Limitation Periods And The Saskatchewan Farm Security Act – What You Need To Know

The recent decision of the Saskatchewan Court of Appeal in MFI Ag Services Ltd. v. Kramer Ltd., 2023 SKCA 10 [Kramer] establishes that the limitation periods set out in The Limitations Act (Saskatchewan) (the "LTA") are not applicable to proceedings for equipment seizure under Part IV of The Saskatchewan Farm Security Act (the "SFSA"). Kramer further clarifies the discretionary powers permitted to be exercised by a Chambers judge in granting orders at a hearing held pursuant to s. 53(1) of the SFSA are limited and meant only to be exercised as they relate to setting a payment structure based on a farmer's inability to pay.

The Court of Appeal addressed three issues in Kramer. This comment focuses on two: whether the Chambers judge erred in law by:

• i) Holding that the secured creditor's ability to seek recovery of the equipment under the SFSA was not statute-barred; and
• ii) Ordering a return of the equipment instead of determining a reasonable price for the equipment or adjourning to have a reasonable price determined.

Issue #1: The LTA limitation periods and the SFSA

The appellant farmer sought an order that the Chambers judge erred in law by finding the secured creditor's ability to recover the equipment was not statute barred by the LTA. The basis for the claim was the appellant farmer had possession of the equipment from 2018-2021 without making payment to Kramer Ltd., and without Kramer Ltd. enforcing its rights until it served the required notices for repossession in January of 2022. Kalmakoff J.A., speaking for the Court, dismissed this ground of appeal finding that the LTA was not applicable to proceedings under Part IV of the SFSA.

Part IV of the SFSA establishes the regime that a secured creditor must follow in order to repossess farm equipment to realize on or protect its secured interests. The regime requires the secured creditor to serve a Notice of Intention to Take Possession on a farmer pursuant to s. 48 of the SFSA. Once served with the notice, the farmer has the ability to elect a hearing governed by s. 53(1) of the SFSA.

In Kramer, the appellant farmer appealed from the Chambers judge's decision at the s. 53(1) hearing that the LTA was not applicable to proceedings pursuant to Part IV of the SFSA. In upholding the decision, Kalmakoff J.A., for the Court, articulated several helpful principles:

• A valid security interest for the purposes of the SFSA does not require the existence of an outstanding debt. The definition of security interest specifically includes "payment or performance of an obligation". This is sufficient to secure a farmer's obligation to return equipment at the expiration of a lease;
• Proceedings under the SFSA are not subject to the LTA because they are not commenced by a statement of claim or originating notice as contemplated by s. 3 of the LTA; rather, the process to seize equipment is commenced by service of a notice as required by s. 48 of the SFSA;
• A hearing pursuant to s. 53(1) allows a court to make a broad range of orders, but does not allow a court to decide on the substantive rights between the parties. While the SFSA does permit a judge to make "any orders that it considers just", there are limits on the exercise of this discretion. Kalmakoff J.A. in citing Naber v. John Deere Financial Inc., 2020 SKCA 94 at paragraph 31, reiterated that a hearing pursuant to s. 53(1) does not "empower judges 'to resolve legal disputes between farmers and their creditors that would ordinarily be subject to court proceedings such as determining the meaning of contractual provisions, determining whether the contract had been breached or the amount owing under the contract (other than a simple accounting exercise)'" (at para 41). The court is limited to making orders to assist with temporary financial hardship or need for temporary forbearance from a creditor's right to proceed; and
• The discretionary powers carved out in s. 53(4) provides limited authority for a court to determine what a contract provides in terms of what is owing under an agreement in order to facilitate a proper payment structure between the parties. However, this does not extend to provide the Court authority to make other, broader determinations.

Issue #2: Whether a reasonable purchase price should have been determined

The second ground of appeal argued that the Chambers judge erred in failing to recognize the legal principle "that no order for a delivery of [the equipment] should be made until an amount owing is determined" (Kramer at para 52). The Court of Appeal again dismissed this argument holding the Chambers judge correctly identified the legal criteria and applied it in the exercise of his discretion for the reasons set out below.

First, the Court recognized that the discretion provided by s. 53(4) of the SFSA is optional, rather than mandatory. The language specifically reads "may determine", not "shall determine" an amount owing under an agreement.

Second, the criteria for exercising such discretion under s. 53(4) of the SFSA have been enumerated in Bartko v. Odnokon Holdings Ltd., 2012 SKQB 262 [Bartko]. Kalmakoff J.A. found it was clear that the Chambers judge considered the Bartko criteria by observing several of the equities between the parties, including the present value of the equipment, the expiry of the rental agreements, and the last payments that had been made towards the equipment by the appellant farmer.

Finally, the arguments put forward by the appellant farmer were contentious issues classified as the "very sorts of legal disputes" Saskatchewan courts had previously instructed cannot be resolved by a s. 53(1) hearing (at para 63). Part IV of the SFSA has a very limited purpose that precludes any decisions on the substantive rights of the parties that might affect the parties' entitlements in pursuing a claim.

The Takeaway

The Court of Appeal in Kramer provided secured creditors and farmers alike with the following useful guidelines for hearings elected pursuant to s. 53(1) of the SFSA in enforcement proceedings to repossess equipment as follows:

• The LTA does not apply in the context of a hearing requested by a farmer pursuant to Part IV of the SFSA. However, the LTA likely still applies (absent other arguments) to a claim commenced by a statement of claim or originating application in the context of determining other issues, such as interpreting provisions of a lease agreement or ownership of equipment; and
• Section 53(1) of the SFSA does not provide the hearing judge discretion to resolve contentious issues relating to substantive rights of the parties outside the limited authority provided by s. 53(4) of the SFSA permitting discretion to determine the amounts owed under an agreement in order to define an equitable payment structure.

The decision of Kalmakoff J.A. speaking for the Court of Appeal can be found hereOpens in new window.

Originally published 15 February 2023

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.