[Recorded by Electronic Apparatus]
Tuesday, October 29, 1996
.0908 
[English]
The Chairman: We will call the meeting to order. We are continuing this morning. I welcome everybody to the committee.
I have just a couple of housekeeping items first. The government response to the first report of the Standing Committee on Agriculture and Agri-Food on the certification of organic agriculture issues and options was tabled in the House yesterday. The clerk will be circulating that to committee members in the very near future.
Also, I believe the request to the department on the budget for the Farm Debt Mediation Act and the Farm Consultation Service was circulated to your offices yesterday. You should all have that in your offices.
We have all received the supplementary estimates. There's a reference in there to Agriculture and Agri-Food that I would like to discuss with the steering committee at the conclusion of this meeting.
I understand there may very well be a vote with a 30-minute bell sometime after 10:15 a.m., so we may be interrupted later in the meeting. We'll worry about that if and when it happens.
I just want to go over the agenda, because sometimes we don't have as many people here at the end of the meeting as we do at the beginning. We will be meeting tomorrow at 3:30 p.m. and Ag Canada officials will be here. I assume Mr. Pickard will be leading that discussion on Bill C-60. That's the single food agency.
.0910
On Thursday at 9 a.m. we will go into clause-by-clause on Bill C-38, the Farm Debt Mediation Act.
This morning we will be continuing discussions on Bill C-38, beginning with a presentation by Mr. Paul Pomerleau. Mr. Pomerleau, I'll let you introduce yourself and tell us a little about yourself and then proceed with your presentation. Welcome to the committee.
[Translation]
Mr. Paul Pomerleau (Lawyer, Beauchamp, Pomerleau): My name is Paul Pomerleau and I am an associate with the firm of Beauchamp, Pomerleau of Montreal. I joined our firm, which specializes in farm law, a little over five years ago. My associate, Jean-Claude Beauchamp, has been practising farm law for at least 15 years and this area accounts for at least 80% of our firm's business. We also practise commercial law, but to a much lesser degree. Personally, I am very interested in this subject. I earned a Master of Laws with a thesis on farmers and the problem of indebtedness, insolvency and bankruptcy. I have made presentations on this subject to many meetings of bankers and bankruptcy trustees.
It is important to state at the outset that our firm does not represent any financial institution, only small, medium-sized and large farms as well as a number of processors, slaughterhouses and so forth. My observations comments may be somewhat slanted as a result, but I will try to remain as neutral as possible.
We are appearing today before your committee to present the viewpoint of lawyers. I will try to refrain from discussing which provisions are advisable and which are not. This, I will leave to your good judgement. For example, I will not talk about the advisability of replacing a three-member panel by a mediator. However, if you are interested in hearing my views on this, I will be happy to oblige.
I believe you have already received a brief, itemized document containing the comments and proposals we feel are most important on the subject. I will start immediately with the definition of "farmer" contained in clause 2 of the bill.
The new definition of farmer includes a new concept. It reads as follows:
- "farmer" means any of the following, where they are engaged in farming for commercial
purposes...
Of course, everything depends on the legislator's intent. Does he want to limit the effect of the legislation or extend it? By introducing the criterion "for commercial purposes", the assumption is made that each time products are sold on the market, they are sold for a purpose which could be qualified as commercial. In this respect, a vast majority of farmers will likely fall within the purview of the legislation.
.0915
We deplore the fact that there seems to be a lack of consistency between this definition of "farmer", which is found in many other laws, and that established by legal authorities, which refer to "a realistic involvement in farming". Section 48 of the Bankruptcy and Insolvency Act contains a reference to individuals engaged in farming, while the bill now under consideration refers to individuals whose primary activity and source of revenue is farming.
If you wish to use a different definition, the courts will automatically assume that you want to say something else. You will have to decide one way or another and try as best as possible to have the same definition appear in a certain number of acts.
With respect to paragraph 5(1)b) concerning applications, the farmer may file an application pursuant to paragraph 5(1)a). I don't talk about this in my submission and I apologize; the idea came to me rather late. The bill provides for the review of the farmer's financial affairs, and for mediation between the farmer and his secured creditors only, without however providing for a stay of proceedings during mediation or during the review of the farmer's financial affairs.
We don't think this paragraph will be used very much; if it is, it will possibly be the source of many disputes and problems. It will be underutilised because we can't see how a secured creditor - of course, I'm excluding the Federal Farm Credit Corporation and provincial corporations which are generally much more understanding - would willingly agree to meet with the farmer pursuant to this paragraph.
Why would he do so under these circumstances when he would not within some other framework? They are under no obligation to engage in mediation. There is no stay of proceedings motivating them to try and resolve matters quickly and the filing of an application under paragraph 5(1)(b) could further hinder the climate between the debtor and the creditor.
The equivalent provision in the existing act is perhaps section 16, pursuant to which the farmer can apply for a review of his financial affairs or exercise the option to request the assistance of the Farm Debt Review Board in order to work out an arrangement with his creditors. This was an option. Under paragraph 5(1)(b) of the bill, this process is no longer optional, but rather automatic. A list of creditors must therefore be submitted, a meeting arranged and an attempt at mediation made.
Certainly, the former section 16 allowed for a preventive review of the farmer's financial affairs in a calmer atmosphere. While he may have been experiencing financial difficulty at the time, his situation was not yet catastrophic. The Board could then intervene in a much more discrete and preventive manner.
We suggest that the farmer whose financial affairs have been reviewed be given the choice of turning to the mediation process or not. If his situation subsequently deteriorates further, he could invoke paragraph 5(1)(a), that is apply for a stay of proceedings.
I wish to comment briefly on paragraphs 6(a) and 6(b). They list the same traditional insolvency criteria as those found in the Bankruptcy and Insolvency Act.
.0920
I have always deplored - and this is the first time that I have done so publicly - that the same criteria be reproduced in whole because a farmer's situation is quite different. Paragraph 6(a) reads as follows:
a) farmers who are for any reason unable to meet their obligations as they generally become due;
As you know, in farming, remuneration cycles are lengthy. For example, a farmer generally plants his field crops at the beginning of the year and harvests them at year's end. In between, he is technically insolvent because he has generally accumulated substantial short-term debts. His cash holdings are generally very low and it is not until the harvest comes in that he will begin to receive some advance payments from his buyers.
Therefore, paragraph 6(a) allows virtually all farmers to take advantage of the legislation. No one will be excluded, since in many farming operations, at one time or another, the farmer is unable to meet his obligations as they become due. This does not mean that he is an insolvent debtor. In fact, he is quite solvent, but at some point during the year, his cash flow is minimal.
This situation was addressed in French law approximately two years ago. An article in the Revue de droit rural français suggested that this definition be amended to read something like this:
- when it becomes apparent that the debtor, whose financial situation is compromised, can no
longer avoid insolvency by acting through normal channels;
Paragraph 7(1)(b) pertains to the stay of proceedings. The Farm Debt Review Act views the stay of proceedings as a much more automatic process. It does not specifically mention, as does your bill, that the administrator must give notice of the stay. "Issuing a stay" implies a thought process and a decision that is generally in writing and so forth.
In some cases, there will likely be delays. I'm not saying that these will be one-week delays. It may only be a delay of one, two or three hours, but from a legal standpoint, this could create some problems.
