Law:Farm Debt Mediation Act

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S.c. 1997, c. 21

Assented to 1997-04-25

An Act to provide for mediation between insolvent farmers and their creditors, to amend the Agriculture and Agri-Food Administrative Monetary Penalties Act and to repeal the Farm Debt Review Act

Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:


Contents

Short Title

Short title

1. This Act may be cited as the Farm Debt Mediation Act.


Interpretation

Definitions

2. The definitions in this section apply in this Act.

“farmer”

« agriculteur »

“farmer” means any individual, corporation, cooperative, partnership or other association of persons that is engaged in farming for commercial purposes and that meets any prescribed criteria.

“farming”

« exploitation d’une entreprise agricole »

“farming” means

(a) the production of field-grown crops, cultivated and uncultivated, and horticultural crops;

(b) the raising of livestock, poultry and fur-bearing animals;

(c) the production of eggs, milk, honey, maple syrup, tobacco, fibre, wood from woodlots and fodder crops; and

(d) the production or raising of any other prescribed thing or animal.

“Minister”

« ministre »

“Minister” means the Minister of Agriculture and Agri-Food.

“prescribed”

Version anglaise seulement“prescribed” means prescribed by regulation.

“secured creditor”

« créancier garanti »

“secured creditor” means

(a) any creditor holding a mortgage, hypothec, pledge, charge, lien, privilege, priority claim or other security interest on or against the property of a farmer or any part thereof as security for a debt due or accruing due from the farmer;

(b) any individual, corporation, cooperative, partnership or other association of persons with which a farmer has entered into an agreement for sale or hire-purchase or, in the Province of Quebec, leasing, or a conditional sales contract, relating to any property used or occupied by the farmer or to which such an agreement or contract has been assigned; and

(c) any bank, or authorized foreign bank within the meaning of section 2 of the Bank Act to which security on the property of a farmer or any part of the property has been given under section 427 of that Act or under section 427 as incorporated by section 555 of that Act, as the case may be.

1997, c. 21, s. 2; 1999, c. 28, s. 161.


Her Majesty

Binding on Her Majesty

3. This Act is binding on Her Majesty in right of Canada or a province.


Administrators

Appointment

4. (1) Subject to subsection (2), administrators shall be appointed for the purposes of this Act in accordance with the Public Service Employment Act.

Designation

(2) The Minister may, in accordance with the regulations, if any, and on such terms and conditions as the Minister may specify, designate any person, other than an employee within the meaning of the Public Service Employment Act, as an administrator for the purposes of this Act.

Agreements

(3) For the purposes of this Act, the Minister may enter into an agreement with any individual or body in relation to the remuneration and travel and living expenses of administrators designated under subsection (2).

Mediators, experts

(4) An administrator may enter into agreements

(a) for the services of mediators, subject to the regulations, and

(b) for the services of experts

relating to applications made under section 5, and such agreements may include provision for remuneration and travel and living expenses.


Applications

Application to administrator

5. (1) Subject to section 6, a farmer may apply to an administrator for either

(a) a stay of proceedings against the farmer by all the farmer’s creditors, a review of the farmer’s financial affairs, and mediation between the farmer and all the farmer’s creditors for the purpose of assisting them to reach a mutually acceptable arrangement; or

(b) a review of the farmer’s financial affairs, and mediation between the farmer and all the farmer’s secured creditors for the purpose of assisting them to reach a mutually acceptable arrangement.

Names of creditors

(2) An application under subsection (1) must include the names and addresses of all the farmer’s creditors.

Farmer must be insolvent

6. Only farmers

(a) who are for any reason unable to meet their obligations as they generally become due,

(b) who have ceased paying their current obligations in the ordinary course of business as they generally become due, or

(c) the aggregate of whose property is not, at a fair valuation, sufficient, or if disposed of at a fairly conducted sale under legal process would not be sufficient, to enable payment of all their obligations, due and accruing due

are eligible to apply under section 5.

