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  • 13 Sep 2019 11:08 AM | Anonymous

    Pilot project found to be compliant with European Convention on Human Rights and Data Protection Acts

    On September 4, 2019, the UK High Court released its decision in R (Bridges) v CCSWP and SSHD, which was a judicial review and test case of sorts to determine the lawfulness of the use of automated facial recognition (AFR) by the South Wales Police (SWP).

    AFR technology is an automated means by which images captured on CCTV cameras are processed to “isolate pictures of individual faces, extract information about facial features from those pictures, compare that information with the watchlist information, and indicate matches between faces captured through the CCTV recording and those held on the watchlist” (para 25). If there is no match, the captured facial images are discarded and flushed from the system within 24 hours, while the CCTV footage is retained for 30 days.

    The South Wales Police was carrying out a pilot project of AFR, resulting in one arrest using real-time AFR deployment was of a wanted domestic violence offender in May 2017.

    The principal objections against the use of AFR are rooted in the European Convention on Human Rights, which includes at Article 8:

    Article 8

    1. Everyone has the right to respect for his private and family life, his home and his correspondence.

    2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.

    The Court specifically noted the impact of technology must be accounted for in its analysis:

    46. AFR permits a relatively mundane operation of human observation to be carried out much more quickly, efficiently and extensively. It is technology of the sort that must give pause for thought because of its potential to impact upon privacy rights. As the Grand Chamber of the Strasbourg Court said in S v. United Kingdom (2009) 48 EHRR 50 at [112]:

    “[T]he protection afforded by art.8 of the Convention would be unacceptably weakened if the use of modern scientific techniques in the criminal-justice system were allowed at any cost and without carefully balancing the potential benefits of the extensive use of such techniques against important private-life interests … any state claiming a pioneer role in the development of new technologies bears special responsibility for striking the right balance in this regard”.

    The court concluded that there was no violation of Article 8 as the police had a legal basis to use AFR. This is rooted in the common law powers and duties owed by the police to prevent and detect crimes, which “includes the use, retention and disclosure of imagery of individuals for the purposes of preventing and detective crime”. As a result, police can make reasonable use of such imagery for the purpose of preventing or detecting crime. The extent of the police’s power are construed broadly, and the court determined that that the police use of the images was reasonable. The court also found that new express statutory powers are necessary for the police to use AFR.

    The court also considered AFR in the context of the Data Protection Act 1998 and Data Protection Act 2018. Following the Article 8 analysis, the court concluded that the processing of personal data inherent in AFR is conducted lawfully and fairly. The court also concluded “[t]he processing is necessary for SWP’s legitimate interests taking account of the common law obligation to prevent and detect crime” (para 127).

    The applicant’s application for judicial review of the AFR program was dismissed.

  • 13 Sep 2019 11:06 AM | Anonymous

    Had emails or text messages included canned “signatures”, limitation period likely would have been extended

    In a case before the British Columbia Civil Resolution Tribunal, Lesko v. Solhjell, the applicant, Daniel Lesko, was seeking to recover four alleged loans made to the respondent, Annette Solhjell. The respondent disputed that the amounts were loaned, instead saying they were gifts.

    Principally what was at issue was whether the respondent had acknowledged the debt in such a way that would have extended the limitation period on collecting the amounts as the action was commenced outside of the limitation period. Section 24 of he Limitation Act says that a limitation period may be extended if a person acknowledges liability before the expiry of the limitation period. Section 24(6) states that an acknowledgement of liability must be:

    a) in writing;

    b) signed by hand or by electronic signature as defined in the Electronic Transactions Act;

    c) made by the person making the acknowledgement; and,

    d) made to the person with the claim.

