Holtrop Farms v. Delta Power Equipment, 2014 ONAFRAAT 14

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:

Holtrop Farms v Delta Power Equipment

Holtrop Farms v DPE 2014 ONAFRAAT 14

STATUTE:

Farm Implements Act

HEARING:

April 28, 2014

DATE OF DECISION:

May 27, 2014

2014-14

NEUTRAL CITATION:

2014 ONAFRAAT 14

Holtrop Farms v Delta Power Equipment

IN THE MATTER OF THE FARM IMPLEMENTS ACT

AND IN THE MATTER OF: An application to the Agriculture, Food and Rural Affairs Appeal Tribunal by John Holtrop of Holtrop Farms, Keswick, Ontario, under Section 5 of the Farm Implements Act from a dispute with Delta Power Equipment concerning a Lexion 570R Combine.

Before:

Jeffrey J. Hewitt, Vice-Chair; Mary Field, Member and Denis Perrault, Member

Appearances:

John Holtrop, Applicant

John D. Holtrop, Applicant

Ben Geiger, on behalf of the Respondent

Rob Clarke, Witness for the Applicant

Scott Dow, Witness for the Respondent

DECISION OF THE TRIBUNAL

This appeal was heard by the Agriculture, Food and Rural Affairs Appeal Tribunal (the “Tribunal”) in Guelph, Ontario on April 28, 2014. John Holtrop and John D. Holtrop for Holtrop Farms applied to the Tribunal for a hearing as a result of an unresolved dispute with Delta Power Equipment concerning a Lexion 570R Combine.

Background

In 2010, Holtrop Farms (“Holtrop”) purchased a used 2008 Lexion 570R Combine (the “Combine”) from Elmira Farm Equipment. At that time, Delta Power was a Lexion dealer and was familiar with the Combine, having sold it to the original owner. As it had in the past for some other farm equipment, Holtrop utilized the services of Delta Power (“Delta”) to service and repair the Combine.

In October of 2011, the Combine developed problems with its hydraulic pump and motor. Holtrop hired Delta to fix these problems, with parts that were obtained through Fenmar Diesel & Hydraulics Ltd. (“Fenmar”), a Toronto-based supplier; Fenmar was not a party to these proceedings.

Over the next year and a half, despite these initial efforts to repair and maintain it, the Combine experienced a series of subsequent failures related, in part, to the hydraulic pump and motor. Each time, Holtrop contacted Delta to effect repairs; each time, save for the last, Delta would come out to do those repairs and Holtrop would pay Delta’s account.

It is this last, but not final, event that brings us to the point we are at today. The Combine experienced another hydraulic pump and motor failure in late 2012. Again, Delta carried out repairs and, on or about May 13, 2013, rendered an invoice in the amount of $25,698.10. This time, Holtrop did not pay the account on the basis that the repairs were under warranty. When Delta disagreed with that position, Holtrop engaged the dispute resolution process provided by Section 5 of the Farm Implements Act, R.S.O. 1990, c. F.4, and an unsuccessful mediation was held.

Subsequent to the last event, the Combine developed an oil leak, which is the fourth and final failure to strike this machine and these parties. Holtrop again contacted Delta, which this time did not carry out repairs for differing reasons as discussed below.

Holtrop comes before this Tribunal asking it (i) to absolve Holtrop of having to pay Delta’s final May 13 invoice, (ii) to order Delta to pay Holtrop’s costs of approximately $10,235.97 associated with the fourth failure, (iii) to order Delta to pay Holtrop for extra costs of approximately $16,250 that it incurred in harvesting, and (iv) to order Delta to pay Holtrop for $25,000 loss incurred when it traded the Combine in for a new machine.

