QUEEN’S BENCH FOR SASKATCHEWAN Citation: 2010 SKQB 187 Date: 2010 05 27 Docket: Q.B.G. No. 1298 of 2009 Judicial Centre: Saskatoon BETWEEN: F.M.I. DEVELOPMENTS LTD. and 1269917 ALBERTA LTD., GEORGE C. SHEN PROFESSIONAL CORPORATION, BRYCE HONG, TRANSWEST FINANCIAL SERVICES CORP., ANUJ RANJAN, NAVJOT DHANOA, RAVINESH AUTAR, BRITPAUL MUTTI, SUKHDEEP BRAR and TIRATH BRAR Counsel: Jeffrey M. Lee for the plaintiff F.M.I. Developments Ltd. W. Randall Rooke, Q.C. for the defendant 1269917 Alberta Ltd. M. Kim Anderson for the defendant George C. Shen Professional Corporation John B.O. Rozdilsky for the defendants Ravinesh Autar and Britpaul Mutti JUDGMENT FOLEY J. May 27, 2010 [1] On March 28, 2007, 1269917 Alberta Ltd. (“Alberta Ltd.”) granted mortgage to F.M.I. Developments Ltd. (“FMI”) over parcel of land (“the Land”) located just outside the boundary of the City of Saskatoon. The mortgage was for $3,100,000 repayable by two installments of $300,000, then the balance payable on April 30, 2009. The payments were not made. [2] FMI issued a statement of claim in October 2009 seeking foreclosure on the Land. None of the defendants entered defence but served demands for notice and then were noted for default of defence on March 12, 2010. By its notice of motion of March 9, 2010, FMI seeks an order nisi for judicial sale. Service of the motion was effected on Alberta Ltd. on March 9, 2010, was returnable in this Court on March 25, 2010, then was adjourned by consent to April 8, 2010. [3] On March 22, 2010, the affidavit of Navdeep Sra dated March 19, 2010, was filed on behalf of Alberta Ltd. asserting, inter alia: 3. THAT the Mortgaged Land is situated outside the City of Saskatoon, in the Rural Municipality of Corman Park No. 344. There is barbed wire fence located on the perimeter of the Mortgaged Land. 4. THAT in 2009, the Mortgaged Land was leased to Trevor Mintz operating as Trevor Mintz Cattle. have been advised by Trevor Mintz and do verily believe to be true that he is farmer, and that bales of the forage grown on the Mortgaged Land in 2009 were used to feed his cattle. have finalized lease of the Mortgaged Land between Trevor Mintz and Alta. Co. for 2010. 6. THAT make this Affidavit in opposition to the application by the Plaintiff for an Order Nisi for Judicial Sale and for declaration that the proceedings commenced on this matter are nullity pursuant to section 11 of The Saskatchewan Farm Security Act. His affidavit, filed as “representative of and consultant to ... Alberta Ltd.”, incorporated as Exhibit “C” document which provided: March 19/2010 Trevor Mintz This will confirm our agreement to renew your lease further term of year on the same terms as last year. Rent $750.00 Property LSD 11-14 Sec 20, Twp 37, Rge 05, W3rd Term Jan. 1, 2010 Dec. 31, 2010 Yours truly, 1269917 Alberta Ltd. per: “Navdeep SRA” Nav Sra representative Accepted: “Trevor Mintz” [4] On this hearing the issues raised are:(i) Whether the foreclosure action was void as initio by virtue of the operation of ss. 9 and 11 of the SFSA? (ii) If judicial sale is to be ordered, what period of redemption should be set? and(iii) Whether FMI may submit a bid which incorporates the value of the Land as a “credit” enabling FMI to merely “top up” by the additional amount needed to reach its bid price? (i) Whether the action is void? [5] The Saskatchewan Farm Security Act, S.S. 1988-89, c. S-17.1 (“SFSA”) provides in part: 9(1) Notwithstanding any other Act or law or any agreement entered into before, on or after the coming into force of this Act: ... (d) subject to sections 11 to 21, no person shall commence an action with respect to farm land; 11(1) Where mortgagee makes an application with respect to mortgage on farm land, the court may, on any terms and conditions that it considers just and equitable: (a) order that clause 9(1)(d) or section 10 does not apply; or (b) make an order for the purposes of clause 9(1)(f). (2) Where an order is made pursuant to subsection (1), the mortgagee may commence or continue an action with respect to that mortgage. (3) Any action that is commenced without an order pursuant to this section is nullity, and any order made with respect to an action or proposed action without an order pursuant to this section is void. [Emphasis added] [6] Alberta Ltd. says that the Land was farm land within the meaning of the SFSA in October 2009 by virtue of the haying operation referenced by Mr. Sra, supra, when the foreclosure action was commenced by FMI and, as no order was sought or obtained by it as required by the combined operation of ss. 9 and 11 of the SFSA, supra, then the entire foreclosure action brought against the Land is a nullity. [7] FMI says that the Land was not “farm land” within the meaning of the SFSA in that, once the nature of Alberta Ltd.’s activities on and its relationship to the Land are examined, then Alberta Ltd. is not farmer but rather is developer and the Land is not farm land but rather development site. FMI relies on Christie v. Texas Industries (1985), 1985 CanLII 2631 (SK CA), 43 Sask. R. 90 (C.A.) in