Q.B. A.D. 1997 No. 929 J.C. S. IN THE QUEEN’S BENCH JUDICIAL CENTRE OF SASKATOON BETWEEN: ROYAL BANK OF CANADA PLAINTIFF (DEFENDANT BY COUNTER-CLAIM) and RONALD COMPAIN DEFENDANT (PLAINTIFF BY COUNTER-CLAIM) G.A. Richards for the Royal Bank of Canada G.M. Currie for Ronald Compain JUDGMENT ZARZECZNY J. March 29, 1999 [1] In January of 1993 Ronald Compain ("Mr. Compain") sustained severe injuries in an automobile accident. As result of these injuries he was unable to work in the construction industry where he was employed prior to the accident. Although his wife Jayne continued to work during his period of disability, Mr. Compain's inability to work resulted in reduction of the family's income, particularly after Saskatchewan Government Insurance ("SGI") weekly disability benefits were exhausted. [2] The Compain's banked with the plaintiff, Royal Bank of Canada ("Royal Bank"), and at the time of the accident the Compain's were indebted to the Royal Bank under Royal Bank Credit Line and Visa credit card account (the "Bank Loans"). [3] Mr. and Mrs. Compain had other debts and while Mr. Compain was receiving the proceeds of SGI weekly disability benefits they maintained their various loans including the Bank Loans in good standing. After the weekly SGI disability benefits were terminated, the Bank Loans fell into default. The Royal Bank reported the particulars of these loan defaults to Equifax Canada ("Equifax"), credit reporting agency. [4] As result of negotiations between the solicitors for the Royal Bank and the Compains, the Royal Bank agreed to defer commencement of any action with respect to the defaulted Bank Loans until such time as Mr. Compain received an accident injury settlement from SGI. The Royal Bank requested a written assignment of those settlement proceeds, however, Mr. Compain declined to give an assignment. [5] Mr. Compain received his settlement. He had in the meantime, however, become aware of the Equifax credit report and through his solicitor insisted that the Royal Bank direct Equifax to eliminate any references to Mr. Compain's default or delinquency upon the Bank Loans. The Royal Bank replied that the were unable to direct Equifax to do so, however, they were in a position to require Equifax to put an explanatory note on their credit report confirming that the arrears and default were generated as a result of Mr. Compain's automobile accident, that he had undertaken to pay the Royal Bank from the proceeds of the accident settlement and once the loans were paid out that Mr. Compain had complied with his undertaking to the Royal Bank and settled his debt. [6] This was not acceptable to Mr. Compain with the result that he refused to pay his loans. The Royal Bank commenced this legal action for payment. The Compain's defended and counter-claimed against the Royal Bank for breach of the bank's duty of good faith, duty of confidentiality and by an amendment application made at trial, and allowed by this judgment, breach of contract. [7] At trial the Royal Bank's claim was admitted leaving to be tried the matter of the Compain's counter-claim against the Royal Bank for general, punitive, exemplary and aggravated damages. ISSUES 1. Did the Royal Bank of Canada breach its lending contract, its fiduciary duty or its duty of confidentiality to Ronald Compain? 2. If the Royal Bank of Canada is found liable for a breach of contract, fiduciary duty or duty of confidentiality what damages, if any, are appropriately awarded against the Royal Bank in favour of Mr. Compain? [8] Counsel for Mr. Compain asserted that it was breach of the Royal Bank's duty of confidentiality to Mr. Compain for it to have released to Equifax the information that it did. [9] It has been generally accepted that the contract between bank and its customer includes an implied term prohibiting the bank from disclosing information concerning the customer's financial affairs. (See: Canadian Imperial Bank of Commerce v. Sayani, 1993 CanLII 937 (BC CA), [1994] W.W.R. 260 (B.C.C.A.); Murano v. Bank of Montreal (1995), 1995 CanLII 7410 (ON SC), 31 C.B.R. (3d) (Ont. C.J.), affm. (1998), 1998 CanLII 5633 (ON CA), 163 D.L.R. (4th) 21 (Ont. C.A.)) These cases and cases similar adopt and follow the principles outlined by the English Court of Appeal in the case of Tournier v. National Provincial Union Bank (1921) K.B. 461 (C.A.) wherein Bankes L.J. at p. 473 enumerated four exceptions to the confidentiality obligation of the bank to its customers, namely: (a) Where disclosure is under compulsion by law; (b) Where there is duty to the public to disclose; (c) Where the interests of the bank require disclosure; (d) Where the disclosure is made by the express or implied consent of the customer. [Emphasis added] [10] During the cross-examination of Mr. Compain at trial, counsel for the Royal Bank produced the personal credit line agreement signed by both Mr. and Mrs. Compain May 30, 1990, when they applied for the credit line. Paragraph of that agreement under the heading CREDIT INFORMATION provides as follows: CREDIT INFORMATION: authorize and consent to the receipt and exchange of credit information about me by you from time to time, including the sharing and exchange of credit information about me with any credit reporting agency and credit bureau or any person or corporation with whom have or may have financial relations. [11] Although there was some argument as to whether or not this or some other credit agreement formed the basis for the credit and loan presently sued upon, no other credit agreement was produced by either party to suggest that an agreement other than the one referred to and marked as Exhibit P-3 existed. [12] have concluded that it was this credit line agreement which formed the basis of the agreement between Mr. and Mrs. Compain and the Royal Bank. Paragraph of the clause quoted clearly meets the "express or implied consent of the customer" enumerated exception in the Tournier