    The text message and email evidence was summarized by the tribunal:

    20. The evidence before me is that the applicant sent a text message to the respondent on January 17, 2017 requesting repayment of the money he was owed. On January 19, 2017, the respondent replied by email stating “I know I still owe you money. I have not forgotten”, and later “I can’t pay”. I find the applicant made a demand for payment on January 17, 2017, and the respondent failed to perform. In his additional submissions, the applicant again stated that he emailed the respondent in January 2017 to pay him back, but that he decided to give her more time. Therefore, I find January 17, 2017 was the date on which the applicant’s claim was discovered. According to the Limitation Act, the applicant was required to start his dispute before January 17, 2019.

    The applicant referred to a subsequent emails and text messages up to August 24, 2017 that acknowledged the debt and argued that they triggered the extension provisions in the Limitation Act. The tribunal had no difficulty in determining that these were in writing, made by the respondent to the applicant. However, the issue turned on whether the “acknowledgement” was signed for the purposes of the Electronic Transactions Act.

    The Electronic Transactions Act defines an electronic signature as information in electronic form that a person has created or adopted in order to sign a record that is in, attached to, or associated with the record. The tribunal followed Johal v. Nordio, in which the court stated that the Electronic Transactions Act focuses on whether the sender of the electronic message intended to create a signature. In that case, the email in question included a relatively standard email “signature”: name, position and contact information, which the court found satisfied the requirements of section 24(6) of the Limitation Act.

    No such information was included in the email or text messages exchanged in this case, so the tribunal concluded that the limitation period expired on January 17, 2019, roughly two weeks prior to commencement of the action on February 1, 2019. The respondent was not required to repay the amounts.

  • 13 Sep 2019 11:04 AM | Anonymous

    Judge invokes proportionality, efficiency, common sense in wide-ranging electronic discovery motion

    In Natural Trade Ltd. v. MYL Ltd., Justice Marchand of the British Columbia Supreme Court heard a set of discovery motions in a hotly-contested action, in which a set of companies alleged that confidential information and customer lists had been misappropriated from the companies by a former employee, who conspired with others to use this information to compete with the plaintiff companies. The plaintiffs sought disclosure of various records, including electronic communications and metadata, while the defendants sought similar materials in a counter-motion.

    The discovery demands were numerous and the resulting order was so long it had to be appended to the judgment as a separate document. Of interest was Marchand J.’s review of the general principles underpinning discovery, in particular proportionality and efficiency. He also provided a tidy capsule summary of electronic discovery principles, and an application of them to cloud storage facilities:

    [34] The word “document” is defined broadly in Rule 1-1 to include “a photograph, film, recording of sound, any record of a permanent or semi-permanent character and any information recorded or stored by means of any device.” While a computer hard drive is typically considered to be a receptacle for the storage of documents akin to a filing cabinet, in certain circumstances the hard drive itself may be a “document” subject to production: Chadwick v. Canada (Attorney General)2008 BCSC 851 (CanLII) at paras. 17-22.

    [35] In Sonepar Canada Inc. v. Thompson2016 BCSC 1195 (CanLII), Pearlman J. dealt with an application for the defendants to disclose electronic documents, including metadata. The case involved allegations that the defendants, including former employees of the plaintiff, conspired to misappropriate the plaintiff’s confidential pricing information and unlawfully interfere with the plaintiff’s contractual relations. At para. 46, Pearlman J. summarized the principles applicable to the production of electronic documents from a computer hard drive or other electronic devices as follows:

