COURT OF APPEAL FOR ONTARIO

CITATION: Thompsons Limited v. 617987 Ontario Inc., 2012 ONCA 178

DATE: 20120321

DOCKET: C52504

Rosenberg, Cronk and Watt JJ.A.

BETWEEN

Thompsons Limited

Plaintiff

(Defendant by Counterclaim)

(Respondent)

and

617987 Ontario Inc.

Defendant

(Plaintiff by Counterclaim)

(Appellant)

Raymond G. Colautti, for the appellant

John M. Skinner, Q.C., for the respondent

Heard: December 6, 2011

On appeal from the judgment of Justice Kelly Anne Gorman, of the Superior Court of Justice, dated September 16, 2010.

Cronk J.A.:

I. Background

[1] 617987 Ontario Inc. carries on a farming and crop-spraying business under the trade name “Triple P Farms” (Triple P) near Chatham, Ontario. Triple P is owned and operated by three brothers: James, Jerry and Dario Prelaz. Thompsons Limited (Thompsons) runs a grain elevator and other agriculture-related enterprises in various locations throughout southwestern Ontario.

[2] For more than two decades, Triple P and Thompsons enjoyed a mutually beneficial business relationship. Triple P purchased farming inputs (items such as fertilizer, seeds and pesticides required for its farming operations) from Thompsons. In turn, Thompsons contracted with Triple P from time to time to buy various of Triple P’s future grain crops for resale by Thompsons to third parties. For many years, Thompsons also hired Triple P to provide custom pesticide spraying to some of Thompsons’ farming customers in the spring of each year.

[3] At the beginning of January 2007, the parties’ long-standing relationship took a turn for the worse. In May 2006, the parties had entered into two soybean contracts (the Soybean Contracts) under which Triple P agreed to grow 203 acres of two varieties of soybeans – “Renwick” and “Respond” soybeans – for Thompsons. Under the terms of the Soybean Contracts, Thompsons agreed to pay Triple P a “seed premium” of $1.35 per bushel if the soybeans met stipulated quality standards.

[4] In December 2006, after testing the soybeans, Thompsons concluded that the Renwick, but not the Respond, soybeans failed to meet the contracted quality standards required for payment of the seed premium. As a result, in early January 2007, it informed Triple P that it would not pay the seed premium on the Renwick soybeans. It was prepared to do so, however, in respect of the Respond soybeans.

[5] Triple P disagreed with Thompsons’ assessment of the quality of the Renwick soybeans. It raised various objections to the testing relied on by Thompsons and sought payment of the seed premium on both the Renwick and the Respond soybeans. Angry and heated remarks were exchanged between one of the Prelaz brothers and a Thompsons’ employee. A meeting held at the end of January 2007 between the parties, attended by some of Thompsons’ senior staff, failed to resolve the matter or alleviate the hard feelings that had developed on the part of the Prelaz brothers.

[6] Unfortunately, the dispute widened in February 2007 when Thompsons informed Triple P that its pesticide spraying contract for the 2007 crop year (the 2007 Spraying Contract) would not be awarded to Triple P. Triple P was of the view that a Thompsons’ representative had orally agreed with, or represented to, Triple P in late December 2006 that it would be ‘business as usual’ with respect to Thompsons’ 2007 spraying work.

[7] Apart from the Soybean and the 2007 Spraying Contracts, the parties had also entered into a series of nine written contracts whereby Triple P agreed to grow corn and wheat for Thompsons, to be delivered in 2007 or 2008, for resale by Thompsons to its customers (the Futures Contracts). When the disputes concerning the Soybean and the 2007 Spraying Contracts erupted, Triple P threatened that it would not deliver the agreed-upon crops to Thompsons under the outstanding Futures Contracts. In early March 2007, one of the Prelaz brothers confirmed this position to Thompsons in a discussion with Bill Foran, a Thompsons’ local branch manager with whom Triple P had dealt for many years. In the event, Triple P did not deliver the crops contracted for under the Futures Contracts.

[8] Litigation soon followed. Thompsons sued Triple P in two separate actions for damages arising from Triple P’s breaches of the Futures Contracts. Triple P defended the actions and also counterclaimed for damages that it claimed to have suffered as a result of Thompsons’ alleged breaches of the Soybean and the 2007 Spraying Contracts.

