EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, October 22, 1996

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[English]

The Chairman: Welcome, everyone. We have a brief matter to deal with before we have our first witnesses this morning, and that is the tabling of the sixth report of the subcommittee on agenda and procedure, or the steering committee report. I believe that's in front of everyone. It just notifies everyone of the witnesses who have indicated that they wish to come forward on Bill C-38 and on Bill C-60. If there is any discussion we'll have that now; if not, I'm prepared to accept a motion to accept that report.

Mr. Easter (Malpeque): I so move.

Motion agreed to

The Chairman: Thank you very much.

We will continue our witnesses and presenters this morning on Bill C-38, the Farm Debt Mediation Act. Our first presenter is from the Canadian Federation of Agriculture: its president, Jack Wilkinson, no stranger to this committee and to the table. Welcome, Jack. If you have others with you this morning, you can certainly introduce them to the committee and then proceed with your comments.

Mr. Jack Wilkinson (President, Canadian Federation of Agriculture): Thank you very much. It's a beautiful day out there for farmers.

The Chairman: It's a lot nicer day in here.

Mr. Wilkinson: Yes, if you're a duck farmer, or dung farming, whichever the case may be.

Thank you very much for having us here. Yves Ruel from our policy branch is the one you address the tough questions to. I try to answer the easy questions.

We have a relatively short presentation. It's just three pages. On this particular topic, we have been working quite closely with Ag Canada staff for a long time and we feel that most of the elements of the legislation that we wanted in here are here, so this time we will not be overly critical of the government piece of legislation.

I know there are a couple of concerns with it that some debt review boards in some provinces have raised, as have some MPs. I would like to move through this relatively quickly and address some of those concerns, as well as where we think they have been addressed.

One of the largest areas of concern is around the fact that the voluntary side of the old debt review legislation - people being able to come before the board and do a voluntary restructuring - is not part of this particular legislation, and that is of concern to some people. It is our understanding - and we keep checking - that the minister intends to bring forward at the same time a farm consultation service that would be able to handle those particular cases, plus reach out even earlier in people's early signals of financial difficulty. It would provide a continuum between the private business planning that currently exists and the provincial sector, all the way through to people who will go in front of the debt review board.

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We were certainly in favour of that. Clearly there are going to have to be enough resources in that farm consultation service, under discretion of whoever is administering it, to be able to handle those cases where people are in quite serious difficulty.

The reason we wanted it split was simple. Under the old system when you voluntarily went before a panel to look at debt restructuring, you were either under the legislation or you weren't. In some provinces, as soon as you were, creditors were notified. So someone who really wanted to restructure themselves all of a sudden was immediately in very serious difficulty. The feed truck stopped coming to the farm, the fuel truck stopped coming to the farm, the fertilizer people called up, etc.

Everybody got nervous, because in some provinces all people were notified, even if it was a voluntary restructuring. We felt that was a serious flaw, that they couldn't be handled differently under a full-blown debt review of a creditor giving notice. That was one of the main reasons why we wanted that split in this current legislation - so that the opportunity for voluntary restructuring could still occur outside of all creditors being notified and moving into a full-blown debt review. That was our logic for pushing for the split to be there.

Also, we have a mediation service here versus the panel. Again, it varies from province to province. There was no sort of pat template, but we felt that in many cases the chairperson was in fact the person who was doing most of the work and that panel members were there, but they were there to offer expertise in relation to particular commodities and what not that were grown on the farm. Generally speaking, that was our sense of how it ended up working. We felt that a lot of farm families were going in front of these panels working under the assumption that the panel was made up of farmers, that the panel was there to almost pseudo-negotiate with the creditor, that the panel was on your side, and that you could kind of walk into the meeting and put your feet up under the assumption that the panel was going to help you out.

Our sense was that wasn't what happened, and it would have been better to advertise it accordingly: this is a mediation service and the best you can expect is for a mediator to keep the table balanced against the powerful position of the creditor.

Let's face it. Anybody who goes in front of debt review has in most cases already broken their contractual relationship with the creditor anyway and is working from a fairly weak position. You do need things like a stay in proceedings - which is in here - you do need things like a mediator to intercede, and you do need resources to help you out, but very clearly you're working from one step down the ladder in relation to your creditors, so you'd best come into the meeting knowing that. You'd best come into the meeting with a five-year business plan of how you're going to recover and lay your negotiating side on the table. At best what you can hope for is a good balance from the mediator to give you an opportunity to work out something with your creditor, because clearly if you'd been able to do it in a pleasant situation in the bank manager's office or whatever, it would have already been put together and you wouldn't be in front of debt review. So you need those mediation skills.

Again, that was why we opted for a full-blown mediation service in all provinces, so people knew when they were coming into the meeting what to expect, that there would be very clearly defined roles, and that farmers would come in with the tools required, hopefully, to negotiate with the lender by putting a proposal on the table that would show a recovery in the business within a limited amount of time.

There still is the opportunity within the legislation for the mediator to pull an expert in; they may need it for your particular commodity. We think there has to be a balance between the skills the mediator has. Both of you have to know agriculture very well - and our sense is most of them will come out of the farm community, who will be either panel chairpeople or what not that currently exist within the system - and they need to have the required mediation skills to make sure they do understand the role of a mediator and work towards a solution. So that still exists.

The other flaw we saw in the old legislation, and which we see as an improvement in this bill, was that you basically had a field staff when you notified creditors - or when creditors notified you, as was more often the case - to say that there was a bit of a problem with your overdue demand note and they were going to call it. You would contact the administrator and a field rep would come out to your farm and start to collect the financial data to prepare the factual information on your current financial status for the beginning of the debt review process.

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That still exists in this bill, and on that point we think there's a need for choice. The farm family should be able to choose, free of charge, obviously, the services given by debt review - i.e., a field person could help you work through restructuring your debt, putting a business plan together - or you would have the opportunity and a portion of the financial resources put forward by the government program if you chose, for whatever reason, to use someone other than the government field staff.

We think that will not be used often, because there will be a price tag on that of picking up part of the cost. But I think it will be used for individuals who do not feel comfortable sharing their financial information and/or who feel, in general, much more comfortable using their accountant or people they are used to working with on a regular basis.

It will cost additional money to do that sort of analytical work as far as analysing a farm, moving from straight books into five-year business plans, looking for the weak parts of your business and dumping those and trying to put in a plan of attack that your creditors will buy into. But we think having that choice there will allow families who choose to use their own accounting staff and what not to in fact have some resources to do that, and yet for those who do feel comfortable using the field staff, they can stay with that route.

We think that is critically important within the system - to give farm families a choice.

I think the numbers clearly are down in the debt review system, but we still think it's absolutely important to have a system in the future. There is no point in trying to rush through legislation if a tariff falls, or if we have the border to the U.S. closed and you have a bunch of Alberta farmers - we hope this will never happen, of course - who can't export beef. Anything can happen in the future, so you always have to have a system in place. We think this system is relatively inexpensive if there isn't a high caseload. Obviously if there is a high caseload, people will be found to do the work, because politically it will be imperative to deal with those cases. So we think this offers savings in that regard.

A key point that I think we have to be careful about is that there are enough trained mediators available and enough panels available.

There's one other aspect of the legislation that we think is of value, and that is that an appeal board be set up for both the creditor and the farm family, in relation to stay of proceedings. One concern we had in the old legislation was the administrator made a judgment call - I think in all provinces it was this way - and usually brought in the chairman of the board and a couple of other people to decide whether the stay of proceedings could be extended.

The stay was the only tool the farmer really had to put pressure on the creditor. The fact that everything was being held gave them that little bit of power to hopefully pursue negotiations. I think there were enough cases of concern as to the stays just being lifted because the creditor told the administrator, ``There's no damn way we're doing business with this farm family, so you might as well drop the stay; we're not going to negotiate with them, period, end of discussion.'' That was often not made public to farmers. If a stay is not extended for whatever reason, if people are bargaining in good faith, we think that should be appealed, and the reasons would have to be given, and given by people totally separate from the actual operations of the debt review.

So if I was in such a situation I would go in front of peers, farm family members, and ask for the reasons why that stay was not there, and they would have the ability to overturn the administrator if they saw fit. Obviously if you give that to the farm, you have to give that to the creditor as well. We accept that notion as fair in that regard, as to a stay being given and a creditor viewing that they shouldn't extend the stay.