In my document, I refer to a recent ruling, Dietz v. The Bank of Montreal. In this particular instance, two hours had elapsed between the application for the stay of proceedings under section 20 of the current legislation and the receipt of a written decision by the administrator. During this two-hour period, the bailiffs had time to load tractors, a thresher and other equipment onto trucks and the court ruled that once they had been so loaded, they had been seized and could no longer be unloaded.
Therefore, in my opinion, it is very important that proceedings be stayed automatically once the application has been received pursuant to the new paragraph 5(1)(a). Once the application has been received, proceedings should automatically be stayed, whether or not third parties, be they creditors, bailiffs or anyone else, have been notified.
.0925
Therefore, we suggest that subclause 7(3) be amended to read as follows:
(3) In the case of an application under paragraph 5(1)(a), the stay of proceedings shall take effect as soon as the farmer's application arrives at the administrator's office.
Proceedings would be stayed even if the creditors or their representatives had not yet been formally notified that such an application had been made.
I would also like to say something about the termination of the stay of proceedings. Mention is made of termination on two specific occasions in the legislation, namely in subclause 11(2)(a)(i) and paragraph 14(2)(a). For example, subclause 11(2)(a)(i) reads as follows:
(i) either the farmer or the majority of the creditors in [...] refuse to participate in the mediation or refuse to continue to participate in good faith in the mediation,
The administrator may then terminate the mediation and order the stay of proceedings to be lifted. Of course, in cases where there are only a few creditors, it will be easy to terminate the mediation and lift the stay of suspension simply by advising the administrator that they have no intention of negotiating.
As subclause 11(2)a)(i) is now drafted, as soon as a majority of creditors refuse to participate in the mediation process, it is totally circumvented and the stay of proceedings is almost automatically lifted.
Our firm reviews many cases of farm debt. Last year, we handled at least 15 such cases. In practice, the stay of proceedings is the main reason why creditors to sit down and mediate because often, when there is no pressure, they have no desire to negotiate. This is especially true of secured creditors. Why negotiate a reduction or rescheduling of the debt or a capital or interest reduction when the debt is fully secured?
The length of the stay of proceedings enables the farmer in some cases to look closely at his situation, to engage in short-, medium- and long-term planning or to anticipate crop changes or changes to his operations. Without a stay of proceedings, this would be impossible. Therefore, if the majority of creditors can manage to have the stay of proceedings lifted merely by refusing to participate in the mediation process, the whole exercise will be pointless. They will be able to get around the legislation.
Therefore, we suggest that in subclause 11(2)a)(i), the following be deleted: "or the majority of the creditors referred to in subparagraph 10(1)b)(ii)". After all, the farmer must participate in the mediation process since he is the one who benefits from the protection it affords. Obviously, he cannot benefit from a stay of proceedings without taking part in the mediation.
The same comment applies to paragraph 14(2)(a).
I have one brief observation to make about subclause 15(5) which concerns the appeal board. The French version should be more consistent with the English version. The expression "Les décisions du comité d'appel sont définitives" should be replaced with "Les décisions du comité d'appel sont finales et sans appel", which corresponds fully to the English version.
Let me backtrack a little. Paragraph 12(b) which pertains to stays of proceedings and their effect reads as follows:
12. Notwithstanding any other law, during any period in which a stay of proceedings is in effect, no creditor of the farmer
b) shall commence or continue any proceedings or any action, execution or other proceedings, judicial or extra-judicial, for the recovery of a debt, the realization of any security or the taking of any property of the farmer.
.0930
The expression "property of the farmer" raises several questions. The existing act refers to property in the possession of the farmer. For example, those who had let out the equipment to farmers maintained that because they still owned it, they could take action to reclaim it. In the Miscellaneous Statute Law Amendment Act, 1991, the expression was changed to "property in the farmer's possession". Therefore, the issue was no longer who had legal possession of the property, but rather who had physical possession of it. The stay of proceedings then applied to leasers as well and they could reclaim their equipment during this period.
This bill refers to "property of the farmer". This is even less clear than in the two previous versions. It is unclear as to whether the issue here is the legal possession or physical possession of the property. The legislation should be clear one way or the other. Clearly, the expression "property in the farmer's possession", therefore the physical possession of the property, should be the one retained since the purpose of the act is to allow the farmer to continue his farming operations when experiencing financial difficulty and to work out an arrangement with his creditors.
If the leaser is allowed to repossess the equipment during the period in which the stay of proceedings is in effect, and often we are talking here about a tractor or a thresher, the farmer will be unable to harvest his crop, and this will hasten his demise and the bankruptcy of his farm.
Clause 21 concerns the notice by secured creditors. The corresponding provision in the former legislation, the Farm Debt Review Act, was section 22 which was the focus of several court rulings. A least 20 or 25 rulings involve the interpretation of the effect of the notice. The matter of the notice provided for under other federal or provincial laws has caused the most problems.
For example, under the Saskatchewan Farm Security Act, creditors are required to give notice of enforcement of remedy. Pursuant to subsection 244(1) of the Bankruptcy and Insolvency Act, secured creditors must give notification of enforcement of remedy. They are also required to give notice under article 2757 of the Quebec Civil Code.
What procedure should be followed? Must one notice be given before the other or can they be given simultaneously? Do the waiting periods run out at the same time or are they concurrent? These are the questions most often raised. The new version, which includes the words "proceedings, judicial or extra-judicial," may partially clarify the situation.
However, the provision could certainly be stated more clearly. Clause 12 of the bill begins with the following:
12. Notwithstanding any other law...
Clause 21 makes no mention of this. What inference are we to draw from this? Does this mean that the interpretation of clause 21 should be reconciled with other rules of law? Perhaps.
The first thing to do is to begin clause 21 with the following:
21. Notwithstanding any other law...
That's the first change that should be made.
.0935
Ideally, the following should be added, and I mentioned this on page 4 of my document:
21. Notwithstanding any other law, every secured creditor shall, before giving the farmer any notice that may be required by any other federal or provincial law...
The situation would then be very clear. However, is this what you want? I don't know. Do you want the farmer to benefit from sixty days' notice under the Civil Code, of fifteen days under the Farm Debt Review Act and then of ten days under the Bankruptcy and Insolvency Act? This seems a little excessive. If I represented a bank, I would probably insist a great deal more on this point. Since I generally represent farmers, having more time does not necessarily seem to be a bad thing to me. However, perhaps this should be tempered somewhat.
My other concern about clause 21 is that the existing act required notice to be given according to a set formula set out in the act. The creditor was required to define precisely what security he intended to realize and which property was involved. I am not especially fond of this formula and I think that in any case, the courts have recognized that it was sufficient for creditors to give official notification so that the farmer could seek protection under the act.
In my view, the important thing is the security that the creditor intends to realize to make the notice even more official and to ensure that the farmer who receives it is well aware of what may happen if he does not avail himself of the provisions of the Farm Debt Mediation Act. Therefore, as I mentioned toward the end of my submission, it would be interesting to include the following: "give him a notice [...] and in the notice shall name the security he intends to realize and advise the farmer of the right to make an obligation under section 5".
My third concern about clause 21 is the time frame. The 15-day waiting period is reasonable, particularly as we are talking about 15 business days. This is not specified in the bill, whereas it was in the previous act. It mentioned that one day equalled one business day. Now, it is no longer clear if this is the case. Furthermore, when does the 15-day period begin? Does it begin when the creditor sends the notice, or only when it is received by the farmer? This is not specified either. To avoid any disagreement, I think it would be a good idea to clarify this point.
