[Recorded by Electronic Apparatus]
Thursday, October 24, 1996
.0922 
[English]
The Chairman: Order. I would remind those who just arrived that the meeting was supposed to start at 9 a.m. I recognize there are other meetings, but in future, in all seriousness, please recognize there are other members. We do have busy schedules, but please be here closer to the starting time. We have witnesses before us this morning.
With that, I welcome everyone to the committee. Our first presenters this morning are Mr. Doug Stevenson and Mr. Bob Hadley, from the Alberta Farm Debt Review Board. As we know, we're continuing our deliberations on Bill C-38, the Farm Debt Mediation Act. I would ask the witnesses if they would introduce themselves and then proceed with their presentation.
Again, welcome, gentlemen, to the meeting this morning.
Mr. Doug Stevenson (Chairman, Alberta Farm Debt Review Board): Good morning. I'm Doug Stevenson, chairman of the Alberta Farm Debt Review Board. With me is Bob Hadley, the general manager.
I'd like to thank the committee for inviting us to give our presentation and views on the proposed Farm Debt Mediation Act. We believe our experience of delivering the Farm Debt Review Board can provide some insight into how the proposed new act may be received and how it may work.
As a farmer and former agricultural lender for fifteen years, I attended many Farm Debt Review Board meetings and I'm pleased to see this worthwhile process continuing. I believe the use of mediation through the Farm Debt Review Board has helped the agricultural industry be ahead of most other sectors in the economy in finding creative solutions to difficult problems. This is something we can all be proud of.
The mediation process is designed to empower parties involved to craft an arrangement or agreement that satisfies all parties' interests by the use of a neutral third-party facilitator who brings process to the discussion. It is my belief that the proposed Farm Debt Mediation Act will do this. This bill provides a movement to a more flexible model of mediation and allows the participants more control of the process and, hopefully, more ways to find creative solutions.
.0925
My address will focus on two areas: first, specific areas in the bill; second, how the bill will affect the participants.
With respect to the specific areas, it's my understanding that the standing committee has already received some discussion papers from the department. These reports have brought forward some concerns about the regulations, guidelines and recommendations. It's not my desire to repeat the department's work, but I would like to emphasize some of the areas that will affect the mediation day directly.
On the first section, clause 9, financial review - and particularly subclause 9(3) - of the bill indicates preparation of a recovery plan done by a person of the farmer's choice, and the administrator can enter into an agreement with that person. Our concern here is that the person who is chosen may not have the knowledge or expertise to design a recovery plan. As a result, it may not be acceptable or feasible at the mediation day. If the farmer is entrenched in this plan, it can be detrimental to the mediation.
Our recommendation is that whether he is under contractual arrangement with the department or of the farmer's choice, the financial expert should have to meet a minimum standard of qualifications, which can be defined in the guidelines. This would not eliminate anyone from the mediation day or the mediation meeting, but would make sure that the farmer has a financial expert to assist him or her.
In clause 10, appointment of mediator, paragraph 10(1)(c) calls for a financial report to be distributed to all creditors in the case of a 5(1)(a) or stayed application. This means a trade creditor, such as a corner store owed $100, would receive the farmer's full financial review whether or not they intended to participate in the mediation. This raises two concerns in my mind. First, will confidentiality be maintained? Second, will farmers use the program once they're aware of this provision?
Our recommendation - and the Alberta board has proposed this - is similar to what I understand to be an amendment that the department has drafted on this as of today. Paragraph 10(1)(c) would read:
provide a copy of the report mentioned in subsection 9(4) to the mediator and to persons who will be participating in the mediation.
Next is clause 15, appeal boards. The concept of mediation is to empower the parties involved to make decisions, arrangements and agreements on a voluntary basis. I therefore have concerns about introducing an appeal board mechanism to the process.
I understand the appeal board is limited to some decisions made by the administrator for accountability purposes. I think this approach will work if there are specific guidelines, but I think it will be very cumbersome. On a practical note, I believe the majority of the appeals will be initiated by the creditors, first on qualifying the farmer, and then on the stays of proceedings. So my recommendation on this is to establish a small national board instead of having an appeal board, possibly with one representative from each administrative region responsible for policy and operations of the Farm Debt Mediation Act.
Moving to clause 16, the guardianship issue is the first element of trust in the mediation process. I believe that if there cannot be balance in this process, the process - or the administrator in this case - should have control of the decision. My recommendation on this is that if no creditor nominates a guardian, the administrator should have the option of appointing the farmer under paragraph 16(1)(a) if the farmer is qualified, or any other qualified person under 16(1)(c). If the creditor nominates someone under paragraph 16(1)(b), the administrator can chose to appoint that person if there is no objection from the farmer, or he can appoint any other person under paragraph 16(1)(c), but he cannot appoint the farmer.
.0930
The next section is supplemental to my original work. It was drafted by Paul Pomerleau, a lawyer in Montreal who I think will be giving a presentation here. I do not wish to steal his presentation, but I agree so much with one of the points he has brought up that I want to emphasize it. It has to do with clause 24, communication of information, in terms of confidentiality of the document and information.
What he's saying is that filing under clause 5 is an admission of insolvency, which has many legal implications. To maintain our confidentiality, to make the mediation system work, he has recommended that:
- No application filed under clause 5, inventory, financial statements, recovery plan or financial
report of which a creditor has obtained a copy under section 10 or otherwise may be used,
alleged, or pledged in evidence to support an application made against the farmer under the
Bankruptcy Act or any other legal action.
- This would maintain the confidentiality of that financial information, and I think it is critical to
our process that we guard confidentiality.
Under the new act, the administrator will have considerably more responsibility, and this should translate into a more timely and responsive program. We believe there is possibly an increased workload per case, depending on how the farmers and creditors react to the act. The administrator must have a good understanding of the mediation process, the culture of agriculture, and an insight into the credit industry, as he's responsible for both the administration and the accountability of the program.
For the field expert, there will be additional skills required for use in the new program. These skills will primarily be in financial analysis, as well as coaching skills to get the farmer prepared for the mediation day. In the preparation, he must also get the farmer ready to be flexible on the mediation day if the creditors don't accept his original workout plan or recovery plan.
On the mediators, the move to a single-mediator model will require skilled mediators who have a solid understanding of the formal mediation process. Neutrality is not only a principle of mediation, it is a part of the legislation. The mediator's role must therefore focus on process. They should not be motivated to become involved in the content of the discussion.
I do not believe this is a great shift for the Alberta mediators. This is the way we've been moving over the last few years. I think the new act is a continuation of what we've been trying to do in Alberta.
For the secured creditors, I believe a positive impact will come out of the Farm Debt Mediation Act. They will have more to say in the process, and I believe it will be more timely for them. This should encourage their participation.
