Frustrating the Purpose of the Receivership Remedy: Federal Paramountcy in Saskatchewan (Attorney General) v. Lemare Lake Logging Ltd.

In 2015, the Supreme Court of Canada rendered its decision in Saskatchewan (Attorney General) v. Lemare Lake Logging Ltd. The majority of the Court held that Part II of The Saskatchewan Farm Security Act did not frustrate the purpose of s. 243 of the federal Bankruptcy and Insolvency Act. Subsection 243(1) of the BIA provides that a court may appoint a national receiver to take control of the assets of an insolvent debtor. Part II of the SFSA, by contrast, creates a procedural regime governing secured creditors pursuing actions in respect of farm land. In Lemare, a secured creditor brought an application under s. 243(1) to appoint a receiver over a farm debtor’s assets. The debtor contested the application, arguing that the creditor must satisfy procedures in the SFSA. Answering the paramountcy question raised in the appeal, the majority of the Supreme Court held that the provincial law was constitutionally operative, overruling the Saskatchewan Court of Appeal. As a result, the Supreme Court enabled the SFSA’s onerous requirements to substantially delay receivership appointments under the BIA, potentially creating unreasonable hurdles for creditors to realize on their security interests. In rendering its decision, the Supreme Court declined to recognize the timeliness of receivership appointments as a federal purpose of s. 243 of the BIA. The Court’s decision is commercially unpalatable. The majority’s narrow interpretation of the purpose of s. 243 does not accord with the time-sensitive nature of receivership law. I argue the Court’s decision can be explained by closely examining two other decisions rendered alongside Lemare: Alberta (Attorney General) v. Moloney, and 407 ETR Concession Co. v. Canada (Superintendent of Bankruptcy). In Moloney, the Supreme Court considered the conflict between the discharge provisions of the BIA and provisions of Alberta’s Traffic Safety Act that enabled the suspension of a driver’s licence for unsatisfied debts. In 407 ETR, the Court considered provisions of the Ontario Highway 407 Act, 1998 that mandated the denial of a vehicle permit to a driver with a toll debt. In holding the provincial laws inoperative, the Court altered the federal paramountcy doctrine by expanding the impossibility of dual compliance branch of the test. This approach allowed the Court to narrow the frustration of federal purpose branch, enabling the majority in Lemare to ascribe a narrow purpose to s. 243. In Part I of this paper, I review the facts of Moloney, 407 ETR and Lemare. In Part II, I examine the relevant provisions of the competing legislative regimes at issue in the decisions. In Part III, I review the impossibility of dual compliance and frustration of federal purpose branches of the paramountcy test, noting their differing purposes. In Part IV, I review the decisions of the courts in Moloney, 407 ETR and Lemare. In the analysis in Part V, I examine the Supreme Court’s approach to the paramountcy doctrine in these decisions, and show that the Court’s changes to the paramountcy test are predicated on unsound reasoning. I further show that the expansion of the first branch of the paramountcy test does not compensate for the ground lost by the second branch. The unbalanced shift in the doctrine explains the incongruous holding in Lemare that the purpose of s. 243 of the BIA does not include the timely appointment of receivers. I conclude by considering the consequences of the majority’s approach for the viability of the federal paramountcy doctrine and the BIA’s receivership remedy.

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