We think that's important, and we think it is absolutely important that it be outside of the direct operations of the board so that it would be viewed as an appropriate appeal mechanism.

The only concern we do have - and I'm not sure whether, at the end of the day when regulations are written or not, it will remain a concern - is that a two-year time period must lapse before you can go back to the debt review board. That's fair enough, in our opinion, if the ownership stays the same, because you don't want it to be a revolving door with everybody back every six months. The theory is that you put these restructuring packages together so they survive into the future. Sometimes circumstances change a lot, though.

What we are concerned about is the transfer of ownership of the farm. If there's a clear transfer of ownership, it's our understanding that you would be able to go back in front of the board, that the two-year time period wouldn't apply. We think partial transfers could be a concern. To our minds, it has to be fairly clearly written so that we don't create a serious problem. For example, if interest rates change or commodity prices collapse after a farm may be sold to a family member, or if there is a partial influx of capital by bringing a family member into the farm operation, we're nervous that those people should not be cut off from the opportunity of a debt review board for an absolute time period. It should be looked at in terms of circumstances for partial transfers, and we're going to keep working with the government in trying, hopefully, to address that concern. To our minds, that's a caution that is not clearly spelled out.

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The last point, once again, is on the farm consultation service. The legislation is only appropriate as put forward as long as the farm consultation service follows in parallel, because, as we said, that's critical. We want to have resources available to those people who want a voluntary restructuring, and even earlier warning signals to be put in place. It's absolutely critical, as well, that enough resources be there for those people going through a voluntary system.

Some discretion will have to be given, because if it's going to be an early warning, you don't want this farm consultation service to be doing everybody's farm books and tax records and whatever and wasting government money. At the same time, when there are signals that someone is having a problem meeting their cashflow obligations - and there clearly are signals that someone is - either with commodity board pricing and what not, working their way to a very serious situation, there have to be ample resources available at that point to do the work required.

I don't understand how lawyers can charge as much as they do, and I certainly don't understand how bookkeepers, let alone chartered accountants, can charge as much as they do, but the simple fact of the matter is a couple of days' work equals a big bill. It seems totally inappropriate that people who have financial stress in their operation would not be able to get some limited amount of resources to help them solve their problem. We think a little bit of resource goes a long way in keeping them away from problem situations in the future. That must be part of that farm consultation.

I know these hearings aren't about that. It's just an opportunity to lobby Agriculture Canada in this regard.

I think that has covered most of our points. We would be quite happy to answer any questions and concerns. Thank you.

The Chairman: Thank you, Jack.

Monsieur Landry.

[Translation]

Mr. Landry (Lotbinière): Mr. Wilkinson, we have been studying reports on Bill C-38 on several occasions already, and noboby has been able to answer a very simple question I have. When a legislation is being prepared, we should figure out the implementation costs for each and every taxpayer. Concerning this bill, the Farm Debt Mediation Act, I would like to know, for each group of people involved in farming over periods of one to five years, five to ten years, ten to 15 years, and over 15 years, the exact percentage of those who used mediation in order to solve farm debt problems. Can you give me that information?

[English]

Mr. Wilkinson: I don't know any way of being able to put an exact amount on this.

I think with the changes to this new system, it's going to be a lower-cost system as far as the bureaucracy is concerned than the current legislation puts in place. There's an amalgamation. As you can see, there are basically five regions, possibly six administrators, with the amalgamation of B.C., Alberta, Saskatchewan, Manitoba, a separate administrator in Ontario and Quebec, and then one region in the Atlantic, but two administrators simply because of the travel distance.

There are no fixed costs per se in this system, or very few. People are not sitting around on salary waiting for somebody to go into debt review. The mediators and field staff will only be called in on a per diem basis when there are cases.

As far as the actual cost is concerned, it's my understanding that there are numbers available within Agriculture Canada as to the cost of the old debt review on a per case basis. I'm guessing here, but I'm under the impression it was somewhere around $2,000 per case.

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It varied dramatically by province. In some provinces they had a very streamlined system in place, where it was effectively over in one day. In other provinces they had a more elaborate system. It varies dramatically case to case. There is the flexibility, within both this and the old system, of having ``as many meetings as required'' to resolve it. You could have substantially more cost with a complicated case than with another one. So I can't give you that number.

As for the farmers themselves, it's our understanding that if they used the field staff in restructuring and doing their work there would be a relatively low cost for themselves, other than whatever additional information they wanted to collect and additional expertise they wanted, whether it be legal or accounting or both, to have brought to the table. With this change, if they use their own people, we're asking for at least $2,000 to be available from the government on a cost-share ratio, with farmer families putting some money up to offset their expertise and then having a 50% rebate, at minimum, coming back from the government if they didn't use the field service.

That doesn't give you an overall cost per case. I know that. All I can say is it's my understanding that by province they have that for the old system. This should be less expensive, in theory, but I do not know the exact number, because the cases would vary dramatically.

[Translation]

Mr. Landry: Mr. Wilkinson, I would like to know, if it is at all possible, when, over a period of 25 years in farming, the number of cases is the highest. Is it after five, 20 or 25 years? What I would like to know is when, exactly, during a period of 25 years in farming, mediation is more frequently requested for farm debt problems.

[English]

Mr. Wilkinson: Maybe I misunderstood your question.

I think it's fair to say people who are entering farming tend to have the highest degree of risk, simply because of the debt load you start with, your debt-to-equity ratios. It becomes very critical that interest rates stay stable over those beginning years and it becomes absolutely critical that in the commodity area of production you're in prices remain fairly stable or on the incline during your beginning years, because you often have a very narrow margin of profitability when you first start a heavily capitalized operation such as agriculture.

What we saw, though, looking back historically, was that when debt review became absolutely critical two scenarios occurred. First, interest rates moved from in the order of 9% on farm mortgages to as high as 18% on FCC mortgages, and to some extent even higher than that with some of the banks. Prime went as high as 22% during that period. Shortly thereafter commodity prices, because of the trade war between the U.S. and the European Community, dropped to less than half what they had been in some specific commodities.

So those changes in interest rates put anybody who had a high debt load in very precarious situations or drove them right out of business. You can well imagine somebody coming off a five-year fixed mortgage at 9% for renewal and having the opportunity to sign their next mortgage at 18%. It buggers up anybody's cashflow. Some cashflows did not have the ability to sustain it, and if you had a lot of debt you went broke. There were thousands upon thousands upon thousands where the high interest rates put them under. Then there were many more who were finished off by low commodity prices. In those areas that had stability, that had supply management, that had good stabilization programs, the carnage was not as severe, but in Saskatchewan I think over 15,000 people went through debt review in a decade. It varied province to province.

It's a long answer. I think you're at highest risk when you have high debt-to-equity ratios. When interest rates change dramatically or commodity prices change dramatically you're in serious trouble. A lot of people whose cases I worked on had fires on their farm within appropriate fire insurance, or had disease in herds, whether it was a swine operation or a dairy operation that had problems in milk production or whatever. If there were unusual circumstances, they could not then meet their financial obligations. Agriculture is very highly capitalized. There was a thin margin and they went out of business.

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[Translation]

Mr. Landry: Thank you, Mr. Wilkinson.

[English]

The Chairman: Thank you.

Mr. Hermanson.

Mr. Hermanson (Kindersley - Lloydminster): Thank you, Mr. Chairman.

Good morning, Jack and Yves.

Jack, you talked about the farm consultation service. You seem to know a little bit more about it than we MPs, at least on the opposition side. It is quite common for us to be kept out of the loop as much as possible. How do you foresee the farm consultation service working? It is not part of C-38. Do you foresee it as being a cost-recovery program? Do you foresee it as being undertaken or facilitated by the staff mandated under C-38, in other words the farm debt mediators? Are they also going to be providing this farm debt consultation service, or would this be a separate service in a different office? What clout or resources would the farm consultation service have?

Mr. Wilkinson: To be fair, all we've ever seen are drafts. I can't imagine the government would ever share the actual legislation with us ahead of time, and my understanding is it won't be legislation; it will be a government program. What we have suggested is that it run parallel to the program. Let's leave it this way and we'll find out what they're planning on doing.

The intention of the program was to cover off services and resources that are available often at provincial extension. Many provinces have farm business management courses and what not. Our sense was there was a hole in what was available to the general farm population. It stopped here and debt review started here. There was a big area in between where effectively you were in no man's land as far as trying to deal with the seriousness of your situation, unless you had very good accounting services and whatever at your disposal. To be fair, not all accounting services are much better than bookkeeping services in filing tax records in some circumstances, which is often adequate when things are working well.

