Farm Protection In Manitoba – Safe Harbour Or A Trap For The Unwary?

By David R.M. Jackson on 2013/04/18

[This paper was originally presented at the Manitoba Bar Association Mid-Winter Conference,  January, 2003. It has since been updated and revised for the 2011 Pitblado Lectures.]

The Farm Protection Regime in Manitoba is built upon a disjointed combination of Federal and Provincial Statutes. Through multiple notice requirements, various administrative stays, Federal and Provincial Mediation Boards and, in some cases, Court supervision, farmers in financial difficulty are afforded a generously wide safety net against the actions of their creditors. While this provides a more than reasonable opportunity to restructure and negotiate settlements through mediation, creditors must tread carefully or risk the hardship of starting the entire process over again in accordance with the statutory requirements.

Background

Before delving into the legislative abyss that governs farm protection in this province, it must not be forgotten that there is also a co-existing regime governing relations between debtors in financial difficulty and their creditors. Pursuant to the Federal governments’ jurisdiction over insolvency, there are two major statutes pursuant to which creditors can seek protection and endeavor to effect arrangements with their creditors: the Bankruptcy and Insolvency Act R.S.C. 1985 c.B-3 as amended (“BIA”) and the Companies Creditors Arrangements Act R.S.C. 1985 C-36 (“CCAA”). While a detailed discussion of these statutes is beyond the scope of this paper, it must not be forgotten that they exist and are available to farmers and farm corporations to restructure their affairs. It should also not be forgotten that once the various farm protection mechanisms have been exhausted secured creditors must still proceed to effect their realization in accordance with the applicable legislation that governs realization of the respective security including The Real Property Act, when dealing with mortgage sale and foreclosure, The Personal Property Security Act and/or Bank Act when dealing with the personal property security realizations and The Farm Machinery and Equipment Act when endeavoring to repossess farm machinery and equipment under the jurisdiction of that Act.

The two major pieces of legislation that specifically govern farm protection in Manitoba are the Farm Debt Mediation Act S.C. 1997, c.21 (“FDMA”) (this is the 1997, successor to the original Farm Debt Review Act) and The Family Farm Protection Act S.M. 1986-87 c.6 (“FFPA”). These are two separate and distinct statutes which arose in response to the farm crisis in the mid 1980’s. During the recession of the 1980’s unusually large numbers of farmers were unable to meet their debt obligations. Consequently there was a disproportionate number of farm foreclosures and receiverships which forced many farm families off the land. While some major farm lenders such as Farm Credit Corporation voluntarily adopted a temporary moratorium on farm foreclosures, that provided only limited relief. The deepening farm crisis and the inadequacy of existing farm aid created pressure on the Federal and Provincial governments for a legislative solution. In response, both levels of government enacted separate farm protection statutes.

On January 26, 1986 the House of Commons passed the Farm Debt Review Act S.C. 1984-85-86, c33 (“FDRA”). It came into force on August 5, 1986. This Act established Farm Debt Review Boards in each province to assist farmers in financial crisis to obtain third party assistance to review their affairs and negotiate with creditors. It did not impose mandatory obligations upon creditors to compromise but, it did provide for a stay of proceedings for up to 120 days. It also provided an obligation on secured creditors to give notice of their intention to realize on security and to inform the farmers of their right to seek the assistance of the Farm Debt Review Boards. If the secured creditors were unwilling to compromise by the end of the stay, they were free to continue realization proceedings. The stated purpose of this legislation was to assist those farmers who were financially viable in the long term whose difficulties could be overcome with the co-operation of the creditors. In 1997 the FDRA was replaced with the FDMA which firmly imbedded mediation into the process.

The Province of Manitoba’s response to the farm crisis was the FFPA which received Royal Assent on September 10, 1986. This legislation prevented creditors from realizing against farm land without first obtaining Court approval. The Court has discretion to grant leave only where it was “just and equitable” to do so after the creditor and the farmer had the opportunity to mediate their differences before the Manitoba Farm Mediation Board. Initially, this legislation contemplated the application process to apply to farmland, machinery and equipment, and in certain circumstances, livestock. While the provisions in the FFPA dealing with farmland were proclaimed in force in December 1986, those dealing with machinery and equipment and livestock have never been proclaimed. Accordingly, the FFPA only applies where the lender’s security includes farm land.