The impact of the Farm Debt Mediation Act on unsecured creditors will be very significant. It may be difficult to predict since they will receive financial information under the act whether or not they participate in the mediation - and that, of course, is if nothing changes. In some situations this may foster a solution-oriented response. In other situations, it will be fuel for a legal action.
Without amendments, the dynamics of this part of the legislation are difficult to interpret and may reach far beyond the mediation. I say that because the farm community is a closely knit or intimate place. To distribute financial information wholesale on anyone in the farm community is, I think, a very dangerous practice.
.0935
For the farmer, the proposed Farm Debt Mediation Act will afford the same protection as the previous Farm Debt Review Board and will give the farmer an opportunity to take control of the situation. The process may require the farmer to be more prepared and to take responsibility earlier in the process. The farmer will receive improved financial counselling and will receive more help in understanding his or her position, his or her interests, and the mediation process. This should have a positive impact on not only the solution but the mediation day.
In conclusion, I believe the mediation process brings people together to solve their own problems. The proposed Farm Debt Mediation Act supplies a forum in a fair way to allow farmers to protect themselves against legal action and to negotiate an arrangement that is more satisfactory to both them and their creditors.
When we talk about changes and concerns, they are meant to improve or refine a process, not to discredit it. I hope this is how you, as the guardians of this legislation, have viewed our thoughts.
The Chairman: Thank you very much, Doug.
Mr. Calder.
Mr. Calder (Wellington - Grey - Dufferin - Simcoe): Thank you very much,Mr. Chairman.
Doug, Bob, I'm sorry about being late this morning. They double-book us on meetings here.
I have two questions. First, the whole process we're talking about here relies on mediation, and the foundation of mediation is basically the financial report that's going to come out of subclause 9(4), if you've seen the bill. I'd like your comments on whether or not you're satisfied with the process of that report coming forward.
That's my first question. The second one is my concern...and you alluded to it here when you talked about clause 16, which is on the guardian of the farmer's assets. If you take a look at that, paragraph 16(1)(b) basically overrides paragraphs (a) and (c) on this, because it states in (a):
where the farmer is qualified to be the guardian, except if someone else is nominated under paragraph (b)
Then paragraph (b) goes on:
any other qualified person nominated by any secured creditor or secured creditors
which is the bank. In other words, what paragraph (b) is saying here, overriding (a) and (c), is that the banks can appoint guardians if they want to.
That brings us to the situation where if the agriculture community is experiencing some problems, probably the banks aren't really going to get into that process, because it's darned hard to sell a farm on a bad market. But what happens if a farmer gets into problems in a good market? Then he can turn around and they can appoint a guardian and move this farm as quickly as possible, because they can get their assets back again.
I'd like your comments on that.
Mr. Stevenson: First, about the financial information, it was very interesting that you said the basis of the mediation is the financial information. As a creditor going to Farm Debt Review Board meetings I thought that. When I started as a mediator I thought that. But I can tell you right now the financial information is not the basis of the mediation day.
We talk about issues of fairness, trust, confidence. If those issues are not dealt with, then discussion of the financial issues is unimportant. In fact, I would go as far as to say that in 60% to 70% of the mediations I do now - and I think I'm up to eighty or ninety mediations over the last year - we don't even open the financial report. In most cases we talk about issues that are much deeper than that. Although it is important once you get to the recovery plan, you have to get through these other things first.
The way the report is coming forward, again the only concern I have is with the unsecured creditors. I just had a mediation where we had 66 unsecured creditors, who were owed approximately $1.2 million. We spent an hour and half discussing whether or not they would see the financial information. That is all we did with the unsecured creditors. There was no mediation.
.0940
The bill says they should receive it. I think if they do come to the mediation, they participate in the solution, then yes, they should see the financial information. But I do not believe they should see it before the mediation day.
Mr. Calder: Okay. Now the second part, guardian of assets.
Mr. Stevenson: As for the guardian of assets, yes; and I think you have hit another really important part of the mediation day. Again, you're dealing with trust, and this is the first element of trust in the mediation. If the farmer sees the bank sending a big accounting firm out to do inventory on his farm, on his land, there's going to be a loss of trust. In the same way, if the bank doesn't trust the farmer and they think assets are disappearing, there's a loss of trust. Therefore I believe the only solution to this one is that if there's no agreement between the two parties, then the decision should be taken away from them completely, and that should be the administrator's decision.
I think I made an interjection in my recommendation that under paragraph 16(1)(b) the administrator should be able to choose the person appointed by the creditor if there is no objection from the farmer. The way the legislation is right now, the farmer doesn't get an opportunity to object. If that were put in there it would allow balance to come back to that and I think it would satisfy your concern. But it is a big concern.
The Chairman: Mr. Chrétien.
[Translation]
Mr. Chrétien (Frontenac): Mr. Stevenson, you are the Chairman of the Alberta Farm Debt Review Board. You are a farmer and also a former lender. Is that correct?
[English]
Mr. Stevenson: That's correct.
[Translation]
Mr. Chrétien: Could you refresh my memory as to when you were appointed Chairman?
[English]
Mr. Stevenson: It was approximately one year ago.
[Translation]
Mr. Chrétien: One year ago, when the Liberal government was in office.
[English]
Mr. Stevenson: That's correct.
[Translation]
Mr. Chrétien: I would like to come back to clause 16. I was a little surprised earlier when you presented your viewpoint on Bill C-38 and said that the farmer could not be appointed guardian. My colleague, Murray Calder, more or less raised the same point.
I am somewhat surprised by this, since last week or rather two weeks ago, we heard testimony on Bill C-38 from witnesses and from one witness in particular whose name unfortunately I cannot recall, but who I am sure we could trace, who told us that in the majority of cases, the farmer was the guardian of his assets until the very end, unless he refused or was unable to take on this role.
My attention is drawn in particular to paragraph 16(1)(b) which states the following:
b) any other qualified person nominated by any secured creditor or secured creditors listed in the application; This means that the secured lender, the secured creditor, could supplant the farmer as the guardian of his farm or herd of animals or that someone else could be appointed guardian at the creditor's request. Is that correct? If that is the case, how do you feel about that?
[English]
Mr. Stevenson: Thank you for the question.
If I understand you correctly, you indicated you thought my point of view was that the farmer would not be the guardian. In Alberta that is almost always the case. There usually is agreement right off the bat that the farmer is the most qualified person for the guardianship role. But the bill allows the creditor to object, and if he objects it disqualifies the farmer.
.0945
What I'm saying is that to bring balance to the new program, if the creditor can object to the farmer being guardian, then the farmer should be able to object to the creditor's guardian; and if you have that disagreement, then you should take the decision and give it to the administrator, because it will not aid the mediation process. You already have a problem, you've created a problem; let's not make it any worse. But I would think, practically, what will happen in 80% or 90% of the cases is that the farmer will still be the guardian.
