Docket: 1736 Lawrence Scraba (Plaintiff) Appellant - v. -, 2011 SKCA 59

THE COURT OF APPEAL FOR SASKATCHEWAN Citation: 2011 SKCA 59 Date: 20110519 Between: Docket: 1736 Lawrence Scraba (Plaintiff) Appellant - and - Sharpe's Soil Services Ltd. (Defendant) Respondent Coram: Vancise, Richards & Caldwell JJ.A. Counsel: Wayne M. Rusnak, Q.C., for the Appellant Shawn M. Patenaude, for the Respondent

Appeal: From: 2009 SKQB 49 Heard: December 16, 2010 Disposition: Dismissed Written Reasons: May 19, 2011 By: The Honourable Mr. Justice Caldwell In Concurrence: The Honourable Mr. Justice Vancise The Honourable Mr. Justice Richards Caldwell J.A. Introduction [ 1 ] The appellant appealed from the judgment of the trial court which dismissed his claims in negligence and otherwise as against the respondent. For the reasons below, I would dismiss the appeal. Background [ 2 ] The facts are set forth in 2009 SKQB 49 and are summarized here only as background. [ 3 ] The appellant farms near Calder, Saskatchewan.

For 15 years the appellant had grown “Roundup Ready” canola, meaning the canola plant is tolerant to glyphosate herbicides. Glyphosate is a non-selective, post-emergence weed control herbicide that desiccates all plants except those few that are tolerant to it. ROUNDUP is the trade-mark associated with the proprietary glyphosate herbicides produced by Monsanto Company. [ 4 ] In early 2005, the appellant entered a grower contact (the “Grower Contract”) with Bunge Canada to grow 270 acres of an identity-preserved canola seed known as “Nexera 828”.

Nexera 828 is a CLEARFIELD variety of canola, meaning the canola plant is tolerant to imidiazoline herbicides, such as those branded as PURSUIT, ODYSSEY and ABSOLUTE. Nexera 828 is not a variety of Roundup Ready canola. [ 5 ] In the Grower Contract, Bunge Canada identified the respondent as its designated retailer of Nexera certified seed.

The respondent is also a retail seller of fertilizers and herbicides, including ROUNDUP glyphosate herbicides and the CLEARFIELD system of herbicides. [ 6 ] Shortly after the appellant executed the Grower Contract, Bunge Canada advised the respondent of that contract and, thereafter, Cory Popowich, an employee of the respondent, contacted the appellant about his purchase of Nexera canola seed for the 2005 growing season. Following several discussions and communications between the appellant and Mr.

Popowich (which, at times, were less than amicable), the appellant acquired 34 bags in total of Nexera 828 canola seed with, at the appellant’s specific request, “Helix Xtra” treatment. HELIX XTRA is the brand name of a seed treatment containing a low-rate fungicide that protects canola seed against seed- and soil-borne diseases and a low-rate insecticide that protects canola seed against flea beetles. The respondent had not previously sold the Helix Xtra seed treatment to any of its customers. The appellant did not acquire any fertilizer or any herbicide from the respondent.

At no time did the parties discuss the use of herbicides on the canola plants to be grown from the Nexera 828 canola seed. [ 7 ] The appellant sought financing from the respondent to cover the cost of the seed. Mr. Popowich reviewed the terms of the respondent’s vendor financing arrangements with the appellant and completed a credit application in the presence of the appellant. As Mr. Popowich did not have the authority to approve credit requests, he faxed the appellant’s credit application to the respondent’s

business office in Moosomin, Saskatchewan, for approval. Mr. Popowich then allowed the appellant to take the seed even though theappellant had not yet been approved to buy it on credit. [8] The appellant planted the Nexera 828 canola seed on his land. When the crop began to germinate, the appellant noted 10 of the270 acres had not been seeded and he attributed that gap to a clutch problem with his drill. The appellant sought out more seed of adifferent variety, but one having an oil content equivalent to Nexera 828 canola seed, and he approached a different seed retailer to fillhis order.

