Saskatchewan Wheat Pool v. Feduk, 2003 SKCA 46

• Judge: Vancise, Gerwing and Jackson, JJ.A.
• Court: Court of Appeal (Saskatchewan)
• Case Date: May 20, 2003
• Jurisdiction: Saskatchewan
• Citations: 2003 SKCA 46;(2003), 232 Sask.R. 161 (CA)

Sask. Wheat Pool v. Feduk (2003), 232 Sask.R. 161 (CA);

    294 W.A.C. 161

MLB headnote and full text

Temp. Cite: [2003] Sask.R. TBEd. JN.003

Saskatchewan Wheat Pool (appellant) v. Morris Feduk (respondent)

(406; 2003 SKCA 46)

Indexed As: Saskatchewan Wheat Pool v. Feduk

Saskatchewan Court of Appeal

Vancise, Gerwing and Jackson, JJ.A.

May 20, 2003.

Summary:

The Saskatchewan Wheat Pool (SWP) sued a farmer for breach of two contracts for the delivery of canola. The farmer counterclaimed for damages for breach of a contract for the delivery of barley. At issue was the validity of all three contracts, whether any or all of them were breached and, if so, the appropriate damages. Also at issue was SWP's entitlement to legal or equitable set-off and the farmer's claim for punitive damages.

The Saskatchewan Court of Queen's Bench, in a judgment reported (2001), 211 Sask.R. 66, allowed the action in part and the counterclaim. All three contracts were valid. The farmer breached the first contract and was liable in damages. The farmer did not breach the second contract, as SWP had repudiated the contract by not paying for canola as it was delivered. SWP breached the third contract and was liable in damages. SWP was not entitled to either legal or equitable set-off. The court awarded the farmer $30,000 punitive damages for the oppressive and highhanded conduct of the SWP. SWP appealed.

The Saskatchewan Court of Appeal allowed the appeal in part. The farmer breached the first contract for nondelivery. SWP did not repudiate the second contract for erroneously withholding payment. SWP had a right to set off monies owing to the farmer under the second contract against monies owed by the farmer to SWP for breaching the first contract. Accordingly, the farmer, by refusing to deliver under the second contract unless paid, also breached the second contract. SWP did not repudiate it. However, the trial judge was correct to find that SWP had no right to set off amounts owing to the farmer for his shares and under the third contract. Accordingly, the farmer was entitled to prejudgment interest on his share value and the amount owing under the third contract. Given SWP's entitlement to equitable set-off, there was no justification for the award of punitive damages.

Contracts - Topic 3664

Performance or breach - Repudiation - What constitutes repudiation - A farmer contracted to supply Saskatchewan Wheat Pool (SWP) with canola - A second contract was entered respecting a poorer quality canola - Since the farmer did not deliver the required amounts under the first contract, SWP withheld payment for deliveries under the second - The farmer refused to make further deliveries under the second contract unless paid - SWP claimed that the farmer breached the contract - The trial judge held that SWP repudiated the second contract, which repudiation was accepted by the farmer when he refused to make further deliveries - The Saskatchewan Court of Appeal held that SWP did not repudiate the second contract where it was entitled to set off monies owed by the farmer under the first contract against monies owing to the farmer under the second contract - Accordingly, the farmer's non-delivery under the second contract constituted a breach of that contract - See paragraphs 20 to 104.

Contracts - Topic 3665

Performance or breach - Repudiation - Effect of acceptance of repudiation - [See Contracts - Topic 3664 ].

Damage Awards - Topic 2027.1

Exemplary or punitive damages - Unconscionable conduct - A farmer had three contracts with the Saskatchewan Wheat Pool (SWP) for the delivery of canola and barley - The farmer breached the first contract by his inability to deliver the contracted for amount of canola - SWP repudiated the second contract by failing to pay for canola as it was delivered and breached a contract for barley by also failing to pay - In both cases, SWP erroneously claimed set-off - SWP refused the farmer's attempt to buy out the first contract, using it as leverage to force him to comply with its wishes and keeping him in a breach of contract situation - There were instances of intentional deception by SWP - SWP also improperly withheld the farmer's shares in SWP and relied on a document on which the farmer's signature had been forged - The trial judge held that SWP's oppressive and highhanded manner of dealing with the farmer warranted an award of $30,000 punitive damages against SWP - The Saskatchewan Court of Appeal held that there was no misconduct sufficient to warrant punitive damages in this commercial dispute - Although SWP was not entitled to set off monies owing on the barley contract and for the SWP shares, the trial judge erred in failing to find the right to equitable set-off respecting monies owed to the farmer under the second contract - See paragraphs 105 to 111.

Damages - Topic 1305

Exemplary or punitive damages - Breach of contract - [See Damage Awards - Topic 2027.1 ].

