QUEEN’S BENCH FOR SASKATCHEWAN Citation: 2010 SKQB 292 Date: 2010 08 13 Docket: Q.B. No. 416 of 2006 Judicial Centre: Yorkton BETWEEN: HARRY WLASWICH and BIO CANADA INTERNATIONAL INC. Counsel: Cecil M. Ozirny for the plaintiff Larry Hanowski for the defendant JUDGMENT MILLS J. August 13, 2010 INTRODUCTION [1] The plaintiff, certified organic farmer, sold organic oats to the defendant who in turn sold the oats through broker in Ontario to the ultimate destination being miller in Germany. The German miller rejected some of the oats as having a high moisture content, the miller refused to pay the defendant, and the defendant refused to pay the farmer. ISSUE [2] Did the plaintiff fulfill his contractual obligations to the defendant, and thus entitled to full payment of the contractual price? BACKGROUND FACTS [3] The plaintiff (Wlaswich) is an organic farmer from the Kamsack region of Saskatchewan. At the time of entering into this contract, he had the necessary certificates of conformity required to be certified organic farmer in Canada, the United States and Europe. In 2005, Wlaswich was phoned by Larry Hanowski (Hanowski), an owner/manager of the defendant Bio Canada. Any reference to Hanowski in this judgment is reflection of the operating mind of Bio Canada. Hanowski had the real and apparent authority to enter into contracts on behalf of Bio Canada. Hanowski represented Bio Canada at the trial. In 2005, contract between Bio Canada and Wlaswich was completed for the sale of 800 bushels of organic flax. That transaction was concluded successfully. In 2006, Hanowski phoned Wlaswich about sourcing organic oats. Wlaswich had approximately 23,000 bushels, however he had committed some of those oats to another buyer, Sunrise Foods International Inc. (“Sunrise”). [4] Bio Canada wanted sample of Wlaswich’s oats which was forwarded by Wlaswich to Bio Canada for inspection and approval, prior to entering into the contract. [5] Bio Canada and Wlaswich entered into contract dated June 24, 2006 that provided the sale by Wlaswich of approximately 23,000 bushels of No. milling oats with moisture content between 12.5% and 14.5% with no insects. Wlaswich was to be paid 30 days from shipment of the oats. [6] Bio Canada wanted the oats right away and Wlaswich started hauling on June 26, 2006. He hauled according to the instructions of Bio Canada and completed the hauling of the last load on July 4, 2006. In total, he hauled 18,132 bushels of oats. Bio Canada was prepared for delivery of less than the contract amount given the conversation between it and Wlaswich regarding the previous sale to Sunrise. [7] find that Bio Canada in its verbal representations was satisfied with the delivery of 18,132 bushels of oats as full satisfaction of Wlaswich’s obligation to deliver the quantity as set out in the contract. Indeed at trial Bio-Canada confirmed this was the case. [8] No other terms of the contract were changed by the delivery of less than the contract amount of the oats. Bio Canada was still prepared to pay the unit amount contracted for and Wlaswich was still obligated to provide the quality as required by the contract. [9] Wlaswich described in great detail the process of testing for moisture and the record keeping in relation to the oats. Wlaswich combined the oats with an 8680 Massey with moisture tester. He stated that he did not start combining until the oats tested moisture level of 14% or less. Mr. Wlaswich says that no testing of the oats showed moisture content of over 13.5%. The oats were eventually stored in large concrete floor quonset. [10] Wlaswich described his procedure for hauling the oats as follows. He checked each delivery truck to make sure that it was clean and checked that each truck had tarps to cover what was being hauled to protect it from rain. sample of the oats hauled into each truck was taken. grain vac was used to load each truck and as the oats were loaded into each truck, one-gallon ice cream pail of oats was taken. The ice cream pail was filled with long-handled scoop and it took 15 scoops to fill the pail. Each pail was marked with the number of the load, the date of the load, and then was taken for testing for weight and moisture. [11] He used his own tester and on occasion, calibrated it against the moisture tester from the local elevator. He states that his tester was only off at the most by one half point of moisture, compared to the elevator’s. [12] Wlaswich testified that in the past he had never had problem with any of his grain heating from excess moisture and if an issue with high moisture came in any of his grain, he used aeration