case (whose principles were adopted in Canada in the CIBC and Murano cases). [13] I conclude that Mr. Compain expressly waived any contractual rights which he impliedly had to confidentiality of his credit information. By the provisions of paragraph 8 of the Personal Credit Line Agreement he authorized the Royal Bank to release to Equifax the information which it did. This part of Mr. Compain's claim against the Royal Bank is dismissed. [14] In the alternative, Mr. Compain claims that even if the Royal Bank was authorized to release credit information to Equifax nevertheless the information as it was reported by the Royal Bank to Equifax and as it was subsequently reported by Equifax in its credit report breached the Royal Bank's contractual or otherwise legal duty to him of fairness and/or good faith. These arguments were based upon the principles established by the cases of Warrington v. Great-West Life Assurance Co., 1995 CanLII 16126 (BC SC), [1995] W.W.R. 428 (B.C.S.C.); Frederikson v. I.C.B.C., 1990 CanLII 3814 (BC SC), [1990] W.W.R. 637 (B.C.S.C.); Shea v. Manitoba Public Insurance Corp. (1991), 1991 CanLII 616 (BC SC), 55 B.C.L.R. (2d) 15 (B.C.S.C.); Adams v. Confederation Life Insurance Co., 1994 CanLII 9244 (AB QB), [1994] W.W.R. 662 (Alta Q.B.); and Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (SCC), [1997] S.C.R. 701. [15] The bulk of these cases deal with the issue of implied or express contractual or fiduciary obligations of insurance companies to their insureds (excepting for the Wallace case which deals with the question of an employer's obligation to an employee in the context of dismissal). Nevertheless, counsel argued that the principles established by these cases applied, by analogy, to the relationship between bank and its borrowing customer. [16] am not satisfied that the analogy is complete or indeed even appropriate as suggested by counsel for Mr. Compain. Assuming, without deciding the point, that banks, much like an insurance company dealing with insureds, do have a duty of good faith and fair dealing towards their customers, I nevertheless conclude, based upon the facts and evidence proven at trial, that the Royal Bank did not breach such duties in their dealings with Mr. Compain. [17] Counsel for Mr. Compain argues that the Royal Bank did not act fairly or in good faith by reporting to Equifax his default or delinquency upon the two loans in all of the circumstances. He argues that the Royal Bank was well aware of his inability to work as result of his accident injuries and his undertaking to pay the loans in full from the accident proceeds. In these circumstances for the Royal Bank to report his default and delinquencies to credit reporting agency constituted bad faith and lack of fair dealing. [18] The Royal Bank argues in reply that all that it did was report an objective state of facts and circumstances to Equifax, namely; that Mr. Compain was in default of his payment obligations on these two loans. As result, in banking terms, the two loans were delinquent. At no time during the discussions between counsel for the Royal Bank and Mr. Compain (nor in any of the exchange of correspondence between them) did the Royal Bank undertake not to make any or its regular reports to Equifax with respect to Mr. Compain nor was such an undertaking ever requested on his behalf. Indeed, there was no suggestion that Mr. Compain was even aware of these reports until at or about the time that he received or expected to receive the accident settlement proceeds. have concluded from all of these facts and circumstances that the Royal Bank did not act in bad faith or in breach of its fiduciary or contractual obligation towards Mr. Compain in making the reports which it did to Equifax. [19] Mr. Compain specifically authorized the Royal Bank to provide credit agencies information with respect to his accounts. That is exactly what the Royal Bank did in this case. The Royal Bank's good faith and fair dealing with Mr. Compain is evidenced by the Royal Bank's acceptance of Mr. Compain's undertaking to pay the Royal Bank from the proceeds of his accident settlement even though the Royal Bank's reasonable request to provide written assignment of those proceeds was rejected by Mr. Compain. The Royal Bank agreed to forebear in its rights to commence legal action upon the loan defaults until such time as Mr. Compain settled his personal injury action. The action of the Royal Bank to enforce payment of these loans was only taken after (and precipitated by) the actions of Mr. Compain in refusing to pay the loans from his accident settlement proceeds except upon unilaterally imposed condition (that the Royal Bank direct Equifax to remove all reference to the loan defaults). This, Royal Bank indicated, it could not compel Equifax to do so. [20] As final gesture of its good faith and fairness the Royal Bank offered to direct Equifax to record certain explanatory comments upon Mr. Compain's credit report. These were proposed in letter sent by the Royal Bank's counsel to Mr. Compain's counsel dated April 24, 1997, (Exhibit P-6) stating as follows: As previously advised, our client is prepared, upon receipt of payment to advise the Credit Bureau/Equifax as follows: (a) That the loans are paid in full; (b) That Mr. Compain advises that his default occurred as result of serious car accident which he suffered and that as initially promised, he paid out the loans in full as soon as he received settlement proceeds from court action relating to his accident. Mr. Compain rejected this proposal. [21] It was further argued on behalf of Mr. Compain that the specific language used by Equifax in reporting upon these loans could be subject to improper interpretation. Since the Royal Bank was the source of the information it acted carelessly or in any event in breach of its duties including contractual, good faith and fair dealing in reporting the state of the loans to Equifax