[Translation]
Mr. Chrétien: In 90% of the cases.
[English]
Mr. Stevenson: Maybe I'll just defer to Bob. He has the numbers a little better on that.
Mr. Bob Hadley (General Manager, Alberta Farm Debt Review Board): Mr. Chrétien, I'll just go back over the current practice in Alberta with the current Farm Debt Review Act, the current legislation.
Under the current legislation the creditors have the right to request that a guardian other than the farmer be appointed, as they do in the new legislation, but the wording is slightly different. In Alberta, the way we were interpreting the the wording of the old legislation was that we had the authority to accept or reject that recommendation. I've been told through legal advice in the last few weeks that we probably didn't, but let's say we got away with it for the last ten years.
So what has happened is that when creditors have nominated individuals other than the farmer to be the guardian, we have challenged them and refused that request by them unless they could demonstrate that the farmer was not qualified to our satisfaction, that something the farmer had done or was doing indicated he or she was not the person logically to be responsible for monitoring the presence and condition of the assets.
In the new legislation a slight change in the wording removes that. It says if that nominee is there they shall be appointed or the administrator shall appoint someone else, but not the farmer. So as administrators of the legislation we would have to make choices to accept the creditors' nominee or say no, we don't think we will accept the creditor's nominee, and we will in turn appoint somebody else of our choice. We will then have to pay for that person, so it has a cost impact on the program.
The concern is that if the creditors decided that as a matter of course they wanted to make it routine to nominate somebody else to replace the farmer, they could do that by simply nominating somebody else in every case, forcing us to accept their nominee or appoint our own nominee and pay the cost of it. That's where the concern lies: with how we are going to carry out that aspect of it.
To go back to the other gentleman's earlier question, though, the guardian can't go in and sell the farm either, because their role is limited to monitoring the presence and condition of the assets that are on the farm. But it's still a real annoyance and aggravation to the farmer, I think, to have somebody say, we don't trust you, therefore we're nominating somebody else to come in and count your ducks and your chickens and report back to the administrator what you're doing with the assets on your farm, because you can't be trusted. That's not positive for the constructiveness of the process in developing solutions.
[Translation]
Mr. Chrétien: On rereading clause 25, I see that no one is liable or held accountable for his acts. It's a question of accountability. Persons engaged in the administration of this act are not personally liable for acts or omissions done in good faith.
.0950
Of course, one always acts in good faith. It is difficult to prove that someone acted in bad faith when exercising duties under the legislation, except that one can be negligent or do one's work a little too quickly because of personal problems or because one stayed up too late the previous evening.
Since you were only recently appointed, are you pleased to see that if you made some mistakes, you would not be held liable in any way?
[English]
Mr. Stevenson: I view that a little differently. The work and the content are done by the participants. Anything really substantive is going to come from the farmer or the creditor. I'm in charge as a mediator. I'm in charge of the process. It is comforting to know that if I make a mistake in the process I'm not liable for it, but I would like you to focus on where the liability would be if we're not handling content in the mediation.
[Translation]
Mr. Chrétien: Mr. Chairman, in your opinion, does Bill C-38 favour creditors more so than indebted farmers? It's a good question.
[English]
Mr. Stevenson: I'd like to break that into two parts. I think the day of the mediation is more advantageous for all of the parties than the present Farm Debt Review Board is. I think it will be a better mediation process, and really that's the essence of the bill. I do have some concerns about getting to the mediation day. I'll have to wait and see how it unfolds and how the creditors and farmers react.
I don't like the appeal situation. I don't think the appeal process has any place in the mediation process. It may be divisive. If the farmer and creditor come to the meeting and the farmer says because he won the appeal he's one up on the creditor, that doesn't help the mediation process.
There may not be any appeals. That's what I'm hoping for and that's what I think we'll see. I think the mediation day will be better under the new act. I think we'll have to wait to see how we get to the mediation day.
[Translation]
Mr. Chrétien: Mr. Stevenson, you seem to be a competent individual. You even wear two hats. You have experience in the area that we are examining, but try to answer my question as honestly as possible. I want Wayne to listen to the question as well as to the answer. Are you biased in favour of the farmers or in favour of the creditors?
[English]
Mr. Stevenson: My bias is to the process, and that's the truthful answer. I'm a farmer. I've been a farmer as long as I've been a creditor. I just look at this as a process to help people solve their problems. If I had a bias to either one I wouldn't be there as the mediator.
.0955
The Chairman: Mr. Hadley.
Mr. Hadley: Mr. Stevenson probably wouldn't do it on his own behalf, but since he was appointed in October 1995 to chair our board - he's the second chairman I've worked with - he, on his own initiative, starting in about November or January this year, 1996, undertook to start taking a lot of mediation training through the law faculty at the University of Calgary. He completed the full 170-hour requirement to become a certified mediator. He took that training on his own initiative, with his own funds and on his own time, because he fell in love with, I suppose, or became dedicated to, this whole mediation process. This is a credit to him. So I want to reinforce him when he says his belief in mediation.... I've never seen anything quite like it, from the point of view of somebody taking an interest and going at something the way he's adopted mediation.
The Chairman: Mr. Reed.
Mr. Reed (Halton - Peel): Mr. Chairman, first I would like to apologize to the witnesses and to my colleagues in the Bloc for being late this morning. As my colleague Murray Calder said, it's one of those days when double bookings swallow you up.
Mr. Easter (Malpeque): You're hard to swallow.
Mr. Reed: That's right.
An hon. member: You walked into that one.
An hon. member: What a mouthful!
Mr. Reed: All I can say to Mr. Easter is that I'll be more careful next time. I won't open my mouth at all.
I'm interested in how the reformation, if you like, is going to affect your ability to handle the caseload. I'm interested in knowing what the caseload has been like historically. Are any trend lines developing in the level of cases you have in Alberta?
Mr. Stevenson: It's going to be hard to say, under the bill. Right now the term ``Farm Debt Review Board'' has a stigma to it, in that it brings people to the process when they have a problem. With the new name, ``Farm Debt Mediation Act'', it might be a little more user-friendly. It may bring more people to use it.
Right now there is an increase in applications. We are very busy.
Mr. Reed: It would appear it's really not too fair to compare the load you're going to face under the new regime with what has been faced in the past, simply because there's a new set of terms, if you like, for farmers to apply. Is that a fair comment?
Mr. Stevenson: I guess what you're asking is how our clientele are reacting.
Mr. Reed: Yes.
Mr. Stevenson: Farmers in general - and I am one myself - don't realize they have a financial problem until somebody tells them they have one, and usually it's a notice of intent or the bank issuing a demand letter. I don't think that's going to change. I think under the proposed new act that's when people are going to wake up and say yes, we have a financial problem and we had better find some way of working through it; let's use the Farm Debt Mediation Act.