Administrator’s duties on receiving application

7. (1) On receipt of a duly completed application under section 5, the administrator shall forthwith

(a) give notice of the application to

(i) each person whose name is listed as a creditor in the application, in the case of an application under paragraph 5(1)(a), or

(ii) each person whose name is listed as a secured creditor in the application, in the case of an application under paragraph 5(1)(b);

(b) in the case of an application under paragraph 5(1)(a), issue a thirty day stay of proceedings against the farmer by all the farmer’s creditors, and give notice thereof to each person whose name is listed as a creditor in the application; and

(c) determine whether the farmer is eligible under this Act to make that application, which determination may be based on, among other things, a preliminary review of the farmer’s financial affairs.

Certain decisions final

(2) In the case of an application under paragraph 5(1)(b), a determination by the administrator under paragraph (1)(c) is final and is not subject to appeal.

Amendment of application

8. (1) A farmer who has made an application under paragraph 5(1)(a) or (b) may, at any time before the termination of the mediation, request permission from the administrator to amend the application to be an application under paragraph 5(1)(b) or (a), as the case may be, and the administrator may grant that permission if satisfied that the farmer is eligible to apply under paragraph 5(1)(b) or (a), as the case may be.

Two year period

(2) For the purposes of section 20, an application that has been amended pursuant to subsection (1) is deemed to have been made as an application under paragraph 5(1)(b) or (a), as the case may be, on the day when the original application was made.


Financial Review

Financial review

9. (1) Where the administrator determines that the farmer is eligible to make the application, the administrator shall as soon as possible undertake, or cause an expert referred to in subsection 4(4) to undertake, a detailed review of the farmer’s financial affairs.

Nature of review

(2) The review mentioned in subsection (1)

(a) must include the preparation of

(i) an inventory of all the assets of the farmer, and

(ii) financial statements of the farmer’s farming operation;

(b) may, in the case of an application under paragraph 5(1)(b), include a recommendation, notwithstanding that paragraph, that one or more creditors who are not secured creditors participate in the mediation; and

(c) may include the preparation of recovery plans for the purpose of reaching financial arrangements with creditors.

Preparation of recovery plans

(3) Where a farmer requests the administrator that the recovery plans referred to in paragraph (2)(c) be prepared by a person of the farmer’s choice, the administrator may, in accordance with the regulations, if any, enter into an agreement for that purpose.

Report

(4) The results of a review under this section must take the form of a report prepared by or on behalf of the administrator.


Mediation

Appointment of mediator

10. (1) Forthwith after the report mentioned in subsection 9(4) has been prepared, the administrator shall

(a) in accordance with the regulations, appoint as a mediator any person who is unbiased and free from any conflict of interest relative to the application in question;

(b) inform

(i) the farmer and all the creditors listed in the application, in the case of an application made under paragraph 5(1)(a), or

(ii) in the case of an application made under paragraph 5(1)(b), the farmer, all the secured creditors listed in the application, and any creditors mentioned in a recommendation under paragraph 9(2)(b),

as the case may be, of the appointment of the mediator; and

(c) provide a copy of the report mentioned in subsection 9(4) to the mediator and to the persons who will be participating in the mediation.

Duties of mediator

(2) In accordance with the regulations, the mediator shall examine the report mentioned in subsection 9(4) and meet with the persons referred to in subparagraph (1)(b)(i) or (ii), as the case may be, for the purpose of assisting them to reach a mutually acceptable arrangement, but shall not provide advice to the farmer or a creditor.

Termination of mediation

11. (1) In the case of an application under paragraph 5(1)(a), the mediation terminates

(a) when a termination of the stay of proceedings pursuant to subsection 14(2) takes effect pursuant to subsection 14(4); or

(b) on a termination of the stay of proceedings by virtue of subsection 14(5).

Termination of mediation

(2) In the case of an application under paragraph 5(1)(b),

(a) if the administrator is of the opinion, based on information received from the mediator or from any other source, that

(i) either the farmer or the majority of the creditors referred to in subparagraph 10(1)(b)(ii)

(A) refuse to participate in the mediation, or

(B) refuse to continue to participate in good faith in the mediation, or

(ii) the mediation will not result in an arrangement between the farmer and the majority of the creditors referred to in subparagraph 10(1)(b)(ii),

the administrator may direct that the mediation be terminated and, where the administrator so directs, the mediation terminates; and

(b) the mediation terminates on the signing of an arrangement under section 19.