in the terms it did. [22] The credit report was filed as Exhibit D-8 and to illustrate the portions complained of it reports as follows: 603BB01124 Royal Bank (306)933-3635 last reported in 10/96 rating the open account as 09, meaning bad debt, collection account or unable to locate. Balance reported: $7888.... [23] Additional details are provided both in respect of this loan and the further loan containing the same comments ("R9, meaning bad debt, collection account or unable to locate") and latter comment in error that the credit line was to limit of $10,000.00 (the actual limit was $5,000.00). Mr. Compain complains that the alternate characterization of the defaults as "a bad debt, collection account or unable to locate" might reasonably lead anyone to the inference that he "skipped town" or otherwise was not good credit risk. [24] No evidence was tendered by the Royal Bank or indeed Mr. Compain to suggest how anyone might have or did read the Equifax credit report if indeed any person did so. [25] When Mr. Compain received his accident settlement he changed bankers and applied for and obtained Visa Gold credit card. He did have some difficulty obtaining second Visa credit card for new business he had established however, with the assistance of his new banker, he did obtain second card as well. There was no suggestion that in the course of either of these new and successful credit card applications any reference was made by his new bankers to the Equifax credit report or, if so, that they had any negative impact upon his credit rating. [26] When one considers carefully the Equifax reports it is clear that an account reported as "09" means alternately bad debt, collection account or unable to locate. One or more of these circumstances might be applicable in any case. The characterization of Mr. Compain's accounts as "collection accounts" is fair, reasonable and accurate in the circumstances. The accounts were in the hands of both the Royal Bank's internal collection department and referred to its external solicitors for collection. Numerous letters between the Royal Bank's solicitors and Mr. Compain's solicitors respecting these accounts, the default and proposals for payment were exchanged and introduced as exhibits at trial. [27] There was no evidence lead to suggest that the characterization of these loans, as they appeared in the Equifax reports, were out of the normal course of business. It is fair and reasonable inference to be drawn, from all of the facts and circumstances, that persons using and relying upon the Equifax statements would be familiar with the various codes and classifications used to generate the credit report. [28] find no facts or evidence upon which an allegation of breach by the Royal Bank of its contractual obligation, duty of good faith or fair dealings occurred with respect to the nature and manner of the loan reports it issued to Equifax and which were reflected in the Equifax credit report issued. [29] find that the Royal Bank acted fairly and reasonably throughout consistent with its obligations to Mr. Compain and its general banking practices including its report to Equifax as credit reporting agency. [30] In conclusion none of the counter-claimant's claims are upheld and they are dismissed in total. The plaintiff Royal Bank will have its costs against the defendant (plaintiff by counter-claim) both with respect to the claim and counter-claim which, unless agreed, shall be taxed (pursuant to column II of the Court of Queen's Bench tariff of costs). [31] As final comment it should be noted that consistent with the finding in this judgment that the Royal Bank has throughout acted in good faith and in keeping with its contractual and fiduciary obligations towards Mr. Compain it is expected that the Royal Bank will now proceed to request Equifax to place upon Mr. Compain's credit report as appropriate commentary in the spirit of that proposed in its counsel's letter to Mr. Compain's solicitors April 24, 1997.
In issue was whether the Bank breached its lending contract, its fiduciary duty or duty of confidentiality; and if so, what damages, if any, should be awarded. The defendant's bank loans fell into default after SGI disability benefits were terminated. The Bank reported the particulars of the loan defaults to a credit reporting agency (Equifax). The defendant declined to give an assignment of any accident injury settlement he might receive from SGI and requested the bank direct Equifax to eliminate any references to his default or delinquency upon the bank loans. The bank offered to put an explanatory note on their credit report confirming the arrears were the result of the defendant's automobile accident and that he had undertaken to pay the bank from the proceeds of the accident settlement. The bank commenced this action for payment. The Compains sought general, punitive, exemplary and aggravated damages in a counterclaim for breach of the bank's duty of good faith, duty of confidentiality and breach of contract. HELD: The counterclaims were dismissed with taxed costs to the bank for both the claim and counterclaims. The bank's claim was admitted at trial. 1)Compain expressly waived any contractual rights which he had to confidentiality of his credit information by the provisions of paragraph 8 of the Personal Credit Line Agreement. The principles outlined by the English Court of appeal in Tournier enumerated four exceptions to a bank's confidentiality obligation to its customers. 2)The analogy between the insurance cases and a bank and borrowing customer was not complete or appropriate. Assuming, without deciding, that banks do have a duty of good faith and fair dealing towards their customers, the bank did not breach such duties in their dealings in this case. 3)The characterization of the accounts as collection accounts was fair, reasonable and accurate in the circumstances and were not out of the normal course of business.