Naber Seed & Grain Co. (Receivership) v. Prairie Pulse Inc. et al., 2004 SKQB 518

• Judge: Klebuc, J.
• Court: Court of Queen's Bench of Saskatchewan (Canada)
• Case Date: December 16, 2004
• Jurisdiction: Saskatchewan
• Citations: 2004 SKQB 518;(2004), 258 Sask.R. 163 (QB)

Naber Seed v. Prairie Pulse (2004), 258 Sask.R. 163 (QB)

MLB headnote and full text

Temp. Cite: [2004] Sask.R. TBEd. DE.002

Naber Seed & Grain Co. Ltd., in Receivership (claimant/plaintiff) v. Prairie Pulse Inc. (applicant/defendant) and Camex Inc., Pulses Etc., S.A., Louis Dreyfus Canada Ltd., Saskatchewan Wheat Pool, Western Grain Cleaning & Processing Ltd., Prairie Land Grain Farm Ltd., Parkland Pulse Grain Co. Ltd., XCAN Grain Pool Ltd. and United Grain Growers Limited (operating as Agricore United) (claimants) and Canadian Imperial Bank of Commerce (third party)

(2002 Q.B.G. No. 2336; 2004 SKQB 518)

Indexed As: Naber Seed & Grain Co. (Receivership) v. Prairie Pulse Inc. et al.

Saskatchewan Court of Queen's Bench

Judicial Centre of Saskatoon

Klebuc, J.

December 16, 2004.

Summary:

An end purchaser entered into three contracts with Walker and one contract with Prairie Pulse for the purchase of 2500 metric tonnes of yellow peas and one contract with Prairie Pulse for the purchase of 1000 metric tonnes of yellow peas. The contracts resulted in five strings (five series of sale transactions) whereby all the peas required by the end purchaser passed from the originators through various sellers to Naber Seed & Grain Co. (Naber), then to Prairie Pulse and then, directly or indirectly, to the end purchaser. The peas were delivered to the end purchaser on the instruction of every seller in all strings. The end purchaser commingled the peas with other peas and sold and delivered them to an offshore buyer. Prior to Prairie Pulse paying Naber for the peas, CIBC appointed a receiver of Naber's assets. CIBC and the unpaid sellers in the five strings made claims against the purchase price that Prairie owed Naber. Prairie Pulse paid the purchase price into court and obtained a consent interpleader order to determine who was entitled to the money. The issues involved in one of the strings were resolved.

The Saskatchewan Court of Queen's Bench dismissed the claims of the unpaid sellers and held that CIBC, by way of the receiver, was entitled to the balance of the purchase price.

Railways - Topic 5122

Operation - Carriage of goods - Contract of carriage and bills of lading - In a case involving shipments by rail, the Saskatchewan Court of Queen's Bench held that a straight inland bill of lading was not per se a document of title whereby the consignor was deemed to have retained ownership of goods consigned to a buyer - It was evidence of a contract between the consignor and the carrier to transport consigned goods to the named consignee who, by virtue of s. 2 of the Bills of Lading Act (BLA), had the same rights as the consignor against the carrier - By itself, a bill of lading was not a title to the consigned goods pursuant to the BLA or the Sale of Goods Act (SGA) - Further, it did not entitle the consignor to direct the carrier not to deliver the consigned goods to the consignee absent other terms, contractual or otherwise - There was no established custom or practice among traders of specialty crops which supplanted the rights and obligations of the consignor, consignees and carriers pursuant to the BLA, the SGA and the jurisprudence - See paragraphs 114 to 118.

Railways - Topic 5122

Operation - Carriage of goods - Contract of carriage and bills of lading - At issue in a case involving shipments by rail was whether the original shipping documents were title documents for purposes of general commercial trade - The Saskatchewan Court of Queen's Bench stated that a straight invoice, commercial invoice, grade certificates, weight certificates and certificates of origin did not individually or collectively "represent the goods" in the manner of negotiable bills of lading, warehouse receipts or certificates of delivery, all of which were generally recognized in the ordinary course of business to be title documents - See paragraph 135.

