This decision is hot off the presses: http://www.canlii.org/on/cas/onsc/2004/2004onsc12118.html.
For privacy lawyers, this is the very first time that the term "commercial activity" has been considered in the context of the Personal Information Protection and Electronic Documents Act. This question is of critical importance because the law only applies to the collection use and disclosure of personal information in the course of commercial activites (or if it is informaiton about an employee of an organization that the organization collects, uses or discloses in the course of the operation of a federal work, undertaking or business).
In this case, a non-profit hunting association was resisting the disclosure of its members list as it was otherwise required to do under the Corporations Act (Ontario). The Court concluded that the organization was not engaged in commercial activities, so PIPEDA does not interfere with the disclosure. (For some unknown reason, there seemed to be some question whether the organization was a "federal work, undertaking or business"!?)
As an aside, I think it's interesting that we are seeing more cases come out of the courts than out of the Office of the Privacy Commissioner. I gather that they are significantly overworked with too few staff and other resources.
REASONS FOR JUDGMENT
MacKENZIE J.
The Nature of the Proceeding
[1]
The applicants, Graydon Rodgers, (Rodgers) and the
Peel Trap Club (an unincorporated entity, being an activity group of the
respondent The Peel County Game and Fish Protective Association), bring a
motion in the context of an application commenced by Notice of Application
dated June 24, 2003.[2]
Briefly stated, the applicants seek: declaratory
relief under various heads for alleged breach of fiduciary duty; injunctive
relief restraining The Peel County Game and Fish Protective Association (the
Association) from expelling Rodgers or any other member of the Peel Trap Club
(the Trap section) as a member of the Association and from disbursing of more
than 43% of the proceeds of sale of the Association's real property; in the
alternative, that the Association be wound up and that 50% of the proceeds of
winding-up to be paid in trust to the Trap section.[3]
The applicants move now for an order compelling the
Association to provide a list of the members of the Association to Rodgers.
The Association previously refused to provide such list to Rodgers.[4]
The basis for the refusal by the Association to
provide such list is that Rodgers' request fails to meet the requirements of
s.306 or 307 of the Corporations Act (Ontario) (the Act) but
even if those requirements are met, the Personal Information Protection
and Electronic Documents Act (PIPEDA) operates to "trump" or
override the provisions of the Act in that regard.Issues on the Motion
(1)
Whether Rodgers is entitled to an order for production of the
membership list of the Association pursuant to s.307 of the Act;(2)
Whether PIPEDA applies to Rodgers' request for the Association's
membership list to override s. 307 of the Act.Analysis
[5]
In 1948, the Association was incorporated as a
non-share corporation pursuant to the Act. Its letters patent
stipulate as its primary purpose the promotion and maintenance of safe
recreational shooting for its members. The record establishes that: the
Association does not carry on any active business; has no employees, relying
on members volunteering to discharge administrative tasks; and, in accordance
with its charter, does not carry on its activities for purposes of gain for
the members.[6]
The Association currently comprises five activity
groups, the two material groups being the Trap section and the Handgun
section. Rodgers is a member of the Trap section and the respondents,
Calvert, Stigge and Modeland, are members of the Handgun section.[7]
For some time, Rodgers has been concerned about the
individual respondents acting in breach of their duties as officers and
directors of the Association by preferring the interests of the Handgun
section to which they belong over the interests of the Association as a
whole. This concern arises over the sale of the Association's lands and
premises and the proposed use of the proceeds of that sale to acquire other
lands and premises. Rodgers' concern is that the individual respondents will
take into account only the interests of the Handguns section in deciding what
will be the appropriate replacement lands and premises to the exclusion of
the interests of the other sections of the Association, including the Trap
section.[8]
To this end, Rodgers made an informal request of the
officers of the Association for the Association's membership list at a Board
of Directors' meeting on March 12, 2002. Subsequently on or about September
10, 2002, he made a formal request for the membership list by filing the
sworn affidavit prescribed by s.307(2) of the Act.[9]
By memorandum dated September 18, 2002 by the
respondent Calvert to the directors of the Association, the directors were
advised that they were obliged to supply Rodgers with the list of members of
the Association on the basis of legal advice obtained from the Association's
counsel. By an undated memorandum (received sometime in October 2002)
addressed to Rodgers, the respondent Calvert, on behalf of the Board of
Directors, informed the applicant that the Board was "unable to comply
