Moloney v Alberta (Administrator of the Motor Vehicle Accident Claims Act), 2012 ABQB 644

Court of Queen ’ s Bench of Alberta Citation: Moloney v Alberta (Administrator of the Motor Vehicle Accident Claims Act), 2012 ABQB 644 Date: 20121019 Docket: 0603 06317 Registry: Edmonton Between: Joseph William Moloney Applicant - and - The Administrator of the Motor Vehicle Accident Claims Act Respondent _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice A.B.

Moen _______________________________________________________ Introduction [ 1 ] Joseph William Moloney, the Applicant, was an uninsured, at-fault motorist involved in a car accident on November 18, 1989. That was just about 23 years ago. [ 2 ] In 1996, the Respondent, the Administrator of the Motor Vehicle Accident Claims Act (the Administrator) obtained a default judgment against Mr. Moloney for a total of $194,875.00 [1] (the Judgment). The Administrator acted on his behalf pursuant to its

statutory representative capacity under the Motor Vehicle Accident Claims Act . The matter was subsequently resolved on June 18, 1996. That is about 16 years ago. [ 3 ] Mr. Maloney made arrangements to make payments to the Administrator but the amounts were not in evidence. At the time of the hearing, the amount remaining was $192,103.79. [ 4 ] In 2008, Mr. Moloney filed for bankruptcy. On June 17, 2011, he was discharged from bankruptcy (Absolute Order of Discharge).

His Statement of Affairs filed in the bankruptcy contained the Judgment obtained by the Administrator amongst his liabilities. [ 5 ] 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. [2] [ 6 ] Mr. Moloney, seeks an Order staying the enforcement of the1996 judgment of the Respondent, the Administrator. Mr.

Moloney also seeks an Order staying the suspension of his driving privileges and use of the provincial registry system. [ 7 ] I note that Mr. Moloney sued the Administrator, but it was two other departments of the Government of Alberta that purported to enforce the judgment. Therefore, I am considering the issues in this case from the perspective of the Government of Alberta rather than simply the Administrator. I also note, that it is a matter of form. The Attorney General of Alberta submitted a brief as an Intervenor.

Therefore the Government of Alberta has had ample opportunity to argue the law from its perspective, particularly on the doctrine of paramountcy which is central to the issues in this case. [ 8 ] I find that the Government of Alberta is not prejudiced by my proceeding without ensuring that it is added as a

partie to this action. There is no issue of limitations here because the actions of the Government of Alberta are ongoing. Therefore, in the interest of judicial economy, my findings will be with respect to the Government of Alberta as well as the Administrator. In these reasons for judgment, I will use the words “ the Administrator ” and by those words I intend to include the Government of Alberta. [ 9 ] The following issues are raised by these circumstances: 1. Can the Government of Alberta enforce the Administrator ’ s Judgment, despite the bankruptcy and absolute discharge of Mr. Moloney? 2.

Despite the absolute discharge, can the Government of Alberta invoke the provisions of the Traffic Safety Act , and suspend the licence and vehicle registration of Mr. Moloney? [ 10 ] These issues necessarily invite a discussion as to whether the provisions in s. 102 of the Traffic Safety Act , RSA 2000, c T-6 ( “ TSA ” ) are in operational conflict with s. 178(2) of the Bankruptcy and Insolvency Act , RSC 1985, c B-3 ( “ BIA ” ) invoking the doctrine of paramountcy. 1. Can the Government of Alberta enforce the Administrator ’ s Judgment, despite the bankruptcy and absolute discharge of Mr.

Moloney? [ 11 ] Pursuant to s. 178(2) of the BIA , “ an order of discharge releases the bankrupt from all claims provable in bankruptcy ” , with the exception of those specifically identified by Parliament in s. 178(1). Furthermore, the BIA provides that a bankruptcy order or assignment takes precedence over all judicial or other attachments, garnishments, or judgments: BIA , s 70(1).

[ 12 ] The Administrator is not entitled to enforce judgments for damages after an assignment into bankruptcy: Belair v Gottschlich 2008 ABQB 47 . In Belair , the Administrator obtained consent judgments against an uninsured motorist after his discharge in bankruptcy.

Bielby J. held that the Administrator was not entitled to enforce those judgments as by the time they were entered into, the debt to which they related had been discharged through bankruptcy: Belair , at paras 1 and 21 . [ 13 ] In her introductory paragraph, Bielby J. stated: “ Discharge from bankruptcy means that no liability remains upon which judgments can be obtained or enforced except if in relation to those types of debt which fall within the exceptions included in s. 178(1) of the [ BIA ].