Evidence

The Tribunal notes that both the Applicant and Respondent were self-represented. While both Parties are to be commended for their efforts navigating in what is no doubt an environment very foreign to them (neither the Parties nor their representatives had been before the Tribunal in the past), it presents evidentiary challenges with which the Tribunal must deal. The Tribunal acknowledges that its Rules of Procedure allow for a more relaxed interpretation of the rules of evidence (in particular, the rule regarding hearsay), which is how it approached the evidence in this hearing. However, a relaxed approached does not mean that the basic principles of evidence are completely discarded; in order for the Tribunal to arrive at a decision in this case, we are, at times, forced to go to those basic principles.

In order to better understand the evidence summaries that follow, it is beneficial to know who the individuals and companies involved are:

• Holtrop Farms is the applicant; it is operated by the Holtrop Family, in particular, the father, John Holtrop, and the son, John D. Holtrop.
• Delta Power Equipment is a farm implements dealer and repairer; Jeff Pyke is a service manager at Delta, and Scott Dow is a technician.
• Fenmar Diesel & Hydraulics Ltd. of Toronto (Weston) provides parts to Delta; Steven Penney is an employee of Fenmar.
• HJV Equipment of Alison, Ontario, is a farm equipment dealer, which also services and repairs farm equipment; Rob Clarke is a technician at HJV.
• SunSource Tech Inc. is a company in Mississauga, Ontario that specializes, among other things, in hydraulics.
• CLAAS is the company that manufactured the Lexion 570R Combine that is the subject matter of this dispute.
• York Spring & Radiator Service Ltd. providing steam cleaning services on the Combine.

John Holtrop and John D. Holtrop, Applicants

John Holtrop is the father of John D. Holtrop; both are actively involved in the operations of Holtrop Farms. In order to maintain a chronological continuity to the evidence and with the consent of the Respondent, the Tribunal allowed both to testify concurrently. Due to the nature of the evidence, unless otherwise explicitly stated, it is immaterial whether father or son gave the evidence; as such, it is presented here as one narrative on behalf of Holtrop Farms.

Holtrop purchased a 2008 CLAAS-built Combine from Elmira Farm Equipment sometime in 2010. As Delta was familiar with the Combine, having sold it to the first owner, Holtrop utilized Delta for servicing and repairing the Combine. Holtrop was very happy with Delta’s work; Delta provided timely service and did field repairs.

In October of 2011, the Combine experienced mechanical problems. Delta was called and the problems were found to be in the hydraulic pump and motor. Delta removed the pump and motor and sent them to Fenmar for assessment. Jeff Pyke advised Holtrop that the pump and motor could be rebuilt with a six-month warranty, or that, for an additional $2,000, a brand new pump with a one-year warranty could be acquired from Sauer, which was the brand of pump that was on the Combine. Given that a new Sauer pump could be acquired over a weekend and that it would have a longer warranty, Holtrop agreed to spend more to obtain a new Sauer replacement pump. Delta’s Scott Dow, who is trained to repair CLAAS equipment, installed the new pump and repaired the Combine in the field, with the assistance of Mr. Holtrop Sr.’s brother-in-law. Delta invoiced Holtrop a total of $19,858.82, which invoice included the cost of the new replacement pump and motor; Holtrop paid this invoice. Despite a line entry on the Delta invoice that indicated that Delta had “cleaned and flushed all hydraulic lines”, the Holtrops stated that they did not see the system flushed by Delta at that time. For the sake of following the narrative and consistent with the language used at the hearing, this event shall be identified as the “First Failure”.

About a year later in or around October of 2012, in the middle of the Holtrop’s soybean harvest, the Combine failed again (the “Second Failure”). Although the Holtrops notified Delta about the problem, they arranged for HJV, which was then transitioning to be the CLAAS dealer in Ontario, to come to their immediate aid as HJV was closer to Holtrop than was Delta and time was of the essence because of the soybean harvest. HJV helped bring the Combine back to Holtrop’s home base, where it removed the hydraulic pump and motor, which was sent to Fenmar. While Fenmar blamed Holtrop for overheating the pump, Delta’s Mr. Pyke told the Holtrops that Fenmar had previously sent the wrong internal parts, incorrectly supplied by Sauer, for the proper external pump casing. Mr. Dow attended at Fenmar, had the pump rebuilt with the proper parts, returned to the Holtrop farm, and installed the pump on the Combine. Delta carried out repairs in December of 2012 and, by way of two separate invoices, charged Holtrop as follows:

