The House resumed at 8 p.m.
GRAIN ELEVATOR STORAGE ACT, 1983
Hon. Mr. Timbrell moved second reading of Bill 40, An Act to revise the Grain Elevator Storage Act.
Hon. Mr. Timbrell: Mr. Speaker, members will recall that the throne speech indicated the Grain Elevator Storage Act was under review and needed to be revamped to provide better protection for farmers who store their grain in elevators. The revised bill clarifies the rights of the producer in stating that farm produce held in an elevator for storage remains the property of the producer, even when subject to a written agreement to sell.
Confusion has resulted in the past as to who owns the stored grain, the producer or the elevator operator, once a contract for sale had been signed, especially so when a third party took over the business operation. When elevator operations fell into financial difficulties, financial institutions would confiscate all the contents in the elevators and legal battles would result when growers attempted to regain property or compensation for it.
The amended Grain Elevator Storage Act specifies that all grain delivered to an elevator is deemed for storage unless otherwise decided by a court or by a written agreement. It states unequivocally that the producer retains title to the grain until he receives his money from any sales transaction.
The chief inspector also has powers under the proposed act to carry out these provisions and he may seal bins and seize, remove and even sell stored grain if he has to. This authority is deemed necessary to safeguard the interests of the producers. There are instances, when an elevator operator becomes insolvent or abandons his facility, in which the chief inspector must be able to step in and discharge the perishable produce before it spoils.
The proposed legislation is similar in its intent to other policy initiatives of my ministry. I refer the members to the beef cattle financial protection program, successfully introduced for beef producers last year; the farm adjustment assistance program, extended for a second year; crop insurance; and this government's income stabilization proposals, all of which are initiatives designed to safeguard the producer from natural and economic calamities.
This bill reflects the wishes of the ministry, the producer marketing boards and the chief inspector. The contents have also been discussed with the Ontario Grain and Feed Dealers Association, which has lately requested an amendment to the bill as it now stands. Consequently, when we get to committee of the whole I will move that section 17 of the bill be amended with the following new subsection:
"(4) Notwithstanding anything in this act, where the owner of farm produce in storage agrees to sell the farm produce on option, payment to the owner by the grain elevator operator on the day on which the farm produce is sold at such percentage of the market price on that day as is prescribed by the regulation is deemed to be due compensation for the purposes of clause (1)(k)."
This amendment will allow the owner of the farm produce to receive a percentage of payment immediately and leave the remainder of his payment due in the hope of getting a better price later. It means that a transfer of title to stored produce can occur before the full amount is paid to the owner.
I will also move two other small amendments. One, related to the amendment I just read, has to do with the powers to make regulations; and the other is to change only slightly the definition of "farm produce."
This legislation will safeguard the rights and property of owners of stored farm produce, allowing them to carry on their business much as they have in the past.
Mr. Riddell: Mr. Speaker, I rise in support of Bill 40, and I want to inform the minister that when the bill goes to committee of the whole House we will be making two or three amendments from this side of the House, and I believe the critic for the New Democratic Party also has some amendments to introduce.
Stepping outside of my usual style, I want to compliment the minister on recognizing the need for financial protection of producers who do not receive immediate payment for their produce when they send it to market. Over the last few years there have been bankruptcies of companies that accepted farm produce for processing and resale or storage, which resulted in farmers having little chance of recovering their produce or payment for it.
The minister introduced the beef producers protection plan after he learned of several packing plant bankruptcies, but I think the thing that really spearheaded the introduction of the beef producers protection plan was the bankruptcy of McIntyre sales yards, where many farmers lost thousands of dollars.
In the short time the Minister of Agriculture and Food (Mr. Timbrell) has served in that capacity, I am sure it has become obvious to him that special policies favouring farmers must be implemented through appropriate legislation or regulations.
Without the kind of legislative protection we have seen in the beef producers protection plan and we are partially seeing in Bill 40, many farmers may be deprived of their very livelihood by finding themselves in liquidation, receivership, or bankruptcy proceedings as debtors, in spite of having managed their farm business in an efficient and productive manner.
The financial difficulties encountered by certain grain elevators led to the introduction of the Grain Elevator Storage Act back in about 1957, I believe. I regret very much having to say, however, that the minister's amendments to the Grain Elevator Storage Act, as found in Bill 40, is nothing more than show-window legislation.
It gives extensive power to the chief inspector, who is appointed by this government in accordance with this bill. Although inspection may give forewarning of a company that is heading for trouble, it will not prevent bankruptcy and or put one cent in the farmer's pocket in case of bankruptcy.
I am certainly pleased I have the minister's attention.
The Acting Speaker (Mr. Robinson): I believe you have it now.
Mr. Riddell: Just in case he missed it, I am going to repeat what I said. I was complimenting the minister for recognizing the need of financial protection for the farmers. I complimented him for bringing in the beef producers protection plan.
But I regret to say we are dealing with a bill that is nothing more than show-window legislation. Let me explain that. This bill gives extensive powers to a chief inspector who will be appointed by this government in accordance with the bill. Although inspection may give forewarning of a company that is heading for trouble, it will not prevent bankruptcy and or put one cent in the farmer's pocket in case of bankruptcy.
I will deal with this later, but first I think the minister should be reminded of the brief presented by the Ontario Federation of Agriculture. I do not think the minister really addressed the concerns they expressed. I do not intend to go into any detail on the brief that was presented to the minister, other than to say he should be aware of the fact the economic forces of supply and demand directly affect agricultural product markets.
Individually, a farmer cannot control the price obtained for a product. Unlike most businesses, the farmer never has the luxury of increasing the price of a product to cover drastically increased costs of production or yearly losses. Thus the farmer who cannot even recover costs of production from gross sales, let alone a margin for living expenses, has become much more commonplace.
This lack of control over prices makes the farmer particularly vulnerable to financial ruin when another business receives his product, is taken over by a prior secured creditor and then through bankruptcy is relieved of the obligation to pay for the product.
In addition, a large volume of agricultural business is carried on near the farm gate and far removed from the mainstream of urban commerce. The average farm business lacks the sophistication, staff or money to effectively make use of such legislation as the Personal Property Security Act, if it can be used at all.
This bill really does not do anything for a farmer if the grain elevator operator happens to go into bankruptcy. Until the introduction of the beef producers protection plan, the government had taken the attitude that the Farm Products Marketing Act provided all the financial protection that producers need.
However, the collapse of packing plants and the recent bankruptcy of McIntyre's sales yards showed the minister the government was operating under false assumptions. It became obvious to the minister the farmers had very little protection in the case of financial collapse of the companies to which they sent their produce.
When farmers lost thousands of dollars in connection with the McIntyre bankruptcy, the minister rushed in and established a beef protection plan which included a levy charged to the producers as well as to those market outlets which accepted the beef from the farmers. There was a levy included in that protection plan and it was to be used for the buildup of a fund to be used to pay farmers in cases of the default of the marketer. That is lacking in this bill.
Farmers producing under supply management programs have the protection of their respective marketing boards for payment for produce marketed by the boards. But other farmers, those farmers who did not produce under a supply management program, do not have this kind of protection, with the exception of the beef producers who have just recently been given the protection in what we considered to be fairly good legislation.
In the United States, where marketing boards do not exist, there are two pieces of legislation protecting the producers. The legislation with the most teeth in it is the Packer and Stockyard Act. It calls for payment of invoices on the same day the shipment is received. Equally important is the creation of a trust fund into which the packer must direct all payments from meat products and from which the producer is paid. In other words, secured creditors cannot get their hands on the producers' money.
Also in the United States there is the Perishable Agricultural Commodities Act which governs trading in the fruit and vegetable trade. There is presently a proposal being supported by 17 produce trade associations throughout the United States. The proposal would create a trust situation under the Perishable Agricultural Commodities Act in the event that a receiver declared bankruptcy.
The proposal does not affect the normal business operation or bookkeeping practices of a receiver, but does provide that in the event a receiver goes bankrupt the accounts owing by the final buyer go into the trust and then to the producer, rather than to the secured creditors such as banks and other suppliers. There are provisions that if producers wish to waive their rights with a signed statement to the receiver, they may do so.
We take issue with this bill because no fund has been established to which moneys can be directed whereby, in the case of bankruptcies, the producers who have sent their grain to the elevators for storage will receive their payment if the grain elevator operator happens to go bankrupt. I cannot see where the producer has any kind of protection under the bill as it now stands owing to the fact that when the grain elevator operator goes bankrupt, chances are that all the secured creditors will get their money long before the farmer is ever considered.
There are no provisions in Bill 40 to give producers the kind of financial protection we believe they must have. For this reason my colleague the member for Kent-Elgin (Mr. McGuigan) is going to introduce amendments to strengthen the bill to give the producers the kind of protection they must have.
Many producers send their grain to the elevator and keep it in storage for six months or longer. If the elevator happens to go bankrupt in the meantime, how is the producer going to get payment under the bill as it stands at present? I do not see how it is going to come about. It does not have nearly the strength the beef producers protection plan has by virtue of the fact that the government is establishing a fund. In this bill there is no fund being set up.
Perhaps we should follow the example of the beef producers protection plan that the minister introduced. I give him credit for that. I know full well he did not have the support of the executive of the Ontario Cattlemen's Association. He made the decision himself and rightly so. He came in with a fairly good bill. This bill is definitely lacking in that one main item. There is no fund established to make payment to the producers in case of the bankruptcy of a grain elevator.
I will simply reiterate that we will support the bill but we will be introducing amendments we think will strengthen it. I hope I have convinced the member for Stormont-Dundas-Glengarry (Mr. Villeneuve), who is most interested in agricultural affairs, that there is a weakness in this bill. I hope he will stay around when we vote on our amendments so we can help the minister give grain producers the kind of protection they need when they send their product to grain elevators for storage.
As parliamentary assistant to the minister, I hope Ronnie McNeil will see the merit in our amendments so we can give the grain producers in his riding the kind of protection they need.
The Acting Speaker: Order. In the best tradition of this House, I have to remind the member for Huron-Middlesex that in debate he must refer to other honourable members only by their riding names. As we do not have a riding named Ronnie McNeil, I would ask you to check your list and correct yourself.
Mr. Riddell: I will refer, then, to the former Liberal member for Elgin (Mr. McNeil) and try to encourage him to see the merits in the amendments his good friend the member for Kent-Elgin (Mr. McGuigan) will be introducing later on. Let us all work together to strengthen this bill and give farmers the protection they need.
Mr. Swart: Mr. Speaker, our party is also going to support this bill. The agricultural organizations are supporting it. It is a bill that will improve the situation with regard to the storage of grain in elevators and will ensure that until it is paid for it remains the property of the producer.
I find myself supporting in principle the comments made by the member for Huron- Middlesex (Mr. Riddell); however, I am a little bit confused about them. I support the principle that there should be a guarantee to the farmer that he will get paid for his produce. Farmers have been put in impossible positions, whether it involves tomatoes for which they have not been paid, or formerly the beef or whatever the case may be, however, it seems the intent of this bill is that the producer retain title to his grain while it is in the elevator until it is paid for.
Mr. McGuigan: What if there is no money behind it?
The Acting Speaker: Order.
Mr. Swart: He still retains title to the grain. I think it is a little different from the situation where the farmer sells his produce, they process it, then there is a bankruptcy and obviously he cannot get his produce back. But this bill, as I understand it, provides title to the farmer for his grain until it is paid for. Therefore, it does not have the same need, I would suggest, as other areas of bankruptcy, because if he owns that grain --
Mr. Riddell: What happens if the grain is squandered?
The Acting Speaker: Order.
Mr. Swart: He owns it; that is what the legislation is for and what I understand they inspect it for. The whole purpose of the legislation is to ensure that he owns that grain until it is paid for.
I accept the minister's comments on the purpose of this bill when he introduced it and in his statement this evening that it is to safeguard the property rights of the producers who deliver grain to the elevator for storage -- not for sale but for storage. The proposed legislation makes it clear that farm produce held in an elevator for storage remains the property of the producer even when it is subject to a written agreement to sell.
So we support the bill. However, in supporting it I do have a couple of reservations, as the minister knows. In fact, I guess I have three reservations. One was mentioned by the member for Huron-Middlesex with regard to the inspection. We have some concern, in view of what happened to the trust companies and a great many other areas, that the inspections may not always be carried out thoroughly and on time. I am afraid, though, that we have to live with this reservation and trust the minister to see that he does carry out his duties as required under the act and under the regulations.
The Ontario Federation of Agriculture would very much like to have had this act extended to cover all produce that is to go into storage, and I hope the minister, when he gets up to reply, will make some comment with regard to whether he intends at some point to bring in legislation that will go further than the elevator storage and apply to apples in storage or, for that matter, to any of the farmers' produce that goes into storage where there might be some dispute about who owns it after it gets into storage. I hope he will make some comment on whether he intends to broaden it at some date. Obviously, he will have to change the name of it; it would no longer be the elevators act.
The first area in which I have some reservations is section 15. I am not suggesting this is the most significant section of the act, but there is some concern in the Ontario Federation of Agriculture, and I understand it, with regard to section 15, where it says:
"(1) All farm produce delivered to a grain elevator shall be deemed to be for storage, and such delivery and storage shall not constitute a sale unless it is established to the contrary in writing or by a court of competent jurisdiction."
The one amendment I will be moving will be to take out the words "or by a court of competent jurisdiction." We know very well that this dispute over the ownership can end up in court; but there is a clear implication here, it seems to me, that the agreement does not necessarily need to be in writing if it is an agreement for sale. I think it should be required to be in writing. If we take out those latter words, it would still permit a dispute to be settled by a court, but it would not leave the implication that somehow or other all these transactions for sale should not be in writing. They should be in writing and the act should say they should be in writing. Therefore, I will be moving that relatively minor amendment.
The minister is aware too of my other concern, on which I intend to move an amendment, with regard to section 19, which is the requirement that the elevator operators keep the products they have fully insured to value all the time. If for any reason a negligent operator who gets into financial difficulties drops his insurance, lapses maybe only for two or three days and somehow the product is destroyed, perhaps $20,000, $50,000 or $100,000 worth of the farmer's produce, then he would not be covered. I know the minister had the same concern about this.
What I am suggesting in my amendment is that there should be a fund set up. I am leaving this very vague in my amendment for obvious reasons. It just gives the minister the authority to set up a fund and to levy a fee against the elevator operator. It seems to me we have to have that backup so that in default of an elevator operator carrying insurance, the producer will not be the one who is stuck with the loss.
The minister is well aware that his government has recognized this in a number of areas; for instance, in the auto insurance field in which there are far more insureds than there are here. Nevertheless the principle is the same; that is, there is compulsory auto insurance. There is also a fund set up so that if for any reason an operator or an owner of a car does not have insurance, the victim will not be penalized. The same thing is true with regard to auto dealers' insurance. Up until this year, the government required that there be a bond by the auto dealer so that if he went into default, the person who purchased the car would not be the loser with regard to maintenance, repair or anything else of that nature.
This year new legislation was brought in that provided for a fund that we supported and that I think is superior. The same thing is true of the travel agencies. We have a provincial fund set up. I know the minister does not like to make changes at the last minute without consultation, but I suggest the disadvantage of doing that is probably not as great as the damage that could arise if we leave this loophole in the act.
I will be moving that amendment unless the minister comes up with some other alternative to plug that loophole. The plugging of that loophole may become even more necessary with the amendment to section 17 because there is going to be grain left in that elevator in a case where there may be partial ownership by the producer.
With those few comments, I will just repeat that we are going to support this bill, but we think there are two or three areas where it has to be strengthened.
Mr. McGuigan: Mr. Speaker, I rise to support this bill, but I do it very reluctantly. I agree with my colleague the member for Huron-Middlesex that this is another piece of show-window legislation for which this government is famous. They put it up in the window and look at it: but do not try to use it, brother, because it will fall apart.
I am especially concerned about this because the events that have precipitated it all occurred in my riding, for some reason or other. In 1957, the original bankruptcy occurred of the MacLean Grain Co., which had its head office in Chatham. They had receiving facilities in Tilbury and in Elgin as well as one in Port Stanley. That bankruptcy and the recent bankruptcy in Tilbury of the Tilbury Farmers' Co-operative were both precipitated by events that are not covered in either piece of legislation. The events are the result of the special human frailty we have when the gambling bug grips us; that is, the matter of speculating in the grain futures market.
On another occasion, I defended the futures system with all the strength I had when we were talking about establishing the futures market here in Toronto for other commodities, because a futures market does serve a very legitimate and very necessary function in the marketing of basic commodities. I am not going to go into a long explanation of that. However, when it is abused, it can lead to very serious losses.
I would point out that the accepted philosophy from people who deal in futures is that 70 per cent of the people who deal in them lose money. It is not something that is limited to the amateurs, because when professionals get to the point when they really feel they know the market, when they feel they understand it and are the master of it, that is when they plunge in and lose their fortunes.
There is an old saying about how to start with a large fortune and go into the grain market and lose it. In both of these cases, the managers were bitten by that attraction to the futures market. In the most recent case, the manager bought beans at about 35 cents over the cash market. He gave free storage for a certain period of time on a proposed, expected or hoped-for sale. He hoped to sell these in Japan --
Mr. Sargent: Mr. Speaker, on a point of order: My friend is making some very important points, and no one is listening to him. Please settle the House down and get members to listen to the points he is talking about.
The Acting Speaker: Thank you.
Mr. McGuigan: Thank you, Mr. Speaker, and thanks for the support, but I see a number of people are listening and are concerned. I was explaining about the loss that was occasioned by the Tilbury Farmers' Co-operative; they lost about $400,000 in that transaction.
There was another event that happened in the Tilbury Farmers' Co-operative which is not addressed in this legislation. The co-op had acquired the shipping and storage facilities of the Montgomery Grain Co. They had paid something like $800,000 two or three years before, and when one of the payments to amortize the mortgage on the recent acquisition came due, the bank reached into the general fund and pulled money out of that general fund to pay for an acquisition.
In this one instance, there are two circumstances or actions that are not even suggested in this legislation: the sanctity of a fund that belongs to producers and the situation created when people step out of their normal role and use the futures market for speculating rather than in the commercial way in which it was meant to be used; they cannot meet their cash flow and out of desperation they reach in and sell a product that does not belong to them.
There is an old saying in the grain trade. It is not very good grammar but it is worded this way to rhyme: "He who sells what isn't his'n goes to prison."
I have been affected by these bankruptcies two or three times in my farming career. I ask, what credit will a banker give someone who goes to the bank and says, "Here is my share of the revenge we have on this fellow for breaking the law"? The banker will not give very much credit for that. This is what we hope to address in an amendment we wish to add to this legislation.
The point is, the two main elements of that bankruptcy are not addressed in this legislation.
I would like to speak on the matter of why farmers are more incensed over this situation than are people in other walks of life. One might very well ask what is so special about the farmers' case. I would like to list for the members some of the risks a farmer takes in producing a crop.
Mr. Sargent: Hey, you guys, hear this.
The Acting Speaker: Order.
Mr. Sargent: This is a key point.
Mr. McGuigan: They are listening.
Mr. Sheppard: Where did the member for Grey-Bruce (Mr. Sargent) buy that jacket?
The Acting Speaker: Order.
Mr. McGuigan: The number one risk is the production-and-yield risk from such variables as weather, disease, insects, choice of varieties, machinery breakdown, timing and production practices and related factors.
The second risk is market-and-price risk. Prices paid for inputs and received for farm products are affected by supply and demand conditions, trends, speculations, government programs, community cycles, seasonal variations and consumer demand.
The third risk is the increased use of borrowed capital. Most people who forecast events in the agricultural industry are telling us that we are becoming more and more capital intensive and that this will continue into the future. All of this puts more pressure on maintaining a cash flow.
The fourth risk is technology and obsolescence risk. Technology is moving along so fast that equipment we buy can become obsolete before it has been written off.
The fifth risk is casualty/loss risk, or as the member for Welland-Thorold (Mr. Swart) mentioned social and legal risks. It is a matter of the environment, of using various chemicals and the risk a producer takes whenever he uses these materials because of unknowns. These chemicals are used under a great variety of conditions and he may well become liable to some third party.
Then, of course, there is the human risk: the farmer or a member of his family may become involved in an accident.
When a farmer goes through all these risks, finally produces a crop and takes it to the receiver only to discover he has lost because of human frailty or a system that has not guarded against that frailty, he becomes terribly incensed.
There is another reason as well: the low returns in agriculture. I guess there are people who would say that I am out of my head or that I am agreeing with the minister, but agriculture, in the total figure, is a low-risk business if we look at the statistics on the number of bankruptcies. We have talked about bankruptcies in the past and we are very concerned about them amongst farmers.
If one looks at the statistics on the number of farm bankruptcies, the actual number, as the minister has pointed out, is something like three tenths of one per cent; that is the latest figure. If one goes into other businesses, there is a much higher rate of bankruptcy. For instance, the commonly accepted figure in the restaurant trade is something like 25 per cent of all restaurants that are in operation in a given year will go broke in that given year. The average life is four to five years.
Farming is a low-risk business from the statistics, but it is also a low-return business. I checked the figures back for a number of years in Ontario, taking the total farm investment versus the return, and worked out the percentage return.
The year 1973 was a very high point in agricultural receipts: soybeans hit $9 a bushel and for a brief period hit $12 a bushel, and corn was $4 a bushel and over. Also, the inputs were a great deal cheaper than they are today; I am probably guessing at the figure, but back in 1973 gasoline might have cost in the range of 40, 50 or 60 cents a gallon. In that year the agricultural sector had a return of 7.5 per cent.
But today in agriculture the average return is only 2.7 per cent. Last year, it was 2.8 per cent. All indications are that it is going down. So whenever a farmer has one of these losses, he simply cannot recoup it. For the rest of his lifetime he is going to be affected by that loss, because he does not have returns in the area of 20 per cent, which are common enough in a great many other businesses.
Just to look at general manufacturing in Canada in recent years -- and this is taking the average of all the manufacturers in Canada doing something more than $1 million -- the return is five per cent. In the processing industry, it is 10 per cent; that explains why we have so many people trying to get into canned tomatoes and starting up factories. The return throughout Ontario in the processing industry is 10 per cent. Again, one of the reasons we need this protection is because the farming industry return is so small.
I join my friend the member for Huron- Middlesex in pleading with the minister: if he does not agree with the particular wording and the avenue we have taken on our amendments, at least accept the principle and bring in amendments of his own. We are not concerned about who gets credit; we simply want the thing to happen.
Hon. Mr. Timbrell: Mr. Speaker, I will be brief so that we can get into committee of the whole House and deal with the various amendments which members opposite, and I for that matter, would like to propose.
In answer to the points raised by the member for Huron-Middlesex and to some extent by the member for Kent-Elgin --
Mr. Sargent: Please turn his microphone up; I cannot hear the guy.
Hon. Mr. Timbrell: Perhaps the member for Grey-Bruce should turn his ears up.
There is nothing in this act, nothing I could put in this act, nothing in any act that could prevent bankruptcy. There is no way I would even try to present a piece of legislation that purported to do that, because everybody would know it was a hoax.
This legislation is to deal with the storage of grain. This legislation preserves the right of the producer to title on his property. Where it refers to sales, they are incidental to storage. It does not deal with sales transactions as such in the normal sense.
I share very strongly the concern my friends opposite have about this matter of protection funds. I will not bore members with details of how the beef cattle protection plan came about. However, it is common knowledge that if it had not been for a certain financial calamity, it would not have been possible to bring that matter to a head in the cattlemen's association as well as among the processors.
I recently began to go through a similar experience with the vegetable producers and the vegetable processors. I am not entirely sure where that will ultimately end at this point because there is no unanimity among those parties.
I can tell members that I have begun to discuss with my senior staff the matter of financial protection funds and what our policy with respect to them should be in the future. As members know, under the Farm Products Payments Act at present, they are voluntary. They can be structured in any way, commodity by commodity, that one might want. Given the way the beef industry is structured, the beef cattle protection plan is set up differently from what one might set up for the grain trade, differently again from what one might set up with the vegetable or fruit trade, and so on. But I am taking a look at it.
Obviously, I would not want to dismiss out of hand whatever amendment my friend for Kent-Elgin is going to propose. I will wait until I see that. I just want him to know that if I do oppose it and urge the members on this side not to support it tonight, it is not because I lack sympathy for that problem. It is a problem we have to address and one that I am pursuing with my senior staff.
To reiterate the point: the member for Huron-Middlesex said this will not put any money in farmers' pockets. I suppose that is true; but again the point is to emphasize and to enshrine in law their rights to that product until it is sold.
I submit that it is much more than show-window legislation. It is legislation that is widely supported by producers and the trade, because it will cover many situations that have occurred in the past. It will not cover a situation I discussed last week with my friend from Kent-Elgin where there has been fraud. I believe that was the case in Tilbury. In that case criminal law has to take over, although again it does emphasize a need for a fund to cover losses in sales transactions, which we will attempt to cover in the future. So the entire emphasis is on the protection of property and property rights.
The member for Huron-Middlesex referred to US legislation. I had staff go down to the United States about a year ago, particularly when we were looking at the problems of the beef industry with respect to financial protection. They found the plans down there pertaining to the beef industry have an "out" built in. The out, very simply, is that where the producer agrees to waive his rights under that legislation, the whole thing is null and void.
The advice we got from American producer officials and from agricultural bureaucrats was that the waiving of rights has become very common. Deals are made behind the scenes, under the table -- call them what you will -- for whatever considerations. If anything, that is show-case legislation: it looks good until you get into all these exemptions or waiving of rights by the producers.
The concerns members opposite raised about the problems of storage and the rights and needs of the producers will be covered by the extensive powers. If we were dealing with some other matters, we would not be so unanimous in our views of whether or not the inspector should have these kinds of powers -- to move in, to seize, to padlock, to remove, to sell and those kinds of things. The powers of the inspector are such that we believe this legislation will cover most of what can be covered, except cases of fraud and the day-to-day course of sales transactions, which we discussed a minute ago.
I had a chance beforehand to talk with the member for Welland-Thorold about a couple of his amendments, one of which I am prepared to accept when we get to it. He suggests removing the words "or by a court of competent jurisdiction" from subsection 15(1). I do not think it makes any difference, quite frankly, because it goes without saying that any part of any act of this Legislature is subject to judicial interpretation. All we have done in drafting this is to say so; so if it comes out, it is really of no consequence.
On the matter of maintenance of insurance coverage on products stored, I indicated to the member beforehand that I felt we could cover his concerns through the regulations by conditions attached to licences, and I undertake to do that. Based on only 45 minutes or maybe one hour of having seen this, I am reluctant to accept it tonight, but I give the undertaking to draft and propose to cabinet, under the regulations section, wording that I think will cover his concerns, which I do share and which I do understand. I am simply reluctant at the 11th hour to accept something we could find out after the fact causes problems completely unforeseen tonight, whereas with regulations we have got some time to deal with it. I am glad he raised it. I think it is a very good point, and we will move through the regulations to address it.
Motion agreed to.
Bill ordered for committee of the whole house.
House in committee of the whole.
