



COURT OF APPEAL FOR ONTARIO

CITATION: BMW Canada Inc. v. Autoport
    Limited, 2021 ONCA 42

DATE: 20210122

DOCKET: C67818

Feldman, van Rensburg and
    Thorburn JJ.A.

BETWEEN

BMW Canada Inc.

Plaintiff (Respondent)

and

Autoport Limited

Defendant (Appellant)

Robert B.
    Bell, Emily Y. Fan, and Julia Boddy, for the appellant

Eric Machum,
    Kyle Ereaux, Marc D. Isaacs and Michelle Staples for the respondent

Heard: July 14, 2020 by video conference

On appeal from an order of the Divisional Court (Justices Nancy L. Backhouse,
    Robert Charney and Lise G. Favreau), dated July 19, 2019, with reasons reported
    at 2019 ONSC 4299, 35 C.P.C. (8th) 141, setting aside the order of Justice
    Carole J. Brown of the Superior Court of Justice dated July 11, 2018, with
    reasons reported at 2018 ONSC 4208, 23 C.P.C. (8th) 23, and restoring the order
    of Master Janet E. Mills of the Superior Court of Justice dated December 11,
    2017, and reported at 2017 ONSC 7379.

van Rensburg J.A.:


A.

INTRODUCTION

[1]

At issue in this appeal is which of the parties
    is to bear the cost of the interim preservation of vehicles in an action where
    the respondent claims damages for their total loss, but wishes to destroy them,
    and the appellant seeks their preservation for the purpose of inspection. The
    appeal originated with a Masters order in a motion under r. 45.01(1) of the
Rules of Civil Procedure
, R.R.O. 1990,
    Reg. 194. This court must determine whether there was a palpable and overriding
    error in the Masters order (which was restored by the Divisional Court) requiring
    the appellant to assume the cost to preserve the vehicles.

[2]

The parties are engaged in litigation in which
    the respondent BMW Canada Inc. (BMW) claims damages in respect of 2,966 vehicles
    it alleges were exposed to adverse weather conditions while being stored by the
    appellant, Autoport Limited (Autoport). After the action was commenced, and
    before Autoport had delivered its statement of defence, BMW informed Autoport
    of its intention to dispose of the vehicles.

[3]

BMW contends that, although it claims damages
    for the total loss of all of the vehicles, it does not need the vehicles to
    prove its claim. BMW asserts that its damages claim does not turn on proving
    actual harm to any of the vehicles, but on the fact that they were all exposed
    to adverse weather conditions and recalled because of safety concerns. BMW seeks
    to avoid the cost of the ongoing storage of the vehicles by turning over
    custody of the vehicles to Autoport, continuing to store the vehicles at
    Autoports expense, or destroying the vehicles. Autoport denies liability and,
    among other things, challenges BMWs decision to recall the vehicles and its
    damages theory. Autoport sought an order for interim preservation of the
    vehicles, asserting that, until it received information from BMW about the
    defects BMW had identified and BMWs own testing and inspection of the
    vehicles, it was unable to develop and implement a testing protocol that is
    appropriate and necessary for its defence of the action.

[4]

The Master held that BMW should not have to bear
    the financial burden of continuing to store the vehicles and ordered Autoport
    to elect within ten business days whether to take physical custody of the
    vehicles or to assume the financial responsibility for their storage and
    preservation, failing which BMW could deal with the vehicles as it deemed
    appropriate. The Appeal Judge reversed the Masters order and required BMW to
    preserve the vehicles and to pay the ongoing storage costs, which it could
    recover from Autoport if successful at trial. On further appeal with leave, the
    Divisional Court restored the Masters order and required Autoport to pay BMW
    the costs of storing the vehicles from ten business days after the date of the Masters
    order to the date of its election.

[5]

Autoport appeals to this court, with leave. For
    the reasons that follow, I would allow the appeal.

[6]

Briefly, the courts below erred in attempting to
    articulate and apply a one-size-fits-all test for r. 45.01 motions. The
    situations in which such a motion may be brought are varied. The court must
    consider all relevant circumstances, including the nature of the property and
    its materiality to the issues in the litigation, as well as the purpose of the
    preservation order and its proposed duration. The court should seek to craft an
    order that is based on and responsive to the evidence before it, including
    evidence of the potential benefit and harm or prejudice to each party. Where,
    as here, the condition of the property is at issue in the action, and its
    preservation is sought for the purpose of inspection, the goal is to best
    ensure fairness in the litigation process. In making an interim preservation
    order, the court can impose conditions which might include provision for the financial
    obligations to be assumed by the parties, time limits, and in appropriate
    circumstances, a mechanism for further directions or review of the order.

[7]

In this case the Master erred when, in assessing
    the relative prejudice to the parties (which she characterized as balance of
    convenience), she considered only the cost to BMW of storing the vehicles. The
    Divisional Court, in restoring the Masters order, erred in its articulation of
    the test, in deferring to the Masters balance of convenience assessment, and
    in concluding that Autoports own experts could determine how many vehicles
    they needed to preserve and test to meet [BMWs] theory of liability. This
    conclusion was contrary to Autoports uncontroverted evidence, and instead prematurely
    gave credence to the damages theory BMW advanced at the motion.

[8]

Taking into consideration the evidence on the
    motion and the factors that are relevant in this case to best ensure fairness
    in the litigation process, I conclude that an order for the interim
    preservation of the subject vehicles is warranted. I would allow the
    appeal and grant an order substantially in the terms of the order sought by
    Autoport in argument on this appeal.

B.

FACTS

(1)

BMWs Claim

[9]

Autoport, a subsidiary of Canadian National
    Railway Company (CN), operates vehicle processing and transloading facilities
    at several locations across Canada, including in Eastern Passage, Halifax, Nova
    Scotia (the Autoport facility). BMW contracted with Autoport to provide vehicle
    handling and storage services for BMW vehicles imported to Canada from Germany.

