QUEEN’S BENCH FOR SASKATCHEWAN Citation: 2006 SKQB 536 Date: 2006 12 15 Docket: Q.B.G. No. 78 of 2004 Judicial Centre: Melfort BETWEEN: TKACHUK FARMS LTD. and LE BLANC AUCTION SERVICE LTD. and RITCHIE BROS. AUCTIONEERS (CANADA) LTD. Counsel: G. Carson for the Plaintiff N. Turcotte and I. Smith for the defendants JUDGMENT WILKINSON J. December 15, 2006 1) In legal circles, fairness of process is every bit as important as fairness of result, hence the saying that justice must be done, and it must be seen to be done. In the auction ring, where the auction is held “unreserved”, public impression is everything. The auction must be clean, and it must appear to be clean, with each fall of the hammer signifying sale to the highest bona fide bidder. An owner of consigned property cannot bid, directly or indirectly, or allow another individual to bid on his behalf. In the old case law, one found these concerns expressed by references to “puffers” or “puffing”, terms used to describe secret bidding at auction by or on behalf of seller, or attempts to run up the price by making spurious bids on behalf of the owner. 2) While a number of issues require exploration in the present case, the preeminent question is whether the plaintiff, the owner of certain farm equipment consigned for sale at unreserved auction, has indirectly allowed another individual to bid on its behalf, or for its own benefit. 3) The plaintiff, Tkachuk Farms Ltd., agreed to sell its entire inventory of farm equipment at unreserved auction on April 12, 2004, for guaranteed return of $577,500. The guarantee was supplied by the defendant, Ritchie Bros. Auctioneers (Canada) Ltd. The auction was to be conducted by LeBlanc Auction Services, newly formed division of Ritchie Bros. The principal of Tkachuk Farms Ltd., one Taras Tkachuk, was purportedly retiring from farming and moving to Saskatoon. 4) Ritchie Bros. had acquired the Saskatchewan company known as LeBlanc Auction Services Ltd., and the transaction was in the closing stages at the time the plaintiff was first approached to become potential customer. In this transitional period, the contractual negotiations between the plaintiff and the defendants generated two standard form agreements, preliminary “LeBlanc” contract dated December 23, 2003, and subsequent “Ritchie Bros.” contract dated March 28, 2004. This raised questions as to which of the two documents contained the pith and substance of the parties’ agreement. 5) After the auction sale was concluded, the defendants refused to pay the plaintiff the guaranteed price. The defendant Ritchie Bros. declared its guarantee unenforceable under provisions of the “Contract to Auction” dated March 28, 2004 and ultimately charged the plaintiff commission of 14% on the gross proceeds. The contractual provision invoked by this defendant, namely (Clause 4.05), reads as follows: 4.05 Default by Owner (b) Owner, directly or indirectly, by agency or otherwise, bids or permits another to bid on Owner’s behalf on the Property or any part thereof at the auction; or ... (d) Owner fails to complete refurbishing in timely manner, as set out in Clause 3.02; or (e) Owner fails to prepare auction site in timely manner, as set out in Clause 3.10; then: (f) Auctioneers’ guarantee of minimum gross proceeds from the sale of the Property shall be unenforceable at the option of the Auctioneers. Clause 4.05 goes on to provide: If, as result of the actions or inactions of Owner, Auctioneers’ guarantee of minimum gross proceeds from the sale of the Property is unenforceable, the commission rate to be paid by Owner to Auctioneers shall be fourteen percent (14%) of the gross proceeds from the sale of that part of the Property sold at the auction and fourteen percent (14%) of the fair market value of that part of the Property not sold at the auction; In the event Owner is in violation of subparagraph 4.05(b), in addition to any other rights or remedies Auctioneers may have under this Contract, Auctioneers shall, at its sole discretion, have the right to sell or re-sell the property by public or private sale and Owner shall pay to Auctioneers as liquidated damages in addition to all other amounts due hereunder, an amount equal to twenty percent (20%) of the proceeds realized from such sale or resale. 6) The first issue, then, is whether Clause 4.05 in the Ritchie Bros. Contract to Auction forms part of the contractual fabric between the parties, or whether, as the plaintiff insists, the terms of the contract were settled by the December 23, 2003 agreement and are to be found partly in writing, and partly in oral representations made by the defendant, LeBlanc Auction Services Ltd. 7) If the March 28, 2004 agreement represents the entire contract between the parties, the next issue is whether the prohibition against the owner bidding directly or indirectly at auction was transgressed when one Orval Caruk, Tkachuk relative and the successful bidder on several large pieces of equipment, was later discovered to have (1) commercial relationship with the plaintiff (leasing all the plaintiff’s cattle), and (2) the benefit of 100% financing from his uncle, Taras Tkachuk, for the sole and express purpose of making the impugned equipment purchase. Taras Tkachuk is the directing mind of Tkachuk Farms Ltd. and its controlling shareholder, with minority shares held by his spouse. 8) The defendants also raised issues of breach of contract insofar as the plaintiff’s alleged failure to refurbish equipment and to adequately prepare the auction site in advance of the sale (clauses 4.05 (d) and (e)). Although these alleged breaches were the focus of considerable attention at trial, they are not central to my decision in the final analysis. 9) If the March 28, 2004 agreement governs the parties and the plaintiff is in breach, there is an issue whether clause 4.05, and its 14% commission rate, amounts to penalty clause, and whether the plaintiff should be relieved of its consequences. 10) Finally, there is an issue concerning combine sold “on terms” to buyer at auction. It was announced at the auction that the plaintiff was willing to take 25% down, and defer payment of the balance until August 1, 2004 with respect to some of the larger pieces of equipment. The combine sold on that basis and with the understanding that the plaintiff would hold the combine as vendor in possession until full payment was received. Before August 1, the defendants attended the plaintiff’s farm without forewarning, removed the combine, and delivered it to the buyer who had paid the balance of the purchase price to Ritchie Bros. directly. The defendant’s justification for proceeding in that fashion is that the plaintiff had actually been paid in full, in that Ritchie Bros. had included the full sale price of the combine when it calculated the gross proceeds of sale, less 14% commission under clause 4.05. The plaintiff argues the taking amounted to trespass and conversion, and seeks damages. 11) As stated, the case has much to do with the unique nature of “unreserved auctions”, where goods are sold to the highest bidder, and the owner is precluded from affecting sale prices either by the use of reserve bids or through involvement, directly or indirectly in the bidding process. Ritchie Bros. has built an international reputation in this domain, and scrupulously enforces their corporate policy to ensure not only that “clean auction” has in fact taken place, but that the public perceives it to be so. Accordingly, there are “no owner buybacks, no artificial or manipulated values, no reserves, and no minimums” and in case where an owner is caught in direct attempt to buy back his own property, or bid up the price, the breach is obvious and the response is swift. An announcement is made to the crowd, and the item is pulled and re-auctioned for sale to the highest bona fide bidder. What constitutes bid indirectly on an owner’s behalf, or for his benefit, is far more elusive question. 12) Where an owner consigning his goods for sale at an unreserved auction has the added benefit of guaranteed price, it is obvious that the full risk of an unsuccessful auction passes to the auctioneer should sale fall short of expectations. 13) For Ritchie Bros., offering guarantees has been commercially viable proposition in the long term. The assumption of risk has, at times, involved significant cost to Ritchie Bros., sometimes in the six or seven figure bracket, cost it pays without hesitation, it says, provided no advantage has been taken by the owner. It is for that reason, among others, that the standard form “Contract to Auction” contains very explicit prohibition against owner involvement in, or influence upon, the auction, or the bidding process and very stringent consequence for breach, namely that the guarantee will be voided. Effectively, it is considered fundamental breach going to the root of the parties’ contract. 14) It is an area of concern has also received legislative attention in the form of s. 57(3) and (4) of The Sale of Goods Act, R.S.S. 1978, c. S-1, which state: 57 In the case of sale by auction: (3) Where sale by auction is not notified to be subject to right to bid on behalf of the seller it shall not be lawful for the seller to bid himself or to employ any person to bid at the sale or for the auctioneer knowingly to take bid from the seller or any such person. sale contravening this rule may be treated as fraudulent by the buyer; (4) sale by auction may be notified to be subject to reserve or upset price and the right to bid may also be reserved expressly by or on behalf of the seller. Where right to bid is expressly reserved but not otherwise the seller or any one person on his behalf may bid at the auction. 15) Besides the considerable risk to business reputation, owner bidding or buybacks can expose the auctioneer at unreserved auctions to liability. The Act states the sale can be treated as fraudulent by the buyer, and fraud will void the sale. Section 58 of the Act also makes it clear that the rules of the common law, and in particular the rules relating to the effect of fraud shall continue to apply. Thus, an auctioneer at unreserved auction who knowingly takes bid from an owner, or person bidding on the owner’s behalf, may find himself facing claim for damages, equitable remedies, solicitor-client costs and any of the other potential consequences of fraudulent transactions. 