[9] The actions were consolidated and tried together in January 2010. The trial judge concluded that: (1) Thompsons had established its claims in respect of the Futures Contracts; (2) Thompsons was not obliged to pay the claimed seed premiums under the Soybean Contracts because the Renwick soybeans “fell below grade” and Triple P had sold the Respond soybeans to a third party; and (3) no binding 2007 Spraying Contract had been entered into by the parties.

[10] Accordingly, by judgment dated September 16, 2010, the trial judge awarded Thompsons damages in the amount of $108,046.39, inclusive of prejudgment interest, on account of Triple P’s breaches of the Futures Contracts, together with costs in the sum of $60,000. She dismissed Triple P’s counterclaim.

[11] Triple P appeals. For the reasons that follow, I would dismiss the appeal.

II. Facts

[12] The trial judge thoroughly reviewed the evidence at trial in her reasons. It is unnecessary to repeat that review here. I will refer to the relevant evidence, and the pertinent facts as found by the trial judge, as needed in the course of my discussion of the grounds of appeal.

III. Issues

[13] I would frame the issues advanced on appeal by Triple P as follows:

(1) Did the trial judge err by failing to address essential elements of Triple P’s defence to Thompsons’ claims on the Futures Contracts?

(2) Did the trial judge err by failing to address Thompsons’ duty to mitigate its damages under the Futures Contracts and by failing to reduce the damages awarded to Thompsons accordingly?

(3) Did the trial judge err in her assessment of the merits of Triple P’s counterclaim: (a) by failing to find that Thompsons breached the Soybean and 2007 Spraying Contracts; and (b) in the alternative, by failing to address Triple P’s claim that Thompsons negligently misrepresented that the 2007 Spraying Contract would be awarded to Triple P?

IV. Analysis

(1) Triple P’s Defence to Thompsons’ Claims on the Futures Contracts

[14] Triple P advances three related submissions in support of its claim that the trial judge err by failing to address essential elements of its defence to Thompsons’ claims on the Futures Contracts.

[15] First, Triple P argues that the parties engaged in a single overall course of dealing, over many years, manifested by numerous related and interconnected contracts to which a general requirement of good faith dealing applied. As a result, Triple P says, the breach by one party of one of the “component contracts” entered into as part of the parties’ ‘overall business arrangement’ precluded the breaching party from relying on or seeking redress as against the non-breaching party under the other component contracts. Triple P contends that since Thompsons breached the Soybean and 2007 Spraying Contracts, the Futures Contracts were “discharged” and Thompsons was estopped from seeking relief in respect of Triple P’s non-performance of the Futures Contracts.

[16] Triple P next submits that, in early March 2007, the parties mutually agreed to terminate all their business dealings and go their separate ways (the Termination Agreement). In essence, Triple P asserts that Thompsons orally: agreed to sever all dealings between the parties; waived its right to insist on performance of or otherwise rely on the Futures Contracts; and released Triple P from its obligations to perform the Futures Contracts.

[17] Finally, Triple P maintains that the trial judge failed to address and make requisite factual findings concerning this defence theory. In effect, Triple P says that the trial judge failed to come to grips with Triple P’s defence to Thompsons’ claims on the Futures Contracts.

[18] There are several difficulties with this argument. I will first address Triple P’s ‘overall business arrangement’ theory.

[19] It is undisputed that the parties’ business relationship extended over many years. Thompsons argues, however, that the parties’ dealings involved numerous discrete contracts, each of which stood on its own. As a result, it says, the trial judge was required to consider Thompsons’ claims on the Futures Contracts on a stand-alone basis.

[20] As I read her reasons, the trial judge accepted this characterization of the essential nature of the parties’ relationship. In my view, on the record in this case, it was open to her to do so.

[21] The trial judge was mindful of the lengthy duration of the parties’ dealings and of the fact that they had entered into many contracts over the years, including the contracts at issue. She considered the evidence relating to the parties’ competing claims in respect of each of the disputed contracts and evaluated the merits of the claims advanced based on that evidence.

[22] I see no error in this approach. On the contrary, in my opinion, it was both justified and required by the pleadings and by the evidence concerning the contracts at issue.

[23] In its Statement of Defence and Counterclaim, Triple P alleged that Thompsons’ conduct in relation to the Soybean and 2007 Spraying Contracts “amounted to a repudiation and a fundamental breach of the contractual relationship between the parties”, as a result of which Triple P advised Thompsons in March of 2007 that “it would not be delivering” on the Futures Contracts. Triple P further alleged that, “At that time [Thompsons] accepted the termination of the contractual relationship between the parties.”

