Litigator Darryl Singer breaks down 407 ETR v. Day — a case we likely have not heard the last of.
The unique creditor’s vantage point that 407 ETR Concession Company Limited (“407”) has by virtue of its lease with the Province of Ontario seems on its face rife with potential court challenges. That is not news. What is news is that it has taken until recently for the challenges to come before the courts for determination.
In the first of these cases, the Supreme Court of Canada will rule shortly on the validity of the section of the Highway 407 Act which gives 407 the right to compel the Ministry of Transportation to deny licence plates for unpaid tolls (“plate denial”) even when a debtor has been absolutely discharged from bankruptcy.
The Court of Appeal ruled last year that the provisions of the Bankruptcy and Insolvency Act were paramount and continuing plate denial post-discharge interfered with the public policy intentions of the BIA’s fresh start concept. Not surprisingly, 407 appealed. The matter was argued before the Supreme Court in October 2014 and a decision is expected in 2015. In the meantime, those consumers who made an assignment in bankruptcy which listed, inter alia, the 407 as a creditor and were subsequently discharged, still have their plates in denial as a result of a stay of the enforcement of the Court of Appeal’s ruling until the Supreme Court renders its verdict.
Increased Limitation Period Questioned
Now along comes another interesting case from the Superior Court which touches upon something that many litigators have long questioned about the 407’s legislatively-enhanced creditor powers. This involves the increased limitation period from two years to 15 years pursuant to the 407’s standard transponder contract.
In the recent decision from the Newmarket court by Justice Mark Edwards, the defendant’s transponder contract with 407 was entered into in March 2010. The defendant’s account with 407 went into arrears as early as December 21, 2010, the date he last made a payment on the transponder account. He was placed into plate denial in 2011. However, 407 did not commence the action to recover his debt until June 14, 2013.
The defendant sought to dismiss 407’s claim for unpaid tolls on the basis that the action was initiated outside the two-year limitation period for civil actions in Ontario. He argued that the two-year limitation period commenced on the date of the individual invoice, which would have been around December 2010 at the latest). 407 argued that by voluntarily entering into the transponder agreement, the defendant attorned to the 15-year limitation period set out therein. 407 argued in the alternative that the two-year limitation clock commenced on the date the plates were put into denial in 2011.
Effect of Legislation on Protections
Writing in 407 ETR Concession Company Limited v. Ira J. Day, Edwards J. held that the 15-year limitation period that the 407 essentially gave itself was a violation of the two-year limitation period prescribed by the Limitations Act and could not apply to a customer who was a “consumer” within the meaning of the Consumer Protection Act. As such, 407 could not rely upon the exception to the two-year limitation period set out in section 22(5)(1) of the Limitations Act that might otherwise apply to business agreements.
However, the judge also struck a practical balance and ruled that if the two-year limitation period commenced on the date of the invoice, it would be unmanageable. To require the 407 to essentially start the limitations clock 30 days after each individual invoice would create a different limitation period for each invoice, meaning multiple limitation periods per customer and result in literally tens of thousands of unnecessary court actions being issued, not to mention a multiplicity of proceedings for a single consumer debtor. He ruled that the two-year limitation period begins to run upon plate denial.
Balancing Rights for Debtors, Creditors
It is a decision which will likely be appealed by both parties. 407 has lost its much cherished leverage of the extended limitation period, while Day will be on the hook for at least some of the debt based on the limitation period commencing at plate denial.
However, this is clearly another victory for the consumers who use the 407 and should be applauded. As in the case previously decided by the Ontario Court of Appeal, the effect of the decision in Day is to claw back from 407 its enhanced collection powers and put it more on footing with other ordinary secured creditors. This is indeed good for consumers.
At the same time, although Justice Edwards founded much of his rationale upon the unique nature of the 407 toll highway, the case may have wider applications to benefit the credit granting industries.
The ratio of this case in that regard is that each new invoice for a single customer does not necessarily create a new limitation period and the implication is that the courts will find a practical application for when the limitation period commences. This ensures that ordinary unsecured creditors need not issue a claim every time there is a chance of non-payment of a single invoice just to preserve their rights. The court is likely, as it did in this case, to take a contextual approach and strike a practical balance between the rights of the creditor, the rights of the debtor, and the exigencies of the business world and the court system.