Eureka Farms Inc. v. Luten et al, 2015 ONSC 431
COURT FILE NO.: C-842-13
DATE: 2015-01-23
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Eureka Farms Inc.
Plaintiff
– and –
Roelof Geuchien Luten also known as
Roel Luten And Roelofje Femmigje
Remmelts-Luten also known as
Roelofje Femmigje Remmells-Luten
Defendants
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
– and –
Eureka Farms Inc., Eva Boerkamp, Estate
Trustee of the Estate of Rene Boerkamp,
also known as Renatus Boerkamp and Eva
Boerkamp
Defendants to Counterclaim
David J. Medcalf, Counsel for the Plaintiff
G. Edward Oldfield, Counsel for the Defendants
G. Edward Oldfield, Counsel for the Plaintiffs by Counterclaim
David J. Medcalf, Counsel for the
Defendants to Counterclaim
HEARD:
THE HONOURABLE MR. JUSTICE R.D. REILLY
reasons for judgment
[1] One of the original plaintiffs, a principal of Eureka Farms Inc., Rene Boerkamp, passed away on November 25, 2013. Therefore, on the 13th of May 2014, Mr. Justice G. Taylor directed an order to continue with the title of proceedings as set out above. The original action in which Eureka Farms Inc. was the plaintiff involved a relatively small claim for compensation for property, which was alleged to be the property of Eureka Farms Inc. and was allegedly transferred to the defendants, Roel Luten and his wife. This transfer of farm property is the subject of the counterclaim and I shall deal with it in further detail. Counsel have advised me that they do not seek a ruling at this time with respect to the original action, but instead focus on the dispute arising from the transfer of the farm property. Depending to some extent on the court’s ruling with respect to any compensation the court directs, arising from the transfer of the farm property, the original action for a claim for the value of a skid steer, two televisions and related sound systems may well be resolved between the parties. I will then, as counsel have requested, focus only on the claim arising from the transfer of the farm property. For purposes of simplicity, I shall refer to the plaintiff in this action (by counterclaim) as Roel Luten and his wife, Mrs. Luten and the defendant as Eureka Farms Inc. and Eva Boerkamp, in her personal capacity (and as estate trustee of the estate of Rene Boerkamp).
[2] In order to better understand the background to this litigation, I shall deal first with the evidence of the defendant, Eva Boerkamp. She met her husband, Rene, in 1994 in Holland. They were married in 1996. They have three children, all in their teenage years. When they were married, Rene Boerkamp owned a mixed farm in Holland. In March of 2001, they emigrated to Canada and purchased certain parcels of land, one of which is the subject property. When they purchased the land, it was effectively undeveloped. They built a substantial barn to house pigs and an executive style home in 2002 and began a swine operation. They originally had an arrangement with an operation known as “Acre T” to supply them with piglets. Then they put in their own piglets. They purchased these piglets from various brokers. It was a large barn which had 16 rooms for the raising of piglets. Eva Boerkamp testified they dealt with several brokers for the supply of piglets and with respect to at least one supplier they lost “a lot of money” when “the market crashed”. Then they began to raise piglets that were supplied by a company called “Nature Pork”. Eva Boerkamp testified that they still owned the pigs in the barn. Eva Boerkamp testified that her husband Rene suffered from cancer and in January 2012, his cancer returned. In February 2012, Rene Boerkamp decided he did not wish to undergo further surgery and on November 25, 2013, tragically Rene Boerkamp passed away.
[3] She advised the court that in 2011 they had sold other properties, one of them abutting the subject property, in order to consolidate their finances. Then, in the Summer of 2011, they were approached to sell the subject property by Kevin Williams. She testified that they didn’t really want to sell, she even considered that if her husband passed away, she might stay in the house but rent out the barn. They purchased a new property to which she moved in March of 2012. The subject property was sold, the transaction closing on April 5, 2012, to the plaintiffs by counterclaim. Kevin Williams acted as agent for the vendors.
[4] Though it seems clear that Rene Boerkamp was principally responsible for the operation of Eureka Farms Inc., Eva Boerkamp was aware that for some time Allen Van Ravenswaay had supplied piglets to the barn.
[5] By January of 2012, she was aware that Mr. Van Ravenswaay was no longer supplying piglets to the barn and she told the court that she didn’t so advise Mr. Luten. She testified that to her knowledge, the barn last housed pigs in late January or early February of 2012. She further testified that as of early 2012, Rene’s illness made him unable to manage the barn. She told the court that if Rene had not been ill they would have continued to accept pigs, but conceded in cross-examination that neither she, nor to her knowledge Rene, took steps to advise Mr. Luten. The subject property is well described in two appraisal reports submitted on consent by counsel. The first is an appraisal report by Marleen van Ham dated March 20, 2012, which date is just prior to the closing of the transaction between the plaintiffs and the defendants. Marleen van Ham estimated the market value of the property at $2,360,000, slightly more than the price paid by the plaintiffs, Mr. Luten and his wife. The second appraisal was done by Mr. Karl A. Douglas & Associates Inc. dated May 31, 2013. They estimated a market value of $1,830,000. The descriptions in the appraisal reports are detailed and need not be repeated by the court. The subject property is approximately 55 acres and includes a very attractive, executive style home and a large barn suitable for housing as many as 10,000 pigs. The problem, put quite simply, say the plaintiffs is that they expected the barn would in fact be filled with pigs on closing, but in fact was empty.
[6] Marleen van Ham testified as a witness. She had prepared her appraisal report (Exhibit 6) for the CIBC for mortgage purposes. She detailed the basis for her report and conceded her respect for Mr. Karl Douglas as an appraiser. She advised the court that she appraises hog facilities approximately 10 times per year. She added that 2,000 – 4,000 head is a “standard” weaner barn. This barn was “large”, holding potentially 10,000 head and she conceded that since this barn appeared to be “out of production” it would negatively impact the property value.
