Keystone Agri-Motive, 2014 MBCA 109

Citation: Keystone Agri-Motive

(2005) Inc. v. Date: 20141128 Desrochers, 2014 MBCA 109 Docket: AI 14-30-08151 IN THE COURT OF APPEAL OF MANITOBA Coram: Madam Justice Barbara M. Hamilton Madam Justice Holly C. Beard Mr. Justice Marc M. Monnin BETWEEN : ) T. D. Warren KEYSTONE AGRI-MOTIVE

(2005) INC. ) for the Appellant ) (Applicant) Respondent ) M. D. Jodoin ) for the Respondent - and - ) ) ) Appeal heard: MARCEL R. DESROCHERS ) October 14, 2014 ) (Respondent) Appellant ) Judgment delivered: ) November 28, 2014 HAMILTON J.A. [ 1 ] The appellant appeals the bankruptcy order against him granted pursuant to s. 43(1) of the Bankruptcy and Insolvency Act (the BIA ). [ 2 ] He asserts that the application judge made three errors: 1) not finding that he was a farmer for the purposes of s. 48 of the BIA ; 2) finding that he committed

an act of bankruptcy for the purposes of s. 43 of the BIA ; and 3) concluding that leave under s. 8(1) of The Family Farm Protection Act , C.C.S.M. c. F15 (the FFPA ), was not required for the respondent creditor, Keystone Agri- Motive

(2005) Inc. (Keystone), to make its application under the BIA rendering the bankruptcy order a nullity under s. 8(4) of the FFPA . [ 3 ] I would dismiss the appeal. Relevant Statutory Provisions [ 4 ] Sections 43 and 48 of the BIA read as follows: Bankruptcy application 43.

(1) Subject to this section, one or more creditors may file in court an application for a bankruptcy order against a debtor if it is alleged in the application that (

a) the debt or debts owing to the applicant creditor or creditors amount to one thousand dollars; and (

b) the debtor has committed

an act of bankruptcy within the six months preceding the filing of the application. Application of sections 43 to 46 48. Sections 43 to 46 do not apply to individuals whose principal occupation and means of livelihood is fishing, farming or the tillage of the soil or to any individual who works for wages, salary, commission or hire at a rate of compensation not exceeding twenty-five hundred dollars per year and does not on their own account carry on business.

[ 5 ] Sections 8(1) and 8(4) of the FFPA read as follows: Actions or proceedings requiring leave 8(1) No person shall commence or continue any action or proceeding to realize upon or otherwise enforce (

a) a mortgage, an encumbrance, a security agreement or an agreement for sale of farmland, or any provision contained therein; or (

b) a judgment or an attachment obtained on the basis of a mortgage, an encumbrance, a security agreement or an agreement for sale of farmland, or any provision contained therein; whereby a farmer could be deprived of the ownership or the possession of farmland of which the farmer is the registered owner or of which the farmer is the purchaser under an agreement for sale, without first obtaining leave of the court under this Part. Non-compliance with this Part 8(4) Any action or proceeding which is commenced or continued after the coming into force of this Act without first obtaining leave of the court as required by this

Part is a nullity. Background [ 6 ] Keystone obtained default judgment against the appellant in March 2010 for outstanding payments due under a lease for grass-cutting equipment. In November 2012, Dewar J. determined that Keystone was entitled to $66,934.07 plus execution costs on a solicitor-client basis under the judgment. [ 7 ] Keystone’s efforts to realize on the judgment, which included examining the appellant in aid of execution, have been unsuccessful. More than $100,000 is now owed under the judgment. [ 8 ] Keystone is one of several judgment creditors. [ 9 ] The appellant is the sole shareholder of Frenchie’s Farm & Ranch Ltd. (the corporation), which owns a quarter

section of land in rural Manitoba (the land). [ 10 ] During the course of the examination in aid of execution in 2011 and 2012, the appellant testified that the corporation has never paid him and he works for it for free; that he did not expect any income whatsoever in 2011 and 2012 from farming; and that he had no income personally as a farmer from 2008 to 2011. There is no evidence to suggest that this changed at any later date. He also testified that he owned an unincorporated grass-mowing business that did work in Manitoba for the Province of Manitoba and that he was employed in Alberta doing the same work.

Dewar J. subsequently found him in contempt of court on September 6, 2013, for refusing to produce court-ordered particulars about his mowing business and employment. [ 11 ] On July 26, 2013, Keystone applied under s. 43(1) of the BIA for an order of bankruptcy against the appellant, stating that he had committed

an act of bankruptcy by ceasing to meet his liabilities generally as they became due within the six months preceding the date of filing its application. See s. 42(1)(

j) of the BIA . [ 12 ] In support of its application, Keystone filed, among other documents, transcripts from the proceedings before both Master Lee and Dewar J. [ 13 ] The appellant opposed the application, arguing that he was not insolvent; that the order could not be granted because he was a farmer for the purposes of s. 48 of the BIA ; and that leave was required under s. 8(1) of the FFPA . Sections 48 and 43 of the BIA [ 14 ]