Therefore, I suggest that subclause 21(2) read as follows:
(2) The notice referred to in subsection (1) must be given to the farmer in the prescribed manner at least 15 business days from the day the notice is received by the farmer before the doing of any act described in paragraph (1).
I would also like to discuss the issue of confidentiality. The subject is covered at some length in clause 24 of your bill, but something appears to have been overlooked in this bill, just as it was in the existing legislation. The filing of an application for a stay of proceedings amounts to an admission of insolvency since pursuant to the legislation, in order to benefit from a stay, a farmer must be insolvent. Insolvency is tantamount to bankruptcy since pursuant to the Bankruptcy and Insolvency Act, as soon as a debtor files for bankruptcy and admits to being insolvent, he can be bankrupt easily by any creditor who holds a minimum $1,000 security. It is not difficult to find a creditor who holds a minimum $1,000 security.
Obviously, an admission such as this can potentially have very serious implications. This is truer still if the application is filed under paragraph 5(1)(b) since no stay of proceedings is involved.
.0940
Let us take a hypothetical situation where a farmer has filed an application under paragraph 5(1)(b) and there is no stay of proceedings. All secured creditors are advised that the debtor has admitted to being insolvent, but three, four or five hours at the most will elapse before a lawyer with some smarts files a bankruptcy petition or a receiving order, that is of course if the farmer cannot avail himself of section 48 of the Bankruptcy and Insolvency Act. This provision states that a private individual involved exclusively in farming cannot be bankrupt.
However, let us consider the hypothetical case of ABC Farming Inc. This company could be pushed into bankruptcy quickly and it might be too late to apply for a stay of proceedings since the damage will have already been done.
Our firm's policy is to explain this situation to our clients. We caution them before they file an application under section 20. We suggest that they begin first by looking to section 16 which involves filing a totally discrete, secret application. The farmer's financial affairs will be reviewed, along with his assets, liabilities, and likelihood of turning a profit. He does not have to declare insolvency, since section 16 concerns farmers in financial difficulty, not insolvent farmers.
Many farmers hesitate at present to invoke the provisions of the law because of this potential problem. Therefore, I suggest that the following be added so that the subclause reads as follows.
24(4) No application filed under section 5,...
namely the application for a stay of proceedings or mediation,
- ...inventory, financial statement, recovery plans or financial review report, of which a creditor
has obtained a copy under section 10 or otherwise...
- because under section 10, creditors can obtain a copy of the report,
- ...may be used, alleged or pleaded in evidence to support an application made against the farmer
under the Bankruptcy and Insolvency Act or any other legal action.
The expression "insolvent farmer" could be replaced by "farmer experiencing serious financial hardship", since this does not have the same connotation as "insolvency". Insolvency is directly linked with the Bankruptcy and Insolvency Act.
Your bill grants certain discretionary powers to the administrator who may have to determine or decide if a farmer is indeed in serious financial difficulty. There would be no notice of insolvency involved; the decision would be a purely administrative one and the information would be protected under existing provisions. Subclause 24(4) as suggested would perhaps be unnecessary if the wording were different.
Clauses 22, 27 and so on of the bill concern penalties and recourse. This is probably the most innovative feature of this bill. The former legislation did not provide for any recourse or penalty when creditors failed to comply with the provisions of the act. An attempt had been made to introduce recourse under the Criminal Code, either in the form of an injunction, damage and interest, and so on, but often the damage had already been suffered and could not easily be remedied.
In the absence of penalties or recourse against a creditor, the courts tended to assess the extent of the damage suffered by the farmer: the farmer may not have received notice, but no serious damage was suffered and therefore, the creditor is not required to give notice.
.0945
Probably 90% of all Canadian lawyers, particularly those in urban regions, are unaware of the existence of the Farm Debt Review Act. They often neglect to mention at the outset of the proceedings that notice was not given.
When the matter came up somewhat later, after a defence had been presented, the court would say: "Since you presented a defence, you gave up your right under the Farm Debt Review Act." That's serious. This addition will have positive impact and will help to remedy this situation.
I would perhaps take things a little further. For the sake of consistency, I would group clauses 22 and 27 together at the end of the act. They would become clauses 27 and 28. Furthermore, subclause 22(1) states the following:
- ...any act done by a creditor in contravention of section 12 or 21 is null...
Pursuant to clause 27, any person who contravenes a provision of the act is liable on summary conviction to a fine not exceeding $50,000 or to a term of imprisonment not exceeding six months.
In our opinion, it will be difficult to exercise this recourse since it will likely have to be proven that the intent was to circumvent the provisions of the act. The courts will also be reluctant to enforce this provision. I doubt very much that the credit manager of the Royal Bank or a lawyer would be sentenced to a term of imprisonment for failing to give notice. They would be severely reprimanded and informed that they had no right to do that. The action will be declared null and void, but that is all.
Financial penalties such as a fine or exemplary or punitive damages are what really hurt. In my view, it is normal that the person who has suffered damage or has been the target of the creditor's actions be the one who is compensated. A fine of up to $50,000 is all well and good, but it doesn't correct the mistake since the farmer does not receive the $50,000. It would be better if the farmer received at least the amount of the fine, whether $50, $100 or $200. But no, the money will be paid to the Crown.
.0950
Therefore, we suggest the addition of a clause which would read as follows:
- If a creditor fails in the obligations set out in sections 12, 21 or 24 of this act,...
- clause 12 concerns the length of the stay of proceedings, clause 21, the notice, and clause 24, the
requirement to respect confidentiality,
- ...the farmer may, without limiting the other forms of recourse provided for in this act, apply to
the competent court to sentence the creditor to pay him exemplary damages.
- Nothing in this act shall be interpreted as limiting the exercise by a farmer of any other right or
recourse that provincial law, this act and the Agriculture and Agri-Food Administrative
Monetary Penalties Act allows him, to obtain the cessation of any contravention or redress for
any damage suffered by him as a result of any action by a creditor in contravention of sections
12, 21 or 24 of this act.
With your permission, I will conclude on a much more general note. I am going to get away from the subject-matter of the bill somewhat, but I will still be talking about insolvency.
There is one fundamental or sacred principle involved when one speaks about the law. The law must be clear and coherent so that no one can claim ignorance of it. Of course, the State is responsible for ensuring that the sources of the law, that is the laws, regulations, decrees, policies, decisions and so forth form a cohesive whole, and this is not always the case in Canada.
This is especially true when it comes to farming. For example, with respect to farm financing, indebtedness, insolvency and bankruptcy, four subjects which form a whole, different words are used to designate the same thing. The words "farmer" and "farming" are defined in a variety of ways.
In the Farm Credit Act, "farmer" is defined one way, while in this particular bill, it is defined another way, and in still other ways in the Bankruptcy and Insolvency Act and in the Bank Act, section 427 of which refers to financing. There is perhaps a need for greater consistency.
Indebtedness and insolvency should also be considered within the same framework. One must refer to the Farm Debt Review Act for information about the minimum protection afforded by the stay of proceedings and to section 48 of the Bankruptcy and Insolvency Act to avoid bankruptcy. Provincial laws dictate which property can and cannot be seized. There is also a constitutional problem that I don't wish to get into, but one must refer to the Bank Act to find out how to dispose of the property of a farmer who has stopped making payments. Therefore, there is not much consistency.