Take the voluntary restructuring out of the debt review. Put it into a service that will reach back even further so when people see the early warnings of problems they have resources to try to work them out. It may be restructuring your farm operations. It may be selling some of the assets and moving more to rental. Maybe you're overcapitalized on equipment. There are a host of situations where, if you start early enough, you may be able to sort these things out so you end up with a successful farm operation long before you think about debt review.

This is where our thrust has been. As far as how it is going to be administered, in my interpretation this would vary by province because in some provinces they're extremely involved in farm business management activity as part of their extension activities. We've recommended they would then piggyback onto the activity of those provinces. They wouldn't try to replace what the province is doing, but they would offer resources for continuing any activity to people who have additional work that has to be done.

Our sense is farmers must have a business plan of recovery before they go out to see a creditor, whether it is voluntary or whether it is in debt review. If you're going to sit down with a creditor and think the creditor is going to come up with a survival package, you have a different banker than I have. They want their money paid. They want their money paid on time. They want good equity. If you don't have a good cashflow, they want an off-farm job where you've signed on the dotted line. Other than that, there are an awful lot of bank managers and people out there who don't give a shit about the rest of your farm operation, quite frankly.

You must have a plan of recovery if you're going to negotiate some continuance when you run into difficulty. We think this is what the farm consultation service must offer. We think it has to have some ability to grant money back on bills accumulated for those farm families.

Other than this, it has really been negotiations and discussions we're having with the government.

Mr. Hermanson: This is a good answer, Jack, but you didn't quite touch on the three points I mentioned. You don't know, so what would you recommend as president of the CFA?

The Chairman: Didn't you know Jack was a politician?

Mr. Hermanson: Should it be a cost-recovery program? Should it be part of the FDMA?

Mr. Wilkinson: We agree some of it can be cost recovered, but only some of it. There has to be a check valve so everybody doesn't come in and say they want you to do their farm books because they think they are in financial difficulty. There has to be an incentive so every farmer does not flood in. So we accept a notion of some cost recovery there, as long as it is reasonable.

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Mr. Hermanson: Right now the consultation services provided by the Farm Debt Review Act -

Mr. Wilkinson: Well, there's only one aspect of the farm consultation under the current act, and this is where we had the problem. That one aspect is somebody who comes in for voluntary restructuring. There's such a stigma, quite frankly, over debt review that to walk into the debt review office for voluntary restructuring is something people don't want to do. We think it should be peeled away from debt review.

Mr. Hermanson: So you're suggesting this farm mediation should not be involved in the consultation.

Mr. Wilkinson: Yes.

Mr. Hermanson: It should be very separate.

Mr. Wilkinson: We think it should be separate. There should be good communications with people back and forth, but it should be a separate entity so that the stigma of debt review does not infiltrate the farm consultation in their early warning system.

Mr. Hermanson: That was a good answer.

Mr. Wilkinson: If it's the morning, you have to only ask me one question at a time.

Some hon. members: Oh, oh!

Mr. Hermanson: The last question, Jack, you touched on in your presentation.

Our understanding of the bill is that, when it comes to terminating the stay, if the majority of creditors refuse to participate in good faith, the administrator can terminate the stay.

That seems to be an incentive for the creditor. It could be one creditor. It could just be a bank or a farm credit corporation. There may be some incentive for them to be uncooperative to see the stay terminated so they can get on with the legal proceedings.

Do you feel there is enough in this act that would discourage creditors from being uncooperative?

Mr. Wilkinson: I guess I'm getting practical in my old age. When we lobbied for debt review legislation in the first place - and I was involved in that lobby in the organizations I was involved with - we were absolutely unsuccessful in getting any teeth in the legislation federally because of the bank lobby and the farm credit lobby that would neutralize, to some extent, the contractual agreement you had signed when you took out your mortgage.

Let's face it. When you're in a very weak position, when you can't meet your debt obligations on what you've signed away, from your kids' bank accounts to the first-born almost....

It probably doesn't go quite far enough, but I don't think any government in Canada, quite frankly, is going to bring something in that would go far enough.

Our sense is that, with some appeal mechanisms and somebody who has skills as a mediator, effectively what you're doing is putting social, community and other pressure on creditors to be reasonable. Where cases should survive, go out of your way to find them, because it's a lot better to have debt review outside of demonstrations in front of the bank and the bad publicity that gives the banking community.

In my opinion, it is stronger now than it was beforehand, because you can now, as a farm family, go and appeal the fact that the stay wasn't renewed. If the answer to that, in front of an appeal tribunal of farmers, is that the creditor is uninterested in sitting down at the table to negotiate with this farm family, my sense is that independent group would say ``Well, tough bananas. We're going to extend the appeal right up to the 150 days if that's going to be the attitude of the creditor. And even though at the end of that time period they have to negotiate or the creditor can move, we're going to stretch it out.''

So in that sense, it's better than the old act.

Is it tough enough? Well, I have no love for banks, but as I said, I don't think the government would pass something that's tough enough - any government.

Mr. Hermanson: Thank you.

The Chairman: Thank you.

Mr. Easter.

Mr. Easter: Thank you, Mr. Chairman.

Mr. Wilkinson: I assume the Bankers Association is on the list of interventions.

Mr. Easter: I'm not sure.

Before I go to my original questions, I agree with you that one of the better features in this particular bill is the appeal board process. You're satisfied, then, that the appeal board, as outlined in Bill C-38, has the necessary authority and power to do what it has to do?

Mr. Wilkinson: We think so. I don't think it would be reasonable to have a stay of proceedings that would last longer than 150 days without the creditors -

A voice: It's only 120.

Mr. Wilkinson: Only 120, eh? Maybe it's 30 days short.

Some hon. members: Oh, oh!

Mr. Wilkinson: But more or less, yes. It's a balance between creditors viewing this as a stalling mechanism and as interfering with their ability to collect on bad loans and it being enough to encourage them to come to the table to negotiate. I think it will be reasonable.

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Mr. Easter: Jack, I think you and I worked together on the previous Farm Debt Review Board legislation. It's true we weren't successful in getting the teeth in the legislation that I felt were required at that time, and I question whether the teeth are in this legislation to balance off against the power of the banks. That's why I'm concerned.

I hear what you're saying in terms of the farm consultation service, but I have problems with this bill as currently written because I feel we're buying a pig in a poke in terms of the farm consultation service. You're saying that if it comes in parallel and the department does what it says it's going to do in terms of that consultation and mediation service, then everything will be fine. But I have a concern that there's something about legislation having more authority and more power.

I've worked on a lot of farm finance cases and I'll tell you, if it weren't for the power of the Farm Debt Review Board Act the banks probably wouldn't sit down with you. I'm saying the consultation service, as a consultation service, is not going to be enough. I want to see it first. I want to see what the resources are, who the personnel are, what the power under the consultation service is before I can support this bill, because I think the ones who we can keep on the land are the ones who are not yet in trouble.

You're saying you want to see them split because of the stigma of debt review, and I agree with you. That was a problem under the old act. It was also a severe problem in terms of all creditors being informed, and feed trucks, etc., as you say, quit running immediately. Are there not other ways of doing that under the power of legislation? Can we not fix those aspects and still have the power of legislation in terms of those farmers who are not yet insolvent? I wonder if the CFA has considered that option.

My question is, what would be wrong with fixing those problems and having that aspect, the farm consultation service, within the legislation itself? Is there any way you can see of doing it?

Mr. Wilkinson: From our point of view, the minister has given a direct assurance that the program is going to be in place, running parallel with the services that we think are important. There are no guarantees, but we're a lobby organization, and when a minister of the crown makes a commitment, that's going to happen. We have major concerns, as you indicated, but that assurance has been given. It's not just by his department, it has been given by the minister, plus the work that's going on in the department to parallel this.

Whether it will turn out this way or not, the way we have looked at this is because of the problems with the other legislation. Notifying all the creditors on a voluntary restructure was very serious, to our minds, and it basically put somebody into debt review. You really didn't have much of a voluntary restructuring. There were very few circumstances where somebody was not.... The delivery mechanism...they were notified that they weren't in full-blown debt review, so I think to some extent it was a misnomer to call it voluntary. Effectively, as a farm family notifying the debt review board, in my opinion, that was about the only difference, versus the creditor sending you a note and notifying the debt review.