16) To further reinforce the prohibition against owner buybacks or direct or indirect bidding, all potential customers at Ritchie Bros. unreserved auction sale are required to enter into, and sign, Bidder’s Registration Agreement which states in clause 11 that “No person shall bid on any Lot: (a) of which he is the consignor; or (b) as agent, associate, or on behalf of the consignor.” 17) For additional good measure, an announcement is made to the public prior to the commencement of the auction emphasizing that no owner buybacks or bidding are allowed, and that the goods are sold unreserved to the highest bidder. An open and level playing field is critical to the integrity of an unreserved auction. If an owner is willing to accept terms of payment (a percentage down, the balance at later date) that is similarly announced at the commencement of the auction, and the terms offered are available to all prospective buyers. 18) It is in this context that the issues in the present case arise, as between litigants well versed in auction etiquette. turn to chronology of the events. Factual Background 19) In 2003, Taras Tkachuk, the principal shareholder and operating mind of the plaintiff, Tkachuk Farms Ltd., was planning to exit farming after more than 30 years involvement. He was experiencing some health issues, and although this was not matter of public knowledge, it was generally known in the community that he had rented out the majority of his lands the year previously. He first explored the prospect of major dispersal of farm equipment in 2002 and, at that time, had arranged for local enterprise, Hodgins Auctioneers Inc., to come and inspect his machinery and equipment. He subsequently decided to continue farming for another year. 20) In an announcement made at Agribition in late November 2003, Ritchie Bros. advertised its plan to acquire LeBlanc Auction Services Ltd. (“LeBlanc’s”), small but successful Saskatchewan business specializing in farm dispersals, estate auctions, and other auction services. The formal transaction was not effectively concluded until January, 2004. It was apparently share acquisition, such that LeBlanc’s became wholly owned subsidiary of Ritchie Bros. LeBlanc’s was an established auction company in its own right, and Ritchie’s made proprietary use of the name, advertising the Saskatchewan company as “a division of Ritchie Bros.” 21) In the first flush of togetherness, the defendants were keen to hold an auction in the Melfort area and engage the competition head to head. They wanted to establish themselves as presence in regional market previously dominated, if not monopolized, by the aforementioned Hodgins Auctioneers Inc. Their sales pitch to the plaintiff came at time of significant upheaval when LeBlanc’s was “transitioning” from their established trade practices to those of Ritchie Bros., who had significantly different modus operandi. LeBlanc’s had never been in the business of conducting unreserved auction sales, nor did it have the financial wherewithal to guarantee return to its customers. 22) Lorne Campbell, long-time employee of LeBlanc’s with auctioneering credentials and wealth of auction experience, was charged with seeking out business in the Melfort area. It was he who made the initial approach to Taras Tkachuk, to inquire whether he had any interest in selling his farm equipment at auction. This occurred somewhere around the end of November, 2003. Mr. Tkachuk told him to come and look at the equipment and they could discuss it. Lorne Campbell completed an inspection of the equipment, although several pieces were not easily accessible from the farm site and it is disputed whether Mr. Tkachuk supplied the particulars on these, or whether Lorne Campbell obtained them on his own. 23) In the course of these initial discussions, Lorne Campbell told Mr. Tkachuk of the impending takeover of LeBlanc’s by Ritchie Bros., explaining to him that with Ritchie’s resources, it meant access to huge customer base, and the ability to conduct an unreserved auction, with Ritchie Bros. guaranteeing firm price to the plaintiff. Mr. Tkachuk is not novice when it comes to auction sales and auction practices. He had attended approximately hundred such sales in his farming career. Approximately one-fifth of them were auctions actually conducted by Ritchie Bros, in Edmonton, Alberta. He understood the language of “unreserved bids, no buy backs, and no bid-ins” and has expressly acknowledged that to be the case. He knows that the essence of an unreserved auction is that equipment is sold to the highest bona fide bidder. 24) According to Mr. Tkachuk, he was told by Lorne Campbell he would not have to do anything, the defendants would do everything in preparation for the auction, and could cut him cheque at the end of the sale for guaranteed amount. As corroboration, Mr. Tkachuk pointed to brochure they left him, advertising the comprehensive services provided by LeBlanc including the claim that they could handle “Every detail pertaining to your auction”. He argues this essentially became term of their contract. 25) Mr. Campbell, on the other hand, said he made it entirely clear to Mr. Tkachuk that cleaning, refurbishing and preparation of the equipment was the owner’s responsibility, but as an extra service, and at an additional cost, specialized crews could be provided to the owner to complete these requirements. Despite his adamant insistence that he was expected to do nothing, Mr. Tkachuk did allow that he agreed to refurbish some of the equipment in need of obvious attention specifically Bourgault cultivator with cracked hitch that required welding, truck with broken rear spring, and various pieces of equipment with flat tires. 26) Lorne Campbell took the information gleaned from his inspection of the equipment, and told Mr. Tkachuk he would be back to discuss guaranteed price. He worked on the pricing, in joint effort with Jason LeBlanc, the regional manager for LeBlanc Auction Service, and Kevin Tink, the agricultural division manager for Ritchie Bros. They estimated fair market value for the equipment at auction utilizing Ritchie Bros.’ vast database of information. 27) In the meantime, Mr. Tkachuk approached Hodgins Auctioneers Inc. to see what they might be prepared to offer. representative of Hodgins came out again to look at Mr. Tkachuk’s equipment. 28) Although the sequence of events is not entirely clear, there are indications Mr. Tkachuk was being more than little coy, and not entirely above board, in his efforts to secure the most lucrative price. In the next round of discussions with LeBlanc’s on December 23, 2003, Mr. Tkachuk rejected defendant’s offer of price guarantee in the $555,000 range, saying “the competition” had offered him $5,000 more than that. In fact, when Mr. Tkachuk discussed prices with Grant Hodgins, (the owner of Hodgins Auctioneers), he was told that Hodgins could not possibly match the guaranteed offer from Ritchie Bros. and that $450,000 was what the equipment might fetch at auction, in their best estimation. (This information was gratuitously volunteered by Mr. Tkachuk in his testimony in chief with view to demeaning the defendant’s evaluating skills, but by the same token, reflects poorly on Mr. Tkachuk’s notions of bargaining in good faith.) 29) In the December 23 discussions, Lorne Campbell and Taras Tkachuk were at Mr. Tkachuk’s residence, with Jason LeBlanc participating by phone. They ultimately agreed on guaranteed net of $577,500 to the plaintiff for the equipment, but with the inclusion of one additional piece of equipment that Mr. Tkachuk had earlier declined to sell. It was agreed that any sale proceeds over and above $617,500 would be split 50-50. Any sale proceeds between $577,500 and $617,500 would constitute commission to the defendants (approximately 6.5%). It was not always worded with admirable clarity in later written documents, but insofar as the monetary aspects of their agreement are concerned, there is no dispute that this was the understanding. 30) This agreement was recorded on standard form contract normally utilized by LeBlanc Auction Service Ltd. It was document singularly unsuited to the purpose, because LeBlanc Auction Services did not conduct unreserved auctions and had never, in their years of operation, guaranteed return to owners/consignors. However, the Ritchie Bros. standard form contracts were not yet available to them for use. As such, the “December 23 contract” contained number of seemingly irreconcilable provisions. Specifically, it provided that “the Auctioneer makes no guarantee, representation, warranty or agreement, with respect to the selling price of any consigned property and any estimate by us with respect to the selling price is for information purposes only”. 31) The document of December 23, standing alone, cannot comprise the agreement between the parties as Mr. Tkachuk contends. It was merely stop-gap, and the inherent contradiction in terms (guarantee/no guarantee) are so fundamentally irreconcilable that the contract would be void for uncertainty by any standard. Mr. Tkachuk knew the guarantee was only available from Ritchie Bros. He had expressly conveyed that fact to Grant Hodgins when endeavouring to seek out matching or better offers. Jason LeBlanc, who found to be credible and candid witness, verified that there were explicit discussions during the December 23 meeting regarding the need for Ritchie Bros. contract, and that new policies and procedures would be in place because of that company’s acquisition of LeBlanc Auction Services Ltd. 32) In any event, there are indications Mr. Tkachuk did not feel inescapably bound to contract with the defendants at that point in time. While Mr. Tkachuk testified at trial that his discussions with Mr. Hodgins were before the December 23 meeting with the defendants, that is contradicted by his answers in examination for discovery, where he indicated that Mr. Hodgins was told, very explicitly, of an offer made by Lorne Campbell in the amount of $577,500, guaranteed. Mr. Hodgins said he could not match that offer. Mr. Tkachuk could not have represented that as concrete offer from the defendants at any time before December 23 because it simply did not exist. It might be inferred from this course of conduct that Mr. Tkachuk was continuing to explore more lucrative opportunities after December 23, 2003, and did not feel he had binding contract with the defendants, notwithstanding his assertion that the entire contract between the parties was formed on December 23, 2003. 