THE STANDING SENATE COMMITTEE ON BANKING, COMMERCE AND THE ECONOMY
EVIDENCE
OTTAWA, Wednesday, September 25, 2024
The Standing Senate Committee on Banking, Commerce and the Economy met this day at 4:15 p.m. [ET], in camera, for the consideration of a draft agenda (future business); and to study Bill C-280, An Act to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act (deemed trust — perishable fruits and vegetables).
Senator Pamela Wallin (Chair) in the chair.
(The committee continued in camera.)
(The committee resumed in public.)
The Chair: I would like to begin by introducing some of the members who are with us today. Senator Bellemare — I would like to take this opportunity to say in public that we would like to thank her for her many years of service here in the Senate. She is retiring in October but she is going to stay with us on the committee and keep us on the straight and narrow for as much time as she has. Also with us today is Senator Gignac, who has been here but he is taking Senator Bellemare’s place as part of our steering committee. We welcome you and look forward to that. We have Senator Deacon (Nova Scotia) with us today. Senator Martin is here. Senator Massicotte is here. Senator Ringuette, thank you. Senator Varone. Senator Yussuff. We welcome Senator Daryl Fridhandler from Alberta. He is one of our very newest senators, coming to look at how the sausage is made here at committees, so welcome and we’re glad you’re here.
Today, we begin our examination of Bill C-280, An Act to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act (deemed trust – perishable fruits and vegetables). We have the pleasure of welcoming in person the Honourable Brent Cotter, a senator from Saskatchewan. Thank you for being with us today. We had also hoped to have with us today the sponsor of the bill, member of Parliament Scot Davidson, but unfortunately he could not make the meeting at the last moment. We are going to try to find another opportunity for him. We will begin with Senator Cotter. Go ahead with your opening remarks.
Hon. Brent Cotter, as an individual: Thank you very much, Madam Chair. This is my first and perhaps last time appearing as a witness before a Senate committee. It may be your wish that I never come back.
The Chair: We’ll see.
Senator Cotter: I hadn’t appreciated that I might be the first witness, and I had not intended to make reference in some detail to the bill, but let me just indicate that it essentially creates an artificial mechanism — a deemed trust — to seek to protect the interests and claims of perishable fruit and vegetable growers once they have sold their product to another party, often a retailer, don’t get paid and the retailer goes bankrupt or becomes insolvent. The consequence for them in the bankruptcy and insolvency proceedings is that they tend to fall to the low end of compensation among unpaid creditors. This intends to create a little better spot for them. I will try to explain exactly where that puts them in these brief remarks, and then, to the extent that I can be helpful in elaborating these observations, I certainly welcome your questions.
I would say at the beginning that I support the bill in its unamended form, though I think if I were working on it from scratch, I might make some minor legal adjustments to the bill. The context, as I say, is that this deals with the question of where fruit and vegetable producers fit into the categories of unsecured creditors in the cases of bankruptcies and insolvencies. I would just make a few brief points. It is the tip of the iceberg in the sense that very often corporate enterprises that go under — that is, go insolvent — don’t go through that process.
Often, the assets are captured by secured creditors and there is no formal process, compared to what happens to individuals who become insolvent and need to kind of clear off the decks, if I can put it that way, in order to carry on their personal lives. Unsecured creditors tend to end up at the bottom of the pile in terms of their claims just because there are often not very many assets to be disposed of. Always — the whole point of insolvency — is that there are more claimants than there is money or money value.
For small creditors, the insolvency of your creditor can often put pressure on you and cause you to be insolvent. You imagine trees falling in the forest, which is the way I describe it. It is quite possible for a small creditor to themselves become insolvent because they don’t get paid by the person who initially went under. This has the potential for fruit and vegetable producers as well. What tends to happen for them is that their product gets commingled with other products. You could imagine a truckload of carrots arriving and put into the process. Chances are they get mixed with somebody else’s carrots and you can’t tell whose carrots were whose.
As well, there is a structure in the U.S., a protection, for fruit and vegetable producers who sell down that pathway and their retailers there go insolvent or bankrupt, but because there is no reciprocal protection in Canada, that protection is not available for Canadians who are selling fruit and vegetables into the U.S.