with your request at this time as certain parts of [PIPEDA] came into effect
January 1, 2001 and January 1, 2002 and this Act appears to deal
directly with requests such as that made above [for the membership list] and
we need a legal clarification".[10]
On October 10,
2003, counsel for Rodgers wrote to counsel for the Association making a
further request pursuant to s.307 of the Act for the membership list.[11]
On October 14,
2003, counsel for the Association responded to Rodgers' counsel, denying the
request for the membership list and stating that the Association "a gun
club, is an undertaking that is outside the exclusive legislative authority
of the Province of Ontario and accordingly it is governed by the requirements
of PIPEDA and the release of any membership information cannot be made
without the consent of the individual members."[12]
I turn now to
the first issue, whether the applicant is entitled to an order for production
of the Association's membership list pursuant to s.307 of the Act.[13]
Section 307 of
the Corporation's Act (the Act) provides as follows:307(1)
Any person, upon payment of a reasonable charge therefor and
upon filing with the Corporation or its agent the affidavit referred to in
ss.(2), may require a corporation, other than a private company, or its
transfer agent, to furnish within ten days from the filing of such affidavit,
a list setting out the names alphabetically arranged of all persons who are
shareholders or members of the corporation, the number of shares owned by
each such person and the address of each such person as shown on the books of
the corporation made up to a date not more than ten days prior to the date of
filing the affidavit....
Ss.2 sets out the
form of the affidavit, the material paragraphs being:(2)
I require the list of shareholders
(or members) only for purposes connected with the above-named corporation.(3)
The list of shareholders (or
members) and the information contained therein will be used only for purposes
connected with the above-named corporation.]...
(4)
Every person who uses a list of shareholders or members of a
corporation contained under this section,(a)
for the purpose of delivering or sending to all or any of such
shareholders or members advertising or other printed matter relating to shares
of securities other than the shares or securities of the corporation; or(b)
for any purpose not connected with the corporation,is guilty of
an offence and on conviction is liable to a fine of not more than $1,000.00.(5)
[This subsection creates an offence where directors or officers of the
corporation fail to furnish the list in accordance with ss.1.](6)
Purposes connected with the corporation include any effort to
influence the voting of shareholders or members at any meeting of the
corporation, any offer to acquire shares in the corporation or any effort to
effect an amalgamation or reorganization or any other purpose approved by the
minister.[14]
Rodger's
position is that he has complied with the requirements of s.307(2), has paid
a fee for the membership list in question and is seeking the membership list
in order that he may communicate with other members of the Association
respecting his concerns about the management of the Association, with
particular reference to the proposed sale of the Association's property.[15]
In response, the
Association contends that there is no evidence that Rodgers intends to use
the membership list for purposes connected with the Association, as required
under s.307(6). As well, the Association submits that it would be open to
Rodgers or any other person to present a blatantly false affidavit in support
of a request for the membership list; accordingly, the Association contends
that it has an obligation with respect to the safety and privacy rights of
its members. In this situation, the directors in discharging their fiduciary
obligations to the members would be obliged to conduct due diligence in
investigating any request for a list of members, including cross-examination
of an applicant on any affidavit under s.307(2) filed in support of that
request.[16]
Counsel for the
respondents refers to s.332 of the Act, which, it contends, gives the
court discretion to make orders deemed fit to give a remedy to a member of a
corporation who is aggrieved by the failure of the corporation or its
directors and officers to perform any duty imposed on the corporation and/or
its directors and officers. In this case, the applicant submits that the court
in the exercise of its discretion could make an order that would permit the
applicant to have communication with the members and at the same time
protecting their privacy.[17]
I reject the
submissions of the respondents and accept the submissions on behalf of
Rodgers on the right to production of the membership list of the Association.[18]
The contention
that the applicant is not using or will not be using the membership list for
"purposes connected with the corporation" i.e. Association is not
tenable. It is undisputed that the Board of Directors of the Association have
signed a relocation agreement with the City of Brampton that requires the
sale of the Association's real property. There is no question that the
relocation of the Association will entail decisions as to the suitability of
the proposed replacement lands and premises for the Association's activities.
