Pioneer Grain Company v. Goy, 2005 FC 530

                                                                                                                Date: 20050420

Docket: T-470-04

Citation: 2005 FC 530

Ottawa, Ontario, this 20th day of April, 2005

PRESENT:      THE HONOURABLE MADAM JUSTICE SNIDER

BETWEEN:

PIONEER GRAIN COMPANY, LIMITED

Appellant

- and -

BARRY GOY

Respondent

REASONS FOR ORDER AND ORDER

SNIDER J.

[1]       Pioneer Grain Company Limited ("Pioneer") is the operator of a grain elevator in the Province of Saskatchewan. Mr. Barry Goy, the respondent, is a farmer who has sold various grains to Pioneer. In a decision dated February 11, 2004, the Canadian Grain Commission concluded that Pioneer had no right to set off amounts otherwise owing by Mr. Goy against the sale proceeds from a shipment of canola and ordered Pioneer to pay $6,134.16 to Mr. Goy. Pursuant to s. 101 of the Canada Grain Act, R.S. 1985, c. G-10 (the "Grain Act") and s. 26 of the Federal Courts Act, R.S. 1985, c. F-7, Pioneer appeals to this Court, asking that the decision of the Commission be set aside and that Mr. Goy's complaint to the Commission be dismissed.

ISSUES

[2]         There is no issue in this case as to whether Mr. Goy owes money to Pioneer. He accepts that he failed to deliver oats as required under his contract with Pioneer and that, therefore, he is indebted to Pioneer. Further, he did not, either before the Commission or before this Court, dispute the amount of the debt owing to Pioneer.

[3]         Accordingly, the issues in this case are:

1.       Does s. 61 of the Grain Act preclude an elevator operator from exercising its entitlement to set off specifically provided for in a contract; and

2.       Does the Commission have the authority to determine any set-off amounts?

[4]         For the reasons set out in the following, I conclude that the two questions should be answered in the affirmative and that the Commission's decision and Order cannot stand.

FACTS

[5]         The facts in this case are straight forward and are not in dispute. Briefly, they are as follows:

1.       On December 10, 2001, Pioneer and Mr. Goy entered into a Deferred Delivery Contract ("DDC") for the purchase and sale of 231.3 metric tonnes of oats at a price of $160.40 per tonne less freight. The oats were to be delivered by Mr. Goy in September 2002. Article 12 of the DDC allowed set off as follows:

Notwithstanding any other rights of the Buyer [Pioneer] under this Contract, the Seller [Mr. Goy] authorizes the Buyer to deduct from any monies otherwise payable by the Buyer to the Seller, whether now or in the future, any amounts owing by the Seller to the Buyer, including without limitation any amount resulting from the Seller's failure to delivery under this Contract.

2.       Mr. Goy failed to deliver the oats in September 2002, as required under the DDC. As a result, Pioneer had to replace the oats at the market cost of $231.00 per tonne, for a total cost of $16,329.78.

3.       On October 7, 2003, Mr. Goy delivered 19.169 net tonnes of canola to Pioneer. The gross amount payable was calculated as $6,933.30. From that gross amount, Pioneer deducted $9.58 for its commission, $789.56 for freight and $6,134.16 as "Accounts Receivable", leaving Mr. Goy with a balance of $0. The $6,134.16 was a portion of the $16,329.78 owing under the DDC.

4.       Mr. Goy complained to the Commission that he was not paid by Pioneer for his load of canola.

5.       The Commission, after written submissions from the parties but without a hearing, reached its decision that Pioneer's set-off of the amounts owing under the DDC against the payment for Mr. Goy's canola was in violation of s. 61 of the Grain Act. Specifically, the Commission stated that:

[P]roducers and licensees cannot agree to waive or opt out of, or ignore the provisions of the Act. They are free to make whatever arrangements they choose, provided the arrangements comply with and are not contrary to the Act. The purchase and sale of grain in Canada is not an ordinary commercial transaction governed only by agreement between the parties, but is also governed by statute.