which Tallis J.A. at para. 10 said of the application of The Farm Land Security Act, S.S. 1984-85-86, c. F-8.01 (“the FLSA”) (predecessor legislation to the SFSA) in the like circumstances of that case: Its lease of the land for farming purposes, after the notice delivered to the plaintiff under paragraph 10 of the agreement dated 12 October 1979, was merely incidental to its main business of developing. In order to bring the transaction within the Act there must be realistic involvement in farming. In our opinion the legislature never intended that developer, by leasing parcel of land in the circumstances of this case, could gain the protection of The Farm Land Security Act. [Emphasis added] [8] FMI submits that in this case, the Christie case remains the controlling authority, such that when applied to this case rejection of the defendants’ submission on the applicability and effect of ss. and 11 of the SFSA must follow. [9] Alberta Ltd. and the other defendants’ response is that the Christie case has no application here as it was decided within the scope of the 1984-85-86 FLSA, now repealed. The SFSA circa 1988-89 is said by them to have replaced, modified or reversed the legislative intention of the FLSA identified in Christie. The Alberta Ltd. brief states: 33. It is respectfully submitted that in passing the SFSA, the legislature did in fact clearly express its intention. Whereas section of the FLSA clearly stated that the purpose of the entire FLSA was to afford protection to farmers against loss of their farm land, in the SFSA, that same intention is contained in section 4, and is applicable only to Part II of the SFSA. In Part II, farmer is defined as mortgagor, except in sections 27.1 to 27.9, where the mortgagor must also be producer or an agricultural corporation to take advantage of the lease back provisions. We would submit that the legislature has now clearly indicated in what circumstances the mortgagor must also be producer or an agricultural corporation in order for the additional protection of certain parts of the SFSA to apply. For Part II to apply, and as was stated by Justice MacLeod in Bank of Montreal v. Nevin [(1993), 1993 CanLII 8863 (SK QB), 115 Sask. R. 179 (Q.B.)], is the person mortgagor? If so, is the land owned by the mortgagor farm land within the meaning of the definition of the SFSA? For the reasons specified aforementioned, it is our submission that the Mortgaged Land is farm land within the meaning of the SFSA. [10] The SFSA of 1988-89 repealed the FLSA of 1984-85-86 as well as The Saskatchewan Farm Ownership Act, R.S.S. 1978, c. S-17 (“the SFOA”) and The Farm Security Act, R.S.S. 1978, c. F-9 (“the FSA”). In so doing it consolidated and restated the repealed provisions such that restrictions on non-resident and non-agricultural corporate ownership of farm land now appear in Part VI of the SFSA under heading of Farm Ownership. Provisions of the FSA concerning foreclosure on homesteads appear in Part III of the SFSA under the heading of Home Quarter Protection. Of particular note for the purposes of this case is the integration of the repealed provision of the FLSA into Part II of the SFSA as it now stands. [11] comparison of the relevant portions of the two statutes discloses: The Farm Land Security Act, S.S. 1984-85-86, c. F-8.01 The Saskatchewan Farm Security Act S.S. 1988-89, c. S-17.1 An Act respecting the Security of Farm Land in Saskatchewan An Act to provide for Security for Saskatchewan Family Farms The purpose of this Act is to afford protection to farmers against loss of their farm land. The purpose of this Part is to afford protection to farmers against loss of their farm land. 2(e) “farmer” means mortgagor or purchaser under an agreement for the sale of farm land or the personal representatives or assigns of mortgagor or purchaser under an agreement for sale. 3(c) “farmer” means, except in sections 27.1 to 27.9, mortgagor. 2(d) “farm land” means land in Saskatchewan that is used for the purposes of farming and is subject to mortgage. 2(f) “farm land” means other than in Part VI, real property in Saskatchewan that is situated outside city, town, village, hamlet or resort village and that is used for the purposes of farming, but does not include: (i) minerals contained in, on or under that real property; and (ii) land used primarily for the purpose of extracting, processing, storing or transporting minerals. 2(f) “farming” includes livestock raising, poultry raising, dairying, tillage of the soil, bee-keeping, fur farming or any other activity undertaken to produce agricultural products. 2(g) “farming” includes livestock raising, poultry raising, dairying, tillage of the soil, bee-keeping, fur farming or any other activity undertaken to produce primary agricultural produce and animals. 