Section 48 of the BIA provides that s. 43 does not apply to “individuals whose principal occupation and means of livelihood is … farming.” The application judge found that the appellant’s “principal means of livelihood was at the relevant time his grass cutting business” and not farming and, therefore, concluded that “[s]ection 48 does not apply in these circumstances.” [ 15 ] With respect to s. 43 of the BIA , the application judge reviewed the evidence with respect to the appellant’s financial circumstances and indebtedness and found that the appellant committed

an act of bankruptcy within six months of the filing of Keystone’s application because he had ceased to meet his liabilities generally as they became due. [ 16 ] At the appeal hearing, the panel advised counsel for Keystone that he need not address the grounds of appeal with

respect to the application judge’s findings concerning ss. 43 and 48 of the BIA. The application judge reviewed and applied the correctlaw. These findings are ones of fact, or mixed fact and law, for which the applicable standard of review is palpable and overriding error. The appellant has not demonstrated that either finding was the result of a palpable and overriding error, so his appeal on these groundsmust fail. Leave under FFPA [17] The appellant argues that leave under s. 8(1) of the FFPA was required because he is a farmer and the application coulddeprive him of ownership of farmland.

He relies on M & D Farm Ltd. v. Manitoba Agricultural Credit Corp., (SCC),[1998] 1 S.C.R. 1074, for his assertion that the bankruptcy order is a nullity pursuant to s. 8(4) of the FFPA because leave was notobtained. [18] Among its several submissions as to why the FFPA does not apply in these circumstances, Keystone says that the FFPAonly applies when a proceeding is against a farmer who is the registered owner of the farmland at issue.

Therefore, it says that becausethe corporation (and not the appellant) is the registered owner of the land (which the appellant asserts is farmland), s. 8(1) did not applyto its application under the BIA against the appellant. I agree. The

definitions of “farmer” and “farmland” in s. 1(1) of the FFPA makethis clear: “farmer” means a person engaged in farming in Manitoba, and includes all individuals holding an interest in farmland in joint tenancywith an individual engaged in farming in Manitoba; “farmland” means land in Manitoba that is used, or that has been primarily used during the immediately preceding two years, by afarmer for farming, and that is owned by the farmer or that is being purchased by the farmer under an agreement for sale, and includesall erections, buildings and improvements thereon, any commercial crops which are growing thereon, and any mines and minerals; [emphasis added] [19] As is evident, the FFPA applies in very specific circumstances, one of which must be that the farmland at issue isowned by the farmer.

Even assuming, without deciding, that the appellant is a farmer as defined in the FFPA (i.e., a person engaged infarming in Manitoba), and that the land is farmland as defined in the FFPA, the FFPA does not apply to Keystone’s application againstthe appellant because the land is not owned by him. [20] The application judge determined that s. 8(1) of the FFPA was inapplicable, stating: …. Granting the bankruptcy order does not mean that the appointed trustee in bankruptcy will be seeking to take steps where a farmercould be deprived of the ownership or the possession of farmland.

If a trustee appointed pursuant to a bankruptcy order intends toproceed in connection with the land … registered in the name of Frenchie’s Farm and Ranch Ltd., then the trustee may be required totake steps to satisfy this court regarding the applicability of the provisions in the [FFPA] and follow the necessary procedures and obtainleave, if necessary, pursuant to that Act. [21] The application judge addressed his mind to whether the steps being taken by Keystone could deprive a farmer of hisfarmland and appropriately concluded that they could not.

Out of an abundance of caution, he pointed out that if the trustee inbankruptcy takes further steps in relation to the share which would directly implicate the appellant’s possession or “ownership” of theasserted farmland, then the action may be subject to the FFPA leave provision. That may be an issue for another day, if necessary. [22] The appellant’s appeal on this ground must also fail. [23] I point out that the application of the FFPA, a provincial statute, to proceedings under the BIA, a federal statute, maytrigger the need to consider the constitutional doctrine of federal paramountcy.

See Lemare Lake Logging Ltd. v. 3L Cattle Co., 2014SKCA 35, 433 Sask.R. 266, leave to appeal to S.C.C. granted, [2014] S.C.C.A. No. 248. Fresh Evidence Motion [24] The appellant brought a fresh evidence motion that was dismissed at the appeal hearing. He wished to bring forwardevidence that he argued demonstrates that he is a farmer for the purposes of s. 48 of the BIA. [25] The panel dismissed the fresh evidence motion at the hearing because the appellant failed to satisfy the four well-known criteria for the admission of fresh evidence. See Palmer v. The Queen, (SCC), [1980] 1 S.C.R. 759.

In particular,he did not establish that the evidence was not available at the time of the hearing of the application (the due diligence criteria). As well,he failed to address the requirement that the proposed evidence was reasonably capable of belief.

Conclusion [ 26 ] I would dismiss the appeal of the bankruptcy order against the appellant with costs in favour of Keystone. J.A. I agree: J.A. I agree: J.A.