33) Lorne Campbell says that on December 23 Mr. Tkachuk also asked if he would be allowed to bid at the sale. Mr. Campbell’s response was that it was “no-no” and would void the contract. He explained that it kills the prices, and the buyers will just back right off. To this, Mr. Tkachuk apparently responded “well, can just get someone else to buy it for me”. Mr. Campbell said he “didn’t know anyone around here who would do something like that” or words to that effect. For his part, Mr. Tkachuk absolutely denied ever talking to Lorne Campbell about the prospect of buying back equipment for himself. 34) As it happened, by December 2003 (if not before) Mr. Tkachuk had formed an intention to remain in the cattle business, despite advising the defendants he was retiring from farming. That intention was not communicated. The defendants advertised the auction as farm dispersal auction. Mr. Tkachuk’s impending retirement was considered sufficiently noteworthy to merit special mention in the sale fliers under the heading “Auctioneer’s Note”. It stated: “Taras has rented his land and is retiring from farming to Saskatoon. Taras has large line of good cattle related and farm equipment...”. This is not information that is without relevance to bargain hunters. retiring farmer presumably has no hidden agendas, and no interest other than in disposing of his equipment, once and for all. 35) Tkachuk Farms Ltd. proceeded to make an arrangement with Orval Caruk, described as lease of all the company’s existing and after-acquired cattle herd, with Mr. Caruk providing all labour and services necessary for boarding the cattle and breeding operations and receiving, in exchange, 70% of the proceeds of the sale of all calves born to cattle covered by the agreement. 36) Mr. Tkachuk saw another lawyer (not his counsel at trial) in order to have the lease agreement prepared. Although the agreement is dated February 27, 2004, Mr. Tkachuk is not certain when it was actually signed. Nonetheless, am satisfied the plan was in place by December, 2003 since Schedule “A” to the lease agreement, dealing with after-acquired cattle, contains the following Acknowledgement: Orval Caruk hereby acknowledge [sic] receipt of the undernoted cattle from TKACHUK which shall be governed by the Agreement made between TKACHUK on Dec 15, 2003. This agreement made on December 15th 2003 for the lease off [sic] one hundred and fifty cows or there about [sic] to be purchased before the end off [sic] 2004. Dec 15/2003 30 cows and one Bull Feb 27/04 41 cows and Heifers Mar 11/04 14 cows July 30/04 34 cows and one Bull Oct 26/04 26 cows Dated on Feb 27, 2004 37) Furthermore, Mr. Caruk confirmed that the lease agreement with Tkachuk Farms Ltd. was entered into before the first delivery of cattle to him, and that by late December, 2003 or early January, 2004 he had received the first deliveries of cattle from the plaintiff under the terms of their lease. 38) The plaintiff entered into separate transaction with Bruno Beaudry, specifically, under lease for one year covering 26 head of cattle, with the plaintiff paying to Beaudry 65% of the proceeds of sale of all calves born to the cattle covered by the agreement. Mr. Beaudry was apparently unable to fulfill the terms of lease due to health reasons, and the subject cattle ended up with Orval Caruk at some unspecified point in 2004, albeit under the terms of his lease, rather than Mr. Beaudry’s. 39) None of this was known to the defendants, of course. There was, in fact, very little in the way of communication between the plaintiff and the defendants after December 23. Both parties share the blame for this state of affairs. Having seemingly achieved their major objectives the plaintiff, guaranteed price for his equipment, the defendants, sale in their competitor’s backyard all of them were apparently too busy to attend to details. 40) Lorne Campbell said he did try, repeatedly, to contact Mr. Tkachuk, but Mr. Tkachuk was never available and his wife would say he was gone fishing, or away, or whatever. This is corroborated to some extent by Jason LeBlanc, who said he was extremely upset that Mr. Campbell wasted an entire day sitting in Mr. Tkachuk’s yard trying to get hold of him. Mr. Tkachuk, on the other hand, complains he tried to make contact with the defendants number of times, but they were the ones who were always too busy. 41) In January 2004, Lorne Campbell provided Mr. Tkachuk sign for the purpose of advertising the forthcoming sale. It bore the wrong date. Mr. Tkachuk corrected it and put the sign up himself. 42) By letter dated January 27, 2004, LeBlanc Auction Service Ltd. forwarded list of the equipment to be advertised for sale by auction, requesting Mr. Tkachuk to review it carefully and correct any errors in description. Mr. Tkachuk signed it on February 10, 2004, with the express written acknowledgement that it was the plaintiff who would bear responsibility for any errors or omissions in description. There was in fact an error in the year, and the number of hours of operation in the description of Versatile Tractor. It was out by about 200 hours or more (roughly season’s worth of use). This was not discovered until the day of sale and had to be announced to the crowd, to make the necessary correction. 43) The defendants proceeded to advertise the sale extensively, taking out ads in three provinces and in the northern United States, preparing thousands of catalogues for mass distribution, and directly delivering 1,500 posters to farm yards and mail boxes in Melfort and area. Lorne Campbell dropped off sample copy of the poster with Mrs. Tkachuk, as, once again, he was unable to catch Mr. Tkachuk at home. Having further opportunity at that time to view the state of the equipment, Mr. Campbell was concerned as numerous flat tires had not been fixed yet, and other refurbishing had not been done. In his view, no apparent efforts were being made by Mr. Tkachuk to prepare for sale. Mr. Tkachuk, for his part, was also experiencing some concern because he felt the sale preparation was entirely the defendant’s responsibility and nothing was being done by them. Neither appear to have taken any meaningful steps to address their respective concerns. 44) On March 27, 2004 an independent contractor came to the Tkachuk farm to power-wash all the major pieces of equipment. This was arranged by Mr. Campbell. There was disagreement as to whose responsibility it was to pay for the cleaning. Mr. Campbell said Mr. Tkachuk should pay, Mr. Tkachuk said it was not his responsibility, he had been told they would attend to everything. Lorne Campbell remained at the yard site most of the day, while the equipment was being cleaned. He pointed out to Mr. Tkachuk that flat tires still had not been replaced, the broken hitch was not repaired, and the Morris cultivator needed to be ploughed out of the field where it was sitting (some miles away) and moved to the yard in readiness for the auction sale. 45) On March 28, 2004, Lorne Campbell went back to the Tkachuk farm around 9:00 a.m with the Ritchie Bros. standard form “Contract to Auction” finally in hand. Again, Mr. Tkachuk was not there. Later that evening, Mr. Campbell returned and finally succeeded in catching Mr. Tkachuk at home. They went over the contract. Mr. Tkachuk refused to accept responsibility for the power-washing bill. Clause 3.02 of the Ritchie contract, which deals with the owner’s responsibility to clean and refurbish equipment to standard acceptable to the Auctioneers, was completed rather ambiguously, in the following manner: Owner shall: 3.02 Refurbishing of Equipment (a) paint, clean and refurbish, prior to the auction, the Equipment to standard acceptable to Auctioneers. Should Auctioneers organize and pay for painting, cleaning or refurbishing any part of the Equipment, Auctioneers shall be reimbursed for these costs plus ten percent (10%) provided that the total cost shall not exceed as needed dollars($ Nil without authorization from Owner. 46) find that the handwritten words “as needed” were inserted by Mr. Campbell, and the handwritten words “Nil” were inserted by Mr. Tkachuk, reflecting their disagreement over who bore responsibility for cleaning. am aided in this conclusion by the fact that the handwriting is distinguishably different. The result of this contradictory stipulation is that the provision for reimbursement is rendered wholly insensible. 47) Mr. Tkachuk also struck out/amended other provisions in the contract, namely: (1) part of clause 1.02 which in its generic form allows the Auctioneer 21 days to make payment. He inserted provision that he would be paid on sale day instead; (2) part of clause 3.10 that states if Owner fails to carry out direction from Auctioneer regarding preparation of the auction site within 10 days of the scheduled auction date, Auctioneer may, in its discretion, prepare the auction site at the expense of the owner; (3) part of clause 4.05 (i) requiring Owner to reimburse Auctioneers for all out-of-pocket expenses incurred in preparation for the auction. 