Current Regime

The practical effect of the farm protection legislation in tandem with other related statutes is that before a secured creditor can commence enforcement of its security, it must overcome a series of hurdles including statutory notices, administrative stays and at least one level of Mediation. If the security involves farmland, it is also necessary to proceed with the Court application process under FFPA and another round of mediation.

Notice Requirements

While the specific statutory notices will vary depending on circumstances, at least two, and sometimes three, separate forms of notice may have to be given by a secured creditor along with the traditional demand letter before even considering moving on to the next stage of the enforcement process. These are as follows:

1. Notice of Intention to Enforce Security under Section 244 of the BIA

This Act applies to secured creditors who intend to realize on security on any insolvent person, not just farmers. This is a prescribed form (BIA Form 86). This notice must be utilized where the secured creditor contemplates taking possession or control of “all or substantially all” of: the “inventory”, “accounts receivables” or the “other property” of an insolvent person.

What that means is that the secured creditor cannot take any steps to realize on that security until either expiry of 10 calendar days following service of the notice or once the debtor waives the notice in writing after service. If the debtor has not sought protection under the proposal provisions of the BIA within that 10 day period (and thereby obtained a stay against the creditors) the secured creditor may proceed with its remedies. The BIA has specific provisions for the creditor to seek the appointment of an interim receiver prior to expiry of the 10 day period in the event that it is necessary for the protection of the interests of the creditor or the debtors estate.

2. Section 21 FDMA Notice of Intent to Realize on Security

Any creditor who seeks to enforce its security as against any property of a farmer must serve the prescribed form of Notice of Intent to realize on Security under this legislation. This is a 15 business day notice and requires actual service on the farmer or as prescribed under the regulations. This notice not only gives the farmer notice of the secured creditor’s intention but of the right to make application for protection under the FDMA. Unlike the BIA, there is no obligation on the farmer to seek protection under FDMA prior to expiry of the notice. A farmer may, and often does, delay applying for the stay until it has the most strategic benefit – such as when the bailiff arrives or just before a mortgage auction sale or before the Final Order for Foreclosure can be filed. During the notice period the secured creditor is prohibited from taking any proceeding or steps in a proceeding, judicial or extra-judicial which would have the affect of taking the farmers property. Pursuant to Section 22 any steps taken by a creditor in violation of this notice are deemed to be “null and void”. While the statute does not specifically state that the notice cannot be waived it is the position of the Minister of Agriculture that no such waiver would be recognized as it would be contrary to public policy. The Courts have also held that the rights afforded under the FDMA can not be waived: Intec Holding v. Grisnich 2003 ABQB 993 additional reasons at 2004 ABQB 43 (CanLII). More significantly, it does not matter that the parties mediated and negotiated a settlement before the notice is sent. The Intec Holdings case recognized that the farmer could take advantage of the mediation agreement and still set aside the foreclosure proceedings because the creditor had not complied with FDMA Section 21.

3. PPSA Section 37(7) Notice Regarding Seizure of Growing Crops

If the secured creditor is contemplating seizing “growing crops” it must first give a 15 calendar day notice to not only the debtor but any other party that may have an interest in the growing crop or the lands on which they are being grown. Any recipient of the notice may apply to Court for an Order postponing its removal.

An interesting question is whether any or all of these notices can be served concurrently. My own view is that notwithstanding the different time/notice periods, the secured creditor can serve all three at the same time. I am not aware of any case which specifically addresses this issue, but I do know of several counsel in this province who take the position that a more prudent practice is to serve the FDMA Notice of Intention and await expiry of the 15 business days before serving any other notices. The concern is whether or not these other notices could be construed as a step in a proceeding and thereby trigger the possibly devastating consequences of Section 22 of the FDMA . My view is that as all of these notices are conditions precedent to either enforcement or commencing proceedings and therefore can be issued concurrently without violating the FDMA.

