The Ontario Superior Court of Justice recently approved a class action settlement involving a case that arose out of an insurer’s practice of conducting credit checks on claimants for accident benefits. The procedural history of the case is interesting and suggests a possible roadmap for other class proceedings. What is also interesting is the court’s statement that the limited powers of the Office of the Privacy Commissioner of Canada (OPC) are a reason why class actions are important tool for behavioural modification to encourage compliance with the Personal Information Protection and Electronic Documents Act (PIPEDA). Justice Glustein stated:
 Behavioural modification is a key objective of the Settlement Agreement. If systemic PIPEDA privacy breaches are not rectified by a class procedure, it is not clear what incentive large insurers and others will have to avoid overcollection of information. While the Privacy Commissioner may encourage or require changes to future practices, it has very limited powers to enforce compliance through strong regulatory penalties (see s. 28 of PIPEDA).Haikola v. The Personal Insurance Company, 2019 ONSC 5982 at para. 88
After a car accident, the plaintiff, Kalevi Haikola, made a claim for accident benefits from his insurer, the Personal Insurance Company. An adjuster from the Personal Insurance Company contacted Haikola and asked for his consent to conduct a credit check. Haikola agreed, allegedly fearing that refusing to permit the credit check might affect his claim. According to the court’s findings, Haikola repeatedly sought answers about why a credit check was necessary but did not obtain a satisfactory answer. So, Haikola complained to the OPC, who found that the Personal Insurance Company was using these credit checks as part of a fraud detection model. In PIPEDA Report of Findings #2017-003, the OPC determined that Haikola’s complaint was well-founded. The OPC concluded that the Personal Insurance Company was unable to justify the use of the credit score and had failed to obtain meaningful consent.
Although the Personal Insurance Company undertook to cease the practice of conducting credit checks, Haikola was not satisfied. Section 14 of the PIPEDA permits individuals to bring an application to Federal Court for a remedy once the OPC renders a decision with respect to an investigation. However, instead of bringing an individual claim, Haikola sought to use section 14 to bring a class action against the Personal Insurance Company. The Personal Insurance Company argued that section 14 could not be used in this way and took the position that the Federal Court could not certify a class action.
Haikola and the Personal Insurance Company entered into settlement discussions and, after a mediation, agreed to a settlement in which the Personal Insurance Company would pay an amount of $2,250,000. After taking into account proposed class action counsel fees, the court estimated that the value of the settlement for each affected individual would range between $150 – $180 depending on the take-up by class members.
As part of the settlement Haikola agreed to discontinue the proceeding in Federal Court and commence a class proceeding before the Ontario Superior Court of Justice. This avoided the necessity of determining the jurisdictional question regarding whether the Federal Court could certify a class proceeding. Because the Ontario Superior Court of Justice does not have jurisdiction to hear an application under section 14 of PIPEDA, the answer was to plead the breach of an implied contractual term that the Personal Insurance Company would comply with PIPEDA. Having allegedly failed to do so, Haikola and the class would be entitled to at least a nominal damages award. But a nominal damages award can certainly add up when there are 8,525 affected individuals.
The Ontario court was very receptive to the use of class proceedings to enforce PIPEDA. It was debatable whether or not the claim of an implied term would have been successful had there been a trial. However, Justice Glustein noted that there were reasons why a class proceeding might be preferable than individual complaints to the OPC followed by individual Federal Court actions for a remedy.
Glustein J. found that the likely small damages award hardly justified class members jumping through the hurdles created by PIPEDA. As Haikola’s case itself showed, an individual had to launch a complaint, wait for the OPC to investigate, obtain a report of findings from the OPC and then go to the Federal Court. Indeed, it took the OPC a few months shy of 3 years to issue a final Report of Findings. (Yes, you read that correctly – nearly 3 years! – even though s. 13(1) PIPEDA says that the Commissioner must issue a Report of Findings in 1 year.)
Even with a successful report of findings, the individual would then have to start all over again in Federal Court. As Glustein J. noted, the Federal Court would then conduct a hearing de novo, meaning that the complainant would have to convince the court that the OPC was correct and there was a violation of PIPEDA – all for a small damage award.
The whole set up of PIPEDA was not, in the court’s judgment, designed to achieve individual remedies for systemic breaches.
Look for more cases in which plaintiffs claim breaches of an implied term to comply with PIPEDA in order to avoid the OPC complaints and section 14 process under PIPEDA.