[24] However, nowhere in its pleading does Triple P assert, as it now claims, that the relationship between the parties was governed by an overall business arrangement consisting of interdependent constituent contracts. Instead, while adverting to the lengthy ongoing business relationship between the parties, Triple P’s pleading specifically and separately addresses the Soybean, 2007 Spraying and Futures Contracts. Thompsons defended Triple P’s counterclaim on the same basis.

[25] Nor is there any suggestion in Triple P’s pleading, as Triple P also now claims in its factum, that Thompsons breached “an overriding duty of good faith performance of contractual duties” that imposed an obligation on Thompsons “to refrain from breaching one set of contractual responsibilities while at the same time trying to enforce another.”

[26] Further, in its pleading, Triple P claims no damages or other relief on the basis of an alleged repudiation and breach by Thompsons of an umbrella business arrangement of which the disputed contracts formed but a part.

[27] Triple P’s overall business arrangement theory also lacks support in the language of the disputed contracts themselves. The thrust of this theory is that the contracts in issue were interdependent – the breach of one contract materially affected the rights and obligations of the parties in respect of all the remaining contracts.

[28] But there is nothing in the language of the Soybean or Futures Contracts, or in the evidence adduced at trial regarding the 2007 Spraying Contract, that indicates such interconnection among the contracts. There was no evidence at trial that any of these contracts was agreed by the parties to be related or subject to any of the other disputed contracts or, indeed, to any other contract at all.

[29] Finally, and importantly, Triple P’s overall business arrangement theory rests on the contention that Thompsons breached the Soybean or 2007 Spraying Contracts. The trial judge rejected this contention. As I will discuss later in these reasons, it is my view that, on the evidentiary record before her, she was correct to do so.

[30] I turn now to consideration of the alleged Termination Agreement.

[31] In contrast to the overall business arrangement posited by Triple P, Triple P did plead the Termination Agreement. As I have mentioned, in its Statement of Defence and Counterclaim, Triple P alleged that when Thompsons was informed in March 2007 of Triple P’s decision not to deliver on the Futures Contracts, Thompsons “accepted the termination of the contractual relationship”.

[32] The trial judge was alert to this allegation. She noted in her reasons that Triple P “claims it advised [Thompsons] of its intention to terminate the [Futures Contracts]”. Later, when describing Triple P’s position at trial, she stated:

When [Thompsons] refused to pay the seed premium, [Triple P] sought to terminate its agreements and relationship with [Thompsons] and subsequently did not deliver the contracted commodities. [Triple P] maintain[s] that the parties agreed to sever their relationship, and never believed that [Thompsons] intended to hold them to the delivery of the relevant commodities.

[33] The trial judge also referred to the provisions of the Futures Contracts, including a term thereof that required the written consent of both parties to the cancellation of the Futures Contracts. She also alluded to Bill Foran’s evidence, on behalf of Thompsons, that he was informed on March 1, 2007 by Jerry and Dario Prelaz that they were “all done dealing with us” and that “they probably wouldn’t be doing any future business with Thompsons”.

[34] In these circumstances, it is simply incorrect to say that the trial judge failed to take account of Triple P’s claim of the existence of the Termination Agreement. Triple P’s real complaint is that the trial judge failed to find that the parties in fact agreed to sever all their business dealings. In this regard, the trial judge accepted that Triple P had sought to terminate the Futures Contracts and all other dealings between the parties at the beginning of March 2007 and, further, that it had informed Thompsons of this intention. However, it is implicit in her reasons that she rejected the suggestion that Thompsons agreed to this course of action, or that it otherwise accepted Triple P’s repudiation of its obligations under the Future Contracts.

[35] There was evidence at trial supporting the rejection of the existence of the alleged Termination Agreement. Triple P claimed that the Termination Agreement was entered into in early March 2007 during two telephone discussions between Jerry Prelaz of Triple P and Wes Thompson, President of Thompsons. I agree with Thompsons’ submission that nothing in the words attributed by Jerry Prelaz to Wes Thompson constituted an agreement by Mr. Thompson that the parties would simply walk away from all their existing obligations or a release by him of Triple P’s obligations under the Futures Contracts.