    1. A computer hard drive is the digital equivalent of a filing cabinet or documentary repository. While the court may order the production of relevant documents stored on the hard drive, Rule 71 does not authorize the court to permit the requesting party to embark upon an unrestricted search of the hard drive.
    2. A computer hard drive as a document storage facility is generally not producible in specie. A hard drive will often contain large amounts of information that is irrelevant to the matters in issue in the litigation, including information that is private and confidential and that ought not to be produced.
    3. In exceptional circumstances where there is evidence that a party is intentionally deleting relevant and material information, or is otherwise deliberately thwarting the discovery process, the court may order the production of the entire hard drive for inspection by an expert. There must be strong evidence, rather than mere speculation, that one party is not disclosing or is deleting relevant information in order to justify such an order.
    4. On an application for production of electronic records from a computer hard drive, the court must balance the objective of proper disclosure with the targeted party's privacy rights.
    5. Proportionality is a factor for the court to consider in determining the scope of the search parameters.
    6. Metadata consisting of information stored on the software which shows the use of the computer, such as dates when a file was opened, last accessed, or sent to another device, is information recorded or stored by means of a device and is therefore a document within the meaning of the Rules.
    7. As a general rule, the producing party's counsel should have the first opportunity to vet for relevance and privilege any information produced from the hard drive or from any other source of electronic data containing private information unrelated to the lawsuit.
    8. To that, I would add that there may be circumstances where it will be appropriate to depart from the general rule, for example, where there is evidence that the producing party has deliberately destroyed records or is likely to interfere with or thwart the production of relevant information.

    [Citations omitted.]

    [36] The plaintiffs submit that the same principles applicable to the production of a computer hard drive also apply to a cloud-based document repository. While the plaintiffs have cited no authority related to “the cloud”, I can see no principled reason to disagree. The cloud is just another place where parties may store their documents. The use of the cloud should not enable parties to shelter relevant documents from production.

  • 13 Sep 2019 11:03 AM | Anonymous

    Court considers use of data extraction tool and warrant requirements regarding searches of cell phones

    In R. v. Sinnappillai, Boswell J of the Ontario Superior Court of Justice presided over the trial of the accused, who was charged with luring a minor for the purposes of prostitution and sexual touching. The charges in fact resulted from a sting operation in which a police officer communicated with the accused via text, indicating that “she” was a 15-year old girl and setting up a meeting at a hotel room. The “customer” texted the officer several times in the hours and minutes leading up to the meeting time, and the accused arrived at the hotel room at the appointed time. The police received a warrant to search the accused’s Samsung phone to see if it contained the matching set of text messages that the officer’s phone did. In order to do the search, a tech crimes officer hooked the phone up to a “universal forensic extraction device” (UFED), which lacked the ability to extract only a portion of the phone’s contents. The officer followed his standard practice, which was to extract all of the phone’s data (essentially creating a mirror image of the phone) and then searching the extracted data. The search revealed the text conversation and a matching call record. The tech crimes officer stored the mirror image on a secure police server.

    At a later preliminary hearing, the police surmised that the accused might raise an inability to communicate in English as part of his defence. They obtained a second warrant and did a second search which turned up additional text messages. The mirror image was left on the police server, but the police did not report the results of either search as required by the warrants and the Criminal Code. The accused raised a number of arguments that neither the warrants nor s. 8 of the Charter had been complied with sufficiently, and asked that the data be excluded.

    Early in the judgment, Boswell J observed:

    [12] Almost everyone is by now familiar with the amazing array of functions that modern cell phones are capable of performing. Less people – though I suspect the number is growing – are alive to the fact that, commensurate with those functions, cell phones are repositories of immense amounts of core biographical data. They can reveal, amongst other things, where one has been and when; who one has talked to, when, for how long and sometimes what was said; who one’s associates are; and what websites one frequents. Cell phones are meticulous and reliable record-keepers.

    [13] Law enforcement agencies are well aware that cell phones are frequently rich sources of evidence. Indeed, I would say anecdotally, that cell phone data now features prominently in a significant percentage of criminal cases tried before Ontario courts. It is certainly the central feature of this case.

    The judge dismissed the accused’s argument that the manner in which the searches had proceeded amounted to an unauthorized search of the entire phone. The police already had the phone in their possession after the initial seizure, and “[c]opying the hard drive before searching it gave them nothing new and did not impact on Mr. Sinnappillai’s privacy interests.” The protocol followed, which involved imaging all of the data and then searching that data, was reasonable and Charter-compliant, given that it was impliedly authorized by the justice of the peace who issued the warrant and was necessary to preserve the integrity of the data. The police were also not obliged to destroy the mirror image after the first search, as the recent decision of the Ontario Court of Appeal in R. v. Nurse dictated that the police were permitted to retain and search the phone indefinitely so long as the warrant so permitted:

    To conclude that Mr. MacLean [the tech crime officer] should have created a second mirrored image and searched that, as opposed to searching the image he had already created, would be to ignore common sense and practicality. Moreover, it would do nothing to advance Mr. Sinnappillai’s privacy concerns, since presumably the content of the second mirror image would be identical to the content of the first mirror image. Creating a second duplication would be nothing but a redundant ‘make-work’ task for Mr. MacLean.