The [Commission] does not accept the argument that the statute does not explicitly prohibit "contracting out", and, therefore producers may consent to a set-off or, presumably, may "opt out" of any other right or protection they are entitled to under the Act. That would lead to abuse and the defeat of an important purpose of the Act.

The [Commission] does not sanction the inclusion of "set-off" clauses or similar clauses in agreements between licensees and producers, and is of the view that such clauses cannot be used to avoid the requirements of the Act.

In any event, the [Commission] has no authority to determine the validity of a contract or to interpret or enforce the provisions of a valid contract. In addition, the [Commission] Commissioners have neither the training nor the experience to make determinations with respect to the complexities of contract law.

STATUTORY PROVISIONS

[6]         The Commission and its powers arise from the operation of the Grain Act. The general object of the Commission and its powers are described in sections 13 and 14 of the Grain Act. Those provisions are set out below, with emphasis added to those particular portions of relevance to the case before me.

13. Subject to this Act and any directions to the Commission issued from time to time under this Act by the Governor in Council or the Minister, the Commission shall, in the interests of the grain producers, establish and maintain standards of quality for Canadian grain and regulate grain handling in Canada, to ensure a dependable commodity for domestic and export markets. 14. (1) Subject to this Act, the Commission shall, in furtherance of its objects, (a) recommend and establish grain grades and standards for those grades and implement a system of grading and inspection for Canadian grain to reflect adequately the quality of that grain and meet the need for efficient marketing in and outside Canada; (b) establish and apply standards and procedures regulating the handling, transportation and storage of grain and the facilities used therefor; (c) conduct investigations and hold hearings on matters within the powers of the Commission; (d) manage, operate and maintain every elevator constructed or acquired by Her Majesty in right of Canada, the administration of which is assigned by the Governor in Council to the Commission; (e) undertake, sponsor and promote research in relation to grain and grain products and, in so doing, (i) wherever appropriate, utilize technical, economic and statistical information and advice from any department or agency of the Government of Canada, and (ii) maintain an efficient and adequately equipped laboratory; (e.1) monitor compliance with end-use certificates provided pursuant to section 87.1; and (f) advise the Minister in respect of such matters relating to grain, grain products and screenings as the Minister may refer to the Commission for its consideration.

13. Sous réserve des autres dispositions de la présente loi et des instructions que peuvent lui donner le gouverneur en conseil ou le ministre, la Commission a pour mission de fixer et de faire respecter, au profit des producteurs de grain, des normes de qualité pour le grain canadien et de régir la manutention des grains au pays afin d'en assurer la fiabilité sur les marchés intérieur et extérieur. 14. (1) Pour réaliser sa mission, la Commission, sous réserve des autres dispositions de la présente loi : a) propose et établit des grades de grain et des normes les concernant et met en oeuvre un système de classement par grades et d'inspection du grain canadien permettant d'en identifier fidèlement la qualité et d'en assurer la commercialisation dans le pays et à l'étranger; b) établit et met en oeuvre des normes et des procédures pour régir la manutention, le transport et le stockage de grain ainsi que les équipements correspondants; c) mène des enquêtes ou tient des audiences sur les questions qui relèvent de sa compétence; d) gère, exploite et entretient les installations construites ou acquises par Sa Majesté du chef du Canada et dont le gouverneur en conseil lui a confié l'administration; e) entreprend, subventionne et encourage la recherche en matière de grains et de produits céréaliers et, à cette fin : (i) met à profit, s'il y a lieu, l'information et les conseils techniques, économiques et statistiques des ministères ou organismes fédéraux, (ii) entretient un laboratoire efficace et convenablement équipé; e.1) assure l'observation des termes des certificats d'utilisation finale délivrés au titre de l'article 87.1; f) conseille le ministre sur toutes les questions relatives aux grains, aux produits céréaliers et aux criblures qu'il soumet à son examen.

[7]         The Commission, in this case, inquired into Mr. Goy's complaint pursuant to s. 91(1) of the Grain Act, which states, in part, that:

91. (1) The Commission has jurisdiction to and may, . . . at any other time, investigate ... (g) any failure or refusal of a licensee to pay any fees for services provided by the Commission or to comply with any provisions of this Act or any regulation, order or licence made or issued pursuant to this Act; ... (h) any complaint by a person with respect to any matter within the jurisdiction of the Commission; and (i) any other matter arising out of the performance of the duties of the Commission.