48) Mr. Campbell objected to the strikeouts. Despite this, the agreement was signed by both and bears the initials of Lorne Campbell and Taras Tkachuk on each page. Mr. Tkachuk denies initialling two of the pages, but did not say which two. He acknowledged all the pages appear to be initialled, but says everything happened in big hurry because he was in the process of moving cattle, and he had heifers on the road requiring his attention. He said Lorne Campbell had merely indicated nothing had changed from their earlier agreement that this document was just something Ritchie’s needed to “update their file”. observe that Mr. Tkachuk was obviously unconvinced, because he went through the document in some detail. 49) Clause 3.07 of the Contract to Auction of March 27, 2004 states: SECTION 3: OWNER’S OBLIGATIONS AND RESPONSIBILITIES Owner shall: 3.07 No Buybacks, Unreserved Auction Sale not bid, directly or indirectly, nor allow any other person to bid on Owner’s behalf, by agency or otherwise, on the Property or any part thereof at the auction. Owner acknowledges the auction is unreserved and Auctioneers shall have no obligation or duty to withdraw the Property or any part thereof from the auction sale or to cancel the auction. The Property shall be sold to the highest bidder. 50) Under cross-examination, Mr. Tkachuk acknowledged and agreed that with respect to clause 3.07 he was made aware of the provision while reviewing the agreement. However, he said he specifically asked Lorne Campbell whether it would be okay if his son bought at the sale, since his son was going into the cattle business, and that Lorne Campbell said that would be alright. The fact that he put this question, inaccurate as it is, demonstrates he was certainly alive to the possibility of controversy. Mr. Campbell denies it, and says the only discussion was that buybacks would nullify the guarantee. 51) Mr. Tkachuk further acknowledged and agreed that clause 4.15 was not struck out, altered or amended by him in any way. That clause provides: 4.15 Entire Agreement this Contract: (a) constitutes the entire agreement between the parties, and supersedes and takes the place of all prior contracts, understandings, representations or warranties; (b) may not be amended except in writing. There are no understandings, agreements, promises, terms, conditions or warranties expressed or implied, whether orally or by law, statute, or trade usage, other than as specifically stated herein; and (c) shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns. 52) Mr. Tkachuk requested copy of the contract, and Mr. Campbell had none available an unacceptable business practice by any standard. He told Mr. Tkachuk that copy would be mailed to him, but Mr. Tkachuk only received his copy on the day of the auction sale. 53) Nonetheless, on the cardinal issue, namely the impact of clause 3.07 and the prohibition against the owner bidding directly or indirectly, am satisfied Mr. Tkachuk reviewed and understood the provision. If he asked Lorne Campbell the question about the propriety of his “son” purchasing at the sale because his son was going into the cattle business it does not offer him vindication of any sort. That hypothetical omits two critical factors, the existence of lessor/lessee relationship between the “son” and the plaintiff, and the existence of debtor/creditor relationship created to facilitate the purchase of the equipment. It thus bears no resemblance to the scenario that is now impugned as breach of clause of 3.07 and as constituting form of indirect bidding “on Owner’s behalf.” 54) Jason LeBlanc had telephone conversation with Mr. Tkachuk toward the end of March. He discussed the prospect of Mr. Tkachuk accepting “terms” at auction (25% percent down on April 12, balance payable on buyer taking possession August 1) with respect to some of the larger pieces of equipment: the two Case combines, the Versatile tractor, and the Prairie Star swather. Jason LeBlanc explained that in their experience, if the buyer had time to come up with the balance, it would likely get Mr. Tkachuk more money on the larger items. The fact that an owner is willing to accept terms of payment, and the nature of those terms is announced right at the commencement of the sale. It is an attractive option for buyers of larger, more costly, pieces of equipment. Mr. Tkachuk agreed and document was prepared to that effect which Jason LeBlanc later took to the auction sale for Mr. Tkachuk’s signature. 55) In the days leading up to the sale, Mr. Tkachuk said he became increasingly concerned because nothing was happening. He was told by Lorne Campbell that LeBlanc’s was very busy, he should just go ahead and get started. Lorne Campbell, on the other hand, said he attended at the Tkachuk farm on number of occasions after March 28, and saw nothing was being done so he spoke to Jason LeBlanc about it. With days to spare, Mr. Tkachuk did arrange for woman to come in and clean the cabs in the motorized equipment. He said he only did this because Lorne Campbell had agreed to reimburse him for the cost of this (about $250). He was not repaid. 56) Mr. Tkachuk’s son, Tracy, an instructor in the armed forces in Victoria, B.C. came home to the family farm about week before the sale. It was Tracy Tkachuk who ended up doing all the work in preparation for the sale, with the assistance of neighbour who was paid for his services. No advice or direction was provided by Lorne Campbell, or anyone from LeBlanc’s. In the few days before the auction sale, Mr. Tkachuk was apparently in hospital for monitoring of his heart condition, although he did not communicate this to the defendants. 57) By all accounts, Tracy Tkachuk and his helper did yeoman’s service, lining up equipment for sale, cleaning, and getting the yard site in order. They were not provided with map showing the Auctioneer’s preferred layout, although Jason LeBlanc said that would be the normal practice, and was Lorne Campbell’s responsibility. The Tkachuk’s were not given any lot numbers to display on the equipment, although this, too, appears to be the usual practice. Lorne Campbell said he had discussed with Mr. Tkachuk on March 28 that the equipment should be lined up certain way, and lot numbers could be displayed, but acknowledged he did not actually have the lot numbers with him that day or, apparently, until the day of the sale. 58) On April 11, 2004, the day before the auction sale, Lorne Campbell and Jason LeBlanc attended at the Tkachuk farm. They had number of concerns about the readiness of the yard site for auction, deficiencies in the cleanliness and state of repair of some of the equipment, the configuration of the equipment line-up, and the fact some of the equipment going into the auction (tractor, grain auger) was still in use for feeding cattle. It had, in fact, been in regular and continual use throughout, in connection with livestock requirements and the plaintiff’s ongoing involvement in cattle operations. 59) do not intend to go into these issues in great detail, because these do not ultimately bear on my conclusions in the case. It suffices to say that in connection with the Auctioneer’s obligation to supervise the preparation and organization of the auction, (clause 1.05 of the Ritchie contract) do not believe Mr. Campbell’s supervisory efforts were all that meaningful, and it is clear from Jason LeBlanc’s evidence that Mr. Campbell was charged with that responsibility. 60) By the same token, the plaintiff’s use of certain equipment right up to the date of auction sale, including equipment already power-washed in preparation for sale, is not the norm for someone who is supposedly retiring from farming and proceeding with farm dispersal auction. Of course, as is now apparent, Mr. Tkachuk was not really retiring from farming, and was rather significantly involved in the acquisition, feeding and transporting of cattle. The ongoing use of the equipment put him rather plainly in jeopardy of contravening his obligation to deliver the equipment “in condition equivalent to or better than its condition when viewed by Auctioneer’s representative on or about 27 Mar, 2004" (clause 3.03 (iii) of the Ritchie contract). March 27 was, of course, the date the equipment was power washed in preparation for sale. 61) Of more direct concern is the arrangement between the plaintiff and Orval Caruk regarding the lease of the plaintiff’s cattle, and financing arrangement for the purchase of equipment at auction sale. Orval Caruk testified he did not have any money of his own to buy equipment at the auction, but made an arrangement to borrow up to $100,000 from his uncle for that purpose. He said that all came about prior to April, 2004 when there were discussions between he and Mr. Tkachuk about the pricing of the equipment and Mr. Tkachuk commented he was getting “a huge dollar” for the sale. With that information imparted to him, Mr. Caruk decided to ask his uncle to finance him for the purchase of some equipment. He reasoned that since he was leasing his uncle’s cattle, and would continue to receive cattle, such an arrangement made sense as purchasing equipment would assist him to meet his obligations under the lease. To put it in another perspective this would enable Mr. Caruk, single individual, to acquire roughly one-sixth of the anticipated value of the entire equipment at auction, without paying dollar down. Mr. Tkachuk was prepared to facilitate that arrangement. 62) At the auction sale, Orval Caruk signed the Bidder’s registration card. He did not inquire about his ability to bid, and did not tell anyone of his relationship to Mr. Tkachuk, or of his legal associations with the plaintiff, Tkachuk Farms Ltd. Obviously, he told no one of the financing he had received from his uncle. He ultimately purchased $88,983 worth of equipment at the auction, including tractor, flat-deck trailer, goose-neck cattle trailer, truck-tractor, hay trailer, and round baler equipment useful in cattle operations although obviously for other general farming purposes as well. Sometime after the sale, Mr. Caruk signed promissory note in favour of Taras Tkachuk in the amount of $90,000 with interest at 5% from April 13, 2004, payable on demand. He acknowledged that nothing at all has been paid on this promissory note to date, despite the fact some two and one-half years have passed since the date of the auction sale. 63) The auction sale proceeded, although not auspiciously. 