Honourable senators, I am the critic on Bill C-280. At third reading, I would get the opportunity to speak for 45 minutes. Given that the debate on this bill is focused, in my view, on the report that has come back from the Standing Senate Committee on Banking, Commerce and the Economy, if you will indulge me for 20 minutes today, I promise not to speak at third reading. That seems like a fair trade. When Her Honour interrupts me and blows the whistle on me after 15 minutes, I’m asking for your indulgence for a few minutes more.

The bill and the committee-adopted amendment have been well explored in speeches in this chamber. I want to focus and limit my remarks to, roughly, four points.

I want to begin, colleagues, by offering my impression with respect to the debate so far. My impression is that, over the last short while and with a few exceptions, including, of course, Question Period, our chamber has — if I can paraphrase that observation of Martin Luther King, Jr. — seen the long arc of our history bend toward civility. This was true even when I testified as the first witness regarding this bill at the Banking Committee. I’m not sure where the House sponsor was or where Senator MacDonald was. I thought I was among friends, but it was something of a shooting gallery, and I was the target. Given the long arc of history bending toward civility, it was, at least, friendly fire.

That said, I thought the debate on this report last week was a setback to that arc. We have a remarkable privilege in this chamber, where we can speak and are rarely accountable except to ourselves. If it is not a great power, it is an unusual and special one, and it comes with an obligation of licence toward self-restraint, not licence in its own language. There are hard rules of decorum here, I know, but I’m more focused on how one wants to be in this place. I have laid down a test for myself, at least, and for the remarks that follow. Let’s see how I do.

I want to start with two stories. The first I will call “Dan Hartney’s Sailboat.” I have a lifelong friend who became a veterinarian and moved out to Vancouver. He didn’t have much money but was very keen to take up sailing, so he acquired a sailboat. When I saw him there, I asked, “How could you possibly afford a sailboat?” Senator Loffreda knows what’s coming. He said to me, “The Royal Bank is now the proud owner of one more sailboat.” The reason he said that — an insight, really — is that, of course, he didn’t have the money. He borrowed it from the Royal Bank, and they took what was then called a chattel mortgage on the sailboat. But the Royal Bank, in legal terms, was the proud owner of one more sailboat. I would like you to hold that thought for a moment.

I would now like to turn to trying to identify a simple example not directly related to the world of perishable fruit and vegetables, but which sets the stage a bit for talking about the workings of the bill in the context of bankruptcy and insolvency. I have chosen to sketch out an example using my grandfather’s business from decades ago — not his business as a moderately successful plumbing and heating businessperson, but his business through the Depression: a small candy-making store in Kamsack, Saskatchewan.

The plumbing business was difficult in the years during the Depression, but he had fortunately learned from a friend how to make handmade chocolates. He took a chance and established a small ice cream and chocolate business in Kamsack, called the Kandy Kitchen. He had little or no money to get that started, so he needed the following: He needed the bank to provide money for the building and working capital as well as to buy a specially equipped bicycle to take the ice cream business to baseball parks for tournaments and to fairs. He needed Ms. Gorski to supply rich cream from the farm and the chocolate and nuts guy to provide the inventory. He also needed the Assiniboine River, which flows near Kamsack, to supply the ice. In February, he would go out and actually cut large chunks of ice out of the river, bury them in layers of straw and use them as the freezing component for making homemade ice cream. Amazingly, the ice lasted until August.

He also needed a couple of staff — Judy Kalmakoff and Ruth David — to serve the customers, and he knew that he would have to make payments of income tax remittances. If there had been pensions, he would have had to make pension remittances to a pension fund.

He had modest success with the Kandy Kitchen. Plumbers are versatile — we know that. But I want you to imagine the business failing. When a business fails, there is not nearly enough money or assets to satisfy everyone, so we have to sort out who gets what and how much. How do we do that? The answer is, in part, market power moderated by, where relevant, priorities set out in federal bankruptcy and insolvency laws. The latter are intended to apply good public policy reasons to support some creditors over others and to sand off the sometimes harsh outcomes of market forces.

