The Farmers' Creditors Arrangement Act, was an Act of the Parliament of Canada that attempted to remedy a wave of insolvencies that occurred among Canadian farmers during the Great Depression. Originally framed to deal with such problems nationwide, it was gradually reduced in scope, and was reenacted in 1943 to apply solely to farmers in the Prairie Provinces.
Background
By 1934, the farm debt problem in Canada, which had been provoked by the Great Depression, reached a scale where provincial moratory legislation could not resolve it, as it could not remove the farmer from his position of default. The last agricultural census reported that 244,201 farms reported having mortgages totalling $677,000,000. Cash flow problems also resulted in a significant increase in the amount of short-term obligations. It reached the point where Prime Minister R.B. Bennett decided to introduce remedial legislation to address it at the federal level. The initial draft submitted by the Department of Finance addressed only voluntary arrangements between farmers and their creditors, but Bennett sent it back to add provisions designed to adjust principal and interest obligations to the productive value of the farm. As Bennett told the House of Commons, "The object, of course, is to keep the farmer on the farm; if possible to keep him cultivating the land on which he had lived." The bill was introduced in June 1934, together with relief legislation concerning farm loans, and received Royal Assent a month later. M.A. MacPherson, a former Attorney General and Provincial Treasurer of Saskatchewan, was appointed to oversee the Act's initial implementation, before permanent oversight was assigned to staff in the Department.
In 1935, the Act was amended to provide for: In 1938, the Act was further amended to provide for:
Attack on constitutional grounds
Many Canadian legal commentators at the time expected that the FCAA, together with 1933's Companies' Creditors Arrangement Act, would be declared unconstitutional as encroaching upon the provincial power over property and civil rights in relation to the rights of secured creditors, and they were astonished when both were upheld. The FCAA was held to be constitutional by the Supreme Court of Canada, and the Judicial Committee of the Privy Council subsequently agreed. As Duff CJ noted in his judgment:
Replacement and repeal
The Act was repealed and replaced in 1943, with its scope limited to the provinces of Alberta, Saskatchewan and Manitoba, but it would fall into disuse later in the 1940s. It would remain dormant until its repeal in 1988, as a consequence of the passage of the Farm Debt Review Act in 1986.
