6517633 Canada Ltd. - v. -, 2014 SKPC 202

IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Date: November 25, 2014 Citation: 2014 SKPC 202 File: File # 256/14 Location: Regina, Saskatchewan Between: 6517633 Canada Ltd. - and - Knudsen & Sons Muddy View Ranch Ltd. Stan Sheppard For the Plaintiff Kenneth Cornea For the Defendant JUDGMENT P. DEMONG , J

Summary [ 1 ] Stan Sheppard is the principal of 6517633 Canada Ltd. On or about the 29 th of May 2014, on behalf of his corporation, he entered into a written agreement with one of the principals of the corporate defendant to provide custom seeding services on approximately 1,050 acres of land owned by the defendant.

[ 2 ] Mr. Sheppard alleges that shortly thereafter, and without justification, the defendant repudiated the agreement before the contractual performance was to begin. He says that he accepted the repudiation on behalf of his company, and now brings action to recover those damages which flow from that breach of contract. [ 3 ] The defendant maintains that while it may have repudiated the agreement, it did so prior to the commencement of the contract, and then it remedied that repudiation by agreeing to abide by the terms of the agreement on the morning that the contract was to commence.

In the alternative, it maintains that if there were grounds upon which to treat the contract as breached, it was incumbent on the plaintiff to mitigate its damages, and the corporation failed to take reasonable steps in mitigation of its loss. Evidence [ 4 ] Mr. Sheppard is the president of 6517633 Canada Ltd. and has the ostensible authority to enter into contracts on its behalf. When Mr. Sheppard is not farming his own land he pursues other business on behalf of his company which includes custom seeding services. [ 5 ] On or about April 24, 2014 and running through until June 16 of 2014, Mr.

Sheppard posted advertisements through the Western Producer, which is an agricultural newspaper, and through Kijiji, an internet service, offering custom seeding services to farmers within one hundred miles of Pangman, Saskatchewan. [ 6 ] On the morning of May 29, 2014, Mr. Sheppard received a phone call from Michael Knudsen who farms with his father Gene Knudsen. Each of Michael and Gene carry on their farming operation through a corporate entity known as Knudsen & Sons Muddy View Ranch Ltd.

Each of them have authority to bind the corporation. [ 7 ] Michael expressed interest in retaining the plaintiff to do some custom seeding for the defendant, and invited Mr. Sheppard to his home quarter to allow Mr. Sheppard to assess the lay of the land to be seeded, and arguably to establish the terms of any custom seeding agreement that might arise. [ 8 ] Mr. Sheppard attended at the farm at about 6:30 p.m. that same evening and over the course of an hour or two, drove though the various fields in order to establish what the defendant might require.

During this time he carried on a conversation with each of Michael and Gene and ultimately they made known to him that they were looking to custom seed about 1,050 acres of durum. They made it known to him that this was all of the durum that would be seeded and that the rest of the land would be seeded with peas by a different person. They advised him that they required his services because they were busy with their cattle and hadn ’ t had time to fix their seeder. Finally they agreed that if the plaintiff accepted the job, Mr. Sheppard could commence seeding on either the 2 nd or 3 rd of June. [ 9 ] Mr.

Sheppard was satisfied that he could undertake the job notwithstanding some concerns about the particular lay of the land and the number of creek beds that ran through it. [ 10 ] Mr. Sheppard had recently been successful in a civil action at both Provincial Court and on subsequent appeal to the Court of Queen ’ s Bench. It dealt with a claim for damages arising from a third party ’ s breach of a swathing and combining contract. With the information that he had gleaned from that trial in hand, he alerted the defendant that he would want any agreement for custom seeding to be in writing.

He made it clear to each of Michael and Gene that he took written agreements seriously. Michael and Gene did not hesitate to enter into the agreement. [ 11 ] Mr. Sheppard prepared a handwritten agreement over coffee at the Knudsen residence that same evening. It stipulated, among other things, that the plaintiff would seed approximately 1,050 acres to durum using the equipment that the plaintiff presently owned.

It spoke of the work being done on a best efforts basis, with an acknowledgement that in the event repairs to the equipment were necessary, the plaintiff would have a reasonable period within which to make those repairs. It identified a set price for the work at $17.50 per acre with payment to be made in a series of four installments over time and as the work progressed. [ 12 ] The agreement is comprised of a single page of handwritten notes. It was signed by Michael Knudsen for the defendant and by Mr. Sheppard for the plaintiff.

