Teresa Scassa - Blog

Tuesday, 09 December 2014 09:00

Class Action Law Suits for Privacy Breaches in Canada: A Useful Tool in a Half-Full Toolbox?

Written by  Teresa Scassa
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Class action law suits for breach of privacy are becoming increasingly common in Canada. For example, the B.C. Supreme Court, the Ontario Superior Court, and Newfoundland and Labrador Supreme Court have all recently certified class action law suits in relation to alleged privacy breaches.

The use of the class action law suit can be a useful solution to some of the problems that plague the victims of privacy breaches. These difficulties include:

1) The lack of any other meaningful and effective recourse for a large scale privacy breach. Complaints regarding a large-scale privacy breach by a private sector corporation can be made to the Privacy Commissioner of Canada under the Personal Information Protection and Electronic Documents Act (PIPEDA) (or to his provincial counterparts in B.C., Quebec or Alberta, depending upon the nature of the corporation and its activities). However, the federal privacy commissioner can only investigate and issue a report with non-binding recommendations. He has no order-making powers. Further, there is no power to award damages. An individual who feels they have been harmed by a privacy breach must, after receiving the Commissioner’s report, make an application to Federal Court for compensation. Damage awards in Federal Court under PIPEDA have been very low, ranging from about $0 to $5000 (with a couple of outlier exceptions). This amount of damages will not likely compensate for the time and effort required to bring the legal action, let alone the harm from the privacy breach. Perhaps more importantly, a few thousand dollars may not be a significant deterrent for companies whose practices have led to the privacy breach. The Privacy Commissioner’s Office has called for reform of PIPEDA to include order making powers, and to give the Commissioner the authority to impose significant fines on companies whose conduct leads to significant privacy harms. Yet legislative reform in this area does not seem to be on the current government’s agenda.

2) The problem of establishing damages in privacy cases. It can be very difficult to establish damages in cases where privacy rights have been breached. For example, although a company’s data breach might affect tens or even hundreds of thousands of individuals, it may be very difficult for any of those individuals to show that the data breach has caused them any actual harm. Even if one or more of these individuals suffers identity theft, it may be impossible to link this back to that particular data breach. While all of the affected individuals may suffer some level of anxiety over the security of their personal information, it is hard to put a dollar value on this kind of anxiety – and courts have tended to take a rather conservative view in evaluating such harm. It simply might not be worth it for any individual to bring legal action in such circumstances – even if they were to succeed, their damages would likely not even come close to making the litigation worth their while.

3) The inaccessibility of justice on an individual scale. Frankly, the majority of Canadians are not in a financial position to take anyone to court for breach of privacy. (Those in province of Quebec might be slightly better off in this regard, as privacy rights are much clearer and better established in private law in that province than they are elsewhere in Canada). It should be noted that those few individuals who have sought damages in Federal Court for PIPEDA breaches have been self-represented – legal representation would simply be too costly given the stakes. A suit for the tort of invasion of privacy or for breach of a statutory privacy tort would be considerably more complex than an application for damages under PIPEDA. Damage awards in privacy cases are so low that litigation is not a realistic solution for most.

In this context it is not surprising that the class action law suit for breach of privacy is catching on in Canada. Such law suits allow large numbers of affected individuals to seek collective recourse. As mentioned earlier, the British Columbia Supreme Court recently certified a class action law suit against Facebook for breach of privacy rights protected under British Columbia’s Privacy Act. The claim in Douez v. Facebook, Inc. related to Facebook’s Sponsored Stories “product”. Advertisers who paid to make use of this product could use the names and likenesses of Facebook users in “sponsored stories” about their products or services. These “sponsored stories” would then be sent to the contacts of the person featured in the story. The court found that between September 9, 2012 and March 10, 2013, 1.8 million B.C. residents were featured in Sponsored Stories. The plaintiffs argued that this practice violated their privacy. Although the issues have not yet been litigated on their merits, the certification of the class action law suit allows the privacy claims to proceed on behalf of the significant number of affected individuals.

In Evans v. Bank of Nova Scotia, Justice Smith of the Ontario Superior Court of Justice certified a class action law suit against the Bank of Nova Scotia. In that case, an employee of the bank had, over almost a five year period, accessed highly confidential personal banking information of 643 customers. In June of 2012, the Bank notified these customers that there may have been unauthorized access to their banking information; 138 of these individuals later informed the bank that they were victims of identity theft or fraud. The bank employee subsequently admitted that he had channelled the banking information through his girlfriend to individuals who sought to use the information for illegal purposes. The lawsuit claims damages for invasion of privacy and negligence, among other things, and argues that the bank should be held vicariously liable for the actions of its employee.

Most recently, in Hynes v. Western Regional Integrated Health Authority, the Newfoundland and Labrador Supreme Court certified a class action law suit against the Health Authority after it was discovered that an employee had improperly accessed 1,043 medical records without authorization. The information accessed included name and address information, as well as information about diagnostic and medical procedures at the hospital. This case is an example of where it may be difficult to assess or quantify the harm suffered by the particular individuals as a result of the breach, as it is not known how the information may have been used. The plaintiffs argued that both the statutory privacy tort in Newfoundland and the common law tort of intrusion upon seclusion were applicable, and that the Health Authority should be held vicariously liable for the acts of its employee. The also argued that the Health Authority had been negligent in its care of their personal information. The court found that the arguments raised met the necessary threshold at the class action certification stage – the merits remain to be determined once the case ultimately proceeds to trial.

What these three cases demonstrate is that class action law suits may give individuals a useful recourse in cases where data breaches have exposed their personal information and perhaps left them vulnerable to identify theft or other privacy harms. Such law suits may also act as a real incentive for companies to take privacy protection seriously. The cost of defending a class action law suit, combined with the possibility of a very substantial damages award (or settlement), and the potential reputational harm from high profile litigation, all provide financial incentives to properly safeguard personal information.

This may be welcome news for those who are concerned about what seems to be a proliferation of data breaches. It should not, however, let the federal government off the hook in terms of strengthening Canada’s private sector data protection legislation and giving the Privacy Commissioner more effective tools to act in the public interest to protect privacy by ensuring compliance with the legislation.

 

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