Until the ruling, under s. 22(1) of the 407 Act
– an Ontario provincial statute – if a person failed to
pay a toll debt, ETR would notify the Ontario Registrar of Motor
Vehicles. Upon receipt of this notice, the Registrar was required
to refuse to issue or renew the debtor's vehicle permit until
he or she was notified by ETR that the debt and related fees and
interest were paid, even if they had declared
The question on this appeal was whether the Registrar could
continue to refuse to renew an individual's vehicle permit
subsequent to a discharge in bankruptcy pursuant to s. 178(2) of the Bankruptcy and Insolvency Act ("BIA") –
a federal statute. The BIA holds that a discharge from
bankruptcy releases a debtor from claims that are provable in
bankruptcy. One such individual, "M," sought an order
that his toll debt had been released by his discharge and an order
compelling the Ontario Ministry of Transportation to issue his
vehicle permits. In other words, the Supreme Court had to decide
whether the concurrent operation of the provincial 407 Act
and the federal BIA resulted in a conflict.
The motions judge concluded that the 407 Act was not in
conflict with the BIA and he had no
jurisdiction, absent a conflict, to order the reinstatement of
M's vehicle permits.
On appeal, the Ontario Court of
Appeal declared the specific section of the 407 Act
inoperative to the extent that it conflicted with the BIA's purpose
of giving a discharged bankrupt a fresh start. The Supreme Court of
Canada agreed: Section 22(4) of the 407 Act is
constitutionally inoperative to the extent that it is used to
enforce a provable claim that has been discharged pursuant to s. 178(2) of the BIA.
The Paramountcy Test
The Supreme Court was tasked with
determining whether it was possible to apply the provincial law
while complying with the federal law. On the one hand, the effect
of the 407 Act was to allow ETR to enforce the
collection of toll debts. Part of the reason for this
protection is that because there are no toll booths or other
barriers restricting access to Highway 407, ETR would have no
effective compliance mechanism without plate denials. Drivers on
Highway 407 either have transponders in their vehicles or else a
photo is taken of their licence plate and they are billed
On the other hand, pursuant to
creditors like ETR cease to be able to enforce their provable
claims upon a bankrupt's discharge.
Before the Court was the fact
that ETR was faced with this clear prohibition under the
BIA. Since s. 22(4) of the provincial 407
Act provided ETR with an administrative
enforcement scheme, it was impossible for ETR to use that
remedy while also complying with s. 178(2) of the federal
The Supreme Court held that both
laws could not apply concurrently or operate side by side without
conflict. The inconsistency was clear and definite because one law
allowed what the other precisely prohibited. The operational
conflict offended the doctrine of federal paramountcy.
The operation of the provincial
407 Act frustrated the federal Parliament's purpose of
providing discharged bankrupts with the ability to financially
rehabilitate themselves. The intent of the federal bankruptcy
statute is to permit a debtor to no longer be encumbered by the
burden of pre-bankruptcy indebtedness. The effect of the provincial
407 Act, however, was that it allowed ETR to continue
burdening a discharged bankrupt until full payment of the debt. The
Supreme Court held that had Parliament wished to exempt ETR's
toll debt from the bankruptcy process, as well as from the
consequences of a discharge, it would have done so expressly in
s. 178(1), which it did not.
In a dissenting opinion, two
justices of the Supreme Court opined that the two laws had
different contents and provided for different remedies. They could
operate side by side without operational conflict. If a debtor
chose not to drive, the province could not enforce its claim. If
407 ETR opted not to notify the Registrar, s. 22(4) of the
provincial act would not apply. Dual compliance was thus, not
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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