As noted, Rodgers has concerns about the proposed replacement lands and
premises and wishes to communicate those concerns to other members of the
Association.[19]
Counsel for the
Association submits that the words "or any other purpose approved by the
minister" are words of limitation. The contention is that the concerns
expressed by Rodgers are not within the stipulated purposes of s. 307(b) nor
are they the subject of "any other purpose approved by the
minister."[20]
I reject this
submission. The proposition that the description of "purposes connected
with the corporation" in ss.(6) of s.307 is exhaustive runs counter to
the principle of democracy inherent in shareholders' rights. Corporate
governance by the directors is subject to review and audit by the
shareholders, pursuant to corporate enabling legislation. To give subsection
(6) the restrictive interpretation sought by the Association would diminish
shareholders' abilities to communicate concerns about corporate governance to
each other and thereby detract from their rights of audit and review of
directors' acts and conduct in properly constituted meetings of shareholders.[21]
For these
reasons, I interpret the word "include" in subsection (6) to be
illustrative rather than exclusive in effect. If the legislator had intended
the examples of "purposes connected with the corporation" to be
exclusive, the word "means" instead of "include" would
have been apt.[22]
Accordingly, I
find that Rodgers' purpose in seeking the membership list is a purpose
connected with the corporation.[23]
I also reject
the submission of the Association that its directors were required in the
proper discharge of their fiduciary obligations, to conduct due diligence
investigations of Rodgers' request including cross-examination of any
affidavit filed in support of the request.[24]
In these circumstances
there is no basis on which the Association can reasonably claim the affidavit
filed by Rodgers under s.307(2) is false and required investigation by the
Association. The record is incontrovertible that on several occasions, both
formally and informally, Rodgers made it known to the officers and/or the
Board of Directors that he wished the membership list.[25]
As noted above,
on the 18th of September 2002 Calvert sent a memorandum to the
Board of Directors wherein, among other things, he noted that Rodgers
"has submitted a duly signed affidavit" and that the Association's
counsel had advised the Board that it must comply with the request. There may
indeed be situations in which a corporation's transfer agent might have valid
concerns as to the truth of the prescribed form of affidavit filed in support
of obtaining a membership list; this is not one of them. I similarly reject
the contention that giving the applicant that the membership list of the
Association would violate the privacy of its members. This concern is
addressed by the provisions of s. 307(4) of the Act. In this regard,
the Act restricts the purposes for which the membership can be used
and makes it an offence to use the list for any restricted objective.[26]
In the result, I
find Rodgers is entitled to production of the membership list of the
Association in accordance with the provisions of s. 307. However, his right
to production of the list engages the issue as to whether PIPEDA operates to
disentitle Rodgers to his rights under s. 307 of the Act.[27]
PIPEDA was given
royal assent on April 13, 2001, being implemented in three phrases over a
three-year period that began on January 1, 2001.[28]
Section 4(1) of
PIPEDA provides as follows:4(1)
This part applied to every organization
in respect of personal information that(a)
the organization collects, uses or discloses in the course of
commercial activities; or(b)
is about an employee of the organization and that the organization
collects or uses or discloses in connection with the operation of a federal
work undertaken or business.[29]
The three stages
of PIPEDA'S implementation are:1.
Stage One: January 1, 2001PIPEDA applied only
to an organization in respect of personal information, other than
"personal health information", that (a) the organization collects
or uses or discloses in connection with the operation of a federal work,
undertaking or business, or (b) it discloses outside the province for a
consideration;
Stage Two: January
1, 2002
PIPEDA applied to organizations covered in stage one in respect of personal
health information that they collect, use or disclose;2.
Stage Three: January 1, 2004PIPEDA applied to
all organizations in Canada that collect, disclose or use personal
information in the course of commercial activities, subject to exemptions
granted or Provinces that have by that date enacted their own privacy legislation.