    However, Justice Boswell agreed with the accused’s argument that the police had failed to report the results of the searches to the issuing justice as required by the warrants and the Code. The Crown argued that the police’s report to the justice upon having seized the phone was sufficient, but “significantly higher privacy interests are engaged once the police begin to look in the phone and seize data.” As an earlier case had held:

    As was subsequently held by the Supreme Court of Canada in Vu, the privacy interest in the data contained on a computer or similar device is subject to a separate level or layer of privacy protection from the seizure of the device itself. Treating supervision of the seized computer as a physical item as comparable to supervision of the data seized from the computers and USB keys is inconsistent with the concerns expressed in cases such as Vu and R. v. Morelli2010 SCC 8 (CanLII), [2010] 1 S.C.R. 253. Consequently, I am of the view that failure to make a report to a justice in relation to the execution of the October 18, 2013 warrant constitutes a violation of s. 8 of the Charter.

    Accordingly, there had been a breach of s. 8. However, Justice Boswell declined to exclude the evidence under s. 24(2) of the Charter. While the breaches were serious, there was no evidence of systemic police misconduct, and the law on the obligation to report back the results of cell phone searches was not entirely settled. The impact on the accused’s privacy was minimal, given that the police had obtained warrants for both searches and both the searches and seizures had been lawful. The evidence was reliable and important to the Crown’s case. Accordingly, the motion to exclude was dismissed.

  • 22 Aug 2019 11:05 AM | Anonymous

    Court rules jurisdiction over tort claims grounded due to defendant company’s e-commerce activities

    In Vahle et al v. Global Work and Travel Co., Inc., two Ontario sisters had gone to Thailand on a work/travel excursion, brokered via the BC-based defendant company. They were injured in an accident while driving a scooter to their employment, and one sister was killed. The plaintiffs (the surviving sister and her parents) brought a number of tort actions in Ontario against Global, including negligence, negligent misrepresentation, and breach of contract and fiduciary obligations. All dealings between the sisters and Global were conducted through Global’s website. Global argued on a motion that the Ontario Superior Court did not have jurisdiction simpliciter and was not the most convenient forum for the actions.

    Justice Paul Schabas of the Ontario Superior Court first noted the Supreme Court of Canada’s jurisprudence on jurisdiction simpliciter included a number of connecting factors which could establish jurisdiction presumptively (though all were rebuttable). On the first, the plaintiffs argued that the contract between the sisters and Global had been made in Ontario, but Justice Schabas applied the usual rule that the contract is made in the jurisdiction where the offeror receives notice of the offeree’s acceptance. The “postal acceptance” exception to the rule did not apply to faxes or emails. On the second presumptive factor, that a tort was committed in Ontario, the plaintiffs had pleaded that substantial negligent misrepresentations were made to them in Ontario, by Global via its website; and that Global’s negligence included failure to notify the parents after the accident and other steps which it should have taken in Ontario. Accordingly, this presumptive factor was made out.

    Justice Schabas then turned to the contentious factor of whether Global was “carrying on a business” in Ontario. It was not sufficient that Global had a website that was accessible in Ontario, or that its online ads and promotions were received in Ontario via Google and Facebook. However:

    [37] Here, the defendant engages in e-commerce in Ontario by contacting and contracting with travellers in Ontario. It does more than simply receive inquiries from clients based in Ontario. It also places foreign vacationers coming to Canada in Ontario through its working holiday program in Canada and works with businesses here who may employ those individuals. Global thus actively works with clients and businesses in Ontario.