to bring the moisture levels down. Wlaswich stated that the oats which were delivered to Sunrise came from the same crop and storage facility as the oats delivered to Bio Canada and did not have any moisture issues. [13] On July 19, 2006, Bio Canada faxed statement to Wlaswich indicating delivery of 18,132 bushels less one percent dockage as provided for in the contract, leaving net bushel number of 17,951 available for shipping. The amount owed to Wlaswich for this amount of oats was $61,033.40. [14] Cross-examination of Wlaswich only served to confirm that Wlaswich had done careful and thorough job of harvesting and storing his oats, paying attention to the moisture levels, and that when the oats were delivered to Bio Canada, they met the moisture requirements of the contract. [15] Wlaswich was aware that Bio Canada was reselling his oats. Wlaswich was unaware as to the eventual destination of the oats and the name of the buyer. Wlaswich was not given any details of the terms of the contract with the German miller and did not know the quantity of oats that was to be delivered in total, the quality requirements and the price to be paid to Bio Canada. [16] Hanowski testified that he used an Ontario broker named Caroll Wehrmann to sell the oats. Mr. Wehrmann arranged the sale and had taken the original oat sample from Wlaswich and forwarded it to the German miller for approval. The sample provided by Wlaswich was good product and met the specifications required by Bio Canada for its eventual buyer, the German miller. Hanowski made it very clear that during the delivery of the oats by Wlaswich, that the product appeared to satisfy the requirements of the contract. The flow of the oats was good, which indicated to him that there was not moisture problem. In fact there was no indication at the time of delivery that there was any problem whatsoever with the oats. Bio Canada at the time of delivery had no complaint with the weight of the oats and had no complaint with the moisture content. The oats did not require cleaning and in Hanowski’s opinion, did not require drying. Hanowski called Wlaswich and told him that the oats looked good. It had appeared that it satisfied the contract in all respects. [17] At the trial in the course of his testimony, Hanowski raised concern about the temperature of the oats. He indicated that when the oats were delivered they were cold, and although that was not concern with him and temperature requirement was not contained in the contract, he believed that as the oats warmed up in the containers, that the moisture appeared and caused the spoiling. He believed that the oats would warm up over time and it could have been days before heating showed up. [18] Bio Canada was responsible for loading and shipping the international containers. Containers were shipped from Melville, Saskatchewan to Rotterdam after being sealed in Melville. [19] The broker, Mr. Wehrmann, testified that there were 100 containers of oats that were shipped to this miller and sourced from two suppliers, one being Bio Canada. There obviously was contractual arrangement between Bio Canada and Mr. Wehrmann and contractual arrangement between Mr. Wehrmann and the German miller. No terms of either of these contracts are entered into evidence. [20] Mr. Wehrmann indicated that the miller advised him that the quality assessment showed there was musty smell in five containers and they were rejected. The documentation and lot numbers provided for the five containers were identified as containing oats from Wlaswich. Mr. Wehrmann testified that Bio Canada was not paid for the oats. [21] Mr. Wehrmann testified that Bio Canada left him with the impression that there was no moisture problem with the oats at the time of loading. There was no requirement on Bio Canada to inspect the oats at the time of shipping, however Mr. Wehrmann wanted Bio Canada to do proper sampling and retain the samples in the event of quality issue. Mr. Wehrmann was not aware if any samples were properly taken and kept. [22] The evidence relating to the assessment in Germany and the rejection by the German miller of the oats is not properly before me. There was no evidence called directly from the German miller. He/she did not testify and no business records were introduced through Mr. Wehrmann or Bio Canada that explained the miller’s position. [23] Mr. Wehrmann, who was fluent in German, had photocopies of documents from the miller and quality assurance people in Germany apparently indicating the problems associated with the oats. Those documents were in German. They were not business records of any