Canada: Agricultural Law Netletter - December 7, 2016 Issue 361

HIGHLIGHTS

* A Justice of the Ontario Superior Court of Justice has reviewed and explained the basic principles of contract with respect to whether individual farmers, or their corporation, are liable for a supplier's debt, and the basis upon which interest can be claimed by a supplier. Credit applications completed by the farmers were hopelessly ambiguous, however they did refer to a corporate name. The Court found that this was sufficient to bring home to the supplier that it was dealing with a corporation. The Court also found that a contract to pay interest had been established based on the provisions of a credit application and numerous invoices. The case contains a discussion of the case law and a number of principles involved in resolving both issues. (Huron Bay Co-operative Inc. v. Needham, CALN/2016-029, [2016] O.J. No. 6170, Ontario Superior Court of Justice)

NEW CASE LAW

Huron Bay Co-operative Inc. v. Needham;

CALN/2016-029,

Full text: [2016] O.J. No. 6170;

2016 ONSC 7296,

Ontario Superior Court of Justice,

C. Conlan J.,

Debtor and Creditor -- Whether it has been brought home to a Creditor that the Creditor is Dealing with a Corporation -- Express or Implied Agreement to Pay Interest.

Huron Bay Co-operative Inc. ("the Cooperative") sued two Ontario farmers, Andrew Needham and Michael Needham (collectively, the "Needhams") and Mar-Bo Farms Inc. ("Mar-Bo"), a trucking and farming corporation used by the Needhams, for an outstanding debt claimed for seed, fertilizer, spray and other agricultural supplies supplied by the Cooperative.

The primary issue was whether the debt for outstanding invoices of $75,392.77 and interest of $98,297.75 (total $173,690.52) was payable by the Needhams or Mar-Bo.

Credit was provided pursuant to a line of credit provided by Farm Credit Canada ("FCC").

The procedure to obtain credit required farmers who wanted to purchase supplies from the Cooperative to make a credit application to FCC. The purchased items were then charged to the FCC credit line. In the event of a default by the farmer, the Cooperative was obliged to reimburse FCC for the farmer's default.

Default was made on the FCC line of credit utilized to pay for the supplies purchased for the Defendants' farm operation. The Cooperative paid the unpaid balance due to FCC. FCC assigned its right to collect the debt to the Cooperative.

The Needhams took the position that if there was a debt owing, it was owed by Mar-Bo and not the Needhams.

The Needhams also took the position that the debt should be reduced as a result of a number of set-off claims regarding alleged deficiencies related to the seed, herbicide and spray provided by the Cooperative.

The Needhams also challenged the Cooperative's right to seek interest on the debt.

Decision: Conlan, J. dismissed the Cooperative's action for judgment against the Needhams personally, dismissed the Defendants' claim for set-off, and granted the Cooperative judgment against Mar-Bo for the full amount of the debt, including interest [at para. 117 to 119].

Conlan, J. considered the following issues:

1. Whether Mar-Bo, or the Needhams, were liable for the debt.

Conlan, J. observed that the FCC credit application, and related documents, were ambiguous:

  • The first piece of information on the credit application refers to a corporation "Mar-Bo Ltd." [at para. 56].
  • Another portion of the same document checked off the word "partnership" rather than "corporation" [at para. 60].
  • The form was signed by Mike Needham personally, with no reference to Mar-Bo, however the form did not provide a blank for a corporate name, but only asked for the legal surname and name [at para. 67].

Conlan, J. concluded that the two contracts involved were ambiguous, confusing and contained information that made them "reasonably susceptible to multiple interpretations" [at para. 75] including the interpretation that Mar-Bo alone was the debtor, and that either or both of the Needhams were the debtor, individually or jointly and severally [at para. 76 to 84].

Conlan, J. also observed that the parties gave contradictory evidence as to what their intentions were as to whether Mar-Bo or the Needhams were to be liable and that the extrinsic evidence was inconclusive.

