35820 Alberta (Attorney General) v. Moloney
Constitutional law — Division of powers — Federal paramountcy — Bankruptcy and insolvency
Appeal from a judgment of the Alberta Court of Appeal (2014 ABCA 68), affirming a decision of Moen J. (2012 ABQB 644).
M caused a car accident while he was uninsured. The province of Alberta compensated an individual injured in the accident and sought to recover the amount of the compensation from M. Section 102 of Alberta’s Traffic Safety Act (“TSA”) allows the province to suspend M’s licence and permits until he pays the amount of the compensation. M made an assignment in bankruptcy and was eventually discharged. He listed the province’s claim in his Statement of Affairs. The debt was a claim provable in bankruptcy. Section 178(2) of the Bankruptcy and Insolvency Act (“BIA”), provides that, upon discharge, M is released from all debts that are claims provable in bankruptcy. As a result of his bankruptcy and discharge, M did not pay the amount of the compensation in full; because of this failure to pay, Alberta suspended his vehicle permits and driver’s licence. M contested this suspension. The Court of Queen’s Bench and the Court of Appeal found that there was a conflict between the federal and provincial laws. Relying on the doctrine of federal paramountcy, they declared s. 102 of the TSA to be inoperative to the extent of the conflict.
Held (9:0): The appeal should be dismissed. Section 102 of the TSA is constitutionally inoperative to the extent that it is used to enforce a debt discharged in bankruptcy.
Per Abella, Rothstein, Cromwell, Moldaver, Karakatsanis, Wagner and Gascon JJ.:
In Canada, the federal and provincial levels of government must enact laws within the limits of their respective spheres of jurisdiction. It is often impossible however for one level of government to legislate effectively within its jurisdiction without affecting matters that are within the other level’s jurisdiction. In certain circumstances, the powers of one level of government must be protected against intrusions by the other level. To protect against such intrusions, the Court has developed various constitutional doctrines, including the doctrine of federal paramountcy. Under this doctrine, the federal law prevails when there is a genuine inconsistency between federal and provincial legislation, that is, when the operational effects of provincial legislation are incompatible with federal legislation. To determine whether such a conflict exists, first and foremost, it is necessary to ensure that the overlapping laws are independently valid. If so, then the court must determine whether their concurrent operation results in a conflict. In this case, the impugned provisions are independently valid. The only question is whether their concurrent operation results in a conflict.
A conflict will arise in one of two situations, which form the two branches of the paramountcy test: (1) there is an operational conflict because it is impossible to comply with both laws, or (2) although it is possible to comply with both laws, the operation of the provincial law frustrates the purpose of the federal enactment. The first branch of the test has been described in the jurisprudence as actual conflict in operation as where one enactment says “yes” and the other says “no”. The question is whether both laws can operate side by side without conflict or both laws can apply concurrently, and citizens can comply with either of them without violating the other. The assessment under this branch is not limited to the actual words or to the literal meaning of the words of the provisions at issue. Rather, the provisions must be read properly based on the modern approach to statutory interpretation. If there is no conflict under the first branch of the test, one may still be found under the second branch. The question under the second branch is whether operation of the provincial Act is compatible with the federal legislative purpose. The effect of the provincial law may frustrate the purpose of the federal law, even though it does not entail a direct violation of the federal law’s provisions.
Under the first or the second branch of the test, the burden of proof rests on the party alleging the conflict. In keeping with co‑operative federalism, the doctrine of paramountcy is applied with restraint. Absent a genuine inconsistency, courts will favour an interpretation of the federal legislation that allows the concurrent operation of both laws. A provincial intention to interfere with the federal jurisdiction is neither necessary nor sufficient. The focus is instead on the effect of the provincial law. Assessing the effect of the provincial law requires looking at the substance of the law, rather than its form. The province cannot do indirectly what it is precluded from doing directly.
Parliament enacted the BIA pursuant to its jurisdiction over matters of bankruptcy and insolvency. TheBIA furthers two purposes: the equitable distribution of the bankrupt’s assets among his or her creditors and the bankrupt’s financial rehabilitation. Equitable distribution of assets is achieved by requiring creditors wishing to enforce a claim provable in bankruptcy participate in one collective proceeding. Financial rehabilitation is achieved through the discharge of the bankrupt from all claims provable in bankruptcy. From the perspective of the creditors, the discharge means they are unable to enforce their provable claims.