Notice of termination

(3) Where the mediation terminates pursuant to subsection (1) or (2), the administrator shall so inform the farmer and all the creditors who were eligible to participate in the mediation.


Stay Of Proceedings

Effect of stay of proceedings

12. Notwithstanding any other law, during any period in which a stay of proceedings is in effect, no creditor of the farmer

(a) shall enforce any remedy against the property of the farmer; or

(b) shall commence or continue any proceedings or any action, execution or other proceedings, judicial or extra-judicial, for the recovery of a debt, the realization of any security or the taking of any property of the farmer.

Extension of stay of proceedings

13. (1) Where the administrator considers an extension of the thirty day period referred to in paragraph 7(1)(b) to be essential to the formulation of an arrangement between a farmer and the farmer’s creditors, the administrator may, subject to the regulations, extend that period for a maximum of three further periods of thirty days each.

Interim extension of stay

(2) Where

(a) there is an appeal under section 15 from a decision of the administrator not to extend a stay of proceedings, and

(b) the stay of proceedings expires before the appeal is decided,

the administrator shall, on that expiration, extend the stay of proceedings until the appeal is decided.

Notice to creditors

(3) The administrator shall give notice of any extension granted under subsection (1) or (2) to the farmer and to each person whose name is listed as a creditor in the farmer’s application.

Where appeal successful

(4) Where, pursuant to an Appeal referred to in paragraph (2)(a), the Appeal Board reverses the administrator’s decision, the resulting thirty day extension of the stay of proceedings starts at the expiration of the original stay of proceedings, or at the expiration of the previous thirty day extension thereof, as the case may be.

Obligatory termination of stay of proceedings

14. (1) If the administrator determines, pursuant to paragraph 7(1)(c), that the farmer is not eligible to make the application, the administrator shall direct that the stay of proceedings be terminated.

Discretionary termination of stay of proceedings

(2) If the administrator is of the opinion, based on information received from the mediator or from any other source, that

(a) either the farmer or the majority of the creditors listed in the application

(i) refuse to participate in the mediation, or

(ii) refuse to continue to participate in good faith in the mediation,

(b) the mediation will not result in an arrangement between the farmer and the majority of the creditors listed in the application,

(c) the farmer has contravened any directive issued to the farmer by the administrator pursuant to subsection 17(1), or

(d) the farmer has, by any act or omission, jeopardized his or her assets or obstructed the guardian in the performance of the guardian’s duties under subsection 17(2),

the administrator may direct that the stay of proceedings be terminated.

Notice of termination

(3) Where the administrator directs, pursuant to subsection (1) or (2), that a stay of proceedings be terminated, the Administrator shall so inform the farmer and all the creditors listed in the application.

When termination takes effect

(4) Where the administrator directs, pursuant to subsection (1) or (2), that a stay of proceedings be terminated, the termination takes effect

(a) on the expiration of the time prescribed for making an appeal under section 15; or

(b) where an appeal is made under section 15, if and when the appeal is dismissed.

Automatic termination of stay of proceedings

(5) A stay of proceedings terminates on

(a) the signing of an arrangement under section 19; or

(b) the farmer’s making an assignment under the Bankruptcy and Insolvency Act.


Appeal Boards

Appeal Boards

15. (1) The Minister may, in accordance with the regulations, constitute one or more Appeal Boards and designate the members thereof, and may enter into agreements for the services of the members, which agreements may include provision for remuneration and travel and living expenses.

Appeals

(2) A farmer or a creditor may, in accordance with the regulations, appeal to an Appeal Board a decision of an administrator relating to

(a) the eligibility of a farmer to make the application under paragraph 5(1)(a); or

(b) the extension or termination of a stay of proceedings.

Regulations

(3) The Appeal Board shall deal with an appeal in accordance with the regulations.

Stay not affected

(4) The making of an appeal does not affect a stay of proceedings that is in effect.

Board’s decision final

(5) A decision of an Appeal Board is final and is not subject to appeal.