Equity - Topic 1482

Equitable principles respecting relief - Clean hands doctrine - Application of - Three separate contracts between a farmer and the Saskatchewan Wheat Pool (SWP) called for delivery of canola and barley - The farmer breached the first contract by failing to deliver the contracted for amount - SWP withheld payment for deliveries under the other two contracts, claiming the right to legal or equitable set-off - The trial judge held that SWP was not entitled to legal or equitable set-off - No legal set-off could exist against a claim founded in damages, nor could a claim founded in damages be set off at law against a plaintiff's claim - Although equitable set-off was available where there was a claim for a money sum whether liquidated or unliquidated, it was not available where SWP, by its conduct in dealing with the farmer, did not come to the court with clean hands - The Saskatchewan Court of Appeal held that there was no justification for finding that SWP came to court without clean hands - Accordingly, equitable set-off was not precluded on that ground - See paragraphs 48 to 65.

Practice - Topic 1848

Pleadings - Counterclaim and set-off - Set-off - Liquidated demand v. claim for unliquidated damages - [See Equity - Topic 1482 ].

Practice - Topic 1850

Pleadings - Counterclaim and set-off - Set-off - Equitable set-off - A farmer was contractually obligated to deliver canola to SWP - The farmer and SWP entered a second contract for a poorer quality canola - The farmer had already met his obligation of supplying barley under a third contract - When the farmer was unable to deliver required amounts under the first contract, SWP set off monies owed to it for breach of that contract against monies owed to the farmer under the second contract, the barley contract and monies owing to the farmer for his SWP shares - The Saskatchewan Court of Appeal held that SWP had a right to equitable set-off, entitling it to set off monies owing under the second contract against monies owed to it under the first contract - Section 61 of the Canada Grain Act was not a bar to equitable set-off - Further, there was no contractual bar - There was a sufficient connection between the two contracts to permit equitable set-off - However, there was an insufficient connection between the first contract and the third contract and monies owed for shares - Accordingly, monies owed by SWP for the third contract and shares could not be set off against monies owed to it under the first contract - See paragraphs 66 to 104.

Practice - Topic 1850

Pleadings - Counterclaim and set-off - Set-off - Equitable set-off - [See Equity - Topic 1482 ].

Cases Noticed:

Gruza v. Kozak; Saskatchewan Valley Credit Union Ltd. v. Gruza (1989), 80 Sask.R. 197 (C.A.), refd to. [para. 15, footnote 14].

Telford v. Holt, [1987] 2 S.C.R. 193; 78 N.R. 321; 81 A.R. 385, refd to. [para. 16, footnote 15].

Shoemaker v. Olson, [1942] 3 W.W.R. 620 (Sask. C.A.), refd to. [para. 17, footnote 18].

Vorvis v. Insurance Corp. of British Columbia, [1989] 1 S.C.R. 1085; 94 N.R. 321, refd to. [para. 19, footnote 21].

Hill v. Church of Scientology of Toronto and Manning, [1995] 2 S.C.R. 1130; 184 N.R. 1; 84 O.A.C. 1, refd to. [para. 19, footnote 22].

Smart v. South Saskatchewan Hospital Centre, [1989] 5 W.W.R. 289; 75 Sask.R. 34 (C.A.), refd to. [para. 33, footnote 33].

Winkler v. Belarus Equipment of Canada Ltd. and Williams (1985), 37 Sask.R. 143 (C.A.), refd to. [para. 37, footnote 35].

Anglo-French Co-operative Society, Re (1882), 21 Ch. D. 492, refd to. [para. 50, footnote 49].

Bolt and Iron Co., Re; Livingstone's Case (1887), 14 O.R. 211 (Ch. D.), refd to. [para. 50, footnote 49].

Bailey Cobalt Mines Ltd., Re (1918), 45 D.L.R. 585; 44 O.L.R. 1 (C.A.), refd to. [para. 50, footnote 49].

Disappearing Propeller Boat Co., Re (1925), 5 C.B.R. 679 (Ont. S.C.), refd to. [para. 50, footnote 49].

CompCorp Life Insurance Co. v. Harvard Developments Ltd. et al. (1996), 195 A.R. 133; 47 Alta. L.R.(3d) 97 (Q.B.), refd to. [para. 54, footnote 54].

Cam-Net Communications v. Vancouver Telephone Co. (1999), 132 B.C.A.C. 52; 215 W.A.C. 52; 182 D.L.R.(4th) 436 (C.A.), refd to. [para. 54, footnote 54].

Cormode & Dickson Construction (1983) Ltd. v. Harrison (1999), 247 A.R. 330 (Q.B. Master), refd to. [para. 54, footnote 54].

Oakley v. Canada Trust Realty Inc. (2000), 131 O.A.C. 175; 33 R.P.R.(3d) 247 (C.A.), refd to. [para. 63, footnote 60].

Crown Life Insurance Co. v. Medipac International Inc. (1996), 3 O.T.C. 62 (Gen. Div.), refd to. [para. 63, footnote 61].

Advocate General Insurance Co. of Canada (Provisional Liquidator of) v. Rocca (Peter) Insurance Brokers Inc., [1996] O.J. No. 121, refd to. [para. 63, footnote 62].

SkyDome Corp., Re et al., [1999] O.T.C. Uned. 203 (Gen. Div.), refd to. [para. 63, footnote 63].

Coba Industries Ltd. v. Millie's Holdings (Canada) Ltd. et al. (1985), 20 D.L.R.(4th) 689 (B.C.C.A.), refd to. [para. 67, footnote 65].

