Supreme Court Censures BNY Mellon, Orders New Award

The Supreme Court of Canada sent a damages calculation back to a lower court after finding that the world’s largest custodial bank concealed evidence in a dispute over proprietary pricing data.

Court finds custodial bank breached data‑sharing agreement

The case originated when a Canadian data provider alleged that the bank violated a 1999 licensing contract. The agreement expressly prohibited sharing the data with any third parties, including its own subsidiaries and affiliates. According to the provider, the institution distributed the information to as many as 65 affiliated entities and collected fees for those transmissions.

Licensing under the contract was priced per security, not per use, meaning a single purchase could supply an entire corporate network. The provider only became aware of the alleged breach in October 2016 after a system glitch revealed that a Canadian joint venture co‑owned by the bank continued to receive the data free of charge years after its own contract had expired.

Spoliation ruling marks a rare Supreme Court decision

When the provider requested preservation of records showing how the data had been shared and the revenue earned, the bank refused to produce the documents. The Ontario Court of Appeal deemed the conduct spoliation—intentional destruction or concealment of evidence—and likened it to contempt for the justice system.

The Supreme Court affirmed that finding, marking its first substantive analysis of the spoliation doctrine since 1896. It noted that once spoliation is proven, judges have no discretion; they must draw an adverse inference strong enough to fill the gap left by the missing evidence.

In the earlier trial, the judge awarded the data provider US$5,696,850 using a “rateable approach,” which considered only the data the bank could not account for. The high court described that figure as untethered from the facts, pointing out that the calculation treated the case as if a single entity accessed the data once, while evidence suggested up to 65 entities had accessed it over several years. The provider had originally sought a global amount of US$889,752,087.

Consequently, the Supreme Court set aside the original damages award and ordered the Ontario Superior Court to recalculate the compensation, this time applying the adverse inferences required by the spoliation finding.

For compliance officers, the message is clear: destroying or withholding records once litigation looms triggers a mandatory presumption that the missing evidence would have harmed the party’s case.

In practice, the decision could reshape how large financial institutions manage document preservation. Companies that handle sensitive licensing agreements may need to tighten internal controls to avoid inadvertent spoliation, especially when multiple subsidiaries are involved. The requirement to infer the worst‑case scenario from missing data could lead to higher liability exposures, prompting a reassessment of risk‑management strategies across the industry.

The order does not specify a new damages figure; instead, it returns the matter to the Ontario Superior Court for a fresh calculation that incorporates the inferred impact of the concealed evidence.

Legal analysts note that the case highlights the importance of robust record‑keeping protocols in the financial sector. While the decision does not create new legal precedent beyond reaffirming the spoliation doctrine, it shows the courts’ willingness to enforce strict remedies when parties fail to preserve relevant evidence.