Supreme Court of Canada Finds Judgment Debtors Can’t Hide Behind PIPEDA – by Alan Melamud

In Royal Bank of Canada v. Trang,[1] the Supreme Court of Canada overturned authority in Ontario which had held that the Personal Information Protection and Electronic Documents Act[2] (“PIPEDA”) could be used to protect an individual’s financial information from a judgment creditor. PIPEDA is federal legislation that prohibits the collection and disclosure of individuals’ personal information without their consent, subject to various enumerated exceptions.

The appeal arose from a motion brought by the Royal Bank of Canada (“RBC”) to compel the Bank of Nova Scotia (“Scotiabank”) to produce a mortgage discharge statement for property held by Phat and Phong Trang (the “Trangs”), who were judgment debtors of RBC. RBC required the mortgage discharge statement in order to effect a sheriff’s sale of the Trang’s property. The Trangs refused to produce the mortgage discharge statement and failed to appear for examinations in aid of execution scheduled by RBC. When RBC asked Scotiabank to produce the mortgage discharge statement, Scotiabank refused on the basis of PIPEDA.

Ontario Courts Refused to Order the Mortgage Discharge Statement to be Produced

The Ontario Superior Court and Court of Appeal dismissed RBC’s motion. The Superior Court relied on earlier Court of Appeal authority, Citi Cards Canada Inc. v. Pleasance,[3] where the Court of Appeal in similar circumstances had found a mortgage discharge statement protected from disclosure by PIPEDA. In Citi Cards, the Court of Appeal considered two exceptions to this protection: (1) s. 7(3)(c) of PIPEDA, which permits disclosure where required by an order of the court; and (2) s. 7(3)(i), which permits disclosure where required by law. The Court found that relying on the former to make an order would result in circular reasoning, and that the latter did not apply because there was no legal requirement for the mortgagee to make disclosure.

When the issue arose again before the Court of Appeal in this case, the Court in a 4 to 1 decision refused to overrule Citi Cards. The Court of Appeal found that RBC had two options to obtain the mortgage discharge statement. First, with foresight, RBC could have required the Trangs to consent to disclosure in advance when obtaining the loan from RBC that was the subject of the judgment debt. Second, RBC could now apply for an order pursuant to Rule 60.18(6)(a) of the Rules of Civil Procedure to obtain an examination of a representative of Scotiabank, who would then be required to bring the mortgage discharge statement to the examination pursuant to Rules 34.10(2)(b) and 34.10(3). The exception provided by s. 7(3)(c) of PIPEDA would then apply without the circularity that concerned the Court of Appeal in Citi Cards.

PIPEDA Does Not Set Out a Blanket Prohibition on Disclosure

In a unanimous decision, the Supreme Court of Canada overturned the Ontario Court of Appeal’s refusal to order Scotiabank to disclose the mortgage discharge statement. The Supreme Court found that Scotiabank could be compelled to produce the mortgage discharge statement either on the basis of (1) an order of the court made at the request of RBC or (2) the Trangs’ implied consent.

The Order of the Court Exception

While the Supreme Court recognized that informed consent is foundational to PIPEDA, the Court highlighted that PIPEDA does not set out a blanket prohibition on disclosure without such consent. To the contrary, PIPEDA admits of various exceptions, which, in particular, ensure that PIPEDA does not interfere with legally required disclosure:

As a result of s. 7(3), 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 PIPEPDA.[4]

Accordingly, the Court rejected the holding in Citi Cards that it was circular reasoning for a party in the position of RBC to seek an order for production on the basis of s. 7(3)(c) of PIPEDA. PIPEDA does not limit the court’s ability to make orders, so production of personal information could be ordered pursuant to either the Rules of Civil Procedure or the inherent jurisdiction of the court. To require RBC to have to specify that it was bringing a motion pursuant to Rule 60.18(6)(a), as held by the Court of Appeal in this case, was overly formalistic and detrimental to access to justice.

In addition, the Supreme Court held that the courts should not impose significant barriers to a party seeking disclosure in the circumstances of the case. Provided there is an outstanding judgment and a writ of seizure and sale has been filed, once a judgment debtor has refused a written request for disclosure or failed to attend a single judgment debtor examination, a judgment creditor is entitled to obtain an order for disclosure.

Implied Consent

While the above would have been sufficient to grant the appeal, the Supreme Court went on to consider whether the Trangs had impliedly consented to the disclosure of their mortgage discharge statement. Schedule 1, cl. 4.3.6 of PIPEDA provides that an organization can rely on implied consent for less sensitive information. Cl. 4.3.5 of PIPEDA further provides that the reasonable expectations of the affected individual are relevant to the consent required for disclosure. The Court acknowledged that financial information is generally considered highly sensitive, but held that both the surrounding context and the reasonable expectations of the Trangs favoured disclosure.

The Court found the information sought by RBC, the state of the account between the Trangs and Scotiabank, to be less sensitive than other financial information. First, the Court considered it highly pertinent that a range of financial information about a mortgage was already subject to public disclosure pursuant to the Land Registration Reform Act.[5] Second, the purpose of disclosure under the Land Registration Reform Act was, in part, to permit creditors with current and future interests in land to make informed decisions. RBC was seeking the disclosure for precisely the same reason, to ensure the parties have all the necessary information when dealing with the Trangs’ land. Finally, the information sought was not just relevant to the relationship between the Trangs and Scotiabank, but also affected other creditors, such as RBC.

Concerning reasonable expectations, the Court held that the determination required consideration of the entire context, not just the relationship between the Trangs and Scotiabank. The intent of PIPEDA is “to promote both privacy and legitimate business concerns”, so the legitimate business interests of RBC, even as a third party to the relationship between the Trangs and Scotiabank, were also relevant:

As the motion judge observed in the initial motion, and I have already noted, 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 other depends, and accordingly is something they have a right to know” (2012 ONSC 3272, para. 20). 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.[6]

[Emphasis added.]

In the Court’s view, a reasonable mortgagor would expect that if he or she defaulted on a loan with a third party, the mortgagee would disclose the mortgage discharge statement to the third party creditor that had obtained judgment and filed a writ of seizure and sale. Given this, the Trangs had impliedly consented to the disclosure when they obtained the mortgage from Scotiabank. RBC’s filing of the writ of seizure and sale made that consent operational. Contrary to the Ontario Court of Appeal’s decision, RBC did not need to bring an examination in aid of execution to be legally entitled to the mortgage discharge statement.

The Supreme Court granted the appeal and ordered Scotiabank to produce the mortgage discharge statements to RBC. The Court was clear that nothing in its decision was intended to permit disclosure of financial information to those without a legitimate underlying interest justifying disclosure. Nonetheless, it appears to now be clear that judgment creditors will face less resistance when seeking financial information to enforce a judgment.

[1]              2016 SCC 50. [RBC]

[2]              S.C. 2000, c. 5.

[3]              2011 ONCA 3.

[4]              RBC, supra note 1 at para. 25.

[5]              R.S.O. 1990, c. L.4.

[6]              RBC, supra note 1 at para. 45.

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