The mechanism that is proposed in this bill is what is referred to as a deemed trust. It is similar to what is in place in the United States. Let me give you a snapshot of how it works. It’s a legal fiction which intends to — I use this word advisedly — “secure” a property interest in competition with other commercial secured creditors and other creditors. It tries to create the idea that the vegetables, let’s say, that have been sold by the producer are still in a beneficial way owned by that producer until they get paid. It goes further and says for the proceeds that are held if the vegetables are sold by the retailer but the original seller — the person we are trying to protect — has not been paid, they have an interest in the money that the insolvent debtor presently has.
In normal terms, trusts are created by contracts or exchanges or if you are the executor of somebody’s will. There is a set of laws that describe trust relationships. It essentially tries to create an entitlement for the beneficiary of the trust — in this case, the producer — in that they have an ownership interest in the property that they sold or the cash that those vegetables generated.
What that does in bankruptcy and insolvency processes and laws is it carves out from the assets of the debtor pieces of property, and the law says those pieces of property don’t belong to the debtor. When a bankruptcy trustee is selling off the property of the bankrupt debtor to pay off creditors generally, those pieces of property are not available to the trustee to sell because they belong to the fruit and vegetable producer.
It is a similar thing that happens when banks finance these people’s operations. The banks take security interests in that property, so that, by definition, if the person goes bankrupt and the trustee has to work their way through selling off the property, the property that the bank has a security interest in doesn’t belong to the debtor. It belongs to the bank. You can see how these property interests shrink down the assets that are left available for others but elevate, in this case, an entity that at least the sponsor of the bill and the people in the other house thought was a vulnerable person who needed better protection.
The deemed trust is a tricky document, and I can talk about the problems it might present. I would also say there are losers in the process, because the quantity of assets for the rest of the folks is smaller because these properties, if the trust works, go to the fruit and vegetable producers and there is a little bit less for everybody else.
One of the challenges in the bankruptcy law is to try to have a fair structure of distribution. This isn’t the best way to do it, that is, one small group parachuting into the legislation and saying, “Bump us up the chain.” One should reflect on that a little more comprehensively. As I think the chair might recall, I urge that to be something that this committee might consider.
I’ll stop there and welcome your questions.
The Chair: Thank you very much for that. I realize you are in this position of having to explain it all and do that. That’s wonderful.
[Translation]
Senator Gignac: Thank you to the witness, our fellow Senator Cotter.
In its brief, the Office of the Superintendent of Bankruptcy expressed concerns about the bill. One of them is that it could have adverse, unintended consequences, including increased borrowing costs and interest rates charged by banks, since they suddenly won’t be first in line.
I have two questions. What is your reaction to the brief from the Superintendent of Bankruptcy about Bill C-280? It has many reservations and recommends not going forward with it.
[English]
Senator Cotter: The point that the superintendent makes — I’m not familiar with what the superintendent has had to say. It hasn’t been communicated to me. The point is a not-illegitimate one. Because there is only so much to go around, if somebody gets a little more, somebody else will get a little less, and if they need protections, they might charge higher interest rates.
The advantage that commercial lenders have in these contexts — they nearly always take large amounts of security — is that they are far better off to assess risk, for example, than some poor outfit trying to sell their vegetables or fruit, perishable goods. Secondly, they have some degree of bargaining power to say that if this is the level of risk, we were going to charge you 5.25%, but now we are going to charge you 5.3%. So there is a way for them to manage risk.
The other thing too, and I think I would say this not illegitimately from the perspective of the Superintendent of Bankruptcy, is there is a structure for sorting out claims in bankruptcy, a priority of rankings and the like. This, to some small extent, disrupts that set of rankings. It ought to be done with a somewhat larger philosophy. In fact, I’m not particularly worried about the banks and the financial institutions. I’m worried about the people who are just a little bit below and end up getting a little bit less. The downside of this bill is that. I’m not deeply knowledgeable about who are the fruit and vegetable producers here, of perishable goods, but my sense is that many of them would be closer to that crowd at the bottom of the pile, employees and small creditors and the like.
