Canada: Ontario Court Of Appeal: License Suspensions For Failure To Pay Highway 407 Tolls Must Be Lifted For Discharged Bankrupt

Last Updated: February 14 2014
Article by Domenico Magisano

Highway 407 (the "407"), a highway creating a semi-circle around the Greater Toronto Area, is Ontario's first toll highway.  Rather than traditional toll booths, vehicles using the 407 are electronically monitored entering and exiting the highway, and the owner of the vehicle permit or the lessee of an electronic transponder are invoiced.  Much like any invoice, if the invoice is not paid in time, interest accrues and the invoicing party must consider its enforcement options.  However, unlike most other invoices, provincial legislation provides that failure to pay a 407 invoice can result in the suspension of the vehicle permit for the vehicle in question. 

The 407 is public-private partnership between the 407 ETR Concession Company Inc. ("ETR") and the Province of Ontario (the "Province").  As part of this partnership, the Province enacted The Highway 407 Act (the "407 Act") which governed the creation, collection and enforcement of tolls on the 407.  Under the 407 Act, if a 407 user (or vehicle owner) fails to pay an invoice for tolls, one of the enforcement options available to ETR is for them to require the Province to suspend the vehicle permit until all 407 tolls (and associated fees and interest) are paid.

However, what happens to the permit suspension if the vehicle owner becomes bankrupt and is subsequently discharged?  Put differently, if the bankrupt vehicle owner is discharged, is the 407 debt also discharged and if the toll debt is discharged, should the permit suspension be lifted?  These were the questions facing the Ontario Court of Appeal in Canada (Superintendent of Bankruptcy) v. 407 ETR Concession Company Limited (the "407 Decision"). 

Matthew David Moore ("Moore") was the nominal plaintiff in this action (nominal because he ultimately settled with ETR, but the Office of the Superintendent in Bankruptcy (the "OSB") proceeded with the case regardless).  He owned two trucks, used the 407 with these trucks and failed to pay the tolls as invoiced by ETR.  Eventually, ETR advised the Province, which suspended the vehicle permits for the two vehicles.  By October 2007 Moore had almost $35,000 in 407 toll debts and on November 10, 2007 he made an assignment in bankruptcy.  ETR did not file a proof of claim in the bankruptcy and did not contest Moore's discharge. 

In June 2011, Moore obtained his absolute discharge and brought a motion before the Registrar in Bankruptcy for an Order that the Province lift the suspension and issue him vehicle permits, which was granted (the "Registrar Order").  ETR moved before a Judge to set aside the Registrar Order and was successful on the basis that there was no operational conflict between the 407 Act and the Bankruptcy and Insolvency Act (the "BIA") and therefore the paramountcy doctrine does not apply.  Paramountcy is a Canadian doctrine which states that when provincial and federal statutes, validly constituted, are in conflict, the federal statute is paramount.  Moore ultimately settled with ETR, but the OSB proceeded with the appeal.

The Court of Appeal considered the two types of conflicts that could give rise to a claim of paramountcy: an operational conflict (i.e. an instance where the laws are such that complying with one law means contravention of the other law) and a purposive conflict (i.e. an instance where while one could comply with both statutes, complying with one would frustrate or negate the purpose or intention of the other law).  While the Court of Appeal agreed with the Motions Judge that there was no operational conflict between the 407 Act and the BIA, it held that the Motions Judge erred in failing to consider whether there was a conflict of purpose between the statutes.  The relevant provisions of the 407 Act, which would permit the ETR to enforce its pre-bankruptcy debt, held the Court of Appeal, conflict with the purpose of the BIA, which is, in part, to provide a bankrupt with a "fresh start" free from its past indebtedness.  In reaching its conclusion, the Court of Appeal noted that the BIA provides an enumerated list of debts that are not expunged by bankruptcy (for example child support payments, alimony payments etc.), however, 407 toll debts are not on that list.

While the Court of Appeal was clear they were only deciding whether the relevant provision of the 407 Act permitted the Province to suspend vehicle permits for discharged bankrupts who failed to pay tolls prior to their bankruptcy, one must query whether the stay provisions of the BIA will also require the Province to lift their suspension of vehicle permits for undischarged bankrupts who have unpaid pre-bankruptcy tolls.  It will also be interesting to see whether the "conflict of purpose" argument will extend to other forms of provincial fines.  

Originally published January 2014

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Domenico Magisano
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