[10]

BMW commenced its action by statement of claim
    dated February 1, 2017. BMW alleges that, as a result of Autoports negligence
    and breach of contract, 2,966 BMW and MINI-branded vehicles (the BMW
    vehicles) sustained damage due to exposure to excessive water and corrosive
    substances, including salt, while stored at the Autoport facility during the
    winter of 2015. BMW claims $175 million in damages, which includes the full
    value of the 2,966 vehicles that were stored by Autoport.

[11]

The statement of claim states that BMW seeks
    damages arising from its recall of the BMW vehicles. The statement of claim
    refers to its inspection of vehicles when they were in the possession of
    Autoport (at para. 19) and to inspections between May 2015 and July 2016 that
    revealed latent and severe damage to the Vehicles (at paras. 21, 22 and 24).
    BMW pleads that the resulting damage includes but is not limited to (a) MINI models:
    damage to the starter motor power supply cable connectors; (b) BMW models:
    damage to internal components within the steering rack; and (c) BMW and MINI
    models: damage to electrical wires and/or connectors (at para. 24).

[12]

BMW pleads that the vehicles were recalled
    beginning in July 2015 (at para. 25), and were to be returned to BMW for
    disposal (at para. 27). BMW claims damages that include its loss in respect of
    the vehicles, the costs of transportation and storage of the vehicles, the
    costs of investigating the source, nature, and extent of the damage, and
    disposal or destruction costs (at para. 40).

(2)

The Motion to Preserve the Vehicles

[13]

In November 2017 Autoport brought a motion under
    r. 45.01 for an interim preservation order, for particulars of certain
    pleadings in the statement of claim and inspection of documents (including
    particulars of the results of the inspections referred to in the statement of
    claim and production of the inspection reports), and for an order under r.
    32.01 for a court-supervised inspection process.

[14]

The evidence on the motion consisted of the affidavit
    of Daniel Steedman, National Claims Manager at CN, sworn November 3, 2017. Mr.
    Steedman noted that BMW had alleged defects to all of the vehicles, but it had
    refused to provide documentation detailing the alleged defects and its own
    inspection results. In seeking interim preservation of the vehicles, Mr.
    Steedman referred to the request by Autoports counsel that BMW propose
    vehicles for inspection since it was the party claiming defects/damage and it already
    had detailed information from its own previous inspections, to BMWs refusal to
    do so, and to BMWs demand instead that Autoport propose the vehicles it
    required for inspection. Mr. Steedman noted that Autoport had conducted a
    preliminary inspection of 12 vehicles (which it had chosen as a sample without BMWs
    input) that had not identified issues that assisted in responding to the
    defects claimed by BMW. He referred to the fact that destructive testing might
    be required, that Autoport would require different types of experts for
    subsequent inspections, and that Autoport did not have sufficient information
    to determine the type of expertise required. Autoport was seeking a
    preservation order because the vehicles would require further inspection.

[15]

The Steedman affidavit attached BMWs responses
    to the demand for particulars and the request to inspect documents (which were
    mostly refusals on the basis that the particulars and documents were
    unnecessary for pleading and sought evidence), as well as some email exchanges
    between counsel indicating that BMW intended to dispose of the vehicles which
    it was continuing to store at an estimated cost of $10,000 per day.

[16]

BMW did not file evidence on the motion. In its
    factum before the Master (which was before this court on appeal), BMW acknowledged
    that the motion was to preserve evidence. It argued that it had no use for the
    vehicles and referred to the ongoing estimated cost of their storage. BMW set
    out the theory underlying its claim for the loss of all of the vehicles (what I
    refer to as BMWs damages theory) at para. 11:

BMW takes the position
    that all of the Vehicles were exposed to unacceptable conditions giving rise to
    serious risk of material damage, but that the extent of such damage to any
    particular Vehicle cannot viably be determined without extensive destructive
    testing. Thus, the recall was for all Vehicles. On this basis, BMW claims in
    respect of all Vehicles, on the basis of exposure, and without regard for which
    Vehicles actually incurred what damage.

[17]

BMW accepted that it would be up to the trial
    judge to determine which party should pay the storage costs after trial, but it
    claimed that the interim obligation to pay storage costs was a burden it should
    not continue to bear. BMW offered to relinquish custody of the vehicles to
    Autoport and asserted that alternatively, Autoport should assume the ongoing
    storage costs because it was the party that wanted the vehicles preserved.

C.

ORDERS BELOW

(1)

The Decision of the Master

[18]

In
    determining whether to grant an interim preservation order under r. 45.01, the
    Master referred to and purported to apply the three-part test set out in
Taribo
    Holdings Ltd. v. Storage Access Technologies Inc.
, [2002] O.J. No. 3886
    (S.C.), at para. 5: (1) the asset sought to be preserved constitutes the very
    subject matter of the dispute; (2) there is a serious issue to be tried regarding
    the plaintiffs claim to that asset; and (3) the balance of convenience favours
    granting the relief
sought by the applicant or moving party.

[19]

The
    Master concluded that because Autoport was not making a claim to the vehicles,
    it could not meet the second prong of the
Taribo
test. Noting that BMW
    was willing to consent to the preservation order so long as Autoport took
    custody of the vehicles or assumed liability for the ongoing storage costs, the
    Master went on to consider appropriate terms for such an order. She observed
    that the underlying purpose of the preservation request by Autoport was to
    ensure the vehicles were available for inspection purposes at a later date,
    something she characterized as without a doubt, a legitimate concern. She
    noted that the fundamental question was who should bear the cost of the ongoing
    storage expense. She concluded that the balance of convenience favoured BMW,
    after referring to the daily storage costs while BMW was awaiting a pleading
    from Autoport and observing that it was unreasonable and  manifestly unfair
    to require [BMW] to continue to bear the financial burden in circumstances
    where [Autoport] [wanted] preservation of the vehicles pending inspection
    and/or trial, but [was] unwilling to take possession of them: at para. 26.

[20]

Accordingly,
    the Master made an order that provided for the interim preservation of the
    vehicles that were in BMWs power, possession, and control, subject to terms
    that Autoport, within ten business days of December 11, 2017, was to elect
    whether to take physical custody of the vehicles or to assume the financial
    costs associated with their ongoing storage, failing which BMW could deal with
    the vehicles as it deemed appropriate. The Masters order required BMW to
    provide a list of such vehicles to Autoport within 30 days.

