The Rural Voice, 1993-11, Page 20The Farm Debt Review Act re-
quires that a mortgagee who intends to
realize on farm mortgage security must
first provide the farmcr with fifteen
days' notice and advise the farmer of
the right of an insolvent farmer to make
an application for debt review under the
provisions of the Act. What arc the
consequences if the mortgagee fails to
give the required notice, but proceeds
with the sale of the farm? Does it make
any difference if the mortgagee
proceeds by way of court foreclosure
proceedings as opposed to privately
exercising the power of sale under the
mortgage?
A court in Ontario has recently
considered these issues and has deter-
mined that the protection afforded by
the notice requirements under the Act
may be different depending upon how
the mortgagee elects to realize upon its
mortgage security. In the case under
consideration by the court, the
mortgagee, after failing to provide the
required notice, instituted foreclosure
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proceedings and obtained from the
court a final order of foreclosure. Only
after the farm had then been sold by the
mortgagee did the farmer attack the
sale on the basis that the mortgagee had
failed to provide
the requisite
notice. Relying
upon a
Saskatchewan
Court of Appeal
decision, the
Ontario Court
determined:
` ...ina
foreclosure
proceeding,
compliance
with the
(notice)
requirement is
a condition
precedent
which if not contested in the
pleadings is presumed to have been
satisfied. I note in this regard that
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16 THE RURAL VOICE
the Act does not provide, as it could
have, that non-compliance with the
Act has any particular result. The
decision I have reached does not
leave (the notice requirement)
without effect. It simply means that
the farm debtor must, in a
foreclosure proceeding, avail
himself or herself in a timely way of
the opportunity those proceedings
afford for the assertion of that issue.
Once raised, the issue would be
before the court and the court would
be bound to address and dispose of it
according to applicable law."
The lesson for farm debtors is that
any objection based upon deficient
notice must be raised as a defence in
the foreclosure proceedings instituted
by the mortgagee; failure to defend the
foreclosure proceeding will prevent the
farmer from later raising the issue to
attack the sale of his farm.
However, in deciding this issue, the
court referred to other cases in Saskat-
chewan and Ontario to distinguish the
consequences to a mortgagee of failing
to provide the required notice when
proceeding privately to exercise the
power of sale under the mortgage. A
farmer does not have an opportunity to
plead a defence where a mortgagee
exercises its power of sale because
there is no pending court proceeding.
Therefore, the court concluded that, in
such circumstances, failure by a
mortgagee to provide the required
notice may invalidate a subsequent
sale.
Farm debtors subject to mortgage
proceedings should obtain legal advice
immediately concerning their rights and
possible defences. Failure to defend
such proceedings in a timely manner
may forever deprive the farmer of the
opportunity to prevent the sale of his
farm.°
Agrilaw is a syndicated column produced
by the full service London law firm of
Cohen Highley Vogel & Dawson. Paul G.
Vogel, a partner in the firm, practises in the
area of commercial litigation. Agrilaw is
intended to provide information to farmers
on subjects of interest and importance. The
opinions expressed are not intended as
legal advice. Before acting on any
information contained in Agrilaw, readers
should obtain legal advice with respect to
their own particular circumstances.