Canada: Another Harsh Lesson Learned Under The Farm Debt Mediation Act – This Time By A Landlord: HCI Ventures LTD. V. S.O.L. Acres (2017 SKQB 264)

Last Updated: January 10 2018
Article by David Gerecke and Julian Nahachewsky (Articling Student)


In a previous Communique post entitled Things You May Not Know About the Farm Debt Mediation Act, we discussed several aspects of how the federal Farm Debt Mediation Act (referred to throughout as the "FDMA" or the "Act") operates, and what creditors need to know when starting to enforce security against farmers.

We published an expanded version of that piece in the National Insolvency Review (February 2017), which may be found here. Two questions not discussed in that post were (1) when a party claiming against a farmer will be treated as a secured creditor, and (2) what will constitute a "debt". In HCI Ventures Ltd. v. S.O.L. Acres 2017 SKQB 264 ("HCI Ventures"), Mr. Justice Barrington-Foote was faced with those questions.

While the Court's findings were neither surprising nor ground-breaking, the decision is interesting as another cautionary tale for creditors attempting to recover from farmers, and the matters discussed provide a good opportunity to supplement our previous post.

Factual Background

The facts were straightforward.  The defendant, S.O.L. Acres ("SOL") was a farming partnership comprised of two individuals. It had leased farmland from the plaintiff, HCI Ventures Ltd. ("HCI") pursuant to a cash lease.  The annual rent was substantial, as the lease covered over 4,500 acres even after some acreage had been removed by a lease amendment.

Most of the lease provisions reproduced in the Court's decision appear quite standard, but two were of particular relevance.  In one clause, SOL granted to HCI a "security interest in all present and future personal property of the tenant".  As well, there was a general security agreement attached as a schedule to the lease, in which the defendants granted security in all of their personal property as a general collateral security for the payment and performance of all obligations and indebtedness of SOL to HCI from time to time.

SOL failed to make certain rent payments and then abandoned the land, unable to afford input costs.

HCI demanded payment of the rent arrears, and then commenced a court action claiming "damages" arising from the rent arrears and other related obligations.  It then applied for summary judgment.  The Court decision deals with that summary judgment application.

Before commencing the court action, HCI served no notice under the FDMA.


Section 21 of the FDMA requires service of a prescribed notice on a farmer before a secured creditor (i) starts to enforce any remedy against the property of a farmer, or (ii) commences any proceedings for the recovery of a debt against a farmer.

HCI Ventures arose in a somewhat unique context for FDMA cases, with the claim against the farmer having been brought pursuant to a real property lease.

In the summary judgment application, HCI argued that it was not a secured creditor and that it was not attempting to recover a debt.  Instead, it argued that it was merely a landlord under a lease, and that it was suing for damages, not a debt. The Court's decision revolved around those two points.

The problem facing HCI was that the lease contained a clear grant of security, and also attached a security agreement as a schedule. On its face, it appeared that HCI was a secured creditor of SOL.  HCI attempted to persuade the Court that the definition of "secured creditor" should be interpreted narrowly, to include only lenders who took security in respect of loans or financing provided for farm purposes.  In the Act, "secured creditor" is defined as including any creditor holding a "security interest...for a debt due or accruing due from a farmer."

Similar to the approach taken in many other decisions interpreting the FDMA, Justice Barrington-Foote emphasized the purpose of the Act – to provide insolvent farmers with some breathing room and an opportunity to try to reorganize their financial affairs given the volatility of markets for farm produce.  Given that protective purpose, the Court was unwilling to interpret the Act narrowly.  With little difficulty, Justice Barrington-Foote determined that HCI was a secured creditor of SOL.

The remaining question was whether the rent arrears constituted a debt.  The Court noted that "debt" has been broadly defined in case law.  The key distinction was between a liquidated money demand, which would be a debt, and an unliquidated claim for damages.  Justice Barrington-Foote gave examples of numerous types of claims, even where liability would be imposed by law rather than contract, that would constitute liquidated demands and thus debts, and he concluded that it was an "obvious proposition that overdue rent may be a debt".

As such, the claims asserted by HCI were to recover debts.  HCI's attempt to characterize its claim as damages could not overcome the proper interpretation of the FDMA.

HCI was therefore subject to the requirement to serve SOL with notice under Section 21 of the FDMA, and its action was a nullity by reason of its failure to do so.

Lessons For Creditors

1. One cannot be too careful when starting any enforcement proceedings against a farmer. Every creditor in that position must carefully evaluate whether the notice under section 21 of the FDMA needs to be served.

2. In many cases, creditors may not think of themselves as secured creditors. For example, crop input suppliers often have brief provisions in their credit agreements where the farmer grants a security interest.  A simple one-sentence paragraph may cause the supplier to be a secured creditor, even if the supplier rarely thinks about that clause in its standard form. All such agreements must be reviewed carefully to ensure that they do not contain clauses that might be treated as a grant of security.

3. It is entirely clear that "debt" will be interpreted broadly for the purpose of the FDMA, and creditors must take that into account.

While a creditor of a farmer may think the FDMA will not apply to it because the arrangement does not involve debt relating to the farm operation, that may not relieve of the obligation to serve the notice.   In obiter, Justice Barrington-Foote added the comment that he was not deciding that "a debt is caught by s. 21 only if it relates to the farming operation." He expressly stated that he was deciding only that "debt" includes at least debt of that kind.  That leaves open the possibility that debt that is entirely unrelated to the farm operation might also be subject to the notice obligation.

4. We consistently advise clients to serve the FDMA notice if there is any chance that section 21 might apply. The fifteen business day notice period is not substantially longer than a normal demand period, so serving that notice places minimal extra burden on creditors. On the other hand, the consequences of erroneously not serving the notice can be extremely harsh, particularly if the farmer's property is seized, which may give rise to a claim for damages by the farmer.

Thus, it is difficult to envision a circumstance where taking any risk of non-compliance with the FDMA would be warranted. Even in this case, where the landlord was merely suing for judgment, it will have incurred substantial expense, will be liable for SOL's court costs, and will have to start again from the beginning.

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.

David Gerecke
In association with
Related Topics
Related Articles
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
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 (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

To Use 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.


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.


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