On January 22, 2021, the Ontario Court of Appeal released a 37-page decision in BMW Canada Inc. v Autoport Limited, providing clarity on principles governing interim preservation of property where no issue is taken as to ownership of the property. This decision sets a new, flexible test under Rule 45.01 of the Ontario Rules of Civil Procedure based upon fairness to the trial process. The Court’s detailed reasoning recognizes the importance of interim preservation at least until all sides to a dispute have had a fair and reasonable opportunity to inspect and test property relevant to issues of liability and damages. This decision will be of assistance to parties in a variety of cases including product liability and fire damage cases.
BMW claimed $175 million in damages relating to approximately 3,000 new BMW and Mini vehicles received from overseas at port in Halifax, Nova Scotia. The vehicles were recalled and BMW alleged that they had no value at all. BMW’s stated concern was that the vehicles may have been damaged at port during severe weather and that there was no way to determine whether any of the vehicles were damaged without destructive testing.
BMW preserved the vehicles for approximately 2 years and then commenced action. At the pleadings stage, BMW indicated that it had no further use for the vehicles and sought to discard them. Autoport, not yet having had an opportunity to meaningfully inspect the vehicles, moved quickly to bring a motion for interim preservation under Rule 45.01.
On the motion before a Master, BMW submitted that it would consent to preservation of the vehicles if Autoport paid for storage. BMW also submitted that it had conducted destructive testing, without notice to Autoport, to a few of the vehicles. Autoport delivered affidavit evidence on the motion to the effect that it had inspected a dozen vehicles at the invitation of BMW. No damage or issue was found. As such, without disclosure of what BMW found on its own testing, Autoport could not determine the appropriate expertise to bring to bear or which complex components in the vehicles to inspect.
The Master held that Rule 45.01 would not apply because the three-part test set out in Taribo Holding Ltd. v. Storage Access Technologies Inc., a 2002 decision of the Ontario Superior Court of Justice, required that there be a dispute as to ownership of property. Preservation was viewed as a “good idea” but could only happen with BMW’s consent. Accordingly, unless Autoport paid for storage BMW would be free to destroy all vehicles.
The decision was first overturned on appeal by Ontario Superior Court of Justice. BMW was ordered to preserve the vehicles and continue to pay for storage. With leave, the Divisional Court restored the Master’s decision and ordered Autoport to pay for storage back to the time of the motion. Leave was granted and the Court of Appeal set aside the Divisional Court’s decision. BMW was ordered to preserve the vehicles until 90 days after providing Autoport with information on vehicle testing.
The Court of Appeal’s Decision
The Court of Appeal opined that there is no “one-size-fits-all test” for Rule 45.01 motions. The Court recognized that situations in which a motion for interim preservation may be brought are varied. The three-part test articulated in Taribo is appropriate where the moving party claims an interest in property (i.e. where ownership is in dispute). However, the Court of Appeal held that where interim preservation is sought for the purpose of inspection, the goal is to ensure fairness in the litigation process. In doing so, a court should now consider four criteria:
1) the issues in dispute;
2) the relevance and materiality of the property as evidence;
3) the purpose for which interim preservation is sought and its proposed duration; and
4) the benefits and harm or prejudice to interests of each party in the litigation.
The Court of Appeal applied these principles to arrive at its decision, adopting a proposal from Autoport that the Court viewed as reasonable. The proposal was that on receiving full disclosure of BMW's testing data, Autoport would identify a sample of vehicles and take possession of that sample. A preservation order was warranted on that basis. There was no dispute amongst the parties that the vehicles constituted evidence. The Court also found that BMW agreed on the importance of testing the vehicles, considering it had already done so. There was uncontroverted evidence from Autoport that in order to identify a sample of vehicles, Autoport required information from BMW on defects identified and inspections already undertaken. In considering the benefits and harm of a preservation order, the Court noted that BMW failed to provide any evidence of hardship in continuing to pay ongoing storage costs. In any event, hardship could be eliminated by providing Autoport with the requested testing information.
This finding was consistent with the theme throughout the Court of Appeal’s decision – that a pragmatic, flexible, and fair approach to preservation orders is necessary.
Rob Bell, Emily Fan & Julia Boddy of Lerners LLP are acting as counsel to Autoport in this matter and appeared via Zoom on the appeal.