



COURT OF APPEAL FOR ONTARIO

CITATION: Canada (Superintendent of
    Bankruptcy) v. 407 ETR Concession Company Limited, 2013 ONCA 769

DATE: 20131219

DOCKET: C54560

Doherty, Simmons and Pepall JJ.A.

In the Matter of the Bankruptcy of Matthew David
    Moore, of the City of Brampton, in the Regional Municipality of Peel, Province
    of Ontario

BETWEEN

The Superintendent of Bankruptcy

Appellant

and

407 ETR Concession Company Limited and Matthew David
    Moore

Respondents

Liz Tinker and Mark Taggart, for the appellant

J. Thomas Curry, Andrew Parley and Jon Laxer, for the
    respondents

David Thompson and Matthew G. Moloci, for the
    interveners

Heard:  June 10, 2013

On appeal from the order of Justice Frank J. C. Newbould
    of the Superior Court of Justice dated October 25, 2011, with reasons reported
    at 30 M.V.R. (6th) 137.

Pepall J.A.:

A.

INTRODUCTION

[1]

Highway 407 is a public-private partnership between the respondent, 407
    ETR Concession Company Limited (ETR), and the Government of Ontario. The
    electronic, open-access highway was established to enhance transportation in and
    around the Greater Toronto Area.

[2]

ETR is a private company that owns and operates Highway 407 pursuant to
    a 99-year lease and certain concession agreements with the Ontario government. The
Highway 407 Act
, 1998, S.O. 1998, c. 28 (the 
407 Act
), enables
    ETR to establish, collect and enforce tolls, administration fees and interest (toll
    debt) charged to members of the public for their use of the highway.

[3]

By operation of s. 22(4) of the
407 Act
, toll debt owing to ETR
    may be enforced against a discharged bankrupt through the suspension of his or
    her vehicle permit by Ontarios Registrar of Motor Vehicles. The appellant, the
    Superintendent of Bankruptcy (the Superintendent), argues that the doctrine
    of federal paramountcy renders s. 22(4) inoperative with respect to a
    discharged bankrupt for two reasons.  First, s. 22(4) conflicts with the
    operation of s. 178(2) of the
Bankruptcy and
    Insolvency Act
, R.S.C., 1985, c. B-3 (
BIA
), which
    provides that a discharge releases a bankrupt from all claims provable in
    bankruptcy. Second, s. 22(4) frustrates the purposes of the bankruptcy and
    insolvency system.

[4]

This appeal addresses whether these two statutory schemes can
    co-exist in the limited context of a discharged bankrupt.  For the reasons that
    follow, I am of the view that they cannot.

[5]

Although served, the Attorney General for the Province of
    Ontario did not appear to defend the provincial statutory scheme or to advance
    any public policy argument in support of its application in the circumstances
    of a discharged bankrupt.

B.

FACTS

[6]

Matthew David Moore was a truck driver. He had two vehicles. Due
    to his use of Highway 407, he incurred indebtedness to the ETR which he failed
    to pay.  As a result, in March 2005 and December 2006, ETR sent notices of his
    non-payment relating to two separate vehicles to the Registrar of Motor
    Vehicles for the Province of Ontario (the Registrar).  When the vehicle
    permit for one of the vehicles expired in August 2005, it could not be
    renewed.  Nonetheless, Moore continued to use Highway 407 for another 18 months
    contrary to s. 51 of the
Highway Traffic Act
, R.S.O. 1990, c. H.8.  As
    of October 2007, Moores indebtedness to ETR amounted to $34,977.06.

[7]

Moore made an assignment into bankruptcy on November 10, 2007.
    ETR was listed as a creditor on Moores statement of affairs filed in his
    bankruptcy proceedings, however, it did not file a proof of claim. A proof of
    claim would have enabled ETR to make submissions at any hearing into Moores
    discharge from bankruptcy and to share rateably with Moores other unsecured
    creditors in the bankruptcy.

[8]

After his assignment into bankruptcy, Moore was involved in a
    slip and fall. As a result of this accident, he retrained to become an
    automotive salesperson and now works in that field.   He gave evidence that he requires
    a vehicle permit for his livelihood.

[9]

Moore obtained a conditional discharge from bankruptcy in February 2011.
    He requested an Ontario Ministry of Transportation (MTO) vehicle permit. MTO
    refused his request due to his outstanding indebtedness to ETR.

[10]

On
    June 21, 2011, Moore obtained an absolute discharge from bankruptcy.

[11]

Moore
    then moved before a Registrar in Bankruptcy seeking a declaration that his debt
    to ETR was released as a result of his discharge, and an order compelling the
    MTO to issue a vehicle permit to him upon the payment of the usual licensing
    fees. ETR was served but due to inadvertence, did not attend at the motion. Neither
    did the Superintendent. The Registrar in Bankruptcy granted the requested
    declaration on September 8, 2011.  Specifically, she ordered that:

(1)   the discharge of the bankrupt dated June 21, 2011
    released him from all claims provable in bankruptcy, including the debt of ETR
    as at November 10, 2007, and

(2)   the Ministry of Transportation was directed to issue
    plates to him upon payment of the usual licensing fees.

[12]

ETR
    then brought a motion before a judge seeking to set aside the order of the Registrar
    in Bankruptcy. Moore brought an amended motion essentially seeking the same
    relief he had already sought and obtained. The Superintendent was not served
    with either of these motions.

[13]

The
    motions judge granted ETRs motion and dismissed Moores motion. As of October
    25, 2011, the date of the order, Moores toll debt to ETR amounted to
    $88,767.83. The motions judge concluded that there was no operational conflict
    between s. 22(4) of the
407 Act
and s. 178(2) of the
BIA
. Although
    the motions judge noted that one of the purposes of the
BIA
is
    financial rehabilitation, he did not consider this purpose in the context of the
    second branch of the paramountcy analysis, that is, whether any legislative purpose
    of the
BIA
was thwarted.  He did not consider whether the operation of
    s. 22(4) to collect pre-bankruptcy indebtedness impeded Moores ability as a
    discharged bankrupt to have a fresh start post-bankruptcy or resulted in
    unequal treatment of unsecured creditors.

[14]

The
    Superintendent was concerned about the correctness of the motions judges
    decision and its impact on the integrity of the bankruptcy and insolvency
    system. Moore advised the Superintendent that he was not pursuing an appeal
    because he had received a very, very attractive offer to settle from ETR. The
    Superintendent therefore sought to appeal the order.

[15]

ETR
    moved to quash the Superintendents notice of appeal. The Superintendent then sought
    leave to appeal the motion judges decision. This Court (Weiler, Blair and
    Rouleau JJ.A.) concluded that while the Superintendent did not have the right
    to bring an appeal, the circumstances were exceptional, and leave to appeal
    under s. 193(e) of the
BIA
should be granted.

[16]

On
    November 26, 2012, Blair J.A. granted intervener status to Michael Dow,
    Gwendolyn Miron and Peter Teolis, proposed representative plaintiffs in a class
    action proceeding against ETR relating to its collection of toll debt in a
    bankruptcy context.

C.

ISSUES ON APPEAL

[17]

The
    issues on this appeal are
:

(i)    Does s. 22(4) of the
407 Act
conflict with the
operation
of s. 178 (2) of the
BIA
?

(ii)   Does s. 22(4) of the
407 Act
conflict with the
purpose
of the bankruptcy and insolvency system because it (a) thwarts the objective of
    providing the bankrupt with a fresh start or (b) creates a new class of debt
    that survives bankruptcy and frustrates Parliaments intention to treat all
    unsecured creditors equally?

