Drivers whose licenses have been suspended due to unpaid judgment debts arising from motor vehicle accidents, who go on to file for bankruptcy after the judgment, may have their licenses reinstated after their discharge from bankruptcy.
Legislative and Constitutional Background
Section 198 of Ontario’s Highway Traffic Act (HTA) mandates that the driver’s license of every person who fails to satisfy a judgment debt occasioned by a motor vehicle accident, shall be suspended. The HTA also specifically precludes the discharge of these judgment debts by way of discharge in bankruptcy.
As a result of this section of the HTA, a driver would be unable to have his licence’s suspension lifted despite declaring and being discharged from bankruptcy.
The federal Bankruptcy and Insolvency Act (BIA) is premised on providing people who are discharged from bankruptcy the opportunity to rehabilitate themselves financially. Therefore, all of a discharged bankrupt’s past indebtedness must be forgiven without future burdens stemming from that debt.
The federal and provincial governments of Canada are mandated exclusive and separate spheres of power by sections 91 and 92 of the Constitution Act, 1867. Bankruptcy and Insolvency is explicitly defined by the Constitution as a federal head of power whereas Licensing is provincial.
As the result of s.198, the provincial HTA and the federal BIA appear to be in conflict and therefore ought to attract scrutiny based on the constitutional law doctrine of federal paramountcy.
Alberta (Attorney General) v. Moloney
On November 13, 2015 the Supreme Court of Canada came out with their decision in Alberta (Attorney General) v. Moloney.
In Moloney, a challenge was brought against s.102(2) of the Alberta Traffic Safety Act (the Albertan equivalent of s.198 of the HTA) premised on the doctrine of federal paramountcy.
Moloney argued that the Albertan legislation frustrated the purpose of the federal BIA and as a result ought to be rendered inoperable to the extent that the provisions conflict. He submitted that s.102 of Alberta’s Traffic Safety Act imperils the bankrupt’s ability to rehabilitate by creating a new class of debt that survives bankruptcy. This class of debt was not intended by parliament to survive bankruptcy or else it would have been expressly provided for in the BIA.
One purpose of the BIA is to rehabilitate the debtor, as provided in s.178(2) of the BIA. This was laid out by Gascon J. (for the majority) at paragraph 83 of his decision:
The rehabilitative purpose of s. 178(2) is not meant to give debtors a fresh start in all aspects of their lives. Bankruptcy does not purport to erase all the consequences of a bankrupt’s past conduct. However, by ensuring that all provable claims are treated as part of the bankruptcy regime, the BIA gives debtors an opportunity to rehabilitate themselves financially. While this does not amount to erasing all regulatory consequences of their past conduct, it is certainly meant to free them from the financial burden of past indebtedness.
At paragraph 90, Gascon J. concludes that “the province cannot withhold the respondent’s driving privileges on the basis of an unsatisfied but discharged judgment debt.”
The Supreme Court held that the s.102(2) of the Alberta Traffic Safety Act, was inoperable to the extent that it is used to enforce a debt discharged in bankruptcy. It was beyond Alberta’s constitutional authority to interfere with the federal parliament’s discretion with regard to classes of debts that survive bankruptcy.
 This doctrine of constitutional law provides that when federal and provincial laws are in conflict with each other, the federal law prevails and the provincial law is rendered inoperable to the extent that it conflicts with the federal law.
 2015 SCC 51.
 R.S.A. 2000, c. T─6.