Judgments owing to the Administrator are not included in that list of excepted debts ” : Belair , at para 1 . [ 14 ] Although Bielby J. left open the question of whether or not a suspension could flow from a judgment obtained prior to bankruptcy, as is the case before me, I find the stated principles applicable: Belair , at para 30 . [ 15 ] The Administrator concedes that its Judgment constitutes a claim provable in bankruptcy, and as such, Mr. Moloney ’ s absolute discharge releases him from his obligation to pay, as it is not a recognized exception under s 178(1) of the BIA .

The Administrator further concedes that as a result of the bankruptcy, it is unable to pursue the personal property of the bankrupt to satisfy its Judgment. [ 16 ] However, the Administrator contends that it is not seeking to enforce its Judgment, but rather it intends to exercise its statutory right pursuant to s. 102 of the Traffic Safety Act , RSA 2000, c T-6 ( “ TSA ” ), to suspend Mr. Moloney ’ s licence and access to the provincial registry system as a result of the unsatisfied judgment. [ 17 ] The TSA provides in part: 102(1) If (

a) a judgment for damages arising out of a motor vehicle accident is rendered against a person by a court in Alberta or in any other province or territory in Canada, and (

b) that person fails, within 15 days from the day on which the judgment becomes final, to satisfy the judgment, the Registrar, subject to sections 103 and 104 and the regulations, may do one or both of the following: (

c) disqualify the person from driving a motor vehicle in Alberta; (

d) suspend the registration of any motor vehicle registered in that person ’ s name.

(2) When, under subsection (1), a person is disqualified from driving a motor vehicle in Alberta or the certificate of registration of that person ’ s motor vehicle is suspended, (

a) the disqualification or the suspension, as the case may be, remains in effect and shall not be removed, and (

b) no motor vehicle shall be registered in that persons ’ name, until the judgment is satisfied or discharged, otherwise than by a discharge in bankruptcy ...[emphasis added] [ 18 ] The Administrator argues that as a discharge in bankruptcy merely releases the bankrupt from his continuing obligations to pay, but does not extinguish the underlying debt, it is authorized to suspend Mr. Moloney ’ s licence pursuant to s. 102 of the TSA . While I agree with the principle that bankruptcy does not extinguish the underlying debt, I disagree with the Administrator ’ s conclusion that as a result it is able to suspend Mr.

Moloney ’ s licence and vehicle registration privileges. [ 19 ] While the underlying debt is not per se extinguished, the Administrator ’ s ability to enforce its Judgment is. The debt is not extinguished and remains extant so as to enable the creditor to participate in the scheme of distribution, and collect its equitable share of the bankrupt ’ s available assets. Without an underlying debt, there would be no basis for this participation. The fact that the debt remains

extant does not allow creditors to utilize remedies that would only be available if the debt survived bankruptcy. This would defeat the entire concept of the “fresh start” principle. Houlden and Morawetz, Bankruptcy and Insolvency Law in Canada, 4th ed., Vol. 3,(Toronto: Carswell, 2010) at 6-283. [20] As was stated by Bielby J., a discharge in bankruptcy means no liability remains upon which a judgment can be enforced,unless it is a debt excepted from this general principle by virtue of s 178(1) of the BIA.

Although the underlying debt is not extinguishedon bankruptcy, the liability to pay it is extinguished. [21] By extension, the Administrator should not be able to utilize an enforcement mechanism (suspension of a licence) associatedwith a judgment that no longer has liability attached to it. Here the Government of Alberta purports to have power that no other litiganthas, that is, to make laws to its advantage. Here, Alberta purports to ignore the fundamental premise of bankruptcy law, that is, that thecreditor can get a fresh start.

Alberta has set itself above other creditors. [22] The question then becomes, whether the Government of Alberta can utilize s. 102 of the TSA to suspend Mr. Moloney’slicence as a result of an unsatisfied judgment, discharged in bankruptcy, which therefore has no liability attached to it. 2. Despite the absolute discharge, can the Government of Alberta invoke the provisions of the Traffic Safety Act, and suspendthe licence and vehicle registration of Mr.

