Canada: Agricultural Law Netletter - Issue 392 - March 21, 2018

HIGHLIGHTS

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A Justice of the Court of Queen's Bench for Saskatchewan has dismissed a farmers' application for relief against forfeiture under s. 50 and 53 of the Saskatchewan Farm Security Act. The farmers were experiencing extended financial difficulty as a result of a number of events beyond their control including the inability to market their grain, and adverse weather conditions. However the Court concluded that it only had discretion under the Act to grant temporary relief arising from a farmer's temporary inability to pay. The hardship in this case was not temporary; the request to postpone removal of the equipment until the fall harvest in the hope that the 2018 crop would be sufficient for them to pay an outstanding debt of approximately $450,000.00 was speculative. The Court accepted the creditor's assertion that the farmer likely had no equity in the equipment and that the best time to market the equipment was in the spring of 2018, before spring seeding operations commenced. (Naber v. Calidon Financial Services Inc., CALN/2018-009, [2018] S.J. No. 98, Saskatchewan Court of Queen's Bench)

NEW CASE LAW

Naber v. Calidon Financial Services Inc.;

CALN/2018-009,

Full text: [2018] S.J. No. 98;

2018 SKQB 84,

Saskatchewan Court of Queen's Bench,

L.W. Zuk J.,

March 9, 2018.

Seizure of Farm Equipment -- Saskatchewan Farm Security Act -- Application for Relief against Forfeiture.

Todd Naber, Colleen Naber and Naber Speciality Grains Ltd. (the "Nabers") applied to the Saskatchewan Court of Queen's Bench pursuant to s. 50 and 53 of the Saskatchewan Farm Security Act, SS 1988-89, c. S-17.1 (the "Act") for an Order for temporary relief against forfeiture with respect to steps taken by an equipment lessor, Calidon Equipment Leasing - Calidon Financial Services Inc. ("Calidon") to take possession of seized farm equipment and grain bins which the Nabers had leased from Calidon.

The Nabers had entered into a series of lease agreements with Calidon with respect to several pieces of farm equipment and grain bins. The leases were over a term of 60 months and provided for 10 semi-annual payments under each lease. At the expiration of the lease agreement, the Nabers had the option of purchasing the equipment at a residual value which was somewhat less than a single annual rental payment.

The Nabers had fallen into arrears in the amount of $158,880.00 in 2016. After enforcement proceedings were commenced, they made a payment of $139,480.00 in March of 2016 which was accepted by Calidon. The Nabers fell into arrears again and Calidon took enforcement proceedings in July of 2017 to take possession of the equipment.

The Nabers made a number of commitments to bring the leases up to date in late 2017 and tendered a partial payment of $25,000.00 on August 3, 2017 as well as a further partial payment in December of 2017. The $10,000.00 payment was declined to prevent triggering the operation of s. 54 of the Act.

The current arrears on all leases were $458,072.00.

The Nabers proposed an immediate payment of $35,000.00 to secure an adjournment to May 1, 2018 followed by a further payment of $50,000.00 on or before May 1 to secure a delay to the end of September, 2018 with the intent to pay all arrears once they completed their 2018 harvest.

Calidon opposed this proposal and took the position that the market value of the leased equipment had deteriorated to the point where the sale of its security may not be sufficient to pay the full amount owing. Calidon contended that any delay in taking possession would jeopardize its ability to market the equipment in advance of 2018 spring seeding and that the best time to market the equipment would be within the next few months.

The Affidavit evidence filed by the Nabers acknowledged being in arrears with Calidon and admitted that they had been in a "catch up mode" in their farming operations for several years due to lack of railway cars to ship their grain in 2013/2014; excessive rain in 2014; an early snowfall which delayed harvest in 2017, and the need to make payments to other creditors. The Nabers maintained that they had built up their equity in the leased equipment to at least 50% or more and anticipated being able to bring arrears current by the fall of 2018 based on their presumption that the 2018 crop would produce sufficient income to cover all debts including the Calidon debt.

Decision: Zuk, J dismissed the Nabers' application for relief from forfeiture, and ordered them to deliver up the seized equipment to Calidon "without further delay" [at para. 22]. Calidon's application for an Order for costs was dismissed. It was directed that each party bear their own costs because there was some merit to the Nabers' application [at para.25].

