Canada: The Supreme Court Of Canada Rules That Québec's Farm Income Stabilization Program Is Not An Insurance Contract Subject To Public Law Rules


Two companion decisions of the Supreme Court of Canada were recently released in cases included on our Appeals to Watch in 2016 list, Ferme Vi-Ber inc. v. Financière agricole du Québec, 2016 SCC 34, and Lafortune v. Financière agricole du Québec, 2016 SCC 35.

Both cases involved the interpretation of the same Québec farm producer income stabilization program (the "ASRA Program") administered by La Financière agricole du Québec ("La Financière), a statutory authority. The appeals focused on whether the ASRA Program should be governed by public administrative law principles or the private rules of contract law.

The Supreme Court rejected both appeals by Québec farm producers who contested  compensation amounts provided to them under the ASRA Program. These producers claimed that the ASRA Program was a contract of insurance under the Civil Code of Québec ("CCQ"), and that La Financière had violated the terms of the contract as it did not consider the rule of the reasonable expectations of the insured ("the reasonable expectations rule").

In its decisions, the Supreme Court (Justice Côté dissenting in Ferme Vi-Ber) ruled in favour of La Financière and held that the ASRA Program was not a social insurance program, and that the reasonable expectations rule did not apply. Instead, the program was governed by the private rules of contract law. As such, La Financière had discretion in determining the calculation method used to compensate farm producers, and did so in accordance with the requirements of good faith and contractual fairness.


The ASRA Program provides financial support to farm producers, who voluntarily participate and contribute to its funding together with La Financière. It protects the participants from having their income drop below a level defined by certain products or classes of products designated as insurable. The purpose of the program is to guarantee that an average farm producer never earns less than a predetermined percentage of the average income of a skilled worker.1

The producers contested various compensation payments, arguing that the calculation method used by La Financière was improper. In Ferme Vi-Ber, the producers specifically took issue with a process referred to as "linkage", where La Financière accounted for other income received by farm producers from government contributions. These linked amounts were deducted by La Financière to account for other income that may have impacted the financial needs of the average benchmark farm, which was the reference standard of the ASRA Program. Income received could be linked either collectively, on the basis of the amounts that the average benchmark farm would have received, or individually, on the basis of the amounts each participant actually received from the government. As such, the higher the linked amounts, the lower the compensation received under the program.2

In 2007, La Financière linked the amounts received collectively, which resulted in less compensation to farm producers than if the amounts had been linked individually.3 The producers brought their claim for relief to the courts and argued the ASRA Program was a contract of insurance under the CCQ, and that it had to be interpreted based on the reasonable expectations rule which required individual linking.4

Similar arguments about proper calculation methodology were made by farm producers in Lafortune, who had contested the statistical and accounting methods used in an economic study relied on by La Financière to determine compensation in the 2006 to 2008 years.5

Decisions Below

In Ferme Vi-Ber, the trial court allowed the action and held that the ASRA Program was a contract of insurance, and that La Financière had to exercise discretion in accordance with the terms of the program and in a reasonable manner, which it had failed to do.6 The Québec Court of Appeal allowed La Financière's appeal and ruled that the ASRA Program was not a contract of insurance under the CCQ, and that it was a sui generis administrative contract that contained elements of public and private law. Despite its characterization, La Financière was not required to use individual linking and had the authority to determine what calculation method to use on a case-by-case basis.7

In Lafortune, the trial court rejected the farm producers' claim and held that the ASRA Program is not a contract of insurance. Further, even if it was characterized as such, under the reasonable expectations rule, the producers would not be entitled to their claim for damages because "[participants] understood that there would be losses in some years".8 The Québec Court of Appeal dismissed the farm producers' appeal and found that the contract's characterization was not determinative, as the issue concerned the validity of the calculation methodology, which did not require warrant the Court's intervention.9

