Canada: The Effect Of PIPEDA On The Enforcement Of Security

A recent Ontario case illustrates the courts' difficulty in integrating the requirements of PIPEDA¹ into the existing legal regime and how PIPEDA is affecting enforcement of judgments. In Trang², the Ontario Court of Appeal has made PIPEDA, (in effect) banking secrecy legislation, with certain cumbersome exceptions and rules to follow for parties that seek to enforce judgment on personal loans or credit card debts.

Facts

In 2010, Royal Bank of Canada (RBC) obtained a judgment against the Trangs for over $26,000 plus interest and costs for default on a personal loan. RBC registered a writ of seizure and sale to enforce the judgment. RBC then directed the Sheriff to seize and sell the Trangs' Toronto home (the Property).

The Bank of Nova Scotia (Scotia) had a first mortgage on the Property registered in 2005 for the face amount of $262,500. RBC requested a mortgage discharge statement to provide to the Sheriff so that that the Sheriff could enforce the writ of seizure and sale. Scotia refused, advising RBC of its view that the mortgage discharge statement was the Trangs' personal information, which was protected from disclosure by PIPEDA. Unless the Trangs consented, Scotia would not release a mortgage discharge statement without a court order. Obviously, the Trangs had no interest in consenting.

The Existing Law

In Citi Cards³, the Ontario Court of Appeal had previously ruled that PIPEDA applied to a bank customer's mortgage statement and declined to order production of it to Citi Cards Canada Inc. (Citi Cards) so that it could seize and sell a judgment debtor's home to enforce judgment on a credit card debt.

However, in Citi Cards, Justice Blair noted that a judgment debtor would be required to produce a mortgage statement at an examination in aid of execution (or "judgment debtor exam") under Rule 60.18(6) of the Rules of Civil Procedure. Justice Blair suggested that the court might have ordered production of the mortgage statement from the third party financial institution if Citi Cards had attempted a judgment debtor exam and the judgment debtor refused to produce the information.

As suggested by Justice Blair in Citi Cards, RBC sought to conduct two judgment debtor exams of the Trangs in 2011 and in 2012 in an attempt to obtain the mortgage statement. Despite being properly served on both occasions (the second examination was pursuant to a court order), the Trangs failed to appear. RBC then applied to the court for an order requiring Scotia to produce the Trangs' mortgage discharge statement.

The Decision

In Trang, Justice Laskin writing for the 3-2 majority of a five-member panel, confirmed that "the information in a mortgage discharge statement is sensitive information for which the mortgagee would need the mortgagor's express consent to disclose to a third party"⁴, even though the mortgage itself (and the amount of the mortgage) is registered on title to the Property for all to see. While Justice Laskin stated that he recognized that interpreting PIPEDA in this way created a "difficulty" for an execution creditor, it was not a "difficulty" that allowed the use of Rule 60.18(6) of the Rules of Civil Procedure in the manner suggested by Justice Blair in Citi Cards.⁵

Instead, Justice Laskin suggested two possible remedies for RBC's situation: 1) It can re-write all of its loan agreements so that the debtor consents to the disclosure of a mortgage statement before funds are advanced; or 2) it could seek to examine Scotia under Rule 60.18(6)(a) of the Rules of Civil Procedure (the judgment debtor exam rule) and require a representative of Scotia to bring the Trangs' mortgage discharge statement to the examination.

For the minority in dissent, Justice Hoy wrote that she would have allowed the appeal. She succinctly summarized the problem with Justice Laskin's judgment as follows⁶:

First, an order requiring a mortgagee to disclose a statement to a creditor need not have been sought under Rule 60.18(6)(a) [of the Rules of Civil Procedure], to constitute "an order made by a court" within the meaning of s. 7(3)(c) of PIPEDA. Respectfully, Citi Cards is wrong to the extent that it holds otherwise. Unlike my colleague, I do not believe that a further motion by RBC is required before disclosure can be ordered. It is clear from the motion judge's thorough and careful reasons that he would have ordered disclosure had he thought he could, and, in my view, it would have been appropriate to do so. Indeed, it is also clear that my colleague would order disclosure of the Statement if RBC had simply labelled its motion as one under Rule 60.18(6)(a). I would accordingly order disclosure of the Statement.

Second, a court order is unnecessary in any event because the Trangs' consent to the disclosure of the Statement can be implied. The Statement constitutes "less sensitive" information for the purposes of s. 4.3.6 of Schedule 1 to PIPEDA, and disclosure accords with the reasonable expectations of an individual in the Trangs' position. Had this court in Citi Cards considered s. 4.3.6, it would have – or at least should have - come to a different result.

However, unless Trang is overturned on appeal, Justice Hoy's reasoning is not the law. Unless there is specific consent to the release of a mortgage discharge statement by the judgment debtor's mortgagee, a third party creditor cannot effectively exercise its rights to seize and sell property under s. 28 of the Execution Act⁷. As Justice Laskin suggests, it might be possible to examine the mortgagee and then order the mortgagee to incur the expense of lawyers and an appearance at a judgment debtor exam with their customer's mortgage discharge statement. If a mortgagee refuses, however, the court may have to revisit Justice Laskin's interpretation (as well as Citi Cards).

What is clear, however, is that there is simply no penalty visited upon a judgment debtor who refuses to consent to the release of a mortgage statement. In fact, by this refusal, the judgment debtor can (quite legally) evade execution of a valid judgment of the Superior Court of Ontario.

Footnotes

1. Personal Information Protection and Electronic Documents Act, S.C. 2000, c. 5 [PIPEDA].

2. Royal Bank of Canada v. Trang (2014), 123 O.R. (3d) 401 (C.A) [Trang]. Application for leave to appeal to the Supreme Court of Canada filed February 9, 2015.

3. Citi Cards Canada Inc. v. Pleasance (2011), 103 O.R. (3d) 241 (C.A.) [Citi Cards].

4. Trang, at para. 54.

5. Trang, at para. 77.

6. Trang, at paras. 92 and 93.

7. Execution Act, R.S.O. 1990, C. E.24 [Execution Act].

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