.0955
Obviously, we must not simplify matters unless there is a good reason for doing so. Last week, I attended the World Agrarian Law Congress in Tunisia. One of my colleagues used the expression "unity in distinctiveness" when referring to agrarian law because it is important for agrarian law to form a whole, even though its distinctive characteristics must be recognized.
It is rather paradoxical that here in Canada, we have so many legal reference sources when it comes to agrarian law. Last year, we identified 80 federal and provincial laws which applied to Quebec farms and 500 regulations. Obviously, this creates a problem. However, an even bigger problem is that legislation of a general nature does not recognize the distinctive characteristics of farming. This problem should be addressed.
This concludes my presentation.
[English]
The Chairman: That bell is calling the House.
Thank you very much, Mr. Pomerleau.
We have a number of members who apparently have to leave early. Mr. Chrétien has to leave in five minutes, so we'll go quickly to him. I understand Mr. Hermanson then has to leave by 10:10 a.m., so we'll go to Mr. Chrétien, Mr. Hermanson, and Mr. Easter.
You set your own times, so I assume you're going to stay within them.
[Translation]
Mr. Chrétien (Frontenac): Mr. Pomerleau, I would remind you that in Canada, over 60% of farmers must seek outside sources of income. Without this outside source of income, most of them would not be able to keep their farms. Could this reality affect in any way your definition of a farmer?
Mr. Pomerleau: The definition that I give in my submission depends of course on what you want to do. I have adopted a clear position as a lawyer. There is no question that a majority of farmers must seek outside sources of income.
If, for example, the legislator's intent here is to exclude gentlemen farmers, perhaps he should come up with another definition. I am not really sure what you want to do with this definition, whether you want to limit or extend the accessibility of the legislation. If you want to extend it, then your definition is quite appropriate since it applies to at least 95% of farmers.
Mr. Chrétien: You spoke earlier about a technicality in the legislation. After a mere two hours, creditors had succeeded in getting tractors, threshers and other farm implements loaded onto tractor-trailers. If I understood you correctly, once loaded, t his property cannot be released. I was very surprised to hear this and I hope that the new act will rectify this situation.
Mr. Pomerleau: I think we have to include the automatic nature of the protection in the statute.
Mr. Chrétien: So you feel the word "automatic" should be included.
Mr. Pomerleau: Yes, yes. That would make it much clearer.
Mr. Chrétien: In the bill as it stands, there are frequent references to creditors, and sometimes to secured creditors. When the bill refers to "creditors", does that include all creditors, secured or not?
Mr. Pomerleau: Yes.
Mr. Chrétien: Would it not be preferable to refer only to "secured creditors"?
.1000
Mr. Pomerleau: That would seem redundant. As far as I know this matter has not been raised since 1986, that is since the Act came into effect. The existing Act only refers to "creditors", but I think that we could clarify that by adding a definition which would state that the word "creditors" includes both secured and unsecured creditors.
Mr. Chrétien: Very well. A week ago one of our witnesses put a great deal of emphasis on the human aspect, on the extremely difficult moments that a farmer goes through when he is facing the bankruptcy of his farm. Since you deal with such cases, have you seen situations where this led to a divorce or in extreme cases to a suicide in a family? Could we add a subclause to the bill to provide remedies, a subclause that would mention the possibility of obtaining assistance from competent counsellors?
Mr. Pomerleau: There is no doubt that any insolvency, be that of a farmer, businessman, consumer or any individual, has very severe consequences on the social environment of the person who is having trouble.
I must add that producers, farmers, are remarkably strong people. In my firm, we have not very often seen situations where people were affected so severely that the damage was irreparable. That being said, I can think of a few clients who still have not gotten over their setbacks ten years later.
Mr. Chrétien: One last point, Mr. Chairman, about guardianship. Have you in the course of your work encountered problems when a guardian had to be appointed for a farm?
Mr. Pomerleau: Generally, 99% of the time the guardian has been the farmer. Thus, there have been very few problems related to that. I can however point to one problem case I have at the present time: the Board told the person to keep his assets, which means that he must harvest his crops even though he does not have the financial means to do so.
That case is fairly exceptional since generally there are very few problems and so I wonder whether this might not cause the stay of proceedings to be lifted.
Mr. Chrétien: Mr. Pomerleau, thank you for having come before the committee.
Mr. Pomerleau: Thank you.
[English]
The Chairman: Thank you.
Mr. Hermanson.
Mr. Hermanson (Kindersley - Lloydminster): Thank you, Mr. Chairman, and good morning. I like your tie, by the way. I thought I'd mention that.
I have a couple of areas that I want to touch on. One is regarding termination of stay. Looking at your proposed amendment, it looks as though you're saying the farmer can refuse to participate. We'd then of course have the consequences of the proceedings against him continuing, but the creditor just wouldn't be allowed to not participate in good faith.
Previous witnesses to our committee suggested - and I brought this issue up - that it doesn't matter. Creditors are very careful not to seem uncooperative, because it will hurt their reputation in the farming community and they need to do business with the community on an ongoing basis, whether it be with the fuel supplier or the local bank.
Is that a valid argument, or do you still stick by your argument? You've had experience, you've dealt with a lot of these cases. You see that as a real problem where the majority of creditors would say they're not going to cooperate so they can get their security and move on.
Mr. Pomerleau: Each case is different, but it happens sometimes that the secured creditors are from the city and don't understand the purpose of this bill. They are used to doing everything fast. Sometimes they don't have very many farmers as clients, and they are not ready to participate in such a discussion on mediation.
.1005
So, yes, in the majority of the cases, the secured creditors are well known to the community, but it's not always the case. That's why I'm still sticking with my proposal.
Mr. Hermanson: Okay. The other question is with regard to confidentiality. You make some good points in your amendments regarding confidentiality.
We had a previous witness who stated he thought it was wrong that the financial report would be made available to all creditors, whether or not they showed up for the mediation hearings. Currently, under the Farm Debt Review Board only those creditors who appear...would that be a second point that would cause you concern, as well as the issue you raised this morning?
Mr. Pomerleau: It depends. When the financial reports are really bad, it's a good thing the creditors get them. When they're not that bad, if there is still some possibility of the creditors being able to get their money back, it's not always a good thing that they get the financial statement. I would be in favour of their getting just a short resumé of it.
Mr. Hermanson: Really, what good does your amendment on subclause 24(4) do? Once the creditors know that an application's been made, even if they don't use that application as a reason to foreclose, banks will call loans. They will call up the loans based on the agreement the farmer's signed with the bank; some of these loans can be called...you know, the size of your finger. So what difference is this going to make? What protection is there for the farmer? Once the lending institution hears about this, they don't need to use this application as evidence against the farmer.
Mr. Pomerleau: Well, it's the best proof they can get that the farmer is insolvent. You're right to say that any bank can call their loan very quickly, but it's harder to send somebody to bankruptcy court. You must prove that the person you want to petition into bankruptcy is really insolvent. That's not easy, and the judges are very clear on that. You must prove it beyond a reasonable doubt. If they can show to the court that the farmer admits he is insolvent, that's it, he's into bankruptcy.
Mr. Hermanson: Thank you. I have to run.
The Chairman: Thank you, Mr. Hermanson.
Mr. Easter.
