Canada: Key Banking Decisions Of 2016: The Supreme Court Of Canada Releases Its Decision In Royal Bank Of Canada V. Trang

On Thursday, November 17, the Supreme Court of Canada released a landmark decision giving important guidance on when personal financial information may be disclosed under Canada's federal privacy law, the Personal Information Protection and Electronic Documents Act ("PIPEDA").1 In Royal Bank of Canada v. Trang,2 the Court ruled that while PIPEDA is consumer protection legislation for the digital age, it must be interpreted in a balanced way to facilitate the collection, use and disclosure of personal information by businesses. In a clear, practical decision that supports the commercial realities of the banking industry, the Court recognized that the sensitivity of personal information depends on its particular context, including the nature of the relationship between a mortgagor, a mortgagee and a judgment creditor. Further, the Court found that express consent to disclosure is not required under PIPEDA: a reasonable mortgagor would expect that their financial information could be disclosed to facilitate collection by a judgment creditor.

This decision arose out of a situation in which privacy law stymied the seizure and sale of a property in connection with a judgment debt. It provides a framework for assessing when it is reasonable to imply consent into a relationship, and comes down on the side of a balanced, contextual approach. It is also now clear that privacy law will not necessarily serve as a trump card for avoiding other legal obligations.

The first key issue under consideration was whether an order sought by a judgment creditor constitutes an "order made by a court" pursuant to s. 7(3)(c) of PIPEDA. The Supreme Court found in the affirmative, noting explicitly that "PIPEDA does not interfere with the court's ability to make orders."

The second main issue involved implied consent; specifically, whether the debtors impliedly consented to disclosure of a mortgage discharge statement. The Supreme Court found that implied consent was present, noting that while financial information is a type of personal information that is generally regarded as sensitive (thereby requiring express consent) "the degree of sensitivity of specific financial information is a contextual determination." The business and regulatory context was important in determining that the debtors had impliedly consented to their bank making the statement available in order to realize upon the judgment debt.

Background

In April 2008, the Royal Bank of Canada ("RBC") loaned the Trangs approximately $35,000. The Trangs defaulted on the loan and on December 17, 2010, RBC obtained a judgment against the Trangs for $26,122.76 plus interest and costs. RBC then filed a writ of seizure and sale with the sheriff in Toronto, which permits the sheriff to sell the Trangs' property pursuant to the Execution Act, R.S.O. 1990, c. E.24. However, the sheriff refused to sell the property without first obtaining a mortgage discharge statement from Scotiabank.

Faced with the concern that PIPEDA did not permit such a disclosure without the Trangs' consent, as outlined in the Ontario Court of Appeal's binding decision in Citi Cards Canada Inc. v. Pleasance,3 Scotiabank declined to provide the mortgage discharge statement to RBC.

The matter then went to the Ontario courts, with neither the Trangs nor Scotiabank appearing. The federal Privacy Commissioner represented the amicus curiae arguing the defence at the Court of Appeal and Supreme Court. At first instance,4 Justice Gray found that he was bound by Citi Cards. Nonetheless, he expressed significant concerns that PIPEDA was not "intended to interfere in only a portion of a commercial activity that has been conducted in a particular fashion for many years," especially because RBC was not seeking "to open up to public scrutiny the entire relationship between a bank and its customer," but to obtain "a small sliver of information that has become germane only because the customer has a final court judgment against him or her, and has a mortgage with a bank."5

In particular, he noted that "[c]onsent need not always be express; it may, in appropriate circumstances, be implied", and suggested that the specific purpose of the statement of account gave rise to a strong argument that there was implied consent on the part of the mortgagor to disclose to third parties the state of account when the exercise of those rights is in issue.

At the Court of Appeal,6 a 3-2 majority upheld the decision below, preserving the Citi Cards precedent. While all judges agreed that a mortgage discharge statement constitutes "personal information" and that the general purpose provisions in sections 3 and 5(3) of PIPEDA did not provide an alternative to obtaining consent to disclosure of personal information, or an exception to the need for consent, the Court of Appeal did split on two points.