9(1) Subject to the other provisions of this section, where mortgagee makes an application with respect to mortgage on farm land, the court may, on any terms and conditions that it considers just and equitable, order that sections and do not apply. (2) Where an order is made pursuant to subsection (1): (a) the mortgagee may commence or continue an action with respect to that mortgage; and (b) The Land Contracts (Actions) Act does not apply to that mortgage. (3) During the period commencing on December 4, 1984 and ending on December 31, 1987 or, where an order is made pursuant to section 13, the further date that is specified in the order, any action that is commenced without an order pursuant to this section is nullity, and any order made with respect to an action or proposed action without an order pursuant to this section is void. 9(1) Notwithstanding any other Act or law or any agreement entered into before, on or after the coming into force of this Act: (d) subject to sections 11 to 21, no person shall commence an action with respect to farm land. 11(1) Where mortgagee makes an application with respect to mortgage on farm land, the court may, on any terms and conditions that it considers just and equitable: (a) order that clause 9(1)(d) or section 10 does not apply; or (b) make an order for the purposes of clause 9(1)(f). (2) Where an order is made pursuant to subsection (1), the mortgagee may commence or continue an action with respect to that mortgage. (3) Any action that is commenced without an order pursuant to this section is nullity, and any order made with respect to an action or proposed action without an order pursuant to this section is void. [Emphasis added] [12] This comparison does not support the defendants’ submission that the provisions of the SFSA modify the underlying legislative principles which form the foundation of the Christie decision. Both statutes contemplate farmers and mortgagors being entitled to the protection accorded by each statute. Both require the land so protected to be “farm land” used for the purpose of farming and thus, in this case, the critical question is, as it was in Christie, whether the Land was in fact “used for the purpose of farming”. [13] For the purposes of this aspect of the motion, accept that an individual named Mintz was authorized by Alberta Ltd. to cut and bale hay on the Land in 2009. The legal relationships thus created between Mintz and Alberta Ltd. may have been one of licence, profit prendre or lease, suffice it to say that do not consider myself bound by the legal characterization of lease asserted in the Navdeep Sra affidavit. The mortgage by s. 7(c) prohibited the mortgager leasing without the mortgagee’s consent, however the effect of this provision on the so-called March 19, 2010 renewal of “lease” was not argued or tested: 7(c) The Mortgagor shall not, except as otherwise expressly permitted by the Mortgagee, grant lease of the Lands or any part thereof other than to such tenants and on such terms and conditions as first consented to in writing by the Mortgagee; it being understood that the granting of such consent shall not be or be deemed to be grant of priority for any such lease over this mortgage. 13. THE MORTGAGEE COVENANTS AND AGREES WITH THE MORTGAGEE THAT: ... (c) on default, the Mortgagee shall have quiet possession of the Lands, free from all encumbrances existing at the time of registration hereof and save and except for any and all usual and ordinary easements, caveats and covenants associated with the supply of power, water, gas or other public utilities. [14] The undisputed evidence is that since its acquisition of the Land in 2007, Alberta Ltd.’s focus and direction vis-à-vis the Land has been the undertaking of a host of activities designed to develop the Land into an industrial park. These include environmental assessment, concept plan and infrastructure development, preparation and circulation of its business plan, listing lots in its proposed “Diamond Industrial Park” as part of its plan of subdivision and attending meetings with the City of Saskatoon to promote the Land’s annexation into the City. These activities bracket the commencement of the FMI action. [15] business plan developed for the owners anticipated: i) approval of the plan by the City of Saskatoon; ii) annexation with the City of Saskatoon as: The subject land area in its current use is agriculture but not currently used for any agricultural purpose and is under-utilized relative to the potential and demand for commercial and industrial business development in Saskatoon, also to access city infrastructure services. [16] The proposed use of the Land is recited to be: The Diamond Business Park is intended for uses that meet the zoning guidelines set by the City of Saskatoon as lL1. Focusing on enclosed showroom/warehouse, light manufacturing, service, including: 154 acres of gross developable land area 127 acres net saleable lots Architectural guidelines for built development components Recognition of the Yellowhead Highway as gateway into Saskatoon Orientation toward sustainable design practices Alignment with the existing roadway fabric Controlled on-street parking Storm water retention to control flow into the existing utility services Coordinated development phasing plan [17] In contrast evidence is lacking of activity