The Court of Appeal’s recent decision in Royal Bank of Canada v. Trang, 2014 ONCA 883 (“Trang”) has important implications for judgment debtors/creditors and mortgagees/mortgagors. 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”).1 As a result, a mortgagee cannot provide a mortgage discharge statement to a judgment debtor 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.
The Court of Appeal indicated 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).2 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.3 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 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 Trangcase, 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, and 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 Trangtherefore maintains the status quo in this respect for mortgagees, as the Court entirely upheld its previous decision in Citi Cards Canada Inc. v. Plaisance, 2011 ONCA 3.
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 upon request.