The Supreme Court of Canada has provided guidance to financial institutions holding otherwise "highly sensitive" information to determine when that information is somewhat less sensitive, such that it can be disclosed. The short answer, as provided in detail in the recent decision of Royal Bank of Canada v. Trang, 2016 SCC 50 (CanLII), is that it depends on the context of the disclosure request.
History of the case
Royal Bank of Canada (RBC) was a judgment creditor of debtors who had defaulted on a loan. In its enforcement of its judgment against the debtors, RBC needed to obtain a mortgage discharge statement from The Bank of Nova Scotia (Scotiabank), because Scotiabank was the mortgagee of the debtors' home. A mortgage discharge statement shows the current balance of a mortgage. RBC needed the mortgage discharge statement in order to obtain a sheriff's sale of the debtors' home, so that RBC could satisfy its judgment. The debtors refused to consent to the production of the document. Scotiabank would not produce it to RBC without the debtors' consent. The debtors' refusal was on the grounds that the Personal Information Protection and Electronic Documents Act (PIPEDA) precluded the production of the document. RBC lost in motions court, lost at the Ontario Court of Appeal, but won at the Supreme Court of Canada. Notably, the debtors and Scotiabank did not respond to the Supreme Court of Canada appeal.
Supreme Court's decision
There are two important aspects of the Supreme Court's decision.
The first is that it agreed with RBC on the availability of section 7(3)(c) of PIPEDA. As a brief aside for context, the purpose of PIPEDA is to regulate the "collection, use and disclosure" of personal information obtained by organizations during the course of "commercial activity". Generally, an organization cannot disclose someone's personal information without their knowledge and consent. A number of exceptions apply. One of these exceptions is section 7(3)(c), which requires disclosure of personal information to comply with a court order. RBC sought such an order, but was denied at every level of the courts, until it reached the Supreme Court of Canada.
The Supreme Court held that a court order requiring disclosure of personal information in the creditor/debtor context is available either where:
(1) the debtor does not comply with a written request that they sign a form consenting to the disclosure of the information sought, or
(2) the debtor fails to attend a single judgment debtor examination (a deposition of a debtor for the purpose of obtaining information relevant to enforcement of a judgment).
The Supreme Court went on to state that a creditor who has obtained a judgment, filed a writ of seizure and sale in respect of the debtor's property in order to collect on that judgment, and undertaken one of the two steps noted above should have a right to the disclosure order, provided that the debtor is served with a copy of the motion materials. The Supreme Court held that the Ontario courts have the power to make such an order either pursuant to the Ontario Rules of Civil Procedure (the interplay between Rules 60.18(6) and 34.10) or the court's inherent jurisdiction. The Supreme Court therefore granted the order requiring Scotiabank to produce the mortgage discharge statement.
The second important aspect of the Supreme Court's decision has to do with the doctrine of implied consent. Schedule 1, clause 4.3.6 of PIPEDA allows for consent to be implied in the context of disclosure of information that is "less sensitive". Financial information is generally considered highly sensitive, as it goes to the "core" of a person. However, the Supreme Court acknowledged that not all financial information is per se highly sensitive.
According to the SCC, determining when otherwise highly sensitive information is "less sensitive" involves a contextual assessment of these three factors:
- Is there related information already in the public domain?
- What is the purpose served by the publicity of the related information?
- What is the nature of the relationship between the parties at issue?
In this case, the information at issue was the current balance of the mortgage. The government already makes the principal amount of a mortgage, the interest rate, the payment periods and due date of a mortgage all publically available when a mortgagee registers a mortgage on title. The purpose of this public disclosure is to guide future creditors of the mortgagor. However, knowing the current state of the mortgage provides certainty to creditors who wish to collect from the debtor by going after their real property. Accordingly, the third party creditor, not a party to the mortgage, has an interest in this information. In light of the foregoing, the Supreme Court held that the information contained in the mortgage discharge statement was "less sensitive". That did not end the enquiry.
The Supreme Court also noted schedule 1, clause 4.3.5 of PIPEDA which states that the "reasonable expectations" of an individual are relevant to obtaining that individual's consent. Again, the SCC held that the entire context is important, and, in particular, the following factors are important to determining reasonable expectations of an individual in these circumstances:
- What are the legitimate business interests of other parties?
- What is the identity of the party seeking disclosure and the purpose for doing so?
The Supreme Court held that there is a clear difference between disclosure to a party with an "established legal right" versus a party who is "merely curious or seeks the information for nefarious purposes." Here, a reasonable debtor should know that defaulting on a loan would entitle the party making the loan (RBC) to recover the debt against the debtor's assets.
Discussion
It is notable that the SCC did not hesitate to grant the s. 7 order. It appears that it was not a question to the Court that such an order should be granted in the circumstances. Thus, the decision should provide clarity to parties seeking such an order and courts that were previously hesitant to grant it.
Arguably most important in this decision is the test laid out by the SCC as to when consent may be implied pursuant to PIPEDA. The answer is dependent on a contextual approach of two enquiries. First, the nature of the financial information must be determined. Is it highly sensitive or less sensitive? The three factors noted above should assist with answering that question. Second, the reasonable expectations of the party whose consent is being sought are important. Note that the term reasonable means that this is analyzed objectively. The point is, that person may not have subjectively intended to provide their consent, but, according to the SCC, they should have, in light of the circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
