Case Report – ABCA stresses need for courts to protect hard drive contents

On June 11th, the Alberta Court of Appeal held that a judge erred in ordering the production of hard drive images that contained patient files.

The case is about a public health authority’s right to audit files held by one of its former service providers, and in particular, its right of access to files of patients whose treatment the authority only partly funded. These patients also received privately-funded services, but only had one patient record with the service provider, which raised an issue about the authority’s right to look at the files in the course of an audit. This issue was initially litigated up to the Alberta Court of Appeal in 2006.  The Court of Appeal held that the authority had no right of access to the “hybrid files” under public law, but did not consider the authority’s contractual right of audit.

The access dispute was revived again when the service provider sued the authority for unlawfully seeking access to the hybrid files and forcing it to defend its clients’ privacy rights through litigation.  Several computer hard drives containing hybrid files that were imaged in the original dispute and stored at the court were central to the action.  The authority revived its attempt at accessing the hybrid files by filing a counterclaim in which it alleged breach of contract and breach of fiduciary duty. It made a vague allegation in its pleadings that the service provider was double-billing, but did not plead fraud.  (It had no evidence of fraud because any such evidence could only be revealed on an examination of the hybrid files themselves.)

A case management judge ordered the hard drives to be produced to the authority in specie (in their actual form) with a direction not to print or take notes of anything irrelevant and in reliance of the no collateral use rule embedded in the implied undertaking.  The Court of Appeal held this order was made in error and that the authority’s vague pleadings of fraud did not give it a right to the hybrid files.

The Court of Appeal’s judgement (written by Madam Justice Conrad) contains some very principled statements on e-discovery.  She held that a party to litigation will not ordinarily get access to a hard drive, which is simply a receptacle for information.  This is not new, but Madam Justice Conrad also suggested that a judge has a duty to protect irrelevant, confidential and private materials in the event of a production dispute.  She also stressed that orders to inspect a hard drive will only be made on “strong evidence” that a party is attempting to thwart the discovery process and, further, that a court that orders inspection of a hard drive should still ensure that irrelevant and confidential information is protected.  Referring to the order made in 2007 by the Alberta Court of Queen’s Bench in Spar Aerospace (subsequently upheld on appeal), she said:

While I agree with Madam Justice Veit’s decision, I would add a caveat. Even in circumstances where it is clear that a litigant is thwarting the litigation process, and the court deems it appropriate to order production of a hard drive, measures should be taken to protect disclosure of irrelevant and immaterial information which the producing party objects to produce. Although litigation confidentiality exists, many times that will not be sufficient to protect personal, confidential and private material. A judge should always hear representations as to how information that is neither material nor relevant can be protected from exposure, and frame any production order in the least intrusive manner.

Madam Justice Conrad then held that there was no basis justifying an inspection order in the circumstances, that the service provider’s pleading did not put the entire content of the hard drives at issue and that concerns about the cost of separating the records on the hard drive were not established or were at least premature.

The Court also held that the action did not give the authority a right of disclosure that extended to the hybrid files.  It held that the dispute was about the scope of a contractual right of audit and not an allegation of fraud despite the vague allegations pleaded in authority’s counter claim.  It seemed clear to the Court that the authority was attempting to seek what it ultimately wanted (a look at the hybrid files) by the way in which it pleaded its counterclaim.  Madam Justice Conrad said the authority was on a “fishing expedition.”

While an obviously significant e-discovery case, this also says something about records management, the need for third-party access and potential conflicts with personal privacy rights.  If the authority’s funding contract demanded that patient records for funded services be separately maintained, this dispute might have been avoided.

Innovative Health Group v. Calgary Health Region, 2008 ABCA 219 (CanLII).