A long standing issue for Alberta debtors has been addressed by the Supreme Court of Canada today. The Supreme Court of Canada has ruled that debts owing as a result of compensation form Section 102 of the Alberta Traffic Safety Act do not apply if a debtor is discharged from a bankruptcy.

What does this mean? I will summarize.

If you are driving in a vehicle without insurance and get in an accident the government will cover the costs and damages of that accident much like insurance would. However, as you did not have insurance the government is going to expect you to pay them back the full amount they are out of pocket, with interest and penalties. If you are not able to then they have the right to withhold your drives license.

Where this becomes challenging, at least up to today, has been if a bankruptcy (or consumer proposal) was filed and completed. Historically the Alberta Government has been of the opinion that they should be able to continue to withhold the license despite the debt being technically cleared by the discharge of the bankruptcy or the finishing of the consumer proposal. A view that I have taken great exception to.

The big problem is that the clearing of this debt is prescribed by federal legislation, Alberta’s laws that allow the withholding of the driver’s license are based on provincial legislation and the two laws are in conflict. The principle here is referred to as paramountcy, meaning if there is a conflict between both the provincial and federal legislation on the same point of law, the federal law takes precedence (or is paramount).While this seems to be a simple principle, it is one that hasn’t been respected by the Alberta Government, and until today there wasn’t a clear and legally binding case that had addressed this.

Today that changed. The Supreme Court ruled in Alberta (Attorney General) v. Moloney, 2015 SCC 51 that:

“Section 102 of the TSA is constitutionally inoperative to the extent that it is used to enforce a debt discharged in bankruptcy.”
So if you are involved with a situation where your license is being withheld, the debt can be dealt with in a bankruptcy or a consumer proposal and the Alberta government no longer has the right to withhold a license in the future.

The full text of the case can be found at: Alberta (Attorney General) v. Moloney.

This case upholds a view that I have had for a long time and was a good decision for Alberta.
Also of interest is a similar principle was addressed by the Supreme Court but with regards to debts owed to the 407 ETR Highway. Here is an excellent article written by a colleague of mine in relation to that: 407 Debts Dischargeable in Bankruptcy – Supreme Court of Canada Decides.