Canada: Agricultural Law NetLetter - Tuesday, April 21, 2015

** HIGHLIGHTS ** *

  • A Justice of the Saskatchewan Court of Queen's Bench has upheld a decision of the Saskatchewan Farm Land Security Board which directed the sale of Saskatchewan farm land subject to a complex series of financing transactions. The Board described the transactions as an attempt to get around the Saskatchewan Farm Security Act by allowing non-Canadian entities the opportunity to profit and derive income from the increasing value of Saskatchewan farm land and to control the operation of Saskatchewan farm land. The financing operations involved issuing derivatives which increased or decreased in value with farm land held by the entities involved. The decision concluded that the "reasonableness" standard of review applied to the Board's decision. (Skyline Agriculture Financial Corp. v Farm Land Security Board, CALN/2015-010, [2015] S.J. No. 167, Saskatchewan Court of Queen's Bench)

** NEW CASE LAW **

Skyline Agriculture Financial Corp. v Farm Land Security Board; CALN/2015-010, Full text: [2015] S.J. No. 167; 2015 SKQB 82, Saskatchewan Court of Queen's Bench, Layh J., March 26, 2015.

Foreign Ownership Farm Land -- Saskatchewan Farm Security Act -- Standard of Review on Appeal.

Skyline Agriculture Financial Corp., Skyline Agriculture Lending Corp., Skyline Agriculturestream Corp. and Skyline Agriculture Capital Corp. (collectively "Skyline") appealed to the Saskatchewan Court of Appeal from a decision of the Saskatchewan Farm Land Security Board (the "Board") from a decision that transactions involving Skyline did not satisfy the residency requirements for persons entitled to have a "land holding" under s. 76(e) of the Saskatchewan Farm Security Act, SS 1988-90, c S-17.1 ("SFSA").

Skyline was involved in a series of complicated transactions decribed in detail (with flow charts) at para. 2 to 16 of the decision. In summary:

  1. Skyline Agriculture Financial Corp. obtained an investment from institutional investors through private share offerings. These investments provided financing to its subsidiaries, Skyline Agriculture Lending Corp., Skyline Agriculturestream Corp. and Skyline Agriculture Capital Corp. The financing was used by the subsidiaries to provide financing for Saskatchewan farm operations owned by Canadian or Canadian owned entities ("Loans").
  2. These entities then purchased Saskatchewan farm land.
  3. The purchased lands were owned by Canadian operating companies ("Op Co's"). The shares in these companies were owned by a Canadian management company ("Management Co").
  4. The Loans used to purchase the Saskatchewan farm land was secured by a mortgage was due and payable if the land was sold or on default. The Loan was also supported by a guarantee and a general security agreement from Management Co.
  5. The next level of transactions were a "swap" agreement under which the landowner paid to "Skyline Stream" a monthly payment of a percentage of its gross farming revenues during the preceding month in exchange for a payment from Skyline Stream equal to the interest payment that the landowner had to pay Skyline Lending under the mortgage.
  6. The next level of transactions was a derivative agreement between the Management Co. and Skyline Capital. The derivative is based on an index based on a basket of Saskatchewan farm land, including the land owned by subsidiary operating companies of the Management Co. The index rose in value if the aggregate value of farm land in the basket rose and decreased if the value decreases. If at the end of the derivative's term index increases in value, the Management Co. receives a payment from Skyline Capital. Conversely if the index decreases in value, Skyline Capital receives a payment.

On August 29, 2014, the Board made a decision which found that Skyline held a "land holding" as defined by s. 76(e) of the SFSA and directed that Skyline dispose of its interest in the land by December 31, 2014.

Skyline appealed the order on October 23, 2014 and the Court directed that the Board reconsider its decision.

On December 11, 2014, the Board made a new order which again ordered Skyline to reduce the land order.

Skyline appealed this order to the Court.

The issues before the Court were:

  1. What standard of review identify in assessing the Board's decision - reasonableness or correctness?
  2. Does the decision of the Board withstand the application of the appropriate standard?

The main issue in the appeal involved the Board's interpretation of the term "land holding" which prescribes the nature of restricted interests in Saskatchewan farm land. Section 76(e) of the SFSA defines a "land holding", in part, as follows:

(e) "land holding" includes:

  1. farm land;
  2. any interest in farm land held under an agreement to purchase or lease;
  3. any interest in farm land held under any agreement that may directly or indirectly:

    1. result in vesting of title to farm land;
    2. confer the right to possession of farm land; or
    3. confer any right or control ordinarily accruing to the owner of farm land;

***

  1. any interest in farm land other than that described in subclauses (i) to (v);

***

Decision: Layh, J. dismissed Skyline's appeal [at para. 84].