Moloney? [23] Whether the Government of Alberta can invoke the suspension provisions under s 102 of the provincial law, the TSA,depends upon the operation of the provisions in face of a bankruptcy under federal law, and whether a conflict arises between the twopieces of legislation: federal and provincial. (

a) Interpretation of Legislation [24] The starting point for statutory

interpretation in Canada has been held by the Supreme Court to be Driedger’s definitive formulation in Construction of Statutes (2nd ed. 1982) at p. 87: Today there is only one principle or approach, namely, the words of

an Act are to be read in their entire context and in their grammaticaland ordinary sense harmoniously with the scheme of the Act, the object of the Act and the intention of Parliament. Barrie Public Utilities v. Canadian Cable Television Assn., 2003 SCC 28, as cited in Houlden and Morawetz, Bankruptcy and Insolvency Law in Canada, 4th ed., Vol. 1, (Toronto: Carswell, 2010) at 1-6. [25] Where the constitutionality of

an Act or its provisions are in question, certain principles of

interpretation apply, namely: thepresumption of constitutionality and the doctrine of paramountcy: KPMG Inc. v Alberta Dental Association, 2005 ABCA 101 at para 20[Hover]. Firstly, provincial legislation is approached with the assumption that it has been validly enacted: McNeil v Nova Scotia (Boardof Censors), (SCC), [1978] 2 SCR 662.

Secondly, where there is an operational conflict between validly enactedprovincial and federal legislation, the doctrine of paramountcy dictates that the federal law must prevail: Multiple Access Ltd. vMcCutcheon, (SCC), [1982] 2 SCR 161. [26] Here, there is no contest that the respective legislation, the TSA and the BIA are validly enacted within the powers of theprovince and the federal government. However, there may be an operational conflict between the two in the circumstances of this case. (

b) What is an operational conflict?

[27] An operational conflict exists where compliance with one Act is inconsistent with, or prohibits full compliance with anotherAct in a given situation.

Where this occurs, to the extent of the conflict, the provincial legislation is ineffective and the BIA prevails:Husky Oil Operations Ltd. v Minister of National Revenue, (SCC), [1995] 3 SCR 453. [28] In Husky Oil, a majority of the Supreme Court of Canada reviewed the law of paramountcy in a bankruptcy context, listing anumber of principles to be applied in determining whether a provincial statute is inoperative: at paragraphs 32 and 39 (1) provinces cannot create priorities between creditors or change the scheme of distribution on bankruptcy under s. 136(1) of theBankruptcy Act; (2) while provincial legislation may validly affect priorities in a non-bankruptcy situation, once bankruptcy has occurred section 136(1)of the Bankruptcy Act determines the status and priority of the claims specifically dealt with in that section; (3) if the provinces could create their own priorities or affect priorities under the Bankruptcy Act this would invite a different scheme ofdistribution on bankruptcy from province to province, an unacceptable situation; (4) the definition of such terms as “secured creditor”, if defined under the Bankruptcy Act, must be interpreted in bankruptcy cases asdefined by the federal parliament, not the provincial legislatures.

Provinces cannot affect how such terms are defined for the purposes ofthe Bankruptcy Act; (5) in determining the relationship between provincial legislation and the Bankruptcy Act, the form of the provincial interest createdmust not be allowed to triumph over its substance. Provinces are not entitled to do indirectly what they are prohibited from doingdirectly; and (6) there need not be any provincial intention to intrude into the exclusive federal sphere of bankruptcy and to conflict with the order ofpriorities of the Bankruptcy Act in order to render the provincial law inapplicable.

It is sufficient that the effect of provincial legislationis to do so. [29] In Husky Oil, the majority found the provincial law had the effect of reordering priorities and there was therefore a clearconflict. In arriving at their conclusion in Husky Oil, the majority stressed the importance of the effect of the provincial legislation.

Indetermining the legislation’s effect, while reference to the purposes of the federal and provincial laws is informative, the existence of aninconsistency or conflict can only be determined by a consideration of the actual operation of the laws: Gorguis v SaskatchewanGovernment Insurance, 2011 SKQB 132. [30] In order to determine whether there is an operational conflict between the TSA and the BIA, it is necessary to review thepurpose and operation of both.

Then one must consider whether compliance with both acts is rendered inconsistent or impossible bydirectly conflicting with an express provision of the BIA, or whether the TSA has the intent and/or effect of interfering with provisions ofthe BIA or its fundamental objectives. (

c) Purpose and Operation of the BIA and TSA [31] It is a fundamental purpose of the BIA to provide financial rehabilitation and a “fresh start” to insolvent persons so they maybe unfettered by past debts while integrating into the commerce of the country once again: Houlden and Morawetz, Bankruptcy and Insolvency Law in Canada, 4th ed., Vol. 3, (Toronto: Carswell, 2010) at 6-283. [32] These purposes underlie the other fundamental objectives of the BIA, which were identified by the Alberta Court of Appealin Hover, 2005 ABCA 101 at para 27, as:

1) to permit debtors to obtain a discharge from their debts subject to reasonable conditions so that they may reintegrate themselves intothe commerce of the country; 2) to provide for the orderly and fair distribution of the property of the bankrupt among the creditors; 3) toensure that insolvency laws throughout Canada are uniform; 4) to provide a regime whereby the creditors of the bankrupt will pursuetheir claims by collective action through the trustee so that the assets of the bankrupt can be realized and distributed on an equitablebasis; and 5) to permit the rehabilitation of the bankrupt unfettered by his debts: Houlden and Morawetz, Bankruptcy and Insolvency Lawof Canada (Toronto: Carswell, 1996) at 1-4-1-6. [33] The power to regulate drivers’ licences falls within provincial authority under property and civil rights.