Provincial legislatures have the power to legislate with regard to property and civil rights. This power includes traffic regulation and the authority to set conditions for driver’s licences and vehicle permits. The TSA is a comprehensive legislative scheme for traffic regulation. A victim injured in an accident may sue for damages. If successful but the uninsured driver does not pay, the victim may apply to the Administrator under the Motor Vehicle Accident Claims Act (“MVACA”), for compensation in the amount of the unsatisfied judgment and the judgment is then assigned to the Administrator. Section 102 of the TSA, which complements the MVACA program, allows the Registrar of Motor Vehicle Services to suspend the debtor’s driver’s licence and vehicle permits until the judgment debt is paid or periodic payments in satisfaction of the judgment are being made. It is, in substance, a debt collection mechanism. Since the judgment debt in this case is a claim provable in bankruptcy, the purpose and effect of s. 102 are to suspend a debtor’s driving privileges until payment of a provable claim.
The laws at issue give inconsistent answers to the question whether there is an enforceable obligation. One law provides for the release of all claims provable in bankruptcy and prohibits creditors from enforcing them, while the other disregards this release and allows for the use of a debt enforcement mechanism on such a claim by precisely excluding a discharge in bankruptcy. This is a true incompatibility. In a case like this one, the test for operational conflict cannot be limited to asking whether the debtor can comply with both laws by renouncing the protection afforded under the federal law or the privilege he or she is otherwise entitled to under the provincial law. In that regard, the debtor’s response to the suspension of his or her driving privileges is not determinative. In analyzing the operational conflict at issue in this case, we cannot disregard the fact that whether the debtor pays or not, the province, as a creditor, is still compelling payment of a provable claim that has been released, which is in direct contradiction with s. 178(2) of the BIA. Neither can the question under the operational conflict branch of the paramountcy test be whether it is possible to refrain from applying the provincial law in order to avoid the alleged conflict with the federal law. Such an approach would render the first branch of the paramountcy test meaningless, since it is virtually always possible to avoid the application of a provincial law so as not to cause a conflict with a federal law. Furthermore, if it is possible to avoid operational conflict simply by declining to apply the provincial law, the same could be done to avoid any frustration of the federal purpose under the second branch of the paramountcy test. In this case, it is impossible for the province to apply s. 102 without contravening s. 178(2). In effect, s. 102 creates a new class of exempt debts that is not listed in s. 178(1) of the BIA. Hence, the provincial law allows the very same thing that the federal law prohibits. The result is an operational conflict.
Section 102 also frustrates the financial rehabilitation of the bankrupt. The crushing burden of the province’s claim against M was the main reason for his bankruptcy. If s. 102 is allowed to operate despite M’s discharge, he is not offered the opportunity to rehabilitate that Parliament intended to give him. Had Parliament intended judgment debts arising from motor vehicle accidents, or the resulting regulatory charges, to survive bankruptcy, it would have stated so expressly in s. 178(1) of the BIA. It did not. It is beyond the province’s constitutional authority to interfere with Parliament’s discretion in that regard. Nor can M’s driving privileges serve as fresh consideration for a new binding contract for the repayment of the discharged debt. M need not enter into such a contract in order to recover his driving privileges, because the province has no authority to withhold them.
The TSA does not however disrupt the equitable distribution purpose of the BIA. This Court has repeatedly cautioned against giving too broad a scope to paramountcy on the basis of frustration of federal purpose. It is always essential to ascertain the exact purpose of the specific provision of the federal law that is at issue. Although it is clear that the purpose of s. 178(2) is to ensure the debtor’s financial rehabilitation and that s. 102 frustrates that purpose, it cannot be concluded that the operation of the provincial scheme in the context of this case interferes with the equitable distribution of assets.
Per McLachlin C.J. and Côté J.:
Section 102 of the TSA frustrates the purpose of financial rehabilitation of the bankrupt that underlies s. 178(2) of the BIA. It is accordingly inoperative to the extent of the conflict by reason of the doctrine of federal paramountcy. As the frustration of one federal purpose is sufficient to trigger the application of the doctrine of federal paramountcy, it is not necessary to address the purpose of equitable distribution.