The first was whether Scotiabank could disclose the mortgage discharge statement on the basis that the disclosure was "required to comply with ... an order made by a court".7

The majority opinion of Justice Laskin considered it "circular" for the proceeding commenced by RBC against Scotiabank to constitute the necessary order. The dissent of Associate Chief Justice Hoy took a different approach; her view was that the procedure necessary under the majority's interpretation would "result[] in unwarranted delay and expense and does not foster access to justice."8

The second point of disagreement was whether the Trangs had impliedly consented to the disclosure. The majority appeared to be concerned that "less sensitive" information could, in context, be highly sensitive as a reflection of the person's financial stability. It considered that, with foresight, RBC could have obtained the Trangs' consent to disclosure by a term in its loan agreement.9

Associate Chief Justice Hoy disagreed. She considered the information at hand to be "less sensitive" in nature, as all of the details of the Trangs' mortgage – the principal amount, the rate of interest, the payment periods and the due date – were made publicly available when the mortgage was registered and the updated numbers could be easily calculated. As less-sensitive information, the information could be the subject of an implied consent. More importantly, the question of sensitivity and reasonableness required consideration of the rights of others.

The Supreme Court of Canada then granted leave in order to provide clarity in respect of the pressing questions raised by the Trang and Citi Card precedents. Only RBC and the Privacy Commissioner of Canada appeared and made representations before the Court.

The Supreme Court's Decision

In its decision drafted by Justice Côté, a unanimous Supreme Court agreed with the principles set out by Associate Chief Justice Hoy, ordering that the mortgage discharge statement be disclosed on two grounds:

  1. The court had inherent jurisdiction to grant RBC's motion to compel disclosure. PIPEDA is not intended to interfere with the courts' ability to make orders. As RBC had obtained a judgment order, filed a writ of seizure and sale, and the Trangs had declined to attend the examination in aid of execution, RBC had both proven its claim and notified the Trangs. RBC was not required, as was argued by the Privacy Commissioner, to formally cite the Rules of Civil Procedure, as the relief sought would be the same under the court's inherent jurisdiction.
  2. The Trangs had impliedly consented to Scotiabank disclosing the mortgage discharge statement. Although personal financial information can be extremely sensitive, in the particular context, the information was less sensitive than other financial information. Much of it was already publicly available and the mortgage discharge statement was being disclosed to another creditor with an established legal right, not to a person who merely wanted to satisfy their curiosity or for nefarious reasons. Further, a reasonable mortgagor would have contemplated, at the time that they entered into the mortgage, that the information would be disclosed to a creditor, as "[i]t follows that a reasonable person expects that a creditor will be able to obtain the information necessary to realize on its legal rights."10

Drawing from the purpose principle in section 3 of PIPEDA, which balances privacy rights of individuals against the need of organizations to collect, use or disclose personal information "for purposes that a reasonable person would consider appropriate in the circumstances", the Supreme Court has clearly suggested that attempts to use PIPEDA to avoid legal obligations should fail:

PIPEDA does not diminish the powers courts have to make orders, and does not interfere with rules of court relating to the production of records. In addition, PIPEDA does not interfere with disclosure that is for the purpose of collecting a debt owed by the individual to an organization, or disclosure that is required by law. In other words, the intention behind s. 7(3) is to ensure that legally required disclosures are not affected by PIPEDA.11

In particular, the Supreme Court emphasized that it would be "overly formalistic and detrimental to access to justice" to insist on multiple proceedings, and blessed Associate Chief Justice Hoy's statement:

It would fly in the face of increasing concerns about access to justice in Canada to dismiss this appeal and require RBC to bring yet another motion. A legal system which is unnecessarily complex and rule-focused is antithetical to access to justice. RBC has brought two motions and made two trips to this court over a several year period — simply to discern how much remains outstanding on the Trang's mortgage to enforce a valid judgment.