[7] It may be significant to understand that the raising of swine involves essentially three stages. The first stage is that of the “early wean” piglets, the piglets that were housed in the Eureka Farms barn. They then become “feeder pigs” at seven weeks (25-27 kgs.). These piglets are then transferred to a finishing stage in a different barn, where they grow from 17-18 weeks at 120-130 kgs. and are then set for “harvest”
[8] I shall now turn to the evidence of Mr. Roel Luten. Mr. Luten is 51 years of age. He is married and he and his wife also have three children, all adolescents. He was originally a farmer in Holland and came to Canada first in 2002 when he purchased a 100 acre dairy farm. It was, as he put it, a “medium size” operation. In 2007 he returned to Holland.
[9] He had difficulties getting started in Holland, notwithstanding his previous experience, and returned to Canada in 2010-2011. He originally searched for a farm on which to raise chickens or turkeys when he returned to Canada. He knew Bart Veldhuizen as a real estate agent and as a friend. He also knew Terry Prestman of Farm Credit Canada (FCC). It was Mr. Terry Prestman who apparently introduced him originally to the Boerkamp operation at Eureka Farms Inc. He became interested in the possibility of a weaner or nursery barn. He was introduced to Kevin Williams, who was the real estate agent for Mr. Boerkamp. On December 13, 2011 he had a meeting at the Boerkamp farm with his agent, Mr. Veldhuizen and Kevin Williams, the agent for Mr. Boerkamp. A sale price was discussed. Mr. Luten testified that Rene Boerkamp said he had a contract with Mr. Van Ravenswaay of Nature Pork to supply piglets. At that time there were apparently 9,000 piglets in the barn. Mr. Luten testified that Mr. Boerkamp told him that Mr. Van Ravenswaay had supplied him with piglets for some eight years. They arrived at the barn, he testified at 5 kilos, aged 2-3 weeks and left at 25-30 kilos. The feed was supplied by Nature Pork. Mr. Luten was told that the arrangement with Mr. Van Ravenswaay was an “evergreen contract”, that there was no contract in writing. On his evidence, he was advised that two of the rooms in the barn were cleaned out and refilled each week and that Mr. Boerkamp told him that he would “guide” him for four weeks, if he purchased the property. He added that Mrs. Boerkamp was not involved in any negotiations. After the first meeting in the house, they all attended to the barn. He noted that all of the rooms, at least on the west side of the barn, were filled. He was impressed by the feeding operation (by auger), which was all computer controlled and he was advised that Nature Pork provided all veterinary services. He observed that there were two water lines in each room and that the floor was one of slats, with two manure pits below. There was a manure contract with a neighbouring farmer to remove the manure. He was aware that of the farm some 46 acres were workable. He still made no decision to buy the property and spoke with his wife in Holland by phone. He spoke with Mr. DeBoer, from the CIBC, who using his computer was positive about a plan for a pig nursery and with the relationship with Mr. Van Ravenswaay and Nature Pork. It seemed that “it was a good plan”. On December 14, 2011, together with his wife, he decided to buy the farm.
[10] Mr. Bart Veldhuizen, his real estate agent, prepared the agreement of purchase and sale at his home. Mr. Luten trusted Mr. Veldhuizen and testified they spoke Dutch together.
[11] The contract of purchase and sale was signed the 16th of December 2011. Then, Mr. Luten testified there was a meeting at Nature Pork with Kevin Williams, Mr. Van Ravenswaay and Mr. Boerkamp. It was clear from their conversation to Mr. Luten that Mr. Boerkamp had no written contract with Mr. Van Ravenswaay, that Mr. Van Ravenswaay acquired the piglets from Manitoba or Saskatchewan. They discussed the price that had been paid ($6.25) for piglets at that time and that on December 17th he returned to Holland. He agreed that prior to closing, the closing date was changed from May 1st to April 5th, but that he remained in Holland between December 2011 and April of 2012. Through that spring, he testified he received no indication from anyone that there would be no pigs in the barn on closing.
[12] He testified that on the 3rd of April 2012 he came to Canada with his wife and children. He had a lawyer representing him (Mr. George Jenkins of Tillsonburg) at that time. His real estate agent, Bart Veldhuizen arranged for Mr. Jenkins to act as his lawyer. He testified that Mr. Veldhuizen spoke with Mr. Van Ravenswaay, who advised that he would try and get the barn filled again.
[13] Mr. Luten at that point had deposited $110,000 on the purchase price of $2.35 million and he didn’t want to “walk away” and possibly lose his deposit. His family and all his possessions were now in Canada. He was both surprised and upset that there were no pigs in the barn, but he decided to close the transaction.
[14] Mr. Luten testified in some detail as to the efforts he then made to put pigs in the barn, including “gilt pigs” which normally are of 80-90 kilos.
[15] Renovation of the barns to accommodate larger pigs, which would include the installation of concrete slabs, would add considerable weight to the structure and would involve considerable expense. He considered several proposals, including that of Genex Corporation, which didn’t come to fruition. He continued to work with Mr. Eric DeBoer of CIBC with respect to increasing his financing. A further loan of $350,000 would not be enough for the renovations to accommodate larger pigs.
[16] Mr. Luten became unable to make his mortgage payments to CIBC and his loan was sent to “special loans”. At some point he was then served with a notice of sale (Exhibit 4) and finally on the 4th of December 2013 he signed a listing agreement (Exhibit 1, Tab 29) to extricate himself from his financial difficulties.
[17] On March 14, 2014, he accepted an offer of $1,800,000 (Exhibit 2, Tab 17) and after the sale he returned to Holland.
[18] He lost on the transactions some $550,000, taking into account the land transfer tax. He testified there were other expenses he incurred, which increased his losses. Finally, after all of these events, Mr. Luten testified he was “mentally down”.
