For companies subject to Canada's private-sector privacy
legislation, the recent Federal Court of Canada decision in
State Farm Mutual Automobile Insurance Company v. Canada
(Privacy Commissioner) may come as both a relief and a
disappointment. The court's decision sheds some light on the
types of "commercial activities" governed by the
Personal Information Protection and Electronic Documents
Act (PIPEDA), but it failed to settle the issue of
PIPEDA's constitutional validity as it relates to the
intra-provincial activities of provincially regulated
PIPEDA applies to private-sector organizations that
collect, use or disclose personal information in the course of
"commercial activities." It defines "commercial
activity" as any transaction, act, conduct or regular course
of conduct that is of a commercial character. While PIPEDA
is a federal statute, it also applies in any province without
legislation that is "substantially similar" to
As a basic principle, PIPEDA requires that personal
information about an individual not be collected, used or disclosed
without that individual's knowledge and consent, except in
limited circumstances. PIPEDA also gives individuals the
right to access their personal information held by organizations
that are subject to PIPEDA.
The State Farm case stems from a car accident involving
Ms. Jennifer Vetter and Mr. Gerald Gaudet in New Brunswick. Ms.
Vetter was insured under a State Farm policy. In contemplation of
litigation, State Farm retained counsel to defend Ms. Vetter. On
the advice of counsel, State Farm also hired a private investigator
to conduct video surveillance of Mr. Gaudet.
Before Mr. Gaudet started a civil action, he asked State Farm to
disclose any surveillance tapes of him, relying on PIPEDA.
State Farm denied the request, asserting that PIPEDA did
not apply. Later, after the action was commenced, State Farm also
claimed litigation privilege over the tapes. Mr. Gaudet complained
to the Privacy Commissioner, alleging that State Farm had violated
PIDEDA by denying access to his personal information, disclosing
his personal information to a third party without his consent, and
failing to provide adequate safeguards to protect his personal
The Commissioner launched an investigation into the complaint
and wrote to State Farm requesting documents and information. After
receiving the letter, State Farm applied to court for a declaration
that the Commissioner did not have the statutory authority to act
upon Mr. Gaudet's complaint. State Farm also challenged the
constitutional validity of PIPEDA. It argued that
PIPEDA's application to provincially regulated
commercial activities exceeded the federal government's
To determine whether PIPEDA applied, the court
considered whether the collection of the surveillance information
constituted a "commercial activity." The Commissioner
argued that the relationship between State Farm and Ms. Vetter was
entirely commercial in nature, being based on an insurance
contract. She further asserted that the surveillance of Mr. Gaudet
related to this relationship, since State Farm had an interest in
minimizing any amounts paid out under that insurance contract.
The court held that the dominant factor in assessing the
commercial character of that activity or conduct under
PIPEDA is the primary characterization of the activity or
conduct in issue. In this case, the court found that the primary
activity was the collection of information in order to properly
defend a civil tort action. That activity, the court determined,
was not a commercial activity, even if third parties were retained
to carry it out or conduct it on another's behalf. Therefore,
the court found that the surveillance tapes of Mr. Gaudet were not
subject to PIPEDA.
Having found that it could reach a decision on the merits
without addressing the constitutionality of PIPEDA, the
court declined to rule on that latter issue.
McCarthy Tétrault Notes
Companies regulated by PIPEDA may be somewhat relieved
by this ruling. By establishing that the collection of personal
information in the context of civil litigation does not constitute
a "commercial activity" and hence is not subject to
PIPEDA, this court decision has helped avoid a potentially
very complex interplay between privacy rights of access and
On the other hand, many had hoped that this decision would
resolve the issue of the constitutionality of PIPEDA as
regards its application to the intra-provincial activities of
provincially regulated entities. As the court declined to determine
this question, the status quo has been maintained in this respect,
at least for now.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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