Mr. Easter (Malpeque): Thank you, Mr. Chairman.
First I want to congratulate you on a well-researched work, and second for the tie. To find something in this town that the hon. member opposite likes is really quite a feat, indeed.
The Chairman: We don't like yours, though.
Mr. Easter: Under subclauses 11(2) and 14(2) you talked about there being pressure...that it would be possible to get around the farm mediation process by those subclauses, and you suggested removing some of the wording.
How in your estimation does that compare with the current act? Under the current act the creditors can't get around it. I've looked, but I can't in my mind sort it out, that there is a lot of difference in terms of how creditors could get around it in the new act versus the old act.
Mr. Pomerleau: In the old act there were two sections, section 16 and section 20. Section 16 had a preventive purpose; section 20 was more drastic. Now we have removed the preventive aspect of the act, but we haven't put everything in the form of the old section 20.
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I'll switch to French if you don't mind.
Mr. Easter: Please do. We get translation.
[Translation]
Mr. Pomerleau: Subclause 5(1)a) provides for a stay of proceedings, a review of a farmer's financial affairs, and mediation between the farmer and all of his creditors. Subclause 5(1)b) provides only for a review of the farmer's financial affairs and mediation between the farmer and all of the farmer's secured creditors, and this may be extended to unsecured creditors if the administrator's consent is obtained.
Subclause 5(1)b), as I said earlier, is of little interest because it provides for a meeting with a few secured creditors whereas there is no pressure on the secured creditors. I would prefer that clause 5 only refer to a stay of proceedings and that a subclause be added that would refer solely to a review of the farmer's financial affairs. I would reintroduce the preventive aspect into your bill because this would be more promising as regards the discussions that would still be possible.
The farmer who has obtained a review of his financial affairs might be given the option of going further and of asking for the assistance of a mediator to arrive at an arrangement with his secured creditors. He would have to be given the option to do so and his secured creditors would not automatically obtain a notice as soon as the farmer requests a review of his financial affairs. The purpose is not to hide anything from the secured creditors, but simply to try to maintain, temporarily, better relations between the debtor and the creditors.
In any case, when people reach that point they generally are in arrears but they are not always very large amounts and the banker is not always advised. But the banker certainly will lose confidence in the farmer if the farmer admits that he is insolvent and submits an application under the law. I don't know if I have answered your question clearly.
[English]
Mr. Easter: I was dealing more with the discretionary termination of the stay of proceedings, but the topic you're on leads into my second question. Maybe we can come back to the discretionary termination.
One of the concerns that some of us have under the bill is the loss of section 16 of the old act and moving to the Farm Consultation Service. It will be great if the Farm Consultation Service will do what it's intended to do, but given the fact that there's no legislative authority as such.... There is legislation under the mediation act regarding insolvency, but in cases of farmers in financial difficulty, there's not the power of legislation with stays of proceedings, etc. You said earlier in your submission that it's really the stay of proceedings that puts the pressure on the creditors to negotiate; otherwise, why would they?
Since you have been involved in this field, what impact do you see in not having legislative authority for the Farm Consultation Service? Will it be possible to achieve settlements that will put farmers in a position of being able to survive and not going for a while after having farm consultation and then falling under the insolvency provisions? That's my worry.
I think from the cases I've worked on - and I've worked on a lot - you need to get the best settlement you can possibly get right off the bat. Otherwise, if you get a settlement that's 70% as good as it ought to be, down the road in two years you're right back where you started and it becomes an even greater struggle. That's my concern.
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[Translation]
Mr. Pomerleau: I agree with you. The law must allow for the problem to be settled. The problem must not be postponed by one, two or three years. It happens quite frequently when things are not followed up sufficiently that the plan goes awry and settles nothing.
I might mention in passing - and this is very unfortunate - that a certain number of consultants don't do the work they are supposed to do, in my opinion. I'm referring to external consultants hired by the Farm Debt Review Board, consultants who tend to be in a big hurry to carry out the review of the farmer's financial affairs in order to obtain their $2,500 or $3,000. They bring nothing new to the situation. They always suggest the same kinds of solutions and rarely adapt them to the individual situation; they don't really take a careful look at the particular circumstances of each farmer.
I think that we must maintain some kind of preventive review of the farmer's financial affairs without notifying creditors. Why without notice? Because the lawyers and others who are entrusted with turning a farm around generally take advantage of this period to attempt a financial reorganization of the organizational structure of the business. A small business which generates little income and has only one crop is certainly in a different kind of situation. But in the case of a farm that produces pork or cereals, for instance, where some activities are profitable and others not, and when we have an overall picture of the situation prepared with the assistance of the Farm Debt Revue Board this allows us, without causing the creditors undue stress, to encourage the sale of certain equipment or lands or suggest that one activity be abandoned in favour of another which might be more profitable in the short, medium or long term. That is why I think it is imperative that you maintain a provision similar to clause 16.
[English]
Mr. Easter: I think what you're implying regarding subclauses 11(2) and 14(2) is that the administrator, in not seeing movement by the creditors, could prematurely allow a termination of the stay of proceedings. Is that what you're implying?
[Translation]
Mr. Pomerleau: No, I would prefer, if nothing happens, that the 30-day stay of proceedings be maintained. The first 30-day period should at least be respected and as the former Act stated - and this is not clear in the new bill - if the administrator notes that there is no will to settle matters the stay of proceedings should not be renewed for another 30-day period, and another and another. Not renewing a stay of proceedings is one thing, and lifting it is something else; these are two completely different things. I would be in favour of not renewing, but I don't think that stays should be lifted prematurely. However, if the creditors are not acting in good faith - and this can be hard to assess - and decide that they will not participate, the stay must be lifted from one day to the next.
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Creditors may signify their intention in an extremely expeditious way. If a farmer files an application pursuant to 5(1)a) and a dozen creditors are feeling rather aggressive about that particular farmer - this does happen from time to time, when the producer is attempting to improve things for his own benefit - those creditors may convene a meeting to have six out of ten of them sign a letter stating that they will not participate in the mediation. They send that letter to the Board and the administrator, under the existing Act, has practically no other choice but to lift the stay of proceedings.
[English]
Mr. Easter: Now I understand what you're getting at, Mr. Chairman. Thank you.
The Chairman: Mr. Calder.
Mr. Calder (Wellington - Grey - Dufferin - Simcoe): Mr. Pomerleau, thanks very much for being here this morning. I found your presentation very enlightening, so far.
As soon as a farmer admits to the fact that he has a financial problem - and especially in the types of markets we have today - and if the banks think the farmer is in trouble, they may take a look at the market. If the market is good for moving farm assets, they may try to rush this through as quickly as possible so they don't get stuck with something they can't move. That's reality.
I see by your presentation that you're basically saying - and it's true - that paragraph 5(1)(b) is going to be the review of the financial affairs and that subclause 9(4) is going to be the prepared financial report. The problem I have with that is with paragraph 16(1)(b), which basically allows the bank to appoint its own guardian, because (b) basically the way it's written with the addendum at the end of paragraph (a) supersedes (a) and (c). If the farmers try to interfere with that, paragraph 14(2)(d) is going to cancel the stay of proceedings.
The Chairman: If I could just interrupt for a minute, I think an amendment will come forward later that will look after some of the concerns on clause 16, Mr. Calder.