There is no operational conflict to speak of in this case. The majority’s analysis contrasts with the clear standard that has been adopted for the purpose of determining whether an operational conflict exists in the context of the federal paramountcy test: impossibility of dual compliance as a result of an express conflict. Impossibility of dual compliance is the undisputed standard for determining whether an operational conflict exists and it is one that very few cases will meet. In the jurisprudence, impossibility of dual compliance has become synonymous with operational conflict. The requirement of an express contradiction is inseparable from impossibility of dual compliance. For the two laws to conflict, each one has to say exactly the opposite of what the other says. A less direct conflict is not enough. In the absence of an express conflict, the two laws are deemed to be capable of operating side by side. In light of the modern jurisprudence, this restrained approach to operational conflict is inescapable. Such a high standard is consistent with co‑operative federalism. If, in practice, the wording of the statutes makes it possible to comply with both of them, then co‑operative federalism requires a court to find that the federal and provincial statutes are compatible, at least at the first stage of the analysis.
The two branches of the modern federal paramountcy test relate to two different forms of conflict. A finding of an operational conflict in the first branch will not necessarily entail a finding of frustration of a federal purpose in the second branch. The first branch is concerned with an incompatibility that is evident on the face of the provisions themselves. Even a superficial possibility of dual compliance will suffice for a court to conclude that there is no operational conflict. If the federal law is prohibitive, as in the case at bar, the question becomes what exactly it prohibits. If the provincial law allows the very same thing the federal law prohibits, there is an operational conflict. In many cases, the two branches of the test have been confused. Although this Court’s past decisions are not always helpful when it comes to drawing a distinction between the two branches, they do support three propositions: (1) that the applicable standard for the first branch is impossibility of dual compliance caused by an express conflict, (2) that this is a high standard that should be applied with restraint, and only in very few cases, and (3) that the two branches are distinct and address different forms of conflict.
Consequently, at the first stage, the determining question is whether the province’s legislation provides a path on which dual compliance is possible. A high standard at the first stage merely means that in most cases, the purpose and effects of the legislation at issue will need to be analyzed at the second stage. Requiring courts to deal with the issue in the second branch has many advantages. For the frustration of purpose analysis, the federal legislative intent must be established by the party relying on it. The court can proceed with a careful analysis of Parliament’s intent and, if possible, interpret the federal law so as not to interfere with the provincial law. The impossibility standard, if applied strictly, will not render the first branch of the federal paramountcy test meaningless. If the provincial law allows or requires something that the federal law explicitly prohibits, or if the conflict is direct rather than indirect, there will be an operational conflict.
In the case at bar, it is clear from the provisions themselves that dual compliance is not impossible. The provisions at issue do not expressly conflict; they are different in terms of their contents and of the remedies that they provide. One of them does not permit what the other specifically prohibits. Under s. 178 of the BIA, a bankrupt is discharged from claims provable in bankruptcy. That section says nothing more. Section 102 of the TSA does not revive an extinguished claim per se; if a debtor chooses not to drive, the province simply cannot enforce its claim. He can also opt to voluntarily pay the discharged debt. The bankrupt is still discharged in the literal sense of the words of s. 178(2) of the BIA. The two statutes answer different questions. In the end, the literal requirement of the federal statute is, strictly speaking, met. It therefore follows that the two acts can operate side by side without operational conflict, although there is a frustration of purpose.
Reasons for judgment by Gascon J. Concurring reasons by Côté J.
Neutral Citation: 2015 SCC 51. Docket No. 35820
35696 407 ETR Concession Co. v. Canada (Superintendent of Bankruptcy)
Constitutional law — Division of powers — Federal paramountcy — Bankruptcy and insolvency
Appeal from a judgment of the Ontario Court of Appeal (2013 ONCA 769), setting aside the decision of Newbould J. (2011 ONSC 6310).
Ontario’s Highway 407 is an open-access private highway operated by 407 ETR Concession Company Limited (“ETR”). The Highway 407 Act (“407 Act”) governs the operation of Highway 407 and 4 empowers ETR to enforce the payment of tolls. Under s. 22(1) of the 407 Act, if a person fails to pay a toll debt, ETR may notify the Registrar of Motor Vehicles. Under s. 22(4), upon receipt of this notice, the Registrar must refuse to issue or renew the debtor’s vehicle permit until he or she is notified by ETR that the debt and related fees and interest have been paid.