[19] During these contract negotiations he testified that no notes were taken at the barn or anywhere else by himself or Mr. Veldhuizen. He agreed under cross-examination that Mr. Boerkamp and Mr. Van Ravenswaay made it clear that they simply had a verbal agreement with respect to the supply of piglets. At the meeting on December 16th he testified that his agent, Mr. Veldhuizen, did most of the talking and that Mr. Van Ravenswaay was clear he would not enter into a written contract. Under cross-examination he conceded that Mr. Van Ravenswaay made it clear he couldn’t guarantee a further pig supply.
[20] Mr. Luten went on to testify that after April, through the end of December 2012, the market for pigs was not good and that the price of feed went up.
[21] Mr. Luten also conceded that on the 25th or 26th of January 2012 he waived the conditions in the offer of purchase and sale with respect to the “existing manure agreement” and the “hog weaner contract”.
[22] Mr. Luten continued in his testimony to state that he arrived back in Canada on the 3rd of April, prepared to close the deal for the property, and the first time he heard that there were “no pigs” in the barn was on the date of closing, the 5th of April. On closing, some $1.5 million dollars was advanced by the bank and some $1.4 million dollars of the Luten’s own money was provided to close the deal.
[23] Finally, after Mr. Luten testified his diligent efforts to find a replacement for the weaner pigs had failed, in 2014 he sold the property at a loss (relative to what he had paid for the purchase of the property).
[24] He felt he had no option on closing, other than walking away and potentially losing his entire deposit.
[25] Mr. Bart Veldhuizen had a significant role to play in these events. He acted as the real estate agent for Mr. Luten. Mr. Veldhuizen is a mature individual of 51 years. His original education was from Fanshaw, with a diploma in agricultural business. He then received an MBA from WLU in 1998 and worked with the CIBC for 4 ½ years. He has been involved in real estate, as a sales representative, since 2002. He specializes in livestock farms, together with cash crop farms and deals with a great many immigrants to Canada. He originally worked for Mr. Luten in the sale of his dairy farm. Subsequently, he visited the Lutens twice in Holland and Roel Luten visited him at least twice in Canada.
[26] He advised the court that between 2007 and 2009, the hog industry had some “bad years”. In 2010 – 2011, the “better players” survived. 2010, 2011 and 2012 were “break even” years.
[27] He went on to advise the court that he has known Mr. Van Ravenswaay for a number of years and that Mr. Van Ravenswaay was a “major player” in the hog industry, that his company, Nature Feeds grows 30,000 head at any one time, amounting to approximately 100,000 head per year.
[28] He testified that when Mr. Luten arrived in Canada in 2011 he showed him some chicken farms which were on the market. Then, Mr. Perry Prestman of Farm Credit, suggested the Boerkamp property might be available. He then connected with Mr. Boerkamp through Kevin Williams, who acted as the real estate agent for Mr. Boerkamp. Although Mr. Luten was an experienced farmer, Mr. Veldhuizen was aware that Mr. Luten had no hog experience.
[29] Mr. Veldhuizen testified about the original meeting at the Boerkamp farm when he was present with Mr. Luten and Kevin Williams was present with Mr. Boerkamp. There was first a discussion in the house (and a tour of the house) and they then attended at the barn, where there was some discussion about the supply of piglets by Nature Pork. It was clear that the barn was appropriate for “segregated early weaners”. Their discussion revealed that the 16 rooms were full of early weaners. They were supplied by Nature Pork and the population flowed on a regular basis. It was clear from their discussion at that time, Mr. Veldhuizen said, that the relationship between Mr. Boerkamp and Mr. Van Ravenswaay (Nature Pork) was verbal. The contract was an “evergreen” contract. The relationship was verbal, based on a handshake. Mr. Veldhuizen testified he would not have expected a contract in writing. He added that Mr. Van Ravenswaay (Nature Pork) was a “top tier” man in the industry.
[30] Mr. Veldhuizen testified that the location of the farm and the quality of the barn were both excellent and that the nature of the relationship that had existed between Mr. Boerkamp and Mr. Van Ravenswaay was a very positive factor, although he was aware Mr. Van Ravenswaay had “significant” other barns available.
[31] This initial meeting at the Boerkamp farm took approximately 2 – 2 ½ hours. The following day there was a meeting to discuss financial affairs with Mr. DeBoer at the CIBC. He then crafted and presented the offer at the farm. Both Mr. and Mrs. Boerkamp were present, together with their agent, Kevin Williams and Mr. Luten. The original offer was signed back and was then accepted.
[32] After the contract was signed, there then followed a meeting with Mr. Van Ravenswaay, at Mr. Van Ravenswaay’s feed store, at which Mr. Boerkamp was present, together with Mr. Veldenhuizen and Mr. Luten. Mr. Luten was then introduced to Mr. Ravenswaay and Mr. Ravenswaay seemed very positive about continuing to supply piglets to the Eureka operation, though he made it clear that he wouldn’t offer a written contract. It was up to Mr. Luten to perform to ensure a continued supply. It was clear from their discussion that the relationship between Mr. Van Ravenswaay and Mr. Boerkamp had been lengthy and positive, for the purchase of piglets, at $6.50 per head.
[33] Mr. Veldhuizen testified that Mr. Luten arrived with his wife and children several days before the closing. Then about the 3rd or 4th of April, Kevin Williams advised Mr. Veldhuizen that there were no pigs in the barn. Mr. Veldhuizen so advised Mr. Luten, who was, according to Mr. Veldhuizen “shocked”. They went to see a lawyer, Mr. Jenkins, who advised them of the risk of losing the deposit and ultimately, Mr. Luten decided to close, notwithstanding the empty barn.