• Invoice WS15137 dated January 29, 2013 in the amount of $529.80 for labour and shop supplies. Fenmar subsidized the cost of replacing and repairing the hydrostat pump and some labour as it had provided the wrong parts on the previous repair (First Failure).
• Invoice WS15330 dated January 29, 2013 in the amount of $1,386.68 for labour, removal of the pump and installing a hardened part. In the description of work done, the invoice states, “removed pump and took into Toronto, got pump rebuilt, drove back up and installed pump, primed pump and ran”.

The Holtrops testified that when Mr. Dow left, he was satisfied that everything was then right with the machine. Again, while the invoice stated that the system was “flushed”, the Holtrops testified that the system was not properly flushed.

Holtrop paid HJV $1,742.48 for services and $104.53 to York for cleaning related to the Second Failure.

At this point in the chronology, the Holtrops rely upon an email exchange with Marco Kaeser, a Switzerland resident who, as an exchange student, was on the Holtrop farm during the repairs for the Second Failure. In the first email from a Holtrop representative, Marco is asked: “When Scott came the last time to put in the second hydrostatic pump in December – did Scott complete the job himself or did he ask you to finish it off. If you did finish it off what did you need to do?” To which Marco replied: “Scott did almost the complete job by himself, i’m only gaved [sic] him a hand to put the pump back to de [sic] transmission and to put some hoses back on. all the rest he did him self [sic]. He also did all the checks if nothing is wrong.”

The next incident occurred on or around January 10, 2013. Mr. Holtrop Sr. was harvesting corn. Due to the cold weather, the ground was frozen and the Combine’s engine, oil and coolant had been pre-heated to bring it up to operable temperatures before the Combine was put to work. After approximately 40 to 50 separator hours, being the time the Combine’s separator mechanism was working as opposed to engine hours, Mr. Holtrop decided to return the Combine to its home base because of pending inclement weather. While on the journey home along a four-lane highway, the Combine locked up and would not move; oil was everywhere under the machine and the end of the hydrostat was blown off. HJV was called and gave advice to Holtrop who towed the Combine back to home base, and Delta was called to advise of another hydraulic system failure (the “Third Failure”). Holtrop finished the corn harvest with a second machine, which was less suited to harvesting corn in cold conditions and therefore resulted in damage to the kernels harvested.

HJV removed the hydraulic reservoir and other components. It found that the hydraulic tank was full of filings, that the “hydro” pump and drive motor were contaminated. Delta repaired the Combine and sent an invoice, dated May 13, 2013, to Holtrop in the amount of $25,698.10 for parts and labour. This invoice indicates that Delta thoroughly cleaned and flushed the system; the Holtrops agreed that, this time, Mr. Dow did an exemplary job of cleaning everything and were satisfied with the job that was done. However, Holtrop did not pay this particular invoice and believed that Delta should absorb the cost as a warrantied item.

As a result of the Third Failure, Holtrop did pay York $100.57 to steam clean the Combine’s cooler, and purchased $2,869.08 worth of hoses from HJV to replace those that were not cleanable. Also, HJV installed a kidney system to filter the fluids in the system at a cost of $688.95.

