Agriculture Financial Services Corp. v. Alberta (Treasury Branches) et al., (2001) 296 A.R. 366 (QB)

• Judge: Sirrs, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: June 01, 2001
• Citations: (2001), 296 A.R. 366 (QB);2001 ABQB 692

Agriculture Financial Services v. Alta. (2001), 296 A.R. 366 (QB)

MLB headnote and full text

Temp. Cite: [2001] A.R. TBEd. AU.105

Agriculture Financial Services Corporation (applicant) v. Alberta Treasury Branches (claimant) and Cargill Ltd. (claimant) and Canadian Wheat Board (claimant) and John Hofer Farms Ltd. (respondent)

(Action No. 0110-000546; 2001 ABQB 692)

Indexed As: Agriculture Financial Services Corp. v. Alberta (Treasury Branches) et al.

Alberta Court of Queen's Bench

Judicial District of Red Deer

Sirrs, J.

August 2, 2001.

Summary:

Agriculture Financial Services Corp. insured John Hofer Farms against crop failure. At issue on this application was which of two creditors had priority to the crop insurance proceeds.

The Alberta Court of Queen's Bench determined the matter accordingly.

Deeds and Documents - Topic 5059

Rectification - When available - Mistake - Common - AFSC insured John Hofer Farms against crop failure - An assignment of insurance proceeds was made in favour of two creditors - One assignment was signed by John Hofer in his personal capacity, rather than by John Hofer Farms - John Hofer was a signing authority for John Hofer Farms and did not personally have an insurance contract with AFSC - Further, AFSC unilaterally changed both assignments, erroneously varying the identification number to that of another entity which did not have any insurance with AFSC in the relevant year - The Alberta Court of Queen's Bench invoked the doctrine of common mistake to resolve both issues and ordered rectification of the documents - There was a common and continuing intention which was not correctly portrayed in the written assignments - see paragraphs 17 to 26.

Mistake - Topic 604

Mistake of fact - General - Common mistake - What constitutes - [See Deeds and Documents - Topic 5059 ].

Mistake - Topic 4005

Relief - General - Circumstances when granted - [See Deeds and Documents - Topic 5059 ].

Personal Property - Topic 6002

Security interests - General - Application of legislation - A debtor farm made two assignments of the proceeds of crop insurance to two creditors, ATB and Cargill - Cargill argued that the assignments were created by the Agriculture Financial Services Act and Regulations, and therefore fell within the exceptions to the Personal Property Security Act (PPSA) as "a lien, charge or other interest given by an act or rule of law in force in Alberta" (PPSA, s. 4(a)) - The Alberta Court of Queen's Bench held that the PPSA applied - The assignments were not unconditional - They required that the cheques be payable to both the assignee and the farmer - This left the assignee subject to claims on the money by the farmer and to all and any security claims against the farmer in existence when the Agriculture Financial Services Corp. accepted the assignment - As a prior security holder, ATB was entitled to direct the farm not to endorse the cheque because of its rights under certain security agreements - See paragraphs 27 to 48.

Personal Property - Topic 6368

Security interests - The security - General -Crops - In 2000, a corporate farm was in default of a loan agreement with ATB - The default would have permitted ATB to seize and possibly force the sale of the farms' equipment, thereby preventing it from planting a crop - ATB agreed not to enforce its security in return for, inter alia, a security interest in all unharvested crops, the proceeds thereof and substitutions therefore (forbearance agreement) - Cargill supplied the seed grain, fertilizer and chemicals for the 2000 crops on credit and took a purchase money security interest (PMSI) - The crops failed - ATB and Cargill disputed priority to the crop insurance proceeds - ATB's forbearance agreement was perfected before Cargill registered its PMSI - Section 34 of the Personal Property Security Act (PPSA) addressed PMSI priorities - The Alberta Court of Queen's Bench held that ATB had established the necessary consideration and causal connection between their services and the existence of the 2000 crop to give it "super priority" under s. 34(9) of the PPSA - See paragraphs 49 to 73.

Personal Property - Topic 6426

Security interests - Purchase money security interests - Priorities - [See Personal Property - Topic 6368 ].

Personal Property - Topic 6431

Security interests - Purchase money security interests - Conditions precedent - Notice - Section 34 of the Personal Property Security Act (PPSA) addressed purchase money security interest priorities - Section 34(9) stated that "A perfected security interest in crops or their proceeds, given for value to enable the debtor to produce or harvest the crops and given (a) while the crops are growing crops, or (b) during the 6-month period immediately prior to the time when the crops became growing crops, has priority over any other security interest in the same collateral given by the same debtor" - The Alberta Court of Queen's Bench stated that, while s. 34(9) did not include a requirement to send notice to other creditors of a "super priority" claim under that section, "Because of the broad wording of s. 34(9), it would ... be prudent for any farm supplier to contact the secured creditors of farmers to be sure that those secured creditors will acknowledge a 'super priority' claim before supplying hundreds of thousands of dollars credit to the farmer rather than take the risk ... that their security is found to be subordinate to another claim" - See paragraph 72.

Cases Noticed:

Canadian Imperial Bank of Commerce v. Perepeluk (Bankrupt), [1986] 2 W.W.R. 631; 47 Sask.R. 81 (C.A.), dist. [para. 30].

Perepeluk et al. v. Touche Ross Ltd. - see Canadian Imperial Bank of Commerce v. Perepeluk (Bankrupt).

Rendamax/G.P. Industries Ltd. (Bankrupt), Re (1994), 119 Sask.R. 121 (Q.B.), refd to. [para. 33].

Orr & Co. v. Saskatchewan Economic Development Corp. - see Rendamax/G.P. Industries Ltd. (Bankrupt), Re.

Statutes Noticed:

Personal Property Security Act, S.A. 1988, c. P-4.05, sect. 34(9) [para. 52].

Counsel:

Gordon G. Yake, for the applicant;

J. Gary Greenan and Perry Mack, for the claimants.

This application was heard on June 1, 2001, by Sirrs, J., of the Alberta Court of Queen's Bench, Judicial District of Red Deer, who delivered the following decision on August 2, 2001.