It is not in dispute that Ontario has not enacted its own privacy legislation
as of the 1st of January, 2004.[30]
It may be seen
from the foregoing timelines that the relevant time for considering the
application of the Act herein was stage two, i.e. the application of
the Act on or after January 1, 2002. In the circumstances, s. 4(1)(a)
of PIPEDA is the operative section inasmuch that there is no question that
the members of the Association are not "employee[s] of the
organization" as described in sub (b) of s. 4(1).[31]
It should be
noted that there is no issue between the parties that the names and addresses
of members of the Association constitutes "personal information"
within the definition of s. 2(1) of PIPEDA; the Association is an
"organization" as defined in the interpretation section; and the
Association is a "federal work, undertaking, or a business" as
defined in the interpretation section of PIPEDA.[32]
I take issue
with the joint submission that the Association is within the definition of a
federal work undertaking or business. In the PIPEDA interpretation section
2(1), the pertinent part reads as follows:2(1) The
definitions in this subsection apply in this Part
..."Federal
work, undertaking or business means any work, undertaking or business that is
within the legislative authority of Parliament. It includes...
(i)
a work, undertaking or business outside the
exclusive legislative authority of the legislatures of the Provinces...
[33]
The Association
was incorporated under the laws of Ontario and its activities are conducted
solely within the Province of Ontario. The legislative jurisdiction of the
Province respecting the Act is founded upon s. 92(13) (property and
civil rights) and matters of a local or private nature within the Province
(s. 92(16), both of the Constitution Act, 1867).[34]
The position of
the respondents is that having regard to the recreational shooting activities
(the Handgun section and the Trap section, among other sections) of the
Association, the Firearms Act and Regulations enacted by the Federal
Parliament under its criminal law power pursuant to s. 91 of the Constitution
Act 1867 take the Association's activities or "undertaking"
outside the exclusive legislative authority of the Provinces.[35]
In order to
determine whether the Association is a federal work or undertaking within the
meaning of PIPEDA, an examination of the nature of the Association's
activities and undertaking is required. It is a given that the mere fact the
Association has been incorporated in the Province of Ontario and conducts its
activities and undertaking within the Province of Ontario is not
determinative of whether it is a federal work or undertaking within the
meaning of PIPEDA.[36]
The examination
of the Association's activities and undertaking indicates that it is not
outside the exclusive legislative authority of the Province of Ontario nor is
it a work or undertaking expressly enumerated in s.91 of the Constitution
Act. The question then becomes whether the pith and substance of the
activity and undertaking is a matter of property and civil rights and of
purely local concern. If this question is answered in the affirmative, it
does not come under the exercise of s.91 of the Constitution Act 1867
to enact criminal law, i.e. the Firearms Act, simply because the
recreational shooting aspects of the Association's activity and undertaking
is impacted by the Firearm's Act.[37]
In Barry's
Ltd. v. Fisherman, Food and Allied Workers Union [1993] N.J. No. 34
(NFLD. C.A.), (leave to appeal to S.C.C. dismissed), one of the issues was
whether the business operated by the appellant was subject to federal
legislation and regulations, specifically, the Fish Inspection Act.
The issue before the Court was whether the appellant's business of fishing
came within the definition of a federal undertaking under the Canada
Labour Code. In this regard, the case is pertinent because the definition
of federal work or undertaking in the Canada Labour Code is similar in
substance to the same definition contained in PIPEDA: "a work,
undertaking or business outside the exclusive legislative authority of the
legislation of the Province".[38]
In the course of
its reasons, the court observed that the Federal Parliament had authority to
legislate with respect to the regulation of trade and commerce and there was
no doubt that the Federal Parliament had authority to enact the Fish
Inspection Act. However, the court further observed that such authority
did not make a company engaged in trade and commerce and bound by some
federal enactment in relation thereto a federal work or undertaking.[39]
The court gives
an example of this principle in noting that s.7 of the Federal Food and
Drugs Act provides that no person shall manufacture, prepare, preserve,
package or store for sale any food under unsanitary conditions. The court
concludes that this provision does not constitute every corner grocery store
a federal work or undertaking within the meaning of the Canada Labour Code.[40]
I find this
reasoning to be apt in the present circumstances. The fact that the Criminal Code of
Canada applies to every aspect of personal, institutional or corporate
activity in Canada does not thereby constitute in law those activities as
federal works or undertakings.[41]
Despite my
finding that the Association is not a federal work or undertaking contrary to
the joint submission of the parties, I turn to the question of whether the
personal information that the Association collects, uses or discloses was
done in the course of commercial activities.[42]
Rodgers submits that the court is
entitled to give significant weight to the interpretation of PIPEDA by the
office of the Privacy Commissioner of Canada, being the administrative agency
under PIPEDA: see Nowegegijick v. R. [1983], 1 S.C.R 29 at p.37.