Railways - Topic 5122

Operation - Carriage of goods - Contract of carriage and bills of lading - In a case involving shipments by rail, the Saskatch-ewan Court of Queen's Bench concluded that general shipping documents were not acknowledged or generally used in the ordinary course of the business of trading specialty crops in the domestic market as proof of possession or control of the goods described therein and did not otherwise authorize the possessor of such documents to transfer the goods described therein - See paragraph 137.

Receivers - Topic 604

Nature of receivership - General - Receiver-manager - Role of - An end purchaser (P&H) contracted with both Walker and Prairie Pulse for the purchase of peas - The contracts resulted in five strings (five series of sale transactions) whereby the peas passed through various sellers to Naber, then to Prairie Pulse and then, directly or indirectly, to P&H - All the sale contracts involved in the transactions incorporated the Canadian Special Crops Association Rules - CIBC appointed a receiver of Naber's assets - CIBC and unpaid sellers claimed against the purchase price that Prairie Pulse owed Naber - The Saskatchewan Court of Queen's Bench rejected an assertion that the receiver was solely the agent of Naber and therefore not entitled to assert a claim to the purchase price ranking higher than the claims of the unpaid sellers - The receiver was acting as agent for CIBC when attempting to realize on the collateral charged by CIBC's security - See paragraphs 191 to 193.

Sale of Goods - Topic 2701

Transfer of property in goods from seller to buyer - General principles - The Saskatchewan Court of Queen's Bench considered the Sale of Goods Act and the Canadian Special Crops Association Rules and various authorities and concluded that in some circumstances "title to goods" might mean something different than "property in goods", particularly where the subject goods passed through the hands of a mercantile agent or a buyer in possession - Consequently, in circumstances where a seller, buyer and third party claim ownership of a good, the terms might not be used interchangeably - Property and title were two different concepts with "property" relating to ownership as between the seller and the buyer and "title" indicating ownership that was good against the whole world - "Good title to goods" was synonymous with "title to goods" because neither the law of personal property nor sale of goods legislation recognized varying qualities of title ranging from good to bad title - One either had or did not have title - See paragraph 152.

Sale of Goods - Topic 2708

Transfer of property in goods from seller to buyer - General principles - Whether title to goods passed to buyer - An end purchaser (P&H) contracted with Walker and with Prairie Pulse for the purchase of peas - The contracts resulted in five strings (five series of sale transactions) whereby the peas passed through various sellers to Naber, then to Prairie Pulse and then, directly or indirectly, to P&H - CIBC appointed a receiver of Naber's assets - CIBC and unpaid sellers claimed against the purchase price that Prairie Pulse owed Naber - The sellers' contracts had incorporated the Canadian Special Crops Association Rules - Rule 47(1) provided that "If before fulfilment ..." of the contract either party, inter alia, suspended payment or gave notice of an inability to meet debts "... the contract shall forthwith be closed ..." - The Saskatchewan Court of Queen's Bench held that "fulfilment of contract" meant substantial performance of all material provisions by both parties subject to waiver - This included payment by Naber - Although rule 47(1) applied, only one seller had made the election required to exercise its right of termination - The peas had now been commingled with other peas and sold to an offshore buyer - Rule 47(1) bound only the contracting parties - An unpaid seller's right to resume possession of goods in transit (Sale of Goods Act, s. 45) could not be contractually extended to include goods that had passed to a third party - Accordingly, rule 47(1) provided no basis for the sellers to regain possession or to determine if they had retained title - See paragraphs 44 to 60.

Sale of Goods - Topic 2708

Transfer of property in goods from seller to buyer - General principles - Whether title to goods passed to buyer - The sale contracts involved in getting peas from the originators through various sellers to the end user incorporated the Canadian Special Crops Association Rules - The Saskatchewan Court of Queen's Bench held that the delivery of original shipping documents in the manner prescribed by rule 30(2) of the Rules was not a condition that had to be met before property in the peas passed from a seller to the buyer - Rule 30(2) went no further than to set out the requirements the seller had to meet to get paid in two distinct circumstances - See paragraphs 138 to 143.

