And This Little Piggy Went to the Bank…in 2016: Royal Bank of Canada v Trang

Judgment creditors across Canada…Here ye, here ye!  On November 17, 2016, the Supreme Court of Canada was presented with a weighty opportunity to determine how Canada’s federal privacy law, Personal Information Protection and Electronic Documents Act (“PIPEDA”), could affect judgment creditors and mortgagees.  In its long-awaited decision, the unanimous Court delivered a practical, balanced, and sound interpretation of the disclosure of personal information without consent and outlined the obligations financial institutions have to preserve personal information under PIPEDA.  In finding that express consent to disclosure is not required under PIPEDA under certain contexts, the decision in Trang allows for debt collection by successful creditors through a more pragmatic and less expensive avenue.

 Show Me The Money – The Facts

In April 2008, Phat and Phuong Trang took approximately $35,000 CAD on loan from the Royal Bank of Canada (“RBC”).  RBC obtained a judgment against the Trangs after they defaulted on their loan.  Subsequently, RBC filed a writ of seizure and sale with the sheriff in order to collect, as per the Execution Act, RSO 1990, c E.24.  The sheriff, however, refused sale of the Trang’s property, requiring a mortgage discharge statement.  RBC needed to first obtain this statement from Scotiabank, the bank holding the first mortgage on the Trang’s property.   Scotiabank refused to produce the discharge statement without the Trang’s consent because it contained their personal information, in accordance with the Ontario Court of Appeal’s binding decision in Citi Cards Canada Inc v Pleasance, 2011 ONCA 3, because the personal information was protected under PIPEDA.

Hey, You Know the Drill – Court of Appeal for Ontario

The Court of Appeal for Ontario agreed that the statement indeed had personal information that could not be disclosed without prior consent (Royal Bank of Canada v Trang, 2014 ONCA 883).  Based on similarity to Citi Cards, the Court of Appeal dismissed RBC’s motion for an order that Scotiabank provide the statement. It ruled that judgment creditors, such as RBC, need to a) obtain the client’s consent for disclosure as a term stipulated in their loan agreements or b) apply for a court order under rule 60.18(6)(a) of the Rules of Civil Procedure to examine a representative of the mortgagor.  The Court of Appeal’s decision meant that statements that include personal information protected by PIPEDA cannot be disclosed by a lender without the mortgagor’s express consent or a court order for disclosure.

The Tribe Has Spoken – The SCC Decision

The Supreme Court reversed the Court of Appeal’s judgment, and ordered Scotiabank to produce the mortgage discharge statement for RBC on the following two grounds:

1. “Order made by a court” pursuant to s. 7(3)(c) of PIPEDA

First, the Court ruled that an order by a judgment creditor is equal to an order made by the court under s. 7(3)(c) of PIPEDA.  Therefore, Scotiabank’s judgment creditor order was sufficient to procure the statement without the consent of the Trangs.  In fact, the Court even drove home:

It would be overly formalistic and detrimental to access to justice to conclude that RBC must make yet another application, this time specifying the particular rule of procedure, to obtain the order it seeks. It is clear that this is a case in which it was appropriate to make an order for disclosure.

2. Implied Consent

The Court ruled that implied consent to disclosure of the statement was expressed by the Trangs.  Justice Côté employed a contextual approach that considered the reasonable expectations of the parties.  While personal financial information is often extremely sensitive, in this context, the information was less sensitive than other financial information.  The Court studied the mortgage amount, interest rate, and payment periods which were made available on public domain through their electronic registration.  The Court stated that this information was “less sensitive” as a result of its widespread accessibility.

Furthermore, the Court considered that RBC pursued the statement to exercise a recognized legal right, and not out of interest or mere inquisitiveness.  Based on the foregoing factual matrix under its contextual analysis, the Court determined that the Trangs impliedly consented to the disclosure when the property was mortgaged.

The Court fairly used the contextual and purposive approach and shone light on the relationship between a mortgagor, a mortgagee, and a judgment creditor, the sensitivity of personal information and commercial realities of the banking sector.

Facing the Music – Implications

If you are a creditor or lender in Canada, this result has special implications.  Consent to disclosure of personal information relevant to transactions can be implied, but context matters.  Contextual factors weighing in favour of implied consent include the reasonable expectations of all parties, the sensitivity of the information, and the nature of the information.  Trang will also permit creditors to obtain required information, such as discharge statements, from third parties without the need to go to court for a separate order.  Ultimately, PIPEDA is not an ace in one’s sleeve to dodge legal obligations.

Where PIPEDA balances individuals’ right to privacy in their personal information with entities’ need to collect, use and disclose information, the SCC decision demonstrates a balanced interpretation of the two.  The implications of the decision goes beyond its explicit overturning of Citi Cards to specifically reducing debt collection for banks. While an enforcement against a debtor’s real property was the narrow issue on appeal, this judgment provides a general framework for assessing when it is reasonable to imply consent into a relationship, and therefore, may have rippling effects on judgment enforcement more widely.