Recent events, such as the May 25 first reading of legislation amending the Personal Information Protection and Electronic Documents Act and the July 9 Federal Court judgment in
State Farm Mutual Automobile Insurance Co. v. Privacy Commissioner of Canada are signaling the end of the federal privacy watchdog’s interference with private investigations in Canada.
On the legislative front, the government introduced enhancements to private-sector privacy legislation in a bill seeking to amend PIPEDA. Bill C-29 proposes to implement the government’s response to the fourth report of the standing committee on access to information, privacy, and ethics dealing with the statutory review of PIPEDA.
With respect to private-sector investigations, PIPEDA currently only provides for non-consent collection, use, and disclosure of personal information where there’s existing evidence of a breach of contract or law.
The privacy commissioner has been of the view that mere suspicion of a crime or contract breach is insufficient grounds for a private-sector company or individual to conduct a covert investigation to protect their interests.
The proposed amendments, which would bring PIPEDA in line with private-sector privacy legislation in Alberta and British Columbia, allow for the non-consensual transfer of personal information to detect and prevent unlawful activity.
The proposed amendments to PIPEDA would permit organizations to collect, use, and disclose personal information, without the knowledge or consent of an individual, for the purposes of:
- Preventing, detecting or suppressing fraud and protecting victims of financial abuse.
- Conducting due diligence with respect to prospective or completed business transactions.
- Taking witness statements related to insurance claims and investigations in employment, business or professional matters.
- Establishing, managing, and terminating employment relationships of federally regulated companies.
These four proposed amendments pertain to the three major areas of private investigations: insurance, employment, and corporate due-diligence investigations.
Under the existing PIPEDA provisions, many insurers, corporations, and federal employers were uncertain what investigative steps they could take without running afoul of Canadian private-sector privacy law.
For example, since PIPEDA came into force in 2004, the insurance industry has been critical of the lack of clarity relating to third-party personal information contained in witness statements.
Bill C-29 removes any notion that the inclusion of third-party information in a witness statement without that person’s consent is somehow prohibited.
Likewise, some lawyers have been critical of the privacy commissioner’s views that covert surveillance is an investigative tool of last resort. Bill C-29 proposes to give employers greater discretion over their investigations.
The other notable development is the State Farm matter. In March 2005, a New Brunswick driver insured by State Farm, Jennifer Vetter, was involved in a collision with Gerald Gaudet.
He then issued a notice to her and State Farm, which placed him under covert surveillance both before and after the initiation of his personal injury tort action.
Before initiating the action, Gaudet made an access request pursuant to PIPEDA to State Farm for all of his personal information they had collected and, in particular, any covert surveillance and accompanying reports.
State Farm denied Gaudet’s access request on the grounds that PIPEDA didn’t apply. Gaudet then lodged a complaint with the federal privacy commissioner alleging State Farm was in breach of PIPEDA.
During the course of its investigation, the privacy commissioner’s office requested access to the reports and tapes from the investigation, as well as the retainer agreement between State Farm and its private investigators.
As a result of this request, State Farm began an application in Federal Court seeking a declaration that Canada’s privacy commissioner didn’t have the statutory or constitutional authority to investigate, make recommendations or otherwise act upon such complaints.
State Farm’s primary argument was a statutory one revolving around the fact that PIPEDA regulates only commercial activity in the private sector and that, when defending its clients, it’s not involved in such a relationship with Gaudet.
The company relied upon the decision of the Ontario courts in
Ferenczy v. MCI Medical Clinics, which applied the principle of agency and ruled that the defendants in an action aren’t engaged in a “commercial activity” for the purposes of PIPEDA if they use an agent such as their insurer or an investigator to conduct a covert investigation.
Remarkably, the privacy commissioner argued that the comments of the court in Ferenczy were obiter and not precedent. The privacy commissioner also said the State Farm application was premature.
In its ruling, the Federal Court held the privacy commissioner’s request for further time to prepare an argument to be “without merit.” It further ruled that the standard of review was correctness and that PIPEDA doesn’t contain a privative clause concerning the privacy commissioner.
In addition, it held that, as the privacy commissioner isn’t acting in an adjudicative capacity under PIPEDA, her role is incompatible with a standard of deference. At the same time, it ruled that “the privacy commissioner has no special expertise in the interpretation of the provisions of PIPEDA, since the statute itself entrusts the Federal Court with the authority and mandate to do so.”
The court concluded that the collection of evidence relating to a plaintiff by a defendant in a tort action doesn’t constitute a commercial activity for the purposes of PIPEDA.
In its view, such an interpretation couldn’t have been the intention of Parliament since the history and purpose of PIPEDA is a compromise between competing interests and its provisions must be interpreted with flexibility, common sense, and pragmatism.
Accordingly, it ruled that investigation reports and covert surveillance aren’t subject to PIPEDA and aren’t matters over which the privacy commissioner may interfere.
In terms of their ramifications, the proposed amendments to PIPEDA and the findings in the State Farm decision are arguments the Canadian Association of Private Investigators and the Canadian Association of Special Investigation Units have been making for some time.
In our view, it follows that if the privacy commissioner doesn’t have the jurisdiction to demand documents relating to access-request complaints into private-investigative matters, the federal watchdog also doesn’t have jurisdiction to issue guidelines pertaining to covert surveillance in the private sector.
The privacy commissioner’s guidelines on covert surveillance in the private sector decree that all third-party images collected by private investigators must be pixilated prior to disclosure to their clients.
Such decrees have resulted in insurers requiring pixilation technology at great expense to both the investigation and insurance industries.
Norman Groot is a lawyer with Investigation Counsel Professional Corp. He can be reached at 416-637-3141 or [email protected].
