Canadian Underwriter

Supreme Court to rule on conflict between bankruptcy law, provinces collecting money from uninsured drivers

June 12, 2014   by Greg Meckbach, Associate Editor

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The Supreme Court of Canada plans to rule on the question of whether a province can suspend the driver’s licence of a person who has been discharged from bankruptcy after failing to pay, in full, money owed to that province’s fund for victims of accidents of uninsured drivers.

The highest court announced Thursday it has granted the Alberta Ministry of the Attorney General leave to appeal an Alberta Court of Appeal ruling issued last February in favour of Joseph Moloney.

Court records indicate that Moloney was uninsured and involved in a collision in 1989.  Seven years later, the administrator of Alberta’s Motor Vehicle Accident Claims Act obtained a default judgment, of nearly $195,000, against Moloney. He declared bankruptcy under federal law in 2008 and was discharged from bankruptcy in 2011.

“Notwithstanding that he had been discharged, the Government of Alberta, through the Director, Driver Fitness and Monitoring, and Justice and Attorney General, saw fit to demand payment of the Administrator’s Judgment, failing which Mr. Maloney would have his driving privileges revoked,” wrote Madam Justice Andrea Moen, of the Alberta Court of Queen’s Bench, in a ruling in released Oct. 19, 2012. Justice Moen granted a motion by Moloney to stay the enforcement of the 1996 default judgement against him, and to stay the suspension of his driving privileges.

The Attorney General of Alberta unsuccessfully appealed Justice Moen’s ruling.

“The continued attempts to collect on the judgment in question here are inconsistent with the ‘fresh start’ principle” of the federal Bankruptcy and Insolvency Act, wrote Mr. Justice Frans Slatter on behalf of the Alberta Court of Appeal, in its ruling published Feb. 13, 2014.

“The judgment in 1996 was for $194,875. At about the time of the chambers application it had been reduced by agreed monthly payments to only $192,103. Over a 16 year period the respondent had barely been able to keep up with the interest payments, much less pay anything significant down on the principal. It is quite apparent that the respondent will never be able to pay off any meaningful portion of this judgment. One can criticize the respondent for getting himself into this situation, but the principle behind the bankruptcy laws is that people’s mistakes should not weigh them down forever.”

The Alberta government filed an application, in April 2014, for leave to appeal that decision to the Supreme Court of Canada. The highest court announced June 12 it is granting leave to appeal.

In its ruling, the Alberta Court of Appeal cited an Ontario case with similar circumstances.

In 1989, Sandra Clarke was driving uninsured and got into a collision on the Allen Expressway in Toronto. She was making payments to the Ontario Motor Vehicle Accident Claims Fund but got behind, so in 2010 the province threatened to suspend her licence.

In ruling in favour of Clarke, Mr. Justice Robert Goldstein, of the Ontario Superior Court of Justice, suggested that when a provincial agency denies a driver’s licence to someone who has been through the bankruptcy process and who has “not fulfilled a judgment debt incurred as a result of an automobile accident,” this is debt collection and is therefore in violation of the federal Bankruptcy and Insolvency Act.

“The federal BIA takes precedence over the provincial legislation,” Justice Goldstein wrote at the time.

In February, the Alberta Court of Appeal had ruled that the Alberta Traffic Safety Act “indirectly disrupts the fair and equal distribution to creditors of the bankrupt,” and that the provincial legislature is “entitled to explore other means of discouraging driving without insurance that do not result in any operational conflict with federal legislation.”