The TSA was intendedto be a comprehensive piece of legislation dealing with all aspects of drivers, vehicle operations, and road safety: Alberta, LegislativeAssembly, Hansard, 24th Leg, 3rd Sess, No 907, ( 12 April 1999) at 927.

As its name implies, its primary purpose is the protection ofpublic safety via the regulation of traffic and motor vehicles. [34] In regards to the licence suspension provisions under s. 102, in speaking to similar provisions under Ontario’s HighwayTraffic Act, RSO 1990, c H-8, s 198, the additional purpose of preventing “irresponsible drivers from having the continued privilege ofdriving in Ontario without being made to account for the normal consequences of their vast irresponsibilities” was identified: Cooke vPilot Insurance Co. (1996), 24 OTC 1 (Ont. Gen.

Div.). [35] There is no question that the BIA and the TSA exist harmoniously in their separate spheres. The question is whether theoperation of the TSA licence suspension mechanisms at issue here conflict or infringe the BIA or its objectives. (

d) Conflicts [36] The Applicant contends that s. 102 of the TSA conflicts with the BIA or its objectives, and is therefore in operational conflictand ineffective to the extent of the inconsistencies. The Administrator on the other hand urges this Court to accept its proposition thatMr. Moloney is not being forced to pay the Judgment, and as such, there is no operational conflict. Further, they argue that Mr.

Moloneyhas a choice: he can choose to pay the Judgment to obtain his licence and registration, or he can find alternative modes of transportation. [37] This area was canvassed by the Alberta Court of Appeal in Hover, in relation to the Alberta Dental Association’s (the“ADA”) power to suspend a practitioner’s licence due to professional misconduct. The Court decided that the suspension provisions didnot result in an operational conflict between the Dental Professions Act and the BIA.

In so concluding, I find several distinguishingfactors from the case before me. [38] Firstly, the factual circumstances of Hover are distinguishable. Hover involved a dentist found by a tribunal of the DentalAssociation to have engaged in professional misconduct. This finding was upheld on appeal within the association, and the costs of thehearings, as well as fines for the finding of misconduct, were levied against Hover.

The power to suspend the licence originated from thefinding of professional misconduct, and a host of statutory sanctions made available as a result; not solely from non-payment of a debt, asis the case before me: Hover, at paras 34-36, 44. [39] Secondly, the Court in Hover suggests that where licence suspension is motivated for an improper purpose, such as “to obtainpayment that the licensing authority would not otherwise be entitled to in a bankruptcy”, an operational conflict is created with the BIA:Hover, at para 58.

Further, the Court alluded to the fact that where the power to suspend is being used to enforce payment, which theAdministrator cannot otherwise enforce, the consequences of non-payment, namely suspension, may also be precluded: Hover, at para45. [40] In relation to this aspect of the decision in Hover, the Court reviewed case law related to the suspension of driver’s licences.The Court found these cases persuasive as a professional licence to practice dentistry was analogous to a driver’s licence in the sense ofbeing a privilege rather than a right. [41] The Court in Hover, relying upon similar authorities put forward by the Administrator in the case before me, concluded thatprovincial licence suspension regimes did not reorder priorities upon a bankruptcy by allowing a province to withhold a driver’s licenceuntil fines were paid: Ollivier, Re (1999), 1999 ABQB 213 , 243 AR 265 (Alta.

Q.B.); Zahara v Alberta (Minister of Highways)(1965), (AB KB), 51 WWR 289 (Alta. T.D.); Cooke v Pilot Insurance Co.; Pizzey v Derrough (1985), (SK KB), 43 Sask R 138 (Sask. Q.B.); Deol, Re (1995), 8 BCLR (3d) 95 (B.C. S.C.). The Court found these decisions were

consistent with the principles enunciated in Husky Oil, as the payment of the fines were not mandatory: Hover, at paras 55 and 59. [42] The Court then distinguished case law where the threat of licence suspension was being used as a tool of debt collection toindirectly collect what was prohibited by the BIA. In such an instance, the licence suspension was for an improper purpose, and not basedon public safety standards: Hover, at paras 57, 58. [43] Here the Government of Alberta seeks to suspend Mr.