Not surprisingly, the bank, through its market power, gets first dibs. Through its leverage, it acquired a mortgage on the building and equipment. In a certain way, like Dan Hartney’s sailboat, the bank owned them. There was probably also some form of — as Senator Moncion reminded me — floating charge on the inventory and perhaps the cash that descended on the assets at the first sense that the bank was not going to be paid its overdue payments.

In most cases, this consumes the whole of the assets, left to pay too many bills, and the Ms. Gorskis, Judy Kalmakoffs and Ruth Davids of the world are left vastly underpaid or not paid at all. We have raised up some of those creditors somewhat. The Wage Earner Protection Program Act steps in for employees, to a certain degree, and there is a so-called super priority for things like income tax remittances. We also recently put in place security for the recovery of pension plan remittances. However, for the most part, the Ms. Gorskis of the world, the suppliers of the input for my grandfather’s business, are left out. This brings us to this bill and, in this context, the Ms. Gorskis of the world — that is, perishable fruit and vegetable suppliers.

I do want to emphasize that — and this should take some of the sting out of some of the arguments advanced earlier — even for the folks who have been bumped up, including this group, nothing beats the commercial lenders if they were there first. Here is why: The Supreme Court of Canada made this clear recently with respect to the best of these raised-up folks. For unpaid income tax remittances, if the income tax people — the Canada Revenue Agency statutory trust — gets there ahead of the security interest of the lender, and the trust asset in this statutory trust can be traced, the Canada Revenue Agency wins. But if it comes along later, after the security interests of the bank — in the case itself TD Bank — there is no asset to be deemed to be held in trust and the commercial lender’s security interest wins. The sailboat really does belong to the bank.

My point here is that the debate we heard last week, if I may call it this, was a red herring. Most of the time the bank will have been there first and will win, so the economy will not collapse. Whether we like it or not, this trust will only very occasionally vault fruit and vegetable producers ahead of the bank. It is only marginally a bankers-versus-farmers debate.

Let me turn next to the reasons why I support the bill and why I have some sympathy for Senator Varone’s amendment. My main interest with respect to supporting this bill is the way in which it tries to raise up what I will call “little people” in the fight for compensation in bankruptcies and insolvencies. As I said at second reading, the main losers in the distribution of bankruptcy proceeds are the little creditors. This bill, while imperfect, somewhat assists those little creditors in the fruit and vegetable sector. This is a good thing for many reasons articulated here and also at committee.

This is a good thing for the agricultural sector and for many who rely on these producers — the people who supply them with inputs, the employees and so on — because when the producers go under they suffer as well, and some of them also go under. As I said, I do like Senator Varone’s amendment, focusing as it does on the main sources of perishable fruits and vegetables: the producers. It is a modest improvement to the bill, but I think only a modest one.

Second, I think what this bill does with respect to a constructive engagement with the U.S. is an important point, though the bill is small in that regard. Earlier this year, I went with Senator Robinson and a small number of members of Parliament to Washington to engage with members of the House of Representatives and senior agricultural administrators in the U.S. government. I was invited along mainly to be able to speak about Bill C-280. In that dialogue, I can tell you with assurance that the congresspeople with whom we met and the senior agricultural administrators welcomed the prospect of Bill C-280 with enthusiasm. While there were no guarantees provided, they indicated a likelihood — I think it’s fair to say — that after Canada’s adoption of Bill C-280 in the form that they saw that access to the Perishable Agricultural Commodities Act, or PACA, system for Canadian producers would be reinstated. I would say it is a likelihood.

Some are correct that the Canadian and American systems are not perfectly aligned. That said, it is a call for the Americans to make as to whether the alignment is adequate to meet their interests. It should be kept in mind, as we have heard, that proportionally American producers selling into Canada represent a significantly larger community than Canadians selling into the U.S. My sense is that the motivation is strong for the Americans to provide that reciprocity.