In July of 2013, while carrying out pre-harvest season maintenance, Holtrop discovered an oil leak on the hydraulic pump of the Combine (the “Fourth Failure”). Delta was called as the Holtrops believed this to be a warrantied item; they relied upon a letter from Delta dated May 27, 2013 and signed by Mr. Pyke that states, “Warranty on this machine will start from April 30, 2013, when it was installed for six months.” According to the Holtrops, Mr. Pyke advised that, as the last invoice for $25,698.10 remain unpaid, Delta would not help and that Holtrop would be on its own. Consequently, Holtrop contacted HJV to carry out the necessary repairs. HJV removed the pump and brought it to SunSource, as the Holtrops no longer felt comfortable with Fenmar. SunSource found foreign debris in the unit, that the piston “slippers” had worn and were too thin, and that the cylinder block bore surfaces were badly etched; these problems necessitated replacing all seals, bearings, swash cradle, valve plate, cylinder block and filter in the pump, at a cost to Holtrop of $5,467.24. HJV’s invoiced Holtrop $4,241.13 for the work necessary to reinstall the pump and getting the combine running once again.

Facing repairs that would not be completed until mid-August and a then-pending wheat harvest without a suitable combine, the Holtrops traded the Combine in on a new one. They stated that, as the Combine now had a history, it was under a “cloud” and they suffered a loss on a trade made under “duress”. Although they could provide no documentary evidence to substantiate such loss, they estimate it to be $25,000.

Further, the Holtrops stated that they suffered a loss because of downtime associated with the Combine being inoperative. They estimated their loss to be 100 hours (10 days at 10 separator hours per day) in November, and 30 hours in January; at $125/hour, this would be quantified as a $16,250 loss, although there was no evidence (such as time sheets, financial documents, expert reports, etc.) provided in support of this claim.

The Holtrops are of the opinion that this is a warranty issue. They state that Delta warrantied its work, both parts and labour, for a period of six months from the date of the repair. Although they did not point to any document relating to earlier repairs, they rely upon the letter from Delta dated April 30, 2013 to demonstrate Delta’s warranty period.

The Holtrops want to be reimbursed for repairs and services that they paid for following the Second Failure. They paid HJV $10,235.97 over five invoices as follows:

• Inv. S03538 dated February 14, 2013 in the amount of $7,039.91 for replacing transmission motor, checking hydraulic oil levels, located contamination, and advising how to remove Combine for the road. This invoice included the cost of a new hydraulic motor that was ordered by Mr. Holtrop and not used, resulting in a credit to the Holtrops in the amount of $4,603.10, which is the cost of the motor minus a restocking fee. Therefore, the total owing and paid under this invoice was $2,436.81.

• Inv. S03629 dated March 28, 2013 in the amount of $688.95 for installation of a kidney system.

• Inv. H66370 dated April 10, 2013 in the amount of $2,869.08 for replacement hosepipe.

• Inv. S04317 dated September 19, 2013 in the amount of $4,241.13 for repairs required after the Fourth Failure.

The Holtrops also paid $354.82 to York Springs over two invoices as follows:

• Inv. 147290 dated February 28, 2013 in the amount of $254.25 for cleaning out metal filings from the hydraulic tank.

• Inv. 147349 dated March 7, 2013 in the amount of $100.57 for cleaning and checking the oil cooler.

Lastly, the Holtrops paid SunSource $5,467.24 for Inv. 3965966-00 dated August 14, 2013, for diagnostic services and replacing all seals, bearings, etc. in the Combine.

Rob Clarke, Witness for the Applicant

Mr. Clarke has been a licensed farm equipment technician since 2008; he has worked for HJV for three years. He gave evidence regarding the Fourth Failure.

He stated that he found oil on the bottom cap where the swash plate of the hydraulic pump is located. In August of 2013, he took the pump off and sent it to SunSource for testing and repair. SunSource found contamination in certain places; some had more than moderate contamination, some more severe. He flushed the contaminated areas, changed the filters on the kidney system and ran the Combine for 10 hours; on another check of the oil, the samples came back clear.

Mr. Clarke explained the CLAAS flushing process, which occurs after installing a hydraulic pump to eliminate contamination, and the installation of a kidney system for one year and running the machine for 1,000 hours, to catch any residue left from an earlier failure.

According to Mr. Clarke, the new owner used the Combine in the bean and corn harvest in the Fall of 2013. After 400 separator hours, there have been no issues.

Under questioning by Delta’s representative, Mr. Clarke stated that he had never seen a failure on this type of combine in the past.

