Docket: CACV2144 Pinder Bueckert & Associates Inc. (Respondent) Appellant - v. -, 2012 SKCA 125

THE COURT OF APPEAL FOR SASKATCHEWAN Citation: 2012 SKCA 125 Date: 2012-12-13 Between: Docket: CACV2144 Pinder Bueckert & Associates Inc. (Respondent) Appellant - and - Ross Allan Quibell (Applicant) Non-Party - and – Advantage Credit Union (Defendant/Applicant) Respondent - and – Doreen May Quibell, Bank of Montreal, Toronto-Dominion Bank (Visa) and Saskatchewan Wheat Pool Inc. (Defendants) Non-Parties Coram: Cameron, Richards and Caldwell JJ.A. Counsel: Christopher Boychuk, Q.C. for the appellant

Donald Layh, Q.C. and Avery Layh for the respondent Appeal: From: 2011 SKQB 144 Heard: December 13, 2012 Disposition: Allowed Reasons By: The Honourable Mr. Justice Cameron for the Court Cameron J.A. [ 1 ] Following a judicial sale of farm land in the course of an action for foreclosure of a mortgage given to Advantage Credit Union by Ross Allan Quibell, the Credit Union applied to the Court of Queen’s Bench to recover its solicitor-client costs of the action from the proceeds of the sale. Mr.

Quibell, a Melfort district farmer, was then in bankruptcy, so the application was brought against the Trustee in bankruptcy, Pinder Bueckert & Associates Ltd. The Trustee opposed the application on the ground The Saskatchewan Farm Security Act , S.S. 1988-89, c. S-17.1, precludes a mortgagee of farm land from recovering any but its party and party costs on foreclosure.

The chamber judge held otherwise and allowed the application, prompting the Trustee to bring this appeal. [ 2 ] The provisions of The Saskatchewan Farm Security Act relied upon by the Trustee in opposing the Credit Union’s application read thus: 33(3) Any provision in any mortgage or agreement whereby the farmer contracts, agrees or covenants: (

a) to pay any fees or costs; or (

b) to allow fees or costs to be added to the principal money secured by the mortgage; is null and void and of no effect.

(4) Nothing in this

section affects the right of a mortgagee: (

a) to recover costs as between party and party and not on a solicitor client basis, in an action under the mortgage; [ 3 ] To understand why the chamber judge allowed the Credit Union’s application to recover its costs of the action on a solicitor client basis, notwithstanding these provisions of the Act , it is necessary to more fully recount the circumstances. As noted above, the Credit Union pursued its foreclosure action though to a judicial sale.

To everyone’s surprise, it seems, the sale resulted in a surplus of $34,722.56 after applying the proceeds of sale to the payment of the amount owing the Credit Union under the mortgage, including its costs as between party and party. The surplus was then paid into court on the understanding it would be paid out to those entitled to it. [ 4 ] The Trustee, of course, claimed to be entitled to the surplus. So, too, did Mr. Quibell, though his claim failed and he did not appeal.

As for the Credit Union, it claimed so much of the surplus as would reimburse it for the difference between its party and party costs, which it had already recovered, and its solicitor-client costs, which it sought to recover despite the provisions of ss. 33(3)and (4) of Act . Its claim was expressed to be contingent upon failure of Mr.

Quibell’s claim, given the fact the Credit Union’s entitlement to solicitor- client costs pursuant to a covenant in the mortgage to that effect was clearly unenforceable against him. [ 5 ] In these circumstances, the chamber judge decided the Credit Union could and should have its solicitor-client costs from out of the surplus, notwithstanding the provisions of ss. 33(3) and (4) of the Act. As the judge saw that matter, these provisions conferred a benefit on Mr. Quibell that did not pass to the Trustee on bankruptcy or, in other words, they conferred a statutory right exercisable only by Mr. Quibell.

As the judge put it: [29] I have concluded that the statutory right granted the farmer in ss. 3 and 4 of s.33 of [ The Saskatchewan Farm Security Act ] is a right that can only be exercised by the farmer. It did not pass to the Trustee and, thus, Advantage is able to make a claim for its actual costs of the foreclosure and eventual judicial sale of the farm lands. In my view, s. 33…protects farmers. It was not meant to preclude recovery of costs against subordinate writ holders.

[ 6 ] With the greatest of respect, we found ourselves unable on the hearing of the appeal to agree with the chamber judge and, therefore, allowed the appeal. We did so for the following reasons, the gist of which we expressed orally on the conclusion of the hearing of the appeal. [ 7 ] As of the date Mr. Quibell made his assignment in bankruptcy under the Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3, he owned the farm lands subject to the mortgage in favor of the Credit Union.