[18]

While
    argued by the interveners, this appeal does not extend to address the time period
    post-bankruptcy and pre-discharge and more particularly, the effect of the
BIA

stay of proceedings on a bankrupts debt obligations.

D.

LEGISLATIVE SCHEMES

(i)

The
407 Act

[19]

In
407 ETR Concession Co. Ltd. v. Ontario (Registrar of Motor Vehicles)
(2005), 82 O.R. (3d) 703 (Div. Ct.), at para. 27, the court described the
    purpose of the
407 Act
:

[T]he purpose of the [
407 Act
] was to privatize the
    operation of Highway 407 and, given its open-access character, to provide [ETR]
    with an effective method of toll collection.  The legislature recognized that
    plate denial is a necessary feature of an open-access toll highway given the
    exceptionally large number of transactions, the small balances and the cost of
    other means of debt collection.

[20]

The
    legislative debates surrounding the enactment of the
407 Act
indicate
    that it was intended to relieve congestion on Highway 401 in and around the
    Greater Toronto Area, reduce the pollution caused by idling cars, and create
    jobs while striking an optimal risk-sharing arrangement with the private
    sector. See
Ontario, Legislative Assembly, Official Report of Debates
    (Hansard)
, 36 Parl., 2nd Sess., No. 47 (21 October 1998), at 1520 (Rob
    Sampson); 36 Parl., 2nd Sess., No. 48A (22 October 1998) at 2120 (John
    Gerretson); 36 Parl., 2nd Sess., No. 50A (27 October 1998) at 1940 (Doug Galt).

[21]

The
407 Act
designates Highway 407 as a private toll highway.  In its
    capacity as owner, ETR is required to provide the public with open access to
    the highway.  Members of the public who use the highway are obliged to pay a
    toll and any related fees to ETR.   ETR may establish, collect and enforce
    payment of tolls and administration fees. These powers are only to be exercised
    in accordance with the terms and conditions of an agreement entered into by the
    Minister for Privatization for the Province and ETR. (No such agreement was
    before the Court on this appeal.)  Toll debt collected by or on behalf of ETR is
    the property of ETR. There are no toll booths, and no fees are paid at the
    entrance to or exit from the highway. The system is electronic, and ETR invoices
    the owner of the vehicle permit or the lessee of an electronic transponder or
    toll device that has been mounted on to the users vehicle.

[22]

Pursuant
    to s. 15 of the
407 Act
, the toll debt is payable on the day an
    invoice is sent.  If not paid within 35 days, ETR may send a notice of failure
    to pay to the debtor.  If not paid within 90 days thereafter, ETR may send a s.
    22 notice to both the debtor and the Registrar.

[23]

The
    relevant sub-sections of s.  22 of the
407 Act
state:

22. (1) If a toll, and the related fees and interest, are not
    paid within 90 days of the day a person receives a notice of failure to pay
    under section 16, the owner [ETR] may notify the Registrar of Motor Vehicles of
    the failure to pay.



(3) The owner [ETR] shall promptly inform the person who
    received notice of failure to pay under section 16 that notice has been given
    to the Registrar of Motor Vehicles under subsection (1).

(4) If the Registrar of Motor Vehicles receives notice under
    subsection (1), he or she shall, at the next opportunity, refuse to validate
    the vehicle permit issued to the person who received the notice of failure to
    pay under section 16 and refuse to issue a vehicle permit to that person.



(6) If notice has been given to the Registrar of Motor Vehicles
    under subsection (1) and the toll and related fees and interest are
    subsequently paid, the owner [ETR] shall immediately notify the Registrar of the
    payment.

(7) If the Registrar of Motor Vehicles is notified by the owner
    [ETR] that the toll, fees and interest have been paid or is notified by the
    dispute arbitrator that the person is not responsible for paying the toll, fees
    and interest, the Registrar shall,

(a) validate any vehicle permit that he or she refused to
    validate under subsection (4);

(b) issue a vehicle permit to a person if it was refused
    under subsection (4).

[24]

As
    can be seen, the effect of this statutory provision is to permit ETR to enforce
    payment of toll debt. Once the Registrar receives notice from the ETR of a
    failure to pay, the Registrar
must
refuse to
    validate the debtors vehicle permit and may not issue a vehicle permit to that
    person. Once ETR notifies the Registrar that payment has been made (or the
    Registrar is notified by the dispute arbitrator that the debtor is not
    responsible for paying the toll), the Registrar shall validate and issue a
    vehicle permit.

[25]

There
    is nothing in the
407 Act
that requires a driver to use Highway 407. 
    Conversely, ETR is unable to refuse anyone access to the highway, including debtors
    who have failed to pay toll debt. To enforce payment, it must rely on the
    powers granted under the
407 Act
.

[26]

There
    is no dispute that s. 22 of the
407 Act
is validly enacted pursuant to
    the Provinces authority under s. 92 of the
Constitution Act, 1867

and
    is therefore within the Provinces competence. As the motions judge noted at
    para. 33 of his reasons, there is also no quarrel with the proposition that the
    purpose of s. 22(4) is to enforce payment of a debt. Similarly, there is no
    issue that the denial of vehicle permits is a legitimate mechanism to achieve
    the purposes of the Highway 407 private/public partnership and the operation of
    that highway. Indeed, for most of those members of the public who use Highway
    407, the issues before this court are immaterial. The appellants challenge
    relates only to a member of the public who is a discharged bankrupt.

(ii)

The
BIA

[27]

Bankruptcy is triggered by insolvency. It is a procedure that is
    governed by statute. The
BIA
is the comprehensive code that addresses
    bankruptcy.  Rand J. captured the essence of the bankruptcy process in
Canadian
    Bankers Association v. Attorney General of Saskatchewan
, [1956] S.C.R. 31,
    at p. 46:

Bankruptcy is a well understood procedure by which an
    insolvent debtors property is coercively brought under a judicial
    administration in the interests primarily of the creditors.  To this proceeding
    not only a personal stigma may attach but restrictions on freedom in future
    business activity may result.  The relief to the debtor consists in the
    cancellation of debts which, otherwise, might effectually prevent him from
    rehabilitating himself economically and socially.

[28]

The
    Supreme Court reiterated these public policy objectives in
Sam Lévy &
    Associés Inc. v. Azco Mining Inc.
, 2001 SCC 92, [2001] 3 S.C.R. 978, at paras.
    33 and 65.

[29]

In
Husky Oil
Operations Ltd. v. Minister of National Revenue
,
    [1995] 3 S.C.R. 453, at para. 7, Gonthier J. stated that the bankruptcy system
    serves two distinct goals: the equitable distribution of a bankrupts assets
    among the estates creditors
inter se
and the financial rehabilitation
    of insolvent individuals.

[30]

In
The 2013 Annotated Bankruptcy and Insolvency Act

(Toronto:
    Carswell, 2013), at p. 2, Lloyd W. Houlden, Geoffrey B. Morawetz and Janis P.
    Sarra describe the purposes of the
BIA
as follows:

It is a fundamental purpose of the
Act
to provide for
    the financial rehabilitation of insolvent persons. The
Act
permits an
    honest debtor, who has been unfortunate, to secure a discharge so that he or
    she can make a fresh start and resume his or her place in the business
    community.

The
Act
was passed to provide for the orderly and fair
    distribution of the property of a bankrupt among his or her creditors on a
pari

passu
basis.

...

The Act provides a regime whereby the creditors of the bankrupt
    will pursue their claims by collective action through the trustee so that the
    assets of the bankrupt can be realized and distributed on an equitable basis
    subject to the priorities of preferred creditors and the rights of secured
    creditors. [Citations omitted.]

