407 ETR Debt Collection Steps Up. Consider the Limitation Period First.

407 ETR debt collectionThe reason you file a bankruptcy or consumer proposal is to eliminate your debts. While there are some exceptions (like special rules for student loans), bankruptcy eliminates most unsecured debts including government debts like income taxes. There is, however, one debt that stubbornly refuses to go away, and that’s a debt owing to the 407 ETR.

As I have previously explained, 407 ETR debts are dischargeable in bankruptcy. They are a debt, just like any other debt. Unfortunately, the 407 ETR refuses to accept that, so they have gone to court to argue that their debt is special. They lost. So they appealed. And they lost that appeal. So now, they have appealed all the way to the Supreme Court of Canada. The case was heard in January 2015 and as of this post, we are awaiting their decision. I’m not a constitutional lawyer, but my assumption is that the Supreme Court will uphold the decisions of the lower courts and say that “a debt is a debt”.

So if nothing has changed why am I writing this update now?

I’m writing now because it appears that, in advance of this Supreme Court decision, the 407 ETR has stepped up their collection efforts.

One of our clients had a debt with 407 ETR in 2007 and filed bankruptcy with us in 2009, and was subsequently discharged. This client just got a letter from a law firm representing the 407 ETR, stating that the debt is owing, and they will take legal action if the debt is not paid.

Obviously, it is my position that the debt was discharged in the bankruptcy, but until the Supreme Court rules on this matter I can’t conclusively state that my opinion is correct. However, there is another issue here: Limitation Periods.

Under the Limitations Act of Ontario, a legal action:

..shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.

In other words, you have two years to start legal action and then it’s too late. You can’t wait forever to sue someone. So how do you calculate two years?

For most debts, the two year clock starts on the date of the last payment, also known as the “last activity” on the account. However, in the case of the 407 ETR, there was a court case (407 ETR Concession Company v. Ira J. Day) that ruled that the two years starts on the date that the 407 ETR sends a plate denial notice.

Section 22 of the Highway 407 Act gives the 407 an extraordinary power: they can notify the Registrar of Motor Vehicles of the failure to pay, and the Ministry of Transportation will refuse to issue a new vehicle permit when the license plate comes up for renewal. This “blacklisting” or “plate denial” is usually the first step that the 407 ETR will take before they serve a statement of claim and commence legal action. The court decided that since 407 ETR has this extraordinary power, they should use this power as a first step to attempt to secure payment.

It is therefore likely that once a driver incurs a debt with 407 ETR, a number of months could elapse before 407 ETR issues a plate denial request, and only then does the two year limitation period begin.

In simple terms, for 407 ETR debts, the limitation period can be considerably longer than two years.

But wait, there’s more!

If you have a transponder, you signed a Transponder Lease Agreement, and the standard agreement used by the 407 ETR attempts to lengthen the applicable limitations period to 15 years. That’s why, when the law firm attempting to collect on behalf of the 407 ETR contacted our client, they stated that they have 15 years to collect on the debt.

Is that true?

Again, I’m not a lawyer, but in my opinion, the answer is “no”. It is a basic principle of law that you can’t contract out of the law. For those of you who are lawyers you can read Section 22(6) of the Limitations Act, which does contain an exception for cases that are not related to a business. But since a person getting a transponder is clearly a consumer, and therefore, is getting the transponder for a business purpose, it would certainly appear that the two year limitation period still applies, even to the 407 ETR.

In summary, the 407 ETR has two years from when they issue a plate denial notice to commence legal action; if they wait longer than two years it would appear that they lose the ability to commence litigation against the debtor. So, if the 407 ETR is threatening to sue you for a debt from more than two years after it “pulled your plates,” you should seek legal advice because you may have a defence in court.

If you have subsequently filed bankruptcy, I am of the view that the debt is extinguished, but we will have to wait for the Supreme Court to rule on that point of law. Stay tuned, I will report back when we have a decision.