The Ontario Court of Appeal has decided an important case about what can happen when a party to litigation accesses the other side’s privileged communications. In 2177546 Ontario Inc. v. 2177545 Ontario Inc., 2023 ONCA 693, the court upheld the motion judge’s decision striking out a notice of appearance and ordering that the underlying application proceed undefended — prohibiting the party who accessed the privileged information from defending the application.

This case arose in the aftermath of a relationship breakdown between two former brothers-in-law who, through their respective holding companies, carried on business together in a group of related corporations. This group had created an email address for itself, which one brother-in-law (the principal of 546 Inc.) used as his personal account. In 2021, after litigation commenced, the other brother-in-law (the principal of 545 Inc.) was then granted access to this account by an Information Technology (IT) consultant who believed it to be a shared address.

546 Inc. was, at the time, pursuing a partition application against 545 Inc. in relation to a development property co-owned by the parties. 546 Inc. began to suspect that 545 Inc. was acting on confidential information. Its principal then contacted the IT consultant, who confirmed that the principal of 545 Inc. had been granted access to the account in 2021. 546 Inc. then moved for an order granting judgment in its favour, based on 545 Inc.’s accessing of privileged communications.

The motion judge applied the three-part test developed by the Ontario Court of Appeal in Continental Currency Exchange Inc. v. Sprott, 2023 ONCA 61, with respect to which the Supreme Court recently denied leave to appeal.

The motion judge concluded that: (1) 545 Inc.’s principal obtained access to relevant, privileged communications between 546 Inc. and its lawyers; (2) 545 Inc. had not rebutted the resulting presumption of prejudice; and (3) allowing 545 Inc. to oppose the application would be unfair as it would “effectively give [545 Inc.’s principal] an advantage in the litigation and reward him for accessing and reading e-mails that he would have known were privileged communications and not intended for him”. The motion judge ordered that 545 Inc.’s notice of appearance be struck and that the application proceed undefended.

On appeal to the Ontario Court of Appeal, the key question was whether the motion judge erred in granting this remedy. The court dismissed the appeal, rejecting 545 Inc.’s argument that the motion judge had improperly reversed the onus at the remedy stage. The Court of Appeal also distinguished cases where a lesser remedy had been ordered. In those cases, the person who accessed confidential information had disclosed what was reviewed, such that the court could consider those documents in the context of the litigation and fashion an appropriate remedy. Here, 545 Inc. had decided not to disclose “what documents [had been] accessed, or what was done with them and when.”

This case provides an important reminder of the potential consequences of accessing another party’s privileged communications. Parties must take care not to obtain access to privileged information, whether inadvertently or intentionally. Additionally, when a party is faced with allegations that it improperly accessed privileged information, it is clear that important consequences can flow from that party’s decisions about disclosure. Choosing to not provide particulars about what documents were accessed, and how and when, may result in a harsher outcome — as it may impair the court’s ability to fashion a lesser, more tailored remedy.