Court Considers Application of PIPEDA to Non-Profit Club

The Ontario Superior Court has given charities and not-for-profit organizations some guidance on what would be considered a "commercial activity" for purposes of applying PIPEDA to the disclosure of personal information.

PIPEDA, the Personal Information Protection and Electronic Documents Act, regulates the collection, use and disclosure of personal information in the course of commercial activities by an organization falling under its jurisdiction. Given that charities and not-for-profits generally do not engage in commercial activities, defined in PIPEDA as "any transaction, act or conduct or any regular course of conduct that is of a commercial character," it is often assumed that PIPEDA would not for the most part apply to them.

The recent decision of the Ontario Superior Court in Rodgers v. Calvert provides some comfort for this view. The Respondent organization, the Peel County Game and Fish Protective Association (the "Association") sought to rely on PIPEDA to prevent the disclosure of its membership list. The Applicant, Graydon Rodgers, himself a member of the Association, had requested a copy of the membership list of the Association in order to communicate to other members his concerns regarding the Association's proposed sale and purchase of land.

Mr. Rodgers applied for the release of the list under s. 307 of the Corporations Act of Ontario, which does permit the disclosure of shareholder or member lists "for purposes connected with the …corporation." While the Association took the position that Rodger's request was not for purposes connected to the Association, Justice MacKenzie found that he had properly applied for the list under the requirements of s. 307.

The Court then considered whether the disclosure of the list was otherwise barred by PIPEDA. The Court began its analysis with a discussion of jurisdictional matters. Both the Applicant and the Respondent submitted that the Association, whose activities included recreational shooting, was a "federal work, undertaking or business" because it was regulated by the federal Firearms Act. The Court rejected this submission, explaining that the "pith and substance" of the activities of the Association are determinative, not the mere fact that the organization was bound by federal legislation.

PIPEDA may however apply to the Association if it was found to collect, use or disclose personal information (which included the names and addresses of its members) in the course of commercial activities. The Court cited (with implicit approval) a number of statements found on the website of the Privacy Commissioner regarding the applicability of PIPEDA to non-profits, in particular:

Whether or not an organization operates on a non-profit basis is not conclusive in determining the application of the Act. The term non-profit or not-for-profit is a technical term that is not found in PIPEDA. The bottom line is that non-profit status does not automatically exempt an organization from the application of the Act.

Most non-profits are not subject to the Act because they do not engage in commercial activities. This is typically the case with most charities, minor hockey associations, clubs, community groups and advocacy organizations. Collecting membership fees, organizing club activities, compiling a list of members' names and addresses, and mailing out newsletters are not considered commercial activities. Similarly, fundraising is not a commercial activity. However, some clubs, for example many golf clubs and athletic clubs, may be engaged in commercial activities which are subject to the Act. (See www.privcom.gc.ca/fs-fi/02_05_d_19_e.asp.)

The Association argued that its collection of personal information regarding its members was done in a commercial context - namely, the collection of a membership fee as consideration for the benefits provided to members.

Justice MacKenzie found, however, that while this exchange of consideration may constitute a legal contract, it is not necessarily commercial in nature. There must be more than a "mere exchange of consideration." Further, the Court reiterated the statement on the Privacy Commissioner's website that "collecting membership fees, … [and] compiling a list of members' names and addresses … are not considered commercial activities."

That said, the Court did not fully accept the argument of the Applicant. The decision rejects that the test of "commercial activity" is one of "preponderant purpose," that is:

… if … the preponderant purpose of the activity is the making of a profit, then the activity may be classified as a business. However, if there is another preponderant purpose to which any profit earned is merely incidental, then it will not be classified as a business.

Perhaps unfortunately, the Court did not articulate a set of criteria as to what would constitute a commercial activity of a not-for-profit organization, preferring to find that there was "nothing in the record" that would indicate that the Association's activities are commercial in nature or that the production of the membership list would be considered a commercial activity. Further, the Court declined to comment on whether the exemption from PIPEDA's restriction on disclosure because it was "required by law" would have applied in this case. It is possible that it would; had the Court found that the collection, use or disclosure of the personal information was in the course of a commercial activity, it may have permitted the disclosure because it was pursuant to s. 307 of the Corporations Act.

It is hoped that the courts will continue to flesh out the meaning of commercial activity in the context of non-profit and charitable organizations in the future in order to provide these organizations with certainty regarding the applicability of PIPEDA to their activities.

Result: The court decided in favour of Mr. Rodgers and ordered the disclosure of the list.

Rachel Blumenfeld practices charity and non-profit law and estates and trusts law with Miller Thomson LLP in Toronto. This article is reproduced with permission from Miller Thomson's Charity and Not-for-Profit Newsletter. A complimentary subscription can be obtained by sending an email to charitieseditor@millerthomson.ca.