Sale of Goods - Topic 2805

Transfer of property in goods from seller to buyer - Unascertained goods - Appropriation to the contract - The sale contracts involved in getting peas from the originators through various sellers to the end user incorporated the Canadian Special Crops Association Rules - Rule 22(2) provided that "Appropriation is the notification process required under these rules and the primary purpose of such is to identify what may have been previously unascertained goods. The process primarily is a confirmation that the Seller has performed his obligations to ship the contractual goods within the quantity and time constraints contained in the contract. ..." - The Saskatchewan Court of Queen's Bench rejected an assertion that rule 22(2) limited the contractual role of an appropriation to a mere information statement - Notice given under rule 22(2) setting out the quantity and quality of goods appropriated to a contract in combination with such goods being loaded on railcars for delivery at a point designated by the buyer, was generally sufficient to constitute an "appropriation", save where the appropriation set out a reservation contemplated by the contract between the seller and buyer - See paragraphs 120 to 127.

Sale of Goods - Topic 2846

Transfer of property in goods from seller to buyer - Ascertained goods - Appropriation to the contract - [See Sale of Goods - Topic 2805 ].

Sale of Goods - Topic 3200

Transfer or loss of title to third parties - Statutory power of sale - Mercantile agent - Sale of goods consigned to agent - An end purchaser (P&H) contracted with Walker and with Prairie Pulse for the purchase of peas - The contracts resulted in five strings (five series of sale transactions) whereby the peas passed through various sellers to Naber, then to Prairie Pulse and then, directly or indirectly, to P&H - CIBC appointed a receiver of Naber's assets - CIBC and unpaid sellers claimed against the purchase price that Prairie Pulse owed Naber - CIBC asserted that Naber was the mercantile agent for the unpaid sellers and in such capacity had authority to pass title pursuant to s. 28(2) of the Sale of Goods Act - The Saskatchewan Court of Queen's Bench stated that if Naber passed title in its capacity as agent for the sellers, the proceeds it realized was the property of its principals - In the result, CIBC's security interest could not attach to the proceeds beyond Naber's property interest therein - See paragraphs 185 and 186.

Sale of Goods - Topic 6084

Performance of the contract - Payment - Buyer's duty - [See first Sale of Goods - Topic 2708 ].

Sale of Goods - Topic 6446

Breach - Remedies of seller - Repossession - When available - [See first Sale of Goods - Topic 2708 ].

Trade Regulation - Topic 3122

Agricultural lending - Enforcement of security - Farmer defined - An end purchaser (P&H) contracted with Walker and with Prairie Pulse for the purchase of peas - The contracts resulted in five strings (five series of sale transactions) whereby the peas passed through various sellers to Naber, then to Prairie Pulse and then, directly or indirectly, to P&H - CIBC appointed a receiver of Naber's assets - CIBC and unpaid sellers claimed against the purchase price that Prairie Pulse owed Naber - The sellers asserted that Naber was a farmer and CIBC failed to give it 15 days notice prior to enforcing its security (Farm Debt Mediation Act, 21(2)) - Naber's principal business consisted of buying, processing and selling pulse crops with income received from the subject lands constituting less than .1 percent of its gross sales - The Saskatchewan Court of Queen's Bench held that Naber was not a farmer and s. 21(2) did not apply - The evidence did not establish that Naber was engaged in the production of field crops - Parliament did not intend to provide for financial reviews and mediation services for all entities that produced field crops as a marginal adjunct to their primary business - See paragraphs 195 to 209.

Trusts - Topic 2310

Constructive trusts - General principles - Circumstances when not imposed - An end purchaser (P&H) contracted with Walker and with Prairie Pulse for the purchase of peas - The contracts resulted in five strings (five series of sale transactions) whereby the peas passed through various sellers to Naber, then to Prairie Pulse and then, directly or indirectly, to P&H - All the sale contracts involved in the transactions incorporated the Canadian Special Crops Association Rules - CIBC appointed a receiver of Naber's assets - CIBC and unpaid sellers claimed against the purchase price that Prairie Pulse owed Naber - The Saskatchewan Court of Queen's Bench held that no trust or fiduciary duty existed between the sellers and Prairie or Naber upon which a constructive trust or other special relationships could be founded - Prairie and Naber were merely buyers and sellers of goods on a credit basis - That relationship was insufficient to meet the requirements of a constructive trust - See paragraph 188.