of Alberta Ltd. directed to the Land qua farm land which could reasonably bring it within the statutory purpose of the SFSA as considered in Christie, supra, and in particular Part II. Section of the SFSA provides: Purpose The purpose of this Part is to afford protection to farmers against loss of their farm land. [18] Section 2(1)(f) provides: 2(1) In this Act: ... (f) “farm land” means other than in Part VI, real property in Saskatchewan that is situated outside city, town, village, hamlet or resort village and that is used for the purposes of farming, but does not include: (i) minerals contained in, on or under that real property; and (ii) land used primarily for the purpose of extracting, processing, storing or transporting minerals; (g) “farming” includes livestock raising, poultry raising, dairying, tillage of the soil, bee-keeping, fur farming or any other activity undertaken to produce primary agricultural produce and animals. [19] The evidence in this case is clear that the Land was purchased by developer for development; was being developed at the time this action was brought, and neither at that time nor since has there been any realistic involvement in farming so as to trigger the provisions of the SFSA and so engaged the legislative intention of providing farm land protection. [20] In my opinion the Christie rationale and criteria are as applicable to the SFSA as they were to the FLSA and the foreclosure proceedings by FMI are not void. (ii) What period of redemption should be set? [21] The defendants suggest that redemption period of at least 16 months is appropriate in the circumstances of this case given the equity held by Alberta Ltd., the difficult refinancing conditions of the present economy and the inequity which would arise were the plaintiff entitled to again recoup its own purchase costs and benefit from sale price enhanced by the defendants’ development efforts. In contrast, FMI notes that the mortgage was only for two-year term and that none of the interim payments were made. It submits that in these circumstances, the usual redemption period of 90 days should apply. [22] In my opinion, no foundation has been laid to cause me to deviate from the usual redemption period where, as here, not only has the mortgage expired, but no attempt to make payments was made and no conduct is alleged on the part of FMI which contributed to the defendants’ default. The redemption period shall therefore be 90 days from the date of this decision. (iii) Whether FMI, should it wish to submit bid, need only “top up” by paying into court only any additional amount needed to attain that bid over the Land value? [23] The purpose of the bidding process in judicial sale remedy contemplates level playing field for all participants. The fact that FMI is owed an amount on the mortgage and that it will likely receive a significant cash payout on sale does not modify the desirability and necessity of obliging all bidders to pay into court the full bid price. To do otherwise would be to pay heed to the financial strengths of one or more of the parties, or at least give preferred position to the entity seeking foreclosure. The bidding process is more than simple accounting device and consequently, the fact that particular bidder will be receiving funds from the property should not enter into the judicial sale process. This application by FMI is dismissed and the usual bidding rules shall apply. [24] The plaintiff FMI shall have its costs to be taxed in the usual way.
The plaintiff granted the defendant a mortgage over a parcel of land just outside the city limits. The defendant failed to make any payment. The plaintiff applied for foreclosure on the land and an order nisi for judicial sale. The defendant was a developer. He argued that the foreclosure action was void because the land was being used as farmland and was subject to protection under s. 9 and 11 of The Saskatchewan Farm Land Security Act. The other issues before the court were the appropriate period of redemption and whether the plaintiff could submit a bid that incorporated the value of the land as a 'credit' enabling the plaintiff to merely 'top up' the bid by the additional amount needed to reach the bid price. HELD: The Saskatchewan Farm Land Security Act (SFSA) did not apply. The undisputed evidence was that since the defendant acquired the land in 2007, their focus was to develop the land as an industrial park and they had undertaken a host of activities to achieve that purpose which clearly indicated that their intent was not to farm the land in the sense contemplated by the SFSA. There was no foundation to deviate from the usual redemption period of 90 days from the date of the decision. The bidding process in a judicial sale contemplates a level playing field for all participants. The fact that the plaintiff is likely to receive a significant cash payout from the judicial sale does not modify the desirability of obliging all bidders to pay into court the full bid price. Normal bidding rules shall apply. The plaintiff was entitled to costs.