Supreme Court of Canada to rule on license privileges for bankrupt uninsured drivers who owe money to accident victims’ claims funds

Canada’s highest court will announce Friday its decision on the constitutional validity of an Alberta law that allows for the suspension of vehicle permits and driver’s licenses of bankrupt uninsured drivers who fail to reimburse the province’s Motor Vehicle Accident Recoveries (MVAR) program.

In 2014, the Alberta Court of Appeal had ruled that there is an “operational conflict” between the federal Bankruptcy and Insolvency Act, and Section 102 of the province’s Traffic Safety Act. The court ruled that federal law must prevail.

All provinces have policies that remove driving privileges from people who are uninsured, injure someone while driving and fail to take responsibility, the Ontario Ministry of the Attorney General reports. Such policies, the ministry suggests, protect the public from the risk of uninsured drivers and are therefore regulatory activities, rather than a debt-collection activities.

In February, 2014, the Alberta Court of Appeal ruled against the province, three years after the MVAR department advised Joseph Moloney that it had suspended both Moloney’s licence and his vehicle registration privileges indefinitely.

Moloney was in a collision in 1989 while driving an uninsured vehicle. A default judgment of nearly $195,000 was obtained against Moloney.

In Alberta, MVAR is the collection unit of the Motor Vehicle Accident Claims Program, which compensates victims of bodily injury accidents, in which the at-fault party was uninsured.

In 2008 Moloney filed for bankruptcy under the federal Bankruptcy and Insolvency Act.

In October, 2012, the Court of Queen’s Bench of Alberta issued an order staying the enforcement of the 1996 default judgment, and staying the suspension of his driver’s licence. Essentially the court ruled that the province was attempting to circumvent the federal BIA in order to collect a debt.

“Where there is an operational conflict between validly enacted provincial and federal legislation, the doctrine of paramountcy dictates that the federal law must prevail,” wrote Madam Justice Andrea Moen.

Her ruling was upheld on appeal in February, 2014. The Alberta Ministry of the Attorney General appealed to the Supreme Court of Canada, arguing there is no conflict between federal and provincial law. Canada’s highest court heard the case Jan. 15, 2015. The decision is scheduled for release Nov. 13.

The Ontario Ministry of the Attorney General, which has intervener status in the case, argued that the all Canadian provinces “have a legitimate regulatory interest in preventing irresponsible drivers who drive without insurance and cause harm to others as a result from driving again until they take responsibility for their actions.”

In 2014, Alberta’s appeal court unanimously ruled that the province’s attempts to collect money from Moloney “are inconsistent with the ‘fresh start’ principle” of the federal bankruptcy process.

But the “fresh start” purpose of BIA “was never intended to relieve a discharged bankrupt from complying with provincial regulatory obligation if he or she wished to continue to hold a provincial license post-discharge,” the Ontario Ministry of the Attorney General stated in its factum.

Every province and territory has legislation “to ensure that drivers who fail to comply with their regulatory obligation to have a certain minimum level of insurance are not permitted to continue driving if they are negligent, injured someone and fail to show responsibility for their actions by satisfying at least some portion of any judgment rendered against them,” wrote lawyers for the Ministry of the Attorney General of Ontario in its factum in the Moloney case.

When it ruled in favour of Moloney in 2014, Alberta’s appeal court cited a 2013 ruling, by the Ontario Superior Court of Justice in 2013, in favour of Sandra Clarke.

In 1989, Clarke got in an accident in Toronto while driving an uninsured vehicle. Clarke was sued by her passenger, who was injured. Clarke’s passenger got compensation from the Financial Services Commission of Ontario’s Motor Vehicle Accident Claims Fund. Clarke started making payments to MVACF but also declared bankruptcy. When she got behind in her payments to MVACF, the province threatened to suspend her licence.

Case Management Master Thomas Hawkins dismissed a motion from the Ontario government seeking an order permitting renewal of an expired writ against Clarke. The province unsuccessfully appealed to the Superior Court of Justice.

“The federal BIA takes precedence over the provincial legislation,” wrote Mr. Justice Robert Goldstein, of the Ontario Superior Court of Justice, in his ruling against the province. Justice Goldstein added he does “not see any evidence of a rational connection” between paying a debt and good driving habits.

“More important, even if a rational connection could be demonstrated, every judgment debtor still has the opportunity to obtain their licence as long as they pay something,” Judge Goldstein wrote. “If Ms. Clarke had won the lottery and paid off the debt, that would have fulfilled the critical condition for renewing the licence without conditions. Obviously serendipitous winning of the lottery does not make a driver more responsible.”

In Ontario, when MVACF compensates an auto accident victim, “the driver’s license of the owner or driver of the uninsured vehicle, as the case may be, is suspended until the owner or driver demonstrates responsibility for driving without insurance, causing an accident, and failing to satisfy his or her obligations to the person he or she injured,” the Ontario Ministry of the Attorney General wrote in its factum in the Moloney case.

The Supreme Court of Canada “has repeatedly acknowledged that driving in an inherently risk activity that is heavily regulated for the protection of the public,” the Ontario Ministry of the Attorney General contended. Protecting the public from the risk if uninsured drivers “is a regulatory, not a debt collection measure,” the province added.