The Pickwick (Privacy) Papers: A Case Comment on Rodgers v. Calvert and the meaning of "commercial activity" under the Personal Information Protection and Electronic Documents Act

© 2004, Deeth Williams Wall LLP. All Rights Reserved. By: Jason Young, Student at Law (September 28, 2004)

In The Pickwick Papers, a 19^th Century account of the comical adventures of a hunt and game association, Charles Dickens ends his fiction with the happy dissolution of the club "to the satisfaction of all members." The case of Rodgers v. Calvert (8 September 2004), 03-BN-6556 (On. Sup. Ct.) involving the disposition of the modern day Peel County Game and Fish club, illustrates that not all such endings are happy ones.

Founded in the 1940's near Brampton, Ontario, by a group of farmers to raise game birds and for recreational shooting, the Peel club is comprised of five independent activity groups, the material ones being the Handgun section and the Trap section. The applicant Rodgers became concerned that the respondents, a group of members affiliated with the Trap section, were preferring the interests of the Handgun section over other sections, including the Trap section. Wishing to communicate his concerns to the general membership, he made several requests of the respondents for the club's membership list.

The respondents refused to provide the list on the grounds that the request failed to meet the requirements under s. 306 or s. 307 of the Corporations Act (Ontario) and that, even if it did, these sections were trumped by the provisions of the Personal Information and Electronic Documents Act ("PIPEDA" or "the Act").

Section 307 requires a corporation to furnish a list of all shareholders or members upon the filing of an affidavit, by any person, provided that the information is sought for a purpose connected with corporation and will only be used for that purpose. The prescribed form of this affidavit is found at s. 306.

Although Rodgers filed the prescribed affidavit, the respondents contended that there was no evidence that he intended to use the information for a proper purpose and that in the absence of any ability to verify his claims, the respondents had a fiduciary obligation to protect the safety and privacy of the club's members and deny the request. The Court rejected this argument, stating that such a restrictive reading of the provision ran "counter to the principle of democracy inherent in shareholders' rights" and that although there may be situations in which such concerns might be valid, this was not one of them. The club had signed relocation papers with the City of Brampton; it was clear that it intended to dispose of its real property in favour of new arrangements and that the applicant had a justifiable reason to address the membership on this question.

MacKenzie J. nevertheless found that the permitted disclosure under the Corporations Act engaged the issue whether PIPEDA operated to disentitle it. As a preliminary matter this seems an odd conclusion, as s. 7(3)(i) of PIPEDA clearly permits disclosures required by law, including provincial or even foreign laws.

PIPEDA has come into force in stages. As of the date of the application, the Act applied to every organization in respect of personal information that the organization collected, used or disclosed in the course of commercial activities across provincial or national borders; it also applied to employee information of federal works, undertakings and businesses.

The Peel club had no employees, as the day-to-day administration of the club was conducted by volunteers. Further, MacKenzie J. rejected a joint submission by the parties that the club must be a federal work or undertaking, because the primary activity of the club was shooting, and subject to the federal regulations.

The only head under which the Peel club could fall was under s. 4(1)(a), involving the collection, use and disclosure of personal information in the course of commercial activities across provincial or national borders. Despite the fact that the club did not transact personal information across provincial or national borders at all, the Court chose to engage in an analysis of the meaning of "commercial activity", the first court in Canada to do so.

Section 2(1) of PIPEDA 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." Most non-profits are not subject to PIPEDA, not because they are classed as such, but because most non-profits do not engage in commercial activities per se. A non-profit organization that did engage in commercial activities, such as a golf or athletic club, could come under the purview of the federal privacy law to the extent that it did so. However, the Privacy Commissioner has stated that the collection of membership fees, organizing club activities, compiling lists of members' names and addresses and mailing out newsletters are not considered commercial activities.

There was no question that the Peel club was non-profit in nature. It was run by volunteers without the object of profit or benefit to any particular member and the general public did not have access to the Association's facilities in the ordinary course. The question was whether the activity under scrutiny: the compilation and production of the membership list, was itself a commercial activity.

The applicant submitted that the Court should adopt a "preponderant purpose" test. Under this test, if the preponderant purpose of the activity is profit-making, then the activity may be classed as a commercial in nature; however if its preponderant purpose is such that any profit earned is incidental, then it will not be classed as commercial. The respondents argued that joining the club involved a transaction of personal information and a prescribed membership fee in exchange for certain benefits and services and that the nature of this exchange of consideration was clearly commercial and therefore subject to PIPEDA.

The Court rejected both arguments. MacKenzie J. found that "there must be something more than a mere "exchange of consideration'" to characterize a transaction as commercial, otherwise the test would be meaningless". He also rejected the preponderant purpose test and, instead, adopted a narrow, fact-specific interpretation.

So what is the test for assessing commercial activity? The decision leaves more questions than it resolves. There must be more than a mere exchange of consideration, but the exchange may be incidental to another purpose. The Court has not closed the door on a test which recognizes that not all commercial activities will be profit-making. A proper consideration of whether the activity of an organization is commercial in nature must include a contextual analysis of the commercial activity at two levels.

First, if the purpose of the organization is preponderantly commercial in nature, then even its ostensibly non-profit activities may be commercial in nature. For example, a loyalty card program involves no exchange of consideration and yet the information collected as a function of such a program is clearly for an organization's commercial purpose. Conversely, if profit-making is merely incidental to the organization's preponderant purpose, then even an activity which involves an exchange of consideration might not be commercial. This is consistent with the conclusion of the Privacy Commissioner that the collecting of membership fees, organizing club activities, compiling lists of members' names and addresses and mailing out newsletters should not be considered commercial by nature because they are for an organizational purpose which is not commercial. The threshold for determining commerciality of a specific activity will likely be lower for organizations whose preponderant purpose is commercial in character and higher for those whose profit-making is incidental to the preponderant purpose.

Reprinted by permission of LexisNexis Canada Inc., from Canadian Privacy Law Review, edited by Michael Geist, Copyright 2004.

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