I used to do a lot of work in this area with respect to employees, trying to have employees come out a little bit better when they don’t get paid and the business goes under. I’m philosophically in favour of trying to get what I would call “the little creditors” a little bit bigger bite of the apple. I’m not as concerned about the point that you or the superintendent made as I am about some people who will now end up a little bit further down the bottom of the pile. As you may know, in relation to unsecured creditors who don’t have a preference, they do very poorly in terms of the percentage of recovery.
Senator Gignac: I understand that, but assuming that this bill goes through, what is the next step? The farmers and fishers and the others will more or less ask for the same thing.
[Translation]
What’s good for the goose is good for the gander, as they say.
[English]
We open the door to many other initiatives like that which could change the rules of the game in Canada if we compare to the U.S., for example.
Senator Cotter: It is entirely possible. I do think that’s an argument not so much for not doing this but for trying to think in a comprehensive and organized way whether we have the public policy imperatives to support A versus B versus C correct, and I have real reservations about that. As I said, for employees — that’s really where I come at this. I start thinking about workers, which is where I did a lot of work before. Quite frankly, these tools are fragile and may not actually work. This trust may fail. It has gaps. I’m kind of nervous about when Senator Fridhandler gets to ask questions. I have a feeling that he would understand this deeply. It’s easy for the darned trust to miss the mark here, as has been the case with efforts of deemed mortgages and deemed trusts for employees at the provincial level. I would prefer a more comprehensive approach. I think this is good to help out one small sector, but you are right that it will encourage others to think along the same lines.
Senator C. Deacon: Thank you for being with us, Senator Cotter. You may not be an expert in bankruptcy law. I know I’m not for sure, but you have a lot more insight than I.
I have been hearing about this problem from the moment I joined the Agriculture Committee six years ago. I’m no longer on that committee, but it’s one of those cans that keeps getting kicked down the road. The producers of perishable goods in the agriculture sector are in a very different position than those that produce non-perishable goods. I empathize very much with the problem they have.
The first I have looked at the bill itself is just recently. I’m wondering, are you aware of other methods that could have been chosen? For example, in business, I used EDC insurance, Export Development Canada, to protect my receivables, domestically and exports. Are you aware of alternatives that might not present the challenges you are talking about?
Senator Cotter: I think there are two sides to that equation, if I could. Can the creditor self-insure, for example? Can the creditor take steps to be safer? They can seek out security interests in this property. They don’t necessarily need the law to do it. Quite frankly, I think the reason why the bill is proposing this is because, generally speaking, those creditors don’t have the leverage. There are questions about the market power that you have as a creditor in this type of equation, and can you do things to exercise that power or engage in forms of self-protection that you described.
Other mechanisms — here now we are talking about legislative mechanisms — are possible. The irony in some of this is the Government of Canada has no hesitation about imposing super priorities to protect its money. I don’t hear the Superintendent of Bankruptcy saying, “Well, how come income tax payments jump to the top of the list?” Which is what happens under the Income Tax Act. That’s one of the arguments to say, let’s figure out who’s the most and who’s less deserving.
You could adopt other tools that are even more powerful. You could choose — I don’t like this idea either — the Wage Earner Protection Program mechanism, which says that the government will step in and put some money in your pocket, and then they can go in and fight the claim for you, which is what happens for workers. It covers a little bit of the project, but it seems like a strange thing for the Government of Canada to essentially be bailing out some of the folks who are losing money in this exercise. I’m not particularly crazy about that model. For the amount that the Wage Earner Protection Program doesn’t cover, you as an employee don’t get very much out of that. The numbers are shockingly low.
Part of it is using other legislative tools. There are ones that I think are a little bit stronger than the trust, but all of them, for whoever happens to be the beneficiary of, it bumps them up the chain, and in a zero-sum game somebody trickles down a little ways.
Senator C. Deacon: Senator Cotter, in summation, you feel this isn’t perfect, but it’s important, it’s heading in the right direction, and in general you see this as something that’s good to move forward with?
Senator Cotter: I do. I would say yes to that. I hadn’t been seeing myself as the major proponent of the bill, but I expressed support for it and shared that with Senator MacDonald.
