Canada: SCC Rules Debtors Impliedly Consented To Disclosure Of Mortgage Discharge Statement

On November 17, 2016, the Supreme Court of Canada (the "SCC") released its decision in Royal Bank of Canada v. Trang, 2016 SCC 50. This case involved the proper interpretation of certain disclosure exceptions in the Personal Information Protection and Electronic Documents Act, S.C. 2000, c.5 ("PIPEDA").

Writing for a unanimous court, Justice Côté overturned the Ontario Court of Appeal's decision and ordered the Bank of Nova Scotia ("Scotiabank") to disclose the debtors' mortgage discharge statement to the Royal Bank of Canada ("RBC") for two reasons: (1) such disclosure was required to comply with a court order pursuant to s. 7(3) of PIPEDA; and, (2) the debtors had impliedly consented to such disclosure. The SCC held that each of these two reasons would have been enough on their own to allow the appeal.

A Mortgage Discharge Statement is Personal Information under PIPEDA

PIPEDA is a federal privacy statute that generally prohibits organizations from disclosing personal information, such as that within a mortgage discharge statement, without the knowledge and consent of the affected individual. Section 7(3) of PIPEDA provides a list of legislative exclusions to the requirement of knowledge of consent, including where disclosure is required to comply with an order made by a court to compel the production of information.

Exception to Requirement of Knowledge and Consent of the Affected Individual

Phat Trang and Phuong Trang (the "Debtors") had defaulted on a loan from RBC. The Debtors owned property in Toronto (the "Property"), for which Scotiabank held a first mortgage. After obtaining judgement against the Debtors in the amount of $26,122.76, RBC filed a writ of seizure and sale of the Property with the sheriff in Toronto, Ontario. The sheriff was permitted to sell the Property pursuant to subsection 9(1) of the Execution Act, R.S.O. 1990, c. E. 24. However, it refused to do so until receiving the Debtors' mortgage discharge statement from Scotiabank. The mortgage discharge statement was necessary for the sheriff to know Scotiabank's interest in the Property, and to determine the rights as between Scotiabank and RBC.

After RBC's attempts to obtain the mortgage discharge statement from the Debtors were unsuccessful, RBC brought a motion to compel the Bank of Nova Scotia ("Scotiabank") to produce the mortgage discharge statement.

Both the trial court and the Court of Appeal held that the order sought by RBC did not constitute an "order made by a court" under s. 7(3)(c) of PIPEDA because it would be circular reasoning to hold that 7(3)(c), which permitted disclosure to comply with a court order, also provided the authority to seek such an order in the first place. In rejecting this reasoning, the SCC overruled Citi Cards Canada Inc. v. Pleasance, 2011 ONCA 3, a case where the Ontario Court of Appeal held that a mortgage disclosure statement was "personal information" under PIPEDA but that none of the exceptions in s. 7(3) of PIPEDA applied.

Procedural Rule Impedes Access to Justice

A point of contention was whether RBC should be required to make another application relying on rule 60.18(6) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the effect of which would be to require the mortgagee (in this case, Scotiabank) to produce the mortgage discharge statement.

Justice Côté agreed with the reasoning of dissenting Justice Hoy at the Court of Appeal, writing that it would have been "overly formalistic and detrimental to access to justice" to conclude that RBC must make another application specifying that it would be relying on rule 60.18(6)(a) to obtain the order to compel disclosure (at para. 30). RBC had already made multiple trips to court to determine the amount outstanding on the Debtors' mortgage to enforce a valid judgement. While RBC has many legal and financial resources, Justice Côté wrote that ensuring access to justice requires paying attention to the plight of all litigants.

Reasonable Expectations Constitute Implied Consent

Schedule 1, cl. 4.3.6 of PIPEDA acknowledges that consent for the purposes of the statute can be implied consent when the information is "less sensitive". Clause 4.3.5 of PIPEDA further states that in obtaining consent, the reasonable expectations of the individuals are relevant. The SCC held that while financial information is generally extremely sensitive, it is a reasonable expectation of a mortgagor that his or her mortgagee would be entitled to provide a mortgage discharge statement in this context.

Justice Côté wrote that the sensitivity of the current balance of the mortgage 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. Certain information is already made publicly available when mortgages are registered electronically on title in part to allow creditors with a current or future interest in the land to make informed decisions. As such, the SCC concluded that the Debtors impliedly consented to the disclosure of the mortgage discharge statement by Scotiabank to RBC.

With thanks to articling student Jada Tellier for her assistance.

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.