You're bankrupt fairly flexibly in Canada. Just about all of us could declare bankruptcy. I think under the act it requires an inability at a particular time to meet your obligations. I know I haven't made a payment some month because of that, or whatever, so in theory it's fairly easy to become insolvent under the legislation if you wish to do so. Most of us choose the other route - not to.

I don't know how to fix it within the legislation. I think the legislation is always there. If creditors will not voluntarily restructure, you're still going to have the legislation there. From our point of view it was a concern that debt review was going to disappear. That was the thrust of our lobby in the last go round. The numbers of cases were so low that all indications were that the legislation was going to be dropped, that there was not going to be any stay of proceedings and that there was not going to be any system in place. That was the backdrop in which we were lobbying for legislation to be continued, with the stay of proceedings, with some appeal mechanisms, and with keeping some authority in the hands of the farm family in relation to negotiations with their creditor.

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We don't know if parts of that consultation service can feed into this legislation. Our sense is that if you give resources to people to voluntarily restructure, it's better than the old system was. You still have the stay. You still have appeal mechanisms and what not here for people who don't...you're going to be into the legislation anyway. No one can escape the legislation that's hanging there over a creditor's head to encourage negotiations. Anybody can get to this legislation because no one can be wound down without going through a process.

Our sense is that it's still sitting there, and we're taking the minister's word that the program will be there with enough resources.

Mr. Easter: You still have the legislation as a backstop. I'll agree with you on that point. And yes, I have complete confidence in the minister sticking to his word.

But you learn a few things around this place over three years, and one of those things is that Treasury Board and the Department of Finance seem to have a lot of control over various departments. If we come in with this farm consultation service that is not in legislation and as a result is the responsibility of the federal government, whether Treasury Board and the finance department like it or not, then we could, two years down the road, find ourselves being asked under a further program review or some other such means....

I'm worried about the danger down the road of this getting cut. I certainly would like to find some way of seeing that the farm consultation service has some legislative authority, somehow, so that the federal government has an absolute obligation to ensure that this process has the resources, the personnel and the pressure from the department to continue that service.

Mr. Wilkinson: That's a fair comment.

The Chairman: Mr. Pickard.

Mr. Pickard (Essex - Kent): Thank you very much, Mr. Chairman.

We've seen a lot of discussion this morning on the farm consultation service. Really, as Jack has pointed out, it's a companion program to the mediation act to provide consultation services to farmers in financial difficulty who currently are eligible for the kind of service that we give under section 16 of the Farm Debt Review Act.

Farm consultation service is not under the act that we're proposing now and is not mentioned in the act. It is a complementary program that will be implemented to support things that were in section 16.

The two major components of the farm consultation service are a referral or pathfinding service and an on-farm assessment and diagnostic service that provides farmers who are in financial difficulty with a diagnosis of the farm.

As for the referral and pathfinding service referring farmers to other federal, provincial and private services, examples of this type of service that could be included in this referral directory are mediation, farm business planning, financial management training, information services, credit, stress counselling and rural extension services. Farmers need not be in financial difficulty to use those pathfinding services. I think every farmer may find themselves requiring that type of service at some time and may not necessarily be in great financial difficulty.

As for the on-farm assessment and diagnostic review, the output from such a service would include an analysis of all resources available to businesses, including financial management, use of physical resources, etc., identification of problems contributing to financial stress, and identification of alternative courses of action. A five-year operational plan may also be provided. This service would be provided by a financial consultant. If asked, the consultant could also accompany the farmer to meetings with a creditor to discuss financial difficulties and alternatives in courses of action they could take. In effect, a farmer in financial difficulty will receive equivalent, and more, assistance than is currently under section 16.

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The one-on-one consultation aspect of the farm consultation service could be considered by some provinces to be within their mandates and farm management extension types of activities. Therefore, we do not want to create, through legislation, a federal responsibility that some provinces might perceive as infringing upon their rights. This is one of the reasons for keeping the farm consultation services out of the act.

I think that really answers what Wayne brought forward as a critical point. We are putting that service in, it's going to be available, but there are provinces that are very cautious about us infringing upon their rights in doing certain consultation activities as well.

So, in fact, I think there are extended services in this case in those areas of consultation that are not involved in section 16. As well, we have all those areas that section 16 covered.

I think Jack is quite right. I just wanted to bring that forward for Mr. Hermanson as well, because Mr. Hermanson didn't seem to understand that part well. I believe we tried to bring that out when the department was here, but I don't recall you being here at that point.

Anyway, Jack, I thank you very much for your support of that issue. I wanted to make sure it was clear with everyone here.

Mr. Wilkinson: Thank you. The only area I think is extremely important is that enough resources are made available for complicated cases needing substantial work done on them.

Second, you mentioned the point about the five-year plan. I think there is a lack in some areas of the expertise required, particularly where maybe agriculture is not of extremely high density, to look at farm operations and the restructuring that may have to be done in a particular time period so that you guarantee as much as possible successful negotiations, restructuring and what not.

We have low interest rates right now, and one imagines they won't go up, but I was around beforehand - I know I don't look that old - and there were substantial changes. What looked like it couldn't happen, did happen very quickly, and all of a sudden, a lot of people were in serious trouble. I think we need to make sure that resource, as you said, is there, as well as develop the expertise for people to really go at it analytically.

Take a business - not only a farm, but small business in general. I think there's a lack of expertise.

Go through that. Take a snapshot of it. Then rework that business so you can get it out of trouble. Find the areas that should be dumped. Find out how to change that. I think that service, hopefully, will encourage people in that field so that this expertise develops in the future.

The Chairman: Mr. Pickard, maybe you could help us. I know the budget for the farm consultation service is around $2.4 million a year. Do you know what the budget is for the debt mediation process?

Mr. Pickard: I could get you the complete budget figures. I don't have them right now. We could possibly pull those from the department and get those to you sometime today.

The Chairman: Would you do that, please?

Mr. Pickard: We'll get them to the clerk.

The Chairman: All right.

Mr. Pickard: Look at the cases, though. There's the very clear fact - Jack mentioned this earlier - that we are in a better climate today. That's not saying we won't run into more difficulty in the future. Particularly, interest rates today are helping tremendously to create a scenario in most small businesses, all farming operations, of more stability in their operation.

The difficulty is that we don't totally control all of those factors. From year to year, we're going to see fluctuations up and down. The general trend in recent years has been more positive, as Jack pointed out.

I also think that when we get extreme cases, such as what Jack suggested, the administrator has the option to carry on and continue into the heavier-cost scenarios to which you referred and say the resources have to be available. We certainly believe that, too, because a little bit of money up front, or even a fair amount of money up front, makes the back end much more profitable in this country.

The Chairman: Thank you very much.

Mr. Hoeppner.

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Mr. Hoeppner (Lisgar - Marquette): Welcome, gentlemen.

Jack, I was kind of impressed with your statement that you felt there should be some financial help to these non-viable farmers - mostly - under this Farm Debt Mediation Act who are going to appear before it for a legal consultation.

My experience has been that when you get to that point of bargaining, the banks and the Farm Credit Corporation have the best legal opinions and expertise you can get, but farmers don't. I fully agree with you that there should be some funding. That's because the only ones I've seen come out of this with a fair deal probably were the ones who did hire legal advice to help them negotiate.

Mr. Wilkinson: Maybe we're saying the same thing but we're using different definitions. Bringing lawyers into the negotiation is an incredibly expensive venture. What I prefer, and where I've seen the greatest degree of success, is for people to have a really good background in financial planning and know the legal system. Sometimes those are lay people as well, but they are the ones who have worked the best.

In most cases, at the end of the day, a lawyer is going to take about $50,000. I'd better be careful here, as some people have very large bills. Then they tell you at the end of the day that you've signed a contract and they aren't willing to negotiate. They're sorry, but you owe them this money.

I agree with you totally that the people who know the system are the ones who are most effective in trying to work their way through to find a solution, but they need some resources for that.

Mr. Hoeppner: I don't usually take the side of the lawyers, but in the few cases in which I've been involved, I thought the lawyers were very reasonable with their costs, because the farmers are their clients.

Mr. Wilkinson: I'd like to meet those lawyers sometime when I'm out in your area.

