Case Report – Competition regulator’s production order set aside

The Globe and Mail’s Law Page from this morning covers a January 31 decision of the Federal Court in which Madam Justice McTavish set aside a production order obtained by the Commissioner of Competition. She held the Commissioner, who obtained the order under section 11 of the Competition Act by way of an ex parte application, did not make a full and frank disclosure of material facts and made statements that bordered on misrepresentations.

There were three specific bases for McTavish J.’s decision. First, she held that the Commissioner ought to have disclosed a statement it had made in a previous section 11 application that the order obtained on that application would likely be sufficient for its inquiry-related purposes. Second, she held that the Commissioner provided “misleading, inaccurate and incomplete” information on the extent of the overlap between the information it sought and information it already had. Third, she held that the Commissioner ought to have drawn the concerns brought to her attention by the respondent earlier in the year in response to a previous and similarly-broad production order in the same inquiry. Most notably, the respondent had complained that the previous order was so burdensome that its process of retrieving documents had caused its file server to crash and likely involved data restoration costs exceeding $500,000.

The decision stresses the strict burden of disclosure on parties seeking ex parte orders for production, whether in the regulatory or civil context. The part about disclosing expressed concerns about the burden of retrieving electronic documents may apply in a limited number of situations because an ex parte process often starts the course of inquiry or investigation, but it is nonetheless significant given the broader challenges associated with managing the retrieval and production of electronic documents.

The Globe also has commentary by Davies Ward lawyers John Bodrug and Anita Banicevic, linked here. This is part of a recent run of cases on transgressions by regulators related to the seizure of documents. See, for example, my coverage of the Nova Scotia Appeal’s recent decision on a Canada Revenue Agency search here and the Ontario Superior Court of Justice’s December 2007 decision on a Ministry of Labour search here. (Full reasons are still pending in the latter case.)

The Commissioner of Competition v. Labatt Brewing Company Limited, 2008 FC 59.

Case Report – NSCA says “Crown” must be implicated in search to be liable for costs

On January 18, the Nova Scotia Court of Appeal issued a significant judgement on Crown liability for costs on an application to quash a search warrant.

The Court held that the Crown in Right of Canada ought not to be liable for costs of on an application to quash an “ill-conceived and poorly executed” search warrant obtained and executed by the Canada Revenue Agency. It reached this conclusion because a Crown Attorney was not involved in the impugned investigation but, rather, had simply responded to the application to quash.

The Court also said that it did not matter the CRA is a deemed agent of the Crown under the Canada Revenue Agency Act because the basis for an award of costs is rooted in the special role of the Crown as prosecutor:

The basis of this general rule is not that the prosecutor might be an agent of the Crown and that an investigator might not be. The general rule is not based on the law of agency, but on strong reasons of public policy which I have already described, and which have been set out in the cases on many occasions: see, for example, Foster, supra at ¶ 62-65; and Ciarniello, supra, at ¶ 31-36. Whether by virtue of ss. 4(2) of the CRAA, the investigator here was or was not an agent of the Crown (a point I need not decide) does not change the general legal principle applicable to costs against the Crown in criminal matters.

The underlying facts involved a search based on a flawed Information and in which the CRA had seized records subject to solicitor-client privilege contained on computer and electronic storage devices.

R. v. Taylor, 2008 NSCA 5.

Case Report – BCCA says confidentiality agreement strict

Yesterday, the British Columbia Court of Appeal held that it ought not relieve B.C. Ferries from a confidentiality agreement it had entered into with the Canadian Transportation Investigation and Safety Board as a condition of receiving data from its own hard drive that had been recovered from its sunken vessel and seized by the Board.  So it could respond to the Board’s draft investigation report on the sinking, B.C. Ferries agreed to the following confidentiality covenant:

The [data] will be kept in confidence by BC Ferries and is to be used only for the purposes of responding to the draft report subject to the parties’ agreement to permitted uses prior to the release of [the Board’s] final report or order of the court.

B.C. Ferries argued that the Board did not exercise its discretion to grant relief from the confidentiality covenant in good faith.  The majority, in a fact-specific judgement written by Mr. Justice Lowry, held that the clause did not grant a discretion subject to an implicit good faith requirement, but rather, was simply an agreement “subject to further agreement.”  Mr. Justice Hall adopted the majority’s reasons and added that the public interest in the safety of the traveling public might have otherwise justified an order of relief, but that there was insufficient evidence of such an interest on the record.