[36] At trial, when describing his March 2007 conversations with Wes Thompson, Jerry Prelaz testified that they discussed the Soybean and 2007 Spraying Contracts. Although Mr. Prelaz claimed he understood from Mr. Thompson’s remarks that Mr. Thompson was suggesting that Triple P “might as well do business somewhere else”, he also agreed that Mr. Thompson did not mention the Futures Contracts or “whether or not he was looking for [Triple P] to fulfill those”. Nor did Mr. Prelaz suggest that he had raised the matter of the Futures Contracts, or the termination of all the parties’ contractual arrangements, with Mr. Thompson. His trial evidence on this matter was consistent with his testimony on discovery, which was read-in at trial during his cross-examination, regarding the nature of his discussions with Mr. Thompson.

[37] Thus, based on Jerry Prelaz’s own evidence, Wes Thompson did not discuss, let alone expressly agree to terminate, the Futures Contracts during his conversations with Mr. Prelaz. While Mr. Prelaz may have assumed that this was the result of his discussions with Mr. Thompson, it was certainly open to the trial judge to conclude, as she implicitly did, that Wes Thompson had not committed Thompsons to a Termination Agreement of the type posited by Triple P.

[38] Finally, I underscore that the Futures Contracts expressly provide for cancellation in writing. They state, in capital letters: “CANCELLATION OF ALL OR ANY PART OF THIS CONTRACT REQUIRES THE WRITTEN CONSENT OF BOTH PARTIES”. Written consent to the cancellation of the Futures Contracts was never provided by either party.

[39] The Futures Contracts also provide that the waiver by Thompsons of any breach by Triple P, “shall not be construed as a waiver of any future such breach nor affect or limit in any way Thompson’s right thereafter to enforce and compel strict compliance by [Triple P] with every term and condition hereof” (emphasis added).

[40] I would reject this ground of appeal.

(2) Thompsons’ Duty to Mitigate its Damages

[41] The evidence at trial established, and the parties accept, that Triple P informed Thompsons in early March 2007 of its intention not to deliver the crops purchased by Thompsons under the Futures Contracts. In its Statement of Defence, Triple P pleaded that: (1) the relevant market commodity prices in March 2007 were less than the prices stipulated in the Futures Contracts; (2) Thompsons had the opportunity “to fully mitigate its losses and damages by purchasing the required commodities at the prevailing market prices” when it became aware that Triple P would not be delivering on the Futures Contracts; and (3) Thompsons would have been “better off” if it had taken “reasonable steps to mitigate its damages by purchasing the commodities at the lower prices”.

[42] There was no evidence at trial of the prevailing market prices for substitute commodities contracts in March 2007. However, Triple P filed a “mitigation chart” at trial, detailing the prices received by Triple P when it sold the crops forming the subject matter of the Futures Contracts to third parties. Based on this chart, Triple P argues that Thompsons overstated its damages on some of the Futures Contracts and that Thompsons would have suffered no damages on most of the Futures Contracts had replacement crops or substitute future grain contracts been purchased by Thompsons at market prices in March 2007.

[43] Triple P submits that the trial judge erred by failing to take account of this evidence, by failing to make requisite findings regarding Thompsons’ duty to mitigate and, more generally, by failing to consider Triple P’s case on mitigation. I disagree for several reasons.

[44] First, on the record before this court, it appears that Triple P’s mitigation chart was simply filed at trial and, we were advised during oral argument, referenced by Triple P’s counsel during closing submissions. However, the chart does not address the availability of substitute future grain contracts, or the value of such contracts, if available, as of March 2007.

[45] Moreover, it does not appear that the contents of the chart were supported by any expert or other testimony at trial. And, no cross-examination of any of Thompsons’ witnesses appears to have been conducted regarding Thompsons’ alleged failure to mitigate its damages. Since it was Triple P’s position that Thompsons could reasonably have avoided some, if not all, of the damages claimed, Triple P bore the burden at trial to establish Thompsons’ failure to mitigate: Michaels v. Red Deer College, 1975 CanLII 15 (SCC), [1976] 2 S.C.R. 324, at p. 332; Barber v. Vrozos, 2010 ONCA 570, 269 O.A.C. 108, at paras. 94-95.

[46] Second, the trial judge’s reasons indicate that she was aware of Triple P’s claim that Thompsons was obliged to mitigate its damages under the Futures Contracts and that it failed to do so. She referred to Triple P’s mitigation argument near the outset of her reasons.

