Agriculture, Food and Rural Affairs Appeal Tribunal 1 Stone Road West

Tribunal d’appel de l’agriculture, de l’alimentation et des affaires rurales 1 Stone Road West

Guelph, (Ontario) N1G 4Y2 Tel: (519) 826-3433, Fax: (519) 826-4232 Email: AFRAAT@ontario.ca

Guelph (Ontario) N1G 4Y2 Tél.: (519) 826-3433, Téléc.: (519) 826-4232 Email: AFRAAT@ontario.ca

AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL

APPEAL:

Moran’s Farm Supplies Ltd. v New Holland Canada Ltd.

Moran’s Farm Supplies Ltd. v NHC 2000 ONAFRAAT 5

STATUTE:

Ministry of Agriculture, Food and Rural Affairs Act

HEARING:

March 14, 2000

DATE OF DECISION:

March 16, 2000

2000-05

NEUTRAL CITATION:

2000 ONAFRAAT 5

Moran’s Farm Supplies Ltd. v New Holland Canada Ltd.

IN THE MATTER OF THE FARM IMPLEMENTS ACT AND SECTION 16 OF THE MINISTRY OF AGRICULTURE, FOOD AND RURAL AFFAIRS ACT.

AND IN THE MATTER OF:

An Application to the Agriculture, Food and Rural Affairs Appeal Tribunal by Moran’s Farm Supplies Ltd. to resolve a dispute with New Holland Canada Ltd. arising from the application the Farm Implements Act. Moran’s Farm Supplies Ltd. claims interest on parts returned to New Holland that were not paid by the due date in accordance with Section 26 of the Farm Implements Act.

Appearances: Tim Moran, on behalf of the applicant, Moran’s Farm Supplies Ltd. Mark Barranger, on behalf of the applicant, Moran’s Farm Supplies Ltd. Simon Wilson, on behalf of the respondent, New Holland Canada Ltd.

DECISION OF THE TRIBUNAL

This application was heard in Guelph, Ontario on March 14, 2000. Moran’s Farm Supplies Ltd. (Moran) applied to the Agriculture, Food and Rural Affairs Appeal Tribunal (the Tribunal) to resolve a dispute with New Holland Canada Ltd. (New Holland) arising from the application the Farm Implements Act (the Act). Moran, relying on Section 26 of the Act, claims interest on parts returned to New Holland that were not paid by the due date.

The pertinent sections of the Act are as follows:

23(1) For the purposes of sections 24 to 30,

“agreement” means an agreement between a dealer and a distributor under which the dealer is required by the distributor to maintain an inventory of new farm implements and new parts supplied by the distributor;

“current net price” means the price listed in the distributor’s price list or catalogue in effect at the time the agreement is terminated;

“invoice price” means the price actually paid by the dealer for the new farm implement and, in respect of a new farm implement that has been rented pursuant to a written rental program approved by the distributor, means the price actually paid by the dealer for the new farm implement less the amount of any rental payments submitted to the distributor;

“new farm implement” means a farm implement that is not a used farm implement and includes,

(a) a farm implement that has been operated by or on behalf of a dealer pursuant to a written demonstration program sponsored by the distributor, and

(b) a farm implement that has been rented pursuant to a written rental program approved by the distributor;

“new part” means a part or parts assembly that has not been used and has not been removed from a complete farm implement;

“used farm implement” means a farm implement that has been operated for a distance or for a period of time in excess of that required to deliver it to the dealer and to enable the dealer to service, prepare and operate it for the purposes of sale. 1988, c. 61, s. 23(1), revised.

23(2) Sections 24 to 30 apply to an agreement that is in effect on or after January 1, 1990.

23(3) Subject to subsection (4), sections 24 to 30 apply to an agreement despite any agreement or waiver to the contrary.

23(4) A distributor and a dealer may agree in writing to repurchase terms that are more favourable to the dealer than the provisions of sections 24 to 30. 1988, c. 61, s. 23(2-4).

24(1) Within ninety days after an agreement has expired or is terminated, a dealer may by written notice require the distributor to repurchase all or any new farm implements and new parts supplied by the distributor under the agreement.