Mr. Hoeppner: We have good people in Manitoba.

Mr. Wilkinson: I know.

Mr. Hoeppner: The other thing I just wanted to bring out, Jack, is that I think you're too soft on this government. It has lots of funds. I just noticed this morning that the Prime Minister gave $85 million to Bombardier.

An hon. member: It was $83 million.

Mr. Hoeppner: It was $83 million, but what's $2 million to the Liberals? The Prime Minister says it hoped to recover some of that someday in the future.

I just did a bit of figuring. Say we have 123,000 farmers and we were given that kind of financial clout. That would mean about $11 billion. Don't you think that would help our value-added industries so that we wouldn't need all of this restructuring?

Mr. Wilkinson: As the standing committee, I'm sure you - particularly those of you in opposition - are going to be extremely tough on the government when it comes to cost recovery. You'll make sure it's fair. I assume that you'll give us lots of support in the Pest Management Regulatory Agency to fix that system in which the government clearly is in error. You will take every opportunity to be tough on it on this one.

The Chairman: We're now going back to Mr. Hermanson and, hopefully, we'll get back to Bill C-38.

Mr. Easter: I have a point of order. I'm wondering if you'll make recommending that amount of money as part of your fresh start a part of official Reform policy.

Mr. Hoeppner: No, I'm just saying that the Liberals like to spend it and hand it out. I guess I want the farmers to get their fair share.

An hon. member: They hand it out to their friends, though, not to the farmers.

The Chairman: Go ahead, Jake.

Mr. Hoeppner: I'm just wondering what you've seen, because I know there are a lot of crops still out there. Prices have gone down 40% in a lot of cases, while input costs have gone up 30% or 40%. I see disaster out there if something isn't done.

Mr. Wilkinson: Clearly, there is a lot more risk in the farm community than there used to be. There's no doubt about it. We have program spending that has decreased substantially. Whether we're in favour of program spending or not, the effect is that it has taken the cushion out of fluctuations in prices and what not. We saw cattle prices drop very substantially for cow/calf producers, with both the high North American numbers, as well as the high grain prices, obviously. If your only enterprise was a cow/calf one, you were running in the red last year, and again this year in most cases.

So it is not a uniform situation to say that everything is rosy in the farm community, because it is clearly not. As you indicated, expenses are up substantially in a whole host of areas from transportation on through to basic inputs.

So it is a very tight margin business, and it always has been. The risk is always there, I think, for financial difficulties if something goes afoul, whether, as you say, grain is still out in the field and not harvested and there is a big hit in that area or a border is closed or there is disease in a herd. I don't want to treat that lightly. Our sense is that you have to have a system in place that deals with individual farm families, that gives them sufficient resources to give them a fair opportunity to renegotiate with their creditors. We hope at the end of the day you have the Farm Credit Corporation or other provincial lenders out there giving alternatives to farmers if in fact they have trouble with their particular lender.

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I don't know what more to say. We think it's critical that a debt review system run into the future for those cases where it occurs. We think it's critical that they have a stay of proceedings to stop creditors, to give time for negotiations. Whether it needs to go further than this....

I guess as I said earlier we were trying to be practical, knowing full well there is always a bank lobby on one side that wants to maintain the integrity of the contracts and mortgages they sign and make sure people try very hard to make repayment and on the other side those who want to try to deal fairly with people who have got into a bad set of circumstances, usually beyond their control. Whether this is the right balance.... We think it goes a fair way as long as that farm consultation service comes forward with as much in the way of resources as is needed to help those people who are one hallway away from debt review and to solve the problems so they won't need the legislation.

Mr. Calder (Wellington - Grey - Dufferin - Simcoe): Jack, as I listened to what you've been saying here...the whole process of Bill C-38 really is going to rely on the mediation, and from that of course the financial review they would go through under clause 9. Finally, in subclause 9(4) is the report, which is prepared either by the administrator or on behalf of the administrator. I would like your comments first on the process of that report being put together, because then it becomes the foundation for the mediator to work with as to whether or not the farmer is viable.

Mr. Wilkinson: I think there's a set of circumstances where under government legislation you can expect only so much of the work that can be farmed out...that there be my client versus the administrator and the mediator. To that extent we accept the notion that clearly the field staff are the ones who have to accumulate the factual information.

Whether you use those individuals then to take that factual information, the snapshot in time, and use them to work on your behalf, to negotiate with creditors, maybe to stretch out short-term commitments under the lower interest rates to give you breathing room...or a host of scenarios that may work your way through to a successful negotiation with your creditor, or whether you choose your own person, I think that's critical. But we give the notion that you could hardly accept a mediator's report, or background going to a mediator, if it were my accountant who was doing it, because they have to have some sense that all creditors, all debts, all everything, is legitimate and all ``in front of'' to make sure it's a fair and above board system.

So we give them that. Where we alter now at that point is a choice for the farm family as to who they're going to use in the analytical work, in the business planning, and if they're going to use them as part of the negotiations with the creditor. Clearly the mediator is not going to run the negotiations. The mediator will make sure appropriate and fair negotiations take place, but they're not in either person's camp, by the definition of a mediator. That's where we think there have to be enough resources so people have a good representation, if they choose to use it, from the private side.

Mr. Calder: Great.

The Chairman: Mr. Hermanson.

Mr. Hermanson: I want to get back to the farm consultation service. Mr. Pickard, you read several pages, or a couple of pages, of briefing notes on the farm consultation service. I've checked all my briefing papers, and maybe it was mentioned back before the summer recess that there would be a farm consultation service, but there were also promises by the Liberal government that there would be stable funding for the CBC for five years, and that went by the wayside. There was a promise that the GST would be scrapped, and that went by the wayside.

I wonder if the Liberal government would be prepared to table its proposals for a farm consultation service before we go through clause-by-clause on Bill C-38, so we'd actually know what companion program is going to be put in place to compensate for the lack of that service in Bill C-38, which was formerly provided under the Farm Debt Review Board Act.

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Mr. Pickard: If you want a direct answer from me, I see absolutely no problem with outlining very clearly what the farm consultation service will be. The minister has already committed to all organizations across this country that it will be implemented in a parallel time with the mediation act. Therefore, that commitment is clearly there. As I mentioned, it is a complementary, companion program.

I tried to outline very carefully all of the aspects, because in the consultation process with the department, the department did outline that in its meetings with all the different parties. At the same time, when the department came forth here it was very clearly outlined by the department where the farm consultation service is. I see absolutely no problem giving you a clear outline of what the farm consultation service will be and, at the same time, a clear outline of the implementation in a parallel time line with the act.

Mr. Hermanson: That can be tabled in the House.

Mr. Pickard: I have no problem with that.

Mr. Hermanson: Good.

The Chairman: Thank you very much, Jack. Since you answered all of the questions, does that mean they were all easy ones? You said at the beginning you'd just do the easy ones.

Thank you very much for your presence here this morning and your contribution.

Mr. Wilkinson: Thank you very much.

The Chairman: Our next presenters are Mr. Alan Coulter, chairman of the Saskatchewan Farm Debt Review Board and Dean Vey, general manager. Are those the two gentlemen who were able to get out of Saskatchewan yesterday to be with us?

Mr. Alan Coulter (Chairman, Saskatchewan Farm Debt Review Board): I hope ``get out of Saskatchewan'' was said in respectful terms.

The Chairman: Definitely. Join us from Saskatchewan. Would that make you feel better?

Mr. Coulter: Much better.

The Chairman: All right. Wherever you came from, you are now here. Welcome. I don't know who is making the presentation, but please introduce yourselves, gentlemen, and proceed.

Mr. Coulter: Thank you, gentlemen. My name is Alan Coulter and I'm the chairman of the Farm Debt Review Board for Saskatchewan. With me is my general manager, Mr. Dean Vey.

I'm somewhat of a newcomer to the Farm Debt Review Board. I began duties on November 1 last year. There is a 5-member board now that, incidentally, was downsized from 21 before and it's been quite an experience for me.

Before we began our duties, we took a one-week CDR in mediation training, and then we were virtually thrown into action, like Daniel walking into the lion's den. I think we've done between 200 and 300 hearings since then. We've had as many as 17 in one week and, due to a shortage of person-power, I did 5 in 4 days. So we have had a tremendous number of hearings.