91. (1) La Commission a compétence pour enquêter et peut, après réception du rapport d'inspection prévu à l'article 90, ou à tout autre moment, enquêter sur : ... g) le défaut ou le refus d'un titulaire de licence de payer les droits exigés pour des services fournis par elle-même ou de se conformer aux dispositions de la présente loi, d'un règlement ou d'un arrêté pris sous son régime, ou encore d'une licence délivrée en application de la présente loi; ... h) une plainte touchant une question de sa compétence; i) toute autre question survenant dans le cadre de l'exercice de ses fonctions.

[8]         The result of the investigation of Mr. Goy's complaint was an order by the Commission that Pioneer pay Mr. Goy the amount of $6,134.16. The authority for making such an order is contained in s. 97(a) of the Grain Act.

97. The Commission may, after any investigation instituted under section 91 and after affording all persons having an interest in the matter under investigation a full and ample opportunity to be heard, make an order (a) for the payment, by any complainant, licensee or other person to whom the jurisdiction of the Commission extends, of compensation to any person for loss or damage sustained by that person resulting from a contravention of or failure to comply with any provision of this Act or any regulation, order or licence made or issued pursuant to this Act;

97. La Commission peut, après avoir mené une enquête en application de l'article 91 et avoir donné aux intéressés toute occasion de se faire entendre, prendre un arrêté visant : a) le paiement d'une indemnité, par tout demandeur, titulaire de licence ou autre personne relevant de sa compétence, aux personnes qui ont subi des dommages par suite d'une infraction à la présente loi ou à ses règlements d'application, ou du défaut de se conformer à leurs dispositions ou à celles d'un arrêté pris ou d'une licence délivrée en application de la présente loi;

[9]         The obligations of Pioneer, as a "licensed primary elevator" is set out in sections 60 and 61(a) of the Grain Act.

60. Subject to section 58 and any order made under section 118, the operator of every licensed primary elevator shall, at all reasonable hours on each day on which the elevator is open, without discrimination and in the order in which grain arrives and is lawfully offered at the elevator, receive into the elevator all grain so lawfully offered for which there is, in the elevator, available storage accommodation of the type required by the person by whom the grain is offered. 61. Where grain is lawfully offered at a licensed primary elevator for sale or storage, other than for special binning, (a) if the producer and the operator of the elevator agree as to the grade of the grain and the dockage, the operator shall, at the prescribed time and in the prescribed manner, issue a cash purchase ticket or elevator receipt stating the grade name, grade and dockage of the grain, and forthwith provide the producer with the cash purchase ticket or elevator receipt;

60. Sous réserve de l'article 58 et d'un arrêté pris en application de l'article 118, l'exploitant d'une installation primaire agréée doit, aux heures normales d'ouverture des jours ouvrables, sans discrimination et selon l'ordre d'arrivée et d'offre légale du grain, recevoir tout le grain pour lequel il est en mesure d'offrir le type et l'espace de stockage demandés. 61. Lorsqu'un producteur lui offre légalement du grain pour vente ou stockage, ailleurs qu'en cellule, l'exploitant d'une installation primaire agréée : a) en cas d'accord, entre lui et le producteur, sur le grade du grain et les impuretés qu'il contient, établit, selon les modalités de temps et autres modalités réglementaires, un bon de paiement ou un récépissé faisant état du grade du grain, de son appellation de grade et des impuretés en question et le délivre sans délai au producteur;

[10]       The definition of "cash purchase ticket" is set out in s. 2.

"cash purchase ticket" means a document in prescribed form issued in respect of grain delivered to a primary elevator, process elevator or grain dealer as evidence of the purchase of the grain by the operator of the elevator or the grain dealer and entitling the holder of the document to payment, by the operator or grain dealer, of the purchase price stated in the document;

« bon de paiement » Document réglementaire qui constate l'achat, par l'exploitant d'une installation primaire ou de transformation ou par un négociant en grains, du grain livré à l'installation ou au négociant, et qui donne à son titulaire droit au paiement par l'acheteur du prix d'achat fixé.

ANALYSIS

(a)     Standard of Review

[11]       The issues before me require the interpretation of statutes. There is no element of fact at issue and no question which is within the particular expertise of the Commission. These issues require a "pure determination of law" to which a standard of correctness applies (HarvardCollege v. Canada (Commissioner of Patents), [2002] 4 S.C.R. 45).

(b)     Availability of contractual set-off

[12]       In my view, the issue of whether s. 61 precludes set-off case has answered by the Saskatchewan Court of Appeal in Saskatchewan Wheat Pool v. Feduk, (2003) 232 Sask. R. 161 (leave to appeal dismissed ([2003] S.C.C.A. No. 359)). The Court's decision in Feduk is both persuasive and dispositive.

[13]       Feduk involved the Saskatchewan Wheat Pool which buys and sells grain in Saskatchewan. Arising out of a complex set of facts, the Wheat Pool attempted to set off amounts allegedly owed by Mr. Feduk against two different contracts and against the delivery of Wheat Pool shares. The Wheat Pool sued Mr. Feduk for the breaching of two canola contracts and Mr. Feduk counterclaimed. In the end, the Court allowed the Wheat Pool to set off amounts owed to it against one of the contracts and disallowed set-off against the delivery of the Wheat Pool shares and an unrelated contract for the delivery of barley.

[14]       As delivery of grain in the case was made pursuant to the Grain Act, the first issue addressed by the Court was whether there was some legislative or contractual bar to the availability of set-off. Mr. Feduk argued that clause 61(a) of the Grain Act means that an elevator agent cannot set off money owed by the producer and must pay the farmer. The Court, at para. 71, held as follows:

Clause 61(a) of the Canada Grain Act does not preclude an elevator agent from setting off amounts owed by the producer. A direction that the producer must be paid is nothing more than that. The section does not, on its face, purport to address the question of set-off and there is no policy reason to read such a limitation into it.

This is a clear and unambiguous statement of the law from the Court of Appeal. Leave to appeal to the Supreme Court of Canada was denied.

[15]       In its decision, the Commission refused to follow Feduk, stating as follows:

The Commissioners note that the Court in [Feduk] was not asked to consider other relevant provisions of the Act, in addition to s. 61, or the statutory scheme generally, and did not have the benefit of the [Commission's] input, based on over ninety years of experience in the grain industry.

Moreover, the Court disallowed a set-off similar to the one here, because the transactions at issue were not sufficiently related, saying at p. 46 "The 1993 barley contract and the deferred delivery contract are not so interrelated that equity requires that the Wheat Pool should be able to set off the earlier amounts. Accordingly, the Wheat Pool remains liable to pay for the three deliveries under the barley contract plus pre-judgment interest from the date monies were payable in the ordinary course." In this case, payment for a canola delivery was set off against an alleged default on a separate and distinct agreement for the delivery of oats. Even if sufficiently connected for a set-off, no evidence was adduced as to losses resulting from the alleged default.

[16]       The position of the Commission appears to boil down to three reasons for not applying Feduk.

• The Court of Appeal did not have the benefit of submissions from the Commission on this issue;

• The Court of Appeal disallowed a set-off similar to the one in this case, where the two contracts were not interrelated; and

• No evidence was adduced as to losses resulting from the alleged default.

I will deal with each of these arguments.

1. Lack of submissions from the Commission

[17]       The first of these responses amounts to a disagreement by the Commission of the Court's decision. Just because a party was not present and did not provide its input does not diminish the precedential value of a decision of a superior court directly on point. Whether or not the Court of Appeal had the input of the Commission is simply not relevant. It is not up to the Commission, at this point, to argue that the Court of Appeal was wrong.