As a result of M’s failure to pay his toll debt, ETR notified the Registrar and the Registrar refused to renew M’s permits. M obtained a discharge from bankruptcy. His Statement of Affairs listed ETR as an unsecured creditor. Pursuant to s. 178(2) of the Bankruptcy and Insolvency Act (“BIA”), a discharge from bankruptcy releases a debtor from claims that are provable in bankruptcy. M sought an order that his toll debt had been released by his discharge and an order compelling the Ministry of Transportation to issue his vehicle permits. The motions judge concluded that s. 22(4) of the 407 Actwas not in conflict with the BIA and he had no jurisdiction, absent a conflict, to order the reinstatement of M’s vehicle permits. M settled his dispute with ETR but the Superintendent of Bankruptcy filed an appeal. Applying the doctrine of federal paramountcy, the Court of Appeal] declared s. 22(4) inoperative to the extent that it conflicted with the BIA’s purpose of giving a discharged bankrupt a fresh start.
Held (9:0): The appeal should be dismissed. Section 22(4) of the 407 Act is constitutionally inoperative to the extent that it is used to enforce a provable claim that has been discharged pursuant to s. 178(2) of the BIA.
Per Abella, Rothstein, Cromwell, Moldaver, Karakatsanis, Wagner and Gascon JJ.:
The companion appeal, Alberta (Attorney General) v. Moloney, 2015 SCC 51, contains full discussion of the principles of the doctrine of federal paramountcy, as well as the purposes and relevant provisions of the BIA. Like in the companion appeal, there is no dispute here concerning the independent validity of the provincial and federal laws. Section 22 of the 407 Act and s. 178 of the BIAwere validly enacted by their respective governments. The only question before the Court is whether their concurrent operation results in a conflict.
The operational conflict branch of the paramountcy test requires determining whether it is possible to apply the provincial law while complying with the federal law. Here, the purpose and the effect of s. 22(4) of the 407 Act are to allow a creditor, ETR, to enforce the collection of toll debts, which in the context of this appeal constitutes a claim provable in bankruptcy. Pursuant to s. 178(2) of the BIA, creditors cease to be able to enforce their provable claims upon the bankrupt’s discharge. ETR is faced with a clear prohibition under s. 178(2). Since s. 22(4) provides the creditor with an administrative enforcement scheme, it is impossible for ETR to use that remedy while also complying with s. 178(2). ETR’s toll debt is not listed as an exemption under s. 178(1), and the resulting financial liability of the debtor cannot survive his or her discharge. As a result, the 407 Act says “yes” to the enforcement of a provable claim, while s. 178(2) of the BIA says “no”. Both laws cannot apply concurrently or operate side by side without conflict. The inconsistency is clear and definite. One law allows what the other precisely prohibits. This operational conflict offends the doctrine of federal paramountcy.
The language of s. 22(1) of the 407 Act does not provide a possibility for there to be no operational conflict. Once notified, the Registrar has no choice but to refuse to validate the debtor’s vehicle permits and no discretion to terminate the enforcement process. It is not valid to suggest that, to negate the operational conflict that exists here, the debtor can renounce his right under the BIA by paying the released debt or by accepting the debt collection mechanism and foregoing his right to a vehicle permit. This would be a situation of single compliance with one of the laws, and renunciation of the operation of the other law by one of the actors involved.
The operation of s. 22(4) also frustrates Parliament’s purpose of providing discharged bankrupts with the ability to financially rehabilitate themselves. While the intent of s. 178(2) is that the debtor will no longer be encumbered by the burden of pre-bankruptcy indebtedness, s. 22(4) allows ETR to continue burdening the discharged bankrupt until full payment of the debt. Had Parliament wished to exempt ETR’s toll debt from the bankruptcy process, as well as from the consequences of a discharge, it would have done so expressly in s. 178(1). It did not.
Per McLachlin C.J. and Côté J.:
Section 22(1) of the 407 Act allows Ontario to do indirectly what it is implicitly prohibited from doing under s. 178(2) of the BIA. This frustrates the federal purpose of financial rehabilitation that underlies s. 178(2) and is sufficient to trigger the application of the doctrine of federal paramountcy. However, there is no operational conflict. The relevant standard is impossibility of dual compliance and express conflict. In the present case, it is possible to comply with s. 22(1) without defying s. 178(2) in the literal sense of its words. The two laws have different contents and provide for different remedies. They can operate side by side without operational conflict, although there is a frustration of purpose. Ifa debtor chooses not to drive, the province cannot enforce its claim. If 407 ETR opts not to notify the Registrar, s. 22(4) does not apply. Dual compliance is not impossible.