[47] It is true that the trial judge did not use the term “mitigation” again in her reasons. However, in her review of the evidence adduced by Thompsons at trial, she summarized part of the testimony of Thompsons’ merchandising manager, Darcy Oliphant, regarding the Futures Contracts:

Mr. Oliphant testified that ... once contracts are entered into with farmers for the purchase of a specific commodity, Thompsons would sell the contract at the locked-in price. [Thompsons] would then gain or lose depending on the fluctuating market. However, if the farmer did not deliver the commodity on the agreed upon day, Thompsons would be required to buy it from another grower in order to satisfy its contract to the third party. The price might be higher or lower than the initial contract.

Mr. Oliphant testified that Thompsons expects, and relies on, producers to physically deliver the crop contracted for. If there was a crop shortage, or drought, the contracts contain terms for its cancellation. However, if the crop was simply not delivered, [Thompsons] would wait until the last possible date for delivery – as stipulated in the contract, and calculate a “buy-out” price and charge an administrative fee.

[48] Then, at the outset of the analysis section of her reasons, the trial judge returned to Mr. Oliphant’s testimony. She stated:

Darcy Oliphant took the court through the price contracted with [Triple P] versus the market prices for the specific commodities on (generally) the last day for buy-out. [Thompsons was] required to wait until the last day for delivery on the contracts before [it] could obtain the commodities elsewhere. In each instance the CBOT price per bushel was higher than the contracted price. Accordingly, [Thompsons] suffered a monetary loss in having to replace the various commodities for resale. There appears to be no real issue as to the quantum of damages [Thompsons] alleges it suffered. Rather, the issue appears to be “set-off”. [Emphasis added.]

[49] Contrary to Triple P’s submission, these passages reveal that the trial judge was alive to Triple P’s mitigation argument. They also indicate, again, that she was cognizant of the terms of the Futures Contracts, which included this ‘valuation’ provision:

The producer [Triple P] agrees that if, for any reason, he is unable to completely fulfill his obligations as specified by this contract, by [a stipulated delivery date], the contract will be valued at the market less 15 cents bushel administration fee.

[50] Thus, the Futures Contracts themselves provided for the time when the value of each contract was to be calculated – the contracted delivery date – and for a valuation formula – market price less 15 cents bushel administration fee – in the event of non-performance by Triple P.

[51] According to Mr. Oliphant, the effect of this provision if the crop was “simply not delivered” was to require that Thompsons “wait until the last possible date for delivery – as stipulated in the contract, and calculate a ‘buy-out’ price and charge an administrative fee”. As I read her reasons, the trial judge accepted Mr. Oliphant’s testimony on this issue. She was entitled to do so.

[52] The above-quoted valuation provision of the Futures Contracts indicates that the parties turned their minds, at the time of contract formation, to the consequences of non-performance by Triple P, including the timing and method for quantifying Thompsons’ consequent losses, if any. In light of this express bargain, it is my view that Thompsons was entitled to rely on the valuation provision to forestall any obligation to purchase replacement commodities contracts or crops at an earlier date.

[53] And that is precisely what occurred in this case. Triple P unilaterally repudiated the Futures Contracts in early March 2007 by declaring its intention not to deliver the goods required under those contracts. In accordance with the valuation provision set out in the Futures Contracts, Thompsons then waited, in the case of each contract, until the contracted delivery date to “value” the contract and, hence, to ascertain its damages, if any. It then sued Triple P to recover those damages.

[54] In these circumstances, it cannot be said that the trial judge erred by ignoring or failing to deal with the issue of mitigation. Based on the terms of the Futures Contracts and Mr. Oliphant’s evidence, which she accepted, the trial judge rejected Triple P’s mitigation argument. It was in this context that she stated, “[t]here appears to be no real issue as to the quantum of damages the Plaintiff alleges it suffered. Rather, the issue appears to be ‘set-off’.”

[55] The trial judge then went on to hold, in effect, that no question of set-off arose in this case. On her findings, Thompsons did not breach the Soybean Contracts and it never entered into the 2007 Spraying Contract with Triple P. Consequently, Thompsons was not liable to Triple P and Triple P had no damages recoverable against Thompsons that could be set-off against any damages owed by Triple P to Thompsons.

[56] I find support for the conclusion that the trial judge did not err in her approach to the issue of mitigation in the general principles governing mitigation of damages. In Red Deer College, at pp. 330-331, the Supreme Court explained the duty to mitigate in breach of contract cases in these terms:

The primary rule in breach of contract cases, that a wronged plaintiff is entitled to be put in as good a position as he would have been in if there had been proper performance by the defendant, is subject to the qualification that the defendant cannot be called upon to pay for avoidable losses which would result in an increase in the quantum of damages payable to the plaintiff. The reference in the case law to a “duty” to mitigate should be understood in this sense.