Please note that holder of a guarantee is not considered a secured creditor nor obliged to give a FDMA notice, unless that guarantor is a farmer and has provided collateral security in support of the guarantee: CIBC v. Verbrugshe (2006) Carswell Ont 3502 and 4461 (Ont.S.C.J.).

Stays of Proceeding Under the FDMA

An insolvent farmer may apply for a stay of proceedings as well as financial review and mediation through the Farm Debt Mediation Board. The full nature and extent of this stay is set out in Section 12:

“Notwithstanding any other law, during any period in which a stay of proceedings is in effect, no creditor of the farmer:

(a) shall enforce any remedy against the property of the farmer; or

(b) shall commence of continue any proceedings or any action, execution or other proceedings, judicial or extra-judicial, for the recovery of a debt, the realization of any security or the taking of any property of the farmer.”

As was the case with the FDMA notice referred to above, any act done in contravention of this stay is deemed to be “null and void”. The consequences of such contravention cannot be any more clearly set out than in the unfortunate situation of M & D Farms Ltd. v. MACC 1999 CanLII 648 (S.C.C.). This case arose under the similar provisions of the FDRA. Clearwater, J. at first instance identified the farmers’ conduct in abusing the system and multiple utilization of FDRA stays as “almost unconscionable” and “almost inexcusable”. Notwithstanding the farmers’ conduct, when MACC proceeded with the application for leave under FFPA notwithstanding the FDRA stay, the Supreme Court of Canada held all of the subsequent steps in the proceedings to be a nullity. It set aside eight years of mortgage sale proceedings and related litigation (not to mention untold legal fees and administrative costs) and forced MACC to transfer back the lands which had been foreclosed upon to the farmer before it could then start the entire farm mediation process all over again.

Upon a farmer’s application, the Farm Debt Mediation Board will grant an immediate 30 day stay and has the power to grant three additional 30 day stays for a total of 120 days. Furthermore, under Section 20(1) the farmer may re-apply every two years to go through the process again.

During the stay the Farm Debt Mediation Board will conduct a financial review and appoint a mediator for the purposes of endeavoring to reach a mutually acceptable arrangement. There are provisions dealing with earlier termination of the stay where an arrangement is not possible or where the farmer jeopardizes the assets. In most situations the affected farmer will be appointed guardian of his own assets although the administrator of the Board can nominate another qualified person selected by the secured creditors or the administrator.

Applications under the FFPA

Except for farm machinery and equipment financed through dealers under The Farm Machinery and Equipment Act, once the applicable notices and/or any FDMA stay has expired, secured creditors may proceed with enforcement remedies against the personal property charged under the security. In other words, the secured creditor can seize, sell, appoint a receiver or take any other relief provided under the security without the need for any further application. This is not the case with farm land.

The FFPA prevents a creditor from pursuing mortgage and other remedies on farmland including proceeding for sale, possession, receivership or foreclosure unless a separate mediation process has been completed and Leave granted by the Court of Queen’s Bench – a process that generally takes approximately 4 to 6 months. (By virtue of Section 22 of the FDMA, and the M&D Farm Decision this FFPA application can not be filed at the same time as the giving of the Section 21 FDMA Notice).

To satisfy the requirements of the FFPA, an Application for Leave must be filed in the Queen’s Bench Judicial Centre closest to the affected farmer. This is a statutorily prescribed form of application. Once the application has been filed it must be served upon the affected farmer and the Manitoba Farm Mediation Board within 30 days.

Service on the Board is the first concern as that starts the clock ticking on the Board’s obligation to mediate and provide a report within 90 days. The mediation process is not unlike what would have already been pursued under the FDMA. Typically the Mediation Board personnel will contact the affected farmer and the creditor to determine the nature of the difficulties and then endeavor to mediate a settlement.