Mr. Calder: Okay, then. Basically that's what I wanted to highlight to you, because I see this whole process as being fairness and trust. That's 80% of the issue here, and I feel that with paragraph 16(1)(b) the farmer should have the ability to object to a guardian appointed by the banks.
The Chairman: That will be clarified, Mr. Calder.
So that we don't need to get into a discussion, there is an amendment. This concern has been raised quite strongly in the past by a number of witnesses and a number of members, and it has been addressed in an amendment that will come forward.
Do you have any other comments, Mr. Calder?
Mr. Calder: No, that's fine.
The Chairman: Mr. Pomerleau.
Mr. Pomerleau: Under provincial laws, the civil procedure code, it's usually the debtor who is the guardian. You need a very good reason to have him removed from that role. I think it should be the same thing here. You must have a very good reason to put somebody else there.
The Chairman: Mr. Hoeppner.
Mr. Hoeppner (Lisgar - Marquette): Thank you, Mr. Chairman.
Welcome, this morning. I feel that I'd like you to represent me if I ever got into financial problems.
I was impressed when you brought out the point that under this bill, once a farmer cooperates, he more or less admits that he's insolvent. Isn't it to his detriment to cooperate with this? Would he not be even wiser to go through the bankruptcy court? He's in such bad shape he's only trying to rescue a few assets. He's probably not going to be viable.
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[Translation]
Mr. Pomerleau: Our firm's experience has shown that in Quebec - I'll limit my remarks to Quebec - very few farmers who have gone through a process like that one who have finally had to declare bankruptcy. This means that we save a lot of them, even though their situation may appear particularly difficult or critical.
I would prefer a more judicial framework for this type of bill. France among others has copied the existing act and has done a lot with it. The French passed a law on the out-of-court settlement of agricultural producers' conflicts that was in fact inspired somewhat by our Fund Debt Review Act, but they have made the intervention and the implementation of the settlement plans more structured and legally determined. In France, the judge may impose a plan on the creditors in certain cases, for instance when the viability of the farm is demonstrated. This can go quite far and is similar to the previous law on arrangements between farmers and their creditors which went back to the 1930s and was repealed.
But is this desirable? Is it preferable for the farmer to go through a more legally determined procedure? This is what you are saying, to a certain extent. Would this be a surer source of settlements? I'm not certain that that would be the case.
Your colleague on your right spoke earlier of the relationship that binds debtors and creditors in the agricultural field and it is true that this is a world onto itself. Often, creditors will prefer to incur large losses rather than taking on the responsibility of pushing the farmer into bankruptcy or into an extremely difficult financial situation. We see incredible settlements in the agricultural field, out-of-court settlements, under this Act or under the terms of some private agreement. For instance, I've seen creditors agree to a reimbursement of 15% of a debt over a ten-year period, and I have seen such terms accepted by unsecured creditors for a debt of several hundred thousand dollars.
This type of thing is never seen in the business world, but the close links that exist in the agricultural community between creditors and farmers are such that it is sometimes very awkward for a creditor to refuse a settlement. Personally, I prefer to use the Farm Debt Review Act rather than submitting a postponement application directly or declaring bankruptcy, because there are other solutions.
[English]
Mr. Hoeppner: The reason I'm bringing this up, sir, is that I've seen under part XI of the old act that this is usually where the problem started. They started to reorganize or to downsize, and a lot of those people did become viable. But if they waited to the point at which we are waiting now, it was very hard for a lot of them to restructure and become viable. Usually they had to make that decision a year or two down the road and go out of farming anyhow. Those two years caused a lot of human hurt.
I've said before during these discussions that I think we are focusing our attention at the wrong end of the scale. We should be focusing it more - not at part XI or section 16 - to prevent them from getting to be insolvent.
What I see happening so often is that the secured creditors will come out pretty well because of section 20, but it will take down more unsecured creditors than it would have before. That's why I'm wondering whether getting farmers to participate under this new act will really be that beneficial.
[Translation]
Mr. Pomerleau: Generally speaking, I think so, because experience shows that a certain number of arrangements are finally made. I would not say that all of those arrangements have been concluded thanks to the Farm Debt Review Act because that would not be true.
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You mustn't think that the intervention of the Board is what solves all problems, but let's say that the stay of proceedings allows people some time to think. Time also allows people to calm down. So that period is particularly useful.
However, I think that the fact of going directly to a postponement proposal under the Bankruptcy Act is not a bad way to arrive at a settlement since in some cases we do recommend that the Board choose a postponement proposal type of approach when the number of unsecured creditors is very high. That is to say that if we can "control" a certain number of unsecured creditors, we can then force an arrangement with all of the others. That is one way of doing things, but we do have a choice. I have the option of invoking the Farm Debt Review Act or choosing a much more traditional course of action which is the postponement proposal. I prefer having that option to not having it.
But I do agree with you that more must be done to prevent these situations. That is what is most important and that is where the least work is being done. The emphasis should be put on that.
In Europe, committees made up of producers and the representatives of various groups were struck. The Canadian Federation of Agriculture, for instance, could sit on such a committee with people from Agriculture Canada, etc. These would be advisory committees where people who are having financial difficulties could go for a consultation. It is quite simply a bona fide administrative procedure which makes it possible for people to have discussions and find out what others have done and obtained, and look for similar solutions and satisfactory settlements.
I don't know whether it would be possible to do that in Canada because the situation is very different here, but it is a solution which I myself found quite interesting.
[English]
Mr. Hoeppner: I'm looking at the stay of proceedings, and it's consent at 60 days, right? Looking at the grain industry, sometimes when these creditors initiate these proceedings right after harvest or before harvest so they know they can get access to most of the products.... Would it help any as far as the grain industry is concerned to take that another 30 days or 60 days so that farmers...?
The Chairman: For clarification, it's a maximum of 120.
[Translation]
Mr. Pomerleau: It might be worthwhile to add something about - not a postponement - but the time of year during which creditors may not exercise their guarantees. But constitutionally I don't think that this would be in keeping with provincial powers because property and civil rights is a matter of provincial jurisdiction whereas insolvency is federal. This might pose a constitutional problem but I think it would be good to provide that a farmer's assets cannot be seized from May to November, for instance. It might be worthwhile thinking about something along those lines.
I think that there is a similar provision in several provinces. In Quebec, in the case of procedures involving fishermen, for instance, you cannot seize a fisherman's boat during a certain period which corresponds to the fishing season, the period when they make their income. It says in fact that before seizing a boat, the fisherman must be given the opportunity of correcting the situation. It might be interesting to consider something like that, but the concept needs further thought.
.1035
[English]
Mr. Hoeppner: That was my concern. A lot of the farming issues are seasonal, and to have it interrupted during that season is very detrimental.
Thank you very much, Mr. Chairman.
The Chairman: Thank you very much. I believe that's the last questioner.
I have a couple of comments, Mr. Pomerleau. You certainly have given us a detailed analysis from your point of view of experience and expertise on the bill, and we thank you very much for that. We will be making some amendments to the bill for clarification and other reasons.
I do have a question for you, and I want this taken the right way. If a number of the suggestions you have made in your presentation are not able, for whatever reason, to be enveloped in the bill.... Your view is of the Farm Debt Mediation Act, with the partnering initiation of the Farm Consultation Service, which I'm sure you're aware is a program in the department. Will producers, farmers, and the whole process be better in the future than they have been in the past?
