Charles Pleasance defaulted on his credit card payments, and Citi Cards Canada Inc. obtained a judgment against him in excess of $11,000.  Citi wanted to enforce that judgment by means of a Sheriff’s sale of the family home, which was jointly owned by Charles and his wife Bibi Pleasance, but the Sheriff would not enforce the writ of execution without mortgage discharge statements from the mortgagees of the property, The Canada Trust Company and The Toronto-Dominion Bank.

The mortgagees declined to provide discharge statements to Citi on the grounds that the statements contained personal information regarding Charles and Bibi, and that disclosure was therefore prohibited under the Personal Information Protection and Electronic Documents Act (“PIPEDA”), S.C. 2000, c. 5, s. 7.

Citi applied to the Ontario Superior Court for an order requiring disclosure of the mortgage statements, but the Judge hearing the application sided with Canada Trust and the TD Bank.  In written reasons delivered recently on behalf of the Ontario Court of Appeal, Mr. Justice Blair upheld the decision of the application Judge and dismissed Citi’s Appeal.

The Privacy Issue

Mr. Justice Blair described the “knotty and interesting question to be to be determined on this appeal” as the issue of whether or not a judgment creditor is entitled to a mortgage statement, unrelated to the judgment debt, from a third-party creditor.  Mr. Jurestice Blair noted that the situation faced by Citi and the mortgagees in the Pleasance case is fairly common, but financial institutions in Ontario are inconsistent in their handling of these kinds of requests from judgment creditors such as Citi.  Some institutions will provide discharge statements, while others such as Canada Trust and TD Bank will not.

Citi admitted that it could have tried to obtain mortgage discharge statements by arranging an “examination in aid of execution” of Charles Pleasance.  This is a legal procedure in which a judgment creditor is entitled to question the debtor to find out about assets that are available to satisfy the debt.  Citi candidly admitted that it did not want to pursue this course of action due to the costs involved.  According to Citi, judgment debtors generally try to frustrate a creditor’s ability to enforce a judgment.  Various means are employed, some of which include avoidance of service of the notice of examination, failing to attend the examination, and failing to provide documents.

Citi complained that the costs involved in obtaining discharge statements by means of an examination in aid of execution often exceed the amount of the judgment.  An additional complication in this case arose from the fact that Mr. Pleasance had left the jurisdiction, and his current whereabouts were unknown.

Bibi Pleasance continued to reside in the home.  Citi had made no attempt to examine her (as a person having knowledge of the debtor’s debts) under Rule 60.18(6)(a) of the Ontario Rules of Civil Procedure, probably for similar reasons.  According to Mr. Justice Blair, however, although Citi’s concerns about debt enforcement costs “may be born of experience, and provide an understandable practical reason” for Citi’s approach, they do not “provide an answer in law”.

Court of Appeal’s Analysis of PIPEDA

Unless one of the section 7 exemptions applies, PIPEDA prohibits disclosure of “personal information” without consent.  ”Personal information” is defined in section 2 of the Act to mean “information about an identifiable individual”.  According to Mr. Justice Blair:

There can be no doubt that financial information pertaining to a debtor, collected and used by a financial institution in the course of a mortgage transaction – including the particulars of, and the balance owing on the debtor’s mortgage – is ‘information about an identifiable individual.’ Current mortgage balances are not information that is publicly available.

Mr. Justice Blair then turned to the two exemptions that Citi relied upon.  Under section 7(3) of the Act, an organization may disclose personal information where required by court order, or where “required by law”.

The court order that Citi relied on was the very order sought on the application.  Mr. Justice Blair found that it was circular to argue that the mortgagees were required to disclose the information because disclosure would be required by an order that had not yet been made.

Under the “required by law” exception, Citi argued that if it had arranged an examination of Charles Pleasance in aid of execution, he could be required to request mortgage discharge statements from the mortgagees and disclose them to Citi.  Since Mr. Pleasance could be required by law to obtain mortgage discharge statements, the mortgagees, according to this argument, were also required by law to disclose statements.

The first flaw in this argument had to do with the wording of the statutory exemption: “An organization may disclose personal information … only if the disclosure is [authorized by one of the exemptions]”.  According to Mr. Justice Blair, the disclosure that is the subject of the exemptions is disclosure by the organization, and not disclosure by the individual whose information is sought.

Mr. Justice Blair also made reference to section 3 of the Act, which sets out the legislative purpose. PIPEDA calls for the recognition of the privacy rights of individuals, but those rights are to be balanced against the need of organizations to collect, use, or disclose personal information for legitimate business purposes.  In order to properly balance these two legislative goals, the Court must weigh the privacy rights of the individual whose information is at stake against the reasonable business needs of the organization that has collected the information.  The needs of other, third-party organizations do not enter into this balancing process.

In any event, the court took note of the fact that while Mr. Pleasance might be required to produce mortgage discharge statements under an order emanating from his examination in aid of execution, no such order had been made, and it was not apparent that he was required by law to volunteer such information in the absence of an order.

The Court also adverted to the fact that the privacy rights of Bibi Pleasance could be affected by the order sought by Citi, and that she was not even a party to the proceeding.  The Court of Appeal therefore agreed with the application Judge that Citi should pursue a rule 60.18 order against Bibi before seeking disclosure from the financial institutions under that Rule.

Impact of the Decision

Although the decision does provide strong support for the privacy rights of individuals, and the Appellate Court’s interpretation of the relevant PIPEDA provisions cannot be faulted, the result could have a negative impact on consumers and borrowers.  Credit card interest rates are already high.  Lenders may now be in a position justify their rates by citing the Pleasance decision, arguing that the law makes it practically impossible to collect on credit card debt by means of the sale of the credit cardholder’s real estate.

The simple answer to this argument, however, is that the Act permits disclosure with the consent of the individual involved.  Credit card companies might therefore be inclined to insert a clause in the credit card application under which the applicant authorizes disclosure of this kind of information for debt enforcement purposes.

Richard Hayles

Link: Citi Cards Canada Inc. v. Pleasance, 2011 ONCA 3

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