First, I'd like to say that if a person hasn't attended a half a dozen of those hearings, there's no possible way for me to describe to you the dynamics that go into one of them. You see all kinds of emotions - anger, tears, people who are divorced, angry creditors, angry farmers and so on sitting across the table from each other. Yet, in spite of all this, it's absolutely astounding the force that mediation has in resolving these disputes.

There are a couple of reasons for this. When a creditor comes to the table and a farmer comes to the table, he's come because the federal government has provided a service free of charge where these things can be worked out, in private. The alternative to this process is litigation, which is very expensive for both parties.

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You were talking about the banks really coming down on the farmers. You must remember that in our area, it's in rural communities where these things happen. There's a stigma for creditors to lower the boom on a farmer, and there's a stigma on the farmer's part to go to open court and have this exposed. We do it in private, where everybody is around the table.

There are a lot of misconceptions when farmers are in financial trouble. When they get around the table in front of us, everybody gets on the same page. All of a sudden, there's a better understanding between all of the parties about what's happening. So we start out by laying down some ground rules - no shouting, no personal insults, everybody must behave in a polite manner, and only one person speaks at once. These ground rules are laid out at the start.

Mr. Hermanson: We have a job for you here at the House of Commons.

Mr. Coulter: I'm available to clean up your act.

An hon. member: We need you to keep Reform under control.

Mr. Coulter: Now, gentlemen, I want to lay down some ground rules that you must agree to here.

The Chairman: Only one person speaks at a time.

Mr. Coulter: Would you contain yourself?

The Chairman: Mr. Coulter, will you proceed? The rest of you, will you be quiet?

Mr. Coulter: Yes, that's right.

Before I go any further, I want to introduce my general manager and give you a little background on him. I'm very biased, remember. We run the most efficient farm debt review board in the country. Can I brag a little? Is that okay?

An hon. member: Sure.

Mr. Coulter: We handle half the farm hearings in the country. The budget is $4 million, and we do our share for about $750,000. Is that accurate? I think we've done close to 300 hearings, but I'm not quite sure of this. I do know for sure, though, that between September 31, 1994 and now, when Mr. Vey initiated single mediation, we have handled 860 hearings. Of those 860 hearings, 760 have arrived at settlements; that's an 88% settlement rate. I can say now, gentlemen, that I rest my case. If you will, however, let me say a few more words.

The system works, and the number of settlements that work is also amazing. I think our system in Saskatchewan.... I have never, ever heard one complaint from a farmer or creditor that we did not hold a fair hearing - not one. Dean may get a few in the office, but I've never had somebody come up and say to me that the meeting was not conducted in a fair and neutral way. But I've had many creditors and many farmers come up and say they felt they had a good hearing, thank you very much. To me, our system works. The reason it does is that when we're sitting there, our whole objective is to get the parties communicating with each other. That's how we change the dynamics of it.

I'm telling you this because it kind of relates to the new act. Basically, many of the things in the new act are things that we have implemented. You might say we have pioneered many of the measures that are in the new act. The mediation is an incredible force.

If I could just let you contemplate for a minute those 760 cases that were settled in two years, can you imagine if the majority of those went to litigation? This litigation can take up to two years, can't it, Dean? That's an incredible cost to taxpayers, to the justice system, to the businesses, and it is all reflected back to the people who pay the costs. Can you imagine the overload of courts if even half of those had gone through the court system instead of being settled in a room in which we treat it as a very confidential matter? I think the success of this program speaks for itself.

Going on to the new program, gentlemen and ladies, I must tell you that we're basically in agreement with this program because it is like what we've done in Saskatchewan. We do have a few concerns, though, and I'll go through these with you.

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Clause 8 causes a little concern. If you turn to clause 8, it says you can start on a section 16, and two-thirds of the way through you can change to a section 20 and go back to the date it was started. Well, there may have been actions taken in that time period that cause a great deal of concern. We're a little concerned about that.

Clause 10 says that financial reports should be sent to all creditors. We like the way we've been doing it, where financial reports are sent only to people who have agreed to attend the meeting. If a creditor has a $50 debt and you send him all this information, we think that's unreasonable. That's our second concern.

But our biggest concern involves clause 16. It basically says that if a bank or credit institution wants to appoint a guardian, it has the power to do that. The key word is ``except'' in clause 16.

I was listening to Mr. Wilkinson's statement here. When we do a section 16 in Saskatchewan, a field person goes out; this is done in confidence and that's as far as it goes. There's nothing in the act that says you have to send financial statements out. This can be done in total confidence. If a person wants a hearing, that is done in total confidence. You get your creditors around.

Let's say there's one major creditor. Our field people can generate options, establish communication with that one creditor and kind of smooth things out and work it over. So, on his concern about section 16s, I don't know what they do in Ontario, but we don't send out financial reports on section 16s unless there's a meeting and a person wants us to.

Whether you extend the stay or not is another thing I'd like to comment on. If a farmer says ``I want to negotiate'' and the bank says ``I don't'', that stay is extended. There's no question about it. We give the farmer the benefit of the doubt. He says ``I'm trying to find a settlement and the banks won't agree''. But very seldom do you hear a banker say ``I'm going to crack down on this farmer and force the stay to come to an end'', because the stigma involved if this big bank comes down on that farmer in the rural community is bad business for the banks.

There's an 88% settlement rate for everybody who comes to those meetings, and that tells me they all want to avoid going to court for prolonged litigation.

Is there anything else you'd like to add, Dean?

Mr. Dean Vey (General Manager, Saskatchewan Farm Debt Review Board): No, that's fine.

Mr. Coulter: That's just a basic outline of where we are in Saskatchewan.

If I may add a couple of comments on the farm consultation act, we have 60,000 farmers in Saskatchewan, and if this farm consultation service encouraged all those farmers to get free financial statements from the government, we'd be buried. There has to be some kind of disincentive for these 60,000 farmers to get free financial statements. It would be too costly.

That's all I have to say, sir.

The Chairman: Thank you very much, Mr. Coulter.

Monsieur Landry.

[Translation]

Mr. Landry: My question is for Mr. Coulter.

I would like to have an explanation. When you were elected, one year ago, you had 21 members. There are only five left today. Has the level of service to farmers been maintained even after that reduction? That is my first question.

The second one is on sub-paragraph 16(1)(a), which says that the farmer himself can be appointed as the guardian of his assets, "except if". That phrase is crucial, and I would like you to explain it to me more fully.

[English]

The Chairman: If I could interrupt for just a minute, I think we should try to clarify ourselves. Sometimes we talk about section 16, which is in the old act, but in this act you're referring to clause 16.

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I know it's semantics, but we talk about section 16 and section 20 in the old act. I know Mr. Landry and Mr. Coulter are referring here to clause 16 in C-38.

[Translation]

Mr. Landry: In the new legislation.

[English]

Mr. Coulter: Paragraph 16(1)(a) says:

where the farmer is qualified to be the guardian, except if someone else is nominated under paragraph (b);

Paragraphs 16(1)(b) and (c) say:

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

(c) any other qualified person chosen by the administrator, where neither paragraph (a) nor paragraph (b) applies.

It seems to us that if a bank wants to appoint a guardian it has the first right to appoint a guardian. That's the way we interpret it, don't we, Dean? Out in the country it is perceived that the bank can bring down the hammer on a farmer, which is very poor as far as perception goes. That's one of our major concerns. This is in the new act, clause 16.

[Translation]

Mr. Landry: Fine. Concerning the clause we have just been talking about, do you see a way to improve it? Do you have amendments you would like to suggest in order to improve the legislation?

[English]

Mr. Coulter: I think the administrator should appoint a neutral guardian - the farmer first, if he is reliable, or an absolutely neutral guardian. That would be our suggestion.

[Translation]

Mr. Landry: You did not answer my first question. I asked whether the level of service to farmers has been maintained or has dropped, given the fact that there were 21 people when you were elected, a year ago, and only five of you are left now.

[English]

Mr. Coulter: I would like to think we're offering better service. We work very hard and have had all these hearings. I think we have had a great success rate in settlements. I'm very pleased with the comments about people who have come to our hearings. I think we're doing a great job, if I may say so. We never miss a hearing. They're all done, the settlement rate is very high, and we're doing the job.

[Translation]

Mr. Landry: Thank you, Mr. Chairman.

[English]

The Chairman: Mr. Easter.

Mr. Easter: Thank you, Mr. Chairman.

Welcome, Allan.

Mr. Coulter: Hi Wayne.

