Earl Kovach - v. -, 2012 SKPC 128

IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Citation: 2012 SKPC 128 Date: August 20, 2012 File: 109/11 Location: Broadview _____________________________________________________________________________ Between: Earl Kovach - and - The Peebles Co-operative Association Limited Self-Represented For the Plaintiff Douglas Pusch For the Defendant ______________________________________________________________________________ JUDGMENT R. GREEN, J ______________________________________________________________________________ I. OVERVIEW [ 1 ] Mr.

Kovach has been a member of the Peebles Co-operative Association Limited since 2002. In his application for membership (Exhibit D-1) he stated his address as Box 443, Kipling, Saskatchewan. From that time, to the present, he has farmed his mother’s land, located northeast of Kipling and legally described as NW 36-13-5 W2.

[ 2 ] In the spring of 2011, Mr. Kovach ordered diesel fuel from the Co-operative. This was primarily the product that he bought from this Co-operative after becoming a member. On the day he phoned the Co-operative to order this fuel he was given a price of 94 cents per gallon. There was a delay in supplying the fuel to him. When the fuel was eventually supplied the price he was charged had increased to 99 cents per gallon. The Co-operative refused to discount this fuel to the original price. This made Mr. Kovach angry. [ 3 ] Mr. Kovach then sought to have his equity in the Co-operative refunded.

By way of a letter dated May 20, 2011 (Exhibit P- 1), the Board of Directors of the Peebles Co-operative responded to Mr. Kovach’s request, refusing to refund his equity (which was $4,695.35). The Board said, under their policy, such a refund would only happen in the case of: (1) an application by his estate after his passing; (2) if he had reached the age of 68 years; or (3) if he had moved away from the Co-operative’s trading area for two years. [ 4 ] None of these conditions applied. Mr. Kovach then commenced this action claiming a refund of his equity.

The basis stated for this refund, in his Summons, was that he was no longer in the trading area of the Co-operative. II. THE RELEVANT BY-LAWS OF THE CO-OPERATIVE [ 5 ] The relevant portion of the by-laws of the Co-operative (Exhibit P-2) are as follows: Payment to Members 3.14 (

a) Subject to clause (d), the Co-operative shall purchase all of a withdrawing member’s shares at their par value and shall repay the member’s loans within six months of the date of the director’s approval of the withdrawal, when withdrawal is for one of the following reasons: (

i) death of a member; or (ii) the member has permanently moved out of the Co-operative’s trading area. (

b) Subject to clause (d), when withdrawal is for reasons other than those described in clause (a), the Co-operative shall repay those shares required as a condition of membership, at their par value and the member’s loans within six months of the date of the director’s approval of the withdrawal; and the balance of the member’s allocated earnings shall be paid within a period not exceeding 20 years of the date of the director’s approval of the withdrawal. (

c) Subject to clause (d), when the directors have terminated the membership of a person in the Co-operative, the Co-operative shall pay the amounts due to the member in the manner provided in the Act. (

d) When in the opinion of the directors, the payment of all amounts due to the members would impair the financial ability of the Co- operative or would be contrary to the interests of the remaining members, the directors shall pay such amounts according to the following order of priority: (

i) to persons whose memberships have been terminated; (ii) to estates of deceased members; (iii) to members who have withdrawn because they have moved permanently out of the trading area of the Co-operative; (iv) to members who have withdrawn for other reasons; (

v) to members who have reached the age of 70 years. (

e) The directors may purchase at par value a member’s shares, except for those required as a condition of membership, at such time and in such amounts as, in their discretion, the financial position of the Co-operative permits. [ 6 ]

Section 3.03 of the by-laws states that applicants for membership are required to purchase $10.00 worth of common shares of the Co-operative. That is what Mr. Kovach did when he applied for membership (as noted in Exhibit D-1).

III. MR. KOVACH ’S POSITION [ 7 ] The letter from the Co-operative referred to above (Exhibit P-1), stated that Mr. Kovach was being dealt with in the same way as any other Co-operative member according to Board policy. Mr. Kovach objected to that, saying that the Board meeting he attended to make his case at had free coffee and cookies, which were not available to other Co-operative members when they purchased fuel at the Co-operative’s retail outlet. Further, he filed as Exhibit P-3, a letter from the Saskatchewan Financial Services Commission.