24(2) The notice to repurchase shall state whether the dealer intends to rely on,

(a) the provisions of this section and sections 25 to 30; or

(b) the terms of an agreement with the distributor under subsection 23(4). 24(3) If the dealer fails to make the election under subsection (2), the dealer shall be deemed to have

elected to rely on the provisions of this section and sections 25 to 30. 1988, c. 61, s. 24. 25(1) The distributor shall pay a repurchase amount to the dealer equal to,

(a) 100 per cent of the invoice price for each new farm implement; and

(b) 85 per cent of the current net price for each new part, plus transportation costs paid by the dealer for delivery of the new farm implement to the dealer’s place of business. 25(2) In addition to the amount payable under subsection (1), the distributor shall pay any other

amount owing to the dealer by the distributor. 1988, c. 61, s. 25. 26(1) The repurchase amount payable to the dealer by the distributor is due on the earlier of,

(a) the ninety-first day after the distributor receives the notice of repurchase; and

(b) the thirtieth day after the distributor takes possession of the new farm implements and new parts that are the subject of the notice. 1988, c. 61, s. 26(1), revised.

26(2) Interest at the prescribed rate shall be payable on any part of the repurchase amount that is unpaid after the due date.

26(3) The dealer and distributor may agree to extend the time for payment.

26(4) A distributor may deduct from the repurchase amount any amount owing to the distributor by the dealer.

26(5) A distributor may deduct from the repurchase amount the current net price, including a reasonable installation charge, for the replacement of any part of a new farm implement that is missing or damaged. 1988, c. 61, s. 26(2-5).

27 A distributor is not required to repurchase,

(a) a new part that is broken or damaged;

(b) a new parts assembly that is incomplete and cannot be completed at reasonable expense;

(c) a new part or parts assembly that has been removed from a farm implement and replaced at no cost to the dealer under a modification or warranty substitution program;

(d) a new part that is a seal or hose made of rubber, a gasket made of cork or a composition of materials, a seal made of leather, a liquid chemical that has deteriorated and is of limited use, or paint;

(e) a new part that is not clearly identified, or that is not resaleable as a new part without repackaging or reconditioning;

(f) a new part that is not listed in the distributor’s current parts record-keeping system;

(g) a new farm implement that is an attachment that,

(i) is not identifiable by a whole goods’ invoice,

(ii) is not resaleable as a new attachment without repackaging or reconditioning, or

(iii) does not fit a current new farm implement;

(h) a new farm implement or new part that has not been adequately prepared for shipment by the dealer within the ninety day period or extension of that period referred to in subsection 28(2);

(i) a new farm implement that was shipped to the dealer more than thirty-six months before the distributor receives the notice of repurchase. 1988, c. 61, s. 27.

28(1) The dealer is responsible for the care of a new farm implement or new part until the earlier of,

(a) the ninety-first day after the distributor receives the notice to repurchase; and

(b) the day the distributor takes possession of the new farm implements and new parts, and thereafter the distributor is responsible.

28(2) Despite clause (1 )(a), the dealer and distributor may agree to extend the time during which the dealer is responsible.

28(3) The dealer is responsible for preparing or packaging all new farm implements and all new parts so that they are acceptable by a carrier for shipment at the distributor’s expense from the dealer’s place of business. 1988, c. 61, s. 28.

The Evidence

Mr. Barranger, speaking for Moran told the Tribunal that:

• Moran surrendered its New Holland dealership in August of 1998.
• Notice of termination was given and Moran began returning parts to New Holland.
• The parts return ran well over the 90 day limit in the Act and New Holland agreed to the extension of time to return the parts.
• In December of 1998 Moran owed New Holland money and was being charged 15% compounded monthly on the outstanding balance.
• Once the parts return started New Holland offset the money owed by Moran. This practice is acceptable to Moran.
• In November of 1999 New Holland offered a settlement cheque of $8,484.47 on the condition that Moran sign a final release. Moran did not sign and the cheque was withdrawn.
• Moran talked to Finbar Desir, an employee of the Ministry of Agriculture’ Food and Rural Affairs familiar with the Act, seeking mediation of the dispute. On February 2, 2000, Moran requested a hearing with the Tribunal.
• New Holland delivered the November 1999 cheque, without conditions, to Moran on February 24, 2000.
• Moran seeks interest on its outstanding accounts.
• New Holland has agreed to pay interest on most of the returned parts. There are three items outstanding where New Holland has paid the principal but refuses to pay interest:

1 $1,623.82 for parts returned in May 1999 with payment due June 1999. Moran claims $175.37 in interest.

