Citi Cards Canada v. Pleasance

Davis LLP Banking & Financial Services Bulletin


The Ontario Court of Appeal recently released its reasons for judgment in Citi Cards Canada Inc. v. Pleasance. The case involved a conflict between a creditor who wanted information about prior mortgages on a debtor's property in order to pursue a legal remedy against the debtor and the debtor's right to the protection of his personal information under the Personal Information Protection and Electronic Documents Act ("PIPEDA"). The Court of Appeal held that prior mortgagees were prohibited from disclosing information about amounts owing on those mortgages to subsequent creditors, in the absence of the debtor's consent or a court order.

Background

The creditor, Citi Cards, had a credit card-related judgement against Mr. Pleasance. Citi Cards sought to enforce judgement through a sheriff sale of his home. The sheriff, however, required mortgage discharge statements from Canada Trust and TD Bank, both of whom were mortgagees of the Pleasance residence. This was so the sheriff could check whether there was any equity remaining in the property before proceeding with the sale. Citi Cards' attempts at enforcing judgement were further thwarted when the mortgagees refused to provide mortgage discharge statements on the basis that such disclosure of personal information would be contrary to PIPEDA. In the end, both the Superior Court and the Court of Appeal agreed with the mortgagees in deciding that disclosure of the mortgage discharge statement in the circumstances of this case would be a violation of PIPEDA.

At the Court of Appeal, Citi Cards unsuccessfully argued that the release of a mortgage discharge statement should be allowed because it would actually fall within two exceptions under PIPEDA for the disclosure of personal information. The first of such exceptions is where the disclosure is in "compliance with a court order". The court rejected that argument as circular: the "order" requiring compliance was the order sought in Citi Cards' application to the court.

Secondly, Citi Cards argued that such disclosure was "required by law" on the basis that Mr. Pleasance would be required by law to disclose the information if examined pursuant to an order in aid of execution; Citi Cards reasoned that the mortgagees should also be required to do so. The court held that such a reading of the exception was inconsistent with its plain wording and that the phrase "required by law" must be interpreted as being required by law independently of PIPEDA.

The Court of Appeal also approved the application judge's refusal to exercise his discretion to order the banks to disclose the information through the rules of court. The court noted that Citi Cards had not yet pursued other available remedies. Notably, Citi Cards could have requested an order in aid of execution which would have allowed Citi Cards to examine Mr. Pleasance regarding the mortgages on his property.

Significance of the Decision

The implications of this decision are not as far reaching as one might initially think. Firstly, banks already have a common law duty of confidentiality towards their customers. Secondly, the decision's application is limited to debtors who are individuals as PIPEDA does not protect corporations (although the duty of confidentiality extends to corporations). Thirdly, a borrower's or mortgagee's consent to release information about encumbrances may be addressed in the underlying contract. Finally, there are a number of other statutory exceptions which may be available to creditors seeking this type of information.

a) Common law duty of confidentiality
Under the common law, banks have a duty of confidentiality toward their customers. Even before PIPEDA was enacted a bank had an obligation, generally, to not disclose personal information without its customer's consent. The established exceptions to a bank's duty of confidentiality in this regard are: (a) compulsion of law, (b) the bank's own interest, (c) the consent of the customer, and (d) other public duties.

b) PIPEDA does not apply to corporations
Under PIPEDA, a bank would not be prohibited from disclosing mortgage statements with respect to property owned by a corporation. This is because the "personal information" that is protected under PIPEDA only extends to information with respect to an individual. Note, however, that even if this information is not protected under PIPEDA, it may be protected under a bank's duty of confidentiality.

c) Other exceptions
There are a number of enforcement situations where a creditor seeking information on prior encumbrances will be able to obtain the information without the debtor's consent because of a statutory exception. Under PIPEDA, disclosure of personal information without the individual's consent is permissible if it is required by law.

For example, a lien holder, under the Construction Lien Act in Ontario, can require a mortgagee or unpaid vendor, by written request, to provide certain information including amounts owing under a mortgage.

In a bankruptcy situation, the trustee in bankruptcy stands in the shoes of the bankrupt and can provide consent to the release of personal information.

Another exception with respect to the protection of personal information in Canada, is that unlike real property, under the Personal Property Security Act ("PPSA") regime in Ontario, information about amounts owing by debtors to creditors with respect to secured personal property is not protected. Pursuant to the Ontario PPSA, a secured party can be required to furnish the following information:

  • a statement in writing of the amount of the indebtedness and the terms of payment, or
  • a true copy of the security agreement.

Considerations

If you are a mortgagee holding a mortgage over the property of an individual debtor and a subsequent creditor asks for information regarding your mortgage, you will need to carefully consider your obligations under PIPEDA, your duty of confidentiality, if any, the underlying contract and other applicable statutes before you respond.

A lender may wish to consider obtaining an irrevocable consent from its borrower to the future disclosure of information relating to any prior encumbrances on the borrower's real property. Under PIPEDA, although consent can subsequently be withdrawn, the withdrawal is subject to legal or contractual restrictions and reasonable notice.

However, one of the requirements for a valid consent under PIPEDA is that the consent be meaningful. For the consent to be meaningful, the borrower must be advised of the purpose for which the information is being provided so that they understand how the information will be used or disclosed. Furthermore, an organization cannot require disclosure of information beyond that required to fulfill the explicitly specified and legitimate purpose.

Conclusion

In summary, this case contains guidance for both mortgagees who are being asked to release information regarding their mortgages, as well as subsequent creditors who are seeking information on prior encumbrances. In both situations, with respect to an individual debtor, creditors will need to take PIPEDA into account when dealing with disclosure requests and, conversely, when giving credit and planning enforcement strategies.

If you have any questions concerning the content of this bulletin, please contact the authors or your usual lawyer at Davis LLP.

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Authors

M. Sandra Appel
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Eric Belli-Bivar
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Bruce Darlington
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Tamara Hunter
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