    [38] Since Van Breda, the Supreme Court has upheld orders of the British Columbia courts in which they exercised jurisdiction over Google even though it did not have servers or offices, or any employees in the province: Google Inc. v. Equustek Solutions Inc.2017 SCC 34 (CanLII), [2017] 1 SCR 824, affirming 2015 BCCA 265 (CanLII). In that case, Google did, however, gather information and data in British Columbia which led to targeted search results and targeted advertising towards residents of British Columbia.

    [39] Global’s connections to Ontario are at least comparable to Google’s connections with British Columbia. Once contacted by Ontario residents, Global actively solicits their business, as it did here in what the plaintiffs describe as aggressive sales tactics towards them by email and telephone. Global knew that it was contracting with Ontario residents, and assured its clients that the contracts would be governed by “Canadian law” which may be understood by clients to mean the law of the province in which they are located. Accordingly, the plaintiffs have met the burden of demonstrating a good arguable case that Global carries on business in Ontario and there is a presumption of jurisdiction.

    The defendant argued that the internet-based connection was weak and rebutted the presumptive factors. Justice Schabas held:

    In this case, however, Global knew it was dealing with clients in Ontario. It frequently dealt with travellers coming from Ontario, as well as those wishing to have a working holiday in Ontario. Global’s representatives were aware that any representations they made to Nora and Marija were received by them in Ontario. Further, providing that “Canadian law” would apply [via the website] suggests that Global contemplated that it may be subject to Ontario law.

    The connecting factors were made out, and Justice Schabas further found that Ontario was not forum non conveniens. In the result, the motion to dismiss for want of jurisdiction was dismissed.

  • 22 Aug 2019 11:05 AM | Anonymous

    California court invalidates bail condition allowing random searches of devices and social media accounts

    In the case of In Re Ricardo P., the appellant was a juvenile offender and ward of the court who had pleaded guilty to two counts of felony burglary, and was placed on probation. He had admitted to the use of marijuana and told a probation officer that he had stopped using it since being apprehended for the robbery, as it interfered with his ability to think clearly. The juvenile court imposed a condition that he “[s]ubmit . . . electronics including passwords under [his] control to search by Probation Officer or peace office[r] with or without a search warrant at any time of day or night.” The court overruled the appellant’s objection that this condition was not related to the offences which he had committed, stating that monitoring the appellant’s drug usage was an important part of probation, and that it was not unusual for young people to “brag about their marijuana usage or drug usage, particularly their marijuana usage, by posting on the Internet, showing pictures of themselves with paraphernalia, or smoking marijuana.” This made the condition an appropriate part of the overall probation program, in the court’s view.

    The case eventually proceeded to the California Supreme Court, which applied its test for when a probation order condition could be held invalid. It noted that the condition had no relation to the crime which was committed, given that there was no indication of the burglaries having anything to do with the use of electronic devices. Also, the condition related to conduct which was not itself criminal. The case turned, in the court’s view, on the third prong of their test, which asked whether the condition “requires or forbids conduct which is not reasonably related to future criminality.” Noting that the entire point of the condition had been to monitor whether the youth was “communicating about drugs or with people associated with drugs,” the court held that the condition was invalid because “the burden it imposes on Ricardo’s privacy is substantially disproportionate to the countervailing interests of furthering his rehabilitation and protecting society.” There was no evidence in the record that the youth had actually been using drugs when he committed the burglaries, nor was there any evidence that he had used electronic devices to plan, discuss or commit burglaries. While the condition need not be related to particular past offences by the individual, there had to be a degree of proportionality between the burden imposed by the condition and the overall goal of preventing future criminality. Such proportionality was lacking here, as the condition “significantly burdens privacy interests”:

    If we were to find this record sufficient to sustain the probation condition at issue, it is difficult to conceive of any case in which a comparable condition could not be imposed, especially given the constant and pervasive use of electronic devices and social media by juveniles today. In virtually every case, one could hypothesize that monitoring a probationer’s electronic devices and social media might deter or prevent future criminal conduct. For example, an electronics search condition could be imposed on a defendant convicted of carrying an unregistered concealed weapon on the ground that text messages, e-mails, or online photos could reveal evidence that the defendant possesses contraband or is participating in a gang. … Indeed, whatever crime a juvenile might have committed, it could be said that juveniles may use electronic devices and social media to mention or brag about their illicit activities.