GRAIN ELEVATOR STORAGE ACT, 1983
Consideration of Bill 40, An Act to revise the Grain Elevator Storage Act.
On section 1:
The Acting Chairman (Mr. Robinson): Mr. Timbrell moves that clause 1(d) of the bill be struck out and the following substituted therefor:
"(d) 'farm produce' means beans, corn, grain, grass seeds and oil seeds and all kinds thereof produced in Ontario."
Mr. McGuigan: Mr. Chairman, I spoke this afternoon to Mr. Otis McGregor, secretary-manager of the Ontario Soya Bean Growers' Marketing Board. His board is quite concerned that the word "soybeans" is not used. I realize that we have "beans" and "oil seeds," but there are about $200 million worth of soybeans affected by this act. Some of those beans are used as oil seeds and others are used as edible beans.
The board can envision a situation in a law court where beans that were used as edible beans might be claimed to be outside the act. They contend that in the event of a lawsuit a defendant might claim that soybeans used for edible purposes were outside the act because they were referred to under the oil designation.
While I do not have an amendment to move in this respect, I would like to see the minister include soybeans; it is certainly the wish of the Ontario Soya Bean Growers' Marketing Board.
Hon. Mr. Timbrell: Mr. Chairman, all I can say is that we are certain that soybeans are included. If we start to list the various types of beans, we will get into a much broader, lengthier definition and run the risk, I suppose, of missing some obscure product. We are certain that the term "beans" does include soybeans, I can assure the honourable member.
Motion agreed to.
Section 1, as amended, agreed to.
Sections 2 to 14, inclusive, agreed to.
On section 15:
The Acting Chairman: Mr. Swart moves that subsection 15(1) of the bill be amended by deleting the words "or by a court of competent jurisdiction" in the fourth and fifth lines so that the said subsection will read: "All farm produce delivered to a grain elevator shall be deemed to be for storage, and such delivery and storage shall not constitute a sale unless it is established to the contrary in writing."
Mr. Swart: Mr. Chairman, I think I explained this before. Unless further explanation is required by any members, I will just leave it at that. I think it speaks for itself.
Mr. McGuigan: Mr. Chairman, I do not think I have any quarrel with the good intentions of the honourable member, but --
The Acting Chairman: Order.
Mr. McGuigan: This act does create a problem, especially in the fall of the year. Producers deliver their grain to the mill. If they do not like the prices that are prevailing at the time, they get into a situation where in the trade they say farmers are tight holding: they put the grain in for storage and do not sell it. Yet the elevator has markets it has to serve; it has feed markets, distilling markets and industrial markets. They also want to ship that grain out of their receiving elevators and get it into the elevators here in Toronto, where it is available to the users.
If the farmers are tight holding and the act says the grain cannot be moved unless it has been sold -- in other words, it is for storage -- with the exception that it can be moved to a terminal elevator, but again to storage, this creates a situation where the buyers, and I am largely talking about the Toronto area, have to turn to imports to supply the trade. This is a great problem and a result that is not wanted.
They have developed a weird and wonderful system of a great variety of deferred contracts whereby the producer signs the contract and prices are established in a variety of ways. There are a great many variations within the grain trade. I could very well see a situation where there would be a dispute as to whether the product was stored or whether it was sold.
Even by deleting this phrase, in the end, under common justice a judge would have to step in and say whether not a sale had been made. If this were allowed, there would be an impasse.
Hon. Mr. Timbrell: Mr. Chairman, as I said earlier, I will accept the amendment because I really do not think it is of any consequence. I do not say that in a pejorative way. The courts will undoubtedly be called on from time to time to rule on certain sections of this bill, as with any act.
I think the concerns of the member for Kent-Elgin (Mr. McGuigan) will be covered by the amendments I will propose to section 17. Perhaps he was not in the House tonight when I made my opening remarks. I will read for him again what I will be moving. I believe the member for Huron-Middlesex (Mr. Riddell) has this text and perhaps he can share his copy with the member for Kent-Elgin.
I will be moving that a new subsection 4 be added to section 17 that will read as follows:
"Notwithstanding anything in this act, where the owner of farm produce in storage agrees to sell the farm produce on option, payment to the owner by the grain elevator operator on the day on which the farm produce is sold of such percentage of the market price on that day as is prescribed by the regulations is deemed to be due compensation for the purposes of clause 1(k)."
Then I will move an amendment to section 26 that will provide for the prescribing of regulations, setting out what the percentage shall be.
Representations were made to us, particularly by the Ontario Grain and Feed Dealers Association, that there are certain practices that would be completely stymied if this section, as it is, stood baldly and said, "It is the producer's, no matter what, until he has paid for it." It would not allow for the day-to-day practice in the trading of grain. We have seen the point of their argument and have drafted these two sections. I think they will cover their concerns.
Section 15, as amended, agreed to.
On section 16:
Mr. McGuigan: Mr. Chairman, I have an item I want to raise about section 16. It says, "shall so mark and issue to the owner or agent, as the case may be, a weigh ticket for each and every delivery."
As I understand it, one takes the grain to a mill and delivers it to a weigh man. It is dumped into the hoppers and each 1000 bushels or whatever units they work with is weighed. One gets a ticket that gives the weight. Later on, the bill says this must be surrendered and another ticket issued.
Why does the weigh ticket have to be marked as to whether it is a sales ticket or a storage ticket when another ticket is issued?
Hon. Mr. Timbrell: Mr. Chairman, as I recall, and this goes back some time to discussions we had with the chief inspector, one of the concerns was that the forms which were being issued were quite confusing as to whether the grain was for storage or for sale. It is simply to clarify that and make it more straightforward and, in the event of any future difficulties, to have clean, clear-cut records that can be used in adjudicating any differences.
Section 16 agreed to.
On section 17:
The Acting Chairman: Hon. Mr. Timbrell moves that section 17 of the bill be amended by adding thereto the following subsection:
"(4) Notwithstanding anything in this act, where the owner of farm produce in storage agrees to sell the farm produce on option, payment to the owner by the grain elevator operator on the day on which the farm produce is sold of such percentage of the market price on that day as is prescribed by the regulations is deemed to be due compensation for the purposes of clause 1(k)."
Mr. Riddell: Mr. Chairman, I want to thank the minister for having his ministry's solicitor phone and offer an explanation for this amendment. I want to be clear that I understand it.
There are many different arrangements that farmers enter into in connection with the sale of their produce. In some cases, they will sell 75 per cent now with the option of selling the rest at some future date, say, by September, with the option of letting it go any time in between if the price is appealing to them.
Am I to understand that, if a farmer enters into that kind of an arrangement where he sells so much of it now and then sells the rest of it at some future time, all the grain the farmer has in storage will have been deemed to have been sold at the time he receives compensation for the 75 per cent of the grain? In other words, this bill will not cover the remaining 25 per cent he still has in storage and has not sold.
If I understand that correctly, I think this is a disincentive for the farmers to use the futures market. Yet I believe the minister is trying to encourage farmers to use the futures market in selling their products. If they are not going to be covered under this kind of option, the farmer is going to say, "I am not too sure I want to gamble on that 25 per cent if I am not going to be covered under Bill 40."
First, let me know if my understanding of this section is right. Second, might it be a disincentive for the farmers to use the futures market'?
Hon. Mr. Timbrell: Mr. Chairman, one has to read my proposed amendment in conjunction with clause 1(k) which defines the word "storage." To use the member's example, if a farmer sells 75 per cent on October 1 delivery, then he must be paid right away.
If he puts 25 per cent of his grain in on option, then what this says is, together with the further amendment I will make later on that will provide for the prescription of regulations, he must be paid a certain percentage of the value of the grain on that date. In other words, his risk will shrink and will be reduced to the percentage of the amount placed on option.
I do not believe this will in any way be a disincentive to using the futures market. The member is quite right. Where it is appropriate and prudent, I am encouraging farmers to make greater and better use of the futures market rather than having the whole crop subject to the vagaries of the marketplace.
Mr. Swart: Mr. Chairman, I rise to support
this. It seems to me the amendment provides another option. It provides the same kind of security for that option as the bill does generally, and provides the identity of ownership. Therefore, we in our party will support this amendment.
Section 17, as amended, agreed to.
Section 18 agreed to.
On section 19:
Mr. McGuigan: Mr. Chairman, a number of perils are covered by the insurance, on which we agree, although I wonder whether hail is a peril for grain in storage. The one I am concerned about is grain silos that are subject to collapse simply from weight and age, not from an explosion, water or a number of things. Sometimes the soil underneath the silo will give way and it will slip and collapse.
I remember seeing -- I guess it is perhaps dated -- in Life magazine that there was a grain mill in the United States mid-west where a whole row of 20 or 30 silos tipped over. I wonder if any consideration has been given to collapse.
Hon. Mr. Timbrell: Mr. Chairman, I cannot say we did; I am not sure. If we could come back to that, I would like a chance to consider whether it could be included.
Mr. Di Santo: Mr. Chairman, I was actually surprised the minister answered the way he did; no, I was not surprised. Section 19 talks of "damage by fire, lightning, explosion, windstorm and hail to the full market value." I would like to ask the minister where has he had that experience in Don Mills? I do not think he has had an experience of that kind.
Hon. Miss Stephenson: How about Downsview? Have you had greater experience in Downsview?
The Deputy Chairman: Order.
Mr. Di Santo: Well, the rural member, Mrs. Bette Stephenson --
Hon. Miss Stephenson: No, you cannot say that.
Mr. Di Santo: That is what the Minister of Intergovernmental Affairs (Mr. Wells) calls her, without any malice. We were at a meeting three weeks ago and he said "Bette Stephenson." I think that is the way we can pronounce her name.
I would like the minister to tell us why he did not think the problem my friend raised was an important one. Is it because he has no experience at all in this area or because he does not think it is important?
Hon. Mr. Timbrell: I think that is probably a very good suggestion. Inasmuch as the honourable member must have been speaking away from his microphone, I could not understand a word he said. He must have been speaking away from his microphone. It was all mumbled. I am sorry.
Mr. Di Santo: I would like to ask the minister to give a justification of what he just said because I do not think it is fair he should accuse me of not being able to express myself properly.
Hon. Mr. Timbrell: I meant no offence to the honourable member. It is just I could not understand what he was saying. It is as simple as that.
Mr. McGuigan: I do not want to nitpick, but there is a question of temporary storage. Sometimes in the fall they store grain on the ground, and I wonder whether this is covered in subsection 19(6).
Hon. Mr. Timbrell: Is the member talking about grain stored by the grain elevator operator, or is he talking about a temporary storage?
Mr. McGuigan: A temporary storage under the open sky.
Hon. Mr. Timbrell: Unless it was grain received by a licensed grain elevator operator, I would not think it would be covered. I think the member is probably referring to a host of temporary storages that people effect for themselves or maybe pool with neighbours, that sort of thing. Unless it is a product that has been received by a licensed grain operator, it would not.
I draw the member's attention to subsection 20(4), which does allow a licensed grain elevator, with the permission of the chief inspector, to make temporary arrangements, but it would still have to be received by a licensed grain elevator operator who would be responsible for it.
Section 19 agreed to.
Sections 20 to 24, inclusive, agreed to.
On section 25:
The Deputy Chairman: Mr. McGuigan moves that section 25 of An Act to revise the Grain Elevator Storage Act be renumbered section 27 and in its place substituted:
"25. (1) Every grain elevator operator shall, at the time that a purchase is made from a producer, issue a payment for the grain which is delivered in person or mailed not later than the end of the next working day, or cause the payment money to be deposited in a designated trust account to the benefit of the producer. Money in a trust account shall be available for payment to the producer on demand.
"(2) Money in the designated trust account shall not be used for any purpose other than to pay producers for the farm produce under clause 1(d)."
Mr. McGuigan: Mr. Chairman, I would like to make one comment in reply to some other remarks by the minister. It arose out of the fact that under the Stockyard Act in the United States there is an option to opt out of the provisions. I am following my remarks and then the minister's remarks that were made in committee.
I phoned yesterday to the administrator of the Stockyard Act, Mr. Billy Jones. He told me he has been administrator for many years and is very familiar with the act. He said it is very rare for a producer to opt out. I do not question the minister's sincerity, but I certainly question the validity of the information he received.
Mr. Jones said that often dealers will opt out of it. He mentioned, too, that when cattle are shipped by rail and the price is not established until after a few days have gone by through the rail-receiving method, the time limits are sometimes exceeded. But he was positive it was a rare event for anybody to opt out of it.
Our purpose in presenting this amendment is simply to highlight the serious flaw we see that exists in regard to protection. I know the minister has said there are other means.
Hon. Mr. Timbrell: Mr. Chairman, on a point of order: I have not yet received a copy. I have tried to listen carefully to what the member read, but it would help me greatly if I could see a copy of what he is speaking to.
Mr. McGuigan: This covers the problem I mentioned that occurred in the case of the Tilbury Farmers' Co-operative, where the bank reached in and took money that really did not belong to it because it belonged to the producers.
In that situation the producers established a trust fund to try to bail the company out of its difficulties. The bank even tried to seize that money, but eventually it did give back 100 per cent of it to the producers because it was a trust account. In the case of the moneys that were in the general pool, to the present time the producers have received about 30 cents on the dollar. There may be some further moneys available when everything is completely wound up.
This is to protect it in that regard. I do not think there is anything more I need to say.
Mr. Swart: Mr. Chairman, in discussing the amendment by the member for Kent-Elgin, I have to say I do not believe the amendment really fits into this bill. It deals with a different issue. I said that before.
In a sense, it also complicates the bill because what we are really doing in this bill is identifying who owns the grain within the elevator. We are trying to define that carefully in the bill itself, and it does not have to do with payment. However, because I believe in the principle of this amendment, our party is going to support it.
There have been all kinds of producers across this nation who have lost money and who would have received payment if this kind of clause had been in some bill someplace. I am not going to miss the opportunity, therefore, to incorporate it in this bill even though it may be the wrong place to do it.
I recall that for years the party on my right talked about the need to elect the chairman of the council of Metropolitan Toronto. They said he must be elected. In this party, when the minority government moved an amendment which would have accomplished that and could have got it through, the Liberal Party voted against it because it did not think that was where it should be.
I am not going to make the same kind of mistake the Liberals did. I am going to support this.
Hon. Mr. Timbrell: Mr. Chairman, with respect, I do not think what the member has proposed meets the objective he outlined in his earlier remarks this evening. I raised this very question with my staff at one of the meetings where we were discussing this legislation. I thought the answer I got was a good one. It indicated why it really was window-dressing.
The analogy which was drawn was to the legal profession. In the legal profession, by statute, although I cannot quote which one or which section, each lawyer must have a trust account into which moneys belonging to his or her clients go, and which can only be expended on behalf of those clients.
But from time to time there are cases of fraud, an unauthorized or inappropriate use of those funds, which usually, when detected, leads to disbarment. The law society has a fund established to which the aggrieved party or parties can then apply for compensation.
I really do not think this meets the member's objective. I know what he is trying to get at and we discussed it earlier. I assure him we are looking at the whole question of the compensation fund and whether the current legislation, as it is structured, should continue or be revised in some way. I submit this would add an additional cost to the business of storing grain which would likely be passed on to the producers and which would not afford them any real additional protection. I regret we cannot support the amendment.
Mr. Riddell: Mr. Chairman, would the minister tell us what protection a producer has in the case of fraudulent practices on the part of the grain elevator operator who has gone into bankruptcy because of those practices? The minister says it is covered under criminal law. That may well be, but we can rest assured that the creditor who has been dealing with the grain storage operator on whatever practices led to the fraudulent charges is going to get his money and the farmer is still going to be left out in the cold.
That is the reason we are making this amendment. We want to make sure the farmer is going to get some protection. It happens many times. In a case where an elevator operator gambles on grain in storage which he does not own, because he happened to do some buying on the futures market, and then had to cover his flanks by making up for that grain so he started gambling on the grain in storage, if something happens the farmer gets no protection.
We are asking what kind of protection the farmer gets in cases of fraudulent practices on the part of the grain elevator operator.
Hon. Mr. Timbrell: This bill enshrines the principle that the grain in storage is the property of the producer until he is paid. Neither this bill nor any other bill can give absolute protection against fraud. There is nothing that can do that. If somebody is intent on breaking the law, however it is structured, there is nothing I can do nor the honourable member can do in the Grain Elevator Storage Act that is going to prevent that.
In those cases, that is where we get into the question of a compensation fund in the industry, how it should be structured, who should contribute to it and what conditions should prevail with respect to reporting of sales transactions, etc. In answer to the concerns raised by the member earlier and raised by the member for Kent-Elgin and the member for Welland-Thorold (Mr. Swart), those are the kinds of things I indicated I am looking at, not just for grain but for all commodities with respect to compensation funds under the five-year-old or six-year-old legislation we have in place.
The Deputy Chairman: All those in favour of Mr. McGuigan's amendment will please say "aye."
All those opposed will please say "nay."
In my opinion the nays have it.
The Deputy Chairman: Shall section 25 stand as part of the bill?
All those in favour will please say "aye."
All those opposed will please say "nay."
In my opinion the ayes have it.
Section 25 agreed to.
On section 26:
The Deputy Chairman: Mr. McGuigan moves that section 26 be renumbered as section 28 and the following substituted:
"26. every grain elevator operator shall post a performance bond to cover the maximum amount for which the elevator operator would be liable to the producer under the terms and conditions of a deferred sales agreement."
Mr. McGuigan: Mr. Chairman, while we recognize the 75 per cent is taken care of at the time of sale, in the meantime 25 per cent of the producer's money is in the hands of the elevator operator. As my friend the member for Huron- Middlesex has said, it can be used for a number of purposes. In the event that bankruptcy occurred during that interval of time, the producer would not be covered for his 25 per cent other than whatever residual came out of the bankruptcy operation.
We looked into the matter of a bond and we understand that when the original act was passed in 1970, officials from the ministry canvassed the people who provide bonds for commercial purposes. They said the amount of money involved is so great -- we would have to agree we are talking about not millions of dollars but probably $1 billion or more -- it simply would not be practical to have a bond that would cover all the grain transactions within Ontario. We think a bond that covered this aspect of the situation would not be onerous to the trade and it would cover the situation.