You're probably as good at predicting the economic climate in agriculture as I am. What I see is that in the cattle industry we're going to see some increased applications, especially from the cow-calf producer. I think the feed lots have gone through the cycle. They should be all right. The grain producers may be.... Grain prices are going down, quality is down, so we're going to see some grain applications too.
Is that more what you were getting at?
.1000
Mr. Reed: I suppose the application of this bill is a bit of a mirror to what's happening in agriculture, in the sense that there are more or fewer farmers who are facing difficulties at any given time. I was just curious to know how Alberta was faring in that way.
Mr. Hadley: From 1986 through about 1990, over those four years, we ran an average of fifty applications a month. In 1992, 1993, 1994 we started dwindling away, to where we got down to twenty or twenty-five a month, and in 1995 even down to an average of about ten a month in Alberta. In 1996 we're running an average right now of twenty a month, so in this current year we've really doubled since last year.
A lot of that had to do with banks reviewing the margins on operating loans this past spring and recognizing they had given operating money to people for cattle. The prices on cattle were dropping dramatically and the prices of feed going into the cattle were significantly higher. When they did those margin assessments they called those farmers and asked them to come in and repay parts of those operating loans, to get the spread between how much money was outstanding and what the cattle were worth down. This all happened in May and June, when it's not cattle-selling season and they didn't have the money to pay. We've seen that right through June, July, and August this year, with the impact it has had, because our applications are clearly coming from the beef sector.
What is going to happen in the future with the new legislation, we don't know. Alberta's situation with Farm Debt Review Board applications in the past has been that most of them, even the ones that have come under section 16 of the current legislation, are insolvent. So they won't be left out of the equation by the new legislation. They're behind in payments with some or more of their creditors, so they won't be lost. They will still be eligible to come to this new legislation without a stay, if they prefer, or with a stay if they need it. There's no drop-off in our ability to service them.
The fanfare that may accompany the announcement of the passage and so on of the legislation might by itself drive applications up. It's especially dependent on the timing. If the legislation is proclaimed and comes into force in January or February, when a lot of lenders traditionally do their annual loan reviews and give the farmer the bad news, and at the same time we're making announcements about the availability of this new miracle legislation, then we could go right through the roof in terms of response. We'd be very busy indeed.
The Chairman: Mr. Easter.
Mr. Easter: I think you touched on my concern in your last point there, Mr. Hadley. I'm concerned about not being able to deal with, or the prospect of not being able to deal with, those farmers who are not considered insolvent. The fact that legislation is in place certainly does put some pressure on the banks, on all the players in the system, including the farmers, to come with a settlement. Without that, although there will always be the backstop position, the legislation's there if they give a farmer notice. But I'm worried the persuasiveness and authority of legislation may not be there to get the creditors at the table with the pressure on them to come to a settlement.
I agree entirely with what you say, Mr. Stevenson, that the financial statement in these cases really in effect doesn't matter a hell of a lot. It's a matter of the lenders having the confidence that the farmer - within reason; even then you're not going to match the letter of the agreement - within reason will do what the new scenario claims he can do.
.1005
I'm very concerned about that aspect of the legislation, and maybe concerned about where we're going to put $2.4 million into the consultation service, with further cutbacks, and that not being available down the road at some time. You never know. If it's not in legislation it's harder to keep. So I wonder what your thoughts are about the loss of section 16 of the old act.
Mr. Stevenson: I thought the consultation service would pick up those types of farmers who are not insolvent, although almost all the section 16s I've dealt with - in fact, all the section 16s I've dealt with - would qualify, because they were insolvent. They were just less insolvent, if you can say that, than a section 20. So I guess I don't have a great concern that anyone's going to be left out of the process.
Mr. Hadley: Mr. Easter, if anything, we may be better positioned to serve the clientele you're concerned about, the ones who aren't insolvent, under the new legislation. I say that because I know our colleagues in Ontario went out with quite an active campaign to try to recruit farmers to apply sooner under section 16, the (a) part or the part where there's actually no negotiation with creditors, just the giving of some advice or assistance in planning or that sort of thing. But it has been a difficult thing for them to do, because it still had required an application under the Farm Debt Review Act and it had a negative connotation to it.
I think by having the consultation service in fact separate we can go out and promote and encourage that as a separate service. It may be administered in the same office, but we're talking amongst ourselves as administrators of a separate identity, a separate telephone line, a separate application form, which segregates it off from the debt problem perception. We may in fact be able to encourage more people to come that way.
Mr. Easter: I liked your suggestion on paragraph 16(1)(b), but Mr. Hadley, you mentioned that if you appoint under section 16 of the old act you have to pay the cost. Is that correct?
Mr. Hadley: If we do not appoint the farmer or the creditor's nominee, then we appoint somebody else, somebody we would have on contract with us available to do guardianship, and we pay the cost of that.
The interesting twist to this about the creditor issue, and we wanted to make you aware of this as well, is that if the creditor appoints or nominates somebody else who is acceptable to the administrator to be the guardian and we accept that, the creditor is supposed to pay for that guardian. But experience in Ontario and Saskatchewan, where they've had a number of these, has been that it's an administrative and collection charge they can pass through, and do pass through, to the farmer. So -
The Chairman: The bottom line is they don't really pay.
Mr. Hadley: The bottom line is if the farmer has any resources left, he pays. If he doesn't, the bank might eat it if there's nowhere to get it from the farmer.
Mr. Easter: What about the unsecured creditors? I agree with you about the notice given, because you're just liable to have an avalanche of judgments once the unsecured creditors know you're in negotiation, so to speak. That's problematic. In my experience with Farm Debt Review Board cases it actually has been the unsecured creditors who to a great extent have kept the farm running when credit tightened up with the bank and other secured creditors.
.1010
What are you suggesting, that this information not go out beyond those at the meeting? I want to be clear on that.
Beyond that, what's in this bill for unsecured creditors? From my own perspective, if the mediation process gains some kind of a settlement, even if it's 70¢ on the dollar to an unsecured creditor, I believe they're likely better off than insolvency.
Mr. Stevenson: My experience has shown me that the first thing unsecured creditors are doing when they come to the meeting is to find out where they're at, if there's any possibility they're going to be paid. The second concern is to get financial information. They overlap a lot.
I think the Farm Debt Mediation Act really addresses that. It's positive from the unsecured's point of view. Where I have the concern is that if too much of that information is put out in the community, there's no way to control the confidentiality, and that's the end of your mediation and our program.
The mechanics I see working would be this. If the unsecureds come the day of the mediation, there would be a financial package for them to look at. My own preference would be that they would not be able to take it home with them. I guess the other choice is that they can take it home with them. The unsecureds would get the financial information prior to the mediation.