GUARDIAN OF FARMER’S ASSETS

Administrator to appoint guardian

16. (1) Where the administrator issues a stay of proceedings under paragraph 7(1)(b), the administrator shall forthwith appoint one of the following persons as guardian of the farmer’s assets:

(a) the farmer, where the farmer is qualified to be the guardian; or

(b) in any other case,

(i) any other qualified person nominated by any secured creditor or secured creditors listed in the application, or

(ii) any other qualified person chosen by the administrator.

Informing farmer and creditors

(2) The administrator shall forthwith inform the farmer, and all the creditors listed in the application, of the appointment of the guardian.

Expenses of guardian

(3) Where the administrator appoints a person referred to in subparagraph (1)(b)(i) as guardian, the expenses of the guardian shall be paid by the secured creditor or secured creditors who nominated that person.

Expenses of guardian

(4) Where the administrator appoints a person referred to in subparagraph (1)(b)(ii) as guardian, the expenses of the guardian shall be paid by the administrator.

Duties of guardian

17. (1) The administrator may issue directives to the guardian, and the guardian shall comply with any such directives.

Duties of guardian

(2) The guardian shall, in addition to the obligation under subsection (1),

(a) prepare an inventory of all the assets of the farmer;

(b) verify periodically the presence and condition of those assets; and

(c) advise the administrator of any act or omission that would jeopardize those assets.

Termination of guardianship

18. The appointment of a guardian under section 16 terminates on the expiration or termination of the stay of proceedings.


Arrangements

Arrangement to be put in writing

19. Where a farmer enters into an arrangement with any creditor as a result of the mediation, the administrator shall see to its signing by the parties thereto.


New Applications

New applications under paragraph 5(1)(a)

20. (1) Notwithstanding any other provision of this Act, where a farmer makes an application under paragraph 5(1)(a), that farmer, or any person who is related to that farmer within the meaning of the regulations, is not entitled to make a new application under that paragraph in respect of substantially the same farming operation for a period of two years after

(a) the date on which the first application was made, where the farmer did not enter into an arrangement with the creditors during the stay of proceedings, or

(b) the date on which the arrangement was signed, where the farmer entered into an arrangement with the creditors,

unless, before making the new application, the person seeking to apply obtains the written consent of the administrator.

New applications under paragraph 5(1)(b)

(2) Notwithstanding any other provision of this Act, where a farmer makes an application under paragraph 5(1)(b), that farmer, or any person who is related to that farmer within the meaning of the regulations, is not entitled to make a new application under that paragraph in respect of substantially the same farming operation for a period of two years after

(a) the date on which the first application was made, where the farmer did not enter into an arrangement with the creditors within the period prescribed for the mediation, or

(b) the date on which the arrangement was signed, where the farmer entered into an arrangement with the creditors,

unless, before making the new application, the person seeking to apply obtains the written consent of the administrator.


Notice By Secured Creditors

Notice by secured creditors

21. (1) Every secured creditor who intends to

(a) enforce any remedy against the property of a farmer, or

(b) commence any proceedings or any action, execution or other proceedings, judicial or extra-judicial, for the recovery of a debt, the realization of any security or the taking of any property of a farmer

shall give the farmer written notice of the creditor’s intention to do so, and in the notice shall advise the farmer of the right to make an application under section 5.

Time of notice

(2) The notice referred to in subsection (1) must be given to the farmer in the prescribed manner at least fifteen business days before the doing of any act described in paragraph (1)(a) or (b).


General

Contravention by creditor

22. (1) Subject to subsection (2), any act done by a creditor in contravention of section 12 or 21 is null and void, and a farmer affected by such an act may seek appropriate remedies against the creditor in a court of competent jurisdiction.

Innocent parties protected

(2) Subsection (1)

(a) does not affect the title to property of a person who purchased the property in good faith from the creditor and who was not then related to the creditor within the meaning of the regulations; and

(b) does not confer on the farmer any remedy against a person described in paragraph (a).

Disputes

23. Nothing in this Act prevents any party to an arrangement made under this Act from taking a dispute arising therefrom to a court of competent jurisdiction for disposition.

Communication of information

24. (1) Except as authorized by subsection (2), no person shall knowingly communicate or knowingly allow to be communicated to any person any information obtained under this Act from a farmer or from any creditor of a farmer, or knowingly allow any person to inspect or have access to any such information.