Cases Noticed:

Shipton, Anderson & Co. (1927) Ltd. v. Micks, Lambert & Co., [1936] 2 All E.R. 1032; 55 Ll. L. Rep. 384 (K.B.), refd to. [para. 48].

European Grain & Shipping Ltd. v. Cremer (Peter), [1983] 1 Lloyd's Rep. 211 (Q.B.), refd to. [para. 48].

Magna Electric & Computers Ltd. v. Speedway Express Ltd. (1978), 34 N.S.R.(2d) 704; 59 A.P.R. 704 (T.D.), refd to. [para. 106].

Sewell v. Burdick (1884), 10 App. Cas. 74 (H.L.), refd to. [para. 108].

Gardana & Giampieri v. Greek Petroleum George Mamidakis & Co., [1961] 3 All E.R. 919 (Q.B.), refd to. [para. 108].

Norfolk & Western Railway v. Great Lakes Brick & Stone Ltd. (1995), 19 B.L.R.(2d) 285 (Gen. Div.), refd to. [para. 109].

Ferguson v. Toronto, Hamilton and Buffalo Railway Co., [1950] O.W.N. 105 (Ont. C.A.), refd to. [para. 109].

Hickman Grain Co. v. Canadian Pacific Railway Co., [1927] 1 W.W.R. 317 (Man. C.A.), revd. in part [1928] S.C.R. 170, refd to. [para. 110].

Paterson Steamship Ltd. v. Aluminum Co. of Canada Ltd., [1951] S.C.R. 852, refd to. [para. 111].

Friendly v. Canada Transit Co. (1885), 10 O.R. 756 (C.A.), refd to. [para. 111].

Nanisvik Mines Ltd. et al. v. F.C.R.S. Shipping Ltd. et al. (1993), 59 F.T.R. 272 (T.D.), refd to. [para. 113].

Saima Avandero S.p.A. v. Coppley Noyes & Randall Ltd. et al., [2000] O.T.C. 574 (Sup. Ct.), refd to. [para. 113].

TK-IDM Distribution Inc., Re (1990), 49 B.L.R. 265 (S.C.), refd to. [para. 123].

Rempel Brothers Concrete Ltd. v. British Columbia (Minister of Finance), [1986] B.C.J. No. 2436 (S.C.), refd to. [para. 124].

Atlantic Concrete Ltd. v. MacDonald Lavatte Construction Co. (1975), 12 N.S.R.(2d) 179; 6 A.P.R. 179; 62 D.L.R.(3d) 663 (C.A.), refd to. [para. 125].

Podborochynski v. Rosolowich (1988), 56 Man.R.(2d) 21 (Q.B.), refd to. [para. 126].

Strauss v. Bowser, [1952] 1 S.C.R. 211, refd to. [para. 157].

Royal Bank of Canada v. Saskatchewan Telecommunications, [1985] 5 W.W.R. 333; 40 Sask.R. 190 (C.A.), refd to. [para. 157].

British Columbia Hydro & Power Authority v. Westcoast Transmission Co. et al. (1981), 36 N.R. 33 (F.C.A.), refd to. [para. 157].

NEC Corp. v. Steintron International Electronics Ltd. (1985), 59 C.B.R.(N.S.) 91 (B.C.S.C.), refd to. [para. 159].

Price Waterhouse Ltd. v. PCL Constructors Western Inc. (1991), 57 B.C.L.R.(2d) 149 (S.C.), refd to. [para. 160].

Smith (George) Trucking Co. v. Golden Seven Enterprises Inc. (1989), 55 D.L.R.(4th) 161 (B.C.C.A.), refd to. [para. 161].

Spittlehouse v. Northshore Marine Inc. et al. (1994), 73 O.A.C. 16; 18 O.R.(3d) 601 (C.A.), refd to. [para. 162].

Rana (Salim) Inc. et al. v. Maduck, [2000] 10 W.W.R. 70; 196 Sask.R. 54; 2000 SKQB 318, refd to. [para. 162].