That letter said the Co-operative had been investigated for a misleading advertisement about storage tanks, and had subsequently printed a retraction of that advertisement. Taken together, Mr. Kovach argued that these circumstances showed that representatives of the Co- operative were not telling the truth and, in total, could not be believed. [ 8 ] Mr. Kovach further submitted that he is not within the trading area of the Peebles Co-operative. He says that Box 443, Kipling, is his mother’s address, and that his address is Box 543, Broadview.

He further said that many of the farmers who are his neighbours buy fuel from a different co-operative or other retail vendor, therefore signifying that he does not live within the trading area of the Peebles Co-operative. He produced a list of the various retail fuel vendors, other than the Peebles Co-operative, that his neighbours buy fuel from (Exhibit P-8). IV. THE POSITION OF THE CO-OPERATIVE [ 9 ] The position taken by the Co-operative is simple. Mr. Pusch, on behalf of the Co-operative, said that Mr. Kovach does live within the trading area of the Co-operative.

He filed as Exhibit D-2 a map which outlines by highlighter the area around Peebles where the Co-operative delivers diesel fuel. I am satisfied from the map that Mr. Kovach’s farm falls within that area, and hence within the Co-operative’s trading area for diesel fuel. [ 10 ] Mr. Pusch stated that the trading area of his Co-operative is not defined in the by-laws, nor is it defined in writing. Quite frankly, he said the trading area is where the Co-operative does business with its customers. I take it from his evidence that the trading area may change over time.

He was asked whether someone who took a membership out who lived in Uranium City would be considered within the trading area of this Co-operative. He replied that was possible, if the Co-operative was prepared to deliver up there. Clearly though, this was a hypothetical situation and what he described in Exhibit D-2 was the Co-operative’s current trading area for diesel fuel. On the issue of free coffee and cookies for members of the Co-operative, he noted that these were available to members on “Members Days”. V.

ANALYSIS [ 11 ] Section 120(2) of The Co-operatives Act says that a member may withdraw from a co-operative on any terms and conditions provided in the by-laws of that co-operative. Mr. Kovach did not at any point testify that he had withdrawn from the Co-operative, although that could be inferred from his evidence. Clearly, his concern was the dispute over pricing of diesel fuel. His stated reason was that he was no longer within the trading area of the Co-operative. [ 12 ] The Co-operative is entitled through its by-laws to set conditions on when and whether equity will be repaid to its members.

I am satisfied that the by-laws of the Peebles Co-operative set out such conditions. My

interpretation of the Co-operative’s Board policy is that the policy being applied is actually more favourable to members wishing to withdraw their equity than that set out in the by-laws: (1) as the age stated is 68 years in the policy, and 70 years in the by-laws; and (2) as the by-law refers to a member permanently moving out of the Co-operative’s trading area, where the policy refers to moving out of the trading area for a period of two years. [ 13 ] I note that s. 2(1) of The Co-operatives Act defines “court” as the Court of Queen’s Bench.

I further note, in s. 188, that “action” is defined as meaning an action pursuant to that Act . I take that to mean a court action, which would, therefore, have to be brought in the Court of Queen’s Bench.

As there are several junctures in the Act where a specific action is described, and as there is no action specifically referred to in s. 120 of the Act regarding the withdrawal of members, I interpret this as leaving open the possibility of a member bringing an action in the Provincial Court for the return of equity from a co-operative, as a debt within the meaning of section 3(1) of The Small Claims Act, 1997 .

[ 14 ] That said, however, and regardless of whether this Co-operative does not regularly give free coffee and cookies to its members and whether this Co-operative put out a misleading advertisement it then retracted, I am not satisfied on a balance of probabilities that Mr. Kovach has made out his claim for the return of his equity. That is because:

(1) I am satisfied on the evidence that he was at the time he applied to become a member, and still is, farming within the trading area of the Peebles Co-operative; and

(2) I am satisfied that the decision taken by the Board of the Peebles Co-operative, as communicated in their letter to Mr. Kovach (Exhibit P-1), was a decision they were lawfully entitled to make under The Co-operatives Act and their by-laws. [ 15 ] This claim is dismissed. There will be no order as to costs. R. Green, J