[Translation]
Mr. Pomerleau: I think it is fundamental that the preventive aspect be reintroduced. I don't think disregarding this question is of any benefit whatsoever. Adding sanctions and recourses is without a doubt a major improvement, and the clarification of the notice along the lines of other federal and provincial notices also seems very positive to me.
[English]
The Chairman: The Farm Consultation Service's initiation as a program will certainly be made available and emphasized to producers in the early stages of their difficulties. Have you ever been involved at that stage, which I guess under the old act would be early - section 16 - requirements? I hope the consultation service will kick in in the quiet way that it can kick in - I should say ``be made use of'' rather than the term ``kick in'' - as a preventive medicine, whereas we maybe haven't emphasized that as much as possible in many cases in the past.
[Translation]
Mr. Pomerleau: It must be said that the vast majority of lawyers don't even know that this law exists. You can thus imagine that a lot or producers and farmers don't know about its existence either.
Consequently, there would have to be a great deal of publicity around the existence of those aid committees if they were to be useful and if producers were to profit from them. It is important, when a producer or farmer is undergoing financial difficulties that the situation be played down as much as possible. The farmer must also be given a type of assistance that is not only financial, i.e. analytical, but will also make him understand that his situation, though difficult, is not necessarily irreversible and may sometimes be quite normal. Many businesses go through difficult cycles, difficult periods, and we must be able to explain that to producers.
When producers come to see me at my office I examine their financial situation and if I see that they are bankrupt and will probably have to go through a bankruptcy procedure I put papers and figures aside and I explain what bankruptcy is to them. Often, people leave my office feeling that they are indeed going to have to declare bankruptcy but that the world is not coming to an end for all that.
.1040
So any consultative committees that are set up - and they already exist under another form - must take that aspect into account. We must go beyond taking care of the strictly financial problem. There is the human aspect which we were referring to earlier. I think that between the committees and the bill, we will be able to come up with some positive solutions.
In conclusion, I would say that the Farm Debt Mediation Act must be made into a coherent whole. Ideally, some of the provisions which appear in the Bankruptcy Act should be deleted and inserted into the Farm Debt Review Act, and that Act should be turned into something that reflects the reality of farming operations.
Farms that fall under the Bankruptcy Act come under the scrutiny of trustees who have never seen a chicken or a cow. They are dealt with by trustees who have no idea what to do with a shipment of tomatoes and often make mistakes, unfortunately, mistakes in good faith that they are not responsible for. I think that it is time for some comprehensive thinking about this whole problem. This may not be the right moment, but I hope that this reflection does take place within five or six years, because it is important and urgent that it take place.
For the time being, very few serious problems have in fact cropped up, but there will inevitably be some. It would thus be preferable to put in place an adequate structure to deal with those rather than having to turn to a mechanism such as the Bankruptcy Act which is not really appropriate for producers.
[English]
The Chairman: Thank you very much, Mr. Pomerleau. We've taken extra time this morning with you, but we value your input and your participation. Thank you very much again for joining us today.
[Translation]
Mr. Pomerleau: Thank you.
[English]
The Chairman: We also have some people with us this morning from the department. I will ask them to come to the table. There obviously have not been bells. Maybe there will not be bells. I don't know what's happened, but we will continue until 11 a.m., and if we don't finish with the officials today, I would suggest that when we go to clause-by-clause, scheduled for Thursday, we will continue at that time.
Mr. Pickard.
Mr. Jerry Pickard (Parliamentary Secretary to the Minister of Agriculture and Agri-Food): I understand that the bells will be at 3:30 p.m. today rather than now -
The Chairman: We'll be done by then.
Mr. Pickard: - so I believe we won't be interrupted.
The Chairman: Thank you. I'd ask Lois James, manager of adaptation policy in the policy branch, Julie Mercantini, senior policy development officer, and Diane Fillmore, counsel in legal services, to come to the table with Mr. Pickard.
Mr. Pickard: Thank you very much, Mr. Chairman. We certainly appreciate being able to come and help the committee with any aspect of the bill that we can. The Farm Debt Mediation Act and the consultation service are very important to us, and we believe they're very important to the farming community.
It's my pleasure today to clarify some of the concerns and questions on Bill C-38 that have been raised over the last while. During the last few weeks there have been many questions raised.
We've been discussing Bill C-38, the Farm Debt Mediation Act, which will repeal the Farm Debt Review Act. We've also had some discussions about the Farm Consultation Service, which is a complementary program that will be implemented at the same time as the FDMA but is not part of the bill. The FDMA and the Farm Consultation Service will be funded through the Canadian adaptation and rural development fund, which is referred to as the CARD fund.
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Up to $4 million annually may be used by these two services. The expenditure forecast for the Farm Debt Mediation Act is in the neighbourhood of $2.2 million, and the balance of the funding, up to $4 million, will be $1.8 million for the consultation service. That in itself points out how important we see the Farm Consultation Service to be, with the added funding.
In response to a point that was brought out, I would say at this time that it is important that we well understand Mr. Pomerleau's concern about knowledge of the act and knowledge of the services that are available. Within that $1.8 million, we have set aside some $250,000 in advertising and making awareness programs of the acts that will be put in place.
Industry groups have asked that the Farm Consultation Service be separated from the Farm Debt Mediation Act. They would like it to be actively promoted with a positive spin, which would not be possible if it were linked to the insolvency situations. The Farm Consultation Service would encourage more farmers to seek help early before the onset of serious financial difficulties or insolvency. As such, the Farm Consultation Service will be that preventive action that we've discussed very carefully in the last hour.
The appeal board was also requested by industry to give farmers and creditors the opportunity to appeal the administrator's decision at that time and extend termination stay of proceedings, if required. If, for example, a stay of proceedings is being terminated and a farmer is of the opinion that a satisfactory arrangement may still be reached, he may appeal to the appeal board. The board will then review the file, including any additional information brought forward by the farmer and creditors, and will make a final decision on the stay of proceedings.
Creditors may also appeal the granting, extension, or termination of a stay. The outcome of mediation, either the arrangement or the lack of an arrangement, cannot be brought to the appeal board. The mediation process is voluntary, and the outcome is not subject to an appeal.
Under the current Farm Debt Review Act, mediators are Order in Council board appointees. Under the Farm Debt Mediation Act, they will not be Order in Council appointees or ministerial appointees. Mediators will be selected through the government competitive contracting process. The positions will be advertised through local newspapers, through trade associations, and the like, and anyone can apply.
Those who demonstrate that they meet the qualifications will be given a standing contract. There may be a number of individuals in any given province on a list of standing offers as mediators for the Farm Debt Mediation Act. The administrator will select an individual for each case, depending on the commodity experience, financial knowledge, language, and geographic location of the mediator. Expense will be incurred only if a mediator is called upon to work on a case.
One phrase that came up a number of times over the last few weeks is ``humane aspect of the act that will help farmers''. I would like to make it clear that farmers, under the Farm Debt Mediation Act and the Farm Consultation Service, will have access to the same help, and more, as they have under the Farm Debt Review Act.
Under the Farm Debt Mediation Act, insolvent farmers will still have an expert on farm to do the financial review, but they will have an additional advantage of being able to use their own financial consultant for the preparation of a recovery plan. They will continue to have help from a neutral party to work on any arrangement with the creditors.
