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Sanity

An execution creditor (i.e. a judgment creditor who has filed a writ of seizure and sale with a sheriff) has a right to request the sheriff to sell the judgment debtor’s equity in property and apply the proceeds of sale to the debtor’s executions. However, if a mortgage encumbers the property, the sheriff insists upon receipt of a mortgage statement from the mortgagee. The sheriff needs to review the statement to assess the equity in the property and ensure that it exceeds the minimum $10,000 threshold set pursuant to the Execution Act. Must the mortgagee give that statement? If the mortgagee does provide the statement, is it breaching the provisions of the Personal Information Protection and Electronic Documents Act (PIPEDA)? These questions had previously been answered by the Ontario Court of Appeal, but the Supreme Court of Canada, in its 2016 decision in Royal Bank of Canada v. Trang, has given new answers.

Problem

As a rule, judgment debtors do not want to assist execution creditors to sell the debtors’ property out from under them. Go figure. Accordingly, debtors will not give their mortgagees explicit consent to provide a mortgage statement to their execution creditors. No mortgage statement, no sheriff’s sale.

Of course, an execution creditor can always attempt to obtain the statement from a debtor by way of a judgment debtor examination. This presumes that judgment debtors are always cooperative and never lie. Unfortunately, a debtor can stall an execution creditor for months, even years, and ensure that the creditor incurs significant costs before finally obtaining what it needs. These costs will often exceed the judgment debt or the equity in the property or both.

A creditor’s right to initiate a sheriff’s sale is no right at all if the sale cannot be carried out efficiently and economically.

History

In 2011, recognising the usual economic futility in attempting to obtain a mortgage statement, we acted on a test case to compel a mortgagee to provide a mortgage statement to an execution creditor: Citibank v. Pleasance. We were unsuccessful before the motions judge and again before the Ontario Court of Appeal.

In 2012, the Royal Bank of Canada took another shot – on facts far more appalling than in Citibank.

Merry Go Round

RBC’s judgment was against husband and wife. The debtors owned their own property subject to a mortgage in favour of Bank of Nova Scotia, which they kept in good standing. RBC served the debtors with a judgment debtor examination notice. They did not appear. RBC requested a mortgage statement from BNS; it refused. RBC then obtained a court order requiring the debtors to appear on a judgment debtor examination. The debtors ignored the order and did not appear. RBC then brought a motion against BNS to compel it to provide a statement. The motions judge refused the request – based on Citibank. RBC appealed. The Court of Appeal, on a technicality which is not immediately apparent to us, held that the decision on the motion did not finally dispose of the issue and refused jurisdiction. It suggested that RBC examine a BNS representative; we do not know why.

RBC took the Court’s direction to heart and wasted more time on an unproductive examination of a BNS representative. Then it brought a second motion before the same motions judge to compel the production of the statement. The judge gave the same ruling, although this time it was seemingly final. RBC appealed the decision to the Ontario Court of Appeal. The court, in a 2-1 split, dismissed the appeal. It held that a mortgage statement was personal information under PIPEDA and that the debtors had not given implied consent to its release.

RBC, whose judgment debt was for the grand sum of $30,000, successfully applied for leave to appeal the decision to the Supreme Court of Canada. RBC was obviously trying to prove a point, but the point should not have had to be proven. By the time the matter made its way to the Supreme Court, BNS was unrepresented and the privacy issues were argued by the Privacy Commissioner of Canada as a “friend of the Court.”

PIPEDA

The Supreme Court succinctly described PIPEDA and the issues before it as follows:

“PIPEDA governs the collection, use and disclosure of personal information by organizations in the course of commercial activities …. In general, PIPEDA prohibits organizations from disclosing ‘personal information’ without the knowledge and consent of the affected individual … There are a number of exceptions for which the requirement for knowledge and consent are not necessary for disclosure including where disclosure is ‘for the purpose of collecting a debt owed by the individual to the organization’ …, ‘required to comply with … an order made by a court’ …, or ‘required by law’ …. At issue is whether, in light of PIPEDA, Scotiabank is precluded from disclosing the mortgage discharge statement to RBC without the (debtors’) consent.”

Reality

 The Supreme Court of Canada concluded as follows:

“… an order requiring disclosure can be made by a court in this context if either the debtor fails to respond to a written request that he or she sign a form consenting to the provision of the mortgage discharge statement to the creditor, or fails to attend a single judgment debtor examination. A creditor who has already obtained a judgment, filed a writ of seizure and sale, and completed one of the two above-mentioned steps has proven its claim and provided notice. Provided the judgment creditor serves the debtor with the motion to obtain disclosure, the creditor should be entitled to an order for disclosure. A judgment creditor in such a situation should not be required to undergo a cumbersome and costly procedure to realize its debt. The foregoing is a sufficient basis to order (BNS) to produce the statement to RBC, and I would so order. But there is more in the present case.

 In the case at bar, a reasonable person would consider it appropriate for a mortgagee to provide a mortgage discharge statement to a judgment creditor who has obtained a writ of seizure and sale of the mortgaged asset from the court and filed it with the sheriff. A judgment creditor who has completed these steps has demonstrated that it intends to exercise an established legal right that depends on the disclosure of the mortgage discharge statement. In this case, RBC also sought the mortgage discharge statement through the examination process, but this additional step is not necessary. Obtaining a writ of seizure and sale, and filing it with the sheriff, makes operational the consent to disclosure given by the (debtors) concurrent with their giving a mortgage to (BNS). In my view, consent for the purpose of assisting a sheriff in executing a writ of seizure and sale was implicitly given at the time the mortgage was given. To be clear, this does not mean that a bank may disclose a mortgage discharge statement to any party who requests it. For example, it is reasonable to expect that a bank will not disclose a mortgage discharge statement to a person with no legal interest in the property.”

In summary, the Court recognised the business realities and held that (i) the debtors impliedly had given BNS consent to provide the mortgage statement and therefore BNS had the right to provide it without running afoul of privacy legislation; and (ii) if a mortgagee does not voluntarily provide a mortgage statement, then a court should order the mortgagee to provide the statement if either the creditor requested the debtors to give consent to the release of a mortgage statement or the creditor scheduled one failed judgment debtor examination.

Image courtesy of mconnors.

Written by Jonathan Speigel Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.