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Constitutional law - Federal Paramountcy - Bankruptcy and Insolvency - Whether the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“BIA”), renders Part II of the Saskatchewan Farm Security Act, S.S. 1988-89, c. S-17 (“SFSA”), inoperative by virtue of the doctrine of federal paramountcy - BIA, s. 243.

The respondent, Lemare Lake Logging Ltd. (“Lemare Lake”), a secured creditor, brought an application for the court appointment of a receiver and manager of assets, excluding livestock, against a debtor, pursuant to ss. 243(1) of the BIA.The debtor, a “farmer” within the meaning of the SFSA, took the position that Lemare Lake must comply with Part II of the SFSA, particularly s. 9 and 11, before seeking the appointment of a receiver under ss. 243(1) of the BIA. Part II of the SFSA requires a creditor to submit a notice of intent and complete a review and mediation process, before initiating court proceedings to enforce its claim against a farmer. Lemare Lake argued that the doctrine of federal paramountcy rendered the relevant provisions of the SFSA inoperative. The appellant, Attorney General for Saskatchewan, intervened on the constitutional issue pursuant to the Constitutional Questions Act, 2012, S.S. 2012, c. 29.01.

The chambers judge dismissed the application. She found that the doctrine of federal paramountcy did not apply. In her view, there was no operational conflict between the provincial and federal statutes because it was possible to comply with both by obtaining an order under the SFSA before applying for the appointment of a receiver. She also found that the SFSA was not incompatible with the purpose of ss. 243(1) of the BIA, which allows for the appointment of a national receiver. In the chambers judge’s view, Part II of the SFSA did not frustrate that objective. In the event that she was wrong, the chambers judge explained that she would have dismissed the application on the basis that the foreclosure procedure was the appropriate remedy and it would be neither convenient nor just to appoint a receiver.

The Court of Appeal agreed with the chambers judge that it would be neither convenient nor just to appoint a receiver in this case, and the appeal was dismissed for that reason. The Court nevertheless addressed the constitutional question on the basis that it was fully argued and that doing so would avoid future re-litigation. The Court of Appeal found Part II of the SFSA to be inoperative by virtue of the doctrine of federal paramountcy. In the Court’s view, the purpose of ss. 243(1) of the BIA is to allow for the quick appointment of a national receiver. The relevant provisions of the SFSA frustrated that purpose by dramatically delaying a creditor’s application for a receivership order and imposing new criteria for the granting of a receivership order.