Barnes v. Saskatchewan Co-operative Wheat Producers Ltd., [1945] 1 W.W.R. 257 (Sask. K.B.), refd to. [para. 188].

Peat Marwick Ltd. v. Consumers Gas Co. (1981), 29 O.R.(2d) 336 (C.A.), refd to. [para. 193].

Corporation Les Produits de la Jardinière v. Banque Nationale du Canada et al. (1996), 118 F.T.R. 61 (T.D.), refd to. [para. 200].

Nerenberg v. Zimmer (1988), 57 Man.R.(2d) 194 (Q.B.), refd to. [para. 200].

Gartrell, In Re; Ex parte Kearns, [1923] 2 W.W.R. 855 (Sask. C.A.), refd to. [para. 201].

Bank of Nova Scotia v. Blair (1989), 75 Sask.R. 289 (Q.B.), refd to. [para. 202].

Naicam Credit Union Ltd. v. Prefontaine (1990), 84 Sask.R. 127 (Q.B.), refd to. [para. 202].

White Rock Farm Ltd. v. Canadian Corp. of Agricultural Financial Services (Agrifinance), [2000] 2 W.W.R. 659; 188 Sask.R. 195; 1999 SKQB 251, refd to. [para. 202].

Christie v. Texas Industries Ltd., [1986] 1 W.W.R. 532; 43 Sask.R. 90 (C.A.), refd to. [para. 202].

R. v. D.A.Z., [1992] 2 S.C.R. 1025; 140 N.R. 327; 131 A.R. 1; 25 W.A.C. 1; 76 C.C.C.(3d) 97; 16 C.R.(4th) 133; 5 Alta. L.R.(3d) 1, refd to. [para. 208].

Rizzo & Rizzo Shoes Ltd. (Bankrupt), Re, [1998] 1 S.C.R. 27; 221 N.R. 241; 106 O.A.C. 1, refd to. [para. 208].

Statutes Noticed:

Sale of Goods Act, R.S.M. 1987, c. S-10; C.C.S.M., c. S-10, sect. 45 [para. 60].

Authors and Works Noticed:

Battersby, G., and Preston, A.D., The Concepts of "Property", "Title" and "Owner" used in The Sale of Goods Act 1893 (1972), 35 M.L.R. 268, pp. 272, 277 [para. 150].

Benjamin, Sale of Goods (5th Ed. 1997), paras. 18-014, 18-044 [para. 105].

Bowstead on Agency (15th Ed. 1985), pp. 374, 375 [para. 185].

Cuming, Ronald C.C., and Wood, Roderick J., Saskatchewan and Manitoba Personal Property Security Acts Handbook (1994), pp. 120, 121 [para. 186].

Fridman, Gerald Henry Louis, The Sale of Goods in Canada (4th Ed. 1995), pp. 91, 92, 93 [paras. 122, 140]; 94 [para. 140]; 95 [para. 122]; 99, 100 [para. 107]; 103 to 106 [para. 149].

Kahn-Freund, O., The Law of Carriage by Inland Transport (4th Ed. 1965), pp. 209, 210 [para. 106].

Lawson, F.H., The Passing of Property and Risk in Sale of Goods - A Comparative Study, [1949] 65 L.Q.R. 352, p. 359 [para. 151].

Slabotzky, A., Grain Contracts and Arbitration: for Shipments from the United States and Canada (1984), p. 58 [para. 59].

Waters, Donovan W.M., The Law of Trusts in Canada (2nd Ed. 1984), generally [para. 188].

Counsel:

Richard Morris, Q.C., and student-at-law Michael Morris, for Naber Seed & Grain Co. Ltd. in Receivership;

Gary Meschishnick, for Pulses Etc., S.A.;

Jamie Kagan and Steve Scarfone, for Prairie Land Grain Farm Ltd., XCAN Grain Pool Ltd. and United Grain Growers Limited (operating as Agricore United);

Andrew Mason, for Louis Dreyfus Canada Ltd.

This matter was heard by Klebuc, J., of the Saskatchewan Court of Queen's Bench, Judicial Centre of Saskatoon, who delivered the following judgment on December 16, 2004.