March 4, 1935

LIB

Harry Butcher

Liberal

Mr. BUTCHER:

By the proposed amendment in section 4 of the present bill, the words "filed in" are to be substituted for the words "approved by" in subsection 6 of section 12 of the original act. But in section 2, subsection 3 of the original act, the opening words are:

In any case where the affairs of a farmer have been arranged by a proposal approved by [DOT] the court or confirmed by the board as hereinafter provided, part I of the Bankruptcy Act shall notwithstanding section 7 thereof apply to such farmer-

And so on. Should not the words "approved by" in that subsection also be changed to read "filed in"?

139S

Farmers' Creditors Act

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CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

I think I have my hon. friend's point. Subsection 3 of section 2 is quite right in its wording in calling for the proposal to be approved by the court. But the section which we are amending has reference to the decision of the board of review, which is a different matter, and in using the words "filed in" we want to make it clear that there is no question of appeal; that the action of the board is final and that the board's decision once it is filed in the court is final.

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LIB

Harry Butcher

Liberal

Mr. BUTCHER:

Then with reference to section 10 I would suggest that the minister take the matter into consideration because it seems to me that the words "filed in" should be substituted for the words "approved by" in each case, that is to say in subsection 3 of section 2 and sections 10 and 8 of the original act.

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CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

If we had the words "approved by" inserted in clause 4 of the bill, we would open the door for a county court judge to sit in appeal on the decision of a board of review which is presided over by a supreme court judge. That would be an anomaly of itself. But we wish to make it clear that there is no question of appeal from the decision of the board of review. That is final; the matter is closed by filing the decision in the office of the clerk of the county court.

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LIB

Harry Butcher

Liberal

Mr. BUTCHER:

But that is exactly what I think will happen under subsection 3 of section 2. I think the words " filed in" should be substituted for the words "approved by" in section 2, subsection 3, of the original act. Perhaps the minister will consider that at his leisure.

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CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

I would not for one

moment attempt to pit my knowledge of the law, which is meagre, against that of my hon. friend, because as I stated in the house the other day, I have not practised law for twenty-five years and have almost forgoten that at one time I was titularly at least a lawyer. But I have had the Department of Justice go over this bill very carefully. It was intended that the settlements of the official receiver should be approved by the county court, but it was not intended that a decision of the board of review should be subject to approval of the county court. The mere filing of the decision in the office of the clerk of the court was a finality to the proceeding. The two cases are entirely distinct.

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Section agreed to. Section 5 agreed to.


UFA

George Gibson Coote

United Farmers of Alberta

Mr. COOTE:

Before the bill is reported

let me say that I have repeatedly urged upon the house the necessity for providing some general act to limit the rate of interest on farm mortgages. I think hon. members will recall that when this act was being passed a year ago I with many other members urged very strongly on the Prime Minister that it was necessary to give to all farmers some protection in regard to interest rates. This legislation I am sure will not benefit more than ten per cent of the farmers, In other words at least ninety per cent will not take advantage of the Farmers' Creditors Arrangement Act. Many farmers are still paying interest at the rate of eight and even nine per cent per annum. I still feel very strongly that we should include in this act some provision for reducing rates of interest on all farm mortgages. What I am anxious to do is to prevent a great many farmers who are included in the ninety per cent of which I spoke from being forced into a state of bankruptcy through the payment of too high interest rates. Almost every agricultural country in the world except Canada has passed legislation of this nature, reducing rates of interest on farm debts. Canada

should not lag behind in this respect. Anyone who has collected interest at the rate of eight or nine per cent during the last five years has had in almost every case purchasing power greatly in excess of the purchasing power of money at the time the loan was made, so that a reduction in the rate of interest during these latter years would not have been a reduction in the purchasing power of these people.

For the purpose of bringing this matter before the committee I wish to move an amendment to the bill. Before doing so I would draw attention to section 17 of the present act which reads:

Notwithstanding the provisions of any other statute or law, whenever any rate of interest exceeding seven per centum is stipulated for in any mortgage of farm real estate, if any person liable to pay the mortgage tenders or pays to the person entitled to receive the money, the amount owing on such mortgage and interest to the time of payment, together with three months' further interest in lieu of notice, no interest shall after the expiry of three months' period aforesaid, be chargeable, payable or recoverable in respect of the said mortgage at any rate in excess of five per centum per annum.