Mr. Easter: Thank you, Mr. Chairman.
The Chairman: Mr. Chrétien, do you have one brief question?
[Translation]
Mr. Chrétien: No. Mr. Easter covered everything. Thank you.
[English]
Mr. Easter: Great minds think alike.
The Chairman: Mr. McKinnon.
Mr. McKinnon (Brandon - Souris): Some of our previous witnesses, after the process was over, commented about the success rate of people continuing in farming. What comment would you have on that as far as the Alberta picture is concerned?
Mr. Stevenson: I'll make a comment and then I'll let Bob deal with the specific numbers.
What we're focusing on mostly is making arrangements between the people so they can continue in the short term. I don't think any research has been done on whether or not these people actually continue to farm in the long term. I'm not sure you should use that as your yardstick for success, because in a lot of cases these people want to negotiate an exit package such that they can exit agriculture with some self-esteem when they leave, knowing they've done a good job.
So whether or not they continue to farm is not really the measure of success for this program. It's whether or not the people are doing what they want to do at the end and can feel good about it.
Mr. McKinnon: In terms of the legislation, as I would read it I think there may be some subtle motivation to support the people on the farm and keep them there. It isn't the sole purpose, of course, as you pointed out.
Coming from rural Canada, I think we do have throughout the country the problems of depopulation and deinvestment. If there are some recommendations you would have in that area I would be interested in hearing them, although not necessarily today.
The Chairman: In closing, are there any further comments either of you gentlemen would like to make?
Mr. Stevenson: I'm really pleased to have had the opportunity to participate in a process like this. The mediation work I've done has been extremely exciting and eye-opening. I'm getting my eyes opened here as well.
.1015
The Chairman: Thank you, very much for coming, gentlemen. On a personal note, over the years I personally have done a lot in not farm debt mediation but in what I refer to as a negotiation process, whether it be school board salary packages or vegetable board contracts in Ontario. I can personally understand the enthusiasm you people obviously have. I find it a very interesting and rewarding process to be involved in. I want to congratulate both you and your board, because it's obvious you are giving it the enthusiasm and the attention it needs.
Thanks for appearing before the committee and adding your comments.
Mr. Stevenson: Thanks very much.
The Chairman: Our next presenters will be from the National Farmers Union.
Welcome to the meeting, gentlemen. As you know, you're here to make some comments on Bill C-38, the Farm Debt Mediation Act. Please introduce yourselves so that everyone around the table knows exactly who you are and the role you play in the National Farmers Union.
Mr. Chris Tait (Vice-President, National Farmers Union): I'm Chris Tait, vice-president of the National Farmers Union.
Mr. Reg Joyce (Member, Board of Directors, National Farmers Union): I'm Reg Joyce, on the board of directors of the NFU.
Mr. Tait: I'd like to thank the committee for the opportunity to appear.
The National Farmers Union is Canada's only voluntary-membership national farm organization representing producers of all major commodities all across the country. The NFU has a great interest in seeing that producers receive a fair return for their labour and production. For producers who experience financial difficulties, the NFU believes an adequate debt review system must be available.
For more than a decade the NFU has been actively involved in cases where farm families in financial difficulty asked for assistance. The NFU has established farm crisis committees in most regions of the country, which work alongside farm families in financial difficulty. The NFU continues to offer assistance to those who request it. From this work, the NFU has come to understand the needs of farm families who encounter financial difficulty.
Representatives of the NFU participated in the consultations held by Agriculture and Agri-Food Canada in 1995 in New Brunswick, Ontario, Manitoba and Saskatchewan on the subject of the Farm Debt Review Act. The NFU was also represented at the final consultation session held in Ottawa in December 1995.
Over the past two decades, realized net farm income has declined, as the following figures indicate. In 1974 Canadian farmers reported cash receipts of $9 billion and realized net income of $3.3 billion. Operating expenses were $4.9 billion. Twenty years later, in 1995, cash receipts totalled $26 billion. Realized net income dropped to $2.9 billion, while operating expenses had more than quadrupled, to $21 billion. Debt problems for many farm families are not rooted in an inability to manage but in the decline of realized net farm income the farm community has suffered.
Most specifically under the Farm Debt Mediation Act, the National Farmers Union has concerns over the proposed budget. It's our understanding that $12 million had traditionally been available for the Farm Debt Review Act, although $4 million was the amount that was spent. During the consultations held by Agriculture Canada in 1995 it was revealed that $4 million would be available. The push to limit the budget clearly came from Ag Canada and not from the stakeholders who were consulted.
In our view, capping the funding at $4 million severely limits the new entities' abilities to respond flexibly to farmers' needs. Should commodity prices fall suddenly, the number of producers who need financial counselling may expand suddenly. Funding must be available if the new act is to meet the new needs of farmers.
We note that under the new program, they're proposing to add on services, such as a stress hotline of farm consultation services, essentially doing more with a budget that is the same or smaller. From our perspective, that isn't possible. The NFU recommends that the budget for any replacement program remain at $12 million.
.1020
On the subject of user fees, Agriculture and Agri-Food Canada proposed user fees for some components of the new service. The NFU opposes the introduction of any user fees. We think it's unrealistic to ask a farm family that's already in financial difficulty - or one that isn't yet in financial difficulty - to pay user fees to ask for help. It's our recommendation that there be no component for user fees in the new program.
In terms of the elimination of assistance for those in financial difficulty, the NFU opposes any move to limit assistance under the Farm Debt Mediation Act to those farmers who are already insolvent. Under the previous Farm Debt Review Act, farmers who were in financial difficulty, as well as those who were insolvent, could apply for assistance under the act. We note that for five years, from 1989 to 1993, more than 70% of those who applied were those who were in financial difficulty.
The farm debt review boards that operated under the Farm Debt Review Act dealt with farmers in financial difficulty and in many cases helped them reach a resolution with their creditors they would not likely have reached otherwise.
Agriculture Canada suggests that those in financial difficulty do not need to be included in the act because they will be dealt with by the companion program. We have difficulty accepting that. The program hasn't been designed, so we have no idea what's included there. It would certainly be preferable to have them included under the legislation.
Limiting the new act to work with farmers who are already insolvent is too narrow a focus. People in financial difficulty who are not yet insolvent ask for help because they need help. Often timely help can prevent their problems from becoming much more serious and costly. The NFU notes with interest that there was no call, at any of the consultative meetings we attended, for section 16 to be removed from the legislation. The NFU recommends that the bill be amended so that those farmers who are in financial difficulty may also apply.
In terms of arbitration, where mediation fails the NFU believes strongly there is a need for the intervention of an independent arbitrator. The Farm Debt Mediation Act has no provision for arbitration. The NFU recommends the bill be amended to include arbitration if mediation fails.