[34] Mr. Veldhuizen testified that by May or June in the spring, it was obvious that no pigs were available from Mr. Van Ravenswaay. He described how Mr. Luten looked elsewhere and told the court how Genex seemed to be a possible supplier, but that the barn had needed expensive renovation to accept the increased weight of the gilts that were available. He confirmed a price of some $450,000 to renovate to accommodate larger pigs and then testified how a listing agreement was signed on the 4th of December of 2012 for the original price of $2,350,000.
[35] He went on to testify that the “pool of players” was very limited to fill a barn this large, that there was an increased movement toward finishing pigs, as opposed to weaners.
[36] He advised the court of lowball offers of $1.2 - $1.5 million dollars that were obviously unacceptable and then of the final sale to Bright Ridge Pork Limited for $1,800.000. As it happens, Bright Ridge Pork is a company jointly owned by Mr. Veldhuizen and a Mr. Burt Van Maren. Part of the ultimate negotiations resulted in Mr. Veldhuizen agreeing to accept no commission, as agent for the sale (Mr. Van Maren apparently agreed to do some renovation to the barn, which would amount to some $290,000 so that at least one-half of the barn would now be suitable for “finishers”).
[37] Apparently, Mr. Veldenhuizen’s son now lives in the house on the property and acts as a manager of the farm.
[38] Mr. Veldhuizen concluded his testimony by advising the court that just prior to closing Mr. Luten had asked him to inquire about “pigs in the barn”. Mr. Veldhuizen then put the question to Kevin Williams and was advised that there were no pigs in the barn. Mr. Veldhuizen said that he was “shocked”.
[39] I now turn to the evidence of Mr. Kevin Williams, who acted as the agent for Mr. Boerkamp on the sale of the subject property. Mr. Williams is a real estate broker, with some 18 years of experience in the sale of agricultural properties. He testified he sells 1-2 pig farms every year. He has acted previously for the Boerkamps, having sold the subject property to the Boerkamps in 2002. He also acted for the Boerkamps in the sale of some 200 acres surrounding the home farm. He knows Mr. Veldhuizen and was aware that the Boerkamp farm might be available. He called Mr. Veldhuizen and then brought Mr. Luten to the farm. He confirmed the description the court heard from other witnesses about the initial meeting at the Boerkamp farm, in the house and then in the barn. He testified that Mr. Rene Boerkamp advised Mr. Luten that he owned the pigs in the barn and that he worked with Mr. Van Ravenswaay to provide pigs for the barn.
[40] Mr. Williams went on to testify that it was a difficult decision for the Boerkamps to sell. This was one of the largest nursery barns in Ontario. He said there was no contract between the Boerkamps and Mr. Van Ravenswaay for the supply of pigs. He testified that he found the barn was empty prior to the date of the amended closing, “probably” in early March of 2012, and told Mr. Veldhuizen “days” before the closing that there were no pigs in the barn.
[41] I now deal with the evidence of Mr. Allen Van Ravenswaay.
[42] Mr. Van Ravenswaay testified that he is in the “pig business”. He is the principal of Nature Pork Systems Inc., as well as Nature Feed Centre and Nature Farms. Nature Pork deals principally with early weaners and feeder pigs. He testified that in a sow unit piglets are born and become early weans in 18-21 days. He confirmed what other witnesses testified as to the “three site” production, after which the pigs move on to “farrow to finish”.
[43] He testified that 90% of the time he has a written contract with his barns. The contracts set out times and amounts to be paid. He testified as to his previous relationship with Mr. Boerkamp and then went on to testify about the vagaries in the industry. He testified that swine flu became an issue in 2009 – 2010 and as he put it the business “became a disaster”. The demand for pork was way down.
[44] As of 2009, he testified that Mr. Boerkamp would buy the early weaners from him and then Nature would buy them back and pay Eureka a management fee. This arrangement continued through 2011.
[45] As of January 2012, the price of piglets he could supply to the Boerkamp farm grew significantly and that he (Nature) couldn’t manage the increase. He went on to discuss with Mr. Boerkamp this increase in price and Mr. Boerkamp’s cancer and they mutually decided to just “put things on hold” for awhile.
[46] He agreed, essentially, with the meeting in late December with Mr. Luten, at which he told the court he had advised Mr. Luten and Mr. Veldhuizen that there were other suppliers. He confirmed that he told Mr. Luten he wasn’t interested in a written contract. He told them it was a “turn by turn” arrangement. In the spring, when Mr. Luten expressed concern about the absence of pigs in the barn, he explained to Mr. Luten why that was so and said there would be no pigs.
[47] Mr. Van Ravenswaay went on to advise that he received a telephone call from Mr. Veldhuizen in the Spring of 2012 to set up a meeting to try and find some pigs. He advised Mr. Luten that there were pigs available, but they were not really affordable. Mr. Van Ravenswaay advised Mr. Veldhuizen that supplying further pigs didn’t make “economic sense”.
[48] Mr. Van Ravenswaay testified that his working relationship with Mr. Boerkamp had been excellent. It was a good barn with good management, that his relationship with Mr. Boerkamp since 2005 was excellent. As of December of 2011, it looked like the pig market “was in for a decent run”. His attitude was “cautious but optimistic”.
[49] He was not aware of Mr. Boerkamp’s illness until January of 2012. He testified that the meeting in December of 2011 was “pleasant”. He went on to say that between the meeting in December and the decision made by him and Mr. Boerkamp in January, the “economics” had changed. His decision was to “wait and see”. He confirmed that he did not contact Mr. Luten to advise him that the barn was being emptied. However, he confirmed that he advised Mr. Luten at the December meeting that he would “have to do a good job” if he was to keep receiving pigs, but that he also advised Mr. Luten that there were other suppliers.
