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AGRICULTURE - Farms - Financing

Wednesday, April 19, 2017 @ 9:52 AM  


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Appeal by the Skyline Agriculture companies from a Queen's Bench judgment affirming a decision by the Farm Land Security Board. In 2014, farmers approached investors seeking alternative financing arrangements for young farmers who sought to acquire farmland. A proposed financing structure divided farm ownership between a parent company, a management company, and an operating company. The financing involved a series of instruments and transactions which included a traditional mortgage and swap and derivative agreements held by additional entities. The farming entities were Canadian-owned. The balance of the structure was held by offshore entities, the appellants. In a test case ruling, the Board determined that the arrangement contravened s. 77 of the Saskatchewan Farm Security Act, as the non-resident appellants had acquired a land holding within the meaning of the Act. Skyline appealed to the Court of Queen's Bench. The Court determined that the Board's decision was reasonable. Skyline appealed to the Court of Appeal.

HELD: Appeal dismissed. The Queen's Bench judge correctly determined the standard of review to be reasonableness and correctly applied the standard. The Board reviewed Saskatchewan's long history of restricting farm ownership, including the Act's restrictions on foreign ownership. The Board reviewed the proposed transaction documents. The substantive issue of whether the proposed financial structure was consistent with a finding that the appellants had acquired a land holding turned on the Board's interpretation of its home statute in a manner within its institutional expertise. The Board reasonably found the purpose of the structure was to give non-Canadian entities access to increasing farmland values, and that capital appreciation was a right or control that accrued to a farmer. The Board's decision did not indicate any misunderstanding of the rights and obligations created by the transaction documents. The chambers judge appropriately concluded that the Board's decision was reasonable, both in interpreting the Act, and in its application of the Act to the evidence.

Skyline Agriculture Financial Corp. v Saskatchewan (Farm Land Security Board), [2017] S.J. No. 111, Saskatchewan Court of Appeal, March 31, 2017. Digest No. TLD-Apr172017006