The purpose of that, I think, is clear; that if any mortgagor can get the money and

Farmers' Creditors Act

tender it in payment to the mortgagee, the mortgagee must accept payment of his principal, or thereafter be content with interest at five per cent per annum. It seems to me that there was very good reason for placing the rate at five per cent per annum; the government felt that five per cent was a fair rate under the circumstances. Of course few farmers have been able to secure the full amount of their mortgage to tender payment of the principal sum so as to get the rate of interest reduced to five per cent. I do not think we should be working much hardship on any person; on the other hand it would be in the interest of the great majority, and we should be following much the same line as has been followed in almost every other country in dealing with farm debts, if we passed legislation effecting a reduction in the rate of interest on farm mortgages. In order to bring the matter properly before the committee I move:

That Bill No. 10, an act to amend The Farmers' Creditors Arrangement Act, 1934, be amended by adding the following section thereto:-

6. Section seventeen of the said act is amended by adding the following subsections thereto:-

(3) No interest at a rate exceeding five per centum per annum shall be charged, payable or recoverable on any existing mortgage of farm real estate, or agreement covering the sale of farm real estate.

And because I believe that this should be retroactive and should cover the past four years of very low prices I have added another subsection:

(4) Where interest at a rate in excess of five per centum per annum has been paid from and after the first day of January, 1931, on any mortgage or agreement covering the sale of farm real estate, the difference between the rate of five per centum and the amount paid or collected shall be credited on any arrears of interest outstanding, and if there are no arrears, then the difference shall be credited on the principal of the mortgage or agreement.

In support of my amendment asking for a reduction in the rate of interest during the years 1931, 1932 and 1933, may I point out again that the average farm income in Canada, which was approximately $1,600 in 1928 and $1,500 in 1929, fell to $740 in 1931, to $660 in 1932, and in 1933 to $640. Anyone reading these figures will realize that it was much easier for a farmer to pay even ten or twelve per cent in 1928 and 1929 than five per cent in these later years. Because of the very difficult situation in which the farmers have found themselves in the last five years due to the very low prices received

for their products, prices over which they had no control, I ask favourable consideration of this amendment by the committee.

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CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

I was not in the house last year when section 17 was added to the Farmers' Creditors Arrangement Act, but it will be apparent to any draftsman that it is a section which has no relation whatsoever to that act. I have no doubt that the reason it was placed there was that it was not thought advisable at that stage of the session to introduce a fresh amendment to the Interest Act. But that is where a section of this kind ought to go. However, section 17 is there.

Now, may I point out that the proposed amendment-of which the hon. member for Macleod was good enough to give a copy in advance, for which I thank him-makes a provision which calls for an expenditure of public money. It is no less public money by reason of the fact that it comes from the farm loan board, for the principal comes out of the public exchequer. Therefore his amendment calling as it does for the expenditure of public money, is out of order, and it would be necessary to raise that point. But may I point out to my hon. friend that at the present moment he has a bill before the banking and commerce committee dealing with the rate of interest, and there is no reason why the whole subject should not be comprehensively dealt with there, so that any action taken by the committee on banking and commerce would be uniform. That would deal with the matter as one of interest and not as one affecting this bill, because I submit that it has no bearing whatever on this bill. The compromise of the debts of a farmer has no relation whatsoever to the question of interest, because it is a matter of compromise. Whether the interest is one per cent or twenty-five per cent would make no difference in the adjustment of the debts. Under the circumstances I hope that my hon. friend will not press his amendment but will take the course I have suggested; otherwise I shall have to raise the point of order which I have mentioned.

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UFA

Edward Joseph Garland

United Farmers of Alberta

Mr. GARLAND (Bow River):

Whether rightly or wrongly I am not going to say now, of course, but last year by section 17 of this very act the government itself did bring this question of interest within the scope of the Farmers' Creditors Arrangement Act. Unfortunately they placed in the act a weapon that was most unworthily used in some cases by unscrupulous persons who alleged, of course, that the government had reduced the interest rate to five per cent. Those who studied the clause realized, of

Farmers' Creditors Act

course, that in itself it was practically useless, and I doubt if a single case has been adjudicated under it. The clause provided, as the hon. member for Macleod has pointed out, that where a debtor farmer tendered the payment of all the principal due, all the arrears due and all the interest due plus three months' interest in advance, after the three months had elapsed no rate of interest higher than five per cent could be collected. When you make a statement of that kind to an average farmer audience in western Canada it is greeted with scornful laughter, and quite properly so. The clause is worthless. I congratulate the hon. member for Macleod on endeavouring to introduce into this act the very principle that the government protested it had in mind last year, the general reduction of interest rates of five per cent, in keeping with the action taken in other countries. It is not my purpose to-night to stress the necessity for that; it has been shown again and again in other years as well as this year.

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LIB
UFA

Edward Joseph Garland

United Farmers of Alberta

Mr. GARLAND (Bow River):

It will be read in a moment. I could tell hon. members of men who came to Canada from other countries; I have one in mind at the moment, who came here with some $35,000. He entered into the purchase of land under an agreement of sale; he operated as a scientific farmer, sparing himself neither in physical toil nor in mental effort. He worked twenty-five years without leaving his farm, but at the end of that time it was found that he owed $63,000, half to the Canadian Pacific Railway and half to the Bank of Montreal. Two years ago his life insurance policy, his last realizable asset, was sold, and the proceeds were divided equally between the bank and the Canadian Pacific Railway Company. That result, of course, was due in large part to climatic conditions over which neither the debtor nor the creditor had control, but at the same time the ruthlessness of collection by the creditors and the extortionate rate of interest charged in relation to the productivity of the farm had no small bearing on the man's ultimate collapse.