[21]

The
    Master dismissed Autoports motion for further and better particulars and for
    inspection of certain documents. She ordered Autoport to deliver its statement
    of defence within ten days. She also ordered, on consent of BMW, that Autoport
    have the opportunity to inspect any or all of the vehicles, that any such
    inspection not delay the delivery of the statement of defence, and that, if the
    parties were unable to establish a mutually agreeable process to facilitate
    inspection, they could return to the court for further directions.

[22]

Autoport delivered its statement of defence on
    January 10, 2018. The statement of defence denies liability in contract and negligence
    and asserts that BMW did not suffer any loss or damage, that if BMW did suffer
    any loss or damage the damages are nominal, and that BMW has failed to mitigate
    its damages. It also alleges that most of the BMW vehicles were not exposed to
    severe winter weather conditions and none were exposed to corrosive salt, and
    it disputes the weathers effect on the vehicles that were exposed. Finally,
    Autoport pleads that BMWs recall of the vehicles was not reasonable and it
    contests BMWs theory of damages. Autoport pleads that if any of the vehicles
    were defective, the defects had nothing to do with the damage alleged to have
    occurred at its storage facility.

(2)

The Decision of the Appeal Judge

[23]

Autoport
    appealed the Masters order with respect to the denial of an interim
    preservation order, to a single judge of the Superior Court, Brown J. (the
    Appeal Judge).

[24]

The
    Appeal Judge held that the Master erred in her articulation of the test for an
    interim preservation order by misinterpreting
Taribo

to require a serious issue to be tried regarding the
    plaintiffs claim
to an asset
. She referred to Autoports argument that
    the
Taribo
test was not applicable because there was no contest in this
    case as to ownership or entitlement to the property. The Appeal Judge
    nevertheless articulated a similar test, stating that, to obtain an order for
    interim preservation of property, the moving party must establish that: (1) the
    assets sought to be preserved constitute the subject matter of the dispute or a
    right to a specific fund or are relevant to an issue in the proceeding; (2)
    there is a serious issue to be tried regarding the plaintiffs claim; and (3)
    the balance of convenience favours granting the relief sought by the applicant
    or moving party: at para. 48.

[25]

The
    Appeal Judge concluded that the Masters order was premised on her erroneous
    application of
Taribo
and her conclusion that she could not grant the
    preservation order except on consent of BMW. Moreover, according to the Appeal
    Judge, the Master failed to take into account BMWs
prima facie
obligation,
    as the party in possession, to preserve the vehicles as the subject matter of
    the litigation. The Appeal Judge noted that the vehicles that were the property
    of BMW and the subject matter of its action were alleged to have been damaged
    beyond being roadworthy by the negligence or breach of contract of Autoport and
    [i]n such a case, it is paramount that the property be preserved,
inter alia
, for the benefit of further testing by both
    parties, or for any other testing which may be ordered by the Court, prior to
    trial: at para. 55.

[26]

The
    Appeal Judge concluded that based on the evidence that was before her, which
    was also before the Master, the vehicles constituted the very subject matter of
    the dispute, there was a serious issue to be tried with respect to BMWs claim
    concerning Autoports alleged negligence and/or breach of contract in storing
    BMWs vehicles, and the balance of convenience favoured granting the relief
    sought by Autoport. The balance of convenience favoured granting the relief
    sought by Autoport because if the vehicles were not preserved, there would be
    no means for either party or the court to inspect and test the subject
    vehicles. The Appeal Judge was also satisfied that BMW, as the party in
    possession of the subject matter of the litigation and as the party with the
    obligation to preserve such property in the interest of justice and to ensure
    fairness of the trial process, ought to bear the cost of the preservation of
    the property, subject to BMW seeking recovery of such expenses if successful at
    trial.

(3)

The Decision of the Divisional Court

[27]

The
    Divisional Court allowed the appeal and restored the Masters order.

[28]

Charney
    J., writing for a three-judge panel, agreed with the Appeal Judge that the
    Master had erred in her analysis when she said that Autoport failed to meet the
    second step of the
Taribo
test. He accepted that the
Taribo

test might apply
    to cases involving a dispute over ownership of an asset, but concluded that it
    was not appropriate in cases arising in other contexts to which r. 45.01 might
    apply. Instead, he proposed a test consisting of the following elements: (1)
    the property sought to be preserved is the property in question in a proceeding
    or relevant to an issue in the proceeding; (2) there is a serious issue to be
    tried with regard to the property; (3) the interim preservation or custody of
    the property is necessary to enable a party to advance or defend its claim; and
    (4) the balance of convenience favours granting the relief sought by the
    applicant or moving party.

[29]

The
    Divisional Court disagreed with the Appeal Judge that the Masters error in interpreting
Taribo
had informed her analysis. While BMW
    had consented to the preservation order on the condition that Autoport take
    custody of the vehicles or assume liability for their ongoing storage costs,
    the Master had not simply acceded to the order sought by BMW, but had assessed
    the balance of convenience. The Master had provided clear and concise reasons
    in finding that the balance of convenience favoured BMW and had exercised her
    discretion to make the order on those conditions. The court concluded that the
    Appeal Judge erred in substituting her exercise of discretion for that of the
    Master, and in basing her balance of convenience analysis on the presumption
    that the party in possession has a
prima facie
obligation to preserve property
    that is the subject matter of litigation or evidence.

[30]

The
    Divisional Court rejected the premise that there is a
prima facie
obligation
    to preserve property that is the subject matter of litigation, which it
    characterized as unsupported in law: at para. 42. Among other things, the
    court distinguished cases relied on by Autoport before the Appeal Judge, which
    dealt with the obligation to preserve documents and property already the subject
    of a preservation order. The court noted that there is nothing in the
Rules
    of Civil Procedure
that imposes such an obligation, and posited that the
    recognition of a
prima facie
obligation to preserve evidence would
    effectively reverse the onus in r. 45.01, and could run counter to a
    plaintiffs duty to mitigate its damages. While recognizing that a plaintiff
    who repaired or destroyed evidence without keeping some record of it would risk
    compromising its case or a finding of spoliation of evidence, the court concluded
    that these were risks that BMW was prepared  and was permitted  to take,
    given its theory of liability in this case.