of the parties before the court. Bio Canada attempted to introduce them as proof of the rejection of Wlaswich’s oats. do not accept them as such. The documents were clearly third-party hearsay documents that were being produced for the truth of their contents. They were not admissible on that basis. Secondly, they were not admissible as they were not in their original form nor were they translated into the language used by the court. Bio Canada wished to have Mr. Wehrmann interpret the documents for the benefit of the court. He however was an interested party in the whole transaction and no evidence was led that he had sufficient skill with respect to knowledge and use of the German language to allow proper interpretation of the documents. [24] For those reasons, the documents submitted by Bio Canada, purportedly copies of the German documentation, were not admitted into evidence. [25] As will be seen from my decision however, that issue is of little relevance in coming to my final conclusion. [26] On September 26, 2006, Bio Canada paid Wlaswich $10,000 of the total amount owing under the contract. No further payment has been made. [27] Bio Canada did not explain how they came to pay Wlaswich the $10,000. There was no indication of the number of bushels of oats supplied by Wlaswich that were allegedly unacceptable. THE POSITION OF THE PLAINTIFF [28] Wlaswich states that he has complied with his contractual obligations. He was required to provide certain amount of oats with certain quality standard. He states that he has done so. [29] Wlaswich points to the acceptance by Bio Canada of the oats delivered without any complaint. Wlaswich has only been paid $10,000 out of the $61,000 owing and wishes to be paid the balance under the contract along with pre-judgment interest and costs. THE POSITION OF THE DEFENDANT [30] Bio Canada acknowledges that it appeared that the oats delivered were in accordance with the contract at the time of delivery. Bio Canada states that the contractual obligation of Wlaswich was to provide it with oats that met the representative sample initially provided. The sample oats were dry. It bought what was in the sample, not the mouldy, spoiling, high-moisture oats that the German miller eventually received. Bio Canada believed that the quality decision is made by the miller, and since the miller received wet oats, Wlaswich did not comply with the contract. [31] This position was essentially stated in letter from Bio Canada dated August 16, 2006 to Wlaswich’s attorney. [32] Bio Canada wanted Wlaswich to make claim under his insurance policy for the loss sustained by Bio Canada. Wlaswich refused. As result thereof, Bio Canada attempted to claim from its insurer and sent letter on December 28, 2006 to Co-operators Insurance explaining the issue as they saw it in relation to the oats’ shipment. The letter was an admission to its insurance company that although they had done testing of the oats for moisture content as delivered by Wlaswich, that its testing procedures were not in accordance with the Canadian Grain Commission sampling procedures, and as result were not verifiable. [33] assume that the Canadian Grain Commission requirements had to do with the contract between the miller and Bio Canada. There certainly was no requirement for such testing in the contract between Bio Canada and Wlaswich. The requirement was for oats of certain moisture level. Although the Canadian Grain Commission requirements may be method of determining the appropriate moisture level, certainly those methods are not the only fashion in which the moisture content could be proven. [34] The testimony before the court has established that the contract as described above was validly entered into between Wlaswich and Bio Canada. According to Wlaswich and Bio Canada at the time of delivery of the oats, the quality requirements of the contract had been met. There were no concerns expressed whatsoever by Bio Canada that there was any problem with the oats delivered by Wlaswich. Bio Canada’s position was that it was the farmer’s responsibility to do testing to ensure that the oats complied with the contract. If that is true statement of the contract, it in fact was met by the procedures adopted by Wlaswich. Practically, one would also think that Bio Canada would ensure that the terms of the contract were met before paying. Bio Canada’s testing and observations at the time of delivery disclosed that the contract had been fulfilled with respect to quality. [35] The only potential evidence pointing to Wlaswich not fulfilling his contract is the information that was led relating