Outstanding Highway 407ETR bills are not a valid reason for the province to withhold the vehicle permit of a bankrupt driver, Ontario’s Court of Appeal has ruled.

A series of recent court battles have attempted to resolve a key question that pits federal legislation against provincial: if a driver doesn’t pay the 407ETR toll, should the province take away their vehicle permit?

The simple answer, according to the provincial Highway 407 Act, is yes. When drivers don’t cough up the money to use the toll road, the highway company contacts the province, which must ultimately refuse to issue a vehicle permit.

The arrangement allows 407ETR to enforce payment on a highway that has no means to refuse access to any drivers — even those who don’t pay to use it.

But the issue becomes complicated when the driver ducking 407ETR fees files for bankruptcy.

Generally, federal laws say debts that existed prior to a bankruptcy declaration are erased following the distribution of their assets to indebted parties. Referred to as “the fresh start” principle, the spirit behind the legislation is to allow insolvent people to get back on their feet.

Lawyers representing 407ETR toll-skippers — some of whom have accrued tabs in the tens of thousands of dollars — have therefore argued that the provincial 407ETR law contravenes the federal bankruptcy act.

A recent Ontario appeal court ruling agreed. The Dec. 19 decision ruled that the 407 ETR arrangement with the province is “incompatible with the fresh start or financial rehabilitation purpose” of Canada’s bankruptcy laws.

“Indeed, it frustrates (bankruptcy) legislation’s heart and the very foundation on which insolvency legislation stands,” wrote Justice Sarah Pepall.

The ruling was met with satisfaction by Hamilton lawyer David Thompson, who has for over a year been making the argument that the provincial legislation was unfair to insolvent drivers.

“This decision goes a long way, as far as we’re concerned,” he said.

Thompson is one of the lawyers seeking certification of a class-action lawsuit for a handful of insolvent drivers denied their vehicle permits, despite being declared bankrupt, because of unpaid 407ETR tolls.

But the ruling is not decisive on all aspects of the issue. Thompson said two important concerns are still yet to be resolved: whether the highway company’s power to withhold a vehicle permit is lost as soon a driver files for bankruptcy (known as bankruptcy assignment) or if they must emerge from the process (bankruptcy discharge); and at what point during the process 407ETR loses its right to charge interest on amounts owed.

Kevin Sack, 407ETR’s vice president of communications, said the company is “very carefully reviewing” the latest decision.

He points out that it reverses a previous Ontario Superior Court ruling by Justice Francis Newbould, in which he determined that a motor vehicle licence was a “privilege” separate from bankruptcy legislation.

“In the interim, 407ETR has filed an application seeking a stay of the decision of the Court of Appeal,” Sack wrote in an email to the Star.

A stay would mean the ruling’s decision would temporarily not be applied, a move often taken in advance of an appeal.

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Thompson said he is going to oppose the stay and move forward with the class-action suit.

“We had essentially agreed to sort of put it on hold pending this Court of Appeal ruling. Our sense now is that we’re going to start prosecuting” and arrange a court date for authorization to proceed as a class-action suit, he said.