Counsel cites various dicta from the website of the Privacy Commissioner. The
pertinent parts of such dicta are as follows:Whether or not
an organization operates on a non-profit basis is not conclusive in
determining the application of [PIPEDA]. The term non-profit or
not-for-profit is a technical term that is not found in PIPEDA. The bottom
line is that non-profit status does not automatically exempt an organization
from the application of [PIPEDA].Most non-profits
are not subject to [PIPEDA] because they do not engage in commercial
activities. This is typically the case with most charities, minor hockey
associations, clubs, community groups and advocacy organizations. Collecting
membership fees, organizing club activities, compiling a list of members'
names and addresses and mailing out newsletters are not considered commercial
activities. Similarly, fundraising is not a commercial activity. However,
some clubs, for example, many golf clubs and athletic clubs, may be engaged
in commercial activities which are subject to [PIPEDA].As the
definition of commercial activity makes clear, selling, bartering or leasing
a membership list or list of donors would be considered a commercial
activity.[43]
It is not in
issue that the Association, at the time of the applicant's request for the
membership list, was not selling, bartering or leasing its membership list or
list of donors. The record establishes the following facts about the
Association, its activities and undertaking.(1)
Its charter objects are "to promote and maintain safe
recreational shooting and to promote and maintain sportsmanship, fellowship
and conservation."(2)
It is carried on without the object of gain for the members;(3)
There is no profit margin in the membership fees nor is there an
objective to make a profit but rather to meet expenses.(4)
It has no employees, volunteers perform necessary services with the
exception of the recording secretary (minutes of meetings) the monthly
bookkeeping service and ground maintenance personnel, who receive a small
honorarium.(5)
The general public does not have access to the Association's
facilities in the ordinary course; when there are competitions, non-members
must pay entrance fees.[44]
The question
remains whether the activities and undertaking are commercial activities
within the meaning of PIPEDA.[45]
Section 2(1)
defines commercial activity as:Any
transaction, act or conduct or any regular course of conduct that is of a
commercial character, including the selling, bartering of donor membership or
fundraising lists.[46]
As noted above,
there is no evidence to support a finding that the Association was
"selling, bartering or leasing its 'donor, membership or other
fundraising lists'." The question then becomes whether producing a
membership list under s.307 of the Act, is of a commercial character
so as to come within the s. 2(1) definition of commercial activity.[47]
Rodgers submits
that in interpreting the words "commercial activity" in the
statutory definition, the court should apply the preponderant purpose test,
set out in Ontario (R.A.C.) v. Caisse Populaire de Hearst Ltee., [1983] 1 S.C.R. 57.