Ben Geiger on behalf of the Respondent

Mr. Geiger acted as both Delta’s representative at the hearing, and as its main witness. However, Mr. Geiger admitted, when questioned by the Tribunal, that he has no personal connection or involvement with this matter; he had been a service manager at Delta’s Exeter location for twenty years but not at the Seaforth location (which is the location that dealt with the Holtrop Combine). Currently, Mr. Geiger farms and runs his own service centre. As a result, all of Mr. Geiger’s evidence is technically hearsay – it is based on the documentary record and on what others have told him. Given that the documentary record of both the Applicant and Respondent contain Delta’s invoices, to which the Holtrops take no objection to the work done, the focus here will be on Delta taking a position different from that of Holtrop and on new information provided by Delta.

With regard to the First Failure, Mr. Geiger stated that the failure of the pump was as a result of the scoring of the valve plate in the pump motor. According to Mr. Geiger, in his opinion, this was not a “catastrophic failure”, and that Delta’s technician, Mr. Dow, cleaned the pump and flushed the lines as he thought appropriate in the circumstances.

However, Mr. Geiger produced as evidence a letter from Steve Penney of Fenmar that directly contradicted his own position. Mr. Penney wrote, in correspondence sent to Delta on or about March 25, 2014, that the “units had catastrophic failure”. He further wrote, “At this time [being the time of the repair], I informed Scott, Service Technician that they would need to clean Mr. Holtrop’s machine from contamination as per the manufacturer’s guide lines prior to the new units being installed back in service. The warranty from Sauer is one year from the time of invoice.”

For the Second Failure, Mr. Geiger pointed out, and relies upon, the notation on Delta’s invoice that the “customer [was] to get cooler flushed and installed”.

The Second Failure, it was agreed by Mr. Geiger, was the result of the hydraulic pump that was installed in October of 2011 having the wrong cylinder barrel, and that such was replaced by Sauer and Fenmar. When explaining how the warranty worked in this regard, Mr. Geiger stated that equipment purchased from an Original Equipment Manufacturer (“OEM”) would be warrantied for both parts and labour. Parts purchased “after market” would only have the part manufacturer or supplier’s warranty and that labour would not be warrantied. If the OEM had installed a Sauer pump that later needed to be replaced, the warranty would cover both the pump part and the labour; if the customer or the repair shop installed a Sauer pump that later required repair or replacement, then only the cost of the part would be warrantied, not, in the case of Delta at least, the labour to replace that part. Mr. Geiger went into this detail to explain why Delta, as strictly a supplier of labour, would not warrant the work component of the repair, while Fenmar gave a credit for the part.

With respect to the Third Failure, Delta again has provided, and relies upon, a letter from Mr. Penney of Fenmar to Mr. Pyke of Delta. This letter accompanied Fenmar’s invoice to Delta dated February 11th, 2013 and states:

As per our conversation regarding Mr. Holtrop’s combine, upon investigation of the first Sauer pump failure we had found that Sauer had sold us the incorrect parts for this application for the pump only. The drive motor had been taken apart at this time and found to be in perfect condition, which then had been assembled and tested. A Credit had been received from Sauer and forwarded to your company for this problem with the pump. The current failure with the drive motor that had been in service for one year previous to this failure had all the signs of improper start-up. This motor was completely destroyed and sent contamination throughout the hydraulic system. The contamination has gone through the system and damaged the pump as well. We have replaced the charge pump, drive shaft bearings and valve plate, lapped the cylinder barrel, resealed the pump and test it. The drive motor has been assembled with all new parts (housing, rotating group, valve plate, hold down sleeve, piston retainer and slipper bearing, drive shaft) except for the end cap which is a [sic] special for this application. The motor has been tested. The pump and motor are ready for service. As noted previous this machine will have to be taken apart to remove the contamination that has gone through the complete hydraulic system. Please let us know if we can help in any way. Best Regards Steve Penney

Mr. Geiger called this event a “complete and utter catastrophic failure”.