2. Nature of the set-off

[18]       The second of the arguments is based on a misunderstanding of the nature of the set-off at issue in the Feduk decision. The Court in Feduk was dealing with the right of equitable set-off - a much different issue than contractual or legal right of set-off. Specifically, none of the contracts at issue in Feduk contained a clause permitting set-off. Absent a legal right of set-off, the Court was required to determine whether the claim for set-off was "so clearly connected with the demands of the plaintiff that it would be manifestly unjust to allow the plaintiff to enforce payment without taking into consideration the cross-claim" (Feduk, at para. 67 referring to Coba Industries Ltd. v. Millie's Holdings (Canada) Ltd. (1985), 20 D.L.R. (4^th) 689).

[19]     That requirement does not exist in the case before me where the right of set-off arises from a contract. Article 12 of the DDC explicitly allows the set-off. As succinctly stated by one author:

Contractual set-off is, not surprisingly, more a matter of contract law than a separate application of set-off. Consequently, the normal rules of set-off regarding mutuality, liquid debts and connected debts do not apply: within the bounds of legality and public policy, parties are free to contract whatever result they wish. Accordingly, agreements to set off which would, aside from the agreement, not be granted relief due to the absence of the requirements of set-off, will be upheld. (Palmer, The Law of Set-Off in Canada, (Aurora, Ontario: Canada Law Book Inc., 1993), at p. 263)

[20]       Thus, the issue before the Commission did not require it to determine whether the DDC contract was related to the later delivery of canola. In other words, the basis upon which the Saskatchewan Court of Appeal determined that equitable set-off was not available in two of three of the specific instances of attempted set-off is not present in this case.

3. Evidence of losses

[21]       The Commission also raised a concern that no evidence was adduced as to losses resulting from the alleged default. In my view, this conclusion is incorrect. At no time did Mr. Goy dispute that he owes the amounts alleged under the DDC and at no time did the Commission advise Pioneer that it questioned whether the losses had been suffered. I also note that there was, in fact, evidence before the Commission related to the debt in the form of statements from Pioneer and identification on the DDC of the market price of oats on January 14, 2003. In my view, absent a submission by Mr. Goy that this amount was not owing, this was sufficient evidence upon which to conclude that the set-off amount was correct. It was patently unreasonable for the Commission to conclude that no evidence was adduced.

4. In the alternative, reasons for allowing set-off

[22]       Even absent the persuasive precedent of Feduk, I would conclude that s. 61 does not preclude contractual set-off. In summary form, my reasons are the following:

• Under Canadian law, a "payment" is not limited to a cash transaction (Feduk; Nelson v. Rentown Enterprises Inc. [1993] 2 W.W.R. 71 (Alta Q.B.): Re Tone Mortgage (1954), 11 W.W.R. 646 (Sask. Q.B.)).

• There is nothing in the Grain Act that requires that a producer be paid for the purchase price of grain in cash.

• The prevailing Canadian law is that set-off may be exercised by agreement.

• If Parliament had intended that s. 61 of the Grain Act operate to preclude a right to contractual set-off, it could have done so. Since it did not, the presumption is that Parliament did not intend to depart from the prevailing law (Rawluck v. Rawluck, [1990] 1 S.C.R. 70 at 90 or para. 36).

• As noted by the Saskatchewan Court of Appeal in Feduk, there is no public policy reason to disallow Pioneer from enforcing its valid contractual rights.

• Contrary to the views of the Commission, this is not an attempt by Pioneer to "opt" out of the Grain Act. The availability of set-off can co-exist with the rights and obligations of producers and operators under the Grain Act. It still remains for the Commission to investigate and rectify any wrongdoing by an operator in calculating the amount of the "payment" to be made to the producer, whether the "payment" includes set-off or not.

[23]     In conclusion on this issue, I would follow the decision in Feduk. Section 61 of the Grain Act does not preclude set-off. Pioneer, in my view, could correctly in law issue a "cash purchase ticket" showing the amount of payment by set-off. Issuance of such a ticket is not in contravention of s. 61 of the Grain Act.In this case, given that Mr. Goy does not dispute the amount owing, the Commission ought to have dismissed his complaint. Its failure to do so constitutes a reviewable error.