Senator C. Deacon: You travelled to the U.S.?
Senator Cotter: I did. We met with a series of U.S. congressmen, and they were enthusiastic about the fact that we might be doing this as kind of a reciprocity for what they do. Their mechanism for kicking in access to a deemed trust for Canadian folks in the U.S. being able to use the same system for protection is an administrative thing. They don’t have to do any legislation. The message we were told is that within months of this bill passing, they would be able to turn the switch on that protection in the U.S.
Senator Massicotte: Thank you for being with us. It is one of your final times. We will all miss you.
In my early life as a professional, I did a lot of bankruptcy work, and what you’re talking about is what we saw and continue to see all the time. Everybody argues that their risk or their liability is more worthy than the others. I have a big problem with that. I see it here constantly. People are coming up, saying, “I want to be at the front of the line.” The question is, why? Why them? I can name hundreds of people. Why not the butcher? His meat is going to go rotten in three or four days. I have a bit of difficulty with taking a piecemeal approach and trying to protect a certain sector as opposed to one that you actually recommended. If someone wants to do a real study, we should look up a list of creditors and see who has priority.
The argument, if you leave it as it is, is artificial. Ninety percent of all bankruptcy officials don’t get a dime and are unsecured. Therefore, you can argue about what you do with the vegetables, but it doesn’t matter. It’s not their money anymore. They’re going to walk away with zero, and I’m sure they understand that.
How do I get my logical mind to that answer? I don’t think I get there. My argument is that I feel it would cause another inequity of greater significance than what occurs today. Would you comment on that?
Senator Cotter: I think you are probably right. There are downsides to doing this, because there are some people who might have got a little bit and will get a little bit less as a result of these folks getting some. There is a degree of equity for people who are working hard, whether it’s workers or people who are growing vegetables and selling them to the market. We ought to try to think through what I’ve called the public policy argument, who deserves more and who deserves less protection from a public distribution of assets system and insolvencies.
How big of a risk is it for the person who doesn’t get paid? I can tell you looking at it from an employee’s point of view that a lot of those folks are working hand to mouth, and each paycheque pays the last set of bills. If they miss a paycheque, they’re in trouble. That is a factor for me, thinking about the consequences of not getting paid. Are you able to, and should you, exercise some forms of self-protection, and you don’t? Well, I’m not as sympathetic then. Are there others who can absorb the risk better than others? Those are all criteria in trying to sort out the more and less deserving, without saying — as we’re doing here in a suboptimal way — that these folks have come forward and have the ear of parliamentarians, so we bump them up the chain a little bit. I don’t like that approach very much, but I feel like we’re not trying the other approach, and if there is a degree of equity for these folks, I would be sympathetic to it.
If I were here a little bit longer and you invited me back to testify a bit more, I would put together whatever we do over in the chamber to send to Senator Wallin to do a real study and see what the framework ought to be that would be better than it is now.
[Translation]
Senator Bellemare: Thank you for being with us. It’s a pleasure.
I would like to come back to the relationship with the United States. I’m not quite sure I understand. What I do understand is that in the U.S., there is a mechanism that protects the fruit and vegetable industry, but it isn’t enshrined in law; it’s just a practice. Canadian suppliers that sell to the U.S. don’t benefit from the practice, because there’s no reciprocity. The bill aims to amend the Bankruptcy and Insolvency Act by introducing a practice that American suppliers could also benefit from. Since ours would be an act of Parliament, they could potentially make their practice law. Have I understood correctly?
[English]
Senator Cotter: I would have to go back and refresh my mind regarding the legal structure of the ways in which that would be achieved in the U.S. The message that was described to me was that this is authorized under their Perishable Agricultural Commodities Act, so it is actually legislatively framed. For the administrative mechanism by which Canadians get brought into being able to use it, I’m not sufficiently familiar with how that would work. There were three or four members of Parliament there, and I think Senator Robinson and I were the only senators who were there. We had some discussions about various things, but on this one, with the congress, they were enthusiastic, and then we met with whatever their department of agriculture is, and I think they were relatively senior people. It sounded to me like the people we were speaking with had the authority to either recommend or implement this, and their indication was that this legislation would meet their reciprocity expectations to protect American suppliers into Canada and that they would extend the same protection to Canadian suppliers into the U.S. My guess is that that might be a more significant benefit for Americans into Canada than for us down there, because I don’t know how many grapefruits we ship down there. Probably not too many. But that was the model and the way it could be done. The way it was described to me as I was listening — there was nothing in writing — was that it didn’t even seem to require a regulation but an administrative act from some senior administrator.
