Digest: Input Capital Corp. v Gustafson, 2018 SKQB 154

• Date: May 18, 2018

Reported as: 2018 SKQB 154

Docket Number: QB17542 , QBG 2120/15 JCR|QBG 89/17 JCE

Court: Court of Queen's Bench

Date: 2018-05-18

Judges:

• Kalmakoff

Subjects:

• Statutes � Interpretation � Farm Debt Mediation Act, Section 2, Section 21
• Contract Law � Unconscionability
• Contract Law � Unjust Enrichment

Digest: The plaintiff brought two actions against the defendant, one commenced in Regina and the other in Estevan. The plaintiff, described as a canola streaming company, used a new business model for agricultural financing whereby it entered into multi-year contracts, �streaming purchase contracts�, with farmers. The plaintiff�s arrangement with farmers protected its interests in contracting with them by taking a security interest in both the crops the farmer was obligated to deliver as well as a collateral security interest in all of the farmer�s present and after-acquired property and a collateral mortgage in any of the lands on which crops were grown. The plaintiff provided an up-front payment to the defendant farmer to be used by him for input costs, in exchange for the defendant agreeing to sell certain quantities of canola to the plaintiff. Prior to the signing of the contracts, the weather in 2012 had prevented the defendant from seeding a large portion of his land. In 2013, the defendant had enjoyed a good harvest but could not cash in on it for various reasons, including a shortage of delivery space because much of it had been spoken for by the plaintiff. By January of 2014, the defendant was under significant financial pressure as he had not been able to sell his 2013 canola and would not be able to obtain financing from his bank and Farm Credit Canada (FCC) to purchase inputs to seed his 2014 crop. At the same time, the plaintiff�s Vice Present of Marketing (VP) was trying to engage farmers in contracts for the delivery of canola because it had entered into a large number of canola delivery contracts with Viterra and needed to fill its obligations. The VP approached the defendant and promoted the streaming purchase contract with him. Although the terms of the agreements were lengthy and complex, the negotiations were conducted in general terms and the defendant did not obtain legal advice before signing. In April 2014, the parties entered into a canola purchase agreement and a streaming canola purchase agreement, followed by another streaming purchase contract in December 2014 which included a collateral security agreement and a mortgage amending agreement. Another amending agreement to the streaming canola purchase agreement was entered into in March 2015. The plaintiff made the advance payments set out in the contracts to the defendant but he did not deliver the commodity required by the contracts in 2014 and 2015. The plaintiff commenced the Regina action against him, alleging a breach of contract and seeking a number of remedies. In its second action, commenced in Estevan in June 2017, the plaintiff also alleged breach of contract and sought remedies such as damages, foreclosure of the mortgages and judicial sale of the defendant�s land in June 2017. The parties provided the court with an agreement that both actions should be dealt with concurrently and a statement of 24 issues. Amongst the issues were: 1) whether the Farm Debt Mediation Act (FDMA) applied and, if so, what the consequences were of the plaintiff�s failure to give the requisite notice before commencing the Regina action. The defendant argued that the FDMA applied because the plaintiff was a secured creditor and because it failed to give the notice under s. 21, the Regina action was a nullity; 2) whether the agreements were unconscionable in common law or equity. The defendant argued that contracts should not be enforced under the common law because he was under severe financial strain at the time he executed them. His problems were worsened by the...