[50] It may be noted that during the Spring of 2012 there was some communication between Canada and Holland, focusing principally on Mr. Luten’s application for a work permit, which he still required to manage the operation of the farm which he had purchased, but there was no communication by Mr. Veldhuizen, Mr. Williams or Mr. Boerkamp to Mr. Luten that the barn was being emptied. Mr. Luten takes the position (understandably so) that he would have appreciated and perhaps benefitted from such news that would have given him an opportunity to consider, in a more timely fashion, his possible options.
[51] I now turn to the contract of purchase and sale, which is at the heart of this matter. This contract is found at Exhibit 1, Tab 2.
[52] As noted above, after the attendance at the farm and after Mr. Luten consulted by telephone with his wife, an agreement of purchase and sale was drafted by Mr. Veldhuizen as agent for Mr. Luten and signed by the parties on the 16th of December 2011. Most of the agreement is the usual boilerplate that would be found in a transaction of this sort. Included in that boilerplate, at paragraph 26, the agreement states:
- AGREEMENT IN WRITING: If there is conflict or discrepancy between any provision added to this Agreement (including any Schedule attached hereto) and any provision in the standard pre-set portion hereof, the added provision shall supersede the standard pre-set provision to the extent of such conflict or discrepancy. This Agreement including any Schedule attached hereto, shall constitute the entire Agreement between Buyer and Seller. There is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein. For the purposes of this Agreement, Seller means vendor and Buyer means purchaser. This Agreement shall be read with all changes of gender or number required by the context.
[53] Mr. Luten paid $10,000 at the time he presented the offer. He also agreed to pay a further deposit of $100,000 pursuant to Schedule A of the agreement “at the time of notification of fulfillment or removal of the condition pertaining to manure agreement and hog contract, as an additional deposit to be held in trust pending completion or other termination of this Agreement”.
[54] Schedule A to the agreement also included the following terms:
This Offer is conditional upon;
Seller ensuring that the existing manure agreement will be transferred to the Buyer and to the Buyers satisfaction.
Buyer arranging or assuming the Hog Weaner Contract to the Buyers Satisfaction.
Unless the Buyer gives notice in writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than six(6)p.m. January 13, 2012 that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller as aforesaid within the time period stated herein.
This Offer is further conditional upon the Buyer obtaining a Work Permit sufficient to allow him to enter Canada. Unless the Buyer gives notice in writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than six(6)p.m. March 30, 2012 that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller as aforesaid within the same period stated herein.
Seller agrees to advertise, prepare a Job Offer, and do all steps necessary to allow the Buyer to obtain a Work Permit valid for the position of Farmers and Farm Manager(NOC 8251).
Buyer and Seller agree to adjust the proceeds of the Hog Contract to reflect their respective periods of ownership.
Seller agrees to provide to the Buyer, management guidance in all aspects of the operation of subject operation for a four week period, at no cost to the buyer.
[55] A further term was added as well in Schedule A. This term states:
The Buyer shall have the right to inspect the property one further time prior to completion, at a mutually agreed upon time, provided that written notice is given to the Seller. The Seller agrees to provide access to the property for the purpose of this inspection.
[56] The closing date was originally set for May 1, 2012. In March, that closing date was amended to April 5, 2012.
[57] There was a further change to the agreement of purchase and sale. On January 26, 2012, Roel Luten waived the conditions with respect to the manure agreement and the “Hog Weaner Contract”. This waiver is found at Exhibit 2, Tab 2. It may be noted that the barn was emptied of pigs, it would appear over a period of several weeks following this waiver. Mr. Luten signed the waiver, effectively at his own risk, and in my view he is now bound by it. He had the opportunity at that time to make further inquiries, as difficult as that may have been logistically, and he failed to do so. His agent, Bart Veldhuizen could have clarified the situation at the farm and properly advised Mr. Luten.
[58] It must be remembered that in fact there never was a “hog contract” between Mr. Boerkamp (or Eureka) and Allen Van Ravenswaay. The only agreement between them was an “evergreen contract” whereby Mr. Van Ravenswaay supplied piglets to the Eureka barn and then purchased them back when they had gained some weight. There never was a contract for a continued supply of piglets. The arrangement could be terminated by either Mr. Boerkamp or Mr. Van Ravenswaay at any time (as it was).
[59] The plaintiffs also allege that the actions of the Boerkamps and Eureka Farms created an intentional interference with the economic interests of the defendants. The plaintiffs further allege that the defendants are responsible for false representations or at the very least negligent misrepresentations and that liability should be imposed upon the defendants for that reason. With respect, I disagree. I am familiar with the jurisprudence cited by the plaintiffs in this case and conclude it does not serve as a basis for liability on the part of the defendants.
[60] It must be remembered that when the contract was signed there is no evidence that Mr. Luten was assured the barn would be full of piglets on the date of closing. Indeed, quite the contrary. There may have been such expectation on his part based on the history between Mr. Boerkamp and Mr. Van Ravenswaay and the presence of piglets in the barn when the contract of purchase of sale was signed, but there was never an indication in writing or verbally that the barn would be full on closing. Mr. Luten’s evidence was that when he spoke with Mr. Boerkamp at the farm, Mr. Boerkamp simply advised him that Mr. Van Ravenswaay had supplied him with pigs for some eight years and that there were then some 9,000 pigs in the barn. Mr. Luten testified that Mr. Boerkamp said it was an “evergreen contract”, that there was in fact no contract in writing for the supply of pigs.
[61] Immediately after the contract was signed on the 16th of December 2011, there was then a meeting at Nature Pork, where Kevin Williams and Mr. Boerkamp were present. At that time it was made clear to Mr. Luten and he so testified that there was no written contract with Mr. Van Ravenswaay, that Mr. Van Ravenswaay simply supplied pigs which he acquired from Manitoba or Saskatchewan. Under cross-examination, Mr. Luten made it clear that his impression was that Mr. Boerkamp and Mr. Van Ravenswaay simply had a verbal arrangement and that Mr. Van Ravenswaay made it clear that he would not enter into a written contract.