This retailer was not a designated retailer of Nexera 828 canola seed. The appellant acquired two bags of “Millennium” canolaseed on the retailer’s advice that Millennium canola seed was the closest equivalent to Nexera 828 canola seed. The appellant acquired aquantity of ROUNDUP glyphosate herbicide from the retailer at the same time. At purchase, the retailer advised the appellant thatMillennium canola was not a Roundup Ready variety of canola.

The appellant later re-seeded the missed 10 acres to Millennium canola. [9] In mid-June 2005, for the purposes of post-emergence weed control, the appellant sprayed his entire crop of Nexera 828 canola(avoiding the 10 acres re-seeded to Millennium canola) with a ROUNDUP glyphosate herbicide with the inevitable result that theherbicide killed all of the Nexera 828 canola plants. [10] The appellant brought suit against the respondent claiming that the Nexera 828 canola seed was not fit for purpose or not ofmerchantable quality, or both, and, in the alternative, that the appellant’s loss resulted from the respondent’s negligence or breach ofduty, or both, in selling canola seed that was not Roundup Ready.

The appellant did not sue, nor did the respondent add as a third party,any of Bunge Canada, Monsanto Company, the retailer of the ROUNDUP glyphosate herbicide, the manufacturer of the Nexera 828canola seed, nor any intermediary re-seller of that seed.

The respondent counterclaimed against the appellant on the unpaid debt owingunder vendor financing advanced to the appellant in respect of his purchase of the Nexera 828 canola seed. [11] At trial, the judge dismissed each of the appellant’s claims and granted judgment to the respondent in respect of the debt owing bythe appellant on his purchase of the Nexera 828 canola seed.

Issues Arising and Standards of Review [12] The appellant did not appeal from the judge’s dismissal of the claims grounded in fitness for purpose and merchantable quality.The issues arising in this appeal dealt only with the dismissal of the appellant’s alternative claim in tort and the rate of interest under theterms of the vendor financing arrangement. [13] In respect of the tort claim, the appellant submitted the trial judge erred in his findings in three ways: (

i) by concluding canolaseed is not dangerous; (ii) by failing to find a duty to warn even though canola seed is not dangerous; and (iii) by failing to giveappropriate consideration to the sales protocols of other seed retailers.

Although the appellant framed this appeal on the footing of thesethree errors, the appellant’s objections to the judge’s findings all speak to one principal question: What is the appropriate standard of carein this case? [14] As to the issue of interest, the appellant asked this Court to determine “what interest rate should be charged?” I would rephrasethis issue more befitting the appellate role of review for error as follows: Did the judge err in concluding that the Interest Act, R.S.C.1985, c. I-15, did not apply on the facts of this matter? Analysis 1.

Did the judge err by failing to find that the standard of care required of the respondent included a duty to warn? [15] In the Supreme Court of Canada decision in Ryan v. Victoria (City), (SCC), [1999] 1 S.C.R. 201 (“Ryan”),Major J. described in general terms the basis for a finding of negligence: [28] Conduct is negligent if it creates an objectively unreasonable risk of harm. To avoid liability, a person must exercise the standardof care that would be expected of an ordinary, reasonable and prudent person in the same circumstances.

The measure of what isreasonable depends on the facts of each case, including the likelihood of a known or foreseeable harm, the gravity of that harm, and theburden or cost which would be incurred to prevent the injury. In addition, one may look to external indicators of reasonable conduct, suchas custom, industry practice, and statutory or regulatory standards.

[16] Here, the appellant asserts that the respondent had a duty to warn the appellant of the dangers of applying glyphosate herbicide toNexera 828 canola plants and was negligent in failing to so warn the appellant. Under the law of negligence, a manufacturer has a duty towarn of risks or dangers “inherent in the use of its product of which it has knowledge or ought to have knowledge” (see Hollis v. DowCorning Corp., (SCC), [1995] 4 S.C.R. 634). However, as noted, the respondent did not manufacture the Nexera 828seed or the glyphosate herbicide applied to the plants