Exception

(2) A person engaged in the administration of this Act may communicate or allow to be communicated, or allow inspection of or access to, any information referred to in subsection (1) to or by any other person engaged in the administration of this Act or any person otherwise legally entitled thereto.

Protection of witness

(3) A person engaged in the administration of this Act, including a mediator or expert referred to in subsection 4(4), is not compellable to answer questions concerning the information, or to produce records or other documents containing the information, as evidence in any proceedings not directly concerned with the enforcement or interpretation of this Act or the regulations.

Personal liability

25. No person engaged in the administration of this Act is personally liable for acts or omissions done in good faith in the performance of their duties under this Act.

Regulations

26. (1) The Minister may make regulations

(a) respecting the designation of persons as administrators pursuant to subsection 4(2);

(b) for permitting a farmer or creditor to request the administrator to replace the mediator or guardian with a different mediator or guardian;

(c) respecting the entering into of agreements under subsection 9(3);

(d) respecting the qualifications and appointment of mediators, and respecting the manner in which and the period within which mediators must perform their duties under subsection 10(2);

(e) respecting the time by which an administrator must decide whether or not to extend a stay of proceedings pursuant to subsection 13(1);

(f) respecting the number and constitution of Appeal Boards, the designation of the members thereof, and the manner in which and the period within which appeals under subsection 15(2) shall be made and dealt with;

(g) respecting the meaning of “related” for the purposes of section 20 and for the purposes of subsection 22(2);

(h) prescribing anything that by this Act is to be prescribed; and

(i) generally for carrying out the purposes and provisions of this Act.

Forms and their content

(2) The Minister may establish forms and other documents for carrying out the purposes and provisions of this Act and may determine the information to be included in such documents, and, without limiting the generality of the foregoing, may determine the manner of

(a) amending an application; and

(b) informing or notifying persons, where such is required by this Act.

Offence

27. Any person who contravenes a provision of this Act or the regulations is guilty of an offence and liable on summary conviction to a fine not exceeding fifty thousand dollars or to a term of imprisonment not exceeding six months, or to both.

Review of Act after two years

28. (1) As soon as possible after the second anniversary of the coming into force of this Act and every three years thereafter, the Minister shall undertake a review of the operation of this Act, and may for that purpose consult with representatives of such organizations as the Minister considers appropriate.

Review by Minister

(2) In conducting the review under subsection (1), the Minister shall review the operation of any program or service that is created after this section comes into force for the purpose of undertaking a detailed review of the financial affairs of a farmer in financial difficulty, at the farmer’s request.

Report to Parliament

(3) As soon as possible after completing the review referred to in subsection (1), the Minister shall cause a report of the results of the review to be laid before each House of Parliament.


Related Amendments

29. and 30. (Amendments)


Repeal

31. (Repeal)


Transitional Provisions

Definitions

32. In sections 33 to 35,

(a) “old Act” means the Farm Debt Review Act; and

(b) “new Act” means the Farm Debt Mediation Act.

Applications made under Farm Debt Review Act

33. For the purposes of section 44 of the Interpretation Act,

(a) an application made under section 16 of the old Act shall be dealt with as if it had been made under paragraph 5(1)(b) of the new Act, regardless of whether the farmer in question would be eligible to apply under paragraph 5(1)(b) of the new Act, but section 8 of the new Act does not apply unless the farmer in fact meets the requirement of section 6 of the new Act; and

(b) an application made under section 20 of the old Act shall be dealt with as if it had been made under paragraph 5(1)(a) of the new Act, regardless of whether the farmer in question would be eligible to apply under paragraph 5(1)(a) of the new Act.

Two year rule

34. (1) Subsection 20(1) of the new Act applies, with such modifications as the circumstances require, in respect of farmers whose previous application was under section 20 of the old Act.

Two year rule

(2) Subsection 20(2) of the new Act does not apply in respect of farmers whose previous application was under section 16 of the old Act.

Members of Farm Debt Review Boards

35. Chairmen and other members of the Farm Debt Review Boards who hold office under section 4 of the old Act cease to hold office on the coming into force of the new Act.


Coming Into Force

Coming into force


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