Canada: Agricultural Law Netletter - Thursday, September 7, 2017 - Issue 379

Issues added on the 7th and 21st of every month.

HIGHLIGHTS

  • A Justice of the Nova Scotia Supreme Court has dismissed a farmer's application to strike out a bank's application to appoint a receiver, on the grounds that the bank failed to comply with the 15 day notice provisions under the Farm Debt Mediation Act. The Justice did so firstly because there was a factual issue with respect to whether the notice was delivered in time to allow 15 days' notice, and secondly because 5 years had passed since the alleged defect in service had occurred during which many steps had been taken, including a Farm Debt Mediation, and a forbearance agreement pursuant to which the bank had agreed to forbear taking legal proceedings if certain payments were made by the farmer. The Justice indicated that waiver and estoppel may overcome the effects of insufficient notice and prevent farmers from arguing that proceedings are "null and void" as a result of non-compliance with FDMA notice requirements. (Bank of Montreal v. Linden Leas Ltd., CALN/2017-055, [2017] N.S.J. No. 329, Nova Scotia Supreme Court)

NEW CASE LAW

Bank of Montreal v. Linden Leas Ltd.;

CALN/2017-055,

Full text: [2017] N.S.J. No. 329;

2017 NSSC 223,

Nova Scotia Supreme Court,

G.R.P. Moir J.,

August 18, 2017.

Farm Debt Mediation Act -- Faulty Service of Notice -- Loss of Right to Challenge Proceedings as a Result of Delay, Waiver and Estoppel.

The Bank of Montreal ("BMO") brought an application for the appointment of a receiver for a beef farm owned and operated by Linden Leas Limited ("Linden Leas").

Linden Leas brought a cross- application for an Order declaring BMO's application null and void on the grounds that BMO had failed to comply with the provisions of the Farm Debt Mediation Act which requires 15 days' notice of legal proceedings to enforce security.

BMO had given notice of its intention to enforce its security some time between March 13, 2012 and April 3, 2012. Proceedings were commenced on April 11, 2012. An application was made under the Farm Debt Mediation Act by Linden Leas that resulted in a stay of proceedings until May 19, 2011.

While the stay was in effect, BMO applied for and was granted an Order for the appointment of a supervisory interim receiver. The Affidavit in support of this application indicated that BMO did not intend to seize cattle or take possession of any assets at this time. No appeal was taken from the Order which was rescinded 2 years later.

A Forbearance Agreement was entered into in 2012 and forbearance payments were made until the spring of 2016.

Decision: Moir, J dismissed both BMO's application to appoint an interim receiver and Linden Leas' application to declare proceedings void [at para. 40].

Moir, J dismissed BMO's application for an interlocutory receivership because he did not feel it would be just and equitable to do so in all of the circumstances, including the fact that a final application to appoint a receiver was scheduled for October 30, 2017.

With respect to Linden Leas' application to declare BMO's actions null and void for non-compliance with the requirements of the Farm Debt Mediation Act, the issue raised by Linden Leas related to whether the notice had been served a full 15 days before proceedings were commenced.

Moir, J considered the provisions of the Farm Debt Mediation Regulations regarding service, stating as follows [at para. 33 to 35]:

[33] Section 17 of the Farm Debt Mediation Regulations prescribes the manner in which the secured creditor's notice is to be given. Paragraph 17(1)(b) allows the creditor of a farming corporation to deliver the notice to an officer, to leave it with anyone at the farm's place of business, or to send it by "priority post, courier or registered mail" to the place of business. In the later case, the notice "is deemed to be given seven business days after the day on which the notice is sent": s. 17(3). Subsection 1(1) defines "business day" as "a day that is not a Saturday or a holiday". Subsection 35(1) of the federal Interpretation Act defines "holiday" to include Sundays, Good Friday, and Easter Monday.

[34] Subsection 22(1) of the Farm Debt Mediation Act provides "any act done by a creditor in contravention of section 12 or 21 is null and void". It also provides that the farmer "may seek appropriate remedies against the creditor".

[35] There is some suggestion the notice was delivered to the business office of the farm by a courier shortly after the notice was prepared. If it were so, and if a person was present to take the delivery, there was plenty of time before this proceeding was commenced. If the notice was not given to a person, there was not enough time for the seven day presumption delivery time and fifteen days following that.

Moir, J concluded, therefore, that there were facts involved in determining whether adequate notice was given and that in the circumstances he could not make a finding about when delivery was made [at para. 36].

However, Moir, J indicated that the problems with Linden Leas' application to declare proceedings null and void "extend beyond that" and that too much time may have passed for Linden Leas to now question BMO's compliance with the Farm Debt Mediation notice requirements having regard to the events which had occurred over the last 5 years stating that the effect of insufficient notice may have been waived, or Linden Leas may be estopped, stating, at para. 37 to 38:

[37] Even if the commencement of this proceeding was initially "null and void", that may not now be the case or it may be something Linden Leas Limited can no longer rely on. Conduct over the past five years, including successfully engaging in the process the secured creditor's notice was designed to protect and entering into the arrangements with their acknowledgements of the bank's position, may have overcome the effects of insufficient notice, waived those effects, or lead to estoppel.

[38] Further, the remedies sought by the respondent for insufficient notice are by no means axiomatic. A remedy that restores the farmer to the position it would have been in had sufficient notice been given would be far less drastic than what the respondent proposes.

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.

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