Executive Summary: Key Legal and Evidentiary Issues

• Enforceability of the 2015 Guarantee in favour of Input Capital Corporation turned on strict compliance with s. 31 of The Saskatchewan Farm Security Act, including execution of the prescribed Acknowledgment of Guarantee before an independent lawyer or notary.
• The absence of any completed Acknowledgment of Guarantee and lawyer/notary certificate under the Saskatchewan Farm Security Regulations rendered the 2015 Guarantee “of no effect” as a matter of statute, not merely an irregularity.
• Whether the 2015 Collateral Mortgage (as amended in 2017) could stand independently of the defective Guarantee raised issues of contract interpretation, the relationship between linked security documents, and the operation of the limited recourse structure.
• The court had to determine if substantial compliance doctrine, relied on in older homestead/dower cases, could save a non-compliant guarantee despite the SFSA’s express language that non-compliant guarantees have no effect.
• An alternative claim that an equitable mortgage should be recognized despite statutory non-compliance engaged the court’s equitable jurisdiction and the limits imposed by the protective scheme of the SFSA.
• Responsibility for costs following the determination of the enforceability question involved assessing success on the application and apportioning a single Column 3 Tariff costs award in favour of the guarantors against both the creditor and its law firm.

Factual background and commercial setting

Input Capital Corporation is a Regina-based agribusiness that finances farmers through “Streaming Canola Purchase Contracts,” advancing substantial upfront cash in exchange for commitments to deliver specified tonnages of canola over multiple crop years. To secure its position, Input typically takes both personal property security and mortgages over farm land. Daniel Bonkowski, a Saskatchewan farmer near Wapella, operated his farm through Bonkowski Farms Ltd. In 2013, Bonkowski Farms and Daniel entered into a Streaming Canola Purchase Contract with Input requiring delivery of 2,075 tonnes of canola per year for six years in exchange for $2.5 million and crop payments. That exposure was secured by a collateral mortgage granted by Bonkowski Farms in favour of Input, as well as a broad collateral security agreement over present and after-acquired property. In 2014, the parties entered a further streaming canola agreement for an additional 230 tonnes per year for five years. By 2015, Daniel and Bonkowski Farms wished to sell some of the land subject to Input’s 2013 collateral mortgage. To facilitate this sale without losing real property security, Input and the Bonkowski family arranged what the court later described as a “mortgage swap”: Input would discharge its mortgage against farmland owned by Daniel’s company and instead take a new mortgage over land owned by Daniel’s parents, Garry and Margaret Bonkowski. This refinancing structure set the stage for the guarantees and collateral mortgage that later became the focus of the litigation.

The 2015 guarantee and collateral mortgage

To implement the security swap, Garry and Margaret executed two key documents in favour of Input on March 9, 2015: the 2015 Collateral Mortgage over their land, and the 2015 Guarantee, which was attached as Schedule “B” to that mortgage. The 2015 Collateral Mortgage secured the obligations owing to Input, initially in the principal amount of $2.5 million, later increased to $3,918,020 by a 2017 amending agreement. The land pledged was a specific quarter section (SE 4-15-33-W1). The guarantee and the mortgage were conceived and drafted together by Input’s counsel, McKercher LLP, and sent as a package to Garry and Margaret’s solicitor, Garry Moore, for execution. Garry and Margaret signed both the mortgage and the guarantee in the presence of Mr. Moore, who commissioned homestead affidavits and an affidavit of execution in the mortgage package. The documentation repeatedly linked the two instruments. The first clause of the mortgage, entitled “Grant of guarantee,” expressly refers to the guarantee attached as Schedule “B”. The repayment clause ties payment obligations to the terms of the guarantee, and default provisions in the mortgage refer directly to defaults under the guarantee. Conversely, the guarantee describes the mortgage as the limited recourse enforcement mechanism, providing that Input’s recourse for the guarantors’ obligations is confined to the mortgage registered against the parents’ land. Internal correspondence later obtained and filed confirmed that both Input and McKercher understood the structure as a guarantee supported by a collateral mortgage over the parents’ land, with the mortgage functioning as the means by which Input could realize on the guarantee.