Mr. Easter: It's been awhile.

What do you determine as being a settlement? Of those 760 settlements, how many would be retained in farming? Do you know?

Mr. Coulter: Some leave farming and a great many are able to continue farming, but I don't have those figures. Maybe Dean could help us with that.

Mr. Vey: Mr. Easter, over 80% continue to maintain their operations. We've noticed over the past two to three years that our volumes are down. The type of difficulty has changed over the years since the late 1980s. We have the type of difficulty where the debt loads on the farms are distributed amongst a lot of the players in the farm communities, such as local suppliers and some provincial lenders. The little credit unions, the FCC, and the banks still play roles, but less than they used to. With that type of environment and the mediation approach we've been utilizing, there has been a greater likelihood of some type of restructuring and rescheduling package taking place with the majority of farms.

Mr. Easter: I think the key to settlement is to keep farmers on the land, if at all possible. There is an interesting dilemma when it comes to dealing with the lending community. I know it's a little different in Saskatchewan because you're dealing with credit unions there, while in many of the other areas we're dealing with banks.

When we were heavily into the farm crisis, I think it was much easier to get a restructuring, a write-down of the debt, a write-off of the debt, lower interest rates negotiated, sunsetting of some of the loans for a period of time - any number of options. It was easier then because the lending community knew it just couldn't dump that land, property and machinery because the market wasn't there. As you get into better times, I think it is tougher to get a settlement from the creditors because they have other options available in terms of selling you out.

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So with the settlements in these kinds of times, what are some of the details that are most utilized? Is it a write-down of debt? Is it lower interest rates? What basically is the thrust now?

Mr. Coulter: All of the above. When you go through as many hearings as we have, you see everything. There's no such thing as a trend line.

Some things are common. People write down debts. Banks write down debts. This all depends on security too. They extend credit, term it over ten years. There are agreements to reduce interest rates. All kinds of these arrangements go on at almost every hearing.

It's very seldom, in the hearings I have done, that bankruptcy is chosen. You must remember an experienced field man in the office and the person who does the financial report and myself review every single file that comes through that office before it's.... We review all those files, and we review them after. So most times the farmer stays in business. There are some severe cases when they don't.

By the way, these agreements are totally between the competing parties. We have nothing to do with these agreements. We can't make judgments. We're not judgmental. We try to promote agreements. These agreements are totally voluntary, and both parties agree to them.

So write-down of interest, long-term terming out of debts, and this sort of thing go on all the time, Wayne.

Mr. Easter: I guess because the Farm Credit Corporation is in our domain, I know in some regions of the country we've had more problem in getting Farm Credit Corporation to come to a settlement than we've had with the banks, surprisingly enough. What's your experience there?

Mr. Coulter: I think Farm Credit has been quite reasonable in our area.

Mr. Vey: Over the last few years the activity of the Farm Credit Corporation out in both Saskatchewan and Manitoba is substantially down, say, from their heavy problems in that 1980s timeframe, or early 1990s. We don't see them at the table very much any more. So it's difficult to give you an accurate assessment right now.

Mr. Easter: You mentioned clause 10, Alan. Currently under clause 10 of Bill C-38, which you had a concern with, are all creditors notified? Your concern was sending the financial information out to basically everyone. I'm wondering if under the current process all creditors are notified.

Secondly, on your point on clause 16 of Bill C-38, I guess I differ with your interpretation there. I believe it's the administrator's decision - of course they'll try to get agreement with the creditors and the farmer - in any event to appoint that person. So I don't see the concern you have with paragraph 16(1)(b), in that you'd be going with the bank's nominee. I think you'd have to find somebody who is agreeable to both.

Mr. Coulter: On your first question, we send financial copies only to those people who are committed to attend on 20s. On 16s it's not necessary to send financial statements at all. Unless a person wants to do a voluntary mediation, we send financial statements to those people attending.

On clause 16, Wayne, I hope you're right that the administrator can appoint an independent guardian or the farmer himself. It's just a matter of interpretation. I just thought I'd point out that the way we're interpreting it, we're a little concerned about it.

Mr. Easter: Fair enough. Thanks.

The Chairman: Mr. Hermanson.

Mr. Hermanson: Thank you, Mr. Chairman, and thank you, gentlemen, for attending from my home province of Saskatchewan.

It's funny how things work, Alan. Your son asked me questions, and now I get to ask you questions. It's a funny turn of justice.

Alan's son is a journalist in the Kindersley - Lloydminster constituency.

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We used to have what I think was called the Farm Land Security Board in Saskatchewan. That was the provincial body that did something similar to farm debt review. It has since become history because apparently the Farm Debt Review Board was doing a better job. There didn't seem to be a need for both. Could you just comment as to how you would rank the mediation in this legislation, C-38, in relation to the Farm Debt Review Board and the old Farm Land Security Board? I have a couple of other short questions after that.

Mr. Coulter: I have no experience with the Farm Land Security Board. I've been mediating on federal cases so I'm going to have to turn this over to Mr. Vey, who has experience with it.

Mr. Vey: Mr. Hermanson, the old Farm Land Security Board operated on a panel basis very similar to the federal legislation as we have it now. In 1988 it made the decision to move to independent mediation, separate from the board function, with just a peer group with decision-making capacity.

We have had some experience on an occasional overlapping case. It's down to about 10%. It's somewhat rare, because it only deals with a foreclosure action, whereas we could get involved in everything. What it has experienced, though, is positive since 1988, when it made its adjustment to a division in the roles between board responsibility and a professional mediator with the field expert working with the farmer. This is very similar to the capacity we have today.

I talk to farmers on a day-to-day basis. They hear about legislative changes and they appear to like the concept we're evolving. Under current circumstances it can be a little difficult when Alan and his group of board mediators get together to review and make a decision on a case that one of them has been involved in. Farmers are more comfortable, from what I've found when I've talked to them....

This goes into Manitoba as well, because I've talked to them. Last week, a fairly strong farmer in Manitoba was advised that a peer group of farmers would be an independent board, an appeal board now, and that if he didn't like the decision made by the administrator in conjunction with discussions and the information available subject to mediation, he could appeal to this group of farmers in the agribusiness industry in his region, and this group would be able to make an independent assessment as to whether his appeal is valid or not.

Mr. Hermanson: So if we go to C-38, which is a mediation service, how will that mesh with the mediation service in the province of Saskatchewan?

Mr. Vey: Right now, there are some discussions taking place between Agriculture Canada officials here in Ottawa and high-level provincial officials in Saskatchewan about that, but we're unsure as to how exactly it is going to evolve as this new act takes place. Some discussions are taking place about that possibility.

Mr. Hermanson: So this act may not take effect in Saskatchewan and they may just go with the provincial...or they may put the provincial mediation service in mothballs and use the federal mediation service right across the country. Is that the type of discussion? Are they talking about both trying not to step on each other's toes and existing side by side in Saskatchewan?

Mr. Vey: I think you've pretty well covered the waterfront.

Mr. Hermanson: Where is it going? That's what I want to know.

Mr. Vey: At this stage I'm not really aware of any specific direction. From my vantage point, I'm aware that those types of considerations are being reviewed, both at the provincial and the federal levels. I'm not aware of any decisions yet.

Mr. Hermanson: Okay.

Mr. Coulter: If I might make a comment here, I think we can adjust very well to this new act in Saskatchewan, but that provincial intertwining or whatever you call it would cause a bigger adjustment for us. That's all I can say, because I don't know what's going to happen.

Mr. Hermanson: It may be more difficult in Saskatchewan to have this act function properly than it would be in other provinces in Canada, as far as you can foresee at the current time.

Mr. Coulter: I have no idea.

Mr. Hermanson: Okay.

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I just want to clarify a couple of things. Did you say in your presentation that Saskatchewan has half of the Farm Debt Review Board cases and that you're using $750,000 of a $4 million budget?

Mr. Coulter: This man is very efficient.

Mr. Hermanson: How do you do that? You'd better pass along your expertise to the government, which can use it in some other areas.

Mr. Coulter: We are on government e-mail. We use phones and faxes. I think we have the best communication system in the country. We're doing single mediation, and Mr. Vey is continually introducing innovations that make it more efficient. He's going to have to take a bow on this. It's almost entirely due to him.

Do you feel better now, Dean?

The Chairman: Mr. Coulter, he may ask you for a raise on the way home. You've set yourself up for that one.

