On November 17, 2016, in the decision of Royal Bank of Canada v. Trang (PDF), the Supreme Court of Canada clarified the interpretation to be given to the expression "order made by a court", while providing an application of the concept of implied consent pursuant to the Personal Information Protection and Electronic Documents Act ("PIPEDA") (PDF). This is a significant ruling in the privacy field, with ramifications for all organizations subject to PIPEDA.
In 2010, the Royal Bank of Canada ("RBC") secured a judgment against Phat and Phuong Trang (the "debtors") for defaulting on the repayment of a loan. Subsequently, pursuant to the Execution Act (Ontario), RBC sought a sheriff's sale of the debtors' property, namely a property in Toronto in respect of which Scotiabank held a first mortgage. The sheriff required a "mortgage discharge statement", on the one hand, to know the value of Scotiabank's interest in the property and, on the other hand, to be able to ascertain rights between the RBC and Scotiabank. However, RBC was unable to obtain the mortgage discharge statement from the debtors (who failed to appear at the examinations in aid of execution) or from Scotiabank (which stated that it required the consent of the debtors pursuant to PIPEDA). This deadlock led RBC to seek an order to compel Scotiabank to produce the mortgage discharge statement.
At the initial stage, the Ontario Superior Court of Justice (PDF) denied RBC's motion on the grounds that a mortgage discharge statement was "personal information" within the meaning of PIPEDA, there was no express or implied consent for the disclosure, and that none of the exceptions to the consent requirement set out in subsection 7(3) of PIPEDA applied. The court held that it could not make an order for disclosure (which would permit Scotiabank to disclose the information without consent pursuant to section 7(3)(c) of PIPEDA) unless there was an independent authority (e.g. the Rules of Civil Procedure) for making the order.
The majority of a five-judge panel of the Court of Appeal for Ontario denied RBC's appeal based on the following grounds:
- The debtors did not give implied consent to disclose a mortgage discharge statement to RBC;
- RBC could have obtained the debtors' consent to the disclosure by inserting a term to that effect in its loan agreement; and
- RBC could have brought a motion pursuant to Rule 60.18(6)(a) of the Ontario Rules of Civil Procedure for an order for the examination of a Scotiabank representative (which would then have satisfied the exemption in paragraph 7(3)(c) of PIPEDA), who would have had to have brought the mortgage discharge statement to the examination.
RBC appealed to the Supreme Court of Canada. At issue was whether "PIPEDA precludes a mortgagee, Scotiabank, from producing a mortgage discharge statement to a judgment creditor, RBC, without the mortgagor's express consent". More specifically, two issues arise, which we will successively address:
- Does the order sought by RBC represent an "order made by a court" under paragraph 7(3)(c) of PIPEDA?
- Did the debtors impliedly consent to the disclosure of the mortgage discharge statement?
Neither the Trangs nor Scotiabank were involved in the appeal.
"Order made by a court" within the meaning of paragraph 7(3)(c) of PIPEDA
The Supreme Court of Canada, from the outset, zeroed in on the crux of the problem: was it necessary for RBC to expressly invoke paragraph 60.18(6)(a) of the Rules of Civil Procedure (or another source of authority for making an order) in support of the order for disclosure, in order to fall within the exception in paragraph 7(3)(c) of PIPEDA? The Supreme Court of Canada ruled that PIPEDA does not interfere with the court's ability to make orders, and the Rules of Civil Procedure or the inherent jurisdiction of the court empowered the motions judge to order the disclosure:
" In this case, the mere fact that the rule number was not pled is not fatal. It would be overly formalistic and detrimental to access to justice to conclude that RBC must make yet another application, this time specifying rule 60.18(6)(a), to obtain the order it seeks. Again, I agree with Hoy A.C.J.O.: . . ."any distinction between a motion brought under rule 60.18(6)(a) with the objective of obtaining a statement and any other motion brought, in accordance with the Rules of Civil Procedure, for the same purpose is artificial" since, in either case, the relief sought is substantively identical (para. 110; see also para. 96)." [the bold lettering is ours]
The Supreme Court of Canada, in the end, posited a series of pragmatic arguments: only the mortgagee, namely Scotiabank, is in a position to produce a mortgage discharge statement, and the judgment creditor in such a situation should not be required to undergo a cumbersome and costly procedure to realize its debt; access to justice ought to be promoted rather than a legal system that is unnecessarily complex and rule-focused (which is wholly in line with the principle of procedural proportionality).
"Implied consent" pursuant to PIPEDA
RBC also argued that the debtors impliedly consented to the disclosure since the mortgage discharge statement was "less sensitive" information (clause 4.3.6 of Schedule 1 of PIPEDA), and that the "reasonable expectations" of the debtors (clause 4.3.5 of Schedule 1 of PIPEDA) could not be properly assessed without considering who the recipient of the information is and the purpose for which they seek it. The Supreme Court of Canada agreed with this submission in light of the relatively low sensitivity of the information in question and the reasonable expectations of the parties concerned.
Although financial information is generally considered sensitive, the Court stated that "the degree of sensitivity of specific financial information is a contextual determination". And, further: "The sensitivity of financial information […] must be assessed in the context of the related financial information already in the public domain, the purpose served by making the related information public, and the nature of the relationship between the mortgagor, mortgagee, and directly affected third parties".
Under the circumstances, the principal amount of the mortgage, the rate of interest, the payment periods and the due date are typically made publicly available (Land Registration Reform Act). The purpose is to allow creditors with a current or future interest in the land to make informed decisions. In this sense, disclosure of the current balance of a mortgage furthers the legislative intent of ensuring that the parties have all pertinent information involving the property, in the sense that it adds certainty to the calculations that could be made from the publicly available information. The Supreme Court of Canada concluded that the mortgage discharge statement was less sensitive than other financial information.
On the other hand, the debtors' reasonable expectations can be appreciated from a considerably different angle: either solely between the debtors and Scotiabank, as mortgagee, or also taking third parties into consideration, namely RBC. The Supreme Court of Canada was of the view that "when determining the reasonable expectations of the individual, the whole context is important" and that "the legitimate business interests of other creditors are a relevant part of the context which informs the reasonable expectations of the mortgagor". Here, RBC is a bank seeking disclosure of information in order to exercise a duly-established legal right – which is quite different from disclosure for the sake of curiosity or for nefarious purposes. Moreover, a reasonable mortgagor knows that, if he or she defaults on a loan, the creditor will be entitled to recover its debt against his or her assets and will therefore be able to obtain the information necessary to exercise its right of recovery. In this vein, the Supreme Court of Canada concluded that the debtors had impliedly consented to the disclosure of their personal information, namely the mortgage discharge statement, from Scotiabank to RBC.
With the decision in Royal Bank of Canada v. Trang (PDF), the Supreme Court of Canada has reinforced the jurisdiction of the Courts to make orders for the production of personal information without consent in appropriate circumstances, based on the inherent jurisdiction of the Courts. Importantly, the Court has affirmed a contextual and pragmatic interpretation of "implied consent" (both as to the "sensitive" nature of the information and as to the "reasonable expectations" of the parties involved), pursuant to PIPEDA, which should facilitate increased confidence for organizations which may seek to rely on implied consent in respect of various collection, use and disclosure of personal information subject to PIPEDA. It is anticipated that further guidance regarding implied consent will be forthcoming from the Office of the Privacy Commissioner of Canada in the wake of the decision, and in conjunction with the recent Commissioner's consultation regarding the consent model.