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Privacy Law Prevents Bank Disclosure to Creditor

The Ontario Court of Appeal very recently decided a noteworthy appeal to determine whether – in the context of attempting to exercise its enforcement remedies – a judgment creditor was prevented by privacy legislation from obtaining a mortgage discharge statement from a third-party creditor. The Court itself described the decision as being “of some importance to debtor/creditor relations and, particularly, to financial institutes that advance funds in that milieu.”
 
The creditor, Citi Cards, had obtained an $11,000 judgment against the debtor. In order to realize on that judgment, Citi Cards wanted to sell the debtor’s home through a Sheriff’s sale. However, the Sheriff would not proceed with the sale until Citi Cards could provide a mortgage or discharge statement from the two third-party banks (the “Banks”) holding mortgages totalling $250,000 on the debtor’s home. Unfortunately, the Banks refused to provide the discharge statements on the ground that it would amount to a breach of the Personal Property Information Protection and Electronics Act (“PIPEDA”) if they did.  Effectively, the Banks’ refusal served to block Citi Cards from being able to realize on its judgment against the debtor.  Citi Cards then applied to the court for an order compelling the Banks to provide the discharge statements, but it was unsuccessful on that first application.  
 
A later appeal by Citi Cards to the Ontario Court of Appeal was also dismissed. That court found that the original judge had been rightly concerned about the privacy rights of the debtor, and correctly interpreted the provisions of PIPEDA to the effect that the Banks were prohibited under it from disclosing the mortgage statements.
  
The Court of Appeal reasoned as follows: First of all, the provisions of PIPEDA clearly apply to banks and financial institutions, which collect information about debtors in the course of their commercial mortgage lending activities.  

Next, mortgage discharge statements contain “information about an identifiable individual”, and therefore fall within the definition of “personal information” within the meaning of PIPEDA.  

The disclosure of the mortgage discharge statements was therefore governed by PIPEDA’s provisions and requirements, according to the court. These provide that personal information is prohibited from being disclosed unless one of the legislated exemptions apply: these include situations where disclosure is “required by law”, or is done in “compliance with a court order.”  The Court of Appeal found that neither of these exemptions applied in this case.  In doing so, it also considered the purpose behind PIPEDA, which was “to balance the privacy rights of individuals in their own personal information with the needs of organizations to collect, use or disclose personal information for reasonable purposes.”
 
In the end, the court declined to order the Banks to provide the mortgage discharge statements, and pointed out that Citi Cards had other remedies available to it: it could either examine the debtor himself, or else bring a motion to examine his wife, since she was joint owner of the home. While the court was sympathetic to Citi Cards’ concerns that the cost of exercising these measures might outstrip the amount of the judgment debt itself, this was not a legal excuse for not pursuing those alternative methods. See
Citi Cards Canada Inc. v. Pleasance, 2011 (ONCA)