According to Mr. Geiger, Fenmar only warrants the parts it provides; it does not warrant any labour costs.

Mr. Geiger confirmed that, except for the final invoice dated May 13, 2013, Holtrop Farms has paid all of Delta’s invoices.

When questioned by the Tribunal, Mr. Geiger had no other information regarding the events in question.

Scott Dow, Witness for the Respondent

Scott Dow has been a mechanic with Delta for seven years. He has both levels of CLAAS training for the 500 series combine. He was the Delta mechanic that worked on the Combine that is the subject matter of this dispute.

When asked by the Tribunal, Mr. Dow summarized the Combine failures and his involvement as follows:

• First Failure – The Combine would not drive in forward gear due to scoring on the valve plate. He removed the hydraulic pump and motor and delivered them to Fenmar in Toronto. He picked up the replacement parts, went to the Holtrop’s field and installed them in the Combine, at which point in time it was then running properly.
• Second Failure – This failure was as a result of the cylinder barrel in the pump delaminating causing brass in the barrel to etch off. While Fenmar had assumed the problem to be heat related, the actual problem was caused by the incorrect barrel being installed by Fenmar (as a result of the wrong part being provided by Sauer). Mr. Dow installed a new replacement pump and flushed the hydraulic lines; however, Mr. Dow admitted that he did not use flushing method prescribed by CLAAS as there was no metal in the system. According to Mr. Dow, he instructed the Holtrops’ student, Marco, to carry out the remainder of the repairs required, specifically, (i) replace the cooler when it is returned, (ii) install two high pressure drive lines on the hydrostatic motor, (iii) fill the reservoir with oil, (iv) bleed out the air, and (v) start the Combine and run it; Mr. Dow believed Marco to be perfectly capable of carrying out the repairs. Mr. Dow has no knowledge of whether or not this work was done correctly or at all.
• Third Failure – This failure occurred when the brass slippers in the hydrostatic motor disintegrated, most likely as a result of a lack of oil to keep them lubricated — being the only situation in which Mr. Dow had previously seen this type of failure. Mr. Dow believes the oil did not get to the brass slippers because of an “airlock” in the system. Mr. Dow replaced the pump and hydrostatic motor, as well as other hydraulic motors and hydraulic lines, which had become contaminated by brass. He flushed the lines using the CLAAS system, bled the system out, added oil and tied a kidney system into the Combine’s existing lines. He started the machine and ran through the cycle procedure, then instructed the Holtrops to do it a second time.
• Fourth Failure – There was an oil leak at the bottom of the hydraulic pump. Other than talking to Mr. Holtrop Sr. and Mr. Penney of Fenmar, neither he nor Delta had any other involvement with the Combine as a result of this failure.

Findings and Reasons

Given the fact that the Parties were both self-represented, it is understandable (and stated with no disrespect to the Parties) that the legal issues that this Tribunal must resolve were not clearly and succinctly stated, such that we can easily state that this dispute is one over which we have jurisdiction under the Farm Implements Act (“Act”).

As a starting point, we rely on a previous decision of this Tribunal in the case of Sharalea Farms Inc. v. Vandenbink Farm Equipment 2009 ONAFRAAT 23, where the purpose of the Act was to provide, “among other things, a scheme to give farm implement buyers, and farm implement dealers and distributors, expeditious and economical mechanisms to resolve disputes about farm implements.” The Act defines “dealer” as a person who, in the ordinary course of business, offers farm implements or parts for sale at retail; given that definition, Delta is a “dealer” within the meaning of the Act as it offers parts for sale at retail. “Farm implement” is defined as any equipment or machinery designed and used for agricultural or horticultural uses and includes attachments; the Combine would fall within this definition. And, although the Act does not formally define “farmer”, it is also a given that the Holtrops are farmers. Accordingly, this matter falls, at first glance, under the Act as this process offers an expeditious and economical mechanism to resolve the Holtrops’ dispute with Delta over the Combine.

