This article originally appeared in the National Insolvency Review. This piece was co-authored by Emma Kenley, a partner at Gowling WLG specializing in commercial law, restructuring, insolvency and business banking matters.
Congratulations! You or your client has just been appointed as trustee in bankruptcy or receiver of a medical practice. There are no unpaid source deductions, no unpaid wage or vacation claims, and no environmental hazards that could be subject to priorities under the Environmental Protection Act. In short, there appear to be no priorities that could erode recoveries to secured and unsecured creditors. It seems like a fairly straightforward mandate — liquidate the assets, get approval for professional fees and distribute the realizations to creditors. It might even be the sort of mandate done on a fixed-fee basis. But beware of what may be lurking in the practice’s filing cabinets if you or your client is deemed to be a “health information custodian.”
Introduced in November of 2004, the Personal Health Information Protection Act (PHIPA) was established to safeguard the personal health information of patients in Ontario. The PHIPA places responsibilities on “health information custodians” (HIC) — who have custody or control over the personal health information of patients of “registered health professionals” (such as doctors, physiotherapists, chiropractors, massage therapists, acupuncturists, pharmacies, medical laboratories, etc.) — to, among other things, retain, transfer or dispose of health records in a secure manner. The definition of an HIC in the PHIPA is broad and includes not only individual practitioners but also group practices, such as medical clinics.
But what happens when the clinic becomes insolvent and a trustee in bankruptcy or receiver is appointed? Does the trustee or receiver become an HIC and, therefore, responsible for complying with the duties prescribed by the PHIPA?
This is precisely the issue that arose for A. Farber & Partners Inc. (Farber or the Trustee) last year when it was appointed as trustee in bankruptcy of 2081467 Ontario Inc., Vicpark Health Clinic Inc. and Viterna Health Centre Inc., three medical clinics operating out of four clinic locations in the Toronto area (collectively, the V Group). Following its appointment, Farber visited each of the four clinic locations. A desktop appraisal disclosed that there were a few thousand dollars of assets on the premises. Since all arrears had been paid, the obvious strategy would have been to take possession and sell the assets. However, during its review, Farber noted that there were dozens of filing cabinets of patient records for chiropractic, chiropody, naturopathy, acupuncture, physiotherapy and massage therapy services.
Recognizing that the costs of taking possession and dealing with the records would likely exceed any realization, Farber elected not to change the locks or otherwise take possession of any of the clinic locations, instead leaving the assets and the records in the possession of the landlords. In an effort to assist the landlords and deliver the records to the appropriate parties, Farber provided the landlords with contact information for the various registered health professionals. After the first meeting of creditors, the Trustee issued disclaimer of lease notices to the landlords.
One of the landlords contacted the Information and Privacy Commissioner of Ontario (IPC) asking for assistance in dealing with the records. The landlord specifically asserted that the costs to store and protect the records were prohibitive and retaining them could impact its ability to re-let the premises. The landlord’s concerns prompted the IPC to issue a notice of review (Notice), in which the IPC determined that there were reasonable grounds to believe that V Group, the Trustee, the landlords or directors and/or officers of V Group were HICs and either may have failed or be about to fail in ensuring that the records were (or are) retained, transferred, or disposed of in a secure manner, and protected against theft, loss and unauthorized use or disclosure in contravention of the PHIPA. In the Notice, the IPC asked that the respondents, including the Trustee, provide it with written submissions setting forth the steps each had taken to secure and protect the records.
In attempting to fix responsibility for the records on the Trustee, the IPC relied on Ontario Regulation 329/04, section 3(7)1, which provides:
“Every person who, as a result of the bankruptcy or insolvency of a health information custodian, obtains complete custody or control of records of personal health held by the health information custodian, is prescribed as the health information custodian with respect to those records.” (emphasis added)
In other words, Farber was in jeopardy of being deemed an HIC simply by virtue of its position as trustee of V Group’s estate if the IPC determined that it had complete custody and control of the records.
In its submissions to the IPC, Gowling WLG (Gowling), as counsel to Farber, took the following position:
- There is no basis in law upon which to foist care and control of the records upon the Trustee since the records were in the possession of the respective landlord of each premises. Farber did not occupy any of the premises nor did it take custody, possession or control of the records and accordingly, any responsibility for the records did not vest in the Trustee;
- the Notice is, in effect, an “action” within the meaning of section 215 of the Bankruptcy and Insolvency Act (BIA) and, as such, the IPC requires leave of the bankruptcy court (Court) in order to proceed against it outside the Court;2
- in the alternative, since the issues to be determined relate to, or arise from, the administration of the bankrupts’ estate, the IPC must bring an application in the Court pursuant to section 37 of the BIA;3 and,
- the BIA is federally enacted whereas the powers of the Commissioner are prescribed under the PHIPA, a provincially enacted statute. Accordingly, the Commissioner and the IPC are bound by the BIA.