[31]

This last purpose was emphasized
    by Deschamps J. in
Century Services Inc. v. Canada (Attorney
    General)
,
2010 SCC 60, [2010] 3
    S.C.R. 379
, at para. 22:

While insolvency proceedings may be governed by different
    statutory schemes, they share some commonalities.  The most prominent of
    these is the single proceeding model.  Th
e
nature and purpose of the single proceeding model
are
described by Professor Wood in
Bankruptcy and Insolvency Law
:

They all provide a collective proceeding that supersedes the
    usual civil process available to creditors to enforce their claims.  The
    creditors remedies are collectivized in order to prevent the free-for-all that
    would otherwise prevail if creditors were permitted to exercise their
    remedies.  In the absence of a collective process, each creditor is armed
    with the knowledge that if they do not strike hard and swift to seize the
    debtors assets, they will be beat out by other creditors. [pp. 2-3]

The single proceeding model avoids the inefficiency and chaos
    that would attend insolvency if each creditor initiated proceedings to recover
    its debt.  Grouping all possible actions against the debtor into a single
    proceeding controlled in a single forum facilitates negotiation with creditors
    because it places them all on an equal footing, rather than exposing them to
    the risk that a more aggressive creditor will realize its claims against the
    debtors limited assets while the other creditors attempt a compromise.

[32]

When a person becomes bankrupt, all of his or her
    property vests in the trustee in bankruptcy: s. 71.  Section
69.2(1) of
    the
BIA
precludes any remedy against the debtor or the debtors
    property once in bankruptcy.  The exercise of a remedy to collect and enforce
    is stayed by the bankruptcy.

[33]

The
    bankrupts property is then divisible among the bankrupts creditors unless an
    exemption applies: s. 67.  Exemptions include prescribed payments relating to
    the essential needs of an individual and property that is exempt from execution
    or seizure under provincial laws. As a result of the operation of s. 67 and s.
    2(1)6 of the
Execution Act
, R.S.O. 1990, c. E.24, a motor vehicle not
    exceeding $5,000 in value is exempt.

[34]

Pursuant
    to s. 121 of the
BIA
, all debts and liabilities, present or future, to
    which the bankrupt is subject on the day of bankruptcy are deemed to be claims
    provable in bankruptcy.  Pursuant to s. 124, every creditor shall prove his or
    her claim, failing which, the creditor is not entitled to share in any
    distribution that is made. All unsecured claims provable in bankruptcy are to
    be paid rateably. The duties and the discharge of a bankrupt are addressed in
    Part VI of the
BIA
. Creditors who have filed a proof of claim receive
    notice of the discharge hearing and may make submissions and address their
    concerns at the hearing. As mentioned, if a creditor fails to file a proof of
    claim, it may not participate in any distribution of the debtors property.

[35]

In
Vachon v. Canada Employment and Immigration Commission
, [1985] 2
    S.C.R. 417, at p. 426, Beetz J. observed that an ordinary unsecured creditor
    with a claim provable in bankruptcy can only obtain payment of that claim
    subject to and in accordance with the terms of the
BIA.
The procedure laid
    down by that Act completely excluded any other remedy or procedure.

[36]

Section
    168.1 and following of the
BIA
address the discharge procedures.  Subsection
    178(2) provides that [s]ubject to subsection (1), an order of discharge
    releases the bankrupt from all claims provable in bankruptcy.   Examples of subsection
    (1) exceptions include debts arising from any enactment of a province that
    provides for loans or guarantees of loans to students and debts arising from an
    order or agreement for child or spousal support. No exception is specified for
    provincial driving or vehicle licensing debts generally or ETR toll debts
    specifically.

[37]

Not surprisingly, the regime results in hardship for
    many creditors.  In
Schreyer v. Schreyer
, 2011 SCC 35, [2011]
    2 S.C.R. 605, a wife argued that her equalization claim survived her husbands
    bankruptcy.  Writing for the Supreme Court, LeBel J. described the nature of
    the insolvency regime and the application of s. 178(2) at paras. 19-21:

The very design of insolvency legislation raises difficult
    policy issues for Parliament. Legislation that establishes an orderly
    liquidation process for situations in which reorganization is not possible,
    that averts races to execution and that gives debtors a chance for a new start
    is generally viewed as a wise policy choice. Such legislation has become part
    of the legal and economic landscape in modern societies. But it entails a
    price, and those who might have to pay that price sometimes strive mightily to
    avoid it. Despite the proven wisdom of the policies underpinning the insolvency
    legislation, it is understandable that few appreciate the haircuts or even
    outright losses that bankruptcies trigger. So creditors seek to obtain security
    or third-party guarantees. In other cases, statutory exemptions from the
    application of the
BIA
may apply. For a long time, governments took care
    to protect their own interests, but they now generally accept, albeit with some
    reluctance, that they should share the fate of ordinary creditors (
Century
    Services Inc. v. Canada (Attorney General)
, 2010 SCC 60, [2010] 3 S.C.R.
    379). Other types of exemptions that seem fair or even necessary are set out in
    the
BIA.
However, the more exemptions there are, the less likely it is
    that the basic policy objectives of insolvency legislation can be achieved.

As a consequence, the interpretation of the
BIA
requires
    the acceptance of the principle that every claim is swept into the bankruptcy
    and that the bankrupt is released from all of them upon being discharged unless
    the law sets out a clear exclusion or exemption.

...

For creditors, the discharge means that they cease to be able
    to enforce claims against the bankrupt that are provable in bankruptcy (L. W.
    Houlden, G. B. Morawetz and J. Sarra,
Bankruptcy and Insolvency Law of
    Canada
(4th ed. (loose-leaf)), vol. 3, at p. 6-283).

[38]

In
    that case, the Supreme Court determined that a provable claim under the
BIA
was to be broadly defined.  The Court upheld the decision that the wifes
    equalization claim was provable in her husbands bankruptcy and was therefore
    released by his discharge.

[39]

Section
    72 of the
BIA
touches on the effect of provincial legislation.  It provides
    that:

72. (1) The provisions of this Act shall not be deemed to
    abrogate or supersede the substantive provisions of any other law or statute
    relating to property and civil rights that are not in conflict with this Act,
    and the trustee is entitled to avail himself of all rights and remedies
    provided by that law or statute as supplementary to and in addition to the
    rights and remedies provided by this Act.

(2) No bankruptcy order, assignment or other document made or
    executed under the authority of this Act shall, except as otherwise provided in
    this Act, be within the operation of any legislative enactment in force at any
    time in any province relating to deeds, mortgages, hypothecs, judgments, bills
    of sale, chattel mortgages, property or registration of documents affecting
    title to or liens of charges on real or personal property or immovables or
    movables.

[40]

Lastly,
    the
BIA

constitutes a complete code governing the bankruptcy
    process. In
Husky Oil
, at para. 85, Gonthier J. stated:

Parliament has enacted a complete code in the
Bankruptcy
    Act
, one which necessarily calls upon provincial law for its operation.
    But Parliaments invitation stipulates an important limitation at the threshold
    of its domain, namely, that provincial law simply cannot apply when to do so
    would entail subverting the federal order of priorities in the
Bankruptcy
    Act
.

[41]

There
    are sound policy reasons in support of Parliaments decision to enact such a
    comprehensive code:

-

creditors
    are placed on an equal footing, in a single proceeding;

-

the
    trustee in bankruptcy may collect all of the bankrupts available assets for
    the benefit of his or her creditors;

-

the
    exemptions in the
BIA
will ensure that the bankrupt has enough to live
    on;

-

once
    the bankrupt is discharged, he or she is released from all claims provable and
    can embark on a fresh start in life, or put differently, financial
    rehabilitation;

-

uncertainty
    about which claims or debts are not released by a discharge is limited, as the
    exceptions are expressly described in the
BIA
.