As for our specific jurisdiction to hear this dispute, we turn to those sections of the Act dealing with “Warranties”. As the Combine was not new when purchased by the Holtrops, nor was it under one year of age or have less 500 hours of operation, the statutory warranty provided under Section 14(1) of the Act does not apply.

However, Section 16 of the Act provides for an implied warranty as to the quality of repair parts:

(1) On the sale of a new repair part there is an implied warranty that the repair part will be free from defects in material or work for a period of ninety days from the date of purchase or, if purchased out of season of use, ninety days from the date it is first used by the purchaser in the next season of use.

(2) The warranty under subsection (1) applies only if the part is purchased from an authorized dealer and supplied by the same distributor who supplied the farm implement for which the part is intended.

Further, Section 17 allows the Parties to contract for a warranty that provides more than the statutory warranty set out in Section 16:

(1) A distributor or dealer may give a warranty in respect of a farm implement or repair part that affords greater protection or that has a longer duration than the warranties under this Act.

Therefore, the Act allows for both a statutory and contractual warranty dispute to come before this Tribunal (see Sharalea Farms Inc.).

Looking at the requirements for a statutory warranty to come into effect, the evidence must show (i) the repair part or work was defective within ninety days from the date of purchase, (ii) the part was purchased from an authorized dealer and supplied by the same distributor who supplied the farm implement for which the part is intended. If these conditions are met, then there is an implied warranty for defective parts or work.

The invoice that the Holtrops dispute is dated May 13, 2013, which is for repairs relating to the January 10, 2013 failure (being the Third Failure). The previous repairs arising from the Second Failure would be the repairs that would engage any warranty. Those repairs were carried out in December of 2012, within the ninety-day period that would have started in October of 2012; although exact dates were not specified in either instance, it is safe to state that there was less than ninety days between events. Therefore, the first part of the test (being a ninety-day warranty) for a Section 16 statutory warranty is satisfied.

Therefore, the repairs conducted in December of 2012 would be covered by the statutory warranty provided by Section 16 of the Act, provided the other elements of section are present. The Act does not define what an “authorized dealer” is; a common understanding of the term is that a party is authorized by the part supplier to sell the part in question, as opposed to a party trading in the parts on an unofficial level. Mr. Holtrop Sr. gave evidence that Delta was the official dealer of the make of combine in question; this evidence was not refuted by Delta. Delta purchased parts from Fenmar, which supplied Sauer pumps and parts purchased from Sauer. There was no evidence or submission by Delta that it was not authorized to sell the parts that it did. Accordingly, we find that Delta was an authorized dealer of the parts used to repair the Combine.

Further, Mr. Holtrop Sr. testified that Delta sold the Combine in the first instance to the original owner; again, this was not refuted by Delta. Therefore, we find that Delta was the distributor who supplied the farm implement in the first place.

Accordingly, the remaining requirements of the Section 16 statutory warranty are met.

In addition, the Tribunal finds that Delta offered a contractual warranty of six months, which is allowed under Section 17 of the Act. We rely upon the letter from Delta dated April 30, 2013, which states, “Warranty on this machine will start from April 30, 2013, when it was installed for six months”, to be indicative of Delta’s standard warranty. While Mr. Geiger testified that the warranty is only on the parts and that Delta did not warrant labour, we note that such a limitation is not stated in the April 30, 2013 letter. Further, Mr. Geiger stated that the parts are warrantied by their supplier; if this was the case and Delta did not warrant labour, then Delta would, in effect, not be warranting anything. Such a position is inconsistent with the concept of providing a warranty.

Therefore, given that the repairs made in December 2012 are covered by a statutory warranty of ninety days and/or a contractual warranty of six months, the issue becomes whether or not the problems encountered by the Combine are of a nature that is covered by the warranty. It is undisputed that the repairs made in December of 2012 (the Second Failure) were required as a result of improper parts being supplied by Fenmar when the Combine was repaired in late 2011. Delta carried out the December 2012 repairs and is responsible for the consequences of those repairs.