Layh, J. considered the following issues;

(a) Standard of Review

Following a lengthy review of the law [at para. 20 to 68], Layh, J. concluded [at para. 68] that:

[68] Given the principle of deference allowed a tribunal in the interpretation of its home statute as stated in Dunsmuir, and nudged by Justice Moldaver in McLean from a principle to a presumption, I find the presumption has not been rebutted and, accordingly, the standard of reasonableness applies.

(b) Whether the Board had met the standard of reasonableness?

Layh, J. concluded [at para. 74] that since he had found that the reasonbleness standard of review applied, Skyline cannot simply show that it offers a more compelling interpretation of "land holding". It must show the Board's interpretation was unreasonable - that the decision lacks "justification, transparency and intelligibility".

Layh, J. also relied on the analysis in Affinity Credit Union v. United Food and Commercial Workers, Local 1400, 2015 SKCA 14 (CanLII) that the Board's interpretation of its governing statutory provision is "reasonable and within the range of possible acceptable outcomes which are defensible in respect to both the facts and the law."

Layh, J. observed [at para. 76] that the SFSA considered the broad definition of an interest in land which was not restricted to juris prudence respecting the Land Titles Act, but which included other interests referred to in s. 76(e)(i) to (v) and (vi) and that land holdings could include corporate shares. Layh, J. noted [at para. 79] that the Board defined "land holding" in a manner which met the "objects and scheme of the SFSA" as "illuminated by a historical review of the legislation". Layh, J. concluded [at para. 80 to 83 as follows:

[80] The FLSB provides a detailed analysis of its reasons for concluding that a "land holding" cannot be as restrictively defined as Skyline suggests. Among its reasons, the FLSB finds that the totality of the proposed structure between Skyline Entites and Farm Land Entities, in the words of s. 76(e)(iii), "direct or indirectly ... confer[s] [upon Skyline Entities a] right or control ordinarily accruing to the owner of farm land." The FLSB anchored its definition of "land holding" in a purposive way, citing Bruce Ziff's Principles of Property Law, 6th ed (Toronto: Carswell, 2014) which, in turn, quoted Professor A.M. Honore's conception of seven elements of property:

Ownership comprises the right to possess, the right to use, the right to manage, the right to the income of the thing, the right to the capital, the right to security, the rights or incidents of transmissibility and absence of term, the duty to prevent harm, liability to execution, and the incident of residuarity.

[81] From this framework of property rights, the FLSB gave primacy to the substance of the Skyline Structure, not to its form. The FLSB found that the combination of the Mortgage, Loan, Swap, Derivative, Index and other agreements gave to Skyline Entities many of the rights and controls respecting Saskatchewan farm land that the SFSA does not countenance them to receive, most particularly, but not limited to, the benefit of any increase in the capital value of Saskatchewan farm land under the Derivative and the right to enjoy the income from the farm land under the Swap. At para. 52 of its reasons, the FLSB offered a summary of its findings:

52. ...the Skyline Structure divides the "farmer" into three entities and involved four entities on the Skyline side. Skyline Lending provides 100% purchase financing and takes the mortgage on the farm; Skyline Stream has the right to control operation and management of the farm and takes 18% of the gross revenue; Skyline Capital gets the benefit of any capital appreciation of the land. Each of these Skyline Entites are wholly owned subsidiaries of Skyline ParentCo. The Board does not accept that distribution of the rights and control, ordinarily accruing to the owner among the three commonly owned Skyline Entities means that the Board cannot consider such rights and control as a whole.

[82] On the other side of the corporate ledger, respecting those corporations included in the Farm Land Entities, the FLSB found disfavour with the minimal rights left to the "putative farmer" comparing its position to a "tenant under a crop share arrangement". The FLSB concluded at para. 59:

59. The Board concludes that the true effect of the Skyline Structure is to transfer the bulk of the bundle of rights associated with land ownership from OpCo to the Skyline Entities in a piecemeal fashion. The Skyline Structure is a series of agreements that confers upon the Skyline Entities rights and controls which normally accrue to a land owner, which collectively constitute a land holding within the meaning of section 76(e) of the SFSA. Upon careful examination, it becomes clear that Skyline Structure is an attempt to get around the SFSA and allow non-Canadian entities the opportunity to profit and derive income from the increasing value of Saskatchewan farm land and to control operation thereof.

[83] I agree with the sentiment of Skyline's counsel that Skyline Entities' efforts should not be characterized as attempting to "get around the SFSA", when an equally apt and more magnanimous characterization allows that Skyline Entitles has attempted to comply with the legislation, as seems apparent from its repeated contacts with the FLSB and its willing disclosure of agreements. Nonetheless, I cannot find fault with the reasonableness of the decision.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Miller Thomson LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Miller Thomson LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions