Co-Author: Grégory Morin-Maltais, Articling Student
Two recent decisions from the Supreme Court of Canada directly affect Quebec’s farm businesses by confirming La Financière Agricole du Québec’s (“La Financiere”) discretion in the administration of the farm income stabilization program known as the Programme d’assurance stabilisation des revenus agricoles (“ASRA Program“) and by concluding that such program is an innominate administrative contract, rather than a contract of insurance.
La Financiere is a public body whose mission is to support the development of the agricultural and agri-food sector in the province of Quebec. The ASRA Program aims at protecting farm specialized businesses against market and production cost fluctuations. By subscribing for a minimum of five years, “insuring” all of their annual production for each designated product and paying a fixed contribution per unit of a designated product, the participants’ goal is to maintain a positive income at the end of the year.
In both matters, the appellants argued that the compensation received by La Financiere did not meet their expectations and that the ASRA Program should be interpreted on the basis of their expectations, as this was a contract of insurance.
In Ferme Vi-Ber Inc v. Financière Agricole du Québec, the appellants were unsatisfied by La Financiere’s decision to collectively (rather than individually) take into account compensation received under federal assistance programs. This decision negatively affected the compensation of those who received lower amounts or no assistance at all from these federal programs. La Financiere’s decision was based on Section 88(3) of the ASRA Program, which states that La Financiere must take into account “any amounts to which a participant is entitled“ in its calculation.
The appellants argued that the ambiguity of this provision should be interpreted according to their expectations as insureds since the ASRA Program would be a contract of insurance. A contract of insurance is subject to the rule of interpretation based on the reasonable expectations of the insured. The Court stated that the ASRA Program should be governed by private law rather than public law. The Court further concluded that such program does not have the main characteristics of a contract of insurance and that it is rather an innominate administrative contract. The general rules of contractual interpretation, under the Civil Code of Quebec, must therefore be applied.
Such conclusion left only one question to be addressed by the Court, which was to determine whether La Financiere acted in accordance with the requirements of good faith and contractual fairness, as provided for in the rules of interpretation of agreements under the Civil Code of Quebec, in deciding to collectively link the amounts received under two federal assistance programs. According to the Court, there were no signs of bad faith or unfairness in the decision making process. La Financiere consulted representatives of farm producers, conducted impact simulations and, according to the Court, made a decision consistent with its mission. The appeal was thus dismissed.
The companion decision Lafortune v. Financiere Agricole du Quebec discusses the use of economic and statistical studies in the calculation of compensation payments. According to the appellants, the calculation method used by La Financiere was not properly carried out. The appellants argued that the ASRA Program is a contract of insurance and that any ambiguity should be interpreted in favor of the insured. The Court reaffirmed that the ASRA Program is an innominate administrative contract and stated that even if this was not the case, there was no ambiguity in the provision under review.
The Court only had to determine if La Financiere calculated the appellants’ compensation in accordance with the requirements of good faith and contractual fairness. Since no specific error was alleged by the appellants and considering it had been demonstrated that the calculation method used was appropriate, the Court concluded that La Financiere had met its obligations under the contract. The appeal was therefore dismissed.
Participant farmers should be made aware of the fact that the ASRA Program does not constitute a contract of insurance. The ASRA Program is a private contract which must be interpreted in accordance with the general principles of contractual interpretation, including the requirement of good faith and contractual fairness. One must also consider that these principles might be applicable to income stabilization programs elsewhere in Canada, which could potentially mean that these programs are contracts governed by private law.