Senator Varone’s well-intentioned amendment may or may not complicate this question of U.S. reciprocity. You have all probably seen the correspondence suggesting this possibility, which I would say may or may not materialize if we were dealing with a bill that has been amended. On balance, I think the adoption of the bill without amendment has a very good chance of attracting U.S. reciprocity. The bill as amended has a somewhat lesser chance. Finally, on this point, the present environment where we can engage constructively with the U.S. on trade matters in ways that are mutually beneficial to both countries would make a very positive statement.

My third point is that we need to be open and honest about problems with the bill — or at least its limitations. These are not specifically related to the amendment adopted by the committee. I have two points to make here. The first is the effectiveness of the trust attaching. This is in part due to the workings of commercial law, to which I alluded earlier, but it is also a function of — at least in some circumstances — the trust that is created by the bill not being in legal language tight enough to attach at the absolute earliest possible moment and thereby improving its prospects of becoming an effective trust in competition with other claims against the assets of a debtor. I have already spoken about that.

More serious, in my view, is the problem of identifying and tracing trust property. This is a trust, after all, and you have to identify the property that is subject to the trust. As I mentioned at second reading — and this is confirmed by what the Federal Court said in the 2018 decision regarding the Toronto-Dominion Bank and the Canada Revenue Agency about statutory trust for income tax purposes — this bill leaves intact the rules regarding the need to trace trust property.

The reason for that is that the legislation leaves in place the rules of provincial jurisdictions regarding property and civil rights, and that means how trusts operate and how they are interpreted. The preservation of provincial jurisdiction regarding trust law is explicit in this bill. The bill could have included provisions whereby, for the purposes of bankruptcy and insolvency, the rules regarding tracing could be set aside. The constitutional principle of paramountcy of federal legislation would give precedence to the federal bankruptcy rules. This might have been tempting for the original sponsor of the bill, but it introduces a new layer of complexity where Ottawa treads upon and overrules provincial laws. That’s an awkward federal-provincial initiative, and it was not pursued in this case.

Senator Cotter, I’m sorry to interrupt, but your time has expired. Are you asking for more time?

I am asking for more time, yes.

Are we agreed, honourable senators?

Furthermore, it would create another complication, because it still remains absolutely necessary to identify the property that is the trust property and to follow it through. As a matter of reality, perishable fruits and vegetables are sure to be commingled with other suppliers and the money generated also commingled, so it will still be an outstanding question: What’s the property that the trust is supposed to attach to? If you cannot answer that question, the trust fails. To be completely honest, after reading the Supreme Court decision I’m less hopeful than I was about the ability of the deemed trust to be fully effective.

I used a cheesy metaphor that I think I have time to repeat: There were two fellows in a rowboat going down a stream. Suddenly, they realized that they were going to go over a waterfall. One of the fellows says to the other, “Throw out the anchor.” The second fellow says, “But the anchor is not tied on to the boat.” The first one says, “Throw it out anyway, it might do some good.” This is not quite as troubling as the two fellows in the rowboat, but I think we should have reservations about whether we will be entirely successful. That said, it seems worth the candle.

Weighing all of these, firstly, too broad a coverage by the trust is a point made by Senator Varone. I think I have a small preference for Senator Varone’s amendment in that regard. Practical problems with the workability of the trust: I think that’s true, but it would have required significant reworking of the bill, and there is some potential for the bill to succeed. Increased risk that an amended bill would fail to align with the U.S. position — it’s a small increased risk, not a great one, but I’m not sure it is worth taking. The bill was supported in the other place, as has already been noted, in its original form. This argument is often used when it suits the position of the arguer. For me it is a consistently serious point, though not always determinative. In this case, I take it seriously.

Support for the ag sector — we consistently undervalue the agricultural and agri-food sector as a critical pillar of our economy noted in the project and report that was led by Senator Harder with appreciation, from my point of view. That’s the case now and going into the future. More and better recognition of its role would benefit us all. This bill is a small signal of our commitment to many of the people who produce our food, and it would be truly unfortunate if we lost the opportunity to send that signal.

