Want to stay current on e–commerce law? Sign up for Email Newsletter.
Ontario Superior Court Examines Organization and Commercial Activities under PIPEDA
Recently, the Ontario Superior Court of Justice was called upon to determine the applicability of the Personal Information Protection and Electronic Documents Act ("PIPEDA) in the context of private incorporated non-profit entities. In particular, the decision of the Honourable Justice MacKenzie in Rodgers v. Calvert helps to bring greater clarity to the terms "federal work, undertaking or business" and "commercial activity" contained in PIPEDA.
Graydon Rodgers, the applicant, was a member of a private sports Association comprising two material sections: the trap section, to which Rodgers belonged, and the handgun section. Members of the Association's handgun section proposed to sell Association lands and premises and to purchase replacements. Rodgers was concerned that the rest of the Association's activities were being neglected in the repurchase process and sought a complete list of the members in order to communicate to them his concerns about the suitability of the proposed replacement lands and premises.
Despite his making informal and formal applications to the Association in 2002, it refused to provide Rodgers with a list. The Association relied on his alleged failure to satisfy sections 306 or 307 of the Ontario Corporations Act as well on PIPEDA to refuse his request. The Association stated that it as "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 individual members".
The two issues for the court were whether Rodgers was entitled under the Corporations Act to production of the membership list and then whether PIPEDA operated to negative Rodgers' request.
The court accepted Rodgers' submissions on his right to production of the Association's membership list under the Corporations Act. However, Rodgers' right to the production of the membership then engaged the issue of whether PIPEDA subsequently disentitled him to those rights under the relevant section of the Corporations Act. Justice MacKenzie determined that, when Rodgers made his request in 2002, section 4(1)(a) PIPEDA was the guiding provision in Ontario. That section reads: "This Part applies to every organization in respect of personal information that the organization collects, uses or discloses in the course of commercial activities".
Confirming that PIPEDA applied to all organizations, which includes associations, Justice MacKenzie then focused on whether the Association was a "federal work, undertaking or a business". According to the court, the mere facts of incorporation and the pursuit of corporate activities in Ontario were not determinative of whether the Association was a "federal work" or "undertaking" for the purposes of PIPEDA.
To determine whether the Association was "a federal work or undertaking" within PIPEDA required "an examination of the nature of the Association's activities and undertaking". An examination of the facts in this case did not indicate that the Association was outside the exclusive legislative authority of the Province of Ontario and nor was it work or undertaking referred to in key constitutional legislation - namely section 91 of the Constitution Act.
If, in Justice MacKenzie's words, the "pith and substance of the activity and undertaking is a matter of property and civil rights and of purely local concern" then it did not amount to a federal work or undertaking merely because the recreational shooting aspects of the Association's activity and undertaking were impacted by federal criminal legislation. Justice MacKenzie agreed with other decisions under substantially similar provisions of the Canada Labour Code which held that Parliament's legislative authority did not render companies active in an area bound by some federal statute related thereto a "federal work or undertaking".
Justice MacKenzie next went on to consider the meaning of "commercial activities" under PIPEDA. PIPEDA defines commercial activity in section 2(1) as: "any particular transaction, act or conduct or any regular course of conduct that is of a commercial character, including the selling, bartering or leasing of donor, membership or other fundraising lists". As a matter of fact, the court established that the Association carried on no business activity, had no employees, relied on volunteers and did not carry on any activities for the object of gain. But did the production of a list for the purposes of the Ontario Corporations Act, involving the Association's collection, use and disclosure of personal information, bring its activities within the scope of "commercial activities" regulated by PIPEDA?
In deciding the answer to this question, Justice MacKenzie dismissed the applicability of a preponderant purpose test to the Association's activities - confining that test's application to taxation law. Additionally, "there must be something more than the mere exchange of consideration" for an activity to come within the definition of "commercial activity".
In clarifying the term "commercial activity", Justice MacKenzie preferred the Privacy Commissioner of Canada's Website interpretation because the Privacy Commissioner was the administrative agency under PIPEDA. According to that Website, the "collecting membership fees, organizing club activities, compiling a list of members' contact details and addresses and the mailing out [of] newsletters are not considered commercial activities".
According to Justice MacKenzie, in assessing whether an organization's activity is a "commercial activity", regard to an organization's non-profit operations is not conclusive for PIPEDA purposes. Further, a non-profit status does not automatically exempt organizations from being commercially active and subject to PIPEDA. Justice Mackenzie did not find it feasible for future purposes to set out criteria as to what constituted a commercial activity but found no indications of such in Rodgers. In the result, the Association was ordered by the court to produce and deliver forthwith a list of Association members to Mr. Rodgers in compliance with the Ontario Corporations Act.
For a copy of the decision, visit: