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Creditors can no Longer Have Bankrupt Debtors’ Driving Licences Suspended

Alberta (Attorney General) v. Moloney, 2015 SCC 51

In 1989, Joseph Moloney was in a motor vehicle accident for which he was at fault. The driver of the other car was injured. Moloney was uninsured and had few assets, so the other driver sought compensation from Alberta’s Administrator for Motor Vehicle Accident Claims. The Administrator paid the victim with money from Alberta’s General Revenue Fund and then sued Moloney for its losses. The Court granted judgment for the Administrator against Moloney for over $190,000.

Moloney paid the Administrator a few thousand dollars over the years but in 2008 he filed for bankruptcy. In 2011, Moloney was discharged from bankruptcy. Despite this, the Government of Alberta told him that his driver’s license and vehicle registration privileges would be suspended indefinitely until he paid his debt to the Administrator. Moloney applied to the Alberta Court of Queen’s Bench for an order staying the suspension of his driving privileges.

The Alberta Court of Queen’s Bench ruled in favour of Moloney. Justice Moen stated that the Government of Alberta’s power to suspend drivers’ licenses and vehicle registration to coerce a person to pay a discharged debt conflicts with Canada’s Bankruptcy and Insolvency Act. The purpose of the Bankruptcy and Insolvency Act is to provide financial rehabilitation and a fresh start to insolvent persons so they may be unfettered by past debts. Coercing bankrupts to pay a discharged debt consequently undermines Canada’s bankruptcy regime.

The Government of Alberta appealed. The Alberta Court of Appeal dismissed the appeal.
The Government of Alberta appealed again, but was dismissed by the Supreme Court of Canada. The Supreme Court stated that the Government of Alberta’s use of its administrative powers to punish Moloney until he repays the discharged debt frustrated his financial reintegration into the community. The inability to drive impedes a person’s capacity to earn income and become a productive member of society. The provisions of the Traffic Safety Act that confer these powers on the Government of Alberta are thus inoperable.

New Brunswick, Nova Scotia and Prince Edward Island have rules similar to those in Alberta’s Traffic Safety Act (Motor Vehicle Act, RSNB 1973, c M-17, s 276; Motor Vehicle Act, RS, c 293, s 227; and Highway Traffic Act, RSPEI 1974, Cap H-6, s 277; respectively). They are likely inoperable for the same reasons.

You can read Alberta (Attorney General) v. Moloney, 2015 SCC 51, in its entirety here.

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