[31]

The
    Divisional Court referred to the principle of proportionality set out in rr. 1.04(1.1)
    and 29.2. The court deferred to the Masters balance of convenience analysis, concluding
    that she had impliedly considered that the cost of $10,000 per day to BMW was
    disproportionate to Autoports continued need to preserve and test the
    vehicles. The court concluded that the Masters order met the principle of
    proportionality because it permitted the defendant, Autoport, in consultation
    with its own experts, to decide for itself how many automobiles it actually
    needed to preserve and test. Moreover, placing the financial burden on Autoport
    created an economic incentive to preserve and test only as many vehicles as it
    actually required for its defence. In contrast, placing the burden on BMW would
    give Autoport an incentive to delay its testing and exaggerate the number of
    vehicles needed to be preserved. The Divisional Court noted that, although
    Autoport argued that it could not know how many vehicles it needed to preserve
    and test without the results of BMWs own inspections, the court was satisfied that
    Autoports own experts could determine how many vehicles they would need to
    preserve and test in order to meet BMWs theory of liability, and that [l]ogic
    and the principle of proportionality suggest[ed] that it [would] be
    substantially fewer than the 2,500 vehicles currently in storage: at para. 81.

[32]

In
    the result, the Divisional Court set aside the Appeal Judges order and
    restored the Masters order. Autoport was given ten business days in which to
    make the election referred to in the Masters order with respect to the
    vehicles, and it was to pay to BMW the costs, plus interest, of storing the
    vehicles from December 28, 2017 to the date of its election or expiry of the
    time for the election.

D.

ISSUES

[33]

The parties identify the following issues on
    this appeal:

·

What is the test for making an order under r.
    45.01 when the property to be preserved is evidence? What factors should be
    considered? What is the role of balance of convenience? Is there a
prima
    facie

obligation or presumption in favour of preservation of property
    that may be required for evidentiary purposes?

·

Did the Master err in refusing to make an interim
    order requiring BMW to preserve the subject vehicles until BMW discloses
    details of its inspections and the results of its destructive testing?

·

If the Master erred, and applying the proper
    test, should such an order be made?

E.

POSITIONS OF THE PARTIES

[34]

Autoport submits that the Divisional Court erred
    in restoring the order of the Master. It seeks an order requiring BMW to
    continue to preserve the remaining vehicles until BMW discloses information
    that would permit it to develop its own testing protocol and to identify the
    vehicles it wishes to inspect. In oral argument on this appeal Autoport
    confirmed that it would be sufficient for BMW to disclose the details of the
    destructive testing it has carried out.
[1]

[35]

Autoport asserts that the Master applied the
    wrong test. First, she erred in applying a balance of convenience test when
    there is nothing in r. 45.01 that mandates such a test and in her balance of
    convenience analysis by focussing solely on the cost of storage. Second, the
    Master ought to have recognized that there is a
prima facie
obligation
    for a party to litigation to preserve evidence in its possession. The evidence
    may not have to be preserved until trial, but the other party must have a
    reasonable opportunity to inspect the evidence. Finally, Autoport argues that a
    consideration of the relevant circumstances and evidence in this case warranted
    an interim preservation order, to prevent the destruction of the vehicles until
    it has sufficient information  which is in the hands of BMW  to be able to
    develop and implement an appropriate testing protocol.

[36]

BMW asserts that the balance of convenience is a
    proper consideration, which in this case clearly favoured the conclusion that
    Autoport should take custody of the vehicles or pay their ongoing storage
    costs. Agreeing with the analysis of the Divisional Court, BMW contends that
    there is no obligation on a party to preserve evidence, which is inconsistent
    with its duty to mitigate damages. Moreover, it argues that such an obligation
    would be contrary to its right to deal with its own property as it sees fit. Even
    if there were such an obligation, it was discharged when BMW offered up the
    vehicles to Autoport for inspection. BMW contends that Autoports complaints
    about needing disclosure of BMWs documents and test results are a collateral
    attack on those parts of the Masters order that were not appealed. BMW asserts
    that there was no reversible error in the Masters decision, or in the decision
    of the Divisional Court upholding that decision.

F.

DISCUSSION

[37]

In the discussion that follows I will begin by
    addressing some of the relevant principles. I will then identify the errors in
    the Masters analysis and that of the Divisional Court. Finally, I will explain
    why, on a proper consideration of the evidence, and having regard to the
    relevant factors, the order sought by the appellant must be granted.

(1)

The Relevant Principles

[38]

The parties invited the court on this appeal to address
    the test for r. 45.01 motions, clarifying the role of balance of convenience
    and whether there is a presumption in favour of the preservation of evidence in
    a proceeding. As I will explain, it is inappropriate to prescribe a single test
    for r. 45.01 motions, including a
Taribo
-type

test that
    focusses on balance of convenience, having regard to the variety of
    circumstances in which such motions can be brought. In a case such as the
    present, where the condition of property is at issue in the action and its
    preservation is sought for the purpose of inspection, the goal is to best
    ensure fairness in the litigation process. I will also explain why it is
    unnecessary to determine whether there is a presumption in all cases in favour
    of preserving evidence for litigation, but that r. 45.01 permits the court to
    address trial fairness concerns that would arise
before
evidence is
    destroyed.

(a)

What is the Appropriate Test for Interim
    Preservation of Property in this Case?

[39]

Rule 45.01 is available to parties as an interim
    measure during litigation. Rule 45.01(1) provides that the court may make an
    interim order for the custody or preservation of any property in question in a
    proceeding or relevant to an issue in a proceeding. The order is
    discretionary. Although the rule provides that the court may authorize entry
    on or into any property in the possession of a party or of a person not a
    party, and r. 45.01(2) permits the court to order the property to be sold in
    such manner and on such terms as are just, there are no criteria prescribed by
    the rule for the exercise of the courts discretion under r. 45.01 and there is
    no limitation on the terms and conditions that can be imposed.