Subsequent streaming contracts and the 2017 restructuring

Financing arrangements between Input and Bonkowski Farms evolved further after 2015. In 2016, amending agreements increased Input’s financial exposure by additional $1.5 million advances tied to 2016 and 2017 crop deliveries. By March 31, 2017, the relationship was restructured through several new contracts: an Accounts Receivable Agreement converting undelivered tonnes from the 2016 crop into a $975,196.01 receivable bearing 18% annual interest; a Capital Stream Contract requiring 1,500 tonnes of canola yearly for six years in exchange for over $2 million in upfront financing; and a Marketing Stream Contract requiring delivery of 9,000 tonnes per year over six years for an additional $900,000 upfront. Bonkowski Farms and Daniel also granted new collateral security agreements in April 2017 to secure these restructured obligations. On the same date as the 2017 restructuring, Garry and Margaret executed a Mortgage Amending Agreement increasing the principal secured under their 2015 Collateral Mortgage from $2.5 million to $3,918,020. That amendment did not correct or replace any guarantee-related formalities; it simply increased the secured amount. Over time, Bonkowski Farms and Daniel allegedly defaulted under the new streaming and receivable agreements by failing to deliver required canola and to pay outstanding balances. Input’s November 8, 2018 letter to them identified significant arrears under the Capital Stream Contract, Marketing Stream Contract and the Accounts Receivable Agreement, and demanded that they bring the accounts current. A subsequent letter of April 3, 2019 demanded payment of $3,472,971.01 from Garry and Margaret under the mortgage/guarantee structure.

Rise of the enforceability dispute

While considering enforcement, McKercher discovered that the formal Acknowledgment of Guarantee and Certificate of Lawyer or Notary Public required by The Saskatchewan Farm Security Act and its regulations had not been completed when Garry and Margaret signed the 2015 Guarantee. Internal emails characterized this omission as a “potentially significant issue,” recognizing that the absence of the prescribed certificate could affect the validity of both the guarantee and the collateral mortgage. McKercher notified its insurers and also informed Input of the defect. In February 2023, Input demanded that Garry and Margaret retroactively appear before a lawyer or notary to execute a certificate in the prescribed form, relying on an obligation in the mortgage to sign documents required to maintain or protect the security. Garry and Margaret never did so. Multiple proceedings then unfolded: Input sued Garry and Margaret in Yorkton for the mortgage debt; sued Bonkowski Farms and Daniel in Regina for streaming contract defaults; and separately sued McKercher in Regina for negligence and breach of retainer in failing to ensure compliance with the SFSA’s guarantee requirements. These actions were ultimately consolidated into a single proceeding in the Judicial Centre of Regina. The parties agreed to pose a focused question of law concerning the enforceability of the 2015 Guarantee, the 2015 Collateral Mortgage and the 2017 Amending Agreement as against Garry and Margaret, supported by an Agreed Statement of Facts and a Joint Book of Documents.

The first decision: refusal to answer on incomplete record

In a July 24, 2025 decision reported as 2025 SKKB 111 (the First Decision), Justice Robertson declined to answer the enforceability question based on the record then before the court. The history of the litigation was summarized, but the judge concluded that the existing material and factual framing were not adequate to resolve the legal issues properly. Instead, the court required the parties to refine and supplement the factual record. Following that direction, the parties filed a revised Agreed Statement of Facts and Documents on August 28, 2025. With that revised statement and additional legal briefs, the court agreed to revisit the original application and determine the key legal questions. The decision issued on January 28, 2026 (2026 SKKB 24) constitutes the second and determinative ruling in this sequence.

Legislative and doctrinal framework

The court’s analysis was anchored in several strands of law. First, The Legislation Act codifies modern principles of statutory interpretation, requiring that statutes be read in their entire context, harmoniously with their scheme, object and legislative intent, and given a fair, large and liberal interpretation aimed at achieving their remedial purposes. Second, standard contract interpretation principles, as summarized by the Saskatchewan Court of Appeal in Gustafson v Input Capital Corp., emphasize that the text of an agreement must be read in light of its surrounding circumstances, including commercial purpose, and not solely in isolation. Third, and most centrally, The Saskatchewan Farm Security Act and its Regulations provide a protective framework for farm families, including specific, mandatory formalities for guarantees related to farm land or farm assets. Section 31 defines “guarantee” broadly as a written obligation to answer for a farmer’s indebtedness in relation to farm land or farm assets and expressly requires that a guarantor appear before an independent lawyer or notary, acknowledge execution, and in that professional’s presence sign a certificate in the prescribed form. The lawyer or notary must then issue their own certificate, attached to or noted on the guarantee, confirming that the guarantor understands the contents and effect of the obligation. Section 31(2) provides that “[n]o guarantee has any effect” unless these core steps are completed; s. 31(7) further requires that a guarantee specify a maximum financial obligation in a sum certain, with non-compliant guarantees declared “null and void and of no effect.” The Regulations prescribe Form B, “Acknowledgment of Guarantee,” which embodies these requirements. Legislative history, including the Justice Minister’s second reading speech when introducing the Bill that became the SFSA, shows a deliberate policy choice to protect farmers and family members from the unexamined and potentially open-ended risks of guarantees by insisting on independent advice and clear monetary limits. The court also relied on prior Saskatchewan authority, particularly Prairie Centre Credit Union Ltd. v River Ridge Cattle Corp., where the King’s Bench had held that non-compliance with s. 31’s certificate requirements rendered a guarantee entirely without effect. Against this background, the court was asked to determine whether there was room for doctrines such as substantial compliance or equitable mortgages to soften or avoid the SFSA’s explicit consequences.