E.

MOTIONs JUDGES REASONS

[42]

Having
    discussed the applicable legislation, I will now turn to the motions judges
    reasons.

[43]

The
    motions judge commenced his analysis by identifying the purpose of ss. 16 to 25
    of the
407
Act
.  In describing s. 22, at para. 14, he said that
    its purpose is directed to the collection of a debt. ETR did not quarrel with
    the proposition that the purpose of s. 22(4) is to enforce payment of a debt.  In
    a footnote, the motions judge stated that ETR pointed out that the collection
    of debts was in the public interest as well as in the interest of ETR, to ensure
    that the partnership flourishes.

[44]

The
    motions judge noted the presumption of constitutionality. He then proceeded to
    observe that s. 178(2) of the
BIA
does not extinguish indebtedness;
    rather, it releases bankrupts from claims provable in bankruptcy. He stated
    that the first goal of the bankruptcy system is to ensure the equitable
    distribution of a bankrupts assets among the estates creditors.  That said, a
    motor vehicle licence is not an asset belonging to the debtor; it is a
    privilege granted by a government authority and does not affect the equitable
    distribution of a bankrupts assets.  Accordingly, s. 22(4) of the
407 Act
did
    not conflict with the scheme of the
BIA
. Furthermore, it did not
    affect in any way the equitable distribution of the bankrupts property. As a
    result of these observations, the motions judge held that there was no
    operational conflict between s. 22(4) of the
407 Act
and the
BIA
.

[45]

As
    mentioned, the motions judge did not consider the second branch of the
    paramountcy doctrine. This would have involved an analysis of whether the
    legislative purpose of the
BIA
was thwarted by the operation of s.
    22(4). As part of his paramountcy analysis, the motions judge did not consider
    whether the collection of pre-bankruptcy indebtedness impeded Moores ability
    as a discharged bankrupt to have a fresh start post-bankruptcy or resulted in
    unequal treatment of unsecured creditors.

F.

STANDARD OF REVIEW

[46]

As
    the issue on appeal is a question of law, the standard of review is
    correctness:
Housen v. Nikolaisen
,
2002 SCC 33, [2002]
    2 S.C.R. 235, at para 8
.

G.

POSITIONS OF THE PARTIES

(i)

The Appellants Position

[47]

In
    brief, the appellant Superintendent submits that when s. 22(4) of the
407
    Act
is used to enforce claims provable in bankruptcy against discharged
    bankrupts, it is in operational conflict with the
BIA
.  Relying on
Schreyer
,
    the appellant argues that while a discharge does not extinguish a claim,
    creditors cease to be able to enforce claims against the bankrupt that are
    provable in bankruptcy.  ETR, like other unsecured creditors, is prohibited
    from enforcing its monetary claim after discharge, but s. 22(4) permits it to
    do indirectly that which it is prohibited from doing directly, thus bringing
    the operation of the subsection into direct conflict with s.178(2) of the
BIA
in the case of a discharged bankrupt.

[48]

The
    appellant also submits that s. 22(4) of the
407

Act
frustrates the two main purposes of the bankruptcy regime: the financial
    rehabilitation of insolvent individuals (also referred to as the fresh start
    principle) and the equal treatment of all unsecured creditors. Firstly, the
    motion judge erred in failing to properly direct his attention to the fresh
    start objective.  Section 22(4) frustrates this objective in that it permits ETR
    to coerce a bankrupt into satisfying debts released by a discharge in
    bankruptcy. Secondly, the only exceptions to the
pari passu
distribution of property among equal ranking creditors are listed in s.
    178(1).  ETRs debt does not fall within any such exception. The effect of the
    motion judges decision is to create a new class of debts that survives
    bankruptcy. Based on the motion judges decision, ETR need not participate in
    the bankruptcy process at all but can recover its entire debt nonetheless.

[49]

The
    appellant concludes by noting that s. 22(4) is valid provincial legislation and
    was not drafted to conflict with the
BIA
. However, when that
    subsection is applied in a bankruptcy situation, it conflicts with the
BIA
and frustrates the two main purposes of the bankruptcy system. To that extent,
    s. 22(4) is inoperable based on the doctrine of paramountcy.

(ii)

The Respondents Position

[50]

The respondent ETR answers by submitting that no federal head of power
    enables Parliament to require provinces to grant vehicle permits or to require
    third parties to extend credit to a discharged bankrupt.

[51]

Operational
    conflict is only engaged where dual statutory compliance is impossible.  This
    is not the case in this appeal.

[52]

As
    for purposive conflict, the respondent submits that provincial laws should only
    be declared inoperative due to frustration of a federal purpose in the clearest
    of cases. Inoperability arises where there is just one reasonable
    interpretation of the provision in issue and that interpretation frustrates the
    purpose of the federal law.  In ETRs submission, s. 22 of the
407 Act
does not frustrate the financial rehabilitation of the bankrupt, reorganize the
    priorities of creditors, or reorder how the bankrupts assets are to be
    distributed. Section 178(2) does not extinguish indebtedness; it simply
    releases the debtor from claims provable in bankruptcy. The MTOs right to
    suspend vehicle permits is unaffected by bankruptcy.  Moreover, the object of
    financial rehabilitation must be balanced against the creditors interest in
    protecting itself. If allowed, this appeal would force the Province of Ontario
    to grant vehicle permits to discharged bankrupts thereby empowering them to
    accumulate additional debt to ETR.

[53]

The
    respondent also submits that certain provincial highway traffic and other legislation
    will be affected if this appeal is allowed.

(iii)

The Interveners Position

[54]

The
    interveners agree with ETR that there is no operational conflict between the
    two statutes, but argue that there is a purposive conflict.

[55]

The
    interveners submit that the central issue in this appeal is whether ETR may use
    the vehicle permit denial remedy in the face of a stay of proceedings
    pre-discharge, and enforce payment of pre-bankruptcy indebtedness post-discharge.
    The procedure in the
BIA
precludes any other remedy or procedure to
    obtain payment of a claim provable in bankruptcy. The remedy at issue in this
    appeal operates to allow ETR to recover its debts in another manner; it is a
    method of debt collection and nothing more.

[56]

Section
    69.2(1) of the
BIA
excludes any remedy against the debtor or the debtors
    property. The denial of the vehicle permit is against the debtor, regardless
    of whether the permit is a privilege or property. The effect of the denial is
    to prevent a bankrupt from driving anywhere in Ontario, not just on Highway
    407. The
BIA
stay of proceedings prohibits the exercise of the
    remedy.

[57]

The
    interveners distinguish the other legislation relied upon by ETR. They argue
    that in instances where provincial highway traffic legislation allows for the
    suspension of licences, the legislation specifically provides that the release
    of debts through bankruptcy has no effect on licence denial.  The
407 Act
contains no such provision.

H.      ANALYSIS

[58]

Before
    embarking on an analysis of the interaction between the
BIA
and the
407
    Act
, certain basic principles should be addressed.

[59]

Firstly,
    where there is an inconsistency between validly enacted but overlapping
    provincial and federal legislation, the provincial legislation is inoperative
    to the extent of the inconsistency:
Rothmans, Benson & Hedges Inc. v.
    Saskatchewan
, 2005 SCC 13, [2005] 1 S.C.R. 188, at para. 11. The remainder
    of the provincial legislation is unaffected.  This is the doctrine of federal paramountcy.

