Evans’ Insights – The Supreme Court of Canada on Mortgage Statements

by John F. Evans, Q.C., LSM

John Evans If you knew as little as I do about web site function, you should be nervous because you are at the back of a terribly long line. So how you found this note reflects search gifts hidden behind mysterious keys for me. Well done.

I plan to write regularly about the decisions and the reasoning of the Supreme Court of Canada when those insightful judges speak out about issues and ideas which have influence on the business interests and personal interplay of Canadians. Less probable topics are the justice disputes about and affecting a relatively narrow interest. I know – you can hardly wait.

A development surfacing has seen the Court granting leave and pronouncing on transactional legal issues. Appointed in 2014 from a distinguished Montreal advocacy practice, Justice Suzanne Côté is writing extensively on business issues where the Court has perceived a need to better the law. In mid-November Justice Côté released reasons on a mortgage issue.

Everybody has a mortgage.  A few are the lenders.  Most though are borrowers. In order to pay off a mortgage what you need from the lender mortgagee is an accounting – a statement setting out exactly how much is owed. Usually that is not a problem – you request and you get.

True, but for a law called PIPEDA; a federal statute controlling and prohibiting disclosure of personal information obtained by commercial organizations in the course of business without the person’s consent. The law was created to address a perceived unjustifiable outrage that had ‘Credit Bureaus’ accumulating personal transaction records which in too many instances became a money rap sheet which prevented any chance for getting credit. So arose a mess.

The mess culminated with judicial confirmation that a mortgage statement is just such personal information that couldn’t be disclosed without the borrower’s consent.  Not bad, unless you were a second or third party mortgage lender seeking to enforce your own mortgage, or worse, a judgment creditor who needs a mortgage statement to effect a sherrif’s sale.

One such mess reached the Supreme Court.  RBC is a judgment creditor of Trang and seeks a sheriff’s sale of Trang’s property. Scotiabank holds a mortgage on Trang’s property. RBC requests a mortgage statement so that, when the sheriff sells, it knows how much to pay out to Scotia. Scotia refused for fear of offending PIPEDA. Ontario’s Court of Appeal agreed. The decision caused an impossible chaos. In effect, persons with judgments were unable to force a sale of a debtor’s property because the sheriff could not pay out the existing mortgages and give a purchaser clear title. Naturally, borrowers were not inclined to consent. The ramifications for creditors, for lenders, for money market stability were severely disruptive!

Justice Côté framed obtaining a debtor’s consent around the reasonable expectation of the person. You do not ‘reasonably expect’ your doctor to disclose your health information to a healthcare product seller. Côté sees your mortgage differently. Your mortgage is publicly registered.  The amount and the terms are in the public record. The current balance is a snapshot of that mortgage’s state at a particular date. All of the pertinent information about your mortgage is publicly known – the rough amount due is calculable – disclosure of the particular balance gives certainty.

This is not private credit information. When you give a lender a registered mortgage, Côté sees it as within your reasonable expectation that the balance will be disclosed to third parties where there is a justifiable commercial need. That leads to a finding that Trang ‘consented’ to the disclosure.

Significant? Most certainly. The Court has made sense of difficult legislation. The Court has enabled commerce to function fairly with better balance and certainty.

Royal Bank of Canada v. Trang, 2016 SCC 50:  Released November 17, 2016