Federal Commerce and Navigation Co. v. Molena Alpha Inc., [1978] 3 All E.R. 1066 (C.A.), refd to. [para. 69, footnote 68].

Algoma Steel Inc., Re (2003), 168 O.A.C. 89; 63 O.R.(3d) 78 (C.A.), refd to. [para. 79, footnote 74].

Algoma Steel Inc. v. Union Gas Ltd. - see Algoma Steel Inc., Re.

Hanak v. Green, [1958] 2 All E.R. 141 (C.A.), refd to. [para. 80, footnote 76].

Ship Angelic Grace, Re, [1980] 1 Lloyd's Rep. 288 (C.A.), refd to. [para. 81, footnote 82].

Mercantile Bank of Canada et al. v. Leon's Furniture Ltd. (1989), 67 O.R.(2d) 454 (H.C.), refd to. [para. 82, footnote 84].

American President Lines Ltd. v. Beetown Honey Products Inc., [1996] O.J. No. 840 (Gen. Div.), refd to. [para. 82, footnote 85].

United Grain Growers Ltd. v. Kit, [2000] A.R. Uned. 372 (Q.B.), refd to. [para. 82, footnote 86].

Blue Range Resource Corp., Re, [2000] 11 W.W.R. 117; 261 A.R. 162; 225 W.A.C. 162 (C.A.), refd to. [para. 82, footnote 87].

Agway Metals Inc. v. Dufferin Roofing Ltd. (1991), 46 C.P.C.(2d) 133 (Ont. Gen. Div.), affd. (1994), 30 C.P.C.(3d) 295 (Ont. C.A.), refd to. [para. 83, footnote 90].

Pollard & Associates Inc. v. Modern Glass & Mirror Ltd., [2001] O.T.C. Uned. 430 (Sup. Ct.), refd to. [para. 83, footnote 91].

Thermoseal Industries Ltd. v. Modern Glass & Mirror Ltd. - see Pollard & Associates Inc. v. Modern Glass & Mirror Ltd.

Cuddy Food Products v. Puddy Bros. Ltd., [2002] O.T.C. 580 (Sup. Ct.), refd to. [para. 83, footnote 92].

Amhil Enterprises Ltd. v. Select Inc., [2002] O.A.C. Uned. 78 (C.A.), refd to. [para. 83, footnote 93].

Ontario Development Corp. v. Bourgault (F.P.) Industries Cultivator Division Ltd. et al., [1995] 9 W.W.R. 342; 133 Sask.R. 311 (Q.B.), refd to. [para. 83, footnote 94].

Whiten v. Pilot Insurance Co. et al. (1996), 132 D.L.R.(4th) 568 (Ont. Gen. Div.), varied (1999), 117 O.A.C. 201 (C.A.), revd. [2002] 1 S.C.R. 595; 283 N.R. 1; 156 O.A.C. 201, refd to. [para. 107, footnote 106].

Sylvan Lake Golf & Tennis Club Ltd. v. Performance Industries Ltd. and O'Connor (No. 2) (2000), 255 A.R. 329; 220 W.A.C. 329; 185 D.L.R.(4th) 269 (C.A.), affd. [2002] 1 S.C.R. 678; 283 N.R. 233; 299 A.R. 201; 266 W.A.C. 201; 209 D.L.R.(4th) 318, refd to. [para. 107, footnote 107].

Statutes Noticed:

Canada Grain Act, R.S.C. 1985, c. G-10, sect. 61(a) [para. 70].

Rules of Court (Sask.), Queen's Bench Rules, rule 104A(1) [para. 68, footnote 67].

Saskatchewan Wheat Pool Act, S.S. 1979-80, c. 107, sect. 25 [para. 93].

Authors and Works Noticed:

British Columbia, Law Reform Commission, Report on Set-Off (1988), p. 24 [para. 54, footnote 54].

Derham, S.R., The Law of Set-Off (3rd Ed. 2003), pp. 71 to 87 [para. 81, footnote 80]; 93 to 102 [para. 54, footnote 53]; 114 to 116 [para. 81, footnote 80]; 115 [para. 81, footnote 83]; 116 [para. 81, footnote 81]; 201 [para. 78, footnote 73].

Judge, John A.M., and Grottenthaler, Margaret E., Legal and Equitable Set-Offs (1991), 70 Can. Bar Rev. 91, p. 118 [para. 54, footnote 54].

Spry, I.C.F., The Principles of Equitable Remedies (6th Ed. 2001), pp. 245, 246 [para. 50, footnote 49].

Waddams, S.M., The Law of Contracts (4th Ed. 1999), paras. 629, 630 [para. 33, footnote 32].

Counsel:

Jeff Grubb, Q.C., and Kerri Froc, for the appellant;

Kevin Bell and Lorie Chambers, for the respondent.

This appeal was heard on June 13, 2002, before Vancise, Gerwing and Jackson, JJ.A., of the Saskatchewan Court of Appeal.

On May 20, 2003, Jackson, J.A., delivered the following judgment for the Court of Appeal.