Reasons for judgment by Gascon J. Concurring reasons by Côté J.
Neutral Citation: 2015 SCC 52. Docket No. 35696.
35923 Saskatchewan (Attorney General) v. Lemare Lake Logging Ltd.
Constitutional law — Cooperative federalism — Division of powers — Bankruptcy and insolvency
Appeal involving a decision of the Saskatchewan Court of Appeal (2014 SKCA 35), affirming a decision of Rothery J. (2013 SKQB 278).
A secured creditor brought an application pursuant to s. 243(1) of the Bankruptcy and Insolvency Actfor the appointment of a receiver over substantially all of the assets of its debtor, a “farmer” within the meaning of The Saskatchewan Farm Security Act. The debtor contested the appointment and argued that the creditor had to comply with Part II of The Saskatchewan Farm Security Act, which requires that before commencing an action with respect to farm land, a person must submit a notice of intention, await the expiry of a 150‑day notice period, and engage in a mandatory review and mediation process. The chambers judge found that the provisions in Part II of The Saskatchewan Farm Security Act did not conflict with s. 243(1) of the Bankruptcy and Insolvency Act. The Court of Appeal found that Part II of The Saskatchewan Farm Security Act frustrated the purpose of s. 243(1) of theBankruptcy and Insolvency Act and was therefore inoperative in circumstances where an application is made to appoint a receiver.
Held (6:1) (Côté J. dissenting): The Court of Appeal’s conclusion that Part II of The Saskatchewan Farm Security Act is constitutionally inoperative where an application is made to appoint a receiver pursuant to s. 243(1) of the Bankruptcy and Insolvency Act, is set aside.
Per Abella, Cromwell, Moldaver, Karakatsanis, and Gascon JJ.:
The paramountcy analysis requires consideration of whether any overlap between the federal and provincial laws constitutes a conflict sufficient to render the provincial law inoperative. Two kinds of conflict are at play: (1) an operational conflict, where compliance with both the federal and provincial law is impossible; and (2) frustration of purpose, where the provincial law thwarts the purpose of the federal law. The operational conflict branch of the paramountcy doctrine requires that there be “actual conflict” between the federal and provincial legislation. Here, there is no operational conflict because it is possible to comply with both statutes. The issue therefore centres on whether the provincial legislation frustrates the purpose of the federal legislation.
Given the guiding principle of cooperative federalism, which allows for some interplay and overlap between both federal and provincial legislation, paramountcy must be narrowly construed. Courts must take a restrained approach, and harmonious interpretations of federal and provincial legislation should be favoured. If 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 a construction which would bring about a conflict between the two statutes. Absent clear evidence that Parliament intended a broader statutory purpose, courts should avoid an expansive interpretation of the purpose of federal legislation which will bring it into conflict with provincial legislation. Clear proof of purpose is required. The burden a party faces in successfully invoking paramountcy is accordingly a high one; provincial legislation restricting the scope of permissive federal legislation is insufficient on its own.
In this case, what the evidence shows is a simple and narrow purpose for s. 243 of the Bankruptcy and Insolvency Act: the establishment of a regime allowing for the appointment of a national receiver, thereby eliminating the need to apply for the appointment of a receiver in multiple jurisdictions.
Section 243(1) of the Bankruptcy and Insolvency Act authorizes a court, upon the application of a secured creditor, to appoint a receiver where such appointment is “just or convenient”. Under s. 244(1), a secured creditor who intends to enforce a security on all or substantially all of the inventory, accounts receivable or other property of an insolvent debtor that was acquired for, or used in relation to, a business carried on by the insolvent person, is generally required to send a notice of that intention to the insolvent person. Section 243(1.1) states that, where notice is to be sent under s. 244(1), the appointment of a national receiver cannot be made before the expiry of 10 days after the day on which the secured creditor sends the notice. The national receivership regime under s. 243(1) does not oust a secured creditor’s power to have a receiver appointed privately, or by court order under provincial law or any other federal law.