Just to make a general comment on some of the earlier remarks, we looked to a number of ways of trying to solve this situation, one of them being that we audit the books of the grain companies to determine whether or not they were gambling, just as trust company books and banks' books are audited to see things are being done properly.
Recent experience with trust companies has undermined our confidence in that system, but our friends in the grain trade have told us that even if such legislation is brought in, there are ways of circumventing it. It is as easy to get into the grain gambling business as picking up the phone, placing an order with a broker who places it in Chicago, and making a notation on the desk blotter to keep your own set of books in line; and this would not be available to an auditor. So we decided that was not the route to go. It leaves very few routes available.
We could probably all agree we would like to see a fund established, but I think the minister will have to forgive us for being a little cynical when we see we have to have major bankruptcies and people being offered as sacrifices to the sheriff before we see any movement in that area. I have covered that argument many times and I do not intend to repeat it. We simply bring these amendments today to try to drive home the need for financial protection.
Mr. Swart: Mr. Chairman, I put forward much the same arguments as I did on the last amendment. This does give an added degree of security to the producer, of course, if it is included in the bill. Again, it seems to me that this may not be the place for it, but because we have the opportunity to give this added security, I am going to support it.
Mr. Riddell: In the example I used in my previous comments, it should have been in the case of where a grain elevator operator sells on the futures market and then finds he is short of grain he actually owns. He then tries to make it up from the grain that is in storage. You cannot blame the elevator operators for playing the futures market. They are trying to do it in the best interest of farmers, but sometimes they get caught. Then they reach into grain that is in storage.
What we are saying is there is no protection for farmers in this case in the event the elevator operator happens to go into bankruptcy.
Hon. Mr. Timbrell: Mr. Chairman, I will briefly say that we looked at this when the Ontario Grain and Feed Dealers Association came in to see us. They were talking about bonds covering all grain moving into the various optional trades. It was our feeling we were better to go with the amendments I have already proposed to section 17 and those I will propose to section 26.
The advice I had was that the cost of these performance bonds is, in fact, high. The large elevator operations, such as the one in the Kent-Elgin riding operated by a well-known local supporter of this government, would not be bothered by the additional cost because they could pass it on. Our concern was with the very small elevator operators around the province. They might not be able to get such bonds because of their size and the volume of their business, and if they did, it might become a prohibitive factor relative to their ability to compete with other operations. The larger ones would enjoy economies of scale.
Secondly, those who could not get the bonds would be out of it altogether. They would be restricted to straight storage and would not be in a position to trade options at all. After discussions with the grain and feed dealers, we opted to go with what I put before you. Therefore, I cannot accept the amendment.
The Deputy Chairman: All those in favour of Mr. McGuigan's amendment will please say "aye."
All those opposed will please say "nay."
In my opinion the nays have it.
The Deputy Chairman: Mr. Swart moves that clause 26(h) of the bill be amended by adding thereto the following subclause:
"(i) establishing a fund for the protection of owners of farm produce who deal with the grain elevator operators who do not have valid insurance under section 19, and requiring grain elevator operators or classes of grain elevator operators to pay levies into the fund."
Mr. Swart: Mr. Chairman, I will be brief because we mentioned this before. In the present act there is a loophole, which I think is recognized. I move this amendment for two reasons, even though the minister has indicated that he will endeavour under the regulations to plug that loophole. I am not suggesting he does not say that in good faith. I know from experience in this House that sometimes a bill will be passed, and then an amending bill comes in and changes the one made in the regulations, and it goes on for months and months and years and years. We need a backup fund because, under the bill as it now stands, if an elevator operator lets his insurance lapse for any reason and that insurance covers the producer's crop which is in his elevator, that producer would lose.
Therefore, when we have the opportunity, I think we should try to plug this loophole and this is the way we do it.
As I said before, it is done in a manner already set by the government in many other areas.
Mr. Riddell: Mr. Chairman, I fail to understand the New Democratic Party. I do not know how many times my colleague and I have stood in the House and told the Minister of Agriculture and Food that a fund should have been established in connection with this bill. The member for Welland-Thorold has stood in his place many times tonight and said there is no room in this bill for the establishment of a fund; it is against the principle. Now the NDP member stands in his place and says he wants a fund established.
It just goes to show the NDP members are so confused it is pitiful. I am convinced they do not know a thing about agriculture, particularly so after the member for Welland-Thorold stood in his place and said there should be no futures market buying and selling in connection with agricultural products. Does he recall that? That just shows how much that party knows about agriculture.
Hon. Mr. Timbrell: Mr. Chairman, as I mentioned earlier in the evening, I cannot accept the member's amendment, but I am committed to addressing the issue he raised. I thank him for raising it. It is a valid point and we will deal with it by way of regulations.
Mr. McClellan: What is the minister saying'? I cannot understand him.
Hon. Mr. Timbrell: No wonder; your mouth is flapping, you cannot hear me.
The Deputy Chairman: All those in favour of Mr. Swart's amendment will please say "aye."
All those opposed will please say "nay."
In my opinion the nays have it.
Mr. McGuigan: Mr. Chairman, clause 26(e) reads, "prescribing the form, terms and conditions of an agreement to sell." I wonder if the minister would take it as a commitment to write in the regulations that words should appear on sales agreements to the effect that by signing an agreement, the producer is waiving or letting go his rights to protection under the Grain Elevator Storage Act.
When I talked to producers in the Tilbury situation, I know many of them were under the impression that they had nothing to worry about because the Grain Elevator Storage Act was going to protect them. That is a false impression, but it is held by many people. The people in the United States told me that in their situation, when people sign those agreements they have a warning that they are opting out.
Hon. Mr. Timbrell: Mr. Chairman, I would ask the member to look at clause 1(k), which says, ". . . the ownership shall remain in the owner of the farm produce until such time as the owner has sold the farm produce and has received due compensation or has removed the farm produce from the elevator." I think his concern is covered.
The Deputy Chairman: Hon. Mr. Timbrell moves that section 26 be amended by relettering clause (i) as clause (j) and by adding thereto the following clause:
"(i) prescribing a percentage for the purposes of subsection 17(4);"
Motion agreed to.
Section 26, as amended, agreed to.
Sections 27 to 29, inclusive, agreed to.
Bill, as amended, ordered to be reported.
On motion by Hon. Mr. Timbrell, the committee of the whole House reported one bill with certain amendments.
GRAIN ELEVATOR STORAGE ACT
Hon. Mr. Timbrell moved third reading of Bill 40, An Act to revise the Grain Elevator Storage Act.
Motion agreed to.
CREDIT UNIONS AND CAISSES POPULAIRES AMENDMENT ACT
Hon. Mr. Elgie moved second reading of Bill 71, An Act to amend the Credit Unions and Caisses Populaires Act.
Hon. Mr. Elgie: Mr. Speaker, it is with pleasure that I move second reading of the bill to amend the Credit Unions and Caisses Populaires Amendment Act, 1976.
As I indicated when I introduced the bill, there are five main thrusts: first, to increase deposit insurance from $20,000 to $60,000; second, to convert the Ontario Share and Deposit Insurance Corp. to an insurer of shares and deposits only; third, to bring into legislation those lessons learned over the past two years as they relate, for example, to the matching of loans, investments and deposits, statutory reserves, retained surpluses and capital, and conflicts of interest; fourth, the introduction of compulsory audits for all credit unions and caisses populaires; and, finally, the provision of additional powers for the director of credit unions so he can move more quickly to address possible future problems that may arise in the credit union movement.
I am pleased to advise the House that the general principles contained in the bill are supported by the various groups consulted by officials. Some requested clarification of some points, such as, for example, the return of OSDIC assessments to credit unions, and these points have been handled to the general satisfaction of the groups involved.
The bill provides a new direction for the leagues of this province, if they wish to avail themselves of the opportunity, through the establishment of stabilization funds as their first line of defence for credit unions unable to adjust quickly to rapidly changing financial and economic conditions. The parameters for such funds will be established by regulation.
Of equal importance is that, to keep premiums down, the leagues would have the facility to ensure that the principles established by legislation and by the ministry are implemented. In turn, the director of credit unions would have the authority to move more quickly than present legislation permits in order to protect the interests of depositors and members generally. Any action taken can be taken only after consultation with the affected parties.
I know that some small credit unions could be concerned about compulsory audits. The special audit report for insurance purposes will be established by regulation and will be tailored to the size of the credit union. A committee was established in January of this year through the Institute of Chartered Accountants of Ontario, and one of the issues it will be asked to address is guidelines for these compulsory audits so they may be tailored to the size of the credit union.
I am confident that this bill will bring a significant improvement and change to the regulatory climate within which the credit union movement operates. It has been developed in consultation with the leagues, with the associations and with individual credit unions, and has their general support.
Mr. Breithaupt: Mr. Speaker, there are a number of themes that require some comment with respect to the legislation before us today. While this bill was introduced only last week and is now before us on second reading, it in fact has been the result of a number of ongoing discussions with the ministry over the last several years.
The results of the events in January with respect to requirements to change the protection under the Canada Deposit Insurance Corp. now see a reflection in this bill, and those increases to $60,000 will be in place as soon as this bill is in operation.