to the German miller’s rejection of some of the oats, none of that evidence is properly before the court. identified earlier that the evidence was hearsay and unreliable. Bio Canada has not established to my satisfaction that Wlaswich’s oats were rejected by the German miller, more importantly it has not established that Wlaswich’s oats did not comply with the contract. [36] Bio Canada’s legal position was that the German miller was to make the final decision with respect to the acceptable quality of the oats. Bio Canada wished to transfer the shipping acceptance risk on its contract with the German miller to Wlaswich. There was nothing in the contract with Wlaswich that allowed Bio Canada to do so. There was nothing in the contract with Wlaswich in which he was to continue to accept risk of non-acceptance or non-payment from any third party. The contract was simple one. It was for the delivery of oats of certain quality to Bio Canada. After that point in time, the resale of the oats to the German miller was the responsibility of Bio Canada. That included loading and shipping the containers. Bio Canada did not lead any evidence that the oat samples that they took from Wlaswich’s shipments were tested and not found to comply with the contract. There was no evidence that Bio Canada tested the retention samples that they had originally taken and found problem subsequent to the delivery of the oats to the German miller. [37] Bio Canada is attempting to put the onus of the delivery of the oats in acceptable condition to the German miller upon Wlaswich even though Wlaswich is not a party to that contractual obligation which was incurred solely by Bio Canada. It is clear in Canada that no one but the parties to contract can be bound by it. [See Greenwood Shopping Plaza Ltd. v. Beattie, 1980 CanLII 202 (SCC), [1980] S.C.R. 228]. Whatever obligations Bio Canada had to the German miller were not transferred to Wlaswich in any contract. [38] Despite Bio Canada’s attempt to place the contractual risk between itself and the German miller on Wlaswich, it has failed to do so. This is simple matter of contract. There is no contractual obligation entered into by Wlaswich that puts that risk on him. His obligation was to deliver oats of certain quality to Bio Canada. On the evidence he has complied with that obligation. There is nothing further required of him in order to be paid the money owed. CONCLUSION [39] Wlaswich has proven that he has satisfied his contractual obligations to Bio Canada resulting in an obligation by it to pay $61,608 to him to satisfy the contract. The sum of $10,000 was paid on September 26, 2008. No further amount has been paid, leaving $51,608 owing. [40] The plaintiff shall have judgment against the defendant in the sum of $51,608. The plaintiff has claimed pre-judgment interest. There is no legal reason why Bio Canada should not have made payment of the entire sum owing to Wlaswich. He is entitled to pre-judgment interest on the sum of $51,608 from the 26th day of September, 2006 until the date of judgment. [41] The plaintiff seeks costs of the action. He shall be entitled to those costs to be taxed on a party-party basis under Schedule I “B”, Column 3 of the Tariff of Costs.
The plaintiff entered into a contract with the defendant for the sale of organic oats. The contract between the plaintiff and defendant stipulated that the oats were to be delivered at a stipulated moisture content. The defendant accepted the oats from the plaintiff and did not indicate any issue with the moisture content. In turn, the defendant sold the oats to a broker for shipment to Germany. When the oats arrived overseas, the German buyer rejected the oats saying they had heated and did not meet his required moisture content. The defendant refused to pay the plaintiff the amount owing under the contract and argued the plaintiff had failed to meet his contractual obligation. HELD: The contract was between the plaintiff and defendant. The defendant accepted delivery of the oats from the plaintiff and did not object to their quality. The evidence before the Court was that the defendant had no complaint with the moisture content of the oats at the time of delivery by the plaintiff. There was nothing in the contract between the plaintiff and defendant that allowed the defendant to transfer the shipping acceptance risk to the plaintiff. The resale of the oats to Germany was the defendant's responsibility and the plaintiff is not a party to the contact with the German company. The plaintiff was awarded the balance of the contract price, plus pre-judgment interests and costs.