The Court of Appeal’s decision in Royal Bank of Canada v. Trang, 2014 ONCA 883 (“Trang”) has important implications for judgment creditors and mortgagees. Writing for the majority in a 3-2 decision, Justice Laskin held that a mortgage discharge statement is personal information protected under the Personal Information Protection and Electronic Documents Act (“PIPEDA”). As a result, a mortgagee cannot provide a mortgage discharge statement to a judgment creditor without the mortgagor’s express consent, a court order, or pursuant to a statutory requirement.
In Trang, the Royal Bank of Canada (“RBC”) obtained a judgment against its debtors Phat and Phuong Trang (“the Trangs”). RBC sought to have the Sheriff sell the Trangs’ house to collect its judgment. The Sheriff refused to sell the house without a mortgage discharge statement from Scotiabank, which held the first mortgage on the house. The Trangs refused to produce the statement. Scotiabank also refused to produce the discharge statement without the Trangs’ consent, because the discharge statement was protected by PIPEDA. The Court of Appeal agreed that the discharge statement was protected, and declined to order its production absent the Trangs’ consent.
These facts were similar to those in Citi Cards Canada Inc. v. Pleasance, 2011 ONCA 3(“Citi”). In Citi, the Court of Appeal held that before it would order the production of the discharge statement, the judgment creditor would need to attempt to examine the mortgagor. In Trang, the judgment creditor served Notices of Examination on the mortgagor, but the mortgagor had not attended at the examination. In a previous post on this blog, the author suggested this was the crucial distinguishing point between Citi andTrang, and that the Superior Court was wrong not to order production of the discharge statement.
However, the Court of Appeal in Trang agreed with the result arrived at by the Superior Court, though not with the reasoning. The Court of Appeal indicated that the judgment creditor needed to do more than merely serve Notices of Examination on the mortgagor before the court would order production of the discharge statement. The Court found there were two possible avenues of recourse open to judgment creditors seeking to collect on debts where the mortgagor/judgment debtor refuses to consent to production of a mortgage discharge statement.
First, creditors could include a term in loan agreements whereby the mortgagor/debtor prospectively consents to the mortgagee producing/disclosing the discharge statement when requested by the creditor. This would satisfy the consent requirement in PIPEDA.
Second, creditors could seek to obtain the discharge statement from the mortgagee through a motion under Rule 60.18(6)(a). The court recognized this option in Citi, and in 2010 Justice Morawetz granted an order in similar circumstances in Echostar Communications Corp. v. Rodgers [Unreported (October 2010), court file number 06-CL-6575 (Commercial List)]. This Rule allows the court to compel a mortgagee (or any third party) to attend an examination, and to bring the discharge statement (or any relevant document) to the examination. Such an order would bring the mortgagee within s. 7(3)(c) of PIPEDA, which allows it to produce the statement without the mortgagor/debtor’s consent where such production is required by a court order or a statute.
The Court in Trang recognized that in order to succeed on a Rule 60.18(6)(a) motion, the creditor would need to demonstrate “difficulty” enforcing its judgment. The Court indicated that in the circumstances of the Trang case, the Sheriff’s refusal to sell the house without the discharge would not constitute sufficient difficulty to support a motion under Rule 60.18(6)(a), but that the debtor’s failure to attend examinations, and the mortgagee’s refusal to produce the statement would likely be sufficient. Ultimately, such an order is discretionary, so the Court would not indicate definitively what would constitute sufficient difficulty in the abstract.
This decision makes clear for mortgagees that absent a court order or a requirement under a statute, a mortgage discharge statement is protected by PIPEDA and cannot be released without the mortgagor’s express consent. The consent cannot be implied. The Court of Appeal’s decision in Trang therefore maintains the status quo in this respect for mortgagees, and if anything the court strengthened the privacy interest in mortgage discharge statements it originally articulated in Citi.
Accordingly, financial institutions may wish to consider whether any of their agreements would benefit from the inclusion of an express term whereby the mortgagor/debtor prospectively consents to the disclosure of any mortgage discharge statements by the mortgagee when requested by the creditor.