[62] There is no evidence before the courts of a misrepresentation made to Mr. Luten, either negligent or otherwise. The leading case on negligent misrepresentation, in my view is Her Majesty the Queen v. Cognos Inc., 1993 CanLII 146 (SCC), [1993] 1 S.C.R. 87. The facts are quite different from the case at bar. However, the principle guiding the tort of negligent misrepresentation is well set out by Mr. Justice Iacobucci on behalf of himself and Mr. Justice Sopinka. At pages 15-16, Mr. Justice Iacobucci stated:
Though a relatively recent feature of the common law, the tort of negligent misrepresentation relied on by the appellant and first recognized by the House of Lords in Hedley Byrne, supra, is now an established principle of Canadian tort law. This Court has confirmed on many occasions, sometimes tacitly, that an action in tort may lie, in appropriate circumstances, for damages caused by a misrepresentation made in a negligent manner (citing precedent) …
The required elements for a successful Hedley Byrne claim have been stated in many authorities, sometimes in varying forms. The decisions of this Court cited above suggest five general requirements: (1) there must be a duty of care based on a “special relationship” between the representor and the representee; (2) the representation in question must be untrue, inaccurate, or misleading; (3) the representor must have acted negligently in making said representation; (4) the representee must have relied, in a reasonable manner, on said negligent representation; and (5) the reliance must have been detrimental to the representee in the sense that damages resulted.
[63] In the case at bar, there is no evidence of a misrepresentation made to Mr. Luten by Mr. Boerkamp or by anyone else. Indeed he was advised, from the onset, that there was no written or continued contract between Mr. Van Ravenswaay and Mr. Boerkamp or Eureka Farms Inc. Mr. Luten, from the onset, was advised of the “evergreen” nature of the relationship. He had the opportunity to further clarify the situation, though I appreciate the logistic problem that faced him given his presence in Holland to wind up his affairs.
[64] The plaintiff relies significantly on the recent Supreme Court of Canada judgment, Bhasin v. Hrynew (2014), SCC 71. This is now the leading case dealing with the duty of good faith between contracting parties and the duty of honest performance.
[65] Put quite simply, the plaintiffs allege the defendants failed to perform their contractual obligations honestly. The judgment in Bhasin v. Hrynew was penned by Mr. Justice Cromwell. In paragraph 1, the issue was clearly stated by Mr. Justice Cromwell “Does Canadian common law impose a duty on parties to perform their contractual obligations honestly?”
[66] At paragraph 25, Mr. Justice Cromwell stated:
The 1998 Agreement contained an “entire agreement clause” stating that there were no “agreements, express, implied or statutory, other than expressly set out” … The trial judge held, however, that this clause did not preclude the implication of a duty of good faith. The parties, she reasoned, cannot rely on exclusion clauses to avoid contractual obligations where there is an imbalance of power and that courts refuse to let parties shelter under entire agreement clauses where it would be unjust or inequitable to do so.
[67] At paragraph 27, Cromwell J. continued:
The Court of Appeal reversed and held that there had been no breach of contract. The duty of good faith in employment contracts could not be extended by analogy to other types of contract. In any event, the duty of good faith in the employment context is limited to the manner of termination and does not include reasons for non-renewal.
[68] The case of Bhasin v. Hrynew involved an employment contract, but I agree with the plaintiffs that the principles of good faith and honest performance of a contract have equal application to the case at bar.
[69] At paragraph 32 of the judgment, Mr. Justice Cromwell stated:
The notion of good faith has deep roots in contract law and permeates many of its rules. Nonetheless, Anglo-Canadian common law has resisted acknowledging any generalized and independent doctrine of good faith performance of contracts. The result is an “unsettled and incoherent body of law” that has developed “piecemeal” and which is “difficult to analyze”.
[70] At paragraph 33, Mr. Justice Cromwell continued:
In my view, it is time to take two incremental steps in order to make the common law less unsettled and piecemeal, more coherent and more just. The first step is to acknowledge that good faith contractual performance is a general organizing principle of the common law of contract which underpins and informs the various rules in which the common law, in various situations and types of relationships, recognizes obligations of good faith contractual performance. The second is to recognize, as a further manifestation of this organizing principle of good faith, that there is a common law duty which applies to all contracts to act honestly in the performance of contractual obligations.
[71] The court continued at paragraph 37:
This Court has not examined whether there is general duty of good faith contractual performance. However, there has been an active debate in other courts and among scholars for decades over whether there is, or should be, a general or “stand-alone” duty of good faith in the performance of contracts. Canadian courts have reached different conclusions on this point.
[72] The court then went on to cite the jurisprudence and quoted Kelly J. in Gateway Realty Limited v. Arton Holdings Ltd. (1991), 1991 CanLII 2707 (NS SC), 106 N.S.R. (2d) 180, where His Lordship stated:
The law requires that parties to a contract exercise their rights under that agreement honestly, fairly and in good faith. This standard is breached when a party acts in a bad faith manner in the performance of its rights and obligations under the contract. “Good faith” conduct is the guide to the manner in which the parties should pursue their mutual contractual objectives. Such conduct is breached when a party acts in “bad faith” – a conduct that is contrary to community standards of honesty, reasonableness or fairness.
[73] Justice Cromwell continued on behalf of the court at paragraph 39 to state:
The detractors of such a general duty of good faith have accepted a limited role for good faith in certain contexts but have held that it would create commercial uncertainty and undermine freedom of contract to recognize a general duty of good faith that would permit courts to interfere with express terms of a contract.
[74] The court went on to state at paragraph 45 quoting from “Chitty on Contracts”:
The primary object of contractual interpretation is of course to give effect to the intentions of the parties at the time of contract formation.
