Damages granted for privacy violations are on the rise 

publication 

November 2013

Privacy Bulletin

Last week, the Honourable Mr. Justice Phelan of the Federal Court awarded over $20,000 in damages following a privacy violation in Chitrakar v Bell TV, 2013 FC 1103.

On December 1, 2010, Chitraker, a first-time Bell Customer with no credit history with Bell ordered a satellite television service. The service was installed on December 31, 2010 at which time Chitraker was required to provide his signature on a Proof of Delivery Device. After the service was installed, Chitraker eventually ordered his credit report at which time he learned that Bell had accessed his credit history on December 1, 2010, without his consent. The type of credit check done by Bell was a "hard pull", and a concentration of a number of these "hard pulls" within a certain time frame may negatively affect an individual's credit score.

After Chitraker unsuccessfully contacted Bell on many occasions to obtain clarifications, he filed a complaint with the Office of the Privacy Commissioner of Canada ("OPC"). It appears that during the OPC's investigation, Bell could not locate any relevant records concerning this case, that it could not confirm the identity of the Bell customer service representative who took Chitraker's order, and that it could not confirm whether this representative had taken the privacy training that dealt with Bell's policies and procedures. The Privacy Commissioner found that Chitraker's complaint was well founded and Chitraker then applied to the Federal Court under s. 16 of the Personal Information Protection Electronic Documents Act ("PIPEDA"), seeking damages for a breach of privacy, aggravated damages for emotional pain, anguish, anxiety and humiliation, as well as punitive damages for Bell TV's malicious and high-handed conduct and negligence.

recent claims for privacy violations

A few recent other cases illustrate that while the awarding of damages is discretionary, the extent of the privacy invasion usually had to be quite important in order for damages to be granted by the Federal Court. In a couple of relatively recent cases, damages were claimed by employees following an illegal disclosure of their personal information which (potentially) led to their dismissal. While these claims originated from findings by the OPC confirming the illegality of the said disclosures, these claims in damages were nonetheless rejected by the Federal Court:

  • In Stevens v SNF Maritime Metal Inc., 2010 FC 1137 (CanLII) the application seeking damages was rejected for the main reason that: "To the extent (if any) that privacy is involved, it is minimal and the Applicant has put forward no other evidence of impact on his standing or community perception or similar features of a breach of privacy claim."

  • In Randall v Nubodys Fitness Centres, 2010 FC 681 (CanLII) the Federal Court articulated the view that "(...) an award of damages is not be made lightly. Such an award should only be made in the most egregious situations."

The "egregious" test dropped: Privacy damages more easily granted

According to the Federal Court in Chitrakar v Bell TV, Bell's conduct in this matter was reprehensible in respect to Chitraker's privacy rights and Bell violated Chitraker's privacy rights under PIPEDA (particularly Article 4.3) by conducting a credit check without his prior consent. In terms of the effect of this violation, the Court mentions that a "hard check" has adverse consequences as it may trigger the lowering of a person's credit score. The Court, on the issue of determining the amount of damages that should be granted following a violation of privacy rights, stated:

"[24] The fixing of damages for privacy rights' violations is a difficult matter absent evidence of direct loss. However, there is no reason to require that the violation be egregious before damages will be awarded. To do so would undermine the legislative intent of paragraph 16(c) which provides that damages be awarded for privacy violations including but not limited to damages for humiliation." (Our emphasis)

Interestingly, the Federal Court articulates the view that "Privacy rights are being more broadly recognized as important rights in an era where information on an individual is so readily available even without consent. It is important that violations of those rights be recognized as properly compensable." (par. 25) The Court mentions that in determining the amount of damages to grant in this case, it had to bear in mind factors such as meaningful compensation, deterrence and vindication (see Vancouver (City) v Ward, 2010 SCC 27, [2010] 2 SCR 28). Given that Chitraker had his rights violated in a real sense with potentially adverse consequences, that Bell is a large company for whom a small damages award would have little material impact, and that Chitraker spent a considerable period dealing with the Bell bureaucracy and in pursuing his claim, the Federal Court awarded damages of $10,000 and exemplary damages of $10,000 for Bell's conduct at the time of the breach of the privacy rights and thereafter.

This decision, read together with the May 2013 Privacy Commissioner of Canada Jennifer Stoddart's report "The Case for Reforming the Personal Information Protection and Electronic Documents Act" which outlines her proposals for modernizing PIPEDA by, amongst other things, providing the OPC with stronger enforcement powers, is sending a clear message that private-sector organizations should be taking data protection laws (such as PIPEDA) more seriously.

takeaways for businesses

The lessons to be learned from this decision are that businesses should:

  • ensure that privacy compliant business practices are in place. This means that they have to ensure that they are being transparent about the type of personal information that they may be collecting (especially if such collection practices may have adverse consequences such as triggering the lowering of a person's credit score), ensure that they have obtained the proper consent from customers and ensure that such consent are properly documented; 

  • invest in preventive measures such as conducting privacy training for their customer services staff which may have to deal with and respond to customer complaints. These employees should be trained to deal with customers' complaints promptly, responsively, and to document each exchange taking place with the complainant; and

  • take privacy complaints from customers seriously and participate in any OPC's investigation. As a matter of fact, this case indicates that the Federal Court will take into account the conduct of the business at the time of the violation of the privacy rights and thereafter, when deciding on whether to grant exemplary damages in such claims.

A breach of privacy may trigger damage to the reputation of a business, bad publicity, loss of trust or public confidence, loss of prestige as well as loss of future business. Chitrakar v Bell TV confirms that on top of these types of damages (as well as the hard costs of responding to a privacy breach), the business' financial exposure following a claim for damages in connection with a violation of privacy rights should also be taken into account, especially if damages granted by the courts in these types of matters are on the rise.

by Éloïse Gratton

a cautionary note


The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2013