[Translation]
Senator Bellemare: My next question is about relationships with the provinces. Would adopting the bill have an impact on the legislative processes of the deemed trusts at the provincial level?
[English]
Senator Cotter: In proposed section 81.7(6), it indicates that the laws of general application in relation to trusts in force in the province would essentially be unaffected. To the credit of the drafter, they don’t want to tumble into provincial jurisdiction, but quite frankly, in a way, that’s a bit of the problem because the general law of trusts is one of the ones that throws up barriers to the efficacy of this law. To give you a small example, the way it’s structured, the trust doesn’t kick in until essentially the fruit and vegetable grower says, “I’d like the trust to kick in.” But by that time, the bank’s security interests are already attached on the property. The model makes it potentially too late. If the property is already owned by the bank, the trust can’t work. So there’s a technical example. Because this law says we don’t touch the working rules of provincial law related to trusts, then those rules stay in place. It’s the way property law is understood. If it essentially, through security, belongs to somebody else, then it can’t belong to you.
Senator Yussuff: Thank you, Senator Cotter, for being here.
I have a number of questions. I recognize the problem, but we haven’t heard from the sponsor of the bill. He is not here. The first question is, how much of a problem is it that we’re trying to solve with these amendments? That is the fundamental question. If it is a big problem, then we have to obviously try to deal with that much more intensely?
The other side to this is we’re trying to fit this in. My background in the bankruptcy law has been the most frustrating. For generations, workers have been reading about what happened to their pensions, wages, vacation pay and severance. The list goes on. For the longest time, there was nothing until we ended up getting the Wage Earner Protection Program that was a stopgap, and then most recently the fundamental change to the bankruptcy laws to give them super priority in the context of the pension plan.
I don’t understand why there couldn’t be any other piece of legislation, like the foreign creditors or some other legislation, to try to deal with this issue in a more wholesome way that would bring some justice to the reality, if the problem is big, where producers of berries or vegetables are encountering challenges in regard to payment. They would be able to get the federal government to say we need to devise a better mechanism than using bankruptcy. I find this difficult.
I also recognize that when trustees get involved in trying to administer who will get priority, that eats up so much of the assets. What we have learned from history is that if you’re already small and trying to get insignificant money, you’re going to get even less when those guys get involved. The history has been the trustees have their own way of operating bankruptcy access to what you might be entitled to with what this law is trying to do.
I’m frustrated trying to understand, given the importance of what I believe someone has identified as an issue. I still don’t know how big of an issue we have with this and how many farmers are struggling with this problem on a year-to-year basis. Could you shed some light on that? Do you have any answers?
Senator Cotter: I can’t shed any light on the question of the quantum and the size and significance of this, to be honest. I came at it on the principle largely on the assumption that these folks are vulnerable. Part of the basis for that is they don’t take security interests like more influential creditors do.
In fact, I came at it more closely to the parallel of workers. I taught a course on bankruptcy law for a while, and a course on employment law at Senator Fridhandler’s alma mater and wrote about employees trying to recover pay, primarily in the context of employer insolvencies. In fact, we called the chapter — it is about 100 pages long and quite boring, actually — “Recovery of Pay.” Are you familiar with the movie Cool Hand Luke? At the end of the movie, the warden says to Paul Newman, who’s run away from the jail — I don’t do the accent very well — but, “What we’ve got here is failure to communicate.” Then they shoot Mr. Newman. I wanted the chapter to be called, “What we have here is a failure to remunerate,” which is, I think, accurate.
