ counsel, which the plaintiffs’ counsel attempted to use and of which copies were made and retained.  The documents were expunged from the record.  Coulombe v. Beard (1993), 16 O.R. (3d) 627 (Gen. Div.), was also relied on by Nordheimer J. for the “reluctance” of courts to impose the “drastic” remedy of removal where the nature of the privileged material inadvertently disclosed is not significant.   In that case, Salhany J. had access to the letter disclosed and so was able to make an assessment of its significance.  In all of these cases, the court knew with precision what the opposing lawyer had seen and what had been done about it.  What the Coulombe case shows is that even where a confidential document is inflicted on a surprised opponent, the court will still take care to review the document to assess the risk of prejudice (as well, no doubt, as to assess whether the apparently inadvertent disclosure was a tactical gambit).  In these cases, counsel avoid disqualification by demonstrating both that they were blameless in receiving the material, and that they did the “right thing” upon recognition that the material was potentially privileged.  See also Nova Growth Corp. v. Kepinski, [2001] O.J. No. 5993 (QL) (S.C.J.), at paras. 13 and 18, leave to appeal refused, [2002] O.J. No. 2522 (QL) (Div. Ct.), leave to appeal refused, [2003] 1 S.C.R. xiv.

 

58                               Both Nordheimer J. and Moldaver J.A. distinguished the present case from Grenzservice which removed from the record solicitors who had botched execution of a Mareva injunction with elements of an Anton Piller order.  In that case, it was held that counsel had behaved “egregiously”.  While Huddart J. (now J.A.) did make that finding, she also relied upon the principles laid down in MacDonald Estate as the governing authority.  I would certainly not describe the conduct of the solicitors here as “egregious”, but as MacDonald Estate itself shows, a violation of privilege that is not the result of “egregious” misconduct may nonetheless give rise to disqualification.


 

59                               In helpful submissions, the interveners Advocates’ Society and the CBA suggest a number of factors to be considered in determining whether solicitors should be removed: (i) how the documents came into the possession of the plaintiff or its counsel; (ii) what the plaintiff and its counsel did upon recognition that the documents were potentially subject to solicitor-client privilege; (iii) the extent of review made of the privileged material; (iv) the contents of the solicitor-client communications and the degree to which they are prejudicial; (v) the stage of the litigation; (vi) the potential effectiveness of a firewall or other precautionary steps to avoid mischief.  Other factors may, of course, present themselves in different cases, but I agree that the foregoing list of factors is appropriate and seems to me sufficient to dispose of the present appeal.

 

60                               As to the first factor, the privileged documents came into the hands of Cassels Brock and Kasowitz under the exceptional Anton Piller order in a way that was unintended but avoidable.  Inadequate precautions were taken.  Those who fail to take precautions must bear the responsibility.  As mentioned earlier, Mr. Colvard testified that quite apart from the as yet unclassified electronic documents he segregated into a “Privileged” file, he found other potentially privileged documents in reviewing material earlier classified as “Relevant”.  Those, at least, Mr. Colvard agreed he “reviewed in some detail in order to decide where to put them”.  We do not know the contents of even these documents.

 


61                               As to the second factor, Cassels Brock failed to have the electronic documents listed at the search site as required by the order and thereafter ignored the obvious significance of BLG’s initials on the sealed envelope containing the electronic documents and then declined to return the material over which privilege was claimed to BLG “whether in print form or electronic” as requested.  Cassels Brock did take steps, as did Kasowitz, to contain the resulting damage, but as a result of their errors the Court does not know (and Canadian Bearings cannot know) the potential scale of that damage.

 

62                               As to the third factor, the CBA submits that the plaintiff’s counsel should not only promptly return the inadvertently disclosed privileged materials, but also “advise the adversary of the extent to which those materials have been reviewed”.  I agree.  Here, Cassels Brock and Kasowitz deny any “substantive review”, but the review must have been sufficiently thorough to classify documents as “Relevant, Irrelevant, Proprietary, and Hot”.  How could anyone classify a document as “Hot” or “Relevant” without reading it?  And, to repeat, some of the documents initially read and classified as “Relevant” turned out (on a second reading) to be potentially subject to a claim of privilege.  In the absence of knowing what Celanese’s solicitors and counsel looked at we are left in the dilemma anticipated by Sopinka J. in MacDonald Estate, at p. 1263:

 

. . . conclusory statements in affidavits without more are not acceptable.  These can be expected in every case of this kind that comes before the court.  It is no more than the lawyer saying “trust me”.  This puts the court in the invidious position of deciding which lawyers are to be trusted and which are not.