My last point here, a risk that amendments would sink the bill. All I can say is that this has been explored by you. It seems likely, and I would prefer a less than perfect bill to no bill at all.

My position is, even though Senator Varone’s amendment will make the bill a little better, on balance, an amended bill will compromise some good that this bill will achieve. I support its adoption in its original unamended form, and consequently, with respect for those who take a contrary view, I will be voting to defeat the committee’s report. Thank you very much.

When I read the decision of the Supreme Court in the TD trust case, it became clear that banks and financial institutions that take security interests early in time when the business is getting under way — which is typical, and maybe revive them — are immune from even the trust for income tax remittances that comes along later. This trust will nearly always come along later.

Thank you, senator. Your time has expired. Senator Martin.

Honourable senators, I rise to speak to the report of the Standing Senate Committee on Banking, Commerce and the Economy on Bill C-280, An Act to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act (deemed trust – perishable fruits and vegetables).

As has been explained in earlier speeches, the purpose of Bill C-280, is two-fold: First of all, it would establish a deemed trust for perishable agricultural commodities in Canada, prioritizing payments to produce suppliers in cases of buyer insolvency. This protection would ensure that farmers, distributors and all suppliers in the perishable goods supply chain would have a secured, reliable mechanism to recover unpaid funds.

Secondly, Bill C-280 would help to restore Canada’s preferred trading partner status by re-establishing reciprocity with the United States under the U.S. Perishable Agricultural Commodities Act, known as PACA.

Canada had reciprocity under PACA for over 70 years before losing it in 2014 due to the absence of a reciprocal payment protection system for U.S. exporters to Canada. This lack of reciprocity has made Canadian produce exporters vulnerable in one of their largest markets, requiring costly double-bond requirements and creating an uneven playing field that threatens Canada’s agricultural economy.

This is important to understand. For Canadian producers, achieving reciprocity with PACA is not a minor regulatory adjustment; it is an economic imperative. Of Canadian produce exports, 85% goes to the United States, making it essential for Canada to provide a trust mechanism that mirrors PACA’s protections. Without this alignment, Canadian suppliers cannot confidently trade across borders, and our produce sector remains at a disadvantage in an increasingly competitive global market.

However, amendments made at committee have raised concerns that they critically impair Canada’s ability to secure our much-needed preferred trading partner status by narrowing the definition of “supplier” to “farmers or dealers,” and stipulating that assets are deemed to be held in trust as a secured creditor rather than just deemed to be held in trust.

Last week, we heard two very different positions on the impact of the amendments that were made at committee. On the one hand, Senators MacDonald, Deacon, Black, Plett and Cotter today argued the amendments would remove Canada’s ability to achieve reciprocity under PACA. On the other hand, Senator Varone argued that the unamended bill would do nothing to protect farmers and — even with his amendments — more work would still be required to, “carry farmers across the finish line of reciprocity.”

Honourable senators, I am an educator by training, not an expert on bankruptcy. However, I am a member of our Banking Committee and was present for the consideration of this legislation.

At committee, we heard from the best witnesses we could find who were experts on this issue. And as the experts, I believe their testimony should carry significant weight and inform our decision on whether we support the amendments in the report before us or not.

Following Senator Varone’s speech last week, I took some time to review his comments and noted a number of arguments that he had made in support of his amendments. I would like to consider each of these arguments in light of the evidence and testimony provided by the experts who appeared at the Banking Committee.

Senator Varone began his speech by referring to the original text of Bill C-280 as “inadequately articulated,” and expressed concern that its provisions were unclear and imprecise. He argued that this lack of clarity could lead to implementation challenges, particularly in insolvency proceedings and necessitated adjustments to ensure the legislation was workable.

