Insights

Insolvent or Bankrupt Farmers not protected by Part II of The Saskatchewan Farm Security Act against Secured Creditors

In Lemare Lake Logging Ltd. v 3L Cattle Company Ltd. and The Attorney General for Saskatchewan, the Saskatchewan Court of Appeal determined that Part II of The Saskatchewan Farm Security Act (The SFSA) is inoperative by virtue of the doctrine of federal paramountcy in circumstances where an application is made to appoint a receiver pursuant to s. 243(1) of the Bankruptcy and Insolvency Act (The BIA). Part II of the SFSA provides that a mortgagee must obtain an order from a court before commencing an action against a farmer mortgagor. Part II also sets out a number of steps that a mortgagee must follow before seeking an order and time restrictions. On the other hand, section 243(1) the BIA provides that on application by a secured creditor, a court may appoint a receiver to take possession of property of the insolvent or bankrupt person. The BIA only provides the timing restriction that a receiver may not be appointed before the expiry of ten days after the day on which the secured creditor provides notice of its intention. The Court found the effectiveness, and ultimately the purpose of s. 243(1) of the BIA was undermined by Part II of the SFSA. The Court found the BIA intended a receiver to act efficiently in the context of insolvency, as proceedings are time sensitive. Those entering into a agreement as, or with a farmer, should be aware that the decision in Lemare Lake Logging Ltd. v 3L Cattle Company Ltd. and The Attorney General for Saskatchewan allows the appointment of a receiver by a secured creditor without compliance with Part II of the SFSA in the event of insolvency or bankruptcy.

 Lemare Lake Logging Ltd. v 3L Cattle Company Ltd. and The Attorney General for Saskatchewan 2014 SKCA 35