    The court commented that the prosecution’s argument that this ruling would prevent the imposition of commonly-used search conditions, such as those for person, property and residence, was flawed:

    the Attorney General’s argument does not sufficiently take into account the potentially greater breadth of searches of electronic devices compared to traditional property or residence searches. (See Riley, supra, 573 U.S. at pp. 396– 397 [“[A] cell phone search would typically expose to the government far more than the most exhaustive search of a house: A phone not only contains in digital form many sensitive records previously found in the home; it also contains a broad array of private information never found in a home in any form — unless the phone is.”].) As noted, the electronics search condition here is expansive in its scope: It allows probation officers to remotely access Ricardo’s e-mail, text and voicemail messages, photos, and online accounts, including social media like Facebook and Twitter, at any time. It would potentially even allow officers to monitor Ricardo’s text, phone, or video communications in real time. Further, the condition lacks any temporal limitations, permitting officers to access digital information that long predated the imposition of Ricardo’s probation.

    Accordingly, the condition was struck.

  • 22 Aug 2019 11:04 AM | Anonymous

    Professor’s tweets held to violate arbitration settlement agreement, university relieved of obligation to provide payment

    In Acadia University v. Acadia University Faculty Association, the university had terminated Dr. Rick Mehta, a tenured professor, after there was controversy about various remarks he had made. The faculty association grieved the termination and the matter proceeded to a mediation, in which a confidential agreement was reached under which neither party admitted liability or culpability, and under which the university was to pay Mehta a specified amount. Despite the clear and strong confidentiality clause, Mehta began tweeting about the agreement within minutes of its conclusion, referring to himself as “vindicated” and making repeated references to “severance.” He was immediately advised by counsel for the faculty association to delete the tweets, but did not do so. At one point he deleted certain tweets but left others, and in a letter to the President of the university he threatened to release the agreement unless certain conditions were met.

    Arbitrator William Kaplan held that it was “quite clear” that Mehta had breached the settlement agreement multiple times; quite apart from breaching the confidentiality clause, he had not been “vindicated” and it was highly inaccurate to refer to the payment provided for in the agreement as “severance.” He ruled:

    Settlements in labour law are sacrosanct and given the repeated and continuing breaches, together with the absence of any mitigating circumstance or explanation, I find that the University is no longer required to honour the payment provision.

  • 22 Aug 2019 11:03 AM | Anonymous

    Hacker re-directs settlement funds paid by defendant, but defendant still on the hook

    In St. Lawrence Testing & Inspection Co. Ltd. v. Lanark Leeds Distribution Ltd., Deputy Judge Shane A. Kelford heard a civil dispute between two companies, the central issue in which he summed as follows: “The Plaintiff and Defendant were both innocent victims of a ‘cybercrime’ which resulted in the loss of funds which were paid by the Defendants to settle the Plaintiff’s claim. Both parties are innocent. Unfortunately, one of them must bear the loss.” The two companies had agreed to settlement terms to resolve a dispute about an unpaid invoice. Baker, a paralegal at the law firm representing St. Lawrence, sent the terms of settlement to Lanark via email; the terms included that Lanark would pay $7,000.00 into the law firm’s trust account at a Bank of Montreal branch in Cornwall, Ontario. Less than three hours later, a hacker had taken over Baker’s email account and was intercepting all emails between her and Lanark. The hacker sent revised settlement terms to Lanark, under which Lanark would send the funds to a different account at a credit union in Medicine Hat, Alberta, which was held by someone named “Richard Hoehn.” Lanark asked for a physical address for Hoehn, which the hacker provided, and the funds were sent. There were several exchanges of emails between Lanark and the hacker in which Lanark sought confirmation that the funds had been received, and (the judge surmised) the hacker stalled until the funds cleared the Medicine Hat account.