266 bidders were registered in person, supplemented by internet bidders and proxy bidders. Jason LeBlanc had to make an announcement correcting the year and hours of operation on the Versatile tractor. He said this can have an adverse effect on an auction, because purchasers come prepared, have done their homework, and secured financing, and if the hours are off by season’s worth of use or more it has negative impact. He was the one that discovered the mistake. There are apparently two instrument settings on the dial, one that gives hours of use at last maintenance, one that gives total hours of use. He conveyed this to Mr. Tkachuk and was surprised that Mr. Tkachuk was not aware of the fact. Mr. Tkachuk blamed Mr. Campbell for the error. Mr. LeBlanc pointed out it was the owner’s responsibility to verify the accuracy of information, since no one knows the equipment better. 64) As earlier agreed between Mr. Tkachuk and Jason LeBlanc, it was announced at the commencement of the sale that the plaintiff was prepared to accept “terms” of 25% down and balance by August 1, on the four large pieces of equipment identified, with the plaintiff retaining possession and insuring the items until paid in full. 65) As the auction progressed, Jason LeBlanc sensed things were not going well. The crowd was unresponsive, and it became increasingly evident the auction sale was not going to meet target expectations. He said it happens sometimes and if you have guaranteed the owner price, you accept your losses, cut your cheque and move on. But some red flags started going up as he observed single bidder buying more and more of the larger pieces of equipment. In his considerable years of experience it was an unusual pattern, since most buyers at auction tend to limit themselves to one big item. He did not know at the time who Bidder #195 was, or that he had any connection whatsoever to the plaintiff. He simply noted that Bidder #195 was purchasing cattle-related equipment in quantities that exceeded the norm for single auction sale. 66) Lorne Campbell was in the midst of the crowd. He, too, felt something was up. He wondered if Bidder #195 was “jockey”, someone who purchases at auction with view to resale to specific customer. As the buyer’s residence is always announced with each fall of the hammer, he knew Bidder #195 came from Weirdale. He recalled Mr. Tkachuk speaking of nephew from Weirdale. Bidder #195 was Orval Caruk. Whether Lorne Campbell directly confronted Mr. Caruk with his suspicions is neither here nor there. He says he did Orval Caruk cannot remember it happening. 67) After the sale was over, Lorne Campbell told Jason LeBlanc he smelled rat. Jason LeBlanc agreed. They conveyed their concerns to Robert Caulfield, Ritchie’s Bros. Senior Manager and the person charged with handling legal and litigation related issues for the company. Taras Tkachuk demanded to be paid the full amount of his guarantee, and the defendants wanted time to investigate the matter further. The gross proceeds of the auction sale were only $452,800, well short of expectations. 68) Mr. Tkachuk was directed to contact Robert Caufield, by phone. Mr. Caufield reiterated and explained to Mr. Tkachuk their no buy-back policy and that there were concerns this had been contravened. He explained that there would be need to investigate and collect information before any money changed hands. He explained if the concerns were justified they would be relying on clause 4.05 of the contract which nullifies the guarantee, and provides for commission rate of 14% to Ritchie Bros. on the gross proceeds of sale. He set out the concerns in greater detail in letter to the plaintiff’s lawyer dated April 22, 2004. Of course at that time, the defendants did not have all the details of the arrangements between the plaintiff and Mr. Caruk, nor did they know of the terms given to Mr. Caruk for 100% financing of the equipment purchased at auction. These details emerged only in the course of these proceedings, which were commenced on May 11, 2004. As such, more significant emphasis was placed on the lesser issues such as failure to refurbish, and failure to prepare the auction site adequately. 69) To add another wrinkle, combine that was sold at auction “on terms” was sold to an individual named David Espenant, of Hudson Bay. The terms were down payment of $20,500 and the balance of $36,750 due and payable on or before August 1, 2004, with the combine being held and insured by the plaintiff until full payment was received. (A Case header was also included in the purchase.) However, on April 21, 2004 the defendants paid the plaintiff $387,799.25 as its share of the auction proceeds. This was calculated by deducting the defendant’s 14% commission ($63,392), and the pressure washing bill and other incidental charges ($1,608.75), from the total auction proceeds of $452,800. The total auction proceeds therefore included Mr. Espenant’s full purchase price for the combine and header, even though $36,750 had not yet been paid. It was Ritchie Bros. that was out this money. 70) Somehow or other, it was arranged that Mr. Espenant would pay Ritchie Bros. directly, rather than the plaintiff. Lorne Campbell then attended at the Tkachuk farm on July 27, 2004 without forewarning, and in Mr. Tkachuk’s absence, entered the shed, and removed the combine, using master key that he had in his possession. The plaintiff accordingly claims the unpaid amount, not as unpaid purchase price he had already been inadvertently paid when the sum was included in the gross auction sale proceeds but as damages for trespass and conversion. 71) The plaintiff’s claim is for $189,700.75, being the difference between the guaranteed amount of $577,500 and the amount actually paid of $387,799.25, and the additional claim for damages for trespass and conversion, in the amount of $36,750, related to the “unlawful taking” of the combine. 72) The Ritchie Bros. Contract to Auction dated March 28, 2004 is valid, enforceable and unambiguous contract, with the single exception of clause 3.02. resolve any ambiguity in favour of Mr. Tkachuk. The contra preferentum rule is principle of interpretation applying to contracts generally. Where there is any ambiguity in term of contract, it is resolved against the author, and in favour of the other party to the contract who did not participate in its drafting, or had no opportunity to modify its wording: Hillis Oil Sales Ltd. v. Wynn’s Canada Ltd. 1986 CanLII 44 (SCC), [1986] S.C.R. 57. Ritchie Bros. has, in clause 4.21 of the contract, provision that makes the entire contract subject to the approval of Head Office and the ability to nullify it within twenty days of signing. It had the last say, and the ability between March 28 and April 12, to resolve any apparent ambiguities in the language. It chose not to do so and proceeded to auction based on the contract as it stood, replete with amendments and strikeouts effected by Mr. Tkachuk. That has consequences for its claim to be reimbursed for the power-washing, and it is my conclusion that this amount was improperly deducted from the proceeds of sale payable to the plaintiff. 73) As for Mr. Tkachuk, am satisfied he read the contract thoroughly, deleted those portions he found offensive, and clearly understood it contents. Mr. Tkachuk is an intelligent individual and an astute businessman, who understands the nature and importance of legal contracts. Even in family dealings (i.e. with Orval Caruk) he was careful to have legal documents properly drawn up and executed. He presumably would have had no difficulty in accessing legal advice, had he so chosen. He argues that Lorne Campbell expressly represented to him that nothing had changed, the document was just something Ritchie Bros. required for their files. He knew that was not the case, otherwise why did he bother to go through and make any number of amendments? 74) The defendants cite Lord Denning in Gallie v. Lee, [1969] Ch. 17 at 36-37 (C.A.) where he said: ...whenever man of full age and understanding, who can read and write, signs legal document which is put before him for signature by which mean document which it is apparent on the face of it, is intended to have legal consequences then, if he does not take the trouble to read it, but signs it as it is, relying on the word of another as to its character or contents or effect, he cannot be heard to say that it is not his document.... 75) Here, Mr. Tkachuk did in fact take the trouble to read the contract, rather carefully it seems, and has readily acknowledged he understood its contents. He is contractually bound by its terms and precluded from asserting otherwise. 76) The fact that the contract contains an “entire agreement” clause is also detrimental to the plaintiff’s position. The following quotation from Parrish Heimbecker Ltd. v. All Peace Auctions Ltd., 2001 ABQB 1104 (CanLII), (2001), 309 A.R. 62 (Q.B.), at paragraph 111, aptly summarizes the consequences: ...Moreover, there is an “entire agreement” clause included in the Auction Contract, being Clause of the Terms and Conditions of the Auction Contract. Clauses of that nature, subject to the wording of the particular clause at issue, generally have the effect of rendering inadmissible extrinsic evidence to prove terms other than those in the written contract. (Chitty on Contracts at para. 12-102) And, as additionally noted in Ritchie Bros. Auctioneers (Canada) Ltd. v. AIMS International Systems Inc., 2003 BCSC 1111 (CanLII), [2003] B.C.J. No. 1680 (B.C. S.C.) (QL) at para. 24: Even if there was evidence of pre-contractual representation, the representation would not override the specific terms of the contract. Paragraphs 4.15 and 4.16 of the contract supersede any prior understandings, representations or warranties. The contract constitutes the entire agreement between the parties. The contract is clear on its face; commission is payable if the defendants fail to deliver the equipment. Subject to the defence of estoppel, the corporate defendants are bound by the terms of the contract. 