[ 13 ] At around noon the following day (May 30), Mr. Sheppard received a phone call from Gene Knudsen requesting that Mr. Sheppard fax a copy of the agreement to him because his copy was unreadable. Mr. Sheppard did so and spent the remainder of the day repairing some of the equipment that he was going to be using for the custom seeding. [ 14 ] At about 8:00 p.m. that same day, Mr. Sheppard received another call from Gene. Gene asked if Mr. Sheppard was prepared to do only a portion of the seeding - about one half of the contracted amount - and to “ seed along side us ” . [ 15 ] Mr.

Sheppard wasn ’ t prepared at that time to amend the terms of the agreement and indicated to Gene that he would think about it. He made it clear to Gene that in his view, this was a breach of the express contractual terms they had agreed to in writing. [ 16 ] At trial Mr. Sheppard explained what he thought “ along side us ” meant.

He explained that two or more pieces of equipment on the same field or fields results in the almost impossible task of attempting to identify which piece of equipment did how much work, in the result, he says, it would be impossible to assess the value of the work he would be doing. [ 17 ] At around noon the following day (May 31), he phoned Gene back and indicated to him that he was not prepared to work along side of them, and that he felt that the defendant had breached the agreement. [ 18 ] Mr. Sheppard has voice mail on his phone, and he had not checked his voice mail before calling Gene at noon.

After his phone call to Gene he did check his voice mail and transcribed it in anticipation of court proceedings. The voice mail was from Gene. The transcription reads: Hello Stan, this is Gene again. Yeah I tell you we got a guy. I, we got to get this crop in... tomorrow is the 1 st of June. I think, um so he is starting now, so um..so do not move down I guess because we got ours about ready too and we just can ’ t wait any longer. Thank You. [ 19 ] Mr. Sheppard then phoned Gene back and advised him that he accepted the breach and Gene ’ s repudiation of the contract.

He then spent the next few hours or so preparing an invoice for the value of the contract and GST totalling $19,293.75 and preparing a fourteen page demand letter. [ 20 ] Mr. Sheppard then inexplicably contacted the RCMP in Coronach to ask for their advice on how best to serve these documents. Mr. Sheppard presumably felt that he had no right to attend on the Knudsen land to deliver them personally and that if he did, there might be some kind of confrontation. [ 21 ] With due respect, I do not see how he could have so concluded, unless he was so upset by the goings on that he could not contain his own emotions.

Certainly at trial both he and Gene Knudsen indicated under oath that their relationship throughout the matters that I have referred to were cordial and professional and non-confrontational. In fact, I had the pleasure of hearing Gene Knudsen testify. He is 83 years old. He presented as a very pleasant man, uneasily ruffled and genuinely surprised that Mr. Sheppard, a farmer himself, could not understand the importance of getting the crop into the ground as soon as possible and by any means possible. [ 22 ] Following his conversation with the Coronach RCMP, Mr.

Sheppard decided that he would plastic bag his invoice and demand letter and attach it to one of the Knudsen sign posts beside their property and then send a fax to them advising where they could find it. [ 23 ] The Knudsens became aware of these documents the following day (June 1). Gene phoned his lawyer and after having received legal advice phoned Mr. Sheppard at around 10:30 a.m. in the morning. [ 24 ] Mr. Sheppard spent very little time in his direct testimony in referring to this phone call. For the reasons which follow it was an important call. Mr.

Sheppard says that Gene said “ you should come and seed some for us ” , to which Mr. Sheppard advised that he would not; that in his view that contract was over; and that he would see Gene in Court.

[ 25 ] In cross-examination however, Mr. Sheppard was asked if Gene had in fact advised him that “ he better come down and seed the land ” . Mr. Sheppard replied “ that ’ s correct ... but only ... only wanted me to seed a portion. Did not want me to seed it all ” . [ 26 ] Mr. Sheppard continued ... ” There was no talk of any ... there was talk of acres, he wanted me to come and seed part of them. Said you should come and do some of it ” . [ 27 ] Gene Knudsen ’ s evidence is not terribly clear on this point, but he says that he told Mr. Sheppard that he was prepared to allow him to seed until the job was done.