That being so, the land obviously formed part of the property of the bankrupt assigned to the Trustee for the general benefit of the creditors of the bankrupt. Accordingly, the Trustee was entitled to the surplus proceeds realized from the sale of the land and, in turn, was bound to apply them in keeping with the scheme of distribution laid down by this Act , beginning with s.136. [ 8 ] That said, we are of the opinion the provisions of ss. 33(3) and (4) of The Saskatchewan Farm Security Act precluded the Credit Union from recovering it solicitor-client costs of the action from out of the surplus.

Contrary to the view of the chamber judge, we are of the view these provisions do not confer upon a farmer, who mortgages farm land, a “statutory right that can only be exercised by the farmer.” With respect, these provisions cannot be so interpreted. As they apply to a covenant in a mortgage of farm lands made by a farmer, the covenant is “null and void and of no effect” in the words of s. 33(3), except to the extent the covenant provides for the recovery of “costs as between party and party and not on a solicitor-client basis” in the words of s. 33(4).

Given the plain meaning of these words, it is as though the covenant, to the extent it provides for “recovery of costs on a solicitor client basis”, does not exist. To interpret these provisions otherwise, as the chamber judge did, one would have to read in words to the effect the covenant is thus null and void and of no effect “as against the farmer but not others”; or “as against the farmer but not other non-farmers”; or “as against the farmer to the exclusion of his or her heirs, successors and assigns”, or to such persons, perhaps, who are not themselves farmers.

This, of course, is altogether beyond the reach of acceptable statutory

interpretation. [ 9 ] Hence, we are satisfied the judge erred in law in granting solicitor-client costs to the Credit Union on the basis of the covenant in the mortgage to that effect. [ 10 ] This is not the end of the matter, however, for the Credit Union sought to sustain the judge’s decision on alternate bases. To begin with, the Credit Union suggested that it was open to the judge, in the exercise of the inherent jurisdiction of the Court of Queen’s Bench, to award solicitor-client costs to the Credit Union on the ground the surplus was realized through its efforts and at its expense. [ 11 ] We do not agree.

Aside from the fact it was not open to the judge to circumvent the provisions of ss. 33(3) and (4) of The Saskatchewan Farm Security Act in this way, we note that solicitor-client costs may only be awarded in rare circumstances: Siemens v. Bawolin , 2002 SKCA 84 , [2002] 11 W.W.R. 246. The circumstances of the present case are not such as to bring it within the contemplation of Siemens’ case.

Hence, the judge could not have awarded the Credit Union its solicitor-client costs in the exercise of the Court’s inherent jurisdiction to make such awards. [ 12 ] Next, the Credit Union suggested that the judge might well have made the impugned order on application of the equitable principles expounded in Father & Son Investments Inc. v. Maverick Brewing Corporation , 2007 ABQB 651 , 290 D.L.R. (4th) 175.

That case stands for the proposition that, where a Receiver has been appointed to realize upon the assets of an insolvent debtor, a lower ranking creditor is equitably entitled, in priority to the claims of higher ranking creditors, to be substantially indemnified for its legal costs in obtaining the appointment of the Receiver if (

i) the cost it incurs in doing so increases the recovery from the debtor, (ii) the increased recovery benefits higher ranking creditors, and (iii) the actions of this creditor do not flow from a separate legal duty.

This proposition, as such, is simply not applicable in the circumstances of the case before us. [ 13 ] Even so, the Credit Union suggested that the equitable principles relied upon in that case can and should be adapted to this case so as to allow the Credit Union to recover its solicitor-client costs from out of the surplus, bearing in mind, once again, that the surplus was realized through the efforts of the Credit Union and at its expense.

In our opinion this cannot be done, for to resort to these principles for this purpose would run counter to both s. 33 of The Saskatchewan Farm Security Act and the case authority of Siemens v. Bawolin . There is also the prospect that this would run afoul of the scheme of distribution contemplated by the Bankruptcy and Insolvency Act , beginning with s. 136 . It is not as though the Credit Union, in pursing its foreclosure action, was acting under the direction of the Trustee or was pursuing its action for the general benefit of the creditors of the bankrupt.

The Credit Union incurred its costs of the action while acting on its own, and in its own interests. That the judicial sale resulted fortuitously in a surplus does not serve to change any of this. [ 14 ] The long of short of it is that we cannot agree to the suggestion of the Credit Union that it should be able, in fairness and equity, to recover its solicitor-client costs on the authority of the Father & Son Investments case. [ 15 ] For essentially these reasons, then, the appeal is allowed and the order of the Court of Queen’s Bench is set aside. The Trustee shall

have its taxed costs on appeal in accordance with this Court’s Tariff of Costs.