77) The latter case dealt with claim by Ritchie Bros. for the contractually stipulated commission in circumstances where an owner withdrew equipment from the sale. Ritchie Bros.’ right to commission was upheld by the court, as constituting genuine pre-estimate of damages. 78) Ritchie Bros.’ failure here to provide copy of the auction contract to the plaintiff until the day of the auction sale is highly objectionable business practice. However, in the end, it cannot absolve the plaintiff of contractual commitments accepted by executing the contract with knowledge of its contents. Consumer protection legislation provides remedies to individuals affected by unfair trade practices where the transactions relate to goods and services ordinarily provided for personal, family or household purposes (The Consumer Protection Act, S.S. 1996, c. C-30.1). The present situation falls outside the ambit and scope of the legislation: see Statutory Regulation of Unfair Business Practices in Saskatchewan: Possibilities and Pitfalls, Prof. Tamara M. Buckwold, Saskatchewan Law Review (1999), 62 Sask. L. Rev. 45‑84. Did the Plaintiff breach Clause 3.07 of the contract? 79) The provisions of clause 3.07 prohibiting an owner from bidding directly or indirectly, and from allowing any other person to bid on his behalf, and the similar concerns that are addressed in s. 57(3) and (4) of The Sale of Goods Act, supra, reflect principles that have an ancient provenance. 80) The Court of Exchequer Chamber in Warlow v. Harrison (1859), E. E. 309, 120 E.R. 925, addressed the issue in case where the auctioneer, at an auction without reserve, completed sale to the owner on bid one guinea higher than the immediately preceding bid by the plaintiff. At page 928, they stated: ...the auctioneer who puts the property up for sale upon such condition pledges himself that the sale shall be without reserve; or ... contracts that it shall be so; ... this contract is made with the highest bonâ fide bidder; and, in case of breach of it ... he has right of action against the auctioneer.... 81) As human ingenuity evolved so did the law, and the prohibition against direct bidding by an owner was extended to include indirect forms of bidding by another individual on the owner’s behalf. An early example of statutory prohibition similar to the provisions currently found in The Sale of Goods Act is found in 31Vic. Ont. passed in 1868. 82) In Heron v. Moffatt, [1875] O.J. No. 205 (Ont. Ch.) (QL), the court held that the 1868 Ontario statute, 31 Vic., ch. 28, was passed for the purpose of putting an end to the conflict between the Courts of Law and Equity, as to the validity of sales where “puffer” was employed. At para. 21, the court said that the statute: .... defines puffer to mean person appointed to bid on the part of the seller, in this respect differing from the Imperial statute on the same subject, which defines it to be person appointed to bid on the part of the owner; and enacts that the sale shall be taken to be without reserve, unless otherwise stated in the conditions [22 Gr Page376] or particulars of sale, and upon any sale without reserve it shall not be lawful for the seller or for puffer to bid. 83) In Jones v. Huntingdon, [1870] O.J. No. 370 (Ont. Ch.) (QL) there was claim for specific performance of contract regarding an auction sale of lands at which the plaintiff was bidder. The defendant argued that the plaintiff bought the land as defendant’s agent, that plaintiff was “puffer” and the sale was illegal since the auction sale was without reserve and that the whole proceeding was scheme of the plaintiff to get the lands cheap. In deciding whether the defence should be struck as scandalous, the Court was of the view that an assertion that purchase was in contravention of “the Act against puffers, 31 Vic. Ont. 1", was relevant plea and should not be struck. 84) The risk usually assumed by the owner of goods offered for sale at an unreserved auction is described in these terms in the case of O'Connor v. Woodward, [1875] O.J. No. 245 (Ont. Ch.) (QL), also reported at P.R. 223 at para. 14: According to the standing conditions under which this property was offered for sale, the highest bidder is the purchaser, and the highest bidder cannot be deprived of his right by the auctioneer refusing to knock the property down to him: McAlpine v. Young, Chy. Ch. 171. When the property was offered for sale on the 7th of March, there being no reserved bid, think the provisions of the 31 Vict. c. 28, (O.), applied, and the sale must be deemed to have been without reserve, and therefore it was not open to the vendors, having once offered the property for sale, to refuse bid, however small. Mere inadequacy of price, unless so great as to be evidence of fraud, is no ground for refusing specific performance of contract biter partes: Emery v. Wase, Ves. 517; nor yet for opening biddings: Ware v. Watson, DeG. M. G. 739; Creswick v. Thompson, Prac. R. 52; and where the sale is by auction, that fact of itself is generally considered bar to enquiry as to the adequacy of consideration: White v. Damon, Ves. 30; Ex parte Latham, Ves. 35, note; Shelly v. Nash, Madd. 232. 85) This considerable risk passes to the auctioneer, where the auctioneer has contracted to provide the owner guaranteed return. Contractual provisions such as Clause 3.07 and 4.05 in the Ritchie Bros. contract, are the understandable response, to ensure the sale proceeds without concealment or deception on the part of the owner, and with due regard for the rights and interests of bona fide bidders. 86) more contemporary review of the nature of unreserved auctions can be found in Proctor v. Almansask Distributors Ltd. and Welsh (1984), 37 Alta. L.R. (2d) 164, (Alta. Prov. Ct.) where the Court said at para. 6: The opinions expressed in Warlow v. Harrison also reflect the unilateral contract approach: (1) The contract is made with the highest bona fide bidder. He alone meets the conditions peculiar to an auction without reserve: (a) neither the seller nor anyone on his behalf shall bid; and (b) the highest bidder shall be entitled to the sale of the property. The lower bidders do therefore not have contract: contra, Gower (1952), 68 L.Q. Rev. 457‑58. Lower bids lapse when higher bid is made: Ontario Law Reform Commission Report on Sale of Goods, vol. at p. 88, relying on Treitel on Contracts, 4th ed., at p. 8. (2) It is immaterial whether bid by or on behalf of the owner is made with the knowledge or privity of the auctioneer and also immaterial whether it is the final bid or whether it is made while the property is under the hammer. Any such bid does not comply with the conditions and breaches the auctioneer's contract. (3) If the auctioneer knows that bid is made by or on behalf of the owner, such bid is not revocation of the auctioneer's authority. The auctioneer should refuse the bid on the grounds that the sale is "without reserve". The owner cannot be the buyer, for he shall not bid. And at paragraph 9, the Court concludes: ...if the conditions specify sale without reserve, the auctioneer's call for bids amounts to an offer to sell to the highest bona fide bidder as determined in accordance with the conditions of sale. The conditions apply throughout the auction even when the auctioneer purports to complete sale which does not comply with the conditions: McManus v. Fortescue, [1907] 87) The essential phrase in clause 3.07 for present purposes is “...nor allow any other person to bid on Owner’s behalf, by agency or otherwise...”. The defendants refer to number of decisions, in variety of contexts, that have interpreted “on behalf of” an owner as meaning “for the benefit of” the owner: See Strata Plan VR 368 v. Marathon Realty Co. (1982), 1982 CanLII 493 (BC CA), 141 D.L.R. (3d) 540 (C.A.) at para. 16; Gilbert v. British Columbia (Forest Appeals Commission), 2002 BCSC 950 (CanLII), [2002] B.C.J. No. 1491 (B.C. S.C.) (QL), at paras. 26 and 27. The latter case was appealed, and in decision reported at 2005 BCCA 117 (CanLII), [2005] B.C.J. No. 408 (B.C. C.A.) (QL), the British Columbia Court of Appeal said, at paragraph 20: In my opinion this finding was both reasonable on the evidence and under the statute. In addition, it was correct in law. Dictionary definitions make it clear that the term “on behalf of” includes or means “for the benefit of”.... 88) In the context of the issues before me that interpretation is logically consistent, and the issue therefore becomes: did the plaintiff allow Mr. Caruk to bid for the plaintiff’s benefit? 89) It seems Mr. Tkachuk was alive to the risks inherent in contravening clause 3.07. He skirted the issue by asking Lorne Campbell whether son going into the cattle business could bid at the sale. Why pose question in that manner? Mr. Tkachuk knew exactly what he was doing with his cattle business, so why put questions in the hypothetical? Jason LeBlanc testified that relatives of the owner can and do bid at auction quite frequently. There is nothing ostensibly wrong with that, provided the fact is disclosed openly to the attending crowd. It is not the existence of family relationship, per se, that offends the contractual prohibition. family member can be bona fide purchaser as well as anyone else, but the nature of an unreserved auction dictates that such relationships be disclosed to the public. The essence of the problem, and the underlying purpose behind clause 3.07, is to protect bona fide bidders, and to ensure that there is be no surreptitious bidding by another for the owner’s benefit. 