Provinces, because they have the property and civil rights authority, can do this, and then the property entitlements tend to flow nicely into the bankruptcy laws, unless there is a big conflict. Provinces across the country have tried to find mechanisms to protect workers’ wages when they don’t get paid. Almost all of them run into the problems of the way we think conventionally about property in commercial law, which is you might have a mortgage deemed by the provincial government on your wages, but the day that you get paid, the mortgage falls away and the bank’s property interests descend on all the property. On Monday, when you go back to work, all the property is now secured by the commercial lender’s security interest. It’s not evil. It is a legitimate exercise of trying to protect a meaningful investment because, without capital, a lot of businesses could never get off the ground. It’s a determined way in which the conventional property law gets in the way of those claims. One can create super priorities in bankruptcy that can work.
Senator Martin: Thank you, senator. It’s a little bit unusual that you are here before we hear from the sponsor.
I know, based on what you said in answer to an earlier question, that you do see the upside of this bill and you are supportive. I know different issues or questions have been raised, but I wanted to focus on the upside. I have such an admiration for our farmers and growers across this country. I can’t imagine the challenges they face every day, with rising operational costs and inflation and whatnot. Would you explain further, in terms of the support you have for this bill, the upside, how this bill will help sustain local economies and protect smaller farms? You mentioned the U.S., but how will passage of this bill help the competitiveness of Canadian produce sellers in the international market beyond the U.S.? I wish to focus on the upside as to why you support this bill.
Senator Cotter: Let me take the last part first, Senator Martin.
The ability to access the equivalent kind of protection in insolvencies in the U.S. moderates the risk for producers who will sell into the States. It doesn’t solve their problem, but it makes it a somewhat safer place to sell on an unsecured basis, without getting paid right away and having to worry too much about the financial viability of the people who buy your product. That helps. We have so many conflicts in the Canada-U.S. trade world, and that is a healthy, little olive branch of constructive relationship, I think.
With respect to the upside for fruit and vegetable producers of perishable products domestically, it improves their place in the claims system and to some extent reduces the risk that they may face financial problems and insolvencies themselves when they don’t get paid. Frankly, I worry about the crowd of little creditors who are vulnerable in that circumstance.
I noticed you spoke about this in more human terms. As I think I said to Senator Yussuff, I don’t know how big an issue this is. To be honest, I don’t know whether in some circumstances it might be a large fruit and vegetable producer who benefits from this. I’m less worried about them, because I worry more about the inequity. I worry about the ones who you describe. It gives them a little better place in the system of claims and somewhat reduces their risk and gives them a little bit more confidence to sell. They can take more risk in terms of how much they produce and who they sell it to. Nothing comes with guarantees, but it’s a better environment for them, I think.
Senator Martin: Thank you.
Senator Varone: Inasmuch as I have a tremendous amount of sympathy for the farmers — and thank you for being here — I’m perplexed by the bill. Let me give you my comments on it.
Adding fruits and vegetables as a deemed trust, as has been said, will cause increased losses for all the other creditors, many of which are similar in nature in terms of agriculture production because you have meat, dairy and cheese suppliers. Where does that slippery slope stop in terms of that? This is an exceptional treatment for a small and specific cluster. The bill provides no evidence or background information for whether they have they been unfairly harmed or impaired as a group with losses compared to the other similar agriculture producers who aren’t included in this bill. My fear is that the slippery slope of the rankings of creditors will compromise the basic, equitable treatment of all similar creditors under the law. When you start creating that ranking, nothing good comes from it. Then you render useless what the deemed trust was meant to be.
Being in construction, not in food and agriculture but the hospitality business, when we buy our fruits and vegetables from the market, there’s no credit. We go to the terminals and we have to pay on the spot. The supply chain is long, because even though we buy at the terminals, other people buy from Costco and others from Loblaws. Regardless of where you buy, the lower part of the chain has no credit. How is credit such an issue in the primary part of that supply chain, from farm to terminal and from the terminal to the suppliers? Isn’t the issue looking at credit and the manner in which it’s administered throughout the supply chain?