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Through the mediator, under this new process, there is a great deal of added help. Under the Farm Debt Review Act there was a three-person panel at every panel meeting. Under the Farm Debt Mediation Act, these additional experts may be brought to the table, as needed, for more complicated cases.
They can now also appeal decisions regarding the stay of proceedings to an independent appeal board. All farmers who went through the farm debt review process were surveyed a few years ago to gauge consumer satisfaction. The result showed that farmers were more satisfied with the service of an expert and with on-farm financial review that was done.
Farmers were less satisfied with the three-member panel process. The services of the financial experts will continue to be an integral part of the services provided under both the Farm Debt Mediation Act and the Farm Consultation Service. The Farm Consultation Service will provide more than what was available to farmers in financial difficulty under the Farm Debt Review Act.
They will continue to get the services of an expert for on-farm financial review, and, under the Farm Consultation Service, the expert consultant can also prepare a five-year recovery plan. As such, the Farm Consultation Service is more preventive in nature.
We, as a government, are responsibly helping farmers to look at the future before problems become more serious. Depending on the time required for the expert to complete the financial review and the wishes of the farmer, the expert consultant may also be able to accompany the farmer to meetings with the creditors to review financial difficulties and propose alternate courses of action.
The issue of section 16 applicants under the Farm Debt Review Act has been raised a number of times as well, and I'd like to spend a few moments talking about those farmers who previously applied under section 16 of the Farm Debt Review Act.
We've always referred to section 16 as being for farmers in financial difficulty. The farm debt review boards who came to speak to us over the past weeks have explained that farmers, who are technically insolvent but want help in mediating with one or two creditors and want a financial review but do not want a stay of proceedings, must currently apply under section 16 of the Farm Debt Review Act.
Under the new Farm Debt Mediation Act, those insolvent farmers who previously applied under section 16 would apply under paragraph 5(1)(b), where services of a field expert could be provided for the financial review. Mediation services with creditors would also be provided but no stay issued. Thus, many of the existing section 16 applicants would likely apply under paragraph 5(1)(b) of the Farm Debt Mediation Act. Those section 16-type farmers, who are not insolvent but facing financial difficulty, will be eligible to apply for assistance under the consultation service.
We are also presenting three amendments today to better clarify the intent of Bill C-38. The first is to clause 10. The current clause requires distribution of farmers' confidential record reports to all creditors listed in the application. This would included minor unsecured creditors as well as major unsecured and secured creditors. The problem with such a wide distribution of information is that it then becomes difficult to maintain confidentiality and this eventually could undermine the integrity of the program.
The current practice under the Farm Debt Review Act is to distribute the financial report only to those persons participating in mediation meetings. This amendment will restrict the distribution of the farmer's financial report to creditors who would be participating in mediation meetings, thus bringing the consistency of the old act to this new act.
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The second amendment pertains to clause 16. There was some confusion as to the interpretation of clause 16. This amendment clarifies that if a creditor nominates a guardian, the administrator can appoint that nominee or can choose to appoint an independent guardian. This particularly addresses the concerns raised at the standing committee last week and again raised by Mr. Calder today.
The third amendment is a minor correction of the French version to make it comparable to the English paragraph 17(2)(b).
Thank you very much, Mr. Chairman, I think that briefly outlines some of the issues we're bringing forth today. I'd be glad, with the help of our senior officials, to answer any questions we may.
The Chairman: Thank you very much, Mr. Pickard.
Mr. Collins.
Mr. Collins (Souris - Moose Mountain): Mr. Chairman, thank you very much.
Jerry, I'd ask you to highlight again one of the items that came up and was talked about just previously so we don't get into the problem of trying to resolve situations that are a disaster. How are we going to work through the preventive level? Just run me through that one again, if you would, because I think it's really going to be the crux of the whole situation. If we can assist them ahead of time, maybe we've done something.
Mr. Pickard: Very clearly, the reason we have set aside the $1.8 million within the preventive side, or the consultation service, is that we believe just what Mr. Pomerleau suggested today, that it is very important we change directions and get to the farmer who may be experiencing difficulties at an early stage but is not at the insolvent level.
It's very important to understand that if the farmer, at this point in time, the early stages of problems, is in a position where his creditors aren't banging on the door and he can make his payments and stave off the creditors because he is solvent, if we don't deal with the issue at this time there will be major problems down the line.
So we have put in place the process whereby someone can come in, look at the financial aspect of the operation, make recommendations, look at all existing programs and avenues that may be available for corrective measures to help him, set out planning on purchases and disbursements of capital, set out whatever arrangements can be made within a one-year, a two-year, a five-year plan, and try to put in place for him a business operation, a plan with proper advice and knowledgeable people who know all existing programs and avenues where help may be streamlined and brought in. What we are doing is really taking the individual who is not insolvent but is a person who needs help at the time - he may become insolvent; the bank may starting knocking on his door - we're going to deal with him.
To make sure this is known by the lawyers, by the accountants, by all people who are dealing with it, we've also set out within that program a means by which we are advertising and making it known to the public that this program does exist, it's there for the aid of the farmer who has some financial problems, it's there for the aid of the farmer who may not be really in a difficult stage but needs some corrective measures, needs some help to make him more prosperous; that, as well, is part of it. I think there are two or three different aspects here that answer those preventive questions very clearly.
The Chairman: We only have the room until 11 a.m., which is two minutes from now. We're not going to complete the questions of those who wish to address the officials here today, so I'll ask them to come back. We'll adjourn the meeting now and ask them to come back on Thursday morning at 9 a.m. and complete this portion of our discussion, and then hopefully we'll move into clause-by-clause on Bill C-38.
I remind the members of the steering committee that we have a meeting in two minutes from now in room 307. And we meet again tomorrow as a committee with the officials on Bill C-60, the single food agency, at 3:30 p.m.
Mr. Easter: Can I have a question to you before we adjourn? It's on process actually.
The Chairman: Yes.
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Mr. Easter: I wonder if we're going to be in a position to deal with clause-by-clause on Thursday. You'd raised a number of questions with a number of witnesses on getting back to us with the statistics on insolvency versus financial trouble. Will we have that information by then?
The Chairman: We had one letter back from Ontario and I think it was circulated. I don't know whether we requested that from some others.
Mr. Easter: It was requested from Quebec, from Ontario, and I believe the department.
The Chairman: We requested it from Quebec and we didn't get it yet, the clerk says. I think we'll have to decide Thursday where we are. It's my understanding that there may be some desire from other people to have some input with some further amendments as well prior to this. So we have this bill at this stage and we'll deal with it that way.
Mr. Pickard: I don't want to interfere with the process, but in the department we have all the statistics with regard to solvencies and insolvent cases and so on and we could possibly share those statistics with everybody on the committee and get them to you today.
The Chairman: We asked for those applications under section 16 versus those under section 20. In other words, if you could provide us on a province-by-province basis the back-up to the figures for the percentages in section 20 versus section 16, and the percentages of success, I think it would be worth while.
I think Mr. Easter has a valid point. It's not my intention to rush the bill, and we will deal with it as fully as we possibly can before we move to clause-by-clause. If we don't get to clause-by-clause on Thursday, so be it, we don't get there on Thursday.
Mr. Pickard: We'll distribute that information to you today so that you have a copy of it and we can then make sure. Could you please distribute it to the members of the committee.
The Chairman: Get it to the clerk and we'll look after it. Thank you.
The meeting is adjourned.