90) Did the plaintiff allow Mr. Caruk to bid at the sale for the plaintiff’s benefit? Certainly. It went beyond the passive act of “allowing” him to bid. It actively facilitated the bidding. Mr. Caruk acknowledged he had no money to buy equipment. Mr. Tkachuk lent him up to $100,000 for that express purpose. It is immaterial that the loan came from Mr. Tkachuk personally rather than from the company he controls and directs. Did the plaintiff benefit? Certainly. It has leased all its cattle to Mr. Caruk and the equipment will be of significant value to the fulfilment of that contract. It is immaterial that it can be put to other uses as well. “For the benefit of the owner” does not have to mean for the exclusive benefit of the owner. 91) All one needs to ask is whether any of the other bidders at auction might have been interested in purchasing that same equipment on equivalent terms to those made available to Mr. Caruk immediate possession, no money down, no fixed date for repayment, and interest at 5% per annum until paid. The fact that nothing has been paid on the debt in two and one-half years underscores the concern The undisclosed arrangement between Mr. Tkachuk and Mr. Caruk gave the nephew a significant advantage at auction. That advantage was magnified by the fact he possessed “insider information” – he knew his uncle had guaranteed price from Ritchie’s for the equipment, because that information, which is not generally disseminated to the public at large, had been imparted to him by his uncle. 92) All one needs to add is that Mr. Tkachuk would have profited very significantly had his arrangement with the nephew gone undiscovered. He would have secured guaranteed price, while procuring the commercial advantages of having his cattle lease fulfilled using equipment the nephew could not otherwise have afforded to purchase. 93) In an area of commercial enterprise where bona fides are of fundamental importance, and particularly where an owner has the advantage of guaranteed price from the auctioneer “huge” price as Mr. Tkachuk put it to his nephew deliberate non-disclosure of material information can have an impact every bit as significant as deliberate and obvious misrepresentation The plaintiff should have disclosed the arrangements with Mr. Caruk to the defendants. In not doing so, and in allowing and enabling Mr. Caruk to bid at the auction, the plaintiff breached clause 3.07. 94) The decision in Kam’s Industrial Auctions Ltd. v. 331616 Alberta Ltd. (c.o.b. Ed Wiebe Contracting), 1990 CanLII 5549 (AB QB), [1990] W.W.R. 605 (Alta. Q.B.) was cited by the plaintiffs. Kam’s case involved situation where the auctioneer declared the price guarantee unenforceable for the owner’s failure to deliver equipment on time, in good working condition, and properly refurbished. The court was of the view the breaches were minor and the auctioneer was aware of the breaches for month and half before the sale took place. The owner argued that by proceeding with the sale, the auctioneer was estopped from relying on its right to terminate the price guarantee. The court agreed, holding that clause 3.02 gave the auctioneer the right to pay for the refurbishing and demand repayment from the owner, and the reasonable course would have been to for the auctioneer to give notice to remedy the defects rather than proceeding with the auction and invoking the provision nullifying the guarantee. 95) If had determined this matter involved nothing more than alleged breaches of Owner’s responsibility for refurbishing, or preparing the yard site, this case would have bearing. have concluded otherwise. breach of clause 3.07 strikes at the very foundation of agreements relating to unreserved auctions. Does Clause 4.05 constitute penalty? 96) The plaintiff argues that the consequence imposed for breach are in the nature of penalty, rather than liquidated damages. Snell’s Principles of Equity (27th ed. 1973) at page 535, which is cited with approval in H.F. Clarke Ltd. v. Thermidaire Corp. 1974 CanLII 30 (SCC), [1976] S.C.R. 319, states the applicable doctrine as follows: The sum will be held to be penalty if extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach. 97) In H.F. Clarke Ltd., supra, the amount exacted by the contract for breach of non-competition covenant was almost three times the amount the courts would have awarded on ordinary principles governing the assessment of damages. The Supreme Court of Canada stated that the contractual stipulation for liquidated damages was “disproportionate and unreasonable when compared with the damages sustained or which would be recoverable through an action in the courts”. The party in breach was relieved from the consequences of the penalty clause, and the issue of damages was remitted back for determination in the ordinary course. 98) For those cases where the conceivable losses arising from breach of covenant are not so readily quantifiable, the seminal decision of the House of Lords in Dunlop Pneumatic Tyre Co. v. New Garage and Motor Co. (1915) A.C. 79 (H.L.) enunciates the doctrine in more apt terms, saying: ...where the agreement is for an act other than the payment of money and the injury that may result from breach is not ascertainable with exactness, depending upon extrinsic circumstances, stipulation for damages, not on the face of the contract out of proportion to the probable loss, may be upheld... 99) The difficulty in assessing damages in the case of breach of clause 3.07 is obvious, particularly when the breach is only discovered after the auction sale is concluded. In S. M. Waddams, The Law of Contracts, (4th ed.), (Toronto: Canada Law Book, 1999), the author describes the difficulty of ascertaining damages in auction sales in other contexts, but the concerns are of equal force in the present one. At para. 35, the author asks: ...Would the auctioneer be liable to all potential bidders or only to the one who would have been the highest? If to all, what is the measure of damages reliance expenses or the loss of the chance of bidding successfully? If to the highest bidder, is an auction to be held in the court to determine who that would have been?... 100) How does one measure the loss to business reputation? If the extent of the loss likely to be caused by the breach is difficult to estimate, that is good reason for upholding the parties’ agreement: see McCuaig v. Kilbach 1945 CanLII 407 (SK CA), [1945] D.L.R. 117 (Sask. C.A.). 101) The provision for 14% commission on the gross proceeds of sale as consequence of breach of fundamental term of the contract is not extravagant or unconscionable and, as the defendants pointed out, they did not elect to exercise their conjunctive right in clause 4.05 to additional amounts as liquidated damages. The concluding paragraph would have entitled them, in addition to all other rights and remedies, to re-sell the property acquired by Mr. Caruk and to retain an amount equal to 20% of the proceeds realized. 102) In Ritchie Bros. Auctioneers (Canada) Ltd. v. AIMS International Systems Inc., supra, commission of 12% on the first $300,000 and 20% over $300,000 on the fair market value of equipment withdrawn by the owner from auction sale was considered to be fair, and genuine pre-estimate of damages, in circumstances where Ritchie Bros. had given the owner guaranteed minimum selling price on its equipment. 103) am satisfied the provision for 14% commission on the gross proceeds of sale does not constitute penalty. Damages for trespass and conversion regarding the combine sold to David Espenant? 104) On July 27, 2004 when Lorne Campbell entered onto the plaintiff’s property and removed the combine, the defendant Ritchie Bros. had paid the plaintiff in full by including the entire price of the combine in the gross proceeds of the auction sale and paying the same to plaintiff on April 22, 2004, less its 14% commission. Mr. Espenant had, as result, paid the balance of his unpaid purchase price to Ritchie Bros. The plaintiff argues his possessory lien over the combine continued because the unpaid balance was not remitted to him, and thus the taking by the defendants was an unlawful one. 105) The defendants rely on clause 3.03 of the “Contract to Auction”. Under this provision, the owner is to deliver the equipment to the auction site together with documents evidencing title, properly endorsed, and it concludes with the following words: 3.03 Delivery ... Owner hereby assigns Power of Attorney to Auctioneers for the limited purpose of executing on Owner’s behalf, all documents required to transfer title to, and permit registration or ownership of, any part of the Property by the purchaser thereof. The defendants also rely on clause 4.08 of the same contract, which states: 4.08 Creation of Lien in addition to any other rights or remedies available to Auctioneers, this Contract creates lien and charge upon the Property and may be registered under any Personal Property Security legislation as may be in effect from time to time and entitles the Auctioneers to seize and retain possession of the Property as security for, and/or to sell the Property to recover, all sums owing thereunder. 106) One might also add that clauses 4.11 and 4.12 have some bearing. They state (emphasis added): 4.11 Collection of Proceeds Auctioneers shall collect the full proceeds from the sale of the Property and Owner assigns to the Auctioneers: (a) the amount required to discharge and satisfy all charges, liens, claims, mortgages and encumbrances in respect of the Property; and (b) all amounts payable to Auctioneers hereunder, including commission and any advances, together with interest thereon which shall be repayable at the time of the sale. 4.12 Uncollected Proceeds Auctioneers may, as it deems necessary, re-auction any part of the Property not sold or paid for at the auction... 