Non-compliance with the acknowledgment of guarantee requirements

The Agreed Statement of Facts contained a pivotal concession: when Garry and Margaret executed the 2015 Guarantee, no lawyer or notary public issued a certificate in the prescribed form under s. 31(3) and (4) of the SFSA, and the guarantors did not sign the prescribed certificate in the presence of such a professional as required by s. 31(2). Their solicitor did witness their signatures, commission homestead affidavits and sign an affidavit of execution in the mortgage package, but he did not provide the specialized guarantee acknowledgment and certificate contemplated by the SFSA and the Regulations. This omission was never cured, even when the 2015 Collateral Mortgage was later amended in 2017 to increase the principal amount. The statutory question thus became whether a guarantee that lacked any attached or noted Acknowledgment of Guarantee and lawyer/notary certificate could nonetheless be enforced, either because the surrounding facts showed that Garry and Margaret had understood and intended to be bound, or because the mortgage could be treated as a distinct, limited-recourse security.

Enforceability of the guarantee

On the enforceability of the 2015 Guarantee itself, the court’s answer was unequivocal. Justice Robertson held that a guarantee that fails to comply with the mandatory requirements in s. 31(2) of the SFSA is “of no effect” and unenforceable. The statute expressly declares that no guarantee has any effect unless the guarantor appears before an independent lawyer or notary, acknowledges execution, and signs the prescribed certificate in that person’s presence; since these steps never occurred, the guarantee simply did not exist in law for enforcement purposes. The court emphasized that this conclusion accords both with the ordinary meaning of the statutory language and with the Legislature’s protective purpose. Prairie Centre Credit Union was directly on point, and the Legislature’s failure to amend s. 31 in response to that earlier ruling reinforced that courts should respect the strict consequences dictated by the statute. The judge rejected Input’s argument that substantial compliance doctrine, recognized in older dower and homestead cases such as Senstad v Makus and Toronto-Dominion Bank v Gordon, could save a non-compliant guarantee. Those cases involved different legislation without an express “no effect” clause; by contrast, the SFSA explicitly stipulates the effect of non-completion of the required form. Allowing substantial compliance would effectively read the “no effect” language out of the statute, contrary to legislative intent and the remedial character of the farm protection scheme.

Relationship between the mortgage and the guarantee

The more nuanced issue concerned the 2015 Collateral Mortgage and its 2017 amendment: could the mortgage survive as an independent, enforceable limited recourse security even if the guarantee was void, or was it inseparable from the defective guarantee? All parties accepted that the mortgage was limited recourse, enforceable, if valid, only against the mortgaged land. Input and McKercher argued that s. 31 of the SFSA applies only to guarantees and does not impose any special formality requirements for mortgages. They characterized the mortgage as a separate contract pledging land, akin to any conventional mortgage that can stand on its own regardless of a related guarantee. Garry and Margaret contended that the guarantee and mortgage formed a single, integrated security structure: the mortgage existed only to secure the guarantors’ obligations under the guarantee, such that if the guarantee fell, the mortgage must fail with it. The court accepted the guarantors’ position. Examining both the text and the surrounding circumstances, Justice Robertson found a “clear and close relationship” between the two documents. They were drafted together by Input’s lawyers, sent together to the parents’ lawyer, signed together, and returned as a combined package without alteration. The guarantee was physically attached to the mortgage as a schedule, and the documents contained numerous cross-references that made it impossible to understand one without the other. The mortgage’s core repayment and default provisions were expressly tied to obligations “under the Guarantee,” and the guarantee in turn identified the mortgage as the exclusive enforcement mechanism. Internal emails from McKercher and correspondence from Input confirmed that both regarded the mortgage as “collateral to a guarantee” and “security for the Guarantee.” On this record, the judge concluded that the mortgage was drafted and intended as the mechanism by which Input could enforce the guarantee, not as a free-standing security instrument. To the extent any ambiguity might be alleged, the court further indicated that the contra proferentem rule would favour reading the documents against the interests of the party that drafted them, namely Input through its counsel. Accordingly, once the guarantee was found to have no legal effect, the mortgage, being “part and parcel” of that guarantee, was also unenforceable against Garry and Margaret.