2 $685.37 for a conditioner roller that was delivered to Moran damaged and was returned to New Holland in May 1998. Moran claims $193.62 in interest. New Holland claims it attempted to contact Moran for more information but no contact was made until July 1998 and the information was sent by fax the same day or the following day.

3 $3,154.23 for an adjustment to a new implement purchase financing agreement that was disallowed by New Holland Credit in November 1998. Moran claims $665.54 in interest.

• While New Holland claims the parts return and principal payments made respecting the damaged roller and the disallowed new implement purchase financing agreement as concessions to Moran in order to settle the termination of the dealership, Moran claims these amounts as money owed and due and therefore subject to interest payment under the Act.
• With respect to the issue of the disallowed new implement financing agreement, Moran claims that it faxed a copy of the agreement to New Holland Credit on March 31, 1998 and followed up by sending a copy of the agreement to New Holland Credit by Purolator the same day. In support of Moran’s claim, Mr. Barranger filed with the Tribunal a photocopy of a Purolator slip dated March 31, 1998 indicating that a shipment was sent from Moran to New Holland Credit on March 31, 1998.

Mr. Simon Wilson addressed the Tribunal on behalf of New Holland. He told the Tribunal that:

• Moran surrendered its dealership September 1, 1998 and New Holland agreed to take back new parts.
• New Holland extended the time for parts return to May/June 1999.
• New Holland agrees with the interest rate used and the amount of the interest calculated by Mr. Moran but disputes that New Holland should pay any interest on the three items in dispute.
• New Holland has accepted all the other calculations provided by Moran relative to all the other parts and goods returned and accepted by New Holland. New Holland has paid this amount on February 24, 2000.
• New Holland agreed to pay the principal amount of the three items in dispute as a concession to settle the termination of this dealership. It paid these items after Mr. Desir mediated.
• The $1,623.32 item is for parts returned May 1999 that were non-returnable to New Holland. These parts were originally rejected and returned to Moran in accordance with Section 27(e) of the Act. These parts were incomplete or not resaleable without repackaging. As a concession to settle the dealer termination, New Holland agreed to pay for these parts that were originally rejected.
• The $665.37 item is for a conditioner roller that has been in dispute since the summer of 1998. Moran ordered the roller from New Holland’s Guelph distribution centre. New Holland’s Policy manual for dealers states that parts must be inspected on delivery and, if damaged, a claim must be made on the carrier at that time. New Holland’s distribution centre will request a credit from the carrier if asked to do so by the dealer. In this case, the shipment was made in May of 1998. Moran found damage on the rubber on one end of the roller. Moran sent in an incomplete service parts claim form saying there was concealed damage in the parts order. New Holland attempted to contact Moran for the information needed to complete the claim on the carrier and was unable to obtain the information until July 1998 at which time the 60 day liability on the carrier had lapsed. New Holland agreed to pay the principal amount of this part in October of 1999 as a concession to the dealer to help the termination process. New Holland denies liability for interest on this item.
• New Holland runs dealer incentive programs on a monthly basis. Each program runs from the first day of the month to the last day of the month. In order to ensure that dealers do not “shop the best deal” any incentive applications have to be delivered to New Holland on the last day of the month. Recognizing that a sale can be made on the last day, New Holland Credit will accept a fax copy of the application on the last day of the month provided a hard copy is mailed or sent by courier to New Holland Credit on the following day. New Holland Credit date stamps material received using the post mark date as the date of receipt. In this case, the credit application was faxed to New Holland Credit on March 31, 1998. The hard copy was sent by Purolator with a post mark date of April 3. This dealer incentive package was denied and Moran was credited with the dealer incentive package for April. The March deal had a 0.00% financing arrangement plus a percentage discount to the dealer. The April deal had double the March dealer discount but no special financing. The difference in the two incentive packages was calculated and the result sent to Moran on August 31, 1998 indicating that if Moran disagreed it could dispute the calculation until October 1, 1998. New Holland agrees that a Purolator package was received from Moran with a March 31, 1998 date but takes the position that the application form was not included in that package.

Mr. Wilson said that New Holland will pay the other interest charges, however, these last three charges are disputed. New Holland does not believe it is required to pay interest on these concessions made in an effort to settle the dispute with Moran.

