POPI and debt collection
By Jerome Veldsman
Royal Bank of Canada v Trang and Bank of Nova Scotia, a decision by the Supreme Court of Canada on 17 November 2016, provided important guidance regarding the central theme of protection of personal information legislation: the prohibition of processing (any activity concerning personal information) such information without the consent of the “date subject” (all of us).
RBC lent CAD 35 000 to the Trang couple. They defaulted on the loan and RBC obtained a judgment against them. Still, the couple did not pay. The couple owned immovable property, over which Bank of Nova Scotia (Scotiabank) held a mortgage bond. RBC wanted to have the property sold in execution to satisfy the debt.
For a sale in execution of immovable property, a judgment creditor must obtain a mortgage discharge statement from the bondholder. A mortgage discharge statement is simply a statement of the amount outstanding “on the bond” – and obviously contains personal financial information. RBC requested the mortgage discharge statement from Scotiabank. The Trangs did not consent to Scotiabank providing the statement to RBC, and therefore Scotiabank refused to provide the statement to RBC.
Businesses are with some justification paranoid about contravening personal information legislation (the penalty and reputational damage can be severe).
RBC made several trips to Court, to no avail. There was actually an Ontario Court of Appeal precedent that supported Scotiabank’s refusal. In the Trang matter, the Ontario Court of Appeal followed that precedent.
On appeal to the Supreme Court of Canada, RBC prevailed. The Court had to do some ‘legal gymnastics’ to overcome the strict wording of the protection of personal information legislation. The Court held that the couple had impliedly consented to Scotiabank disclosing the mortgage discharge statement to a judgment creditor. Essentially, the judgment is a monument to the lore that “the law is not an ass“.
There is no guarantee that a South African Court will be as pragmatic. Lenders will be well advised to include a specific consent by the debtor in standard loan documentation.