Chesterman Farm Equipment Inc. v. CNH Canada Ltd., 2016 ONSC 698

• Judge: Molloy, Hackland and Hambly, JJ.
• Court: Superior Court of Justice of Ontario (Canada)
• Case Date: October 20, 2015
• Jurisdiction: Ontario
• Citations: 2016 ONSC 698;(2016), 347 O.A.C. 73 (DC)

Chesterman Farm v. CNH Can. (2016), 347 O.A.C. 73 (DC)

MLB headnote and full text

Temp. Cite: [2016] O.A.C. TBEd. MR.008

Chesterman Farm Equipment Inc. (applicant/respondent on appeal) v. CNH Canada Ltd. (respondent/appellant)

(14-0033-00; 2016 ONSC 698)

Indexed As: Chesterman Farm Equipment Inc. v. CNH Canada Ltd.

Court of Ontario

Superior Court of Justice

Divisional Court

Molloy, Hackland and Hambly, JJ.

March 7, 2016.

Summary:

The Agriculture, Food and Rural Affairs Appeals Tribunal determined that CNH Canada Ltd. (distributor) had improperly terminated a dealer agreement with Chesterman Farm Equipment Inc. (dealer) and awarded $200,516.61 in damages to Chesterman ($60,000 for lost profit, $80,000 for obsolete assets, and $60,000 in prejudgment interest) (the March 2014 decision). In subsequent reasons, the Tribunal awarded partial indemnity costs to Chesterman ($376,338.05) (the costs decision). CNH appealed from both the damages and costs decisions. Chesterman cross-appealed from the damage award for lost profits, submitting that this head of damages was wrongly calculated and should be higher.

The Ontario Divisional Court, Molloy, dissenting in part, upheld the March 2014 decision, except with respect to the award for obsolete assets which was set aside. Otherwise, the appeal and cross-appeal respecting the March 2014 decision were dismissed. The costs decision was quashed and the issue of costs was remitted to the Tribunal to be reconsidered in light of the court's rulings as to the jurisdiction for awarding costs and the relevant factors to be taken into account, as well as the Tribunal's Rules and s. 17.1 of the Statutory Powers Procedure Act. The court invited written submissions regarding the costs of the appeals.

Interest - Topic 5008

Interest as damages (prejudgment interest) - General principles - Prejudgment interest - Entitlement - [See second Trade Regulation - Topic 3381 ].

Statutes - Topic 6711

Operation and effect - Commencement, duration and repeal - Retrospective and retroactive enactments - Retrospective or retroactive operation - Regulations - [See Trade Regulation - Topic 3375 ].

Trade Regulation - Topic 3375

Sale of agricultural products and machinery - Dealerships - Termination and renewal - General - On April 25, 2006, Ontario Regulation 123/06 (Dealership Agreements), made under the Farm Implements Act, came into force - That Regulation prescribed certain mandatory terms that had to be included in any farm implement dealership agreement, including renewal terms - The Agriculture, Food and Rural Affairs Appeals Tribunal determined that the Regulation applied to a dealership agreement which came into effect on January 1, 2000 - The Ontario Divisional Court agreed with the Tribunal that Regulation 123/06 came into force with retrospective effect - The court noted that the retrospectivity issue was a pure question of law involving issues of statutory interpretation and was not dependent on the factual matrix between the parties in this case and, therefore, the court had jurisdiction to deal with that issue (Farm Implements Act, ss. 5(7), 5(8) and 5(9)) - See paragraphs 1, 3, 30, 71 to 75 and 96 to 127.

Trade Regulation - Topic 3376

Sale of agricultural products and machinery - Dealerships - Termination and renewal - Notice - On September 20, 2006, CNH (distributor) refused to renew a Dealer Agreement with Chesterman Farm Equipment Inc. (dealer) - The Agriculture, Food and Rural Affairs Appeals Tribunal found that Ontario Regulation 123/06 (Dealership Agreements) which came into effect on April 25, 2006, and contained mandatory provisions relating to renewals, applied to the Dealer Agreement - However, having found that Regulation 123/06 applied to the Dealer Agreement, it was necessary for the Tribunal to modify the existing notice and renewal provisions to comply with the Regulation - In doing so, the Tribunal held the right not to renew in paragraph 22 of the Dealer Agreement was void and was therefore removed and based on agreement of counsel, the automatic renewal clause was deemed to constitute the notice of intent to renew contemplated by the Regulation - CNH appealed - The Ontario Divisional Court dismissed the appeal - The court held that the manner in which the Tribunal applied Regulation 123 to the Dealer Agreement in this case was a mixed question of fact and law and was not subject to review (Farm Implements Act, ss. 5(7), 5(8) and 5(9)) - See paragraphs 7, 8, 30, 76 to 82.