In short, a wronged plaintiff is entitled to recover damages for the losses he has suffered but the extent of those losses may depend on whether he has taken reasonable steps to avoid their unreasonable accumulation.

[57] These principles gained further support in Asamera Oil Corporation Ltd. v. Sea Oil & General Corp., 1978 CanLII 16 (SCC), [1979] 1 S.C.R. 633. Asamera holds that in the event of an anticipatory breach or anticipatory repudiation of a contract, the innocent party is required to take reasonable steps to avoid further loss. Those steps, however, need not be taken immediately.

[58] The issue, then, is how these principles apply to non-performance of a contract for the sale of goods. The applicable authorities recognize that in the face of an anticipatory repudiation or anticipatory breach of contract, the innocent party may elect either to “affirm” the repudiation and sue for damages immediately, or to “disaffirm” the repudiation and treat the contract as subsisting for the benefit of both parties. In the latter event, the innocent party is entitled to wait to sue for relief until the performance date specified in the contract. S. M. Waddams in The Law of Damages, Looseleaf Edition (Toronto: The Cartwright Group Ltd., 2008) explains, at 15.400:

Where a party announces in advance an intention not to perform a contractual obligation, the innocent party may sue immediately for damages or may await the date of promised performance and sue then. If the innocent party sues immediately or otherwise accepts the repudiation, the plaintiff is bound to mitigate the loss, a result often expressed by holding that damages crystallize at that time. [Citations omitted.]

[59] Elsewhere in the same text, at 1.1570, Professor Waddams indicates:

Where non-delivery of goods is in question, the usual problem is to choose between alternative dates; when the market price changes between the date of repudiation and the date of promised delivery, there is an added problem. Even if the argument made elsewhere is accepted to the effect that the innocent party is bound to act reasonably in the case of anticipatory breach, it is by no means clear to what result this principle would lead in the case of an anticipatory repudiation by a seller of goods and a rise in market price between repudiation and date of due delivery. Although, in retrospect, it may have become apparent that the market was steadily rising, this is seldom obvious in advance because the current market price at any time itself represents predictions about the future. Thus, one can rarely say “the market is sure to rise” and similarly, it is submitted, it can rarely be unreasonable to fail to predict market changes. Where the price rises after the repudiation, the cases have generally held that the buyer can recover damages based on the higher price at the date of promised delivery. Though the analytical foundations may be open to attack, there is, it is submitted, considerable practical sense in the rule that a buyer can ignore a repudiation and recover the difference between contract and market price at date of due delivery, even if this is higher than the market price at the date of repudiation. [Citations omitted; Emphasis added.]

[60] In this case, it was Thompsons’ unchallenged evidence at trial, provided by Mr. Oliphant, that if a farmer failed to deliver on a Thompsons’ futures contract, Thompsons was obliged to purchase the crop in question from someone else in order to satisfy its own contractual commitments to its customers. Consequently, if non-delivery was foreshadowed, it was Thompsons’ custom to discuss an early “buy-out” of the futures contract with the defaulting farmer. If the defaulting farmer clearly indicated its acceptance of an early buy-out, Thompsons would attempt to purchase a substitute commodities contract or substitute crop at prevailing market prices. Failing such instructions, Thompsons was obliged under the terms of its standard form futures contracts, to wait for the last possible crop delivery date set by the applicable contract and to then buy-out the contract in accordance with the valuation provision agreed upon by the parties.

[61] In other words, on Thompsons’ undisputed evidence, its futures contracts determined both the timing and the price for the buy-out of a futures contract in the event of non-performance by a producing farmer, unless Thompsons and the farmer agreed otherwise.

[62] Under this approach, as the market prices for grain crops are constantly in flux, the defaulting farmer might benefit financially. Mr. Oliphant testified that if, at the contract delivery date, the contract price to be paid to the farmer was more than the market price for the crop in question, Thompsons would buy-out the contract by purchasing replacement grain at market price and paying the defaulting farmer the difference between the market and contract prices, less an administration fee. Conversely, if, at the contract delivery date, the contract price to be paid to the farmer was less than the market price, Thompsons’ loss, to be paid by the defaulting farmer, was the difference between the contract and market prices, plus an administration fee.