Part II of The Saskatchewan Farm Security Act is aimed at affording protection to farmers against loss of their farm land. Subject to ss. 11 to 21, s. 9(1)(d) of The Saskatchewan Farm Security Actprohibits commencement of any “action” with respect to farm land. This includes an application for the appointment of a receiver under s. 243(1) of the Bankruptcy and Insolvency Act. Section 11(1)(a), however, states that, where a mortgagee makes an application with respect to a mortgage on farm land, the court may, on any terms and conditions that it considers just and equitable, order that s. 9(1)(d) does not apply. Before a mortgagee can bring an application under s. 11, a number of preconditions must be fulfilled, including a compulsory and non‑waivable 150‑day waiting period during which a mandatory review and mediation process occurs. Once the 150‑day waiting period is over, the mortgagee may then make an application for an order granting leave to commence the action. On hearing the application, the court must presume that the farmer has a reasonable possibility of meeting his or her obligations under the mortgage, and that he or she is making a sincere and reasonable effort to meet those obligations.
As a result of the concurrent operation of s. 243(1) of the Bankruptcy and Insolvency Act and Part II of The Saskatchewan Farm Security Act, a secured creditor wishing to enforce its security interest against farm land must wait 150 days, rather than the 10 days imposed under federal law. The creditor must also comply with the various additional requirements of The Saskatchewan Farm Security Act, such as the statutory presumptions described above. That interference with s. 243(1), however, does not, in and of itself, constitute a conflict. A conflict will only arise if such interference frustrates the purpose of the federal regime.
Section 243’s purpose is simply the establishment of a regime allowing for the appointment of a national receiver, thereby eliminating the need to apply for the appointment of a receiver in multiple jurisdictions. There is insufficient evidence for casting s. 243’s purpose more widely.
There is nothing in the words of s. 243 suggesting that the 10‑day waiting period imposed by the provision should be treated as a ceiling rather than a floor. The discretionary nature of the s. 243 remedy — as evidenced by the fact that the provision provides that a court “may” appoint a receiver if it is “just or convenient” to do so — lends further support to a narrower reading of the provision’s purpose. A secured creditor is not entitled to appointment of a receiver. Rather, s. 243 is permissive, allowing a court to appoint a receiver where it is just or convenient. Interference with a discretion granted under federal law is not, by itself, sufficient to establish frustration of federal purpose. Nothing in the text of the provision or the Bankruptcy and Insolvency Act more generally suggests that s. 243 is meant to be a comprehensive remedy exclusive of provincial law.
Any uncertainty about whether s. 243 was meant to displace provincial legislation like TheSaskatchewan Farm Security Act is further mitigated by s. 72(1) of the Bankruptcy and Insolvency Act, which explicitly recognizes the continued operation of provincial law in the bankruptcy and insolvency context, except to the extent that it is inconsistent with the Bankruptcy and Insolvency Act. Moreover, other provisions of the Bankruptcy and Insolvency Act further support a more narrow reading of s. 243’s purpose. Notably, s. 47 provides a mechanism for the appointment of an interim receiver where there is an urgent need for the appointment of a receiver.
The legislative history of s. 243 of the Bankruptcy and Insolvency Act further supports a narrow construction of the provision’s purpose — i.e., to avoid a multiplicity of proceedings and the inefficiency resulting from them. Vague and imprecise notions like timeliness or effectiveness cannot amount to an overarching federal purpose that would prevent coexistence with provincial laws.
It is notable that Parliament has recognized that the receivership provision under s. 243 can be subordinated to potentially longer delays in other federal legislation (including the federal Farm Debt Mediation Act). Given the presumption that Parliament does not enact related statutes that are inconsistent with one another, courts should avoid an interpretation of a federal statute which does not accommodate similar limitations imposed under a provincial statute. It follows that Parliament intended neither to preclude all notice periods longer than the 10‑day notice period in the Bankruptcy and Insolvency Act nor to oust legislation which is intended to favour mediation between creditors and farmers.
Furthermore, on this record, there is simply no evidence to support the argument that the 150‑day delay or the other conditions in The Saskatchewan Farm Security Act frustrate any effectiveness or timeliness concerns. It is the burden of the party invoking paramountcy to not only establish that these are, in fact, the purposes of s. 243, but also that the evidence supports a finding that the provincial law frustrates them in some way. The record is silent in that regard. Parliament’s purpose of providing bankruptcy courts with the power to appoint a national receiver is not frustrated by the procedural and substantive conditions set out in the provincial legislation.