He advised the Court that in his estimation his neighbour had seeded between 70 and 100 acres, although he was less than clear as to whether he advised Mr. Sheppard of the amount that remained unseeded. He thinks that he did. He further stated that Mr. Sheppard ’ s response was that he was not prepared to negotiate. [ 28 ] Following that conversation Mr. Sheppard had no further dealings with the Knudsens. He says that he attempted to mitigate his damages. In so doing, he left his advertisements in the Western Producer and on Kijiji but received no other offers for custom seeding work. [ 29 ] Mr.

Sheppard is of the view that his efforts at mitigation were entirely reasonable, and so the plaintiff is now seeking damages as set forth in his invoice less 10% which he feels is a realistic estimate of his costs of performing the contract. I would note in passing that the defendant has stipulated for the record that they agree with this 10% estimate. Issues a. Was there an anticipatory breach of the contract? Did the defendant repudiate the written agreement that it entered into? Was there any lawful justification for the repudiation? Was the repudiation of the contract accepted by the Plaintiff? b.

Did the defendant revive the contract by repudiating the repudiation? c. If the plaintiff is entitled to damages consequent upon the breach of the contract, did it take reasonable steps to mitigate its loss? Analysis [ 30 ] I have carefully considered the evidence. I am satisfied that Gene Knudsen ’ s voice mail would be regarded by any reasonable person as a repudiation of the written agreement. His comment that he had someone else for the job; that they were already starting to do the seeding; and that Mr.

Sheppard should not bother to move his equipment down to the farm cannot reasonably be viewed as anything other than an acknowledgment that the defendant was no longer prepared to give Mr. Sheppard the opportunity to complete the contract in accordance with its essential terms. [ 31 ] As noted by G.H.L.

Fridman in his text The Law of Contract in Canada 6 th ed. (Toronto: Carswell, 2011) at pp.585-585: Anticipatory breach occurs when a party, by express language or conduct, or as a matter of implication from what he has said or done, repudiates his contractual obligations before they fall due. [ 32 ] In addition, I am satisfied that in the circumstances described, there was no lawful justification for the repudiation. Certainly the defendants wanted to get their crop down as soon as possible. Certainly, a window of opportunity had, on the evidence, opened up for them to commence seeding.

Nevertheless, the Knudsens are, by all accounts, experienced farmers and they agreed to let the plaintiff commence operations on either June 2 or June 3. Presumably the seeding could have been completed in time for a viable crop or the defendant would not have contracted as it did and would have insisted on an earlier start date. [ 33 ] In addition, I am not persuaded that the June 2 nd telephone call at 10:30 a.m. in the morning operated to somehow repudiate the

[33] In addition, I am not persuaded that the June 2nd telephone call at 10:30 a.m. in the morning operated to somehow repudiate therepudiation and revive the contract as suggested by the defendant. Firstly, some of the acres had already been seeded. At that point anyrevival of the agreement would have been on terms distinctly different than what was agreed upon. The potential profit would certainly have been diminished. Secondly, the parties had agreed to let the plaintiff start on either the 2nd or 3rd of June, at the option of the plaintiff.

Phoning on June 2nd obviously precluded the plaintiff from taking those steps to prepare for seeding the very morning of June 2nd. He would have to move his equipment and presumably lose a valuable day of profitable work. [34] As such, there was an anticipatory breach of the contract, and the plaintiff was within its rights to accept the repudiation, therebyterminating the agreement and sue for the loss that flowed naturally from the breach.

This is subject, however, to any reduction by virtueof the plaintiff’s failure to mitigate that loss. [35] The defendant has pleaded that the plaintiff failed to mitigate its loss. It bears the onus of showing that the plaintiff failed to do so. It relies on the fact that on June 2nd the plaintiff was offered the opportunity to seed the balance of the durum which would have beenthe difference between the 1050 acres under the contract, less the 70 to 100 acres already seeded by another party. [36] I was impressed with the candour and straightforward manner in which Gene Knudsen gave his evidence.

He conceded matters thatmay have been at odds with his success in this action, and while he can hardly be described as an experienced and confident witness, heappeared to fairly and honestly explain his position even under the somewhat heated cross-examination by Mr. Sheppard. I believe him when he tells me that on June 2nd he would have explained to Mr. Sheppard that there were some 900 to 950 acres of land that remainedto be seeded and that Mr. Sheppard could seed them. [37] Comparatively speaking, on this essential point, I was left with the distinct impression that Mr.

Sheppard attempted to gloss over hisevidence in his examination-in-chief and attempted, to some degree, to downplay the words that were used on that occasion, and onlylater made certain concessions under cross-examination. [38] Mr. Sheppard did not get any other calls in answer to his advertisement to custom seed, and this is not particularly surprisingconsidering the lateness of the season. As an experienced farmer and custom seeder should he have mitigated the plaintiff’s damages thislate in the season by accepting the balance of the acres offered to him by Gene Knudsen?

He clearly chose not to and in my view hisfailure to do so was unreasonable. [39] In Red Deer College v Michaels, (SCC), [1976] 2 SCR 324 our Supreme Court stated: 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 inif there had been proper performance by the defendant, is subject to the qualification that the defendant cannot be called upon to pay foravoidable 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 that 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 uponwhether he has taken reasonable steps to avoid their unreasonable accumulation. [40] In Evans v Teamsters Local Union No. 31, 2008 SCC 20, [2008] 1 SCR 661 [EVANS], our Supreme Court discussed a situationwhere, upon a wrongful dismissal, the employer had offered the employee a return to work as a means to effect his duty to mitigate hislosses.

The head note of that decision reflects the principles enunciated by the Court: The employer bears the onus of demonstrating both that the employee has failed to make reasonable efforts to find work and that workcould have been found. Where the employer offers the employee a chance to mitigate damages by returning to work for the employer,the central issue is whether a reasonable person would accept such an opportunity.

A reasonable person should be expected to do sowhere the salary offered is the same, where the working conditions are not substantially different or the work demeaning, and where thepersonal relationships are not acrimonious..... The critical element is that an employee not be obliged to mitigate by working in an atmosphere of hostility, embarrassment orhumiliation.

Although an objective standard must be used to evaluate whether a reasonable person in the employee’s position would haveaccepted the employer’s offer, it is extremely important that the non-tangible elements of the situation – including work, atmosphere,stigma and loss of dignity - be included in the evaluation.

[ 41 ] I see no reason why the principles enunciated in Evans should not also be considered in determining whether or not a person working for a corporation who has contracted with another corporation should not accept an offer to resume the balance of a contract in its efforts to mitigate its loss under a custom seeding contract. [ 42 ] As I look through those principles I note that the amount offered per acre would have been the same if the plaintiff had accepted the offer. I note that the working conditions would have been identical.

I note that the work could therefore not be seen as demeaning in any way... it was precisely the same as what was contracted for. [ 43 ] I note that the personal relationships were not at all acrimonious, this notwithstanding Mr. Sheppard ’ s suggestion that the RCMP got involved. The defendant did not involve the RCMP. The plaintiff called them out of an abundance of caution to avoid a potential situation which I find on the evidence, or rather on the absolute lack thereof, was not likely to occur. [ 44 ] I note that the very nature of seeding anticipates long hours of lonely tractor work.

This is hardly a job where things like hostility, embarrassment, humiliation, stigma and loss of dignity are likely to occur. [ 45 ] Finally, it was clear from the evidence that it was late in the season for seeding. The fact that the plaintiff had no further responses to its advertisements for work lends credence to this. It would seem most reasonable therefore that any work offered at this late date in the season should have been seriously considered by the plaintiff.

Conclusion [ 46 ] For all of the foregoing reasons, I find that there was an anticipatory breach of the contract, repudiation of the contract and an acceptance of the repudiation which resulted in the termination of the contract.

Prima facie the plaintiff would be entitled to damages equivalent to its potential profit under the contract which would be 90% of the invoice tendered, or the sum of $17,364.37. [ 47 ] I also find that the plaintiff failed to take reasonable steps to mitigate its loss when it summarily dismissed the defendant ’ s offer of the remaining acres to be seeded. [ 48 ] I find that had the plaintiff accepted the offer it could have avoided much of its loss and I find that the amount of seeding still available to the plaintiff would have been 950 acres.

In the result, the plaintiff ’ s true loss after consideration of its failure to mitigate is equivalent to 100 acres at $17.50 per acre less 10% of that amount for input costs. The total amount of damages due and owing to the plaintiff therefore equates to $1,575.00. [ 49 ] I award the plaintiff costs in the sum of $100.00 to reflect the cost of issuing its claim and pre- judgment interest on the principal sum from June 2 nd of 2014 in the further sum of $7.07. P. Demong, J