[63] There was evidence at trial that inquiries were made by Triple P in the spring of 2007 regarding an early buy-out of the Futures Contracts. However, Triple P did not pursue this option. Nor did it provide instructions to Thompsons, at any time, to complete an early buy-out of the Futures Contracts prior to the specified contract delivery dates. Instead, it simply treated the Futures Contracts as terminated and disposed of its crops elsewhere.

[64] For its part, on what I regard as the trial judge’s findings, Thompsons did not “affirm” Triple P’s anticipatory repudiation of the Futures Contracts. Instead, it elected to await the agreed-upon dates for performance under the Futures Contracts and to then value the Futures Contracts and determine contract buy-out prices, thereby establishing its losses, if any.

[65] Read as a whole, the trial judge’s reasons reflect her conclusion that Thompsons did not act unreasonably in doing so. I agree. By the terms of the Futures Contracts, the parties agreed to the allocation of the risks associated with non-performance by Triple P in a fluctuating grain market. The valuation provision in the Futures Contracts entitled Thompsons to wait for the last delivery date specified to determine its losses, even if, in the interval between the date of Triple P’s repudiation (March 2007) and the contract delivery dates in 2007 and 2008, market prices for the crops in question rose above the agreed contract prices. The trial judge’s reasons reveal that she appreciated the significance of the valuation provision in the Futures Contracts and the evidence as to its meaning and effect.

[66] I conclude that the trial judge did not fail to address Triple P’s mitigation argument. Nor did she err in her approach to it. While her reasons for doing so might have been more fully or clearly expressed, she simply rejected Triple P’s mitigation complaint, on the evidence. She concluded, in effect, that Thompsons’ actions in all the circumstances were reasonable. That was her call to make.

[67] I add this final observation. Thompsons and Triple P were not strangers. Neither party was in a less significant bargaining position than the other. Indeed, each was a valued customer of the other. By the time of their falling out, they had engaged in business together for almost 25 years. They were at liberty to structure their commercial affairs as they thought appropriate. In these circumstances, effect should be given to the terms of the Futures Contracts upon which they agreed.

(3) Triple P’s Counterclaim

[68] Triple P’s remaining ground of appeal concerns the trial judge’s assessment of the merits of its counterclaim.

[69] Triple P argues that the trial judge erred by failing to find that Thompsons breached the Soybean and 2007 Spraying Contracts and, in the alternative, by failing to consider Triple P’s claim for damages based on negligent misrepresentation in respect of the 2007 Spraying Contract.

[70] In my opinion, the trial judge’s finding that Thompsons did not breach the Soybean Contracts was firmly anchored in the evidence. Thompsons’ denial of a seed premium on the Renwick soybeans was based on its conclusion that these soybeans did not meet the contracted quality standards. The Soybean Contracts provided for the payment of a seed premium “on a clean seed basis if the seed meets CSGA and [Thompsons’] minimum quality standards”. They also stated that if the soybeans did not grade “Canada No. 1”, Thompsons had the option of either accepting or rejecting the soybeans for seed and/or negotiating a reduced price.

[71] There was evidence at trial that, on testing by Thompsons itself and by the Canadian Grain Commission at Bill Foran’s request, the Renwick soybeans fell below the seed grade specified in the Soybean Contracts. Triple P did not conduct its own grading or testing of the Renwick soybeans. Nor did it arrange for testing to be done by the Canadian Food Inspection Agency, as was permitted under the Soybean Contracts.

[72] Furthermore, when Triple P elected to sell the Renwick soybeans to a third party purchaser, Archer Daniels Midland (ADM), in mid-January 2007, ADM assigned the Renwick soybeans a grade of Grade 2, below the minimum grade agreed on by Thompsons and Triple P in the Soybean Contracts. Triple P also sold the Respond soybeans to ADM, although Thompsons had raised no complaint about their quality.

[73] Accordingly, there was ample evidence to support the trial judge’s finding that the Renwick soybeans fell below grade, thus disentitling Triple P to a seed premium on them. The trial judge’s finding that Thompsons was prepared to pay the seed premium on the Respond soybeans, but was prevented from doing so because Triple P unilaterally elected to sell them to a third party, is not challenged before this court.

[74] I also see no basis for appellate interference with the trial judge’s conclusion that Thompsons did not agree to award its 2007 spraying work to Triple P.

[75] Triple P’s claim that Thompsons offered and Triple P accepted the 2007 Spraying Contract rests on the evidence of a discussion between Jerry Prelaz and Bill Foran that occurred in late December 2006. At trial, Jerry Prelaz testified that, during this discussion, he inquired of Mr. Foran about the spraying work for 2007, asking: “So you think we will be able to carry on business next year as we did this year?” Mr. Foran replied “Sure”, but gave no indication of the number of acres to be involved in the work or of any other details concerning the 2007 spraying work.