107) The combined effect of these provisions and the clear expression in clause 4.11 that it is the auctioneer’s responsibility to collect sale proceeds means that there could be no basis for objection if Mr. Espenant paid his unpaid balance to the auctioneers. Once he paid, he was entitled to possession of the combine. The auctioneers had limited power of attorney for the purpose of permitting the buyer to have ownership of the property purchased. The actions of Lorne Campbell on July 27, 2004 appear odious and high-handed, in light of the fact that legal proceedings were already underway, however it does not automatically follow that those actions constituted trespass in law. 108) In Perlitz v. DBM Heating and Air Conditioning Ltd., [1994] O.J. No. 1167 (Ont. Gen. Div.) (QL), the Court held that party taking possession of property under contractual right to do so (in that case an unpaid seller, DBM) was entitled to resort to ruse, or contrivance, to gain entry to the purchaser’s (plaintiff’s) premises for that purpose, provided there was no breach of the peace. In that case, DBM gained entry to the purchaser’s residence by misleading the housekeeper. In the Court’s opinion there was no trespass. These comments appear at paras. 61 and in 64-65: 61 The leading case in Ontario on repossession of goods is the decision of the Court of Appeal in Stackaruk v. Woodward et al., 1966 CanLII 284 (ON CA), [1966] O.R. 32 where, at p. 34, the classic statement in Bl. Com., pp. 3-4, is expressly approved, as follows: The right to recaption without process of law may exist at common law, by contract or by statutory authority. The limitations upon that right are stated in Bl. Com., pp. 3-4, to be II. Recaption or reprisal is another species of remedy by the mere act of the party injured. This happens when any one hath deprived another of his property in goods or chattels personal ... in which case the owner of the goods ... may lawfully claim and retake them wherever he happens to find them, so it be not in riotous manner, or attended with breach of the peace. The reason for this is obvious; since it may frequently happen that the owner may have this only opportunity of doing himself justice: his goods may be afterwards conveyed away or destroyed, and his wife, children, or servants concealed or carried out of his reach; if he had no speedier remedy than the ordinary process of law. If therefore he can so contrive it as to gain possession of his property again without force or terror, the law favours and will justify his proceeding. But as the public peace is superior consideration to any one man's private property; and as, if individuals were once allowed to use private force as remedy for private injuries, all social justice must cease, the strong would give law to the weak, and every man would revert to state of nature; for these reasons it is provided that this natural right of recaption shall never be exerted where such exertion must occasion strife and bodily contention, or endanger the peace of society. 64 It is also appropriate to deal at this point with the submissions on behalf of the plaintiff to the effect that DBM's representatives by entry to the house be means of ruse committed trespass. In my opinion there was no trespass. 65 Under the amended terms of the original contract DBM had the right to retake the goods in any of the circumstances there stipulated. As read the decision in Stackaruk, supra, and the excerpt therein from the Court of Appeal decision in R. v. Shand (1904) 1904 CanLII 109 (ON CA), O.L.R. 190, the actions of DBM in this case do not amount to trespass because its representatives entered pursuant to the provisions of the governing contract and did so without breach of the peace and so there was no trespass. The contractual provisions confer licence, exercisable in certain circumstances to enter the premises of the plaintiff where the goods are situate. 109) The plaintiff’s claim for damages for trespass and conversion must be dismissed. 110) The defendant’s claim solicitor-client costs pursuant to clause 4.03 of the contract which provides as follows: 4.03 Legal Costs should either party be required to participate in any action or proceeding in respect of this Contract, the prevailing party shall be entitled to recover all costs incurred, including legal fees, on solicitor and own client basis. 111) Having prevailed on all aspects of the litigation other than on the minor issue of the costs of power-washing, which conclude were wrongfully deducted from the sale proceeds, the defendants are prima facie entitled to costs on solicitor and client basis, but in the circumstances there are issues whether they should be restricted to one set of costs, and other issues relating to appropriate quantum. The issue of costs will be assessed by me on application made pursuant to Rule 565, with the defendants serving upon the plaintiff, and filing, draft bill in the form required for solicitor and client bill, an affidavit of disbursements, and written argument, and allowing the plaintiff 14 days to reply. If required, special time may be set aside for the hearing in consultation with the registrar. (1) The plaintiff will have judgment against the defendants in the amount of $1,316.64 together with prejudgment interest calculated in accordance with the provisions of The Pre-Judgment Interest Act, S.S. 1984-85-86, c. P-22.2, from the 12th day of April 2004 until paid, the said amount representing the power washing bill wrongfully deducted from the auction sale proceeds payable to the plaintiff; an (2) In all other respects, the plaintiff’s action is dismissed with costs, to be determined on a solicitor client basis, upon further application by the defendants under Rule 565 as herein directed. J. Y.G.K. Wilkinson
The primary issue is whether the plaintiff, the owner of certain farm equipment consigned for sale at unreserved auction, has indirectly allowed another individual to bid on its behalf, or for its own benefit. The plaintiff corporation agreed to sell its entire inventory of farm equipment at unreserved auction for a guaranteed return of $577,500. The guarantee was given by the defendant corporate auctioneers (Ritchie). The auction was to be conducted by the defendant corporate auctioneers (LeBlanc), a newly formed division of Ritchie. After the auction sale was concluded, the defendant refused to pay the plaintiff the guaranteed price. The defendant declared the guarantee unenforceable under provisions of the 'Contract to Auction' and ultimately charged the plaintiff a commission of 14% on the gross proceeds. The defendant alleges that the plaintiff indirectly allowed another individual to bid on its behalf or for its own benefit. HELD: 1) Clause 3.07 of the Contract to Auction prohibits an owner from bidding directly or indirectly, and from allowing any other person to bid on his behalf. The issue here is whether the plaintiff allowed a family member to bid for the plaintiff's benefit. A family member can be a bona fide purchaser as well as anyone else, but the nature of an unreserved auction dictate that such relationships be disclosed to the public. The essence of the problem and the underlying purpose behind clause 3.07 is to protect bona fide bidders, and to ensure that there be no surreptitious bidding by another for the owner's benefit. 2) The plaintiff allowed Mr. Caruk to bid at the sale for the plaintiff's benefit. It went beyond the passive act of allowing him to bid. It actively facilitated bidding. Mr. Caruk acknowledged he had no money to buy equipment. The plaintiff lent him up to $100,000 for that express purpose. It is immaterial that the loan came from Mr. Tkachuk personally rather than from the plaintiff company he controls and directs. The plaintiff corporation benefited. It has leased all its cattle to Mr. Caruk and the equipment will be of significant value to the fulfillment of that contract. 'For the benefit of the owner' does not have to mean for the exclusive benefit of the owner. 3) The undisclosed arrangement between Mr. Tkatchuk and Mr. Caruk gave the nephew a significant advantage at auction. That advantage was magnified by the fact that he possessed insider information. He knew his uncle had a guaranteed price from Ritchie's for the equipment, because that information had been imparted to him by his uncle. All one needs to add is that Mr. Tkachuk would have profited very significantly had his arrangement with the nephew gone undiscovered. He would have secured a guaranteed price, while procuring the commercial advantages of having his cattle lease fulfilled using equipment the nephew could not otherwise have afforded to purchase. 4) In an area such as this where bona fides are of fundamental importance, and particularly where an owner has the advantage of a guaranteed price from the auctioneer, a deliberate non-disclosure of material information can have an impact every bit as significant as a deliberate and obvious misrepresentation. The plaintiff should have disclosed the arrangement with Mr. Caruk to the defendants. In not doing so, and in allowing and enabling Mr. Caruk to bid at the auction, the plaintiff breached clause 3.07.  5) The provision for a 14% commission on the gross proceeds of sale as a consequence of breach of a fundamental term of the contract is not extravagant or unconscionable and, as the defendants pointed out, they did not elect to exercise their conjunctive right in clause 4.05 to additional amounts as liquidated damages. The concluding paragraph would have entitled them, in addition to all other rights and remedies, to re-sell the property acquired by Mr. Caruk and to retain an amount equal to 20% of the proceeds realized. The provision for a 14% commission on the gross proceeds of sale does not constitute a penalty. 6) The defendants' claim solicitor and client costs pursuant to clause 4.03 of the contract. The defendants are prima facie entitled to costs on a solicitor and client basis, but in the circumstances there are issues whether they should be restricted to one set of costs, and other issues relating to appropriate quantum. The issue of costs will be assessed by this Court pursuant to Rule 565, with the defendants serving and filing a draft bill in the form required for a solicitor and client bill, an affidavit of disbursements, and written argument. The plaintiff shall have 14 days to reply. 7) The plaintiff will have a judgment against the defendants in the amount of $1,316.64 representing the power washing bill wrongfully deducted from the auction sale proceeds payable to the plaintiff. In all other respects, the plaintiff's action is dismissed with costs.