Mr. Coulter: That's right.

Mr. Hermanson: What that does is make the other farm debt review boards look very inefficient.

Mr. Coulter: I have no comment on that. We have such a big load that we have to be efficient or we'd be buried.

Mr. Vey: In part, the answer to your question is the volume we have had over the years and the demands we have had. At our peak, we had slightly more than 2,000 cases in one year, and we have 1,600 to 1,800 consistently. We would find out in a hurry, through both farmer and creditor feedback - and a lot of it was from farmers - and through our own internal surveys of farmers, what type of service we were providing, how effective it could be, and how we could do it better. We're still trying to do that.

From that feedback, we would try to introduce things here and there to accommodate and provide a better process. If a decision was made that could provide a better process and also be more efficient, in cooperation with the board - as you can tell, Alan is very supportive, as are my other four members; I get the benefits of their support - we would introduce these things over time. That's where we got the gains. There's no question about that.

Mr. Hermanson: The obvious question that arises out of this is whether or not the federal government has come to the Saskatchewan Farm Debt Review Board, in light of your good record, to ask for advice on how to keep the costs down in this new mediation service.

Mr. Vey: I have had a lot of dialogue over the years with Ottawa officials. Again, they've been very supportive. I have absolutely nothing but good things to say about the relationship that I've had at all levels. They've encouraged us to try a few new techniques, such as one-on-one mediation a couple of years ago. Alan still reviews them all to make sure that from his position of board chairman, the ultimate buck has to stop with him. He reviews them all through an administrative process that still has the panel review, as required by the act. But we've been in constant dialogue with our program people, and I think they've tried to incorporate some of what we've learned into this new legislation, such as the findings we came up with on one-on-one mediation. I can't take the credit for the innovation on that because the province was ahead of us there.

Mr. Hermanson: Do you think the consultation service should be separate from mediation service?

Mr. Vey: There are good reasons for why it should be looked at separately. The stigma of debt is definitely there; however, there is going to be some overlap.

In our section 16 application, there are currently approximately one-third to half of those farmer applicants who require a financial review on a month-to-month basis. They are feeling some financial pressure, some financial stress. They may be in arrears, but their creditors are willing to live with that. It's usually one main creditor. The field person, who establishes the relationship on the farm, does the review option generation, and will meet with the creditor to re-establish communications in order that the parties can have a discussion about things. It's not at a conflict stage where you need mediation. So for that one-third to one-half, we see the farm consultation service fulfilling that role, and there is still going to be a need to have some overlapping connection there.

I find it difficult to comment on this. Here I am, the general manager of the Farm Debt Review Board, and they are proposing that we be the administrators. It sounds as if I'm going to be a bit self-serving, but in some way, whether it's a federal-provincial agreement or whatever, there has to be a connection between the people doing the debt mediation, field staff work, and this farm consultative work, because you could have maybe one of these stress situations being as it is now, where the other half of the section 16s we go see actually are virtually insolvent, and then they go into mediation.

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In a practical sense I would see that the farm consultation review would take place. Maybe it would be just counselling and one-on-one communication with the creditor, or looking at a value venture, with greater income, or it could go into ``no, you don't have the capital available, you're financially stressed to the point that this review says you're right, your concerns are valid, you need to have a mediation forum'', and they can apply to the 5(b). I see most of the 5(b)s coming as a result of a prior farm consultative type of meeting with a farmer on the farm. But they don't want to stay. They have certain secureds they need to bring around the table in a mediation environment.

That's how I envision this thing evolving over time. When you add it up, and from my vantage point, I see us providing a broader service to farmers under the consultative.... The concerns about the legislative part and the funding and all that I can understand as well, but just from a delivery standpoint I feel we're going to be giving a broader service to the people out there, and it's in tune with what farmers have been asking from us in the boards.

Mr. Hermanson: Are you able to be proactive in preventing problems from arising? I'm thinking about the Farm Credit Corporation back in the 1970s and 1980s. They became the lender of last resort and made some - in my opinion, and I think a lot of people would support this - very foolish loans to farmers, which precipitated the farm crisis of the 1980s and early 1990s. It seems as if Farm Credit is going down that road again, perhaps making some loans to farmers it shouldn't be making. Through this bill, would there be any proactive role for the mediation service or you people who are on the front line to be able to wave a red flag and say, look, somebody had better change something here or we're going to be going down the wrong road?

Mr. Vey: There is some potential for that, and that's where it becomes the consultative part. If a creditor and the farmer do see they're having some difficulties, some credible relationship is going to have to be developed with the people who are doing that financial review under the consultative part. There can be a valuable service in a proactive role like that, because that situation is likely developed between the farmer and the creditor. As time evolves, their discussions, operative lines, are getting more tense, they're having more and more difficulty, falling behind, so they would have to....

The flag usually happens between the two parties. If we can get them - I'm talking about the creditor side - in some of these things, referring the farmers to this consultative aspect, to get an independent financial review, I think it can work fairly well. While there's overlap, there has to be a bit of a perceptive difference between the proposed Farm Debt Mediation Act and the farm consultative service to get it to work for all. I don't know if we can get it to work for all, but I think everyone is going to be trying, anyway.

The Chairman: Mr. Hoeppner.

Mr. Hoeppner: I want to get back to one issue that was quite prevalent in the middle or late 1980s - maybe this has changed - the unsecured creditor. This is where I have been stressing that the farmers should have some good legal advice. At that time it wasn't available, and I've seen the unsecured creditor really being the guy who carried the farm the last couple of years and later on got the short stick. Such things as FSAM I, FSAM II, which the banks did not secure, were available to unsecured creditors. That's why I'm very concerned that the farmer does have some good legal opinion. Or do you now have the expertise to give him that?

Mr. Coulter: We advise farmers to get an advocate. We are not legal experts. We don't know the inside-out of all these aspects of it. It's really unfortunate when you go to these hearings and see the incredible list of unsecured creditors. They are the ones who are going to get the short stick. The people holding the security are in the dominant position and the poor, unsecured creditors a lot of times come out on the short end.

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So it is very important to have legal advice. Every farmer should have an advocate. It's much cheaper than going through litigation. We strongly advise it.

Mr. Hoeppner: I've seen instances where the family didn't have food to put on the table because they weren't aware that there were certain limitations. It made it such a stressful situation on the farm that they couldn't even deal with the issue. That's why I've been stressing that there should be some financial assistance if they can't afford any legal advice. To me it's very important that the farmer does have a good opinion on what's right and what's wrong.

Mr. Coulter: I'm a strong believer in following the process. If you do that, you can't go very far off base.

One of the first things I had to learn was to leave my feelings at the door. When a farmer comes in and I can see he's making a bad deal, if I say ``Hey, you're making a bad deal'', I've lost all my credibility. You can do reality checks if you do them very carefully, but to lose my credibility as a neutral mediator is the worst thing that can happen to me. It's very important.

Lawyers out in Saskatchewan.... I'm not much of a fan of lawyers, but they're living in these communities. If they sock it to a farmer, word soon gets around. So having a financial and legal expert who can put forward a recovery plan is very important.

Mr. Hoeppner: I appreciate those comments, because that was my concern. I've dealt with some issues that really made me mad concerning the unsecured creditors and the living expenses of families.

Mr. Coulter: A good advocate knows every regulation there is and can really make a big difference.

The Chairman: I believe those are all the questions and comments.

Mr. Coulter and Mr. Vey, we thank you very much for joining us this morning and making a very good contribution to the process of Bill C-38. We congratulate you on the success you've had and we hope you're not very busy in the future, but the reality is you will likely have some business.

Thanks again for joining us this morning.

Mr. Coulter: Mr. Chairman, we were very pleased to come out of Saskatchewan and now we're going to go back into it.

Some hon. members: Oh, oh!

The Chairman: We understand. Have a safe journey.

I remind committee members that you've been given notice of a joint meeting between the members of this committee and the foreign affairs committee. The Consultative Group on International Agriculture Research is making a presentation to the foreign affairs committee at 11:15 in room 253-D. They wanted to meet with us. I did not see the purpose of them making a presentation there and then repeating it to us, so I would ask you to attend.

It's only a 45-minute presentation at 11:15 in 253-D. Everybody was sent that information yesterday. If you can, please join. All committee members were e-mailed. I know everybody can't be there, but for those who can, I urge you to attend.

This meeting is adjourned.

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