- An order made in the receivership proceedings of Xela Enterprises serves as a useful precedent for dealing with blanket assertions of privilege over documents that may be relevant to the receivership proceedings.
- KSV was appointed Receiver of Xela Enterprises in July 2019, on application by Margarita Castillo, a judgment creditor of Xela Enterprises, who successfully sued the company, her brother, Juan Guillermo Gutierrez (referred to as Juan Guillermo), who was the controlling mind of the company, and her father, Juan Arturo Gutierrez, for oppression.
- The Appointment Order granted the Receiver “unfettered access” to the company’s books and records. However, following several failed attempts to obtain information with respect to reviewable transactions between Xela Enterprises and certain companies under the direct or indirect management of Juan Guillermo, the Receiver obtained a Disclosure Order on October 29, 2019.
- In March 2020, the Receiver brought a contempt motion against Juan Guillermo for failing to comply with the Disclosure Order. Upon the agreement of counsel, Justice McEwen issued an Endorsement on March 26 requiring, among other things, Juan Guillermo to produce the relevant documentation in his power, possession or control to the Receiver within 14 days.
- Juan Guillermo and others failed to comply with the March endorsement. As a result, on October 27, the Receiver sought and obtained further production Orders against Juan Guillermo and Arturos Technical Services, which purportedly has control over the company’s old servers.
- Juan Guillermo had asserted various forms of privilege, including attempting to assert the company’s privilege against the Receiver, as well as asserting privilege/personal information on behalf of third parties’ information.
- Accordingly, the Orders granted provide a process for settling individual assertions of privilege over specific documents. The process includes the following steps:
- Juan Guillermo is required to provide the Receiver’s Forensic Specialist, Duff & Phelps, with possession of all devices used by him, including his cell phones, iPads and computers, which may include Xela information within 7 business days of the Order;
- Duff & Phelps is permitted to make a single forensic image of each of the devices and load each image onto the Relativity document review platform;
- Juan Guillermo, but not the Receiver or its agents, will then have 35 days to access the platform, review the documents and assert any objections to disclosure to the Receiver of any documents based on privilege, personal information, or other reasonable basis.
- If no objection is received within 35 days, or a longer period if an extension is obtained, the Receiver will be entitled to review all of the documents on the platform.
- The Receiver is permitted to challenge any objection to disclosure or assertion of privilege. If the challenge is not resolved within 3 business days, the Receiver may address the challenge before the Court. If this occurs, the challenged document must be provided to the Court for non-public, confidential review outside the presence of any person other than counsel for the Receiver and counsel for Juan Guillermo.
- With respect to the servers, Arturos Technical Services is required to schedule a mutually agreeable time to provide Duff & Phelps with access to the servers. Duff & Phelps is then permitted to make a single forensic image of certain of the servers, and is permitted to take and hold certain other servers described as non-operational into its possession. Duff & Phelps is not permitted to do anything with the images or the servers (including review them) until further order of the Court or written consent of the Receiver and Arturos Technical Services.
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