[60]

Secondly,
    there are two ways in which a claim of paramountcy may arise. These were
    described by McLachlin C.J. in
Quebec (Attorney General) v. Canadian Owners
    and Pilots Association,
2010 SCC 39, [2010] 2 S.C.R. 536, at para. 64:

(i)      where there is an operational conflict between federal
    and provincial laws such that dual compliance is impossible; and

(ii)    where dual compliance is possible, but the provincial
    law is incompatible with, or frustrates the purpose of, the federal        legislation.
    As stated in
Canadian Western Bank
, at para. 73,

[T]here will be cases in which imposing an obligation to
    comply with provincial legislation would in effect frustrate the purpose of a
    federal law even though it did not entail a direct violation of the federal
    laws provisions.

[61]

Thirdly,
    the party seeking to invoke the doctrine of paramountcy bears the burden of
    proof:
British Columbia (Attorney General) v. Lafarge Canada Inc.
, 2007
    SCC 23, [2007] 2 S.C.R. 86, at para. 77.

[62]

The
    invocation of federal paramountcy on the basis of frustration of purpose
    requires clear proof of purpose and the standard is high. Mere permissive
    federal legislation does not suffice:
Canadian Owners and Pilots
    Association
, at paras. 67 and 68.

[63]

Fourthly,
    in considering a potential conflict, a court should first decide whether the
    two laws in issue are validly enacted. This involves an examination of the pith
    and substance of the impugned legislation. The analysis may concern the
    legislation as a whole or only certain of its provisions:
Canadian Western
    Bank

v. Alberta
, 2007 SCC 22, [2007] 2 S.C.R. 3, at para. 25.

[64]

To
    determine the pith and substance, the purpose of the enacting body and the
    legal effect of the law should both be examined:
Canadian Western Bank
,
    at para. 27. The dominant purpose of the legislation is decisive and incidental
    effects do not disturb the constitutionality of an otherwise
intra vires
law:
Canadian Western Bank
, at para. 28.

[65]

Lastly,
    Canadas federal system must balance flexibility and predictability. As such,
    when addressing the validity of statutes, there is a presumption of
    constitutionality. Based on this presumption, a government is presumed to have
    enacted a law that does not exceed its powers. Judicial restraint is the
    operative principle. As Professor Peter Hogg describes in his book,
Constitutional
    Law of Canada
, 5th

ed. (Scarborough: Thomson Carswell, 2007) vol.
    1, at p. 449, due to this presumption, in choosing between competing,
    plausible characterizations of a law, the court should normally choose that one
    that would support the validity of the law. As stated in
Canadian Western
    Bank
, at para. 37, and reiterated in
Chatterjee v. Ontario (Attorney
    General)
, 2009 SCC 19, [2009] 1 S.C.R. 624, at para. 2, a court should
    favour, where possible, the ordinary operation of statutes enacted by
both
levels of government (emphasis in original). Co-operative federalism should be
    facilitated, not impeded.  This approach is consistent with the dominant tide
    of modern federalism:
Reference

re

Securities Act
, 2011
    SCC 66, [2011] 3 S.C.R. 837, at para. 57.

[66]

In
    keeping with this approach, when a federal statute can be properly interpreted
    so as not to interfere with a provincial statute, such an interpretation is to
    be applied in preference to an alternative construction which would bring about
    a conflict between the two statutes:
Canadian Western Bank
, at para.
    75; and
Marine Services
, at para. 69.  The fact that Parliament has
    legislated in respect of a matter does not lead to the presumption that in so
    doing it intended to rule out any possible provincial action in respect of that
    subject:
Canadian Western Bank
, at para. 74; and
Sun Indalex
    Finance, LLC v. United Steelworkers
, 2013 SCC 6, at para. 57.

(a)

Operational Conflict

[67]

The
    first issue to consider is whether there is an operational conflict between s.
    22(4) of the
407 Act
and s. 178(2) of the
BIA
.  In this
    regard, the appellant relies on dicta in
Husky Oil
to argue that an
    operational conflict exists between the two statutes.  In response, ETR submits
    that the majority position in
Husky Oil
has been overtaken by subsequent
    jurisprudence such as
Canadian Western Bank
and
Chatterjee
.

(i)
Applicable Test

[68]

The
    test for operational conflict was established in
Multiple Access Ltd.  v.
    McCutcheon
, [1982] 2 S.C.R. 161, at p. 191.  On behalf of the majority, Dickson
    J. explained that an operational conflict exists where one enactment says
    yes and the other says no; the same citizens are being told to do
    inconsistent things; compliance with one is defiance of the other.

[69]

Early case law limited the application of the doctrine of
    paramountcy to cases of operational conflict. The frustration of purpose branch
    of paramountcy had not yet been developed.

[70]

However, in
Bank of Montreal v. Hall
, [1990] 1 S.C.R. 121,
La Forest J. appeared to broaden the test from
Multiple
    Access.

He stated at p. 154 that 
dual compliance will be impossible when application of the
    provincial statute can fairly be said to frustrate Parliament's legislative
    purpose.  Although not so identified at the time, this decision would later
    come to be viewed as establishing a separate branch of federal paramountcy,
    namely, frustration of purpose.

[71]

Husky Oil
followed on the heels of
Hall
in 1995. In
    dealing with paramountcy, t
he majority relied on
Hall
and did not cite the test from
Multiple Access
.

The Court addressed the issue of
    conflict between the
Bankruptcy Act
and a provincial statute which
    purported to allow a creditor to recover a debt outside of the bankruptcy
    process. The impugned provincial legislation made the principal of a defaulting
    contractor personally liable to Saskatchewans workers compensation fund. A
    principal who was required to make a payment to the fund was then permitted to
    set that amount off against any amount the principal owed to the bankrupt
    contractors estate. At para. 39, Gonthier J., on behalf of the majority,
    observed that the form of a provincial interest must not be allowed to triumph
    over its substance:

The provinces are not entitled to do indirectly what they are
    prohibited from doing directly; ... there need not be any provincial intention
    to intrude into the exclusive federal sphere of bankruptcy and to conflict with
    the order of priorities of the
Bankruptcy Act
in order to render the
    provincial law inapplicable.  It is sufficient that the
effect
of provincial legislation is to do so. [Emphasis in original.]

[72]

In that case, the majority found that the effect of the
    provincial legislation in securing the Boards debt against the bankrupts
    estate conflicted with Parliaments intention to establish priorities as
    described in the
Bankruptcy Act
,
R.S.C., 1985, c. B-3. The
    offending provincial statutory provisions were therefore determined to be
    inapplicable in a bankruptcy context.

[73]

The majority summarized the Courts
    jurisprudence in the bankruptcy quartet (
Deputy Minister of
    Revenue v. Rainville
, [1980] 1 S.C.R. 35;
Deloitte
    Haskins and Sells Ltd. v. Workers' Compensation Board
,
    [1985] 1 S.C.R. 785;
Federal Business Development Bank v. Quebec
    (Commission de la santé et de la sécurité du travail)
,
    [1988] 1 S.C.R. 1061;
British Columbia v. Henfrey Samson Belair Ltd.
, [1989] 2 S.C.R. 24), concluding at paras. 32-39 that the quartet
    stands for six propositions:

(1)   provinces cannot create priorities between creditors or
    change the scheme of distribution on bankruptcy under s. 136(1) of the
Bankruptcy

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 of distribution on bankruptcy from province to
    province, an unacceptable situation; and

(4)   the definition of terms such as "secured
    creditor", if defined under the
Bankruptcy

Act
,
    must be interpreted in bankruptcy cases as defined by Parliament, not the
    provincial legislatures. Provinces cannot affect how such terms are defined for
    purposes of the
Bankruptcy Act
;

...