As a result of these submissions, the IPC conducted its own due diligence, which included an inspection of certain clinics and the state of the records on site. Some weeks later, the IPC issued an interim order requiring one of the landlords to take specific steps to secure the records pending completion of the IPC’s review. In its decision, the IPC stated that Gowling’s submissions raise a constitutional question, which triggers section 109 of the Courts of Justice Act.4 The IPC made no determination as to the issuance of an order against the Trustee but rather stated that Farber may raise the issue with proper notice.5
Ultimately, the personal health information was either retrieved by the registered health professionals who had provided the services (i.e. the individual chiropractors, etc.), returned to the various colleges (Colleges) that regulate the registered health professionals (i.e. the College of Chiropractors, etc.) or, in the case of one location, retained by the landlord who agreed to comply with the responsibilities related to the records as an HIC. The IPC was satisfied that the records were secure, that individuals had been notified of the location of their records and that individuals were able to exercise their right of access. Accordingly, the IPC concluded its review and did not make any order against the landlords, Farber or the other parties.
Given that no final order was issued, the responsibilities of a trustee in bankruptcy of a medical practice remain unclear. We expect that had Farber taken possession of the premises of the four locations, the outcome would have been very different. If deemed an HIC, Farber could have attempted to provide the records to the appropriate registered health professionals or Colleges, or it could have incurred the costs to store the records itself. Returning the health-care records would have entailed sorting through them, contacting the various registered health professionals or Colleges and liaising with them to ensure the records were retrieved. This task would have been complicated by the fact that some patients had seen more than one type of practitioner, requiring certain records to be copied. On the other hand, keeping the records would have included paying for storage for the time period prescribed by each College, notifying patients as to where their records were stored and providing patients with continued access to their records. In either case, the costs would have been significant.
It should be noted that the PHIPA is not the only source to consider when assessing a trustee’s or receiver’s responsibilities with respect to the retention of records. The individual Colleges, which regulate registered health professionals, prescribe many of the responsibilities related to record retention, such as the period of time records must be retained. The practical implication of this is that an HIC responsible for chiropractic records, for example, must also be aware of the Standards of Professional Practice for Chiropractors in order to comply with the storage requirements for chiropractic records. If a clinic has chiropractic, massage therapist and acupuncturist patients, then the HIC for those records must comply not only with the PHIPA, but also the record requirements for all three Colleges.
In summary, there are inherent risks, which may not be readily apparent, that could result in substantial and unexpected costs to the bankrupt estate or to the receiver where health-care records are involved. Trustees, receivers and their counsel should take special care and consider the dangers associated with being deemed an HIC under the PHIPA before taking possession of a clinic or other health practice where medical records remain on-site.
Rob Stelzer is a Managing Director with the Restructuring practice of Farber. His practice focuses on acting as a Proposal Trustee, Receiver, and Trustee for distressed businesses undertaking a restructuring or an insolvency proceeding. Rob can be reached at 416.496.3500 and email@example.com.
For those who practice outside Ontario, reference should be made to the following:
- Alberta: Health Information Act
- British Columbia: E-Health (Personal Health Information Access and Protection of Privacy) Act6
- Personal Information Protection Act7
- Freedom of Information and Protection of Privacy Act8
- Manitoba: Personal Health Information Act
- New Brunswick: Personal Health Information Privacy and Access Act
- Newfoundland and Labrador: Personal Health Information Act
- Northwest Territories: Health Information Act
- Nova Scotia: Personal Health Information Act
- Prince Edward Island: Health Information Act9
- Saskatchewan: The Health Information Protection Act
- Yukon: Health Information Privacy and Management Act10
1 See also subsections 3(1) and 3(12) of the PHIPA.
2 Section 215 of the BIA provides that no action lies against the trustee with respect to any action taken pursuant to the BIA without leave of the Court; Gowling further submitted that, should the IPC seek such leave, it would be required to demonstrate that the issue can be dealt with more efficiently under the provisions of the BIA and without disadvantage to the Estate.
3 Section 37 of the BIA provides that any person aggrieved by any decision of the trustee may apply to the Court and the Court may confirm, reverse or modify the decision complained of. Gowling further submitted that since Farber is an officer of the Court, any proceedings against it should be heard by a judge of the Court.
4 This section provides as follows:
“Notice of constitutional question
109. (1) Notice of a constitutional question shall be served on the Attorney General of Canada and the Attorney General of Ontario in the following circumstances:
110. The constitutional validity or constitutional applicability of an Act of the Parliament of Canada or the Legislature, of a regulation or by-law made under such an Act or of a rule of common law is in question.
111. A remedy is claimed under subsection 24 (1) of the Canadian Charter of Rights and Freedoms in relation to an act or omission of the Government of Canada or the Government of Ontario.”
5 As required by s.109(2) of the Courts of Justice Act.
6 applies to certain designated databases only
7 applies to the private health care sector
8 applies to health authorities and hospitals
9 passed, but not yet in force
10 passed, but not yet in force