If a negotiated settlement is reached through this process that may typically end the matter; if not, it is necessary to obtain the Board’s Report before moving onto the next step: Leave of the Court. As indicated above, the Board has 90 days in which to provide its Report to the Court. While the language of Section 9(3) is mandatory – “the Board shall, within 90 days following the service of an application upon the Board, file with the Court a copy of the Board’s report” – it is frequently recognized in the breach. On occasion it may be necessary to remind the Board to produce and file its report. It is not uncommon for the Board to seek the creditor’s “Agreement” to extend the time period for filing the Report. If the farmer consents, or if there has been a history of particularly recalcitrant behavior on the part of the farmer, or if the farmer is simply unwilling to participate, the Board may be persuaded to produce its Report in a shorter time frame.

Once the Board Report has been filed with the Court, the creditor may then bring the matter on before a Judge for Hearing to obtain the necessary Order for Leave. This is commenced by the filing of a Notice of Motion together with supporting Affidavit material detailing the history of the relationship and difficulties between the parties.

The farmer must receive at least 15 days notice of the hearing unless the Court can be persuaded to abridge the notice period.

The decision on whether or not to grant the creditor leave to proceed with its remedies is entirely at the “discretion” of the presiding Judge. The FFPA provides little guidance for the exercise of that discretion. Section 9(8)(b) does say that a Judge can grant the relief sought if he or she is “satisfied that it is just and equitable to do so”.

Fortunately, there are some precedents setting out the factors for the Court’s consideration in determining whether or not it is ‘just and equitable” to grant the relief:

(a) Is there any indication that the farmer will ever be able to repay the debt;

(b) Is it likely that the farmer will be able to receive financial assistance or concessions from any other source;

(c) Does the debt by far exceed the value of the lands in question; and

(d) Has the farmer presented or attempted to present a viable plan as to how he would be able to arrange his affairs to accommodate the mortgagee.

CIBC v. Maguet (1988) 53 Man.R. (2d) 226 at 227 (Man Q.B.)

Virden Credit Union Limited v. Harvey (1989) 60 Man.R.(2d) 204 at 208 (Man.Q.B.)

Typically the Court is fairly swift in dealing with otherwise hopeless situations. However, if there is a substantive issue, such as an interest rate dispute or a question as to the validity of the security, the FFPA hearing may be adjourned pending a trial of the issue.

Once the Judge has made an Order there is a right of appeal to the Manitoba Court of Appeal on a question of law only.

Assuming that the Leave Order has been granted, the creditor can then commence the legal proceedings necessary to commence mortgage sale, foreclosure, receivership or other relief available under the security.

Some counsel have endeavoured to shoe-horn into their FFPA leave motions requests for substantive enforcement relief such as an Order for possession. My own view is that this is not appropriate as FFPA Section 8 mandates that a Leave Order must be granted before a creditor can “commence or continue” enforcement activities. Recently, however, a mortgage lender was able to obtain an Order for Possession without commencing a separate action or application: Triple D Land & Cattle Inc. v. Dyrda et al 2009 M.B.Q.B. 270, affirmed 2010 M.B.C.A. 5. It is respectfully submitted that the facts in Dyrda were unique insofar as that at the time of the initial hearing, Menzies, J. was only prepared to grant the FFPA Leave Order and then adjourned the balance of the relief sought under the Notice of Motion. Almost a year later, the motion was brought back on before Schulman, J. where counsel for the farmer candidly admitted that his client was deliberately stalling and that there was no defence to the relief sought. Needless to say, Schulman, J. granted the Order for Possession. Subsequently, Dyrda retained and instructed new counsel who brought the matter back on before Schulman, J. on the grounds that the Order for Possession should have been brought on by way of a separate proceeding i.e. a separate Notice of Application or Statement of Claim. Schulman, J. was not prepared to set aside his previous Order nor grant a stay pending appeal as any procedural concern was effectively waived by counsel’s candid admissions at the previous hearings. The Court of Appeal acknowledged that the Appellant’s position on the procedural defect was “technically correct” but it still refused the appeal. The point being that separate proceedings should be still taken for enforcement relief after the Leave Order is granted.