However, with respect to the other portions of the bill, some time is going to go by, I presume, until those portions are brought forward. The point, of course, is that these other provisions will not come into effect until they are proclaimed by the Lieutenant Governor, and this will allow some development of regulation upon which these other themes are based.
The leading members of the Credit Union Central of Ontario, the Credit Union Managers (Ontario) Association executive and the advisory committee to the Credit Union Central of Ontario board of directors met with my leader, the member for London Centre (Mr. Peterson), and other members of our staff to discuss the proposed legislation only a couple of days ago.
It was clear there are a number of themes in this legislation and many points with which we have no particular quarrel. We note the leagues are given power to maintain stabilization funds upon the authorization of the director of credit unions, and there are some new eligibility requirements for election to the board of directors of a league. In addition, the credit unions are required to match the terms of investments and loans with the terms of deposits and they are prohibited from making loans to corporations or partnerships in which an employee of the credit union has a direct financial interest.
In the accompanying notes dealing with these other themes, the matter of maintaining five per cent of their assets as mandatory permanent capital, as the director may prescribe, and also having the exclusion of league shares in the Ontario Share and Deposit Insurance Corp. assessment from assets qualifying for statutory liquidity, are matters which seem entirely reasonable.
We note the objects and powers of OSDIC are further refined, and deposit insurance protection as well is going to be provided on a premium basis rather than on the capitalization of a deposit insurance corporation. The powers of the director are referred to and there are certain other regulatory powers which are substantially expanded.
Other than those particular areas, there are really three concerns that come forward in this legislation. The first, which I have referred to, is the immediate increase to cover the deposits up to $60,000. This is complementary legislation to what we have seen not only on the federal scene, but also here in Ontario with respect to trust companies. That area is particularly welcome.
There are two other areas that do cause some concern. In the first instance we note that audits are going to be made mandatory for all credit unions. That may be of great value, in particular with the larger credit unions, but we understand that OSDIC is accordingly expecting to reduce its staff complement from between 20 and 45 persons. I do not know whether those numbers are entirely accurate, but concerns have been expressed with respect to the loss of that employment.
If these changes are going to be made, which will no doubt increase the work of a variety of chartered accountants around Ontario, it is important, and I think the honourable thing to do, to ensure those persons who may otherwise be laid off from this employment be given some opportunity to continue in the public service if there are positions available to them.
We recognize there are going to be some changes, of course, but I would hope that at least assistance will be given, whether it be by counselling or by a commitment to attempt to find employment opportunities within the public service, to the people who are going to be involved when OSDIC reduces its role to that of a deposit insurer and a gatherer of statistics.
The other theme raised by some persons serving in the smaller credit unions at somewhat more distant points deals with the prohibition of directors of credit unions from serving in a professional capacity on behalf of the credit union. This would mean a lawyer who happened to be on the board would no longer be able to do mortgage or other work for a credit union. Presumably the accountant perhaps in the local community might also be involved in that area.
I recognize the importance of having a certain arm's-length situation here. I do think when the regulations are drawn, however, perhaps depending upon the amount of the assets of the credit union, there may be some possibility of accepting an exception or two in a smaller community. There, the voluntary contribution of that person brought to the board of directors may be valuable and therefore that person should not be entirely precluded from having the opportunity of doing certain legal, accounting or other work for the particular credit union. I recognize there is a certain conflict-of-interest difficulty.
We are putting the smaller credit unions to the costs of an audit where that has not occurred before. That is a reasonable situation, particularly as we know there may be some arrangements to assist in the cost of audits for those credit unions which may have assets below the $500,000 mark. Obviously, most of the larger credit unions have had this kind of audit going on for some time, but it is some of the smaller ones that are the particular areas of our concern.
When we look at the press release issued by the ministry on June 16 respecting this bill, we note the minister comments that he had already received letters of support for the amendments from credit union groups representing nearly $4.5 billion in assets. However, the credit union system, as we see on the first page of that press release, has some $5.4 billion in assets. Presumably, there are likely some of the smaller credit unions that either did not reply or may have some concerns at least with respect to the auditing costs and with respect to the conflict of directors' services which they have enjoyed over the past and which may now be foreclosed to them.
Those are two themes which may be of greater interest for the smaller credit unions than they are to the practice of the much larger credit unions that represent the bulk of the groups that make up the $4.5 billion in assets and that have a much more broadly based and developed staff and other facilities of, effectively, the trust company relationship and all of those opportunities that go along with it.
We have those concerns with respect to the audit and with respect to the prohibition of directors serving otherwise. I would hope the minister would at least consider those themes as he proceeds to prepare the regulations and decide whether any exceptions or any opportunity for consideration, depending on the costs or the uncertainty that the prohibition may bring, would relate to the circumstances for the smaller credit unions.
Certainly, we must all be assured that the operations of the credit union system are healthy within Ontario. An industry that has some $5.4 billion of assets, as referred to by the minister, is something about which we in Ontario can be very proud. The publication on their centennial which I recall was entitled, To the Credit of the People, was an exceptionally fine representation of the whole history of this movement within Ontario. Indeed, it is to the credit of many of the smaller businesses and individual depositors that have made the strength of credit unions important in this province that we recommend these kinds of changes now in the legislation that is before us.
Bill 71 will make some substantial changes, following the difficulties which some of the credit unions had during this past recessionary time when there was some problem in the matching up of funds and there was a requirement in the circumstances to much increase the base of support and the capitalization requirements to ensure the full protection of any depositor's assets.
We seem to have weathered that storm, albeit there were some difficulties at the time. Now we can go on in this bill to clear up a number of these other general areas and improve and strengthen the credit union system within Ontario. We certainly welcome the bill and we are quite prepared to see it brought into completion as quickly as possible so that the variety of the amendments that are here before us tonight will be in place when the regulations are appropriately drawn and the credit union system, we hope, will go from its present circumstance to even greater strength.
Mr. Swart: Mr. Speaker, I rise this evening to speak on this bill in the absence of the member for Ottawa Centre (Mr. Cassidy) and also because I have some personal interest, having been involved in credit unions for quite a number of years.
I think the minister would agree this is not insignificant legislation which we have before us. This is an exceedingly important bill. It makes some real fundamental changes in the credit union system in this province with regard to the Ontario Share and Deposit Insurance Corp. Generally speaking, I think those changes are desirable. Certainly, the increase in the Ontario share and deposit insurance from $20,000 to $60,000 is very necessary, in fact urgent, if credit unions are going to keep their place in the financial spectrum. The requirement for audit of all the credit unions, I think, is desirable as well.
The change in the Ontario Share and Deposit Insurance Corp. to make it just an insurer, rather than a sort of supervisor or inspector of the credit unions, is desirable in principle too. Our caucus has gone on record as supporting this bill and we are not going to propose any amendments to it.
However, there are two things that bother me, and bother our caucus. One is the lateness of the submission of this bill to the House. I know there were problems. The minister had to have meetings with various groups and so on, but it is not fair to the House to bring in a bill of this significance in the last days of the session. It does not give us the opportunity to do justice to this bill.
That bothers me, because this is the kind of bill that should have a lengthy discussion because of its importance; I am not saying because of its controversial nature, but because of its importance. I fault the minister for not having brought it in sooner so we could have had that necessary time for this bill.
The second matter of real concern to me is -- I just found out about this today and I am not sure so the minister can correct me if I am wrong -- that the passage of this bill, I understand, is going to mean about 40 people are going to be out of work. Those who work for OSDIC as inspectors and in other ways are going to lose their jobs because the service they perform is going to be passed over to the credit union leagues, the umbrella body there.
I hope the minister will tell us this is not true, that those people are not going to be laid off. For him to bring in a bill on the last sitting day, or at least in the last week, which is going to lay off 40 people, if that is the case, I suggest is not only unfair to this House but is unfair to those people. We do not have the time to investigate and perhaps explore alternatives whereby those people would not be losing their jobs.
For those two reasons, we have some strong reservations about this bill, even though the principle is good, as I have already said. I am not going to take the time to go into all of the details of this bill because they have been dealt with by the minister on two or three occasions, and by the member for the Liberal Party. I, too, could spend half an hour going over all of them. Most of them are desirable.
I want to hear, in particular, an answer from the minister on whether 40 people -- or some number out of 65 or some total -- are going to be laid off because of what his government is doing in this bill. I want to say this to the minister: if that is the case, I think he should have brought that to the attention of the House when this bill was tabled and let us know all the implications of this bill.
Hon. Mr. Elgie: I want to thank both critics for their comments and, as the member for Kitchener (Mr. Breithaupt) quite rightly pointed out, the credit union movement has been a grass-roots movement in this province that has served its members well, and has served the financial community well. I think the important thing we are learning tonight, with the general consensus that has developed among the credit unions, is that they and we have learned a lot from the past two years' experience.
I certainly understand some of the concerns raised by the member for Kitchener, such as the issue of mandatory audits and the impact it might have on some small credit unions. I might say that one of the central leagues supports the principle, nevertheless, and I might also say there is going to be considerable consultation to try and tailor the audit process in such a way for small credit unions that it will be as inexpensive as possible for them.