Zuk, J referred to the provisions of s. 53 of the Act [at para. 6] which give the Court a wide discretion to "make any order that it considers just".

Zuk, J referred to the decision of Mills, J in Bartko v Odnokon Holdings Ltd., 2012 SKQB 262 in which listed a number of equitable considerations which might be considered by a Court.

Zuk, J also referred to the decision of Halvorson, J in Stefaniuk v Canadian Imperial Bank of Commerce (1989), 1989 CanLII 4807, [1989] S.J. No. 167 (SK QB), 77 Sask R

214 (Sask QB).

Zuk, J observed [at para. 9 and 12]:

  1. It is abundantly clear that the court's discretion to grant temporary relief pursuant to s. 53 of the Act arises from a farmer's temporary inability to pay...

***

  1. In Stefaniuk, the court adopted reasoning in Belarus Equipment of Canada Ltd. v Chernoff and Chernoff, 1983 CanLII 2101 (SK CA), [1983]S.J. No. 539, [1983] 5 WWR 536 (Sask CA). In effect, the temporary relief from forfeiture is predicated upon an applicant's temporary hardship or inability to pay. The question then becomes whether the Nabers inability to pay arises from a temporary hardship. Secondly, even if the hardship causing the inability to pay is found to be temporary, the relief from forfeiture must itself also be temporary.

Zuk, J concluded [at para. 13 to 16] as follows:

First, I find that the hardship suffered by the Nabers has not been temporary in nature. By their own admission, the Nabers financial difficulty extends back to 2013 and 2014 and continuing unabated to the present day. I am cognizant that most grain farms operate on the basis of an annual farming cycle. At its most basic, this involves crops being planted in the spring and harvested in the fall. The crop is then sold and the farmer uses the proceeds to pay his farming costs and any amount remaining becomes the farmer's profit. The partial or full loss of any crop, even if insured, can have devastating financial consequences to a farmer. The financial consequences are magnified if the farmer suffers a series of successive poor crops. That appears to be the unfortunate circumstance in which the Nabers find themselves.

  • From 2013 onwards the Nabers have, through no fault of their own, suffered a series of events beyond their control which have led to extended financial difficulty...
  • Secondly, it cannot be said that an order postponing seizure of the equipment to some unspecified date in the fall, a period of eight or nine months, is a temporary relief from forfeiture given the facts of this case. They are asking for relief extending for a period of no less than eight months.
  • The Nabers are not requesting temporary relief to enable the sale of existing grain or additional time to arrange alternate financing or pending the receipt of crop insurance proceeds, upon which they will be able to pay all the arrears. Rather, they seek the lengthy adjournment in the expectation that the 2018 crop will provide sufficient income to pay the Calidon debt. Given the vagaries of farming, many of which have afflicted the Nabers in the last five years, it is purely speculative that the Nabers will be able to pay Calidon in the fall.

Zuk, J observed [at para. 17] that the payments proposed by the Nabers represented a very small portion of the $458,073.42 owing.

Zuk, J rejected the Nabers' assertion that they had significant equity in the leased equipment [at para. 18] and concluded [at para. 19] that there was likely little or not equity in the equipment.

Zuk, J accepted Calidon's argument that the best time to market the majority of the equipment was in the near future, prior to spring seeding operations and indicated that this would also allow the Nabers an opportunity to seek alternate equipment for their seeding operations.

Zuk, J also concluded [at para. 21 and 22]:

  1. ...The proposed method of payment is too speculative and uncertain to warrant such a lengthy period of relief. Nor is there any evidence of the Nabers having the means by which to pay the arrears, or even a substantial portion of the arrears, in the near future.
  2. Essentially, the Nabers' inability to pay is not temporary in nature and the relief from forfeiture that they are requesting is based on speculation that they will be able to pay the arrears after the fall harvest. The relief from forfeiture, a period of eight months is far too long in the circumstances of this case to be considered temporary relief. For the reasons stated, the Nabers are not entitled to relief from forfeiture. Accordingly, the Nabers are ordered to deliver up the security to Calidon without further delay.

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