Senator Cotter: Senator Varone was kind enough to telegraph this question when we were chatting earlier in the day, and I largely agree. I’m not familiar with the empirical evidence, and I tried to be transparent about that. My perspective on this bill is that there are noticeable inequities for large collections of unsecured creditors, and this is a minor contribution to addressing that inequity. That is where my sympathy lay. I’m not a fruit and vegetable producer or a farmer of any kind. I served on the Agriculture Committee with Senator Deacon, but I came to doubt and stayed to pray, trying to learn more about agriculture. I come to this to see what the legal tools are that can be used to try to moderate those inequities. My thinking was entirely along those lines. I’m at a deficit in terms of even the way in which fruit and vegetable producers organize their credit, and maybe many don’t, but this does seem to me to be a modest improvement for somebody who could easily be in jeopardy by not getting paid.
Senator Fridhandler: Before I ask my specific question, I would just like to say that it’s a unique honour for me to ask my first question as a senator to a former law professor at the school that I attended in 1980 to 1983, before he retires.
I agree with the remarks about the potential inequity of other food producers. The fishers, the livestock producers and the poultry producers should be marching in the street for not being included in this legislation, and that is a big issue.
You also talked about managing risk relative to these players. I would like your views on whether integration of a financial cap to protection would be a solution to broaden it and protect the small people? Does that exist in the U.S.?
Senator Cotter: Certainly when I took a quick look at the U.S., I did not see that, senator.
I think a financial cap may be proportionate to the size of the claim and what’s on the table as a distinct possibility. To some extent, the wage earner protection regime did exactly that. It doesn’t make you whole, but it makes you partially whole, and chances are that you don’t ever get to be more whole than that. There are tools and mechanisms to do that.
It might be right that I should have paid more attention to this bill when it was initially formulated in the other place. You never know what’s going to come our way, quite frankly. Perhaps I should have taken the opportunity — I thought about it — to give you an example of trying to achieve some other equities here, to take the bill that Senator Yussuff was championing with respect to securing pensions and say, “Let’s also add on people’s wages in those circumstances.” I thought that would not blow up the bill but make it a good deal more difficult.
There are tools that could address what you describe. This bill doesn’t do that; it doesn’t go that far. Maybe that’s an answer to moderate one person getting everything in the law and everybody else goes backward a little bit. That might be a tool. If this addresses one kind of inequity but creates some others, maybe there’s a way to create a soft landing for the others.
As usual, students’ ideas are better than the prof’s.
Senator Fridhandler: Just a supplement or a clarification: I think you said that you support the intent of this bill relative to what it’s aimed at. I know the empirical data is not there, and a lot of things are missing. Just to confirm, from what you’ve heard in terms of the issues we’ve addressed, do you support this bill in its entirety as presented?
Senator Cotter: Well, the bill only does one thing, so the answer is, yes, I do support it. I do think there are ways that it could be better. In particular, in cases like this, which is a private member’s bill from the other place, amendments tend to cause the bill to go somewhere to die. I would prefer it went somewhere rather than not going anywhere.
The Chair: I think that’s an important part of understanding how our system works here.
Senator Ringuette: Thank you, colleagues, for your excellent questions, and Senator Cotter for your excellent answers.
You put a lot of stress on looking at the fundamentals of this bill in regard to fruit and vegetable workers being paid. There is no guarantee in here that the fruit and veggie group in this deemed trust situation will take the money that they’ll get from that trust and pay the salaries of their employees. Is that in the bill?
Senator Cotter: Well, no. I think the answer to that is no. The idea of this bill would be to help the fruit and vegetable producers who have a business — it could be an individual, but you could have a bunch of workers — to get the revenue that they were expecting through the payment of their bills and maintain their own solvency so that, in the normal course, they would pay their workers. If they don’t pay their workers, there is another process, and I have a chapter in the book that can talk about that. Also, there is the work that Senator Yussuff and others have done in the bankruptcy and insolvency world to create a softer landing for them. There is nothing in this bill that says, once the fruit and vegetable producer gets paid, what they have to do with the money. Normally, the revenue comes in and you pay your bills.
Senator Ringuette: We have to admit that the other group of producers who are on the lower end of the scale along with the fruit and vegetables producers gets less. Therefore, they’ll be less able to pay the wages of their employees.