[75] The court continued at paragraph 47 to state that there had been many attempts to bring a measure of coherence to this “piecemeal accretion of appeals to good faith” (citing a number of learned authors):
By way of example, Professor McCamus has identified three broad types of situations in which a duty of good faith performance of some kind has been found to exist: (1) where the parties must cooperate in order to achieve the objects of the contract; (2) where one party exercises a discretionary power under the contract; and (3) where one party seeks to evade contractual duties.
[76] The object of this contract was the simple transfer of property. There is no suggestion that there was any lack of cooperation in the fulfillment of that obligation. Neither is there any evidence of the exercise of a discretionary power by Mr. Boerkamp or anyone else and finally I would conclude that subject to the contract of purchase and sale, Mr. Boerkamp had no other contractual obligations, apart from the plaintiffs would say, the duty to act in good faith.
[77] Mr. Justice Cromwell went on to recognize that there are classes of relationships that call for duty of good faith that would be implied by law. He cited the well known cases of Honda Canada Inc. v. Keays, 2008 SCC 39, Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (SCC), [1997] 3 S.C.R. 701 and Whiten v. Pilot Insurance Co., 2002 SCC 18.
[78] Having considered the history of the jurisprudence to this point, Mr. Justice Cromwell then considered “the way forward”. At paragraph 60 he stated:
Commercial parties reasonably expect a basic level of honesty and good faith in contractual dealings. While they remain at arm’s length and are not subject to the duties of a fiduciary, a basic level of honest conduct is necessary to the proper functioning of commerce. The growth of longer term, relational contracts that depend on an element of trust and cooperation clearly call for a basic element of honesty in performance, but, even in transactional exchanges, misleading or deceitful conduct will fly in the face of expectations of the parties: (citing authority).
[79] Mr. Justice Cromwell went on to summarize the current state of the law with respect to good faith and honest performance, at paragraph 62 through 66. He stated:
[62] I conclude from this review that enunciating a general organizing principle of good faith and recognizing a duty to perform contracts honestly will help bring certainty and coherence to this area of the law in a way that is consistent with reasonable commercial expectations.
[63] The first step is to recognize that there is an organizing principle of good faith that underlies and manifests itself in various more specific doctrines governing contractual performance. That organizing principle is simply that parties generally must perform their contractual duties honestly and reasonably and not capriciously or arbitrarily.
[64] As the Court has recognized, an organizing principle states in general terms a requirement of justice from which more specific legal doctrines may be derived. An organizing principle therefore is not a free-standing rule, but rather a standard that underpins and is manifested in more specific legal doctrines that may be given different weight in different situations: (citing jurisprudence and authority).
[65] The organizing principle of good faith exemplifies the notion that, in carrying out his or her own performance of the contract, a contracting party should have appropriate regard to the legitimate contractual interests of the contracting partner. While “appropriate regard” for the other party’s interests will vary depending on the context of the contractual relationship, it does not require acting to serve those interests in all cases. It merely requires that a party not seek to undermine those interests in bad faith. This general principle has strong conceptual differences from the much higher obligations of a fiduciary. Unlike fiduciary duties, good faith performance does not engage duties of loyalty to the other contracting party or a duty to put the interests of the other contracting party first.
[66] This organizing principle of good faith manifests itself through the existing doctrines about the types of situations and relationships in which the law requires, in certain respects, honest, candid, forthright or reasonable contractual performance. Generally, claims of good faith will not succeed if they do not fall within these existing doctrines. But we should also recognize that this list is not closed. The application of the organizing principle of good faith to particular situations should be developed where the existing law is found to be wanting and where the development may occur incrementally in a way that is consistent with the structure of the common law of contract and gives due weight to the importance of private ordering and certainty in commercial affairs.
[80] The court continued at paragraph 70:
The principle of good faith must be applied in a manner that is consistent with the fundamental commitments of the common law of contract which generally places great weight on the freedom of contracting parties to pursue their individual self-interest. In commerce, a party may sometimes cause loss to another – even intentionally – in the legitimate pursuit of economic self-interest: (citing jurisprudence). Doing so is not necessarily contrary to good faith and in some cases has actually been encouraged by the courts on the basis of economic efficiency: (citing further jurisprudence). The development of the principle of good faith must be clear not to veer into a form of ad hoc judicial moralism or “palm tree” justice. In particular, the organizing principle of good faith should not be used as a pretext for scrutinizing the motives of contracting parties.
[81] Mr. Justice Cromwell then went on to consider whether there should be a “new duty”. As he put it “the key question before the Court, therefore, is whether we ought to create a new common law under the broad umbrella of the ongoing principle of good faith performance of contracts.” At paragraph 73 he stated:
In my view, we should. I would hold that there is a general duty of honesty in contractual performance. This means simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. This does not impose a duty of loyalty or of disclosure or require a party to forego advantages flowing from the contract; it is a simple requirement not to lie or mislead the other party about one’s contractual performance. Recognizing a duty of honest performance flowing directly from the common law organizing principle of good faith is a modest, incremental step. The requirement to act honestly is one of the most widely recognized aspects of the organizing principle of good faith: (citing authority).
[82] The Supreme Court clarified at paragraph 77:
The precise content of honest performance will vary with context and the parties should be free in some contexts to relax the requirements of the doctrine so long as they respect its minimum core requirements.
[83] Mr. Justice Cromwell, on behalf of the court concluded at paragraph 93 with a summary of the principles:
(1) There is a general organizing principle of good faith that underlies many facets of contract law.
(2) In general, the particular implications of the broad principle for particular cases are determined by resorting to the body of doctrine that has developed which gives effect to aspects of that principle in particular types of situations and relationships.
(3) It is appropriate to recognize a new common law duty that applies to all contracts as a manifestation of the general organizing principle of good faith: a duty of honest performance, which requires the parties to be honest with each other in relation to the performance of their contractual obligations.
