On January 6, 2011, the Ontario Court of Appeal released a decision affirming the decision of the Ontario Superior Court of Justice concluding that the Personal Information Protection and Electronic Documents Act, S.C. 2000, c. 5 (PIPEDA) prohibited a financial institution from disclosing the mortgage discharge statement of a mortgagor to a third party creditor.1
This decision is important, as it confirms that financial institutions cannot disclose financial information about one of their customers without the consent of that customer, unless one of the exceptions in PIPEDA allowing disclosure without consent applies.
Background to the Appeal
The Appellant, Citi Cards, had a credit card-related judgement against the Respondent, Mr. Pleasance, in the amount of $11,039.77. It sought to enforce that judgement through a sheriff's sale of the Pleasance home. However, the Sheriff would not act on the writ of execution without mortgage discharge statements from the mortgagees of the property, The Canada Trust Company and The Toronto-Dominion Bank. The mortgagees refused to provide the information to the Sheriff or the Appellant.
The issue before the Applications Judge was whether a judgement creditor is entitled to obtain a mortgage statement, unrelated to the judgement debt, from a third-party creditor of the debtor so that the creditor can pursue a legal remedy to enforce its judgement.
The Applications Judge dismissed Citi Cards' application for an order requiring the mortgagees to produce the statements on the basis that they contain "personal information" of the judgement debtor and PIPEDA therefore prohibited the Respondents from releasing the information. He also ruled that Citi Cards had an alternative remedy available to it, namely a motion pursuant to rule 60.18(6) of the Rules of Civil Procedure seeking to examine the wife of the debtor, who was a joint owner of the home.
The Appeal Decision
The Court of Appeal dismissed the appeal affirming the decision of the Applications Judge. The Court noted that PIPEDA prohibits organizations from disclosing personal information without the knowledge or consent of the affected individual unless disclosure is permitted by one of the exemptions provided in section 7(3). Citi Cards relied upon two of those exemptions, namely that the disclosure is required to comply with an order of the court and by law.
The Court confirmed that financial information pertaining to a debtor, collected and used by a financial institution in the course of a mortgage transaction, is personal information. The Court further confirmed that none of the exemptions raised by Citi Cards applied. The order required by Citi Bank under the first exemption was the specific order it was actually seeking from the Court and not yet made. On the second exemption, "required by law", Citi Cards claimed that it should be interpreted and applied whenever the "organization" or the "individual" is required by law to disclose the personal information. The Court of Appeal refused this argument finding that this interpretation actually went against the intent of PIPEDA of protecting the privacy rights of individuals. The Appellant's argument would have meant that any organization could disclose personal financial information about the individual to interested third parties, without that individual's consent, any time there is an outstanding judgement against the individual. Further, the Court noted that it was not clear that the debtor was actually "required by law" to volunteer the information in the absence of an order.
This decision confirms a debtor's right to privacy under PIPEDA and a financial institution's obligation to protect the debtor's financial information.
It is important to note that this decision does not actually impose any new obligations on financial institutions as, in the absence of PIPEDA, a financial institution would likely be breaching its contractual obligation of confidentiality as well as its obligations that a bank owes to its customers under the common law if it disclosed the information without the customer's consent or a legal requirement.
This decision is an important reminder to financial institutions that they should be wary of requests by third parties for financial information about their customers. These requests should be refused on the basis of confidentiality and the statutory obligations under PIPEDA unless there is an express consent or an independent legal obligation or right to disclose the information.
It is interesting to note that in Echostar Communications Corporation v. Rodgers, Court File No. 06-CL-6575, rendered prior to the release of the Court of Appeal decision, but after the decision of the Applications Judge in Citi Cards Canada, Justice Morawetz of the Ontario Superior Court of Justice agreed with the Plaintiffs and refused to apply the Applications Judge's decision in Citi Cards Canada. The Plaintiffs distinguished Citi Cards Canada on the basis that there was no alternative remedy in their case as the debtor had been examined and had refused to produce the documents relating to his mortgage and his wife, who was also a judgement debtor, was incarcerated for contempt of court and could not be examined. In these circumstances, Justice Morawetz agreed to order the financial institution to provide the discharge mortgage statement.
1. Citi Cards Canada Inc. v. Pleasance, 2011
ONCA 3 (CanLII)
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