The Issue

The only issue in dispute at this hearing is whether or not New Holland is obligated to pay interest for late payment on the three items still in dispute.

The Findings

Both parties expressly asked the Tribunal to deal with the items in issue, and agreed that the Tribunal has jurisdiction to deal with them in the context of the repurchase provisions in the Act. The Tribunal was also advised that there are a number of other outstanding issues between the parties. The Tribunal specifically restricts the findings and the decision to the issues precisely before it. The Tribunal does not intend any part of this decision to have any effect on any other issues outstanding between the parties.

The Tribunal gives effect to the agreement of the parties and orders that the interest amount not in issue, namely $1,235.40, be paid by New Holland to Moran.

In regard to the contentions matters, the first item is $1,623.82 for parts returned to New Holland, rejected and then, after mediation and reconsideration by New Holland, returned again to New Holland and accepted. New Holland selected these parts from a bevy of returned parts worth $3,600. In the particular circumstances of this case, based on the evidence presented, the Tribunal decided that New Holland should pay interest on the $1,623.82. The parties agreed that the interest amount is $175.37.

The second item is $665.37 for a damaged conditioner roller delivered to Moran in May 1998. Moran claims that he returned the damaged roller and when contacted by New Holland promptly responded with the information requested. New Holland claims that it received insufficient information to claim on the carrier on Moran’s behalf. New Holland attempted to contact Moran and had difficulty obtaining the necessary information with the result that the liability time for the carrier lapsed. It appears that neither party was diligent in pursuing this issue and much time lapsed with no action. New Holland is aware of the 60 day limit for making claim on the carrier and did not vigorously pursue Moran for the necessary information. Moran did not vigorously pursue credit for the part even though Moran knew it was being charged 15% interest compounded monthly on the charge. The Tribunal accepts the New Holland position that payment of this amount is a concession in an attempt to settle the termination of the dealership arrangement and therefore does not fall under the by back provisions of the Act. Therefore, no interest is due on this amount.

The third item is the interest on the $3,154.23 charge-back on the Dealer Sales Allowance. The contract of sale was signed on March 31, 1998. The credit application was a faxed to New Holland Credit Corporation on March 31, 1998. New Holland claims that the “hard copy” of the application was not “postmarked” in the Purolator package until April 3^rd , 1998. The practice of New Holland Credit is to hold the faxed copy of the credit application until the hard copy comes in and the hard copy must be “postmarked” by mail or courier the following day for the application to be valid. In this case the verbal evidence from Mr. Tim Moran at the hearing is that he definitely put the credit application into the Purolator package that was sent to New Holland Credit on March 31, 1998. New Holland agrees that a Purolator package dated March 31 was received from Moran. The Tribunal prefers the evidence of Mr. Moran over the business record evidence of New Holland. In the circumstances of this case, the Tribunal accepts the evidence of Mr. Moran that the work required of Moran was done appropriately, the application should have be honored and therefore this is an item where interest should be paid. Moran claims $665.54 in interest for this item and New Holland accepts this figure as the correct amount if it is required to pay.

ORDER OF THE TRIBUNAL

After careful consideration of the evidence filed and the submissions made the Tribunal orders:

1New Holland is to pay the agreed sum of $1,235.40 on account of interest to Moran for those items not in dispute.

2New Holland is to pay $175.37 in interest on the parts returned in May 1998 by Moran and accepted by New Holland but not paid for by New Holland until February, 2000.

3New Holland is to pay $665.54 in interest for the adjustments made to the new implement purchase credit application submitted March 31, 1998 and originally rejected August 31, 1998.

4No interest is due on the conditioner roller that was returned by Moran in May 1998.

5If the interest payments required under this order are not paid by April 14, 2000, interest at the rate of 15% per year, not compounded, is to be added to the unpaid balance until such time as the amount is paid in full.

The reasons for these decisions are:

1 The parties have agreed that the sum of $1,235.40 is due to Moran from New Holland.

2 In the particular circumstances of this case New Holland should have accepted $1,623.82 worth of parts under the repurchase provisions of the Act.

3 Neither party was diligent in pursuing their interests respecting the conditioner roller damaged in transit. The Tribunal accepts that New Holland’s payment for this part is a concession to help resolve the termination of this dealership agreement and, since it is a concession, no interest is due.

4 The Tribunal prefers the evidence of Moran that the credit application was sent in on time to comply with the terms of the incentive.