It should be noted that Holtrop has no contract with Fenmar. Its contract is with Delta, who obtained parts from Fenmar. Delta invoiced Holtrop for those parts on Delta’s invoices. Therefore, while Delta may take issue with Fenmar, as between Delta and Holtrop, liability rests with Delta; Fenmar is not a party before this Tribunal.

By his own admission, Mr. Dow did not follow the CLAAS method to flush the system after the Second Failure, even though this was the process prescribed by the manufacturer. We find this negligent on Mr. Dow’s, and therefore Delta’s, part.

Further, Mr. Dow stated that he did not complete all of the necessary repairs after the Second Failure, and that he gave Marco directions to install the cooler, install two high pressure drive lines on the hydrostatic motor, fill the reservoir with oil and bleed out the air. Mr. Dow stated that these tasks were done incorrectly as the Third Failure was the result of an airlock in the lines. Marco, by way of his email, wrote that Mr. Dow “did almost the complete job by himself” and that Mr. Dow “did all the checks” to see if anything was wrong.

We are reluctant to place much weight on Marco’s email as it is hearsay and therefore not subject to the scrutiny of any cross-examination. However, we need not do so in any event. We find that, accepting Mr. Dow’s version of the events as correct, he and therefore Delta were negligent in not finishing the work and not ensuring that it was done properly. These failures led to the subsequent failure (that is, the Third Failure).

Given the evidence, we find that the repairs made after the Second Failure¹ should have been covered by both a statutory warranty and a contractual warranty, and the Holtrops should not have been charged for those repairs. Accordingly, the Holtrops do not have to pay Delta Invoice WS15421 in the amount of $25,698.10.

Further, we find that the repairs following the Third Failure would also be under warranty, both statutory and contractual, and that Holtrop Farms should not have had to pay HJV, York and SunSource for the repairs those entities carried out. However, we do not believe that Delta should pay for the restocking fee as Mr. Holtrop admitted ordering such in haste before anyone had really checked out the Combine. Accordingly, Delta is ordered to pay Holtrop Farms $9,217.59 for costs incurred in repairing the Third Failure when Delta refused to honour its warranty.

With respect to this last issue regarding Delta refusing to honour its warranty, the Tribunal notes that Mr. Jeff Pyke, the Service Manager for Delta, sat beside Mr. Geiger throughout the hearing. Although Mr. Pyke had direct involvement in the Holtrop Combine matter, although given an opportunity to give evidence, and although Mr. Geiger was warned about the hearsay nature of his own evidence, Delta chose not to call Mr. Pyke as a witness. The Tribunal makes an adverse inference from this fact. Mr. Pyke could have refuted Mr. Holtrop’s claim about Delta refusing to honour its warranty after the Third Failure. He did not. The Tribunal therefore accepts Mr. Holtrop’s evidence in this regard.

As for Holtrop Farms’ claim for damages related to machine downtime costs and trading loss under duress, the Tribunal finds that there was insufficient evidence before it to allow these claims.

Order of the Tribunal

The Tribunal orders:

1. Holtrop Farms does not have to pay Delta Power Equipment’s Invoice WS15421 as these repairs are covered by Delta’s warranty, both statutory and contractual.

2. Delta Power Equipment is order to pay Holtrop Farms the amount of $9,217.59 to cover costs associated with repairs following the Third Failure that should have been covered by warranty.

Any party to this appeal may appeal the decision of the Tribunal on a question of law to the Divisional Court of the Superior Court of Justice in accordance with its rules of practice within 15 days from the day on which this decision was served.

Dated at Ottawa, Ontario this 27th day of May, 2014

Footnotes

1. 1It is important to note that it is the failure of the repairs following the Second Failure that resulted in the Third Failure. Therefore, it is the cost of the repairs following the Third Failure that is the quantification of the warranty cost associated with the repairs following the Second Failure.