[40]

Rule 45.01 is available in a wide variety of
    circumstances in which interim preservation of property may be sought. The
    court, in considering whether to make such an order and on what terms, will
    take into consideration the evidence on the motion and make the order that best
    responds to the circumstances. The only precondition for preservation or
    custody is that the property is in question in a proceeding or relevant to an
    issue in a proceeding. As I will explain, it is inappropriate to attempt to
    prescribe and apply a single test (such as that set out in
Taribo

or
    a derivation of such test) to all r. 45.01 motions.

[41]

In some cases a r. 45.01 motion will seek to
    preserve the very property the plaintiff or applicant is pursuing in its
    litigation. In
Taribo
, for example, the litigation involved a dispute about
    shares that former employees of the respondent corporation had tendered in
    consideration for a reduction of their obligations under promissory notes. The
    shares were pledged and deposited with a third party. The moving parties motion
    for an interim preservation order sought what was essentially a form of
    injunctive relief  to prevent the corporate respondent from having the shares
    released from deposit to it and then converting or cancelling the shares.

[42]

The motion judge in
Taribo

articulated
    and applied a three-part test requiring that: (1) the assets sought to be
    preserved constitute the very subject matter of the dispute; (2) there is a
    serious issue to be tried regarding the plaintiffs claim to that asset; and (3)
    the balance of convenience favours granting the relief sought by the applicant or
    moving party. She relied on two cases involving r. 45.02, which provides that
where
    the right of a party to a specific fund is in question
, the court may order
    the fund to be paid into court or otherwise secured on such terms as are just:
News
    Canada Marketing Inc. v. TD Evergreen
, [2000] O.J. No. 3705 (S.C.);
Sun
    v. Ho
(1998), 18 C.P.C. (4th) 363 (Ont. Gen. Div.). The
Taribo

test has been applied in other cases involving r. 45.01 where the moving
    party is seeking to preserve property that it seeks to recover in the
    litigation: see e.g.,
Progressive Moulded Products Ltd. v. Great American
    Group
, 2007 CanLII 12205 (Ont. S.C.);
Meade v. Nelson Resources
    Limited
(2005), 14 B.L.R. (4th) 244 (Ont. S.C.).

[43]

I accept that the
Taribo

three-part
    test is appropriate where a r. 45.01 motion is brought to preserve property
    that the moving party is claiming in its litigation. In such cases, the moving
    party seeks to limit or constrain what the responding party may do with
    property that is in its possession, and to preserve the property for the
    benefit of its claim. Factors such as whether the property is unique and whether
    damages claimed in the alternative would be an adequate remedy are also
    relevant and can fit within the balance of convenience analysis: see
Auto
    Enterprise Ltd. v. Oakville Motors Sales & Leasing Inc.
, [1995] O.J.
    No. 716 (Gen. Div.), at paras. 10-14. And, where an interim preservation order
    would tilt the scales in favour of a plaintiff on the basis of unproven
    allegations the court must exercise caution before making such an order: see
Stearns
    v. Scocchia
(2002), 27 C.P.C. (5th) 339 (Ont. S.C.) involving a motion
    under r. 45.02.

[44]

While the
Taribo

test is
    appropriate for r. 45.01 motions where the moving party claims an interest in
    property, or for r. 45.02 motions where the claim is to a specific fund, it is
    not required to be applied or adapted for
all
motions for interim
    preservation of property. This is apparent from the wording of the rule itself.
    Rule 45.01(1) authorizes the court to make an order for entry into any property,
    including the property of third parties, for the purpose of an interim order
    under the rule. Likewise, r. 45.01(2) permits the court to order the sale of
    property. The test articulated in
Taribo
,

even as modified by
    the Divisional Court, would be insufficient and would not account for the range
    of factors that would need to be considered where entry into property, third
    party interests, or sale of property arises in a r. 45.01 motion.

[45]

Similarly, a
Taribo
-
type test focussing
    on serious issue to be tried and balance of convenience is neither necessary
    nor appropriate in a case like the present, where the r. 45.01 motion sought to
    preserve evidence to permit inspection. In my view, the overall consideration in
    such motions is to make an order that is consistent with a fair litigation
    process. In making or refusing the order, and in establishing terms, the court
    should have regard to the issues in dispute in the litigation, the relevance
    and materiality of the property as evidence, the purpose for which interim
    preservation is sought and its proposed duration (whether for the entirety of
    the proceeding or for an interim period to permit the evidence to be
    documented, inspected, tested, and the like), and the benefits and harm or
    prejudice to the interests of each party in the litigation.

(b)

Is There a
Prima
    Facie

Obligation to
    Preserve Evidence?

[46]

The parties joined issue in the courts below and
    in this appeal on whether there is a
prima facie

obligation in
    all cases to preserve property that is the subject matter of litigation, or
    more narrowly, to preserve evidence for trial. It is unnecessary to determine
    that issue in this appeal. First, any attempt to delineate the scope of such a
    rule would be met by a range of factors, which could be characterized as
    exceptions to or limitations on such a rule, such as considerations of the
    importance of the evidence to the proceeding, the perishability of the
    property, the feasibility of its preservation, and the like. Second, the
    determination of the relatively narrow issue on the r. 45.01 motion in this
    case and accordingly on appeal would not turn on any such obligation or
    presumption. Autoport seeks interim preservation of the vehicles for a limited
    time and purpose, and BMW characterizes the question as simply one of cost.

[47]

While it is unnecessary to determine whether
    there is a
prima facie
obligation to preserve evidence, and its scope,
    I do not agree with the Divisional Courts unqualified rejection of the duty of
    litigants to preserve evidence, and BMWs assertion in this court that parties
    must be free to deal with their property as they see fit. The principle
    advanced by BMW, articulated so broadly, would apply whether or not the
    property is evidence and whether or not its temporary preservation or pre-trial
    destruction would affect trial fairness.