Trade Regulation - Topic 3376

Sale of agricultural products and machinery - Dealerships - Termination and renewal - Notice - On September 20, 2006, CNH (distributor) refused to renew a Dealer Agreement with Chesterman Farm Equipment Inc. (dealer) - The Agriculture, Food and Rural Affairs Appeals Tribunal found that Ontario Regulation 123/06 (Dealership Agreements) which came into effect on April 25, 2006, and contained mandatory provisions relating to renewals, applied to the Dealer Agreement - The Tribunal held that the September 30, 2006 notice of non-renewal was void as it breached the Regulation because; (1) it was based on the void automatic renewal provision, (2) it did not give Chesterman the required period to address the concerns raised and (3) it did not adequately set out the reasons for the non-renewal - The Tribunal was not satisfied that CNH's letter of September 20, 2006, complied with the requirement of the Regulation that the distributor provide written reasons for the refusal to renew so that the dealer could then address the concerns within the allowable 15 days - CNH appealed - The Ontario Divisional Court dismissed the appeal - The court held that the nature and adequacy of the reasons for non-renewal provided by CNH were matters of fact arising from the dealings between the parties and clearly did not engage questions of law - They were, therefore, not subject to review by the Divisional Court (Farm Implements Act, ss. 5(7), 5(8) and 5(9)) - See paragraphs 9, 83 to 88 and 128 to 161.

Trade Regulation - Topic 3376

Sale of agricultural products and machinery - Dealerships - Termination and renewal - Notice - CNH (distributor) refused to renew a Dealer Agreement with Chesterman Farm Equipment Inc. (dealer) - The Agriculture, Food and Rural Affairs Appeals Tribunal analyzed the Dealer Agreement and the relevant dealings between the parties and concluded CNH had unreasonably withheld its approval to renew (Ontario Regulation 123/06 (Dealership Agreements)) - CNH appealed - The Ontario Divisional Court held that the decision on whether CNH unreasonably withheld its approval to renew was within the Tribunal's specific mandate and the considerations were fact and credibility based for the most part - Therefore, the Divisional Court lacked the jurisdiction to hear an appeal from the Tribunal's finding as to the reasonableness of CNH's decision - The court, applying the reasoning in Housen v. Nikolaisen (SCC 2002) and Sattva Capital Corp. v. Creston Molly Corp. (SCC 2014), found no extricable questions of law in the Tribunal's ruling as to the unreasonableness of CNH's decision not to renew - The Tribunal's decision was based on a consideration of the historical relationship of the parties and the events and communications surrounding the decision not to renew - That specialized Tribunal's assessment of reasonableness in all the circumstances was entitled to deference - In any event, there was no right of appeal on these matters as they are not questions of law (Farm Implements Act, ss. 5(7), 5(8) and 5(9)) - See paragraphs 3 and 11 to 16.

Trade Regulation - Topic 3381

Sale of agricultural products and machinery - Dealerships - Termination - Damages - The Agriculture, Food and Rural Affairs Appeals Tribunal determined that CNH (distributor) had improperly terminated a dealer agreement with Chesterman Farm Equipment Inc. (dealer) and awarded $200,516.61 in damages to Chesterman ($60,000 for lost profit, $80,000 for obsolete assets, and $60,000 in prejudgment interest) (the March 2014 decision) - CNH appealed and Chesterman cross-appealed - The Ontario Divisional Court upheld the decision, except with respect to the award for obsolete assets which was set aside - The Tribunal erred in law in awarding damages of $80,000 for the value of special tools and materials Chesterman had purchased from CNH - Neither the Ontario Regulation 123/06 (Dealership Agreements) nor the terms of the Dealer Agreement imposed any such repurchase obligation on CNH - The fact that this loss was "reasonably foreseeable" in the Tribunal's view, did not provide a legal basis for this award in the context of the contractual relationship between the parties - There was no legal basis for this award and it had to be set aside - See paragraphs 18, 89 to 91 and 162 to 167.

Trade Regulation - Topic 3381

Sale of agricultural products and machinery - Dealerships - Termination - Damages - The Agriculture, Food and Rural Affairs Appeals Tribunal determined that CNH (distributor) had improperly terminated a dealer agreement with Chesterman Farm Equipment Inc. (dealer) and awarded $200,516.61 in damages to Chesterman ($60,000 for lost profit, $80,000 for obsolete assets, and $60,000 in prejudgment interest) - CNH appealed and Chesterman cross-appealed - The Ontario Divisional Court upheld the decision on the merits, except with respect to the award for obsolete assets which was set aside - The court stated that the issue of the Tribunal's power to award prejudgment interest was a question of law and the Tribunal had the power to make the award - The court stated that it ought not to interfere with the Tribunal's exercise of discretion in determining the applicable rate of interest - See paragraphs 19, 33, 93 and 171 to 176.

Trade Regulation - Topic 3385

Sale of agricultural products and machinery - Dealerships - Regulatory tribunals (incl. jurisdiction, practice issues, judicial review and appeals) - The Agriculture, Food and Rural Affairs Appeals Tribunal determined that CNH (distributor) had improperly terminated a dealer agreement with Chesterman Farm Equipment Inc. (dealer) and awarded Chesterman damages ($60,000 for lost profit, $80,000 for obsolete assets, and $60,000 in prejudgment interest) - The Tribunal awarded partial indemnity costs to Chesterman ($376,338.05) - CNH appealed - The Ontario Divisional Court quashed the costs decision - The Tribunal exceeded it jurisdiction in awarding costs in this case - The court remitted the issue of costs to the Tribunal to be reconsidered in light of the court's rulings as to the jurisdiction for awarding costs and the relevant factors to be taken into account, as well as the Tribunal's Rules and s. 17.1 of the Statutory Powers Procedure Act - See paragraphs 20, 33 and 177 to 193.

