Canada: Privacy Law Does Not Shield Judgment Debtors

The recent Supreme Court decision in Royal Bank of Canada v. Trang has provided important guidance on how Canada's federal privacy legislation, the Personal Information Protection and Electronic Documents Act ("PIPEDA"), is to be interpreted.   To the relief of judgment creditors across the country, the Supreme Court ruled that courts can use their inherent jurisdiction to make orders permitting the disclosure of personal information, including personal information contained in mortgage discharge statements, and that such disclosures are permitted based on the implied consent of the mortgagor.

RBC was a judgment creditor of Phat and Phoung Trang and sought a sheriff's sale of their Toronto property. The sheriff required a mortgage discharge statement from Scotiabank, the Trangs mortgagee, in order to sell the property and determine the rights of both Scotiabank and RBC to the proceeds of sale. RBC was unable to obtain the mortgage discharge statement from the Trangs as they failed to attend on an examination in aid of execution. After Scotiabank refused RBC's request that it provide the mortgage disclosure statement citing PIPEDA, RBC brought a motion to compel Scotiabank to produce it. RBC's motion was dismissed and, quite surprisingly, the majority of the Court of Appeal upheld the motion judge's decision.

The Supreme Court ordered Scotiabank to disclose the mortgage discharge statement to RBC on two separate bases. First, the Court reasoned that disclosure was required to comply with an order made by a court, pursuant to s. 7(3)(c) of PIPEDA, which allowed such disclosure without consent of the Trangs. Second, the Court ruled that the Trangs had impliedly consented to the disclosure of the mortgage discharge statement for the purpose of assisting a sheriff in executing on a writ of seizure and sale when they gave the mortgage to Scotiabank.

Both the motion judge and the Ontario Court of Appeal concluded that the order sought by RBC did not constitute an "order made by a court" under s. 7(3)(c) on the basis that it would be circular to find that Scotiabank was required to disclose a mortgage discharge statement by an order not yet made. In so deciding, the courts below followed the earlier decision of Citi Cards Canada Inc. v. Pleasance. The Court specifically overruled Citi Cards, concluding that the order sought by RBC constitutes an "order made by a court" under s. 7(3)(c). PIPEDA does not diminish the powers courts have to make orders and does not interfere with the rules of court relating to the production of records; the order sought by RBC could and should have been made by the motion judge.

All parties to the appeal agreed that it was possible for RBC to obtain an order for disclosure that came within the exception provided by s. 7(3)(c). Their disagreement was procedural as RBC failed to plead Rule 60.18(6) of the Rules of Civil Procedure which provides for the examination of a non-party (here a representative of Scotiabank) when a creditor encounters difficulty enforcing its judgment. Requiring RBC to start over citing this rule was overly formalistic and detrimental to access to justice, as in effect, the relief sought on the motion RBC did bring was substantively identical. The motion judge could have made the order sought by RBC pursuant to the court's inherent jurisdiction. Where, as here, the debtor fails to respond to a written request to consent to the disclosure or fails to attend a single judgment debtor examination, a court may make an order requiring disclosure, provided the judgment creditor serves the debtor with notice of the motion to obtain disclosure. Judgment creditors should not be put to a cumbersome and costly procedure to realize on their debt.

The Court also found that the debtors had also impliedly consented to the disclosure of the mortgage discharge statement by Scotiabank to RBC. PIPEDA acknowledges that implied consent is generally appropriate when the information is less sensitive. To determine the degree of sensitivity of specific information, the Court adopted a contextual and purposive approach that considered the reasonable expectations and legitimate interests of the parties. The Court considered what related financial information is already in the public domain, the purpose served in making the related information public and the nature of the relationship between mortgagor, mortgagee and directly affected third parties. The public availability of information registered on title – the principal amount of the mortgage, the rate of interest, payment periods and due date – make the information at issue less sensitive than other financial information. It was important that RBC sought the mortgage disclosure statement in order to exercise its legal rights, not out of mere curiosity. After weighing the contextual factors, the Court found that the Trangs impliedly consented to the disclosure sought at the time the mortgage was given to Scotiabank.

This decision should facilitate the enforcement efforts of creditors. It strongly suggests that debtors will not be allowed to use privacy legislation to defeat or frustrate their creditors enforcement efforts. It also provides guidance to organizations who receive requests to disclose information to third parties, allowing them to make disclosure where the context of the transaction, the sensitivity of the information sought and the reasonable expectations of all parties point to implied consent.

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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