[48]

The courts have long recognized the doctrine of
    spoliation of evidence: see
McDougall v. Black & Decker Canada Inc.
,
    2008 ABCA 353, 302 D.L.R. (4th) 661 for a useful summary of the case law and
    principles. Underlying the doctrine is the trial fairness principle that
    parties to litigation are expected not to destroy important evidence, at least
    until the opposing party has had a fair opportunity to examine that evidence. The
    remedies are informed by considerations of trial fairness: the imposition at
    trial of a rebuttable presumption of fact that the missing evidence, had it
    been preserved, would have been unfavourable to the party who destroyed it, and
    other possible remedies to level the playing field, such as the exclusion of
    expert reports: see
Gutbir v. University Health Network
, 2010 ONSC
    6752, at para. 13;
McDougall
, at paras. 18, 29;
Stilwell v.
    World Kitchen Inc.
, 2013 ONSC 3354, 47 C.P.C. (7th) 345, at para. 55; and
Endean
    v. Canadian Red Cross Society

(1998), 157 D.L.R. (4th) 465
    (B.C.C.A.), at para. 32, leave to appeal granted but appeal discontinued, [1998]
    S.C.C.A. No. 260. The debate in the cases about whether there is a standalone
tort
of spoliation, and whether remedies are available for negligent spoliation (the
    cases are summarized at paras. 19 to 22 of
McDougall
), does not
    undermine the animating principle: that the destruction of evidence can be harmful
    to trial fairness.

[49]

Rule 45.01 permits the court to address trial
    fairness concerns that would arise if property constituting evidence were to be
    destroyed prior to its destruction, and so avoid the kind of harm in the
    litigation process that spoliation remedies address.

(2)

Application of the Considerations of Trial Fairness
    to This Case

[50]

As I have already observed, it is not
    appropriate to apply the
Taribo

test, or a derivation of that
    test, to the motion that underlies this appeal. The focus here should have been
    on trial fairness  that is, on the parties ability to prosecute and defend
    the proceeding, and ought to have considered the relevant factors, including
    the nature of the property and its materiality to the issues in the litigation,
    as well as the purpose of the preservation order and its proposed duration. In
    considering the r. 45.01 motion the court ought to have attempted to craft an
    order that was based on and responsive to the evidence before it on the motion.

[51]

I agree with the appellant that the Master erred
    in concluding that she had to apply the
Taribo

test and that
    the balance of convenience in determining who should bear the cost of interim
    preservation of the vehicles favoured BMW. The Master considered only the cost
    of continued storage of the vehicles and Autoports delay in inspecting when
    she concluded that the balance of convenience clearly favoured BMW: at para.
    26. The Master referred to the fact that BMW had repeatedly offered to
    relinquish possession or custody of the vehicles to Autoport, and she concluded
    that it was manifestly unfair to require BMW to continue to bear the financial
    burden of storage when Autoport wanted preservation of the vehicles, but was
    unwilling to take possession of them. In arriving at this conclusion the Master
    failed to consider Autoports evidence that it needed information from BMW
    about the defects it had identified and BMWs own inspections and testing before
    Autoport could conduct the appropriate inspections.

[52]

The Divisional Court erred in its articulation
    of the applicable test, in deferring to the Masters balance of convenience
    assessment, and in concluding, in the absence of evidence, that BMWs storage
    cost was disproportionate to Autoports continued need to preserve and test the
    vehicles. In requiring Autoport to assume the cost of preservation of the
    vehicles, the Divisional Court determined, at para. 81, that Autoport, in consultation
    with its own experts, could decide for itself how many automobiles it actually
    needs to preserve and test in order to meet BMWs theory of liability. This
    conclusion failed to give effect to Autoports evidence about the need to first
    receive information about the defects BMW had identified and the results of
    BMWs own inspections and testing before embarking on its own destructive
    testing program, and instead gave credence to the damages theory BMW advanced
    at the motion.

[53]

It therefore falls to this court to determine,
    on a proper consideration of the context of the action, the evidence, and the
    relevant factors, the appropriate disposition of Autoports r. 45.01 motion.

[54]

The evidence consists of the Steedman affidavit,
    filed by Autoport. Although BMW cross-examined Mr. Steedman, it did not file a
    transcript of the cross‑examination, and it did not provide its own
    affidavit. Autoport sought to file fresh evidence in the appeal before this
    court, which BMW opposed and countered with a cross‑motion for fresh
    evidence if Autoports evidence were admitted. The fresh evidence, which is
    unnecessary for the determination of this appeal, consists of affidavits that
    speak to two issues: the fact that BMW had already disposed of 517 vehicles
    before the Masters motion; and a procedural update to the effect that as of
    March 2020, documentary production had not yet taken place and the parties were
    continuing to negotiate a discovery plan. BMWs disposition of 517 of the
    vehicles was known to the parties but not argued in the courts below;
[2]
as such, while the facts and
    circumstances surrounding a partys destruction of evidence in another case might
    be relevant to a r. 45.01 motion, it would be inappropriate to consider such
    evidence in the determination of this appeal. The other fresh evidence simply
    confirms that the relevant
status quo
has continued  Autoport
    continues to require the vehicles to be preserved pending disclosure of
    information which it has not yet received.

[55]

In the discussion that follows, I will address the
    following factors: the issues in dispute in the action, and the relevance of
    the vehicles as evidence; the purpose and proposed duration of the interim
    preservation order; hardship or prejudice to the respondent; and the impact of a
    preservation order on the duty to mitigate damages. After considering these
    factors, I conclude that an order requiring BMW to continue to preserve the
    vehicles for the purpose of permitting Autoport to conduct an informed inspection
    of the vehicles was and is warranted, in the interests of trial fairness, and I
    address the terms of the order that are appropriate at this time.

(a)

The Issues in Dispute in the Action and the
    Vehicles as Evidence

[56]

BMWs action is for damage to vehicles alleged
    to have been caused by Autoports negligence and breach of contract in storing
    the vehicles. BMW claims damages for the total loss of all of the vehicles that
    were stored by Autoport. All of the vehicles are alleged to have been affected
    to the extent that they cannot be repaired and have no resale or salvage value.

