Wrestling With Paramountcy In Restructuring Or Insolvency

What do a car crash in Alberta, a delinquent farm mortgage in Saskatchewan and an unpaid highway toll ticket in Ontario have in common?

They all ended up in the Supreme Court of Canada.

The Supreme Court issued reasons for judgment in the following three cases, each of which wrestled with the constitutional concept of paramountcy in the context of a bankruptcy or insolvency: 407 ETR Concession Co. v. Canada (Superintendent of Bankruptcy), 2015 SCC 52; Alberta (Attorney General) v. Moloney, 2015 SCC 51; and Saskatchewan (Attorney General) v. Lemare Lake Logging Ltd., 2015 SCC 53.

Paramountcy

If valid federal legislation and valid provincial legislation "clash", then under the constitutional doctrine of paramountcy the federal legislation prevails. Essentially the tie goes to the Feds.

There is substantial room for debate as to whether a "clash" exists, or the extent or degree of a clash that must exist before provincial legislation is trumped using the paramountcy card.

For example the federal Bankruptcy and Insolvency Act (the "BIA") empowers the Trustee to sell the assets. Under provincial law some assets, cigarettes and liquor for instance, can only be sold with provincially issued permits or licences. Is this a "clash" if the Trustee is able apply for such permits?

The Facts

In this trio of cases, the court had to come to grips with paramountcy in three different circumstances;

In Alberta, Mr. Moloney, while driving his car caused uninsured damage, became indebted to the province and under provincial legislation was not entitled to renew his driver's license until he had dealt with the debt. He went bankrupt and the debt was discharged under the federal BIA. The province would not renew his licence. In Saskatchewan, a mortgagee moved for the appointment of a receiver under the provisions of the BIA in respect of an insolvent company that owned a farm. Provincial farm protection legislation established a lengthy process of mediation before steps could be taken to enforce a mortgage on a farm, including the appointment of a receiver. Can the farm protection legislation be avoided by using the much quicker BIA receiver process? In Ontario, Mr. Moore did not pay the toll charges for driving on a provincial highway. Provincial law provided that he could not obtain registration for his vehicles until the debt was paid. Mr. Moore went bankrupt and the debt was discharged under the federal BIA. The province would not register his vehicles. The...