Disclosure of mortgage information required by law; collection of information by bankruptcy trustee also allowed

PIPEDA Case Summary #2006-336

(Principle 4.3; paragraphs 4(1)(a), 7(3)(b) and 7(3)(i); subsection 2(1))

An individual complained after a bank, from which she and her husband had obtained a mortgage, disclosed her personal information to the Trustee of the Bankrupt Estate of her husband.  There was no dispute that this disclosure occurred without the complainant’s knowledge or consent.  However, the Assistant Privacy Commissioner determined that it was allowable under the Personal Information Protection and Electronic Documents Act (the Act) since the bank was required to hand over the information under the provisions of another law, namely, the Bankruptcy and Insolvency Act.

The complainant also objected to the Trustee’s collection of her personal information.  However, the Assistant Commissioner noted that if the bank was required to disclose personal information by law, then there was an implied right on the part of the collector, in this case, the trustee, to collect that information. 

The following is a detailed summary of the investigation and the Assistant Commissioner’s deliberations and findings.

Summary of Investigation

The complainant and her husband obtained a mortgage from the bank when they purchased a home.  They are tenants in common.  They married a month after making the purchase, and the marriage contract set out a strict separation of assets and liabilities.  The marriage contract provided that the mortgage for the home was to be charged against the complainant’s husband’s one-half interest in the property.  The bank was not aware of the marriage contract at the time that it received the mortgage application and approved it.

The complainant’s husband was forced into bankruptcy some time later.  The assigned trustee for her husband’s bankrupt estate wrote to the bank, demanding that the complete bank file relating to the mortgage on the home jointly owned by the complainant and her husband be disclosed, pursuant to the provisions of subsection 164(2) of the Bankruptcy and Insolvency Act.  The bank complied with the disclosure demand, releasing, among other things, a copy of the mortgage application, a tax return, and net worth statements of the complainant.

The complainant felt that, as she had entered into a marriage contract with her husband, she was not liable for his debts or obligations.  Therefore, she believed that the trustee did not have the right to collect her personal information from the bank without her knowledge or consent.

The bank stated that it disclosed the complainant’s personal information without her knowledge or consent in accordance with two provisions of the Act, namely, paragraphs 7(3)(b) and 7(3)(i).  Paragraph 7(3)(b) allows an organization to disclose an individual’s personal information to a third party without knowledge or consent, if the disclosure is made for the purpose of collecting a debt owed by the individual to the organization.  Paragraph 7(3)(i) allows an organization to disclose personal information without knowledge or consent if the disclosure is required by law. 

As for the trustee, it contended that it was not an organization as defined in subsection 2(1) of the Act and that, when sending the request letter, it was not acting in the course of a commercial activity.  Instead, the trustee claimed that, in administering the estate, it was acting as an officer of the Court and fulfilling duties prescribed by statute.

Findings

Issued June 21, 2006

Application: Subsection 2(1) defines “commercial activity” as any particular transaction, act or conduct or any regular course of conduct that is of a commercial character, and defines “organization” to include an association, a partnership, a person and a trade union.  Paragraph 4(1)(a) states that Part I of the Act applies to every organization in respect of personal information that the organization collects, uses or discloses in the course of commercial activities.

Principle 4.3 states that the knowledge and consent of the individual are required for the collection, use, or disclosure of personal information, except where inappropriate.  Paragraphs 7(3)(b) and 7(3)(i) are exceptions to the requirement for consent.  Paragraph 7(3)(b) states that an organization may disclose personal information without the knowledge or consent of the individual if the disclosure is for the purpose of collecting a debt owed by the individual to the organization.  Paragraph 7(3)(i) states that an organization may disclose personal information without the knowledge or consent of the individual if the disclosure is required by law.

In making her determinations, the Assistant Privacy Commissioner deliberated as follows:

• With respect to the Trustee’s view that it was not subject to the Act, the Assistant Commissioner noted that the mere fact that an organization may be designated an “officer of the Court” is not sufficient to remove them from the jurisdiction of the Act.  Trustees are licensed under the Bankruptcy and Insolvency Act and are held to standards of behaviour or service established by that law.  Trustees do not work for the bankrupt, but rather are appointed by the court to administer a bankruptcy, and are remunerated for their work.
• The Assistant Commissioner therefore determined that the trustee in this instance was an organization that was acting in the course of a commercial activity and was thus subject to the provisions of the Act, under paragraph 4(1)(a).
• With respect to the bank, it referred to paragraphs 7(3)(b) and 7(3)(i) to defend its disclosure of the complainant’s personal information. 
• As for  its reliance on paragraph 7(3)(b), the Assistant Commissioner did not agree that this paragraph applied in this instance since the mortgage was not in default and the bank was not therefore trying to collect a debt. 
• However, she considered paragraph 7(3)(i), which allows personal information to be disclosed without the individual’s knowledge or consent where required by law, to be applicable in this case. 
• She referred to subsection 164(1) of the Bankruptcy and Insolvency Act, which states:

Where a person is believed or suspected to have in his possession or power any of the property of the bankrupt or any book, document or paper of any kind relating in whole or in part to the bankrupt, his dealings or property…he may be required by the trustee to produce the book, document or paper for the information of the trustee, or to deliver to him any property of the bankrupt in his possession.

• Both the complainant and her husband were co-owners of the property and thus co-holders of the mortgage.  Both had submitted personal information as part of the application process, and the mortgage was granted based on all of the personal information submitted, not merely that of the husband.  The Assistant Commissioner was of the view that when the trustee demanded information regarding the mortgage from the bank, the bank rightly provided the entire file of information. 
• The Assistant Commissioner stated that the information in that file constituted a “book, document or paper of any kind relating in whole or in part to the bankrupt, his dealings or property” and the trustee was therefore within its power under subsection 164(1) to compel the production of the information.  Although the information related in part to the complainant, it also related in part to the bankrupt who held the mortgage.
• She also noted that, in addition to subsection 164(1) of the Bankruptcy and Insolvency Act, subsection 164(2) of the same Act allows a trustee to, without an order, examine the person before the court registrar concerning the information if a person does not produce the information within 5 days of being required to do so.  Under subsection 164(3), the person may be compelled to attend and testify and produce any information subject to the same rules of examination and the same consequences as would apply to the bankrupt. 
• The Assistant Commissioner was therefore satisfied that the Bankruptcy and Insolvency Act is a law that requires the disclosure of all information relating in whole or in part to the bankrupt.  She thus determined that the bank’s disclosure to the trustee met the requirements of the exception to consent set out in paragraph 7(3)(i), and was not a contravention of Principle 4.3. 
• Although the complainant argued that the bank did not take its clients’ privacy seriously since it could have contacted her to obtain her consent during the 5 day timeframe it had to respond to the trustee, the Assistant Commissioner noted that Act does allow for exceptions to consent, and thus, the bank was not required to request the complainant’s consent.
• As for the collection by the trustee, the Assistant Commissioner stated that if an organization is required to disclose information by law, there is an implied right on the part of the collector, the trustee in this case, to collect that information.  She therefore determined that the trustee did not contravene Principle 4.3.

The Assistant Commissioner concluded that the complaints were not well-founded.