[57]

Autoport denies liability and asserts that the
    damages are excessive and that there has been a failure to mitigate. It also
    denies that most of the BMW vehicles were exposed to severe weather conditions,
    or to corrosive salt, and it disputes the weathers effect on the vehicles that
    were exposed. Autoport pleads that BMWs recall of the vehicles was not reasonable
    and that if any of the vehicles were defective, the defects had nothing to do
    with the damage alleged to have occurred at its storage facility.

[58]

In light of the issues in dispute in the
    litigation, the vehicles themselves are relevant as evidence. Damaged property
    itself may be in evidence; more often, the parties witnesses and their experts
    will testify about the extent of the damage, how it was caused, and the cost of
    repair or replacement. The parties may rely on photographs, inspection reports,
    test results, and the like to support their respective positions.

[59]

BMW does not dispute the fact that the vehicles
    are evidence, although BMW says that, because of its damages theory, it does
    not need the vehicles as evidence to support its claims. That conclusion
    however is based on information BMW already has in its possession. Only BMW
    knows at this stage what inspections and testing have already taken place
    (including destructive testing, according to BMWs counsel), what defects it
    has already documented, and the basis for its conclusion that it is entitled to
    damages for the loss of all of the vehicles that were recalled for safety
    reasons, irrespective of whether a specific vehicle has sustained damage. I
    will return to BMWs damages theory later in my discussion. At this point it is
    sufficient to note that BMWs contention that it does not need the vehicles to support
    its damages theory does not detract from Autoports claim that it needs to
    inspect the vehicles as part of its defence, nor does it automatically shift
    the burden to Autoport to pay for their preservation.

[60]

It can safely be assumed that in the present
    case, but for the cost of continued storage, the vehicles would have been
    preserved, at least until both parties were satisfied that they had
    sufficiently documented and investigated the nature and extent of the damage,
    and that the vehicles themselves were not needed for trial. BMW preserved the
    vehicles for almost two years before it commenced its action, and it invited
    Autoport to complete its inspections when it gave notice of its intention to
    destroy the vehicles. BMWs actions are consistent with the recognition that it
    could not simply destroy all of the vehicles because it had no further use for
    them, and that Autoport should have access to the vehicles for the purpose of
    inspection.

(b)

The Purpose and Proposed Duration of the Interim
    Preservation Order

[61]

Autoport seeks an interim preservation order for
    the purpose of its own informed inspection of the vehicles before they are
    destroyed. The r. 45.01 motion for interim preservation was accompanied by a r.
    32.01 motion.

[62]

According to the Steedman affidavit, Autoport
    was notified of BMWs intention to destroy the vehicles some eight months after
    the action was commenced on the basis of the estimated cost of continued storage
    of $10,000 per day. Mr. Steedman referred to BMWs refusal to provide
    documentation detailing the alleged defects in the vehicles and its own
    inspection results, and that Autoports preliminary inspection of 12 vehicles (selected
    without BMWs input) had not identified any issues of the nature claimed by
    BMW. Mr. Steedman referred to the fact that destructive testing might be
    required, that Autoport would require different types of experts for subsequent
    inspections, and that Autoport did not have sufficient information to determine
    the type of expertise required.

[63]

Essentially, Autoports evidence on the motion
    was that it could not conduct an informed inspection of the vehicles before it
    received information from BMW about the defects BMW had identified and the
    inspections it had already undertaken.

[64]

BMW did not provide any evidence to challenge
    this assertion. Rather, BMW argued, and continues to assert, that Autoport has
    unreasonably delayed in deciding what vehicles to inspect, and that Autoport has
    all the information it requires to be able to decide which vehicles to inspect
    to respond to BMWs damages theory. BMW also argues that Autoports request for
    disclosure of information and documents before it determines which vehicles it
    needs to inspect is a collateral attack on the parts of the Masters order that
    were not appealed. I consider each argument in turn.

[65]

First, BMWs damages theory does not appear in
    BMWs statement of claim, nor was it set out in an affidavit, where it could
    have been tested through cross‑examination. It is simply a theory that
    was advanced in argument in response to the interim preservation motion as an
    explanation for the recall of all of the vehicles, and for BMWs position on
    the motion.

[66]

The assertion that was accepted by the Divisional
    Court at para. 81 of its reasons, that Autoports own experts can determine
    how many vehicles they need to preserve and test in order to meet [BMWs]
    theory of liability, ignores Autoports evidence about needing to receive
    information from BMW about its inspection results. Moreover, it prematurely gives
    credence to BMWs damages theory, a theory that is based on information in
    BMWs possession and that may well change in the course of the proceedings.

[67]

Second, the uncontroverted evidence in this
    record supports the contention that Autoport cannot develop and implement an
    appropriate inspection and testing protocol for its defence without first
    obtaining certain information from BMW. Autoports continued request for such
    information is not, as BMW submits, a collateral attack on the Masters dismissal
    of the motion for particulars and inspection of documents. The Master concluded
    only that the particulars and documents sought by Autoport were not required
    for the purpose of
pleading
, and Autoport complied with the order to
    deliver its statement of defence. The Master did not consider Autoports need
    for the information for the purpose of inspection of the vehicles, as set out
    in the Steedman affidavit, when she concluded that it was manifestly unfair for
    BMW to bear the financial burden of storing the vehicles when Autoport was
    unwilling to take possession of them. Indeed, as I have already observed, it
    was an error for the Master to fail to consider Autoports evidence to this
    effect.

(c)

Hardship or Prejudice to BMW

[68]

As BMW emphasized before this court, it never
    objected to the making of an interim preservation order; its concern was having
    to bear the ongoing cost to store the vehicles.