Moloney’s licence solely for the purpose of collecting on a debt whichhas been the subject of a bankruptcy, that is, for so long as the 1996 Judgment remains unpaid. I am not aware of any other sanctionshaving been sought by the Government of Alberta against Mr. Moloney at any time after the 1989 accident or before the 2011bankruptcy. Clearly, the Government of Alberta had the power to suspend Mr. Moloney’s licence at the time of the accident as onesanction for his irresponsible driving. This is not a situation where continuous sanctions were sought against an individual formisconduct as was the case in Hover.

Additionally, the Government of Alberta’s sole basis for its authority to suspend is premised uponone statutory provision dealing with non-payment of a judgment, and therefore again distinguishable from Hover. [44] In the letters received by Mr.

Moloney, the reasons for the suspension are specifically stated as being related to hisunsatisfied Judgment: “This letter will serve as notification that due to your unsatisfied motor vehicle accident claim, your operator’s licence and vehicleregistration privileges will be suspended indefinitely...” [Brief of the Applicant, Tab 3, Letter from the Director of Driver Fitness andMonitoring]. “...I advise that your client, Joseph William Moloney, remains indebted for the judgment debt obtained against him.

Section 102(2) ofthe Traffic Safety Act (copy attached) states that he remains indebted “until the judgment is satisfied or discharged, otherwise than by adischarge in bankruptcy.” [Brief of the Applicant, Tab 4, Letter from Supervisor of Motor Vehicle Accident Recoveries]. [45] The Government of Alberta’s actions are not disciplinary measures but a method of debt collection, and a colourable attemptto circumvent the provisions of the BIA.

They therefore constitute an improper purpose and are in operational conflict with the BIA.Under the doctrine of paramountcy, to the extent of the inconsistency, they are ineffective. [46] There is also the additional factor of the phrase “otherwise than by a discharge in bankruptcy” contained in the impugnedprovision: TSA, s 102(2).

I interpret the effect of the phrase as follows: If a person is subject to the suspension provisions, the suspensionshall not be removed until the judgment is satisfied or discharged, otherwise than by a discharge in bankruptcy - i.e. a bankruptcydischarge does not constitute a discharge within the meaning of s. 102(2) of the TSA. This specific language referencing a bankruptcyscenario directly offends the powers of Parliament, and engages the doctrine of paramountcy.

In regards to the same phrase used insimilar license suspension legislation, the Ontario Superior Court of Justice reached the same conclusion: Lucar, Re (2001), (ON SC), 32 CBR (4th) 270 at para 13 (Ont. S.C.J.). [47] Although the provincial legislation operates validly outside the context of bankruptcy, its purposes are valid, and there maynot have been an intention to intrude into the exclusive domain of bankruptcy, the fact of the matter is s. 102 of the TSA has that effect.The importance of the age old adage “substance over form” cannot be overemphasized.

As was stated by Gunther J., writing for themajority in Husky Oil, at para 39: “the provinces are not entitled to do indirectly what they are prohibited from doing directly”. Conclusion [48] Where a debtor has received an Absolute Order of Discharge in bankruptcy under the BIA, the use of s. 102 of the TSA bythe Government of Alberta to enforce an unsatisfied judgment is operationally inconsistent with the BIA and to that extent is ineffective. [49] Therefore, I find that the Government of Alberta is not entitled to utilize its statutory powers under s 102 of the TSA tosuspend either Mr.

Moloney’s driver’s licence or vehicle registration privileges. The relief of the Applicant is granted, and an Order shall

issue to the effect that: (1) enforcement of the 1996 Judgment obtained against Mr. Moloney by the Administrator is stayed; and (2) suspension of Mr. Moloney ’ s driving privileges and his use of the provincial Registry system arising from the 1996 Judgment is stayed. [ 50 ] Costs are awarded in favour of Mr. Moloney. If there are any issues concerning costs the parties may bring an application before me only if they arrange to do so within 30 days of this judgment. Heard on the 09 th day of September, 2012. Dated at the City of Edmonton, Alberta this 19 th day of October, 2012. A.B. Moen J.C.Q.B.A.

Appearances: Jeremy Newton for the Applicant Lionel Whittaker (Alberta Justice) Lillian Riczu (Alberta Justice & Solicitor General) for the Respondent [1] From the Affidavit of Mr. Maloney filed March 29, 2012. [2] 2011: He received two letters related to his driving privileges. Both letters indicated that his operator ’ s license and vehicle registration privileges would be suspended indefinitely for a failure to satisfy the Administrator ’ s Judgment against him.