    When the fraud was discovered, it became clear that the hacker was unknown and that the funds were gone and probably unrecoverable. The law firm’s IT provider determined that the firm’s overall system had not been compromised, but just the email address of Baker, probably by way of a phishing attack or brute force (though she had a password in place that was “strong” by Microsoft’s standards). There was no evidence that the firm had been negligent in its IT security and the court held that Baker had acted reasonably and promptly once the fraud had been discovered, based on what she knew.

    The question that arose was: which party was responsible for the settlement funds? Deputy Judge Kelford reviewed the similar 2017 case of Du v. Jameson Bank, in which Du sued the bank for accepting a request to transfer funds from a hacker purporting to be Du. In that case, Du had signed an account-holder agreement with the bank in which he agreed that: the bank was not obliged to question any request that came from an email account which Du authorized; he was responsible for his own email security; and he was aware of the risk associated with email requests. Outside gross negligence by the bank, Du had given up any potential claim. Here, however, there was no such agreement in place. Lanark argued that, similarly to the bank in Du, it was entitled to rely on email from Baker, the law firm’s representative and had no reasonable basis on which to question the revised instructions regarding the funds. St. Lawrence argued that Lanark should have been suspicious of the same-day revision of the instructions, and that there was no evidence of negligence by St. Lawrence or the law firm.

    The court held:

    56. As noted at the outset of these reasons, the issue in this case can be restated as follows: Where a computer fraudster assumes control of Victim A’s email account and, impersonating Victim A, issues instructions to Victim B, who then transfers funds intended for Victim A (or a third party) to the fraudster’s account, is Victim A liable for the loss?

    57. In my view, the answer is “no”, unless:

    a. Victim A and Victim B are parties to a contract which (i) authorizes Victim B to rely on email instructions from Victim A and, (ii) assuming compliance with the terms of the contract, shifts liability for a loss resulting from fraudulent payment instructions to Victim A;

    b. There is evidence of willful misconduct or dishonesty by Victim A; or

    c. There is negligence on the part of Victim A.

    Deputy Judge Kelford continued:

    59. By way of further reasoning, I see no basis on which to distinguish the circumstances of the fraud in this case from those in which a home computer or business computer is “hacked”, giving a fraudster access to the owner’s email account. The fraudster then sends out an email to all of the “contacts” in the owner’s email address book, asking the recipient to wire funds (typically $1,000 to $5,000) immediately to a PayPal or similar account able to receive electronic funds transfers. Assuming that the computer owner took the reasonable and recommended security precautions for its email account, I see no basis on which the computer owner could be held liable to reimburse those individuals who unfortunately fall victim to the fraud.

    60. In reviewing legal commentary on computer fraud, this is clearly an area that would benefit from legislation to establish clear principles and guidelines for the allocation of liability in the event of computer frauds, which are increasing in number. In the United States, commentary with respect to the Uniform Commercial Code provisions dealing with wire transfer fraud suggests that in most cases, absent evidence of negligence or malfeasance by the “beneficiary” (receiving party), it is the “originator” of the transfer who is in fact dealing with the fraudster (albeit unknowingly), and is therefore in the best position to recognize potential indicia of fraud (i.e. such as changed or unusual payment instructions).

    61. As a general rule, equitable negligence principles seek, after the fact, to place responsibility for a loss on the party best able to prevent the harm.

    In the result, Lanark was ordered to pay the settlement funds but with no award of pre-judgment interest. Moreover, due to the novelty of the case, no costs award was made.