In terms of the stay of proceedings, the NFU supports the provision that the bill provide for a 120-day stay of proceedings.
As well, farmers in financial difficulty need small sums of money for specific purposes such as the following: developing a business plan; retaining a lawyer; stress counselling; and negotiating with creditors. These small sums for specific purposes would add no more than a few hundred or a few thousand dollars to the cost of each case. Such funds would assure that the farm family had the greatest possible chance of salvaging its farm and remaining as farmers.
The NFU recommends that small amounts of money be made available to farmers in financial difficulty to pay for necessary services such as legal advice and drafting a business plan.
Further, interest to any lending institution should cease to accrue upon first notice that this institution intends legal action. The positive effects of this for the farmer are twofold. First, it gives the farm family a fund of money with which to pay a portion of their legal defence. Second, it makes lending institutions both reluctant to initiate legal action and more willing to negotiate.
This interest freeze could be capped at some point, possibly 120 days. Banks cannot argue that this would be an unfair burden to them. Canada's banks made over $5 billion in 1995. Canada's farmers made $2.9 billion. The NFU recommends that interest owing to a lending institution that takes legal action against a farmer be frozen for up to 120 days.
In terms of delivery of services, farmers in financial difficulty need quick, stress-free access to farm debt services. A widely publicized toll-free number could give farmers that access. Farmers could call and, without giving their names, discuss in general terms their situation and the services available to them. This first contact is extremely difficult for farmers, because it may be their first admission that they are in financial difficulty and in danger of losing their farms. The NFU recommends that an office of first contact be set up and that this office have a toll-free number that is widely publicized.
With regard to other federal activities affecting farm debt and insolvency, federal farm debt services, whether the old Farm Debt Review Act or the new Farm Debt Mediation Act, indicate that the Government of Canada has an interest in helping farmers deal with debt and insolvency. If this is the government's interest, the government should look at its other actions that directly or indirectly affect the revenues, profits and debt levels of farmers.
.1025
When considering the new Farm Debt Mediation Act and its $4 million budget, the government should remember that its 1995 budget cut $1 billion from agriculture and related transportation programs. That $1 billion came out of the pockets of already beleaguered farm families.
Orderly marketing and supply management: Directly related to the financial well-being of farmers are the policies of orderly marketing and supply management. To the extent that the government has allowed those policies and institutions to be weakened, the ability of farmers to recover a fair return from the marketplace has been diminished. Protecting those institutions and policies from further erosion must be a priority.
Federal cuts: Any analysis of farmers' debt problems would be incomplete without looking at the impact of federal cuts to farm programs. In the 1995 budget alone, cuts to agriculture and related transportation programs amounted to $1 billion. The $560 million Western Grain Transportation Act was eliminated in the 1995 federal budget, as were the feed freight assistance act and the maritime freight assistance act.
For grain producers in western Canada the elimination of the WGTA equates to a $20 per tonne increase in freight costs. In some years, we note, payments under the WGTA have nearly equalled the net farm income of Saskatchewan. The elimination of these programs reduces the ability of Canadian farm families to compete in an international marketplace where countries such as the United States continue to subsidize their transportation system.
Safety nets: The establishment of a safety net program that genuinely allowed producers to stabilize their incomes would help to reduce the number of farm families facing serious financial difficulty. The current NISA program fails to serve such a role. In Alberta, for example, approximately 60% of the accounts contain less than $2,000.
In conclusion, recent increases in cereal crop prices have been more than offset by declines in livestock prices and exorbitant increases in input costs. According to Statistics Canada, Canadian net farm income dropped 5% between 1993 and 1995. Debt over that same period rose 9% from $23.5 billion to $25.6 billion. Funding cuts to farm debt services cannot be justified by pointing to farm prosperity or lack of need.
Recent actions by the federal government have severely eroded revenues and profits for farmers. The problems caused must not be compounded by reducing the scope and effectiveness of federal farm debt services. By limiting assistance to those who are already insolvent the proposed act will leave farm families alone and at the mercy of banks as they try to fend off bankruptcy, restructure their operations and keep their farms. The timely advice of the Farm Debt Review Board field personnel before insolvency has allowed many farmers to restructure their operations and avoid the loss of their farms.
This is respectfully submitted by the National Farmers Union.
The Chairman: Thank you very much, Mr. Tait.
Mr. Chrétien.
[Translation]
Mr. Chrétien: The WGTA subsidy which was eliminated in the 1985-1996 budget totalled $560 million per year.
I was surprised to hear what you had to say, because when I fought like the devil in the House of Commons to get the Finance Minister to reverse his decision, I received very little support, particularly from western representatives, and here today, on two or three occasions, you have alluded to these cuts in your presentation. It's a little late. If I had received some tangible support, I would have pressed my point a little harder.
I would, however, like to focus on something you said on page 5 of your brief in reference to the Canadian Wheat Board. In the House of Commons, members are not allowed to mention who is absent, only who is present. However, if our Reform friends were here, they would certainly have disagreed with you and your statement that the Canadian Wheat Board had succeeded in extracting $265 million more annually, because of the monopoly it has and its aggressive action on international markets, than it would have received under a free market system.
.1030
Could you take a few minutes to elaborate further on what you said? I will then discuss it with the Reform members when I see them.
[English]
A voice: You're beginning to sound like a Reformer.
The Chairman: May I ask for a point of clarification? It might have been in the translation, but, Monsieur Chrétien, did you say that you think if the Reform Party members had been here they would have agreed with that statement?
Oh, okay, they would not agree with this statement.
[Translation]
Mr. Chrétien: If the members of the Reform Party had been here, they would have been startled.
[English]
Some hon. members: Oh, oh!
The Chairman: You've now made it very clear!
Go ahead, Mr. Tait.
Mr. Tait: First of all, I appreciate your comments on the Western Grain Transportation Act. As an organization, we led what kind of struggle we could, but it's very difficult to motivate people when they make their intentions very clear at the ballot box that they're voting for a federal government that made no mention of that. They didn't run on a platform of eliminating the WGTA.
In time, when people see that they can elect representatives and still be betrayed and still find a hidden agenda afoot, I think they will become demoralized. Over time, in a series of campaigns, it becomes harder to mobilize people. We mobilized what support we could. I don't have any regrets. I think we did the best we could and I'm happy to see that there was some concern in some areas of the House over the cuts that were made.
Specifically, on the Canadian Wheat Board, the evaluation was conducted by independent academics and hasn't been challenged in any serious way. None of that research has been discredited, so that $265 million is a fact. I'm sure the Reform Party doesn't like it, but that doesn't mean it isn't true.
As an example, when we look at the 1993 continental barley market for the few months in which the Conservative government initiated a dual market in barley, the price for premium malting barley dropped $50 per tonne. When it was placed back under the board it went up $50 a tonne, so it returned.... I think the mathematics there are very clear. I think western Canadian farmers recognize that and we hope the government does too.