(5)   in determining the relationship between provincial
    legislation and the
Bankruptcy

Act
, the form of the
    provincial interest created must not be allowed to triumph over its substance.
    The provinces are not entitled to do indirectly what they are prohibited from
    doing directly; and

(6)   there need not be any provincial intention to intrude
    into the exclusive federal sphere of bankruptcy and to conflict with the order
    of priorities of the
Bankruptcy Act
in order to render the provincial
    law inapplicable. It is sufficient that the
effect
of provincial legislation is to do so. [Emphasis in original.]

[74]

The Court did remark at para. 36 that for a
    provincial law to be inapplicable, the Court must find a clear conflict, that
    is, an inconsistent or mutually exclusive result. Applying the six
    propositions to the facts of
Husky Oil
, the
    Court found a conflict.

In contrast, the dissent
    applied the strict
Multiple Access
test and found that there was no
    conflict because the
Bankruptcy Act
did not prohibit that which the
    provincial legislation authorized.

[75]

Although not so described in the case, in my
    view, the majority in
Husky Oil
is best understood as a decision
    involving frustration of a federal purpose rather than an operational conflict.
    Firstly, the majority did not rely on
Multiple Access
but on
Hall
,
    a case which is now viewed as a frustration of purpose decision.  Secondly, the
    majority relied on the effect of the provincial legislation and indirect
    conflict to ground its paramountcy analysis and not the strict operational
    conflict test found in
Multiple Access
.

[76]

The treatment accorded
Husky Oil
is seen
in the Supreme Courts subsequent insolvency
    decisions and particularly in the dicta of Deschamps J.
in
GMAC
    Commercial Credit Corporation - Canada v. T.C.T. Logistics Inc.
, 2006 SCC 35, [2006] 2 S.C.R. 123
. The
    majoritys decision did not turn on the paramountcy doctrine, however,
    Deschamps J. invoked paramountcy in dissent,
stating:

In
Husky Oil
, Gonthier J., writing for the
    majority,  not only noted that provinces may not
directly
affect
    priorities under the
Bankruptcy Act
, but also stated propositions that
    permit the paramountcy doctrine to be applied where provincial legislation
indirectly
conflicts with the
BIA


Although the propositions enunciated in
Husky Oil
relate
    more specifically to conflicts between provincial statutes and the scheme of
    distribution established in the
BIA
, they have a scope that extends
    beyond that specific context, and they demonstrate how the paramountcy doctrine
    applies in the context of bankruptcy. [Emphasis in original.]

[77]

In
    2012, Deschamps J. again cited the majority in
Husky Oil
,
holding
    that  provinces cannot affect the order of priorities set out in the
BIA
(see
Newfoundland and Labrador v. AbitibiBowater Inc.
,
    2012 SCC 67, [2012] 3 S.C.R. 443, at para. 19
).

[78]

However,
    in
Indalex
, the Supreme Court again had the opportunity to apply the
    doctrine of paramountcy in an insolvency context. Deschamps J. cited
Husky
    Oil
, at para. 56,

to the effect that the provincial legislature
    cannot, through measures such as a deemed trust, affect priorities granted
    under federal legislation.  She did not repeat the six propositions enunciated
    in
Husky Oil
. Rather, she went on to apply the
Multiple Access

test as restated in
Canadian Western Bank
.  Based on that test,
    she found that there was a direct conflict between the provincial legislation
    and an order made under the
Companies Creditors Arrangement Act
,
    R.S.C., 1985, c. C-36 such that, at para. 60, compliance with the provincial
    law necessarily entails defiance of the order made under federal law.

[79]

It is therefore clear that for the purposes of
    operational conflict, the
Multiple Access
test is applicable and not the
    principles described in
Husky Oil
.

[80]

Moreover, t
he Supreme
    Court has consistently cited the
Multiple Access
test in other cases. See
Canadian Western Bank
, at para 71;
Chatterjee
, at para.
    36;
Lafarge
, at para. 76;
Rothmans
, at para. 11;
Law Society of British Columbia v. Mangat
, 2001 SCC 67, [2001] 3 S.C.R. 113, at para. 69;
114957
    Canada Ltée (Spraytech, Société darrosage) v. Hudson (Town)
, 2001 SCC 40, [2001] 2 S.C.R. 241, at para. 34;
M &
    D Farm Ltd. v. Manitoba Agricultural Credit Corp.
, [1999]
    2 S.C.R. 961
, at para. 40.

[81]

Most recently, in
Marine Services
    International Ltd. v. Ryan Estate
, 2013 SCC 44, at para.
    68, the Supreme Court restated the test in the following terms: Where the
    federal statute says yes and the provincial statute says no, or vice versa,
    compliance with one statute means a violation of the other statute.  It is
    the archetypical operational conflict.

[82]

In its recent jurisprudence, the Supreme Court
    has applied the test from
Multiple Access

narrowly to find an operational conflict only where it was
    impossible to comply with both statutes: see
Indalex
.

[83]

Where the federal legislation was merely
    permissive, the Court did not find a conflict because it was possible to comply
    with both laws: see
Quebec (Attorney General) v. Canada (Human Resources
    and Social Development)
, 2011 SCC 60, [2011] 3 S.C.R. 635
    and
Canadian Owners and Pilots Association
.  Where
    the legislation could be interpreted to avoid a conflict, or where there were
    other means of avoiding a conflict, the Court did not find a conflict: see
Marine
    Services International Ltd.
;
Chatterjee
and
Canadian
    Western Bank
. As such, t
he test for operational conflict is to be strictly applied and is engaged
    only where dual compliance is impossible.


(ii)
Application

[84]

Turning then to the facts that underlie
    this appeal, there is no issue that both the
BIA
and the
407 Act
are validly enacted,
    the former falling under federal authority and the latter under provincial
    authority.  The purpose of the
BIA
is to establish an organized system
    for the distribution of a bankrupts estate, and to provide for the financial
    rehabilitation of the bankrupt. The purpose of the
407 Act
is to
    establish a private toll highway with open access to the public, and to set out
    how the highway will operate. However, as noted by the motions judge, the
    purpose of s. 22(4) of the
407 Act
is to collect ETRs debt.  The
    legal effect of the
407 Act
is to permit ETR to operate the highway
    and to establish, collect and enforce toll debt from users regardless of their
    bankruptcy status.  As noted in para. 33 of the motions judges reasons, ETR
    does not quarrel with the proposition that the purpose of s. 22(4) of the
407
    Act
is to enforce payment of a debt.  It also cannot be seriously
    contested that ETRs claim to toll debt is a claim provable in bankruptcy.
The insertion of the provinces licensing authority
    does not alter this conclusion.

[85]

I
    must then consider the approach established by the Supreme Court in
Multiple
    Access,
as restated most recently in
Marine Servi
ces
: can
    there be dual compliance?

[86]

It
    is fair to conclude that Moore could be in compliance with both statutes. While
    he would not be able to drive his own car, he could forego obtaining a vehicle
    permit and not pay the toll debt to ETR.  Alternatively, he could pay the debt
    and obtain a vehicle permit.  As he is not required to pay the debt and the
BIA
does not require him to obtain a vehicle permit, there is no impossibility of
    dual compliance insofar as he is concerned.

[87]

What
    of ETR?  Can it be in compliance with both statutes?

[88]

The alleged conflict in this case is between s. 178(2) of the
BIA
, which releases the discharged bankrupt from most claims, and s.
    22(4) of the
407 Act
, which permits ETR to
    initiate a process by which the debtor will be denied a vehicle permit until he
    or she discharges the debt to ETR.