 

63                               As to the fourth factor, Cassels Brock and Kasowitz failed to discharge the onus of identifying the contents of the solicitor-client communications which they accessed in the course of classifying the material.  It is therefore not possible to determine “the degree to which they are prejudicial”.  As stated, Celanese’s solicitors and counsel created this problem by their failure to proceed with prudence and they and Celanese will now have to shoulder the consequences.

 


64                               As to the fifth factor, the litigation is at an early stage.  At advanced stages of complex litigation, an order removing counsel can be “extreme” and may have a “devastating” effect on the party whose counsel is removed (Michel v. Lafrentz (1992), 12 C.P.C. (3d) 119 (Alta. C.A.), at para. 4).  That is not the case here.  No doubt substantial costs have been incurred by all parties, but BLG advised Cassels Brock by letter dated July 15, 2003, i.e. within less than a month after commencement of the litigation, and a few days after learning of the privilege controversy, that “[t]his is a most serious matter and we intend to bring it to the attention of the Court at the earliest opportunity.”  The removal motion was launched July 24, 2003.  There was therefore ample early notice that removal was being sought.

 

65                               Sixth, and finally, with respect to “the potential effectiveness of a firewall or other precautionary steps”, Cassels Brock advised the court of a number of measures taken (although, in the defendant’s view, too little and too late).  The motions judge held that “an affidavit from the attorney in charge of this matter for the Kasowitz firm ought to have been filed confirming that such [privileged] material had been deleted and that no one at that firm had accessed the information prior to such deletion (with the obvious exception of Mr. Colvard, who has been isolated from the case)” (para. 30).  I agree.  In a matter of such sensitivity the court and the defendant are entitled to the best available evidence.  It seems apparent that appropriate firewalls were not in place prior to the occurrence of the mischief.

 


66                               In view of all the circumstances, I agree with the Divisional Court that Cassels Brock and Kasowitz have not produced sufficient evidence to satisfy the MacDonald Estate test, namely “that the public represented by the reasonably informed person would be satisfied that no use of confidential information would occur” (p. 1260). 

67                               I also agree with the Divisional Court that the right of Celanese to choose counsel yields to what occurred in the execution of the Anton Piller order in this case and its aftermath, and that “the reasonable perception of the integrity of the administration of justice would be adversely affected were Cassels, Brock . . . permitted to remain solicitors of record for [Celanese]” (para. 42).  As to future role of Kasowitz however, I think the Divisional Court went too far in holding that “[Celanese] should be precluded in this litigation or any related proceeding from receiving advice or information directly and/or indirectly from the firm” (para. 40 (emphasis added)).  Celanese has worldwide interests and Kasowitz is its primary legal advisor.  As the vinyl acetate plant is to be built in Iran, there may well be related litigation outside Canada.  I think Canadian Bearings will be sufficiently protected if Celanese is ordered not to seek or receive advice or information directly or indirectly from Kasowitz in connection with any litigation in Canada arising out of the matters referred to in the amended statement of claim, or related thereto, provided Kasowitz files affidavit(s) satisfactory to the case management judge confirming that the firewalls it had undertaken to install were and are in place, and sworn confirmation that all of the material for which privilege is claimed that came into Kasowitz’s possession as a result of the Anton Piller order has been returned or destroyed.

 

IV.    Disposition

 


68                               The appeal is allowed with costs in this Court.  Cassels Brock are removed as solicitors of record for the respondents in these proceedings.  They are not to act for or advise the respondents, directly or indirectly, with respect to this proceeding or with respect to any related proceedings arising out of the facts pleaded in the amended statement of claim.

 

69                               Neither the respondents nor anyone on their behalf is to communicate with or receive advice or information directly or indirectly, from Kasowitz with respect to this proceeding or any related proceedings in Canada arising out of or related to the facts pleaded in the amended statement of claim.

 

70                               Any and all materials subject to the claim of privilege still in the possession of the respondents, Cassels Brock or Kasowitz seized from the premises of Canadian Bearings on June 20 and 21, 2003, pursuant to the Anton Piller order shall be returned forthwith to Canadian Bearings without retention of copies whether printed, electronic or of any other type.

 

71                               Kasowitz is to file affidavits satisfactory to the case management judge confirming the existence of adequate firewalls and the destruction or return of all allegedly privileged material that came into its possession as a result of the Anton Piller order made in this case.

 

Appeal allowed with costs.

 

Solicitors for the appellants:  Borden Ladner Gervais, Toronto.

 

Solicitors for the respondent Celanese Canada Inc.:  Heenan Blaikie, Toronto.

 


Solicitors for the respondent Celanese Ltd.:  Lenczner Slaght Royce Smith Griffin, Toronto.

 

Solicitors for the intervener Advocates’ Society:  Lax O’Sullivan Scott, Toronto.

 

Solicitors for the intervener Canadian Bar Association:  Osler, Hoskin & Harcourt, Toronto.

 

 

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