It is also important to note that pursuant to Section 37 of the FFPA any agreement to waive the provisions of that Act or to modify or abrogate its effects are void. Furthermore, contravention of the Act may leave the culprit susceptible to prosecution with a fine not exceeding $50,000.00 or imprisonment for a term not exceeding two years or both.

Commentary

What all this means is that any creditor which finds it necessary to realize on its security from a farmer in financial difficulty must be patient and prepared to slavishly follow the notice requirements and participate in the mediation process. For example, with personal property security the creditor could be delayed four to five months after service of the Section 21 Notice if the full extent of the FDMA stay were granted. If that creditor also had real property security it would likely be necessary to tack on an additional four to six months, to complete the provincial Leave Application process under FFPA – and longer if the Court proceedings are seriously contested.

These legislative hurdles have at least in part accomplished the original objective of restraining secured creditors from enforcing their security before the affected farmer has an opportunity to mediate and/or restructure the farm operations. Prior to the mid-1980’s a secured creditor who had lost patience with a farmer could have appointed a receiver over the farm with a few days notice and liquidated the assets as quickly as local market conditions permitted, the current statutory regime prevents this from occurring.

Interestingly, the statutory delays have not in my experience prompted creditors to expedite the statutory notices and mediation in an attempt to jump start the process. Over the quarter century since this farm protection regime was enacted, creditors have become more pragmatic and will typically afford farmers significant time in which to try to overcome their difficulties. There may be other causes for this but most financial institutions have learned that a bad settlement may well be preferable to an otherwise successful liquidation. They are prepared to do what it takes to get a deal done and to do so wherever possible with and without resort to the various mediation boards. Accordingly, a great deal of the “farm realization” work tends to result in voluntary forbearance agreements and other negotiated arrangements long before the creditors see fit to issue the formal notices. In other words, our farm protection regime has created a temporary safe harbour for farmers to weather the storm of financial difficulty and negotiate mutually acceptable arrangements with creditors.

That being said, there are situations where the existing regime poses serious and practical difficulties. For example:

What can a secured creditor do when the farm assets are disappearing rapidly, whether by virtue of the aggressive enforcement tactics of other stakeholders or in the admittedly rare situation where the farmer is dishonest? What if the farmer has effectively abandoned the farm operations and is not prepared to consent to the lender taking control? The immediate reaction of creditors and their lawyers is to try to “close the barn doors before the horse gets away”. But how can you do that if the Section 21 Notice has not yet been sent, let alone the 15 business days expired under the FDMA? There are several ways to approach if the farmer has not yet applied for the Section 12 FDMA stay.

It is important to recognize that there are distinctions between “the stay” under Section 12 where a farmer has applied for relief under the FDMA and the “stay” under Section 21 pending expiry of the statutory notice period. Careful review of the two sections reveals that:

(a) The Section 21 stay prevents secured creditors from exercising secured creditor remedies, but does not prevent exercise of unsecured creditor remedies. For example a Mareva injunction or Prejudgment Attaching Order are not secured party remedies. Similarly, where a secured creditor also has an unsecured component to its debt, there is always the opportunity to file an Application for Bankruptcy Order against a farm corporation or partnership (though not individual farmers) and seek an ex parte Interim Receiving Order under Section 46 of the BIA. A Section 46 Interim Receiver does not actually take possession or control of the farm property, but effectively creates a monitor who can oversee the farmer’s actions and seek further assistance from the Court to maintain the status quo. This was done in CIBC v. Bruce & Bob Stewart Management (1994) Ltd, Unreported Manitoba Queen’s Bench, March 5, 2001 Kennedy J.;

(b) Section 21 does not have a provision which states “notwithstanding any other law”. Accordingly, if there is some other legal basis for granting relief you may be able to persuade the Court to provide assistance. For example in Jacob’s Hold Inc. v. CIBC (2000) 28 C.B.R. (4th) 50 (Ont.S.C.) Jarvis, J. granted a secured creditor an Interim Receiving Order under Section 47 of the BIA which did in fact permit the receiver to take charge and control over the farm assets even though the 15 business day notice period had not expired. While this is an Ontario decision where there is no equivalent provincial legislation to our FFPA, based upon the paramountcy of the Federal BIA provisions over the provincial FFPA in an insolvency situation, a BIA s. 47 Interim Receiver Order was obtained without complying with the provincial requirements: Farm Credit Canada v. Mesa Swine et al, unreported Manitoba Q.B. August 24, 2004 (McKelvey, J.). The paramountcy argument may also permit the appointment of a National Receiver under BIA s. 243 in an insolvency situation.