[89]

As indicated in
Schreyer
, at para. 21, s.
    178(2) of the
BIA
bars creditors from enforcing their claims after
    discharge.
Section 124 of the
BIA
provides that before an
    unsecured creditor is entitled to share in the distribution of the bankrupts
    property, it must file a proof of claim.  Under s. 178(2) of the
BIA
,
    such claims are then released on discharge unless they fall within one of the exceptions
    clearly set out in s. 178(1). Pursuant to s. 22(4) of the
407 Act
, ETR
    need not file a proof of claim and may collect all of its debt from a bankrupt
    in the absence of an exception. It can opt to ignore the regime established for
    all other creditors of the bankrupt.

[90]

That
    said,
the provincial legislation in this case is permissive in
    that it does not require ETR to initiate the collection process. ETR could
    comply with both statutes by declining to pursue its remedy under s. 22.
But,
    can ETR rely on s. 22(4) to enforce its claim against Moore? ETR asserts that
    it relies heavily on the collection process embodied in s. 22 as it cannot deny
    access to users who refuse to pay their bills, and other means of debt
    collection are costly. If ETR has the choice of declining to enforce, but
    routinely chooses to enforce, is there still no operational conflict?

[91]

In
    substance, s. 22(1) provides ETR with the choice of causing the collection of a
    debt from a discharged bankrupt, a choice which the
BIA
expressly
    abrogates. In this sense, the
BIA
says no and the
407 Act
says yes.

[92]

However,
    to find an operational conflict where it is possible to comply with both laws would
    not be in keeping with the strict test for operational conflict which the
    Supreme Court has consistently applied.  Furthermore, to take a more
    substantive approach to operational conflict would also render the frustration
    of federal purpose branch of the paramountcy test largely superfluous.

[93]

On
    a strict reading of the test for operational conflict, there is no
    impossibility of dual compliance.  Section 22 of the
407 Act
gives ETR
    the choice to notify the Registrar of a failure to pay. ETR may comply with
    both laws by declining to initiate the enforcement procedure.  Where bankruptcy
    occurs after the ETR has initiated the enforcement procedure, compliance
    depends on the debtor.  He is not required to obtain vehicle permits and is not
    required to pay his debt.  Similarly, the Registrar cannot compel him to do
    so.  I conclude that there is no operational conflict between s. 22(4) of the
407
    Act
and s. 178(2) of the
BIA
.

(b)

Conflict
    of Purpose

[94]

The
    next issue to consider is whether the operation of s. 22(4) of the
407 Act
conflicts with the purpose of the
BIA
. As mentioned, the purpose of s.
    22(4) is to collect toll debt. There are two
BIA
purposes in issue: 
    the fresh start principle and the equal treatment of unsecured creditors. 
    Given my conclusion on the former, it is unnecessary to address the latter.

(i)
Applicable Test

[95]

In
    2010, in
Canadian Owners and Pilots Association
, at para. 64, the
    Supreme Court described frustration of federal purpose as a second branch of
    the doctrine of paramountcy.

[96]

At
    para. 66, McLachlin C.J. described the test for frustration of purpose as
    follows:

The party seeking to invoke the doctrine of federal paramountcy
    bears the burden of proof.  That party must prove that the impugned
    legislation frustrates the purpose of a federal enactment.  To do so, it
    must first establish the purpose of the relevant federal statute, and then
    prove that the provincial legislation is incompatible with this purpose. 
    The standard for invalidating provincial legislation on the basis of
    frustration of federal purpose is high; permissive federal legislation, without
    more, will not establish that a federal purpose is frustrated when provincial
    legislation restricts the scope of the federal permission. [Citations omitted.]

[97]

The
    Supreme Court cited this articulation of the test in its most recent
    paramountcy decision,
Marine Services
, at para. 69.

[98]

As
    discussed above, in assessing whether the provincial legislation frustrates a
    federal purpose, it must be recalled that when a federal statute can be
    properly interpreted so as not to interfere with a provincial statute, such an
    interpretation is to be applied in preference to an alternative construction
    which would bring about a conflict between the two statutes. The fact that
    Parliament has legislated in respect of a matter does not lead to the
    presumption that in so doing it intended to rule out any possible provincial
    action in respect of that subject.



(i)

Fresh Start Principle

(a)

The Fresh Start Purpose of the
BIA

[99]

I
    have already referred to the fresh start principle which underlies the
BIA
and which permeates the jurisprudence on bankruptcy legislation. From a
    debtors perspective, and indeed societys, financial rehabilitation is a primary
    goal of the bankruptcy regime.  At its heart, permitting a creditor to insist
    on payment of pre-bankruptcy indebtedness after a bankruptcy discharge frustrates
    a bankrupts ability to start life afresh unencumbered by his or her past
    indebtedness.  As often repeated in United States bankruptcy jurisprudence, one
    of the purposes of bankruptcy legislation is to give debtors a new opportunity
    in life and a clear field for future effort, unhampered by the pressure and
    discouragement of pre-existing debt. See for example
Local Loan Co. v.
    Hunt
, 292 U.S. 234 at 244 (1934);
Perez v. Campbell
, 402 U.S. 637
    at 648 (1971);
Grogan v. Garner
, 498 U.S. 279 at 286 (1991). Indeed, although
    obviously inapplicable in Canada, the Supreme Court of the United States held
    in
Perez
that state laws that attempted to enforce payment of a
    bankrupts indebtedness through licence denial were invalid because they
    conflicted with the fresh start principle
.

[100]

In Canada, there
    are some claims that constitute exceptions to the fresh start principle.  As
    mentioned, there are those claims that are expressly excluded from the ambit of
    s. 178(2). They are described in s. 178(1) of the
BIA
. One such claim
    was described by this court as the kind which society (through the
    legislators) considers to be of a quality which outweighs any possible benefit
    to society in the bankrupt being released of these obligations:
Buland
    Empire Development Inc. v. Quinto Shoes Imports Ltd
. (1999), 123 O.A.C.
    288 (C.A.), at para. 18. The claims excepted in s. 178(1) include certain
    specified provincial programmes. There is no exception for toll debt owing to
    ETR.

[101]

In
Schreyer
,
    LeBel J. observed, at para. 19, that giving debtors a chance for a new start is
    generally viewed as a wise policy choice.  He went on to state that exemptions
    that seem fair or even necessary are set out in the
BIA
. However, the
    more exemptions there are, the less likely it is that the basic policy
    objectives of insolvency legislation can be achieved.

[102]

In my view, the
    appellant has satisfied its burden of establishing the fresh start purpose of
    the
BIA
.

(b)

Incompatibility of s. 22(4) of the
407 Act

[103]

The parties addressed
    two competing lines of cases in support of their respective positions.  I do
    not propose to review all of the cases cited.  Some deal with the operational
    conflict branch of the paramountcy analysis or the validity of certain provincial
    legislation as a whole. (The 407 Act as a whole is not in question in this case.)
     Moreover, many of the cases relied upon were decided before the frustration of
    federal purpose branch of the paramountcy doctrine was solidified in Supreme
    Court jurisprudence.

