Paramountcy Problems in Alberta (Attorney General) v Moloney

This is the first part of a two-part series. Part I will look at the implications of Alberta (Attorney General) v Moloney, 2015 SCC 51 [Moloney]. Part II will focus on the Saskatchewan (Attorney General) v Lemare Lake Logging, 2015 SCC 53 [Lemare] decision.

Part I

As a federal state, there is a plurality of legislative bodies in Canada with the constitutional authority to make law. Part IV of the Constitution Act, 1867 sets out the manner in which law-making power is divided between the Federal government and the provinces, designating respective spheres of exclusive jurisdiction. Contrary to what the framers of the Constitution may have thought, however, the different heads of power are not “water-tight compartments,” and may on occasion butt heads with one another.

To reconcile such conflict, Canadian courts have adopted the doctrine of “federal paramountcy” – a rule which, according to Professor Peter Hogg, stipulates that “where there are inconsistent (or conflicting) federal and provincial laws, it is the federal law which prevails,” and the provincial law is deemed inoperable to the extent of the conflict (Peter W Hogg, Constitutional Law of Canada, 2013 Student Edition (Toronto: Carswell, 2013), p 16-2 [Constitutional Law of Canada]). A two-part test (the “paramountcy test”) has been established to determine whether such an “inconsistency” exists:

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 (Alberta (Attorney General) v Moloney, 2015 SCC 51 [Moloney], para 18. emphasis added).

The ruling in Moloney is the Supreme Court of Canada’s (“SCC”) latest re-assessment of the doctrine of paramountcy – particularly with respect to the manner in which the term “inconsistency” and “conflict” applies to the first branch of the paramountcy test.

Facts and Decisions

In 1989, the Respondent – an uninsured driver – was responsible for an automobile accident. Pursuant to the Motor Vehicle Accident Claims Act, RSA 2000, c M-22, the Province of Alberta compensated a third party injured in the accident, and obtained default judgment against the Respondent for the amount it paid out. The Respondent agreed to repay his debt in monthly installments.

However, in 2008, the Respondent declared bankruptcy, and was discharged from all of his debts in 2011, pursuant to the federal Bankruptcy and Insolvency Act, RSC 1985, c B-3 [BIA]. Section 178(2) of the BIA stipulates that, “upon discharge, the respondent is released from all debts that are claims provable in bankruptcy,” and for this reason, the Respondent did not make any re-payments to the Province (Maloney, para 2). Consequently, the Province suspended his vehicle permits and drivers licence, pursuant to section 102(2) of Alberta’s Traffic Safety Act, RSA 2000, c T-6 [TSA] – effectively forbidding him from driving until he pays the amount the Province claims he owes.

The Respondent contested the constitutional operability of this provision, “arguing that [section 102(2) of] the TSA conflict[s] with the BIA, in that it frustrate[s] the purpose of bankruptcy” (Maloney, para 3). The Respondent was successful in establishing an operational conflict between the two statutes before the Alberta Court of Queen’s Bench, and invoking the doctrine of paramountcy, Justice Moen declared the TSA ineffective to the extent of its conflict with the BIA. This holding was upheld by a unanimous Alberta Court of Appeal – albeit, for slightly different reasons.

At issue before the SCC was whether section 102(2) of the TSA is constitutionally inoperative by reason of the doctrine of federal paramountcy, to the extent that it is used to enforce a debt discharged in bankruptcy pursuant to the BIA. The SCC unanimously decided that it was. However, the court split 7-2 on the proper approach to the first branch of the paramountcy test – the “impossibility of dual compliance.”

The Doctrine of Federal Paramountcy

It is important to begin by noting that the doctrine of paramountcy is a relatively extraordinary doctrine, which comes into effect only where there is an inconsistency, or true conflict between the validly enacted federal and provincial legislation. Where there is no conflict, Canadian courts have no constitutional basis to render inoperative any provision of the provincial statute under a division of powers analysis. For this reason, properly setting out the circumstances where such a conflict arises becomes of “paramount” importance. This notion is captured in the following passage from Professor Hogg:

Given the overriding force of federal law, a wide definition of inconsistency [(a term which Professor Hogg equates with the term ‘conflict’)] will result in the defeat of provincial laws in ‘fields’ which are ‘covered’ by federal law; a narrow definition, on the other hand, will allow provincial laws to survive so long as they do not ‘expressly contradict’ federal law. The wide definition is the course of judicial activism in favour of central power; the narrow definition is the course of judicial restraint, leaving all but the irreconcilable conflicts to be resolved in the political arena (Constitutional Law of Canada, p 16-4, emphasis added).

In Moloney, the SCC took the opportunity to re-assess the proper judicial characterization of a “conflict in operation” in its application to the first branch of the paramountcy test.

The Majority: Contextualizing “Dual Compliance”

Justice Gascon begins his analysis of the doctrine of federal paramountcy by setting out the basic, uncontested principles attached to the doctrine: where there is a genuine conflict or inconsistency between federal and provincial legislation, the federal law prevails. Reaffirming the traditional approach to the doctrine, Justice Gascon further cites Justice Dickson’s famous passage in Multiple Access Ltd v McCutcheon, [1982] 2 SCR 161 [Multiple Access]:

In principle, there would seem to be no good reasons to speak of paramountcy and preclusion except where there is actual conflict in operation as where one enactment says ‘yes’ and the other says ‘no’; ‘the same citizens are being told to do inconsistent things’; compliance with one is defiance of the other (Multiple Access, p 191, emphasis added).