Conlan, J. concluded that the burden was on the Cooperative to prove that its contractual relationship was with the Needhams personally, and that the most important issue was whether it was brought home to the Cooperative that it was dealing with a corporation, stating at para. 36 and 37:

[36] The burden is on the Plaintiff, HBC, to prove on balance that its contractual relationship was with the Needhams personally, or either of them. Kobes Nurseries Inc. v. Convery, 2010 ONSC 6499, 2010 CarswellOnt 8850 (S.C.J. - Justice Lauwers, as His Honour then was), at paragraph 22.

[37] In determining whether HBC has met that burden, it is important to consider whether the Needhams, or either of them, brought home to HBC the fact that the Plaintiff was dealing with a corporation. In other words, the responsibility was on the Needhams to do or say something to, at a minimum, cause this Court to conclude that HBC must be imputed with the knowledge of the existence of the corporation, Mar-Bo. Kobes Nurseries, supra, at paragraph 17.

Conlan, J. observed that in determining whether the Cooperative had sufficient notice, the totality of the circumstances must be considered and that no one factor is determinative. The fact that Mar-Bo, and not the Needhams, paid the Cooperative by cheque, would not by itself be conclusive: Morse Electro Products (Can.) Corp. v. Central Discount House Ltd., 1978 CarswellBC 21 (County Court).

With respect to whether a debtor must provide "clear and unambiguous" notice that the creditor is dealing with a corporation, Conlan, J. concluded that it was sufficient to say that the notice must be sufficient to bring home to the Cooperative that it was dealing with a corporation [at para. 48].

Conlan, J. concluded [at para. 74] that the Cooperative "had clear notice, or ought to have had clear notice, of the existence of a corporation, Mar-Bo, and that the credit applicant was the corporation" [at para. 74] and that it did not matter that the credit application provided an incorrect corporate name - "Mar-Bo Ltd.", rather than "Mar-Bo Farms Inc."..."the precise name of the corporation is less important, however, than the clear notice of a corporation as the business entity and as the applicant for credit" [at para. 64].

Conlan, J. also observed that the doctrine of contra proferentem described by the Supreme Court of Canada in Eli Lilly & Co. v. Novapharm Ltd.; Eli Lilly & Co. v. Apotex Inc., [1998] 2 S.C.R. 129 (SCC), [1998] 2 S.C.R. 129 would only be applied as a rule of last resort, when all other rules of construction fail [at para. 50 and 51].

Conlan, J. concluded that the ambiguities in the documents could not be resolved, and that as a last resort, the Court would have to apply the principle of contra proferentem stating [at par. 94]:

[94] ...As none of the documents in question were drafted by the Defendants, the confusion and the ambiguity would have to be resolved against [the Cooperative].

Conlan, J. concluded that the Cooperative had failed to prove on a balance that it and FCC had contracted with the Needhams personally, as opposed to their corporation [at para. 97].

The Cooperative argued that the Court should pierce the corporate veil, relying on the decision of Kosmopoulos v. Constitution Ins. Co. of Canada, 1987 CarswellOnt 132 (SCC), in which it held that the doctrine of separate legal entity is not enforced when it would yield a result that is "flagrantly unjust" in the light of the suffering that would result to innocent third parties.

Conlan, J. stated [at para. 97]:

[97] It was clearly brought home to HBC such that it knew, or ought to have known, that it was dealing with a corporation. Having made that determination, as much as it is difficult to make, I observe that there is nothing flagrantly unjust about the result in the sense alluded to by the Supreme Court of Canada in Kosmopoulos, supra.

2. What interest rate should prevail?

The interest at the rate claimed by the Cooperative was set out in the credit applications and monthly invoices.

Conlan, J. accepted the Defendants' proposition that an agreement to pay the interest claimed was required, stating at para. 111:

[111] The Defendants are correct that "the mere presence of a statement on an invoice that interest is claimed at a particular rate, standing alone, is an insufficient basis to warrant a finding that interest is owed". An agreement to pay the intereset rate being claimed, whether express or implied from a course of conduct by the parties, must be found. Accent Metals Inc. v. Stelfab Niagara Ltd., [2010] O.J. No. 237 (S.C.J. - Justice Harris).

Conlan, J. then held that if Mike Needham had taken time to read the credit applications he would have seen and understood the interest rate provisions, and that the interest rates were clearly stated on all of the Cooperative invoices, which the Needhams received[at para. 112 and 113].

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.