[104]

There is limited
    provincial appellate commentary on comparable legislative regimes.
KPMG
    Inc. v. Alberta Dental Association (Re Hover)
, 2005 ABCA 101, 363 A.R. 170
    was a decision of the Alberta Court of Appeal.  It involved a case of professional
    misconduct by a dentist and the enforcement of disciplinary requirements
    consisting of the payment of a fine and associated costs.  Due to the
    disciplinary objective of the underlying provincial regulatory authority, the
    court found that requiring a suspended licensee to pay outstanding fines in
    order to have his license reinstated did not conflict with the
BIA
even
    though the payor was a discharged bankrupt. The power to suspend was founded
    not on non-payment of a debt but on a finding of professional misconduct.  If
    professional sanctions or conditions on licences were no longer operable in the
    case of a discharged bankrupt, self-regulating bodies would lose the ability to
    regulate their members conduct once in bankruptcy.  Further, the purpose of
    the dental licence suspension was not to enforce a debt but to impose
    conditions on licences which should be withheld from irresponsible
    individuals.

[105]

That said, at
    para. 58, Paperny J.A. distinguished the case from others where [t]he
    suspension of a drivers licence was motivated for an improper purpose, that
    is, to obtain payment that the licensing authority would not otherwise be
    entitled to in a bankruptcy. This suggests that where the purpose of the
    suspension is to collect a debt, there would be a conflict with the
BIA
.

[106]

I will also address
Re Caporale
, [1970] 1 O.R. 37-38 (S.C.), a decision of Houlden J. (as
    he then was), which was relied upon by ETR.  That case simply involved an
    application to discharge a bankrupt. The bankrupt had been involved in a motor
    vehicle accident and the judgment had been assigned to the MTO.  The MTO
    appears to have disputed the application for a discharge. In a very brief oral
    endorsement, Houlden J. granted the discharge noting that the bankrupt had been
    making payments to the MTO and the MTO would not be prejudiced by the granting
    of the discharge. He stated that the MTO had an effective remedy in that it
    could refuse the debtor the privilege of driving in Ontario until he had repaid
    the full amount of damages awarded against him arising from a motor vehicle
    accident that had been paid out of the Unsatisfied Judgment Fund. Houlden J.
    did not perform any paramountcy analysis, and it would appear that the decision
    was rendered in the context of a contested discharge application.

[107]

I do not view
    these cases as being akin to the appeal before this court.  The purpose of the
    legislation in those cases was directed at the provinces regulatory
    responsibilities and the public interest in establishing and enforcing
    standards of professional conduct for dentists, and presumably the promotion of
    safe and responsible driving.

[108]

Although public
    safety is not at stake in this appeal, ETR argues that the collection of debts
    arising from the use of Highway 407 is in the public interest, as well as in
    ETRs interest, so as to ensure that the public private partnership flourishes. 
    I note in this regard that the Province did not advance such a position on this
    appeal.   Furthermore, as noted by the motions judge, the purpose and effect of
    s. 22(4) are to enforce the collection of debts.  This is the substance of the subsection.

[109]

I would also
    observe that s.198 of the
Highway Traffic Act
expressly states that,
    where a person has failed to satisfy a judgment for damages occasioned by a
    motor vehicle, his or her drivers licence shall be suspended and remain
    suspended until judgment is satisfied or discharged otherwise than by a
    discharge in bankruptcy.  No such language is found in the
407 Act
.
    Arguably, this reflects a provincial intention that the collection of ETRs
    indebtedness would be affected by bankruptcy.  In
Section 270 of the

Highway
    Traffic Act
(Report 97) (Winnipeg: Manitoba Law Reform Commission, 1997),
    the Manitoba Law Reform Commission discussed the provincial counterpart to
    Ontarios s. 198 at p. 7:

In those jurisdictions whose statutes are silent on the effect
    of bankruptcy, it is presumably arguable that bankruptcy would be held to
    discharge the debt within the meaning of the motor vehicle statute, thus
    clearing the way for a reinstatement of the suspended licence and
    registration.

[110]

In any event,
    this decision only addresses the legislation in issue on this appeal and does
    not purport to encompass statutes that reflect their own individualized
    legislative objectives.

[111]

It must also be recalled
    that the appellant does not seek a declaration that s. 22(4) of the
407
    Act
is invalid, but only that it is inoperable in relation to discharged bankrupts.
    Discharged bankrupts do not represent a large segment of the adult population in
    Canada or in Ontario, and there was no evidence that would suggest that they
    are disproportionate users of Highway 407. Typically, all unsecured creditors
    are negatively affected by bankruptcy and, as noted by LeBel J. in
Schreyer
,
    at para. 19, few appreciate the haircuts or losses that bankruptcies
    trigger.  The introduction into the mix of a private commercial participant in
    a public-private enterprise is inadequate in my view to remove the evident
    inconsistency with such a fundamental purpose of the
BIA
as financial
    rehabilitation of the discharged bankrupt. The
407 Act
should not be
    used to permit ETR to occupy the collectors lane.

[112]

While
    co-operative federalism should be the goal, it should not serve to undermine
    one of the two key rationales for the bankruptcy regime.

[113]

I also agree
    with the appellant that it is no answer to say that a vehicle permit is a
    privilege. Denial of a vehicle permit may constitute a significant deprivation.
    The non-renewal of a vehicle permit does not just affect a discharged bankrupts
    ability to drive his or her own vehicle on Highway 407 but on any road in
    Ontario.  Frequently it is essential to employment as well as family
    transportation requirements and responsibilities.  Ontario is a vast province. 
    Denial of a vehicle permit has the potential to result in great hardship to a
    discharged bankrupt struggling to start anew.  The importance of a motor
    vehicle is recognized in the assets identified by Parliament and the
    Legislature as being exempt from execution or seizure.

[114]

I accept that as
    Highway 407 is an open-access road, ETR cannot stop a bankrupt from using the
    highway. That said, if ETR had filed a claim in Moores bankruptcy, its
    concerns could have been raised at a discharge hearing. Additionally and
    significantly, a vehicle permit may be denied based on debts incurred after an
    individuals discharge from bankruptcy.

[115]

In my view, the
    appellant has established that s. 22(4) of the
407 Act
is incompatible
    with the fresh start or financial rehabilitation purpose of the
BIA
. 
    Indeed, it frustrates the
BIA
s heart and the very foundation on which
    insolvency legislation stands.

[116]

In conclusion, in
    keeping with a restrained approach to paramountcy and recognizing the
    presumption of constitutionality, I am of the view that there is a clear
    conflict between s. 22(4) of the
407 Act
and the fresh start
    purpose of the bankruptcy system.

(ii)

Equitable Treatment of Unsecured Creditors

[117]

The appellant
    also argues that the enforcement of ETRs claim pursuant to s. 22(4) frustrates
    the purpose of the bankruptcy and insolvency system by creating a new class of
    debt that survives bankruptcy and which frustrates Parliaments intention to
    treat all unsecured creditors equitably.  As mentioned, given my conclusion on
    the fresh start purpose, there is no need to address this submission.

I.        DISPOSITION

[118]

For these
    reasons, I would allow the appeal and, as requested by the appellant, set aside
    the order of the motions judge.  In its place, I would substitute an order
    that:

(1)

the
    discharge of Moore dated June 21, 2011 released him from all claims provable in
    bankruptcy, including the debt of the 407 ETR as at November 10, 2007 and

(2)

the
    Ministry of Transportation is hereby directed to issue license plates to Moore
    upon payment of the usual licensing fees.

Further, I would declare that s. 22(4) of the
407 Act
is inoperative to the extent that it thwarts the purpose of providing a
    discharged bankrupt with a fresh start.

[119]

As agreed, the
    respondent shall pay the appellant $36,000 in partial indemnity costs inclusive
    of disbursements and applicable taxes.  The interveners shall bear their own
    costs.

Released:

DEC 19 2013                                   S.E.
    Pepall J.A.

DD                                                  I
    agree Doherty J.A.

I
    agree Janet Simmons J.A.