However, the approach for which Justice Gascon advocates entails less of a “mere literal reading of the provisions at issue,” and instead involves “a proper reading of the provisions based on the modern approach to statutory interpretation…” (Moloney, para 23). With reference to the recent pronouncement on the point in Marine Services International Ltd v Ryan Estate, [2013] 3 SCR 53, he noted that there is no suggestion in the jurisprudence that “the assessment of an actual conflict in operation is limited to the actual words or to the literal meaning of the words of the provisions at issue…” (Moloney, para 23). Rather, it is the “proper meaning of the provision that remains central to the analysis, not really its literal sense” (Moloney, para 23).

In other words, the majority’s ruling on this point departs from a formalistic, literal, and even “superficial” analysis of the provisions in question. Instead, Justice Gascon’s understanding focuses on whether a more robust understanding as to whether the two provisions in question lead to a genuine, substantive conflict between them. This approach, it would appear, is a broader and more contextual definition of inconsistency in relation to the approach adopted by Justice Côté in her concurring reasons (Moloney, para 112). This was particularly evident when dissecting the way this approach was applied to the case at hand. After undertaking an analysis of both legislative schemes, Justice Gascon turned to the first branch of the paramountcy test, stating early on that:

…the test for operational conflict cannot be limited to asking whether the respondent can comply with both laws by renouncing the protection afforded to him or her under the federal law or the privilege he or she is otherwise entitled to under the provincial law (Moloney, para 60).

Indeed, the majority found true incompatibility in the matter before it, given that the federal BIA prohibits creditors from enforcing all claims provable in bankruptcy, while the provincial TSA disregards that release, and “allows for the use of a debt enforcement mechanism on such a claim by precisely excluding a discharge in bankruptcy” (Moloney, para 63). Despite the fact that the literal wording of the two provisions allows Mr. Moloney to avoid paying his provincial debts by simply choosing not to drive, Justice Gascon’s substantive and contextual approach to characterizing an “conflict in operation” lead to the finding that there was in fact an operational conflict between the two provisions.

Turning to the second branch of the test, the majority had no trouble upholding the lower courts’ decisions: that the Province’s use of its driving-related powers had the effect of frustrating the purposes of the BIA – the debtor’s financial rehabilitation – by “creat[ing] a new class of debts that survive[s] bankruptcy” (Moloney, para 79). Therefore, taking everything into account, the majority had no trouble concluding that there did exist a conflict between those two provisions, and that section 102(2) of the TSA is inoperative to the extent that it is used to enforce a debt discharged in bankruptcy (Moloney, para 90).

A Critique from Justice Côté…

Justice Côté, writing for herself and Chief Justice McLachlin, concurred in result with the majority, particularly with regard to the way the majority interpreted and applied the second branch of the paramountcy test. However, she held that the case should have been decided on the second branch of the test alone. In her opinion, Justice Gascon’s approach to the doctrine conflates the two branches (or “at minimum, blurs the difference between them”), and his interpretation of the first branch conflicts with the clear standard expressed in jurisprudence on this point: the “impossibility of dual compliance as a result of an express conflict” (Maloney, para 93, emphasis added).

Justice Côté’s approach to the first branch of the paramountcy test places considerable focus on the requisite directness in the conflict, emphasizing the need for an “express contradiction” borne out of the wording of both provisions in question. This notion is strengthened with reference to Multiple Access – one provision must say “yes” while the other says “no.” According to Justice Côté, a less direct conflict is simply not enough (Maloney, para 102).

Moreover, Justice Côté also points to policy considerations in support of a narrow, restricted approach to this first stage. Where there is no express or direct conflict, she notes that the provisions are deemed capable of operating side-by-side; lowering the threshold from that of a “tight restriction” would allow for increased intrusion upon the provincial sphere of power, and undermine the principles of cooperative federalism (as outlined in NIL/TU,O Child and Family Services v BC Government and Service Employees’ Union, [2010] 2 SCR 696, para 42 – curiously, authored by Justice Abella, who sided with Justice Gascon on this point).

Additionally, she indicates that a focus on the purposes and the effects of the provisions, rather than their actual wording, has the potential to infringe upon the function fulfilled by the second branch of the paramountcy test, which is expressly intended to weigh the effect of the provincial legislation vis-à-vis the purpose of its federal counter-part.

Applying her approach to the issues at play, Justice Côté would not have found any inconsistency between these two provisions – it is possible to comply with both provisions, so long as the bankrupt elects not to drive. In other words, the bankrupt is still discharged in the literal sense of the term, and strictly speaking, the “two acts can operate side by side without conflict” (Moloney, para 97, emphasis added). Any substantive frustration of the BIA’s purpose is to be assessed on the second branch of the paramountcy test.

Reconciling the Differences

In short, the majority of the SCC appears to adopt a broader understanding of a “conflict in operation” – one that entails a more substantive, contextual, and purposive approach to determining the existence of a conflict. Of particular significance is the apparent departure from the notion that dual compliance must be impossible to trigger the first branch, particularly as Justice Côté (and the lower courts) convincingly indicates that dual compliance is in fact possible. Justice Gascon notes that it would be “impossible for the province to apply s. 102 without contravening s. 178(2)…” (Moloney, para 75), with the inquiry on dual compliance has traditionally focused on whether it is “impossible for a person to obey both laws” (Constitutional Law of Canada, p 16-4; see also Multiple Access, p 191).

Whether Moloney substantially changes the doctrine of federal paramountcy remains to be seen; the precedential value of a decision can only be properly assessed after it has been interpreted and applied by subsequent courts and decision makers.   If nothing else, however, the ruling leaves us with some conceptually interesting questions and debates, which will surely play out in constitutional law classes and circles across the country.