I hope the member will agree that a credit union which cannot afford a yearly audit should be doing some very careful soul searching in any event.
Both the member for Kitchener and the member for Welland-Thorold (Mr. Swart) have raised the issue of whether or not there will be any staff reduction as a result of the changing role that takes place in OSDIC. Of course, there will be some staffing implications; the exact numbers, I have to be honest, I am not fully aware of at the moment. The chairman of the commission, of the board of OSDIC, is well aware of this problem. It will not happen with any degree of rapidity and it will not take place without every available facility, in terms of the Civil Service Commission and other options, being fully explored. I think the member knows me well enough that this kind of issue is one that would be paramount in my own mind as well.
The issue of section 4 of the bill was raised by the member for Kitchener. I understand the question he has raised because I have asked it myself. The fact of the matter is it is an amendment that, by and large, has the general approval of most of the leagues. It is one that may affect some individuals in some way that is detrimental, but I have to say it is an issue that has to be addressed.
The issues of arm's-length relationships and conflicts of interest have been major issues the credit unions, as a result of the past two years, have come to face. The fact that the member sensed there is general consensus about these amendments indicates the real way in which they have decided to face them, even that particular issue.
That is not to say there will not be some individuals who will be adversely affected, and perhaps with some justification; but as a general overall principle. I think there is general agreement that had to be done.
In general, the fact there has been such a consensus is a very good omen for this bill, and I commend the members for their support.
Motion agreed to.
Third reading also agreed to on motion.
EXECUTIVE COUNCIL AMENDMENT ACT
Hon. Mr. Wells moved second reading of Bill 77, An Act to amend the Executive Council Act.
Mr. Nixon: Mr. Speaker, I was not going to say anything about the bill but I have been prevailed upon by my colleagues to do so. I have substantial doubts myself in this bill, but we are following the recommendations of the Commission of Election Contribution and Expenses upon which there is a representative of each party.
Since the increase in this connection is somewhat less than the cost of living, we feel our cabinet colleagues probably deserve this sort of an improvement in their basic indemnity. We know they are going to cutback on some of their unclassified and unreported expenditures, which in this instance have given us so much concern.
But we are prepared to say to you, Mr. Speaker, that under the circumstances described to us repeatedly by the government House leader we are prepared to support the bill at this time.
Mr. Martel: My whip has the stopwatch out and he tells me I have 32 seconds. Like my friend the member for Brant-Oxford-Norfolk (Mr. Nixon) I am sure the commission will be happy we are following their recommendations, for once to the letter of the recommendations.
I might also add it is hoped that, next year, the air flights for cabinet ministers will show up in the expenditures so that across this province it does not show as though back benchers are spending more than cabinet ministers.
The minister might just include that next year, because it is rather an unfair comparison. I am being flashed by the time sign. We, too, will support the bill.
Motion agreed to.
Third reading also agreed to on motion.
LEGISLATIVE ASSEMBLY AMENDMENT ACT
Hon. Mr. Wells moved second reading of Bill 78, An Act to amend the Legislative Assembly Act.
Hon. Mr. Wells: Mr. Speaker, I want to put on the record that this bill, which changes the remuneration for all members of this House and for those people who get additional indemnities, follows the recommendation of the sixth report of the Commission on Election Contributions and Expenses of an increase of not more than five per cent.
Then I wanted to record that we have a decision here -- it states right on the top, "Decision from the Inflation Restraint Board." It indicates that in this case, and in the case of the members of the Legislative Assembly, the board decided that since an appropriate adjustment to the compensation rate had been proposed, the changes to the compensation plan conform to the requirements of section 14 of the act and, therefore, may be implemented provided that the compensation rate increase is limited to 4.86 per cent for the 12-month period ending March 31, 1984.
This bill follows the decision of the Inflation Restraint Board in changing all the indemnities by 4.86 per cent, and the expense allowances for members and for the Premier (Mr. Davis), the Leader of the Opposition (Mr. Peterson) and leader of the third party by five per cent.
Mr. Nixon: Mr. Speaker, for all the reasons the minister has brought forward, we are prepared to support the bill, but I felt I should bring to the attention of the minister's colleagues how effective he has been in discussing this matter with his opposite numbers in the other parties. He has really been fearless in putting this before the representatives of the other parties, and has always been an example of moderation and co-operation. I sometimes feel he is not enough appreciated by his colleagues in cabinet or in caucus. His best efforts to make this a better place go unfulfilled and unrewarded.
We do not have any compunction at all in expressing to you, Mr. Speaker, our enthusiastic support for this bill.
Mr. Martel: I am not certain, Mr. Speaker, if those complimentary words from my colleague mean the minister will not be around come fall. That might be the kiss of death, getting commendation from my friend on the negotiations that have gone on. I will not do that to the minister, because they would skewer him over there. Some of them think he is too soft. My friend the member for Brant-Oxford-Norfolk and I know differently. He is a tough negotiator and helps to keep this place going.
Might I say one thing in the act I am delighted about is the move to set up a system which removes Mr. Speaker from having to make decisions with respect to problems in this building. We have agreed on a procedure that establishes a commission and the person who is aggrieved nominates his own representative. I think that goes a long way -- I hope I am speaking on the right bill; I think I am -- to improve conditions and we will endorse the bill. Time is up again.
Motion agreed to.
Third reading also agreed to on motion.
Mr. Bradley: Here we go, the Teachers' Superannuation Act.
Hon. Mr. Wells: No, Mr. Speaker, at this point we have no other legislation to bring forward.
Mr. Conway: Didn't I hear that Bette got two raises and the teachers are still waiting to get one?
Hon. Mr. Wells: They will do all right, you watch.
With the consent of the House, I would like to revert to motions so I could make three motions.
Mr. Speaker: Do we have the concurrence of the House?
Hon. Mr. Wells moved the following substitutions be made on the standing and select committees:
Select committee on the Ombudsman: Mr. Breithaupt for Mr. Boudria; Mr. Di Santo for Mr. Lupusella.
Standing committee on resources development: Mr. Hennessy for Mr. Piché; Mr. Wrye for Mr. J. A. Reed; Mr. Lupusella for Mr. Stokes.
Standing committee on social development:
Mr. Mackenzie for Mr. Allen, for the committee's hearings on the subject of child abuse during the recess; Mr. Conway for Mr. McGuigan, for the committee's hearings on Bill 42 during the recess; Mr. Brandt for Mr. McNeil; Mr. Gillies for Mr. Runciman; Mr. Cureatz for Mr. Shymko.
Motion agreed to.
Hon. Mr. Wells moved that, notwithstanding the adjournment of the House, the committees scheduled to meet on Wednesday, June 22, and Thursday, June 23, be authorized to meet on these days.
Motion agreed to.
Hon. Mr. Wells moved that when the House adjourns today it stands adjourned until October 11, 1983, provided that if it appears to Mr. Speaker, on the advice of the government, that the public interest requires the House to meet at an earlier time, Mr. Speaker may give notice and thereupon the House shall meet at the time stated in such notice, and that should Mr. Speaker be unable to act owing to illness or other cause, the Deputy Speaker or the Deputy Chairman of committees of the whole House shall act in his stead for the purpose of this order.
Motion agreed to.
Hon. Mr. Wells: Mr. Speaker, the Lieutenant Governor awaits in his chambers to come in and give royal assent to certain bills.
Hon. Mr. Aird: Pray be seated.
Mr. Speaker: May it please Your Honour, the Legislative Assembly of the province has, at its present sittings thereof, passed certain bills to which, in the name of and on behalf of the said Legislative Assembly, I respectfully request Your Honour's assent.
Assistant Clerk: The following are the titles of the bills to which Your Honour's assent is prayed:
Bill 40, An Act to revise the Grain Elevator Storage Act;
Bill 58, An Act to amend the Municipal Act;
Bill 62, An Act to amend the Labour Relations Act;
Bill 64, An Act respecting certain Health Facilities;
Bill 65, An Act to amend the Public Service Superannuation Act;
Bill 66, An Act to amend the Workers' Compensation Act;
Bill 71, An Act to amend the Credit Unions and Caisses Populaires Act;
Bill 72, An Act to amend the Expropriations Act;
Bill 73, An Act to amend the Retail Sales Tax Act;
Bill 77, An Act to amend the Executive Council Act;
Bill 78, An Act to amend the Legislative Assembly Act;
Bill Pr18, An Act to revive the United Native Friendship Centre;
Bill Pr20, An Act respecting the Bernard Betel Centre for Creative Living;
Bill Pr23, An Act to revive The Star of Progress Spiritual Church;
Bill Pr27, An Act respecting Morton Terminal Limited;
Bill Pr29, An Act to revive Andonald Enterprises Limited;
Bill Pr35, An Act respecting St. Augustine's Seminary of Toronto.
Clerk of the House: In Her Majesty's name, the Honourable the Lieutenant Governor doth assent to these bills.
The Honourable the Lieutenant Governor was pleased to retire from the chamber.
Hon. Mr. Wells: I would like to wish everyone a very happy and hardworking summer. Having looked at the committee schedule which the members of this House have struck for themselves, it is obvious that no one is going to take a very long vacation.
The House adjourned at 10:25 p.m.