The test simply stated is that if, upon analysis, the preponderant purpose of
the activity is the making of a profit, then the activity may be classified
as a business. However, if there is another preponderant purpose to which any
profit earned is merely incidental, then it will not be classified as a
business.[48]
The respondents
contend, however, that since the primary purpose of PIPEDA is to protect
personal information, the term "commercial activity" should be
interpreted primarily as it relates to "the collection, use or disclosure"
of personal information rather than as it relates to the Association
engaged in the "collection, use or disclosure". Counsel submits
that if the collection of personal information in a membership list arises in
a transaction that is of a non-commercial character, but the use or
disclosure of that personal information is in a transaction or act that is of
a commercial character then the personal information is entitled to the
protection of PIPEDA. Counsel further submits that if the collection of the
personal information arose in a transaction that is of a commercial
character, then that personal information is entitled to the protection of
PIPEDA regardless of whether disclosure itself was in the course of
commercial activity. In sum, the Association submits that the collection of
personal information in making up the membership lists was in the context of
a "commercial activity".[49]
Counsel argues
as follows:(1)
The personal information that the applicant seeks to obtain from the
Association's list of members was collected by the Association in the course
of the membership transaction.(2)
The membership transaction involves the member submitting among other
information his or her name, address and phone number, together with the
prescribed membership fee.(3)
In return, the member is entitled to receive the services and benefits
that members of the Association enjoy.(4)
That exchange of consideration is a transaction that is clearly
commercial in character.[50]
I deal first
with the preponderant purpose submissions. I am persuaded that the question
of whether any organization is a business for purposes of taxation under the Assessment
Act is not determinative or applicable to the interpretation of the term
"commercial activity" under PIPEDA, having regard to the different
objectives of the two statutes. However, I am not persuaded that the
interpretation submitted by the Association as to the breadth of the words
commercial activity as defined in PIPEDA is apt.[51]
The
"exchange of consideration" involved in supplying personal
information and a prescribed membership fee in exchange for the services and
benefits of membership in the Association may constitute consideration under
the law of contract. However, consideration in contract does not in itself
lead to the finding of commercial activity in the PIPEDA context. In my view,
there must be something more than a mere "exchange of consideration",
as described by counsel, to be within the definition of "commercial
activity".[52]
Counsel for the
Association has in his written submissions referred to a dictionary
definition of the words "commerce" and "commercial", in
aid of interpreting the meaning of the phrase "commercial
activity".[53]
In that
dictionary, the word "commerce" is defined as:exchange
between men of the products of nature and art; buying and selling together;
exchange of merchandise...
The
word "commercial" is defined as:engaged in
commerce; trading; of or relating to commerce or trade.(See
Shorter Oxford English Dictionary page 349 - Appendix B.)[54]
The same words
are defined in the Oxford English Reference Dictionary, Oxford University
Press, Second Edition, 1996, as follows:"commerce":
financial transactions, especially the buying and selling of merchandise, on
a large scale;"commercial":
of, engaged in or concerned with commerce; having profit as a primary aim
rather than artistic, etc. value.(See
page 290).The difficulty in
dictionary definitions can be readily seen by the absence of the word or
notion of profit or gain in the source quoted by counsel for the Association
and the presence of the notion of profit or gain in the definition found in
the Oxford Reference Dictionary.[55]
Although the
dictionary definitions assist somewhat in interpreting the term
"commercial activity" in s. 2(1) of PIPEDA, I rely more heavily on
the interpretation from the Privacy Commissioner's website noted above
wherein it is stated that "collecting membership fees, organizing club
activities, compiling a list of members' names and addresses and mailing out
newsletters are not considered commercial activities."[56]
On the record
before me, it is not feasible to set out criteria or facts as to what
constitutes a commercial activity for a not-for-profit organization. I am
nonetheless persuaded there is nothing in the record that indicates that the
activities of the Association at large and the production of the membership
list in particular in this case would be considered a commercial activity for
purposes of PIPEDA. In light of these findings I do not find it necessary to
address to address the contention of the Association that the words
"required by law" in s.7(3)(i) of PIPEDA do not apply to s.307 of
the Corporation's Act but only to case law. In similar fashion I find
it unnecessary to give effect to concerns expressed on behalf of the
Association that if the list of members were to get into "the wrong
hands" it could result in dangerous consequences since the members own
firearms and ammunition. The applicant in receiving the membership list for
the Association is governed by the provisions restricting the use to which
the membership list can be put and will be subject to the sanctions contained
in the Act for any non-compliance with those restrictions.Disposition
[57]
An order shall
go directing the Association through its proper officers to produce and
deliver forthwith to the applicant a list of the members of the Association
in accordance with the provisions of s.307 of the Act.
Costs
[58]
The motion
raises a novel point of law. Both parties through their counsel have
attempted to address the issues and have done so in a thorough manner. In the
circumstances, I am of the view that each party should bear his/their own
costs.___________________________
MacKENZIE J.
Released: September 8, 2004
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