I have a problem with the fact that we have no data. We have no data on what happens in Canada. I follow finance and business in Canada pretty closely, and I’m trying to remember a bankruptcy situation where the Canadian fruit and vegetable producers were at risk of not being paid. I’m trying to, but there’s no data.
Senator Deacon put forward a good solution. We have to consider the cost of buying insurance from Export Development Canada for your products, whatever they are deemed to be, versus the additional cost from the banking sector to these companies in the balance.
The Chair: You have under a minute, Senator Cotter.
Senator Ringuette: Where is the balance?
Senator Cotter: I guess all I can say is that, based on my previous experience unrelated to fruit and vegetable producers, the banks always win. They have the ones that can manage the risks best. If I were thinking of amending this bill, I would try to raise up those other little people as well rather than worry too much about whether interest rates might go up three points.
Senator Ringuette: So what you’re suggesting is that this bill be amended so that all the people at the lower end should have equity into a bankruptcy.
Senator Cotter: Yes. Although as the chair pointed out, there is a certain naïveté in that. We face that regularly with private bills. This could be a lot better, and the risk is whether we try to make it better and end up with nothing. I have a bunch of amendments, but I just worry that they would just —
Senator Ringuette: Will you share them?
Senator Cotter: They are mostly up here.
The Chair: We have crossed this bridge many times, and we end up doing piecemeal bits of legislation because that’s what’s doable.
I think we’ll wrap things up with Senator Deacon.
Senator C. Deacon: I have heard about this for five years. It’s the highly perishable nature of the product that is a concern. You have done more work on this than I have, by far. You have greater insight in terms of the legal elements than I have. Have you heard of any reasons why the government has not acted to protect our perishable food producers in this situation through this or other means in the past? It’s as if the issue just goes into a black hole, and I don’t understand why there hasn’t ever been a viable response given.
Senator Cotter: In this area, you would have followed it closer than I have, Senator Deacon.
Often it’s the case that some legitimate community interest gets the ear of government or a corner of government and advances it. When I learned that there was no reciprocity with the U.S., I would have thought the Canadian government might have said, “Let’s take a look at that,” because that’s a lot easier than dealing with supply management and doing something constructive with the U.S. I was a bit surprised that had not been on the executive government’s radar. It could be that they have seen the challenges of doing what you think is the equitable thing and creating some other inequities, which is what we’re discussing here.
I think an honourable government and maybe even an honourable committee would think this deserves to be looked at. To me, it’s about a bunch of people that do honourable work and don’t get paid, whether it’s growing and selling vegetables or working 30 to 40 hours a week and going to work on Monday to find the place is closed and they don’t get paid. Those are terrible outcomes, I think, and we should be trying to find a way to try to raise them up a little bit. That’s good for the economy, in my view.
Beyond that, I don’t have any real insights on the kind of motivations or lack thereof, Senator Deacon.
Senator C. Deacon: I find providing farmers with any sort of protection against the risks of weather and politicians is a good thing. Thank you very much for that.
The Chair: Thank you for your comments on this and for trying to put it in some perspective. We often try to bite off more than we can chew, and maybe this is something manageable. We should not let perfection be the enemy of getting something done.
We are going to ask the sponsor of the bill, when he can be with us, to bring some economic data. I’m sure he has looked at that to see how many people we’re talking about. I think we have heard the case for this group with the perishable nature of their product. It is different than even a piece of beef that you can put in a freezer, but we will look at that.
We appreciate you doing double duty on this and coming in on short notice out of your own committee to participate.
Senator Cotter: It’s been an honour to be here. Thank you very much. I wish I could have been more helpful to you. We all come with our own limitations, and pretty soon, I’ll get out of your hair permanently, and you can get a good senator to replace me.
The Chair: Thank you for your contributions during your time here.
Colleagues, just to remind you, we are going to try to squeeze some more things in during the next few days, so I’m going to ask you all to have a bit less testimony in your questions, get to the questions a little faster and let our witnesses provide the testimony for us, because I think we’ll be able to cover a lot more ground that way.
Thank you all as we get back to work for this fall session. We’ll see you again tomorrow morning. Thank you, Senator Cotter.
(The committee adjourned.)