(c)Powers of the Commission

[24]       Although not clearly articulated, it appears that the Commission concluded that it did not have the jurisdiction to assess amounts of set-off. In its decision, the Commission asserted that the Commission has no authority to determine the validity of a contract or to interpret or enforce the provisions of a valid contract. It also stated that they have "neither the training nor the expertise to make determinations with respect to the complexities of contract law". And, later in the decision, the Commission states that it "is not equipped to make decisions with respect to the law of set-off".

[25]       A tribunal, as a creature of statute, has only the powers given it by the statute. This, of course, does not mean that every action of a tribunal must be explicitly listed in the words of the statute. Rather, it means that the action in question must either be contained in the explicit words of the enabling legislation or be necessarily incidental to the mandate expressed in the statute. It follows that the exercise of a broad mandate, by necessity, will almost always bestow a number of incidental powers upon the tribunal. Otherwise, it would be unable to carry out its statutorily-mandated functions.

[26]       The mandate of the Commission is very broad; as set out in s. 13, "the Commission shall, in the interests of the grain producers . . . regulate grain handling in Canada, to ensure a dependable commodity for domestic and export markets." Under s. 97, the Commission may make an order for the payment of damages for a contravention of the Grain Act. It follows that Parliament must have intended the Commission to make findings of fact and law necessary to determine whether there has been a contravention of the Grain Act. Such determinations are necessarily incidental to its broad jurisdiction. In my view, the Commission may - and, in fact, is obliged to - consider whether any amount claimed is actually owing. If this involves interpreting certain provisions of a contract, this is completely within the realm of the Commission's jurisdiction.

[27]       A major concern of the Commission was an alleged lack of expertise in the area of contract law. This is an irrelevant consideration. The Commission's mandate is to determine whether an operator has acted properly in issuing a "cash purchase ticket" for the delivery of grain to it. If the law allows set-off in calculation of the "purchase price", it is up to the Commission to address whatever it must to carry out its mandate under the Grain Act. This may require, from time to time, that the Commission or its expert staff carry out some analysis of underlying contracts. I do not see this as requiring extraordinary resources. There may well be procedures that could be put in place to assist the Commission. Specifically, I note that the Commission has the ability, pursuant to s. 12 of the Grain Act, to "make by-laws respecting . . . the regulation of its proceedings and generally for the conduct of its activities." Through its by-laws, the Commission could, for example, set out filing requirements in cases involving a claim to set off.

[28]       In any event, the problems described by the Commission do not exist in this case, since Mr. Goy is not disputing the amount he owes to Pioneer. Speculation about future problems that may or may not arise and concern for lack of expertise are not sufficient reasons for the Commission to decline to exercise its jurisdiction in this case.

[29]      I conclude that the Commission, in investigating a complaint under the Grain Act, has the authority to examine underlying contracts as necessary to determine whether there has been a contravention of the Grain Act.

CONCLUSION

[30]       For these reasons, the appeal will be allowed. The Order of the Commission will be quashed and the complaint of Mr. Goy dismissed.

[31]       Pioneer requests costs in this matter. Mr. Goy has been, throughout, an honest and forthright self-represented participant in these complex proceedings. In my view, it would be unfair to punish him for legal errors made by the Commission. Accordingly, there will be no order as to costs.

ORDER

This Court orders that:

1. The Order and decision of the Commission dated February 11, 2004 are set aside;

2. The complaint of Mr. Barry Goy to the Commission in this matter is dismissed.

                 "Judith A. Snider"

______________________________

Judge

FEDERAL COURT

NAME OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                                           T-470-04

STYLE OF CAUSE:                           PIONEER GRAIN COMPANY, LIMITED v.

                                                            BARRY GOY

PLACE OF HEARING:                     Regina, Saskatchewan

DATE OF HEARING:                       March 10, 2005

REASONS FOR ORDER:                The Honourable Madam Justice Snider

DATED:                                              April 20, 2005

APPEARANCES:

Jeffrey N. Grubb, Q.C.                                                              FOR APPELLANT

Kerri A. Froc

Barry Goy                                                                                 FOR RESPONDENT

SOLICITORS OF RECORD:

Balfour Moss                                                                             FOR APPELLANT

Regina, Saskatchewan

Mr. John H. Sims, Q.C.                                                             FOR RESPONDENT

Deputy Attorney General of Canada