[Translation]
Mr. Chrétien: With your permission, Mr. Chairman, I would like to ask a few questions, particularly regarding one recommendation. I must admit that I too am rather biased in favour of farmers, but there is one recommendation in particular on page 4 of your submission which concerns me, although bankers are quite capable of defending themselves.
Your union recommends that interest owing to a lending institution which takes legal action against a farmer be frozen for up to 120 days.
I would have some obvious reservations about supporting this recommendation and here's why. Some abuse could occur, because 120 days divided by 30 equals four months, or one third of the year. In some cases, substantial interest charges could accrue. Some farmers might use this system for the maximum 120 days allowed to save on interest charges. This would be, in my opinion, unfair to the creditors.
[English]
Mr. Tait: It's certainly a proposal that would give the farmer some power, and I don't think that's an unfortunate thing. In the long term, the more people we can keep on the land and the more land we can keep in production, the greater are the benefits to the economy.
I'll let Reg add whatever he wants.
Mr. Joyce: I think that will give the farmer a chance to hold onto a little money if he's dealing with a bank, because if he's dealing with a bank and there's one drop of blood left in him the bank is going to squeeze it out of him. That has been proven time and time again.
There's another point, too, about that. When the farmer borrows the money he's actually entering into a partnership. The bank is putting up the money, he's putting up the labour, and so on. They're both there to make money. Therefore, if there's any loss they should share it in some manner.
.1035
We know the banks wouldn't go along with that, but at the same time, that money doesn't cost them anything. As the saying goes, money is man's only creation. The banks create it; therefore, they have the power and the government and everything else.
The farmer grows the seed and so on. By doing that, he's creating money. Even if he goes broke, he has created money for the government from the crop he has produced.
The banks can sit there, day in and day out, week in and week out, saying no, no, no, until a man's money is all gone. Then they'll probably make some kind of an arrangement or settlement. But it's too late for the farmer. The bank gets all their money.
When you sign that first note you not only have signed for the money you borrowed but you also have signed for the interest on that until the end of that term. They don't have to foreclose. They don't have to take your property. All they have to do is foreclose on that last note signed. That's what they'll do. The farmer has to go to court, and you know what kind of chance he has.
[Translation]
Mr. Chrétien: You stated that your union was consulted by Agriculture and Agri-Food Canada. I'm still bothered by one thing and perhaps you sensed it earlier when I first asked the Chairman of the Alberta Farm Debt Review Board when he was appointed to this position. By inference, many things become clear.
Therefore, you were consulted about the bill that we are examining this morning. Is your union consulted on a regular basis and asked to suggest a list of possible members for the Farm Debt Review Board?
[English]
Mr. Tait: The answer to that is no. In terms of the consultation that was held, we are happy this consultation process was at least a little more honest and open than other consultation processes Ag Canada has held. The results reasonably reflected what was discussed, although not entirely.
So we appreciate being asked, but we would also appreciate that what people say at the meetings is also written down. For example, the movement to eliminate section 16 applicants was not something farmers said at any of the meetings we were at. Why bother having a consultation process if the direction's already set?
As well, it appears the budget was already capped in advance. If there was an agenda, if the bill was already drafted before the consultations were held, then I think farmers would appreciate knowing that.
[Translation]
Mr. Chrétien: So then, you are not asked to propose three names before the Governor in Council goes ahead and appoints people to the Farm Debt Review Board? You are not consulted? That's what I understood.
[English]
Mr. Tait: In my time, no, that hasn't been the case.
[Translation]
Mr. Chrétien: Therefore, if we stretch things a little, we could end up with a board of directors which would be fully biased in favour of the creditors and which would not look favourably upon farmers. It may not even know anything about them at all.
[English]
Mr. Tait: I think that can be a danger. We note that in the Farm Debt Mediation Act the government proposes that mediators will be people who do not have a conflict of interest and who are unbiased. I think there probably would be very little hesitation for the government there to appoint a banking activist whereas there probably would be quite a bit of hesitation to appoint someone who's a farm activist.
.1040
I think the government would see clearly the conflict of interest in appointing as a mediator a farmer who would represent and worry about farmers, whereas there would not likely be the same concern about appointing someone from a financial institution background who would clearly sympathize and represent financial institutions. So that's a concern for us.
[Translation]
Mr. Chrétien: I note that the budget available for the Farm Debt Mediation Act will decline from $12 million to $4 million. In the past, they did a good job. The $12 million were put to good use. Do you think that with only one third of the funding, we will be able to improve service, as the government is claiming?
[English]
Mr. Tait: Dividing the budget into three? I don't have that information.
[Translation]
Mr. Chrétien: You state on page 2 of your submission that your understanding was that the budget available for the Farm Debt Review Act was $12 million... Let me rephrase my question. You go on to say that $4 million was the amount traditionally spent. Do you believe that $4 million will be enough to provide a level of service that compares with past years?
[English]
Mr. Tait: No, we don't think so, particularly when they're talking about expanding the program. We don't have good information on that, unfortunately, because the companion program hasn't been designed. No one has information on it.
But Ag Canada has stated that an aim of the new program is reaching farmers before they get into financial difficulty. So we're talking about a whole new level of bureaucracy, a whole new area, which could be very valuable.
They also mention setting up a stress hotline. We're talking a whole range of new services that we don't think can be achieved with $4 million, nor do we think there's a need to be cheap here. Farmers have taken some pretty significant cuts over the past few years, and I think the goal should be to design a program and see what it reasonably can cost, not to set a very small budget and then design a program to fit within those parameters.
So in our view $4 million is not acceptable. We don't believe the government can achieve what it wants to with that budget.
[Translation]
Mr. Chrétien: My final question concerns the state of the agri-food industry from 1974 to 1995. Although I deal on an almost daily basis with agriculture and agri-food issues, I was surprised to see your figures. I totalled them up here in a column. The results are quite dramatic.
On the one hand, you spend more and more money every day, whereas your revenues have declined somewhat, dropping from $3.3 billion to $3 billion. On the other hand, your operating costs have risen sharply. Do I take it that it would be very difficult to predict the state of the agricultural industry around the year 2000-2010?
[English]
Mr. Tait: I think that's a fair assessment. Other components as well play into this. Something like 60% of net farm income is now coming from off-farm jobs. If farmers were not subsidizing the industry to the degree they are, I think we'd see a much more severe crisis.
For example, in British Columbia, for farm operators off-farm income accounts for 79% of their net income. In some provinces it's lower. But we see farmers chipping in a tremendous subsidy. A lot of farms would be out of business if you didn't have people who were dedicated enough to go out and work off the farm to keep paying to do what they enjoy doing - and very important work, too, I think.