If the farmer has already been able to apply for protection under the FDMA and a Section 12 stay in effect, I do not believe it is possible to utilize any of the extraordinary remedies referred to above. Certainly, once that stay has been issued it is clear that no step in any proceedings can be taken without risking violation of Section 22 of the FDMA and certainly no bankruptcy application can be issued or proceeded with until the stay expires: Re: North 40 Farms (1999) 11 C.B.R. (4th) 82 (Registrar); (affirmed) Unreported Manitoba Court of Queen’s Bench, March 10, 1999 (Steele, J. as she then was). However, if a receiver has already been appointed prior to issuance of the stay, the Court may not interfere with the existing appointment.

If the Section 21 stay is in place before the creditor obtains adequate protection there are several options. Firstly, once the farmer applies for a stay under Section 21 he is obligated not to dispose of any assets except with express consent of the creditors. If the farmer’s conduct is jeopardizing the security, the Farm Debt Mediation Board is obliged to terminate the stay. Secondly, it is possible to apply to the Board to substitute guardians. As mentioned previously, ordinarily when a farmer makes application under this legislation the board leaves the farmer as the “guardian” of the farm assets. Pursuant to Section 16 of the FDMA the Board can instead appoint “any other qualified person” whether chosen by the board or by a secured creditor. If the secured creditor selects a different guardian it would likely be obliged to pay its costs. It is important to note that the guardian’s duties are fairly limited and include preparing an inventory, periodically checking on the existence and conditions of the assets and advising the Board of anything that would jeopardize those assets.

The lesson to be drawn from these situations is that if a secured creditor finds itself in the rare situation where it has real evidence that the farmer or other stakeholders are placing the security in jeopardy, it may be preferable to launch a pre-emptive strike and obtain the Court Order for the necessary relief ex parte before the farmer has an opportunity to apply under the FDMA for the Section 21 stay.

What can you do if the FDMA notice period or stay has expired but there is also farm land to be dealt with under the FFPA? In those circumstances there is case law to support the proposition that the creditor may appoint a receiver and/or receiver manager over all of the assets and undertaking of the debtor excluding farm land:

Portage Credit Union v. 620031 Manitoba Ltd. (1989) 59 Man.R. (2d) 308 affirmed (1989) 62 Man.R. (2d) 300 (Man.C.A.).

Alternatively, as mentioned above, it may be possible to apply to Court for either an Interim Receiver or National Receiver under ss. 47 or 243 of the BIA and rely upon the paramountcy doctrine: Jacob’s Hold v. CIBC, Supra; FCC v. Mesa Swine, Supra.

Another problem deals with settlement or Forbearance Agreements. One downside of creditors preferring to negotiate settlements is that certain aspects of our farm protection regime may limit or in fact undermine the parties’ abilities to negotiate an enforceable forbearance or arrangement. While you would assume that the spirit and intention of the law would be complied with where a voluntary settlement had been negotiated between the parties, this may not necessarily be the case.

For example when negotiating with ordinary debtors on an arrangement, the creditor is typically being asked to afford additional time and perhaps even more credit in return for which the debtor will provide a consent to enforcement on default thus giving the creditor a “hammer” or leverage to enforce the settlement. Similarly in many civil litigation matters it is not uncommon for Consent Judgments and Orders to be entered into between the parties and held in trust until default. These I believe to be generally accepted in practice and should be supported and encouraged by the Courts in most circumstances on public policy grounds as a reasonably acceptable means of promoting settlement.