Supreme Court of Canada Decisions

The Supreme Court reviewed the general characteristics applicable to government social insurance programs governed by public law and found that the ASRA Program differed in several ways from a social insurance program, and was not incidental to any statutory public law scheme. Further, the ASRA Program contained several contract-like provisions. It also did not fall within the structure of a simple agricultural subsidy program. On the basis of this contextual exercise, the ASRA Program was characterized as an innominate administrative contract and not subject to the rules of public law.10 While La Financière had discretion in implementing the government scheme, the public interest had to be onsidered when exercising such discretion, and La Financière was required to act with regard to the duty of good faith and contractual fairness as set out in the CCQ.11

Further, the ASRA Program is not a contract of insurance as it does not contain the three main characteristics as set out on the CCQ: "(i) an obligation on the client to pay a premium or assessment; (ii) the occurrence of a risk; and (iii) an obligation on the insurer to make a payment to the client if the insured risk occurs."12 Given that conclusion, La Financière was not subject to the interpretive rules specific to those contracts, including the reasonable expectations rule, which the producers alleged had been violated.

Significantly, the Supreme Court used both decisions to clarify the extent to which the reasonable expectations rule applies in Québec law. The farm producers had argued that the interpretative rule applies in its "maximum dimension" regardless of whether there is contractual ambiguity. La Financière took the position that the rule applied in its "minimum dimension", only where an ambiguity existed. The Supreme Court agreed with the latter position.13

In Ferme Vi-Ber, the Supreme Court relied on the rules of contractual interpretation set out in the CCQ, and determined that linking amounts individually was possible, but linking amounts collectively must be preferred.14 Notably, La Financière was under no statutory or contractual obligation to link amounts individually.15 The Supreme Court concluded that La Financière acted in accordance with the duty of good faith and contractual fairness as the calculation method was determined after extensive consultations with representatives of farm producers, and La Financière assessed the impact of the decision on the program's participants to ensure the decision would be fair.16

In Lafortune, La Financière also acted in accordance with the principles of good faith and contractual fairness by participating in extensive consultations during the economic study. In addition, there was no evidence to suggest bad faith. Even if the ASRA Program had been characterized as a contract of insurance, the reasonable expectations rule did not apply as the provisions at issue were not ambiguous.17


Justice Côté would have allowed the Ferme Vi-Ber appeal in part by reducing the damages claim. In her view, the ASRA Program's characterization as a contract or otherwise made no difference to the result as the determinative issue involved contractual interpretation. Justice  Côté held that the relevant ASRA Program provision was ambiguous and must be interpreted in favour of the farm producers who were the adhering party to the contract.18


These decisions have significance across Canada as they better clarify whether the rules of public law or private law apply when parties challenge government decisions arising out of government compensation programs that have non-traditional structures.

The decisions also define limits on the application of the rule of the reasonable expectations of the insured for Québec insurance contracts, and set out that the rule can only be relied on in the presence of ambiguity.

Case Information

Ferme Vi-Ber inc. v. Financière agricole du Québec, 2016 SCC 34

Docket: 36205

Date of Decision: July 29, 2016

Lafortune v. Financière agricole du Québec, 2016 SCC 35.

Docket: 36210

Date of Decision: July 29, 2016


1 Ferme Vi-Ber at paras. 5-8.

2 Ferme Vi-Ber at paras. 7-13.

3 Ferme Vi-Ber at para. 14.

4 Ferme Vi-Ber at para. 17.

5 Lafortune at para. 2.

6 Ferme Vi-Ber at paras. 20-24.

7 Ferme Vi-Ber at paras. 25-28.

8 Lafortune at para. 18.

9 Lafortune at paras. 20-22.

10 Ferme Vi-Ber at paras. 30-45 and 66.

11 Ferme Vi-Ber at paras. 49-51.

12 Ferme Vi-Ber at paras. 52-61.

13 Ferme Vi-Ber at paras. 62-65.

14 Ferme Vi-Ber at para. 74.

15 Ferme Vi-Ber at para. 83.

16 Ferme Vi-Ber at paras. 86-94.

17 Lafortune, at paras. 26-27, 30-43.

18 Ferme Vi-Ber at paras. 96-136.

To view the original article please click here.

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

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

In association with
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.