There is, as a result, no evidentiary basis for concluding that s. 243 was meant to circumvent the procedural and substantive requirements of the provincial laws where the appointment is sought. The general goals of bankruptcy or receivership cannot be used to trump the specific purpose of s. 243 and to artificially extend the provision’s purpose to create a conflict with provincial legislation. Construing s. 243’s purpose more broadly in the absence of clear evidence, is inconsistent with the requisite restrained approach to paramountcy.
The conclusion that Part II of The Saskatchewan Farm Security Act is constitutionally inoperative where an application is made to appoint a receiver pursuant to s. 243(1) of the Bankruptcy and Insolvency Act, is accordingly set aside.
Per Côté J. (dissenting):
A yearning for a harmonious interpretation of both federal and provincial legislation cannot lead courts to disregard obvious purposes that are pursued in federal legislation. In the case of s. 243 of theBankruptcy and Insolvency Act (“BIA”), Parliament intended to establish a process for appointing national receivers, and intended that process to be timely, sensitive to the totality of circumstances and capable of responding to emergencies. These federal purposes are plainly evident in s. 243 BIA,understood in light of the realities and demands of real‑time insolvency practice, s. 243’s statutory context and its legislative history. To the extent that The Saskatchewan Farm Security Act (“SFSA”) is incompatible with these purposes there is a frustration of purpose.
Given the often frenzied rush of insolvency proceedings, secured creditors will frequently have an acute need to have a receiver appointed promptly. Implicit in the 10‑day notice period of s. 243 BIA is the very notion of urgency.
In addition, Parliament permits secured creditors to apply for receivership before the expiry of the 10‑day notice period in certain circumstances. This is evidence of Parliament’s intention to provide secured creditors with a remedy capable of adapting to the often dramatic circumstances of insolvency. The significant discretion vested in the courts suggests that Parliament wished courts to respond to each application on a case‑by‑case basis in light of the full factual matrix before them. Moreover, the BIA’s interim receivership regime confirms the vital importance of timeliness for the full, national receivership.
This federal purpose of timeliness can also be discerned from the legislative history of the statutory notice provision. A full purposive analysis must account for the federal objectives that were originally given effect in the statutory scheme. While s. 243 BIA’s introduction was prompted by a need for a national full receiver, s. 243 is the product of an incremental evolution. The foundational purposes that have animated federal receivership law since 1992 must form part of any credible account of the federal purpose underlying today’s s. 243. If this Court disregards these foundational purposes in its frustration of purpose analysis, the provinces will be left free to mangle the receivership scheme.
On the argument that the special treatment afforded to farmers by the BIA must be included in any purposive analysis of s. 243 BIA, given that Parliament expressly excluded farmers from involuntary bankruptcy proceedings, one would expect that Parliament would have enacted a similar provision with regard to the appointment of a national receiver under Part XI of the BIA. However, there is no such provision in Part XI. In addition, there are stark differences between the federal Farm Debt Mediation Act (“FDMA”) and the SFSA, both in their operation and the policy preferences they embody. As a result, the existence of the former cannot be taken as evidence that Parliament intended the BIA to coexist with the latter. The scheme of the FDMA is quite compatible with the balance struck in s. 243BIA; if the provincial legislation had mirrored the FDMA, the conclusion as to frustration of federal purpose would have been different.
Although Part XI of the BIA contemplates some degree of interaction and overlap with provincial legislation, the essential question remains whether the operation of Part II of the SFSA undermines to a sufficient extent the federal purpose underlying s. 243 BIA. Here, if understood in more general terms, the federal purpose is clearly drawn in broad strokes, namely to establish a process for applying for a national receiver that is timely, adaptable in case of emergency and sensitive to the totality of circumstances. If a province wishes to legislate in a way that will affect the federal receivership regime then it must do so in a manner consistent with that purpose.
In the instant case, the federal purpose has been frustrated by the important obstacles the province has deliberately placed in the way. The notice period in the SFSA is far longer, and is absolute. TheSFSA also establishes a series of evidentiary hurdles that are incompatible with Parliament’s purpose. It is clear that the provincial legislation cannot operate in real time, and is in fact intended to hinder the timely appointment of a receiver thereby triggering the application of the doctrine of federal paramountcy.
Reasons for judgment by Abella and Gascon JJ. Dissenting reasons by Côté J.
Neutral Citation: 2015 SCC 53. Docket No. 35923.