Unfortunately, difficulties arise when the debtor happens to be a farmer. As note previously, a secured creditor must still serve the FDMA s. 21 notice before taking any enforcement action even though the farmer may have already consented to it under the terms of a Mediation Agreement: Intec Holdings v. Grisnick, Supra. Also, it does not matter that the farmer has acknowledged service of the FDMA s. 21 notice and the 15 day period expired, the farmer may still apply to the Farm Debt Mediation Board for a stay provided that one has not been issued at least in the last two years. Accordingly, even if the parties had agreed to forebear for one or two years in return for a quit claim or voluntary transfer of land, there is nothing to stop the farmer from applying for a stay under the FDMA and delay enforcement of the agreement. Just how long the Farm Debt Mediation Board would let the stay continue in the face of a formal forbearance or settlement agreement may be a matter of debate but it does not give creditors a great deal of certainty that their willingness to extend deadlines will be reciprocated with a clear cut remedy on default. This can certainly be a fly in the ointment when endeavoring to negotiate settlements and may be cause in some circumstances for the creditor to not only issue all notices but also require as a condition of forbearance that the farmer actually apply for and exhaust its stay rights under the FDMA during the forbearance period.

It is also tricky to deal with the FFPA when endeavoring to negotiate settlements on farm land security. For instance, if at the end of the forbearance period there is a default, the creditor wishing to proceed with mortgage sale or appointing a receiver would still have to obtain a Leave Order from the Court of Queen’s Bench. To expedite this process some settlement agreements include a Consent for Leave from the affected farmer to be held in trust by the secured creditor’s counsel. Unfortunately enforcement of such consent may be problematic for a number of reasons including:

(a) Pursuant to Section 9(6)(a) the Judge hearing the application, is statutorily obliged to consider the Report of the mediation board. While there have been a few settlements where the Leave Order has been obtained on consent without waiting for such a Report, there is a risk that a disgruntled party could come back to the Court after the fact and suggest the Leave Order was improper or a nullity for failure to comply with a statutory pre-condition.

(b) The non-avoidance provisions of the FFPA also merit concern. Section 31 of that Act provides as follows:

“Every agreement or bargain, verbal or written, expressed or implied, whether entered into before or after the coming into force of this Act, that this Act or any part or provision of this Act or any provision of any Act similar to this Act shall not apply, or that any benefit or remedy provided by this Act or any similar act is not available, or which in any way limits, modifies or abrogates or effect, limits, modifies or abrogates the benefit or remedy, is void.”

Arguably the Consent Leave Order held in trust could be characterized as limiting, modifying or abrogating the benefit of the FFPA. This language may be so wide as to lead to arguments that some of the settlement agreements negotiated through the FFPA’s own Mediation Board may “modify or abrogate” the benefits of the legislation. However, the better view is that provided the Consent Leave Order was obtained through the mediation process, the spirit and intent of the legislation has been complied with and should not be set aside.

(c) In fact there is some case law, albeit unreported, that calls into question some of the very practices of the Mediation Board. For example it is not unusual when the parties have reached a settlement with the Board’s assistance that the Board will file a Court report which advises that an agreement had been entered into but that in the event of default the creditor may seek the Leave Order. In Farm Credit Corporation v. White (Unreported Manitoba Queen’s Bench, December 28, 2001) Sinclair, J. suggested that such reports might be “illegal” and that the proper practice was for the Board to mediate the matter again following a default and provide a further report to the Court before the creditor proceeds with its application. There have also been instances where I have been instructed by the Queen’s Bench Judge to relay the Court’s concerns to the Mediation Board on particularly “skinny” Court Reports. The Board’s practice does not appear to have changed.

Fortunately, notwithstanding these difficulties, the over all effect of the farm protection legislation in Manitoba has been positive. Creditors are generally able to reach practical solutions with farmers without the need for adversarial proceedings. While they must still tread carefully with the procedural requirements of the farm protection legislation, creditors should still be able to protect and enforce their rights in the event a negotiated solution can not be reached – it may just take more time.

 

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