Constitutional Question, Bankruptcy & RTA Termination

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Date Retrieved:	2024-11-13
CLNP Page ID:	2438
Page Categories:	[Constitutional Law], [Bankruptcy], [Bankruptcy & Consumer Proposals (BIA)], [Payment of Rent (LTB)]
Citation:	Constitutional Question, Bankruptcy & RTA Termination, CLNP 2438, <https://rvt.link/dx>, retrieved on 2024-11-13
Editor:	Sharvey
Last Updated:	2024/11/04

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Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3)

178 (1) An order of discharge does not release the bankrupt from

(a) any fine, penalty, restitution order or other order similar in nature to a fine, penalty or restitution order, imposed by a court in respect of an offence, or any debt arising out of a recognizance or bail;

...

(2) Subject to subsection (1), an order of discharge releases the bankrupt from all claims provable in bankruptcy.

407 ETR Concession Co. v. Canada (Superintendent of Bankruptcy), 2015 SCC 52 (CanLII), [2015] 3 SCR 397

[21] I consequently agree with the Court of Appeal that the purpose and the effect of s. 22(4) of the 407 Act are to allow a creditor, ETR, to enforce the collection of toll debts, which in the context of this appeal constitutes a claim provable in bankruptcy. The remaining issue is whether this enforcement scheme conflicts with s. 178(2) of the BIA.

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[24] In my view, the respondent is correct on this issue of operational conflict. Pursuant to s. 178(2) of the BIA, creditors cease to be able to enforce their provable claims upon the bankrupt’s discharge: Schreyer v. Schreyer, 2011 SCC 35, [2011] 2 S.C.R. 605, at para. 21. As I indicate in the companion appeal, it is undisputed that a discharge under s. 178 of the BIA releases a debtor, thus preventing creditors from enforcing claims that are provable in bankruptcy. They are deemed to give up their right to enforce those claims. This includes both civil and administrative enforcement. In this case, ETR, the creditor, is faced with a clear prohibition under s. 178(2) of the BIA. It cannot enforce its provable claim, which has been released by an order of discharge. Since the debt collection mechanism put in place by s. 22(4) provides the creditor with an administrative enforcement scheme, it is impossible for ETR to use that remedy while also complying with s. 178(2): Canadian Western Bank v. Alberta, 2007 SCC 22, [2007] 2 S.C.R. 3, at para. 72; Husky Oil Operations Ltd. v. Minister of National Revenue, 1995 CanLII 69 (SCC), [1995] 3 S.C.R. 453, at para. 46. Indeed, ETR’s toll debt is not listed as an exemption under s. 178(1), and the resulting financial liability of the debtor cannot survive his or her discharge. As a result, the 407 Act says “yes” to the enforcement of a provable claim, while s. 178(2) of the BIA says “no”, such that the operation of the provincial law makes it impossible to comply with the federal law.

[25] In other words, while the provincial scheme has the effect of maintaining the debtor’s liability beyond his or her discharge, the federal law expressly releases him or her from that same liability. Both laws cannot “apply concurrently” (Western Bank, at para. 72) or “operate side by side without conflict” (Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44, [2013] 3 S.C.R. 53, at para. 76); a debtor cannot be found liable under the provincial law after having been released from that same liability under the federal law: British Columbia (Attorney General) v. Lafarge Canada Inc., 2007 SCC 23, [2007] 2 S.C.R. 86, at para. 82; M & D Farm Ltd. v. Manitoba Agricultural Credit Corp., 1999 CanLII 648 (SCC), [1999] 2 S.C.R. 961, at para. 41; Multiple Access Ltd. v. McCutcheon, 1982 CanLII 55 (SCC), [1982] 2 S.C.R. 161, at p. 191. I respectfully disagree with my colleague that this conflict is “indirect” or concerns something that is merely “implicitly” prohibited by s. 178(2) of the BIA (Moloney, para. 92), or that I am resorting to a broad interpretation of s. 178(2) in order to find that an operational conflict exists (para. 36). Under the federal law, the debt is not enforceable; under the provincial law, it is. The inconsistency is clear and definite. One law allows what the other precisely prohibits.

[26] In that regard, unlike my colleague, I do not believe that the language of s. 22(1) provides a possibility for there to be no operational conflict (para. 39). Once the Registrar is notified by ETR, as was the case on the facts on this appeal, s. 22(4) uses mandatory language (“shall”), such that the Registrar has no choice but to refuse to validate the debtor’s vehicle permits. From that point in time, the Registrar is left with no discretion to terminate the enforcement process after, for instance, the debtor’s discharge in bankruptcy. The Registrar is only required to reinstate the debtor’s permits once notified that the debt is paid: ss. 22(6) and 22(7). To suggest that dual compliance with both laws remains possible if ETR declines to pursue its remedy under s. 22 of the 407 Act would be to turn a blind eye to the factual reality of this case, on the basis of which it was argued. In addition, as I explain in the companion appeal, to suggest that an operational conflict can be avoided in circumstances in which the provincial law does not operate leads, with respect, to a circular reasoning that removes a key condition for consideration of either of the two branches of the paramountcy doctrine, that is, the existence of two valid laws that operate side by side. Nor, as in the companion appeal, is it in my view valid to suggest that, to negate the operational conflict that exists here, the debtor can renounce his right under the BIA by paying the released debt or by accepting the debt collection mechanism of the 407 Act and foregoing his right to a vehicle permit. If that were the case, the situation would no longer be one of a possibility of dual compliance with both laws. Rather, it would be one of “single” compliance with one of the laws, and renunciation of the operation of the other law by one of the actors involved. When the two laws operate side by side, ETR cannot comply with both at the same time, and the provincial law denies the debtor the benefit of the federal law.

[27] I therefore conclude that the operation of s. 22(4) to enforce a debt that was discharged in bankruptcy is in conflict with s. 178(2) of the BIA. Section 178 is a complete code in that it sets out which debts are released on the bankrupt’s discharge and which debts survive the bankruptcy. Through s. 22(4), the province creates a new class of exempt debts that is not listed in s. 178(1). This operational conflict offends the doctrine of federal paramountcy.

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[33] In my view, s. 22(4) of the 407 Act is inoperative to the extent that it conflicts with s. 178(2) of the BIA. The provision cannot be used by ETR to enforce an otherwise discharged provable claim contrary to s. 178(2) of the BIA. In any event, the operation of s. 22(4) frustrates the financial rehabilitation purpose of s. 178(2). I would dismiss the appeal with costs and answer the constitutional question as follows:

Is s. 22(4) of the Highway 407 Act, 1998, S.O. 1998, c. 28, constitutionally inoperative under the doctrine of federal legislative paramountcy, having regard to the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3?

Answer: Yes, to the extent that it is used to enforce a provable claim that has been discharged pursuant to s. 178(2) of the BIA.