British Columbia Ferry Services Inc. v. Canadian Transportation Accident Investigation and Safety Board, 2008 BCCA 40.

Government ordered to return electronic records seized under warrant

On December 11th, the Ontario Superior Court of Justice found the Ministry of Labour violated Booth Centennial Healthcare Linen Services’ section 8 Charter rights and ordered it to return electronic records seized under an extremely broad search warrant. Mr. Justice Corbett’s order states, “The search and seizure of electronic records in this case was grossly overbroad, in the circumstances. There was no evidence before me of the practicality of an on-site search for electronic records, an approach that, as a matter of common sense, ought to be possible in a case like this.” We expect supplementary reasons to be issued in January.

One to watch – Blood Tribe at the SCC

The Supreme Court of Canada is scheduled to hear an appeal of Blood Tribe Department of Health v. Canada (Privacy Commissioner) on February 21, 2008.  The case will present an opportunity for the Court to comment on a principle it first articulated in 1982 in Descoteaux v. Mierzwinski – that laws authorizing interference with solicitor-client privilege must be interpreted restrictively.  Of perhaps greater interest, it will be the Court’s first opportunity to provide significant commentary on the Personal Information Protection and Electronic Documents Act.

The dispute arose when the respondent to a complaint alleging a failure to provide access to personal information refused to produce records of communications that it claimed to be subject to solicitor-client privilege.  In demanding the records be produced, the Commissioner relied on the investigatory powers granted by section 12 of PIPEDA, a broadly-worded provision which does not expressly grant the power to order the production of records over which solicitor-client privilege is claimed. 

Litigation ensued and the Federal Court held that the Commissioner had the power to order production.  It did so by applying a purposive analysis, stressing the Commissioner’s “central role in achieving the important objectives of the legislative scheme.”

The Federal Court of Appeal disagreed with the lower court’s approach, which it found to be inconsistent with the Mierzwinski strict interpretation principle and the concept of solicitor-client privilege as a substantive rule of law.  It stated:

In short, the reason express language is required to abrogate solicitor‑client privilege is because it is presumptively inviolate. The exception for solicitor‑client privilege in the PIPEDA is not what shelters privileged documents from disclosure. The law of privilege does that. The exception simply recognizes that privilege.

There are some finer points to the Federal Court of Appeal’s decision that may also catch the Supreme Court’s interest, including (1) whether the principles developed in interpreting the federal Privacy Act should be applied in interpreting PIPEDA and (2) what effect should be given to language authorizing the exercise of powers “to the same manner and to the same extent as a superior court.”

Blood Tribe is likely to remain relevant given that Parliament’s Standing Committee on Access to Information, Privacy and Ethics made a rather moderate recommendation in its recent Statutory Review of the Personal Information and Electronic Documents Act.  Asked by the Privacy Commissioner to address the gap to her investigatory powers identified by the Federal Court of Appeal in Blood Tribe, the Standing Committee only recommended that PIPEDA be amended to expressly permit her to apply to the Federal Court for an expedited review of solicitor-client privilege claims. 

Case Report – Jurisdiction to order production of non-resident data

The Federal Court rejected an application to vacate a production order made under section 231.2 of the Income Tax Act. The order required two Canadian eBay subsidiaries to produce data about specific Canadian eBay users that resided on servers operated by eBay’s American subsidiary in the United States.

The Court dealt only with the issue of whether it had jurisdiction to order production of non-resident data because the parties agreed that the Court should reserve on whether there was a sufficient basis for the order pending resolution of the appeal in Canada (MNR) v. The Greater Montreal Real Estate Board, 2006 FC 1069 (CanLII). On the threshold issue, the Court stated:

In the present case, eBay Canada has access to and uses information respecting PowerSellers. It is not determinative of the issue that the electronic apparatus storing the information which eBay Canada accesses is outside Canada. The information can be summoned up in Canada and for the usual business purposes of eBay Canada. The situation may be different if the information never had been used in Canada.

For commentary by Michael Geist, please click here.

eBay Canada Limited v. Canada (National Revenue), 2007 FC 930 (CanLII).