Canada: Guidance From The Supreme Court Of Canada On Mortgage Discharge Statements And Pipeda

Last Updated: December 22 2016
Article by Amanda Jackson

The Supreme Court of Canada recently provided some comfort to mortgage lenders regarding the provision of mortgage discharge statements and their privacy obligations under PIPEDA1. Trang2 has confirmed that PIPEDA does not prevent a mortgagee from providing a mortgage discharge statement to a judgment creditor who has filed an execution with the sheriff.

PIPEDA governs the collection, use and disclosure of personal information by organizations in the course of commercial activities. In general, PIPEDA prohibits organizations from disclosing personal information without the knowledge and consent of the affected individual. The Court in Trang considered two exceptions to the prohibition on disclosure - where required to comply with a court order and where information is "less sensitive" and consent may be implied. The decision confirms that a mortgagee must provide a discharge statement when production is ordered by a court but also provides much needed clarification about when a mortgagee may provide a statement absent a court order.

Royal Bank had obtained a judgment and execution against the Trangs who owned a property mortgaged with Scotiabank. Royal Bank sought to proceed with a sheriff sale of the property, however, the sheriff refused to proceed without a mortgage discharge statement from Scotiabank. Royal Bank attempted to obtain the statement by examining the Trangs, but they failed to attend. Royal Bank requested the statement from Scotiabank, however, it declined on the basis that it was precluded by PIPEDA from disclosing the information without the Trangs' consent. An order was obtained compelling the Trangs to attend at another examination, but again they failed to attend. A motion was then brought to compel Scotiabank to provide the statement. The motion judge denied the motion based on the Ontario Court of Appeal's decision in Citi Cards3, which held that a mortgage discharge statement was "personal information" under PIPEDA and none of the exceptions for disclosure applied, including where disclosure is required to comply with an order of the court as it would be circular to find that the exception could itself form the basis for a disclosure order. 

The Court overruled Citi Cards and confirmed that PIPEDA does not interfere with a court's ability to make disclosure orders. It then summarized the steps necessary to obtain an order for production of a mortgage discharge statement: (1) a judgment debtor fails to respond to a written request to sign a form consenting to the provision of a discharge statement to an execution creditor; or (2) fails to attend a single judgment debtor examination. A creditor who has obtained judgment, filed a writ of seizure and sale, and completed one of these steps will have proven its claim and provided notice and will be entitled to an order for production of a discharge statement. A mortgage lender presented with a court order will be required to provide a statement.

Perhaps more importantly, Trang confirmed that a mortgage lender may also provide a discharge statement to an execution creditor in the absence of a court order on the basis that consent to disclosure for the purposes of PIPEDA can be implied when the information is "less sensitive". While financial information is generally extremely sensitive, the degree of sensitivity of specific financial information is a contextual determination and must be assessed in the context of related financial information available in the public domain, the purpose served by making the related information public, and the nature of the relationship among mortgagor, mortgagee, and directly affected third parties. When a mortgage is registered on title to property, the principal amount, interest rate, payment periods and amounts, and maturity date become publicly available. Among other things, this allows creditors to make informed decisions. The provision of a discharge statement gives certainty to the rough calculations that could be made from information already publicly available from title. The legitimate business interests of creditors as well as the identity of the party requesting the statement and the purpose for the request will also be relevant considerations. The Court recognized that in the context of the provision of a mortgage discharge statement to an execution creditor a reasonable mortgagor would be aware that the details of their mortgage were publicly available from title, that default on some other debt obligation could result in a judgment and sheriff sale of their property, and that a execution creditor would be entitled to obtain information necessary to realize on the judgment, including obtaining disclosure of a mortgage discharge statement.

Although the Court limited its conclusions to the fact situation between RBC and Scotiabank, the analysis nevertheless provides guidance on determining other instances where a discharge statement might be provided absent a court order. For example, the Court's analysis and conclusions would appear to apply to requests among lenders with mortgages registered against the same property. 

With the release of Trang, it will be interesting to see whether those lenders who customarily were not comfortable providing discharge statements absent a court order or signed consent will alter their practice or whether the status quo will be maintained. 

Footnotes

Personal Information Protection and Electronic Documents Act, S.C. 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]

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