Rejection of the substantial compliance argument

Input argued that, even without a formally executed Form B acknowledgment, the factual circumstances—execution before a lawyer, presence of homestead affidavits and an affidavit of execution—demonstrated that Garry and Margaret understood and intended the guarantee, such that there was substantial compliance with the SFSA’s goals. The court carefully distinguished the homestead and dower cases cited by Input. In those earlier contexts, courts had room to focus on whether the non-owning spouse consented, because the statutes did not expressly declare non-compliant instruments to be of no effect. In contrast, s. 31(2) and (8) of the SFSA spell out the legal consequences of non-compliance in clear terms. Justice Robertson held that, where the Legislature has specified that non-compliant guarantees have “no effect,” the court must respect that explicit choice and cannot import a judge-made doctrine of substantial compliance to revive an instrument the statute has declared legally void. Doing so would undermine the SFSA’s protective scheme by eroding the very formalities designed to ensure that guarantors receive independent advice and understand the scope of their financial exposure.

Equitable mortgage and the limits of equitable intervention

As an alternative, McKercher submitted that, even if the legal mortgage and guarantee were defective, the court should recognize an equitable mortgage based on the parties’ clear intention that Garry and Margaret’s land serve as security for Daniel’s debt, particularly given that Input advanced funds in good faith and relied on the pledged land. The argument invoked the court’s broad equitable jurisdiction under The King’s Bench Act and the SFSA’s own recognition that equitable mortgages may exist in some circumstances. Justice Robertson accepted that equitable mortgages are recognized in Saskatchewan but rejected their application here. Recognizing an equitable mortgage in place of a legal mortgage rendered unenforceable because of non-compliance with s. 31 would, in the judge’s view, amount to a judicial override of the SFSA’s carefully crafted public policy. The Legislature had deliberately imposed firm, formal requirements on guarantees related to farm indebtedness; allowing equity to recreate functionally equivalent security despite failure to meet those requirements would frustrate that policy and weaken the statutory protections for farm families. The court also noted that Input was not left entirely without recourse: the underlying default was Daniel’s failure to pay his obligations, and Input could still pursue him and Bonkowski Farms for their debts under the streaming and receivable contracts.

Costs and overall outcome across both decisions

The two decisions, taken together, chart a progression from procedural caution to definitive resolution. In the First Decision (2025 SKKB 111), the court declined to answer the enforceability question on an incomplete or unsatisfactory record, directing the parties to refine and formalize the factual basis for the legal issues. After the revised Agreed Statement of Facts and additional legal briefs were filed, the Second Decision (2026 SKKB 24) answered the core questions of law: the 2015 Guarantee in favour of Input Capital Corporation is unenforceable as against Garry and Margaret Bonkowski because it does not comply with the mandatory acknowledgment and certificate requirements in s. 31 of The Saskatchewan Farm Security Act, and the 2015 Collateral Mortgage, as amended in 2017, is likewise unenforceable against them because it is inseparable from and functions as the enforcement mechanism for the void guarantee. The court also refused to save the security structure through doctrines of substantial compliance or equitable mortgage, holding that such approaches would undermine the statutory protections afforded to Saskatchewan farm families. On the question of costs, the court found that Garry and Margaret were the successful parties on the application. Given the complexity and novelty of the issues, Justice Robertson awarded them a single set of costs against both Input Capital Corporation and McKercher LLP, calculated on Column 3 of the Tariff of Costs and payable forthwith. The decision does not specify the actual dollar figure corresponding to Column 3 in this case; accordingly, while it is clear that Garry and Margaret succeeded and obtained a costs award in their favour, the total amount ordered cannot be determined from the text of the decisions alone.