I add that not all litigants have the resources RBC has available, or are able to make multiple trips to court. Ensuring access to justice requires paying attention to the plight of all litigants.12

This theme returns later in the decision, where Justice Côté observes that:

[A] mortgage discharge statement "is not something that is merely a private matter between the mortgagee and mortgagor, but rather is something on which the rights of others depends, and accordingly is something they have a right to know" (2012 ONSC 3272, para. 29). In other words, the legitimate business interests of other creditors are a relevant part of the context which informs the reasonable expectations of the mortgagor.13

It appears, then, that attempts to use PIPEDA to frustrate access to justice will be difficult, especially in circumstances in which the privacy interests at stake appear to be collateral or out of proportion with the right the counterparty is seeking to assert.

In Alberta, a 2011 decision by Master Schlosser had espoused the same practical approach that was evident throughout Trang when he stated, in similar circumstances, that, "[t]he appropriateness of disclosure in these circumstances requires balancing a range of the debtor's rights and not just an abstract consideration of privacy rights."14

Takeaways for Banks and other Financial Institutions

As financial institutions are often in the position of both the mortgagee and the third-party judgment creditor, the decision in Trang will impact them in both of these roles.

With the explicit overturning of Citi Cards, banks will likely no longer need to pre-emptively obtain consent from the debtor to access their personal financial information at the time that they issue the loan, for the purposes of facilitating collection in the event that the debtor defaults.

Further, when requesting a mortgage disclosure statement as a judgment creditor, banks will likely not require a court order to obtain the release of the statement. The Supreme Court's statement is clear that, "consent [to releasing personal information] for the purpose of assisting a sheriff in executing a writ of seizure and sale was implicitly given at the time the mortgage was given."15 This may reduce the costs of debt collection significantly.

Prior to releasing any personal information to any third party, banks should undertake an assessment of the financial information's sensitivity, applying the framework from Trang:16

  1. Is related financial information already in the public domain? Where the basic information is already publicly available, as in the case of a mortgage registered against title, then the information will generally be less sensitive;
  2. What was the purpose served by making the related information public? For example, information registered against title is partly available to allow creditors to make informed decisions. The mortgage discharge statement provides an updated "snapshot" of that information at a later date and is therefore in line with that purpose, making it less sensitive; and
  3. What is the nature of the relationship between the mortgagor, mortgagee, and directly-affected third parties? The state of the mortgagor's account also affects the interests of creditors, making release of personal information to that creditor less sensitive. Although the court did not comment directly on this point, it is possible that there would be a distinction between a creditor and a judgment creditor who has obtained a court order for payment. Parties who are not creditors, but who are merely curious or who may have nefarious purposes should not be granted access to a party's personal financial information.

Banks should then consider two additional points:

  1. Is the amount of personal information disclosed appropriate in the circumstances? If the same goals could be accomplished with less information, or with the information that is already publicly available, then the disclosure should be so limited; and
  2. Is the information being provided to the correct person? There may be a more appropriate party who should be making the request. Disclosure should only be made to a person with a legal interest in the property.

As personal financial information is generally extremely sensitive information, this framework should be carefully considered before releasing any personal financial information to a third party.

Overall, this decision demonstrates that the Supreme Court of Canada recognizes both the importance of individuals' privacy interests and legitimate business concerns, and in this decision, has aimed to find a balance between the two. Similarly, banks should continue to protect clients' privacy, but should also take confidence that in situations such as in Trang, that the courts appear to have little tolerance for individuals attempting to use privacy legislation to stymie legitimate debt collection.

Footnotes

1 Personal Information Protection and Electronic Documents Act, SC 2000 c 5 [PIPEDA].

2 Royal Bank of Canada v Trang, 2016 SCC 50 [Trang].

3 Citi Cards Canada Inc v Pleasance, 2011 ONCA 3 [Citi Cards].

4 2012 ONSC 3272.

5 Trang at para 40.

6 2014 ONCA 883.

7 PIPEDA, s 7(3)(c).

8 2014 ONCA 883at paras 104, 112-114.

9 Ibid at para 76.

10 Trang at para 48.

11 Trang at para 25.

12 Trang at para 30.

13 Trang at para 45.

14 Toronto Dominion Bank v Sawchuk, 2011 ABQB 757.

15 Trang at para 49.

16 Trang at para 36.

To view the original article please click here.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.