I hold in my hand a statement which I gave the house last year, but which possibly has been forgotten. It is the result of research work carried on by Doctor Win Allen and Doctor Hope of the university of Saskatchewan. After two years of study they found that if the farmers of Saskatchewan had wanted to pay the interest on the farm debt- the interest only-according to their investigation it would have required four-fifths of

the entire wheat crop raised and sold in that province. If they had wanted to pay their taxes-with which we are not concerned at the moment-it would have required two-fifths of the total wheat crop raised and sold. So if the farmers of that province had endeavoured to pay interest and taxes alone it would have required one-fifth more wheat than they raised and sold. Exactly similar conditions prevail, varying only slightly in degree, in the three western provinces where grain is the principal source of revenue.

A few days ago the hon. member for Macleod again drew vividly to the attentionof the house the collapsed financial condition of agriculture. He must have made it apparent to every hon. member who listened to him that it is impossible foragriculture to continue to pay even fiveper cent, or certainly more than five

per cent. I think he is exceedingly conservative in placing the figure at five per cent; if I had my way I would eliminate all interest from the time this depression commenced, and I would not restore it until we had price levels analogous in some degree with those of 1926. The figures quoted by the hon. member for Macleod are worth putting on Hansard once more. He stated that the total farm income in Canada for the four pre-depression years amounted in round figures to $4,012,000,000. In the four years of the depression that total income was only $1,740,000,000, so there was a decline in income of $2,268,000,000 during that four year period. These figures are significant; they tell a story, more vividly than words, of conditions that must be dealt with by this parliament and that must be recognized by this government. The proposal made by the hon. member for Macleod, even if it were out of order-and I contend it is not-ought to be accepted by the government and introduced as their own measure. If they are not willing to accept it as an amendment from this section of the house let them accept the principle and bring in the amendment themselves.

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CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

My hon. friend from Bow

River is too shrewd to have misunderstood my position. I am not dealing with the merits of the interest question at all. I have stated time and again that I should like to see interest rates as low as they can be reasonably made, but the question of interest does not arise in connection with this bill at all; it has no reference to it. The hon. member says section 17 was placed in the bill last year by the government. That is quite true. The only explanation I can offer is that at that stage of the session it was thought

Farmers' Creditors Act

perhaps unwise to attempt to amend the Interest Act, but the bill was altogether silent on the question of interest. That would have no bearing upon the operation of the Farmers' Creditors Arrangement Act. The settlement is made in the first place by compromise between debtor and creditor, and it does not make any difference whether the rate is ten per cent, seven per cent or two per cent; it is a question of settlement. Then you come to the board of review, who make their own terms with respect to interest. So the question of interest has no bearing on the Farmers' Creditors Arrangement Act whatever. The government has taken a stand so far as its general policy with respect to interest rates is concerned; we have come to the point where we have received many complaints from savings bank depositors that the rates of interest are too low. That is just an aside. I have told the hon. member for Macleod and I now tell the committee that the question of interest is one that should be dealt with in connection with the Interest Act, and my hon. friend from Macleod now has a bill dealing with the question of interest which is being considered in the banking and commerce committee. I am not trying to evade responsibility, so far as the government are concerned, in dealing with the question of interest on its merits. But having regard to the question of propriety, so far as the committee is concerned there is no question about this amendment being out of order. It is one of the cardinal rules of the house that only at the instance of the crown, by way of message, can a measure be submitted involving the expenditure of public money.

Mr. HA'NBURY: In what way would that involve an expenditure of public money?

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CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

Because the amendment

provides not only that there should be a certain fixed rate of interest, but that where more than five per cent has been paid an amount shall be returned to the borrower.

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LIB

Wilfred Hanbury

Liberal

Mr. HANBURY:

To the one who holds

the mortgage. It may be a private individual it does not necessarily have to be the government.

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CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

This will affect mortgages made under the farm loan board.

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LIB

Wilfred Hanbury

Liberal

Mr. HANBURY:

But is it not a general

provision affecting all mortgages, and not necessarily only farm loan mortgages?

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CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

Even so, it will affect the

farm loan board.

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LAB
CON

Edgar Nelson Rhodes (Minister of Finance and Receiver General)

Conservative (1867-1942)

Mr. RHODES:

I have done so often, and I do not know whether I can do it any clearer. All the money which is lent under the farm loan act comes out of the public exchequer, and if the farm loan board has to hand back four years' interest, that money would have to come out of the public treasury.

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March 4, 1935