Court of Appeal for Ontario

Citation: Eureka Farms Inc. v. Luten, 2016 ONCA 969 Date: 2016-12-21 Docket: C60015

Before: Sharpe, Lauwers and Miller JJ.A.

Between:

Eureka Farms Inc. Plaintiff (Respondent)

and

Roelof Geuchien Luten also known as Roel Luten and Roelofje Femmigje Remmelts-Luten also known as Roelofje Femmigje Remmells-Luten Defendants (Appellants)

And Between:

Roelof Geuchien Luten also known as Roel Luten and Roelofje Femmigje Remmelts-Luten also known as Roelofje Femmigje Remmells-Luten Plaintiffs by Counterclaim (Appellants)

and

Eureka Farms Inc., Renatus Boerkamp also known as Rene Boerkamp and Eva Boerkamp Defendants to the Counterclaim (Respondents)

Counsel: G. Edward Oldfield, for the appellants David Medcalf, for the respondents

Heard: December 19, 2016

On appeal from the judgment of Justice R.D. Reilly of the Superior Court of Justice, dated January 23, 2015.

ENDORSEMENT

[1] This appeal arises from an agreement of purchase and sale of a swine farm. The appellant purchasers submit that the trial judge erred by dismissing their claim for damages for the loss they suffered when they were forced to sell the farm at a loss when they could not secure a supply of pigs.

[2] In our view, the trial judge properly dismissed the appellants’ claim on the basis of the terms of the written contract between the parties.

Duty of Good Faith

[3] The appellants submit that the respondent breached its duty of good faith, citing Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494, by failing to advise the appellants well in advance of closing that there would be no pigs in the barn when the transaction closed.

[4] Prior to closing, the principal of the respondent became gravely ill and market conditions for pigs took a turn for the worse. As a result, the vendor did not enter a new “turn by turn” arrangement with his supplier and there were no pigs in the barn at the time of closing.

[5] The agreement of purchase and sale contained a condition that gave the appellants the right to extract themselves from the agreement if they were unable to satisfy themselves as to the supply of pigs. The appellants met with the respondent’s supplier who told them that he was prepared to supply them with pigs but only on the basis of an oral “turn by turn” agreement. He declined to enter any written or long-term agreement. Following that meeting, the appellants waived the condition.

[6] After learning that the barn was empty prior to closing, the appellants did not ask for an extension of the closing date to verify their source of supply, nor did they refuse to close on the basis that the respondent was in breach.

[7] We agree with the appellants that at the time the agreement was concluded, both parties expected that there would be pigs in the barn at the time of closing. However, the appellants knew that they had no assurance of an on-going supply of pigs and by waiving the condition in their favour prior to closing, they assumed the risk that market conditions could change and that the supply of pigs could dry up. Even if the respondent should have told the appellants in a more timely fashion that the barn would have no pigs at the time of closing, we do not agree that that amounts to a breach of the duty of good faith sufficient to trigger a remedy for the appellants given the terms of the contact and the way it allocated the risk of market change.

[8] We conclude that the allegation of bad faith is insufficient to overcome the fact that the appellants knew they had no guaranteed source of supply and they assumed that risk by waiving the condition and closing the transaction with full knowledge of the fact that the barn was empty.

Negligent Misrepresentation

[9] The appellants submit that the respondent made a negligent misrepresentation when he failed to disclose that under the arrangement with the third party supplier in place at the time the agreement of purchase and sale was entered, the respondent was financing the supply of pigs by purchasing them when they came to the barn and reselling them to the third party supplier when they left.

[10] We agree with the respondent that any failure on its part to disclose the details of its arrangements with the supplier does not assist the appellants. First, the agreement of purchase and sale contains an entire agreement clause. Second, and in any event, the appellants met with the supplier and discussed with him the details of the arrangement the supplier was prepared to offer them if they purchased the farm. The appellants decided to proceed with the transaction on that basis and the terms of the respondent’s arrangements with the supplier are irrelevant.

Contractual obligation to have pigs in the farm on closing

[11] We do not accept the argument that the agreement of purchase and sale required the respondent to have pigs in the barn at the time of closing. There is no provision to that effect in the agreement. The trial judge made a finding that the provisions providing for an adjustment on closing regarding the proceeds of the hog contract and to provide management guidance for a four week period following closing could not be interpreted as creating a contractual obligation to ensure that there were pigs in the barn at the time of closing. That finding, in our view, was entirely consistent with the overall effect of the agreement. It was reasonable and is entitled to deference on appeal.

[12] Finally, we are not persuaded that the loss the appellants suffered was caused by the fact that there were no pigs in the barn at the time of closing. The supplier could not supply the appellants with pigs because of the adverse market conditions, and there is no evidence that the supply problem was causally related to the fact that appellants had acquired the farm with an empty barn.

[13] The real cause of the appellants’ loss was the significant rise in the price of pigs, an adverse market condition for which, on a fair reading of the agreement of purchase and sale, they had assumed the risk.

Disposition

[14] Accordingly, the appeal is dismissed with costs to the respondent fixed in the amount agreed to by the parties, namely, $15,000 inclusive of disbursements and taxes.

“Robert J. Sharpe J.A.”

“P. Lauwers J.A.”

“B.W. Miller J.A.”