The other component that I think spells trouble in the farming industry is that it's not an attractive industry to enter. Two years ago the average farm population age reached the highest ever, 49. We have an industry that is driving away young people in droves. I fully expect that if we look down the road 20 years, we're going to see that the average age is close to 60. Then we're going to see massive retirements and consolidation in a very changed rural Canada, which I don't think is desirable at all. This is all very much tied to a debt situation and an income problem.
.1045
The Chairman: Thank you, Mr. Chrétien.
Before I go to Mr. Easter, I have a point of clarification. Mr. Tait, we've asked for this clarification from the department, but I believe - as you say, I can't confirm it today - the budget for the Farm Debt Mediation Act is $4 million. I will get that clarified, but I also believe $2.4 million is being set aside for the consultation service. If those are the correct figures - and I again state that we need those clarified - and only $4 million has been spent on this service in the past, which you have stated in your paper, then between the consultation service and the farm debt mediation maybe we are looking at more money being available than there has been in the past.
Again, I know there are department people here, and it's imperative to get those numbers clarified as far as budget numbers are concerned, as far as the anticipated numbers are concerned, money that is set aside for that if necessary. We need that clarified as quickly as possible.
With that, I'll go to Mr. Easter.
Mr. Easter: Thank you, Mr. Chairman. I agree that it needs to be clarified. That was one of my questions, but Jerry is not here.
In any event, welcome, Reg and Chris. Some around here will accuse me of being a little biased on this, but I do think this has to be stated on the record. I congratulate the NFU for its efforts in the farm crisis arena. I very firmly believe that there is no other organization that has given up as much of their people's time, voluntarily, to assist in terms of the farm crisis over the years. As a result of that, I think some people are still farming who might not be otherwise.
In your submission you raise one of the concerns I have. You've talked about it as well. It's the fact that section 16 is not under the act - those that are not yet insolvent - and the department is looking at handling them under the farm consultation service, which in fact is some of the hotline, or whatever you call it in your office...the first contact. I think that's what it will serve.
Previous witnesses, some of the Alberta Farm Debt Review Board members, and some of the other farm debt review boards believe that most of the farmers who come to them who are not yet actually insolvent in fact could be deemed to be insolvent and that section 16 really could be deemed to be under clause 20. Mr. Chairman, there's a question here. What is financial difficulty? Are you in financial difficulty if you miss one 30-day payment?
Can you expand on your views in terms of the loss of the authority under the act to deal with those who are not yet insolvent? That's my biggest concern. How do we get to those farmers in the farm community with some power under legislation or with other means that are going to force the lending community and those creditors to come to terms to keep this person on the land?
Mr. Tait: In our view, as I've said, the section 16 component of the legislation is very important. For every year except 1986, according to the figures that we have, the majority of the people who used the Farm Debt Review Board system were section 16 applicants. Clearly we're dealing with people who are having financial difficulty.
And that's who we should deal with. I don't agree with what was stated earlier in one of the presentations, that we should be helping people to exit the industry. We should be helping people who are in difficulty to take control of their operations and stay in, and I think that's what most people have been applying for.
.1050
Out of the 17,000 people who have used the act since 1986, only 7,846 were people who were actually insolvent. So the vast majority of those who use the system were people in financial difficulty; and I don't see that a program that's not yet designed can provide the kind of protection those people need. I think they need legislation, and I don't know why there has been a movement to take them out of the legislation.
Mr. Joyce: I'm from Ontario, and the situation in southwestern Ontario is really unique. There is so much off-farm income available from working in the factories and so on. I come from Chatham, where International Harvester has 1,500 employees and about 600 of them are farmers. When things get tough, if it does get tough with the money they make, their wife and some of the family are working and they can work through some difficulties. But the farmer who is a full-time farmer has to go to the Farm Debt Review Board.
Mr. Easter: I have just one other question. You've recommended in the submission, Chris, that the bill be amended to include arbitration if mediation fails. In the bill we do talk about an appeal board. Does that move any distance towards meeting your recommendation on arbitration; and if it doesn't, then can you explain why and what is the process you entail between coming to the board for mediation and then arbitration? What's the final...?
Mr. Tait: From our view, independent arbitration would be a useful step in that realistically mediation is going to fail, and we don't see that an appeal process will necessarily always work to support farmers. Arbitration would have an advantage in that it could be an independent and binding look at the situation to see what's happening, and a decision-making process. From our view that would be preferable.
Mr. Joyce: Arbitration is absolutely necessary to get any kind of reasonable solution when you get down to the bottom line. If there's no willingness to agree, then the only other thing is arbitration. Under the old Farmers' Creditors Arrangement Act they had a judge. It worked very well and it was very cheap. They have the Companies' Creditors Arrangement Act, where the same thing exists. That is still in existence and still being used. As a matter of fact, it was used in Chatham on a company that went broke and wouldn't pay its employees. They took it through the Companies' Creditors Arrangement Act and they got their money.
Mr. Easter: I have a point of clarification. I'm well aware of the Farmers' Creditors Arrangement Act - it was talked about extensively in the parliament before last - but is the Companies' Creditors Arrangement Act Ontario or national legislation?
Mr. Joyce: National. It runs parallel to the Farmers' Creditors Arrangement Act.
Mr. Easter: How recently has it been used?
Mr. Joyce: This was three years ago in Chatham.
The Chairman: I thank you, gentlemen, for taking the time to come here to add to this discussion and to make your contribution to the debate on Bill C-38. If you have any closing comments, we would welcome them now.
Mr. Tait: I would just like to point out that cases that were handled under the farm debt review boards peaked in 1991 at 3,665 cases. By 1995 that had declined to 1,100 cases. That is supposedly the reason why this process is out of date and no longer needed. I note, however, that in 1986, when this process started rolling, they dealt with only 1,096 cases. In other words, in 1995 we were dealing with more cases than in 1986, when this process started rolling. I think there's as big a need now.
I think we're going to see the fruition, or the tragedy, of a lot of the federal cuts that took place in 1995 in the next few years. This is not the time to make a radical change and a radical cutback.
I'd like to thank the committee again for the opportunity to appear.
.1055
The Chairman: Thank you very much, gentlemen.
The next meeting of the committee - we have three meetings next week - will be on Tuesday at 9 a.m. with Mr. Pomerleau on Bill C-38. Agriculture Canada officials will be back for some further discussion and will be available for questions and comments on Bill C-38. On Wednesday, Agriculture Canada will be with us at 3:30 p.m. on Bill C-60, which is the single food inspection agency. It's our intention to move on to clause-by-clause on the present bill, Bill C-38, on Thursday morning.
That's three meetings: Tuesday morning, Wednesday afternoon, and Thursday afternoon of next week. Monsieur Chrétien and I want everybody here on time.
We're adjourned.