However, Massimo Bergamini, Executive Director of the Fruit and Vegetable Growers of Canada, told us the following at committee:

Fruit and Vegetable Growers of Canada has advocated for the financial protection found in Bill C-280 for almost 40 years. The fruit and vegetable sector deals with perishable products and short sales windows. The simple reality is that current insolvency laws offer no protection to growers who can’t reclaim goods that quickly lose value. Bill C-280 would fill this gap.

Mr. Bergamini is an expert representing the fruit and vegetable industry across the country which currently supports over 185,000 jobs. He believes that the bill directly aligns with the unique realities of the fresh produce industry, and there were other witnesses who also concurred.

Senator Varone’s second concern was that the bill, as drafted, would disrupt existing creditor hierarchies in bankruptcy proceedings. He argued that prioritizing fresh produce sellers through a deemed trust might unfairly elevate them above other creditors, such as secured lenders or employees, potentially destabilizing the broader insolvency framework.

However, Ron Lemaire, President of the Canadian Produce Marketing Association did not agree. In a letter submitted to the committee, he wrote:

. . . a deemed trust is the only means by which the Government of Canada can provide effective financial protection to growers and other fresh produce sellers in Canada.

It does not disrupt creditor hierarchies but ensures fairness in payments owed to suppliers.

Mr. Lemaire was clear that Senator Varone’s concern was unfounded. A deemed trust is a targeted solution designed to address payment inequities without disrupting the broader creditor hierarchy.

Senator Varone’s third argument was that prioritizing fresh produce sellers may lead to increased borrowing costs and reduced credit availability for small businesses. This claim was disputed by witnesses as well. Fred Webber, past president of the Fruit and Vegetable Dispute Resolution Corporation, told the committee:

This bill would open the door to reinstating financial protection for Canadian growers under the United States Perishable Agricultural Commodities Act. PACA has been a proven system for over 30 years, ensuring financial stability for suppliers without disrupting credit markets.

Richard Lee, Executive Director of the Ontario Greenhouse Vegetable Growers, said, “The current wording of this bill will ensure the reciprocity is restored with the United States” — without introducing undue financial risk or administrative burdens to Canadian businesses.

Furthermore, evidence from the U.S. experience under PACA suggests that such mechanisms have not led to widespread credit issues or systemic financial disruptions. Protecting the sellers of fresh produce enhances economic stability by reducing the likelihood of cascading bankruptcies in the agricultural sector, which supports food security and local economies.

The simple truth is that small businesses in the fresh produce supply chain face greater harm from unpaid debts than from hypothetical credit constraints. This bill mitigates risks for these businesses, which are critical to the economy.

Senator Varone also suggested that his amendments were necessary to ensure a more equitable balance between the interests of fresh produce suppliers and other stakeholders in the insolvency process. He suggested that the original bill overly favoured one group at the expense of a fair and transparent system for all creditors.

Yet, there was no testimony at committee that confirmed this concern and suggested that the amendments were necessary. Rather, the prevailing testimony and evidence overwhelmingly favoured the unamended bill as a fair and necessary solution for the unique vulnerabilities of the fresh produce industry.

Rather than creating inequities, Bill C-280 resolves existing ones. The sector’s unique challenges, including perishability and long payment terms, necessitate additional protection. Other industries, such as grain producers, already have their own tailored financial safeguards, and Bill C-280’s deemed trust simply ensures that fresh produce sellers receive the payments owed to them, which is fairness, not preferential treatment.

Finally, according to Senator Varone, the original text of the bill deviated significantly from Canadian insolvency principles and norms, which aim to balance interests rather than heavily favour specific groups. He argued that his amendments sought to align the legislation more closely with established practices and legal frameworks.

Ron Lemaire, President of the Canadian Produce Marketing Association, disagreed. He said that the bankruptcy protection mechanism in this bill would create “. . . a critical fit-for-purpose tool for an industry that is unique and currently unprotected.”