  • 30 May 2019 12:14 PM | Anonymous

    PIAC requested clarification that this right extends to former customers and purchasers of second-hand devices

    The Public Interest Advocacy Centre (PIAC) petitioned the CRTC for clarification of the device unlocking rules that are part of the Wireless Code. The ambiguity PIAC pointed to had to do with prior customers of telcos. In particular, they said:

    11. PIAC asked the Commission to clarify Rule F.1.(ii) of the Wireless Code such that all devices purchased prior to 1 December 2017 that are locked to a given WSP’s network should be unlocked upon request and at no cost, regardless of whether the device owner currently has, previously had, or never had an active account with the WSP (hereafter, PIAC’s proposed clarification).

    12. In PIAC’s view, the Wireless Code may be ambiguous in terms of who the device unlocking rules are intended to benefit. The Preamble to the Wireless Code states that any ambiguity is to be resolved in favour of customers. PIAC argued that this ambiguity should be resolved to clarify that a person does not need to have an ongoing service contract to have their device unlocked free of charge.

    The Code defines customers to be “Individuals or small businesses subscribing to wireless services, including account holders, device users, and authorized users.” The obligation to unlock devices relates to “customers” and the preamble of the Code says that any ambiguity is to be interpreted in favour of the “customer”. 

    The CRTC, in Telecom Decision CRTC 2019-169, declined to “clarify” or otherwise change the Code, noting that current customers have this right and former customers have other options available to them. Now that devices must be sold unlocked, the number of current or former customers who seek unlocking of devices is declining significantly.

  • 30 May 2019 12:12 PM | Anonymous

    Broad proposals more of an election platform than an action plan for digital issues

    In a speech at the Empire Club on May 21, 2019 (YouTube recording), Innovation Minister Navdeep Bains outlined a “Digital Charter” intended to guide future legislation and policy priorities in the areas of trust, data policy, privacy, misinformation and democracy. The Charter is based on ten principles, some of which have been further elaborated on in documentation linked from that page:

    1. Universal Access: All Canadians will have equal opportunity to participate in the digital world and the necessary tools to do so, including access, connectivity, literacy and skills.
    2. Safety and Security: Canadians will be able to rely on the integrity, authenticity and security of the services they use and should feel safe online.
    3. Control and Consent: Canadians will have control over what data they are sharing, who is using their personal data and for what purposes, and know that their privacy is protected.
    4. Transparency, Portability and Interoperability: Canadians will have clear and manageable access to their personal data and should be free to share or transfer it without undue burden.
    5. Open and Modern Digital Government: Canadians will be able to access modern digital services from the Government of Canada, which are secure and simple to use.
    6. A Level Playing Field: The Government of Canada will ensure fair competition in the online marketplace to facilitate the growth of Canadian businesses and affirm Canada's leadership on digital and data innovation, while protecting Canadian consumers from market abuses.
    7. Data and Digital for Good: The Government of Canada will ensure the ethical use of data to create value, promote openness and improve the lives of people—at home and around the world.
    8. Strong Democracy: The Government of Canada will defend freedom of expression and protect against online threats and disinformation designed to undermine the integrity of elections and democratic institutions.
    9. Free from Hate and Violent Extremism: Canadians can expect that digital platforms will not foster or disseminate hate, violent extremism or criminal content.
    10. Strong Enforcement and Real Accountability: There will be clear, meaningful penalties for violations of the laws and regulations that support these principles.

    Given that there is a short window before Parliament rises for the summer and with an election expected in October, the Digital Charter has been understood to be as much of an election platform as anything else. And, in many cases, the Digital Charter recites previous statements of principles made by the federal government. 

    In particular, the Minister in his speech and in subsequent documentation, has outlined significant changes to Canada’s private sector privacy law, the federal Personal Information Protection and Electronic Documents Act. This is described in “Strengthening Privacy for the Digital Age”, which does not lay out may specifics about privacy law reform, but includes a list of “possible options” and “considerations and questions” for each of them. Most significant, perhaps, is an intention to increase the Privacy Commissioner’s enforcement powers, though this also has few specifics.

  

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