[69]

I accept that it may be inappropriate for a
    party to preserve property where the cost of doing so is disproportionate to
    the value of the evidence to the party seeking its preservation (an argument
    ultimately accepted by the Divisional Court). In this case however the evidence
    is that Autoport cannot proceed with an informed inspection of the vehicles until
    it has certain information that BMW has refused to provide until discovery, and
    BMW seeks recovery of its ongoing storage costs as part of its $175 million
    damages claim.

[70]

While this matter has proceeded on the assumption
    that BMW has been paying for the storage of the vehicles across Canada at an
    estimated cost of $10,000 per day, BMW filed no evidence about the actual cost
    of storage, the location of the vehicles, the terms of their storage, and the
    like. Nor did BMW provide evidence of hardship if it were to continue to pay
    the storage expenses until Autoport receives the information it requires in
    order to carry out its inspections and testing. Arguably, BMW might have
    avoided or limited the ongoing storage costs by developing a joint testing
    protocol, as Autoport had requested, or if it was unwilling to do so, by
    providing the information Autoport requested so that Autoport could proceed
    with its testing. In these circumstances and on this record, I am not persuaded
    that the ongoing cost of preserving the vehicles in the context of BMWs $175
    million damages claim would constitute hardship or prejudice to BMW that would
    reasonably justify shifting the interim cost of preservation to Autoport.

(d)

Impact of a Preservation Order on the Duty to
    Mitigate Damages

[71]

BMW contends that an order requiring its
    preservation of the vehicles would be inconsistent with its duty to mitigate
    damages, an argument that the Divisional Court accepted. I am not persuaded
    that BMWs duty to mitigate damages would justify its destruction of the
    vehicles before Autoport has had the opportunity to develop its testing
    protocol. BMW is not seeking to mitigate its damages by repairing the vehicles,
    salvaging their parts, or selling them at discounted prices. Rather, it plans to
    dispose of the vehicles which it says (and Autoport denies) are all worthless. Only
    BMWs claim for storage costs would be avoided if the vehicles were destroyed,
    but at the cost of the loss of the vehicles before Autoport has the opportunity
    to conduct an informed inspection.

[72]

In any event, Autoport has its own concerns
    about mitigation. Autoport is entitled to seek and to develop evidence through
    expert testing and appraisal that, contrary to BMWs total loss theory of
    damages, some or all of the vehicles could have been repaired and sold or their
    parts salvaged. Destruction of the vehicles before informed inspections take
    place would impair Autoports ability to advance this type of failure to
    mitigate argument.

[73]

I am not persuaded that BMWs duty to mitigate
    damages is a factor that would weigh in favour of Autoports assumption of the
    cost to preserve the vehicles.

(3)

Conclusion that BMW Must Bear the Costs of Interim
    Preservation

[74]

Considering all of the relevant factors in light
    of the central concern of fairness of the litigation process  the role of the
    vehicles in the context of the issues in the litigation, the need for interim
    preservation for Autoports informed inspection of the vehicles in its defence,
    BMWs ability to claim recovery of the interim storage costs in its action, the
    lack of evidence of hardship or prejudice to BMW sufficient to shift the costs
    to Autoport, and its ability to avoid further costs, the Master ought to have
    made an order for the interim preservation of the vehicles until BMW provided
    the information Autoport required for its own inspection. To the extent that
    there was any disagreement about the information BMW provided, the parties
    could have returned to the Master for further directions.

[75]

In oral argument before this court, Autoports
    counsel was asked to specify the terms of the order Autoport is now seeking, at
    this stage in the litigation, if successful in the appeal. Autoports counsel proposed
    that on receipt of full disclosure of BMWs destructive testing to date it
    would provide BMW with a methodology and sample size. BMWs counsel made it
    clear that BMW is not interested in a joint inspection or testing protocol, or
    the ability to be present at or involved in any inspections conducted by
    Autoport. Autoports counsel then proposed an order that would require BMW to
    preserve the vehicles until a reasonable time following its receipt of the
    results of BMWs destructive testing, at which time Autoport would pick up the
    vehicles it required, and BMW could then dispose of the remainder of the
    vehicles.

[76]

Accordingly, in allowing the appeal I would set
    aside the order of the Divisional Court and I would make the following order:
    (1) BMW shall continue to preserve the vehicles set out in Schedule A to the
    order of the Divisional Court dated July 19, 2019 until 90 days after it
    provides to Autoport the details of any and all destructive testing it has
    performed; (2) within that 90-day period, unless extended on motion, Autoport
    shall notify BMW of the vehicles it wishes to preserve for its own purposes and
    take custody of such vehicles; (3) after Autoport has taken custody of the
    vehicles it has identified BMW shall be at liberty to dispose of the remaining
    vehicles as it sees fit; (4) the cost of the interim preservation of the
    vehicles by BMW and subsequently by Autoport will remain an issue for trial; and
    (5) any further directions that may be required to give effect to this order may
    be obtained from a case management judge or Master in the Superior Court.

G.

CONCLUSION

[77]

For these reasons I would allow the appeal, set
    aside the order of the Divisional Court and make the order referred to in the
    preceding paragraph. If the parties are unable to agree on the costs of this
    appeal they may serve and file at coa.e-file@ontario.ca
their
    costs submissions of up to three pages each, with Autoport providing its costs
    submissions within 30 days of the release of these reasons and BMW providing
    its submissions within 15 days thereafter.

Released: January 22, 2021 (K.F.)

K.
    van Rensburg J.A.

I agree. K. Feldman J.A.

I agree. Thorburn J.A.





[1]

BMWs
    counsel, in the course of the proceedings below
and in oral
    argument on this appeal,
confirmed that it had destructively tested a
    number of vehicles.



[2]

See
    para. 33 of the Appeal Judges reasons, which refers to the fact that the
    schedule of vehicles provided by BMW pursuant to the Masters order (which
    schedule was eventually attached to the order of the Divisional Court under
    appeal) listed 2,449 vehicles rather than 2,966 vehicles, and that BMW objected
    to any submissions about implications or inferences to be drawn about the 517
    vehicles not listed. The Appeal Judge did not draw any such inferences, nor did
    the Divisional Court address the prior destruction or disposal of some of the
    vehicles by BMW.