On this point, it is important to note that Canadian insolvency law already recognizes sector-specific priorities, such as super-priorities for agricultural producers. A Library of Parliament study notes that section 81.2 of the Bankruptcy and Insolvency Act:

. . . establishes a special right for farmers, fishers and aquaculturists who deliver their farm and fisheries products to a purchaser for use in the purchaser’s business. Where the purchaser subsequently becomes bankrupt or is placed in receivership and such products are delivered within 15 days prior to the purchaser’s bankruptcy or receivership, the farmer, fisher or aquaculturist can file a claim for any unpaid amount in respect of those products within 30 days after the bankruptcy or receivership. This claim is secured by a charge on all the inventory held by the purchaser; it takes priority over all other rights or charges against that inventory, except an unpaid supplier’s right of repossession.

Bill C-280 is not a novel initiative; it aligns with the existing provision available to agricultural producers by addressing the distinct needs of fresh produce suppliers. The bill recognizes that while this existing provision benefits much of the agriculture sector, it does not help fruit and vegetable growers because of the short shelf life of their produce.

Contrary to Senator Varone’s concerns, Bill C-280 does not undermine the fairness of the system; it strengthens it. The experts we heard at committee disagreed with Senator Varone’s concerns and believed that his amendments were harmful to the industry, not helpful, and threatened the likelihood of achieving reciprocity with the United States.

Limiting the term “supplier” to just “farmers or dealers” excludes vital participants in the produce supply chain, such as packers, wholesalers and resellers. This exclusion runs directly counter to PACA’s inclusive approach, which protects the entire value chain. The U.S. authorities have made it clear that full reciprocity requires protections comparable to those in PACA, which cover all perishable goods suppliers, not just primary producers or dealers. Thus, the amendment endangers Canada’s opportunity to restore PACA reciprocity.

Additionally, changing the bill’s wording to classify suppliers’ claims as “held in trust as a secured creditor” rather than simply as a “deemed trust,” effectively reduces suppliers’ priority status. Under this amendment, Canadian suppliers would compete with other secured creditors for repayment.

Colleagues, I have more to say, but I know I am reaching my limit. What I want to simply say — and you’ve heard many of these arguments — is that I urge you to reject the committee’s report, restore Bill C-280 to its original, unamended form and bring reciprocity back to our Canadian producers.

Thank you.

Will the senator take a question?

The time has expired. Senator Martin, are you asking for more time to answer a question?

Yes, in order to answer this question.

Is leave granted?

Thank you, colleagues.

As I recently stated in this chamber, the government takes a position on all bills that would change federal legislation, including private members’ bills. As the Government Representative, I’m in the habit of sharing those views with you here in the chamber. Indeed, I recently spoke, as you know, to Bill C-275, on which the vote was deferred, but it was discussed today, in order to express the government’s view that we should not adopt amendments on that bill. I’ll be voting that position when we return next week.

Today, we’re speaking about Bill C-280. The government’s position is also that the bill should be adopted without amendment.

Senator Martin, we heard from colleagues in debate and from witnesses at committee that the deemed trust must remain extended to the entire supply chain to protect growers, given that payment disruptions could indirectly result in economic losses for growers. Could you elaborate a little bit more on why that is a concern that has led you also to oppose the amendments?

As I said in my speech, in order to receive reciprocity under PACA, which we did have for 70 years — there is protection across the supply chain in that act. For American producers to have that protection, as we would want our Canadian producers to have, we need to ensure that the entire chain is protected. It’s a very vulnerable sector, as I and others have explained. They are perishable goods, so these protections are very important and necessary.

Hear, hear.

I move the adjournment of the debate.

It is moved by the Honourable Senator Clement, seconded by the Honourable Senator Petitclerc, that further debate be adjourned until the next sitting of the Senate.

Is it your pleasure, honourable senators, to adopt the motion?

All those in favour of the motion will please say “yea.”

Some Hon. Senators: Yea.

The Hon. the Speaker: All those opposed to the motion will please say “nay.”

Some Hon. Senators: Nay.

The Hon. the Speaker: In my opinion the “nays” have it.

I see two senators rising. Is there an agreement on the length of the bell? One hour? The vote will take place at 5:40 p.m. Call in the senators.