Trade Regulation - Topic 3385

Sale of agricultural products and machinery - Dealerships - Regulatory tribunals (incl. jurisdiction, practice issues, judicial review and appeals) - [See Trade Regulation - Topic 3375 , all Trade Regulation - Topic 3376 , and both Trade Regulation - Topic 3381 ].

Cases Noticed:

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, appld. [paras. 13, 45, footnote 6].

Creston Moly Corp. v. Sattva Capital Corp., [2014] 2 S.C.R. 633; 461 N.R. 335; 358 B.C.A.C. 1; 614 W.A.C. 1; 2014 SCC 53, appld. [paras. 13, 41, footnote 4].

Director of Investigation and Research, Competition Act v. Southam Inc. et al., [1997] 1 S.C.R. 748; 209 N.R. 20, refd to. [para. 37, footnote 2].

Pezim v. British Columbia Securities Commission et al., [1994] 2 S.C.R. 557; 168 N.R. 321; 46 B.C.A.C. 1; 75 W.A.C. 1; 1994 CanLII 103, refd to. [para. 39, footnote 3].

Investors Compensation Scheme Ltd. v. West Bromwich Building Society, [1998] 1 All E.R. 98 (H.L.), refd to. [para. 44, footnote 5].

Upper Canada College v Smith, [1920] 61 S.C.R. 413, refd to. [para. 73, footnote 9].

Rizzo & Rizzo Shoes Ltd. (Bankrupt), Re, [1998] 1 S.C.R. 27; 221 N.R. 241; 106 O.A.C. 1; 154 D.L.R.(4th) 193, refd to. [para. 73, footnote 10].

Épiciers Unis Métro-Richelieu Inc. v. Collin, [2004] 3 S.C.R. 257; 326 N.R. 89; 2004 SCC 59, refd to. [para. 99, footnote 11].

Gustavson Drilling (1964) Ltd. v. Minister of National Revenue, [1977] 1 S.C.R. 271; 7 N.R. 401; 66 D.L.R.(3d) 449, refd to. [para. 102, footnote 12].

Parklane Private Hospital Ltd. v. Vancouver (City), [1975] 2 S.C.R. 47; 2 N.R. 305, refd to. [para. 104, footnote 14].

Apotex Inc. v. Merck & Co. et al. (2011), 425 N.R. 279; 2011 FCA 329, refd to. [para. 105, footnote 15].

1392290 Ontario Ltd. et al. v. Ajax (Town) (2010), 257 O.A.C. 311; 2010 ONCA 37, refd to. [para. 113, footnote 17].

Chapin v. Matthews (1915), 24 D.L.R. 457 (Alta. S.C.), refd to. [para. 122, footnote 19].

Board of Trustees of Acme Village School District v. Steele-Smith, [1933] S.C.R. 47, refd to. [para. 123, footnote 20].

Billes v. Parkin Partnership Architects Planners (1983), 40 O.R.(2d) 525 (C.A.), refd to. [para. 174, footnote 22].

Westcoast Transmission Co. v. Majestic Wiley Contractors Ltd. (1982), 31 B.C.L.R. 174 (S.C.), affd. [1982] 6 W.W.R. 149; 139 D.L.R.(3d) 97; 38 B.C.L.R. 310 (B.C.C.A.), refd to. [para. 174, footnote 22].

LaGantoise Inc. v. Dairy Farmers of Ontario, 2012 ONAFRAAT 21, refd to. [para. 185, footnote 26].

HSBB Drain, Re, 2010 ONAFRATT 26, refd to. [para. 185, footnote 26].

Short and No.2A Drain, Re, 2011 ONAFRAAT 37, refd to. [para. 185, footnote 26].

OQRO v. DFO, 2009 ONAFRAAT 27, refd to. [para. 185, footnote 26].

Statutes Noticed:

Farm Implements Act, R.S.O. 1990, c. F-4, sect. 5(7), sect. 5(8), sect. 5(9) [para. 1].

Farm Implements Act Regulations (Ont.), Dealership Agreements, Ont. Reg. 123/06, sect. 1 [para. 4]; sect. 3 [para. 5].

Statutory Powers Procedures Act, R.S.O. 1990, c. S-22, sect. 17.1 [paras. 23, 179].

Counsel:

Eric Gillespie, John May and Ian Flett, for the applicant/respondent on appeal;

Stuart R. MacKay, for the respondent/appellant.

This appeal was heard in Brampton, Ontario, on October 20, 2015, before Molloy, Hackland and Hambly, JJ., of the Ontario Divisional Court. The decision of the court was released on March 7, 2016, including the following opinions:

Hambly and Hackland, JJ. - see paragraphs 1 to 24;

Molloy, J., dissenting in part - see paragraphs 25 to 193.