[84] I accept without reservation the principles enunciated in Bhasin v. Hrynew as they relate to the duties of contracting parties to act in good faith, in accordance with honest performance of the contract. I have considered and reconsidered the jurisprudence and in particular the case of Bhasin v. Hrynew, together with the persuasive submissions of Mr. Oldfield, on behalf of the plaintiffs. However, I conclude that the plaintiffs are not entitled to the relief which they seek (essentially the difference between the price which they paid for the farm property and the price at which they sold the property). Essentially, the plaintiffs received exactly what they contracted for, a farm property of some 55 acres, with a large barn and an executive house located thereon. There was nothing in the original contract which provided that the barn would be full of swine (of any age). Indeed Mr. Luten was aware that the swine that were in the barn when he signed the offer of purchase and sale were subject only to an “evergreen contract”, an ongoing relationship, which was not based on any written contract between Mr. Boerkamp and at the time, Mr. Van Ravenswaay.
[85] Mr. Luten was clearly advised that there was no ongoing commitment on the part of Mr. Van Ravenswaay to continue to supply piglets to the barn. He simply relied upon the previous history between Mr. Boerkamp and Mr. Van Ravenswaay to believe that that relationship would continue.
[86] I have considerable sympathy for Mr. Luten and his family, when they arrived in Canada to close the real property transaction and found the barn empty. However, the empty barn was not in any way a violation of the contract to which he had committed himself.
[87] Mr. Luten had a number of options available to him when he arrived in Canada to close the transaction. On April 5, 2012, he could have requested, or indeed insisted, that the closing date be delayed to May 1, the original close date of the transaction. Such a request may have been favourably received by the Boerkamps. Again, I would emphasize I appreciate his position, having arrived from Holland with family and possessions ready to move into the new property.
[88] He could have resiled from the agreement pleading that a barn full of piglets was part of the original contract (which I conclude it was not). Had he done so, he would have been at risk of a loss of his deposit ($110.000) or at least in theory, for a claim by the defendants for specific performance of the contract. It is not for this court to inquire into or pass judgment on any legal advice he may have received at that time. However, the bottom line is that he decided to close the transaction, to move his family into the property, which he obviously found initially very attractive and to attempt to establish a swine operation. Regrettably, largely for economic reasons, he was unable to do so.
[89] Again it is not for this court to speculate as to the numerous possibilities that may have flowed from the decisions made by the plaintiffs. However, in theory, the transaction may have closed with a barn largely or at least partially filled with piglets, but with Mr. Van Ravenswaay deciding three months or six months later that he could no longer afford economically to supply piglets to the Eureka operation. This decision, as I understand the evidence, is at least in part responsible for the joint decision of Mr. Boerkamp and Mr. Van Ravenswaay to cease the flow of weaner pigs. In that circumstance, the plaintiffs would have found themselves in somewhat the same position they did when they arrived to find an empty barn.
[90] The contract of purchase and sale, which is at the heart of this matter, did not include a barn full of weaner pigs. Mr. Van Ravenswaay is not a party to this action, nor should he be. It was clear to Mr. Luten from the onset that there was no “permanent contract” of any sort between Mr. Van Ravenswaay (or anyone else) and Eureka Farms Inc. It was simply an “evergreen arrangement”, which regrettably, after the Lutens arrived in Canada, was not economically feasible either to Mr. Luten or to Mr. Van Ravenswaay. That is very much to be regretted, but such are the risks of the market place, such are the risks of doing business in a swine operation or in any other business.
[91] Would it have been appropriate for Mr. Boerkamp to advise Mr. Luten, whether by telephone or any other communications that occurred (directly or indirectly) with respect to Mr. Luten’s work permit, that the flow of piglets to the barn had been interrupted? The simple answer is yes. That would have put Mr. Luten in a position where he could, in a more timely fashion, consider his options, either personally or through his agent, Mr. Veldhuizen. However, Mr. Boerkamp’s failure to do so (and in part I consider his medical condition) does not fall within the ambit of the duty of good faith and honest performance that has been clarified by the Supreme Court of Canada in Bhasin v. Hrynew.
[92] The Supreme Court has clarified the duty of honest performance and the duty of good faith, but it has not swept away all principles of contractual obligation. The plaintiffs contracted to buy a farm property and they received exactly what they contracted for. They were made aware of the risks, with respect to the swine operation, from the onset. Regrettably, those risks came to pass. The sympathy which this court has for their position does not permit the court to put aside the consequences of the contract to which the plaintiffs freely entered.
[93] Therefore, I direct that the claim (by counterclaim) is dismissed.
[94] I would be remiss if I did not commend counsel, Mr. Oldfield and Mr. Medcalf, for their thorough preparation and persuasive advocacy and thank them for the assistance they have been to this court, in this challenging matter. If counsel are unable to agree on the issue of costs, they may make brief submissions to me in chambers, within 60 days of publication of this judgment, with 30 days accorded to each counsel to reply to original submissions, if they so wish. If counsel feel it necessary to address the court orally, they make arrangements with the trial coordinator to do so. My comments apply as well to the original action by Eureka Farms against the Defendants related to the skid steer, the television sets and related sound equipment.
R.D. Reilly J.
Released: January 23, 2015
CITATION: Eureka Farms Inc. v. Luten et al, 2015 ONSC 431
COURT FILE NO.: C-842-13
DATE: 2015-01-23
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Eureka Farms Inc.
Plaintiff
– and –
Roelof Geuchien Luten also known as
Roel Luten And Roelofje Femmigje
Remmelts-Luten also known as
Roelofje Femmigje Remmells-Luten
Defendants
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
– and –
Eureka Farms Inc., Eva Boerkamp, Estate
Trustee of the Estate of Rene Boerkamp,
also known as Renatus Boerkamp and Eva
Boerkamp
Defendants to Counterclaim
REASONS FOR JUDGMENT
R.D. Reilly J.
Released: January 23, 2015
lr