[76] Based on this exchange, Jerry Prelaz said that he understood that Mr. Foran had provided “the indication that [Triple P] would be doing the spraying for 2007”. Mr. Foran also testified at trial. No questions were asked of him concerning this discussion with Jerry Prelaz.

[77] The trial judge concluded that this discussion was insufficient to constitute a contract between the parties for the 2007 custom pesticide spraying. She noted that the evidence established that, for several years prior to the discussion in contention, Thompsons’ annual spraying contracts were formalized in writing.

[78] In his own evidence, Jerry Prelaz acknowledged that, commencing in approximately 2000, Thompsons required written contracts for its spraying work. He also said that custom spraying contracts with Thompsons were usually “all signed, sealed and delivered by, in December”, even though the formal written contracts were often signed later. He said that, from Triple P’s perspective, this was “very important” because Triple P needed time to hire and train workers and to work out all necessary details before the start of the spraying season for the spraying work for Thompsons and Triple P’s other spraying customers.

[79] It is undisputed that no written 2007 Spraying Contract was entered into by the parties. In addition, even on Jerry Prelaz’s account of his December 2006 discussion with Mr. Foran, no details regarding Thompsons’ 2007 spraying work were ever discussed with Triple P.

[80] Further, it appears that after the December 2006 discussion, Triple P did not pursue a written contract for the 2007 spraying work with Thompsons although it knew that such contracts were required. It was not until mid to late February 2007, shortly before the spraying work was due to begin, that Jerry Prelaz again inquired of Bill Foran about the 2007 Spraying Contract. And, according to Mr. Foran, even in February 2007, he made no commitment regarding the 2007 spraying work.

[81] It is important to remember that by February 2007, a serious fissure in the parties’ business relationship had developed, tempers had flared and angry words had been exchanged. It was against this backdrop that Mr. Foran informed Triple P, at the end of February, that it would not be doing Thompsons’ 2007 spraying work.

[82] Viewed in this context, and in light of Thompsons’ admitted post-2000 practice of requiring written contracts for its spraying work and the lack of specificity in Mr. Foran’s remark to Jerry Prelaz in December 2006 regarding the 2007 spraying work, there was ample evidentiary justification for the trial judge’s conclusion that no enforceable 2007 Spraying Contract was entered into by the parties.

[83] Before this court, Triple P argues that the trial judge misapprehended its position concerning the 2007 spraying work. It submits that its claim on this issue was not based on breach of contract but, rather, on Bill Foran’s alleged misrepresentation, in his December 2006 exchange with Jerry Prelaz, that Triple P would receive the 2007 Spraying Contract. By reason of that alleged misrepresentation, Triple P maintains that Thompsons is estopped from denying Triple P’s entitlement to damages for its losses associated with the 2007 Spraying Contract.

[84] With respect, I have difficulty understanding the basis for this submission. The trial judge’s reasons must be read in the context of the case before her. Triple P’s claim regarding the 2007 spraying work, as pleaded, was framed solely in contract. Its Statement of Defence and Counterclaim makes no mention of misrepresentation, promissory estoppel or, more generally, tort-based relief. There is no suggestion that Triple P’s pleading was amended before or at trial.

[85] In any event, I regard Mr. Foran’s reply of “Sure” to Jerry Prelaz’s December 2006 inquiry whether the parties would be “able to carry on business next year as we did this year”, as falling far short of the particularity required to make out an actionable misrepresentation concerning the 2007 spraying work.

[86] It follows that Triple P’s claim for damages in relation to the 2007 spraying work, whether grounded in contract or in tort, was properly rejected by the trial judge.

[87] Finally, I recognize that Triple P also alleges on appeal that Thompsons breached an “overriding duty of good faith performance of contractual responsibilities”. Assuming, without deciding, that this claim is available to Triple P, it must also fail. It depends on a finding of contractual breach by Thompsons, which was not made out by Triple P.

V. Disposition

[88] For the reasons given, I would dismiss the appeal. I would award Thompsons its costs of the appeal, fixed in the amount of $18,000, inclusive of disbursements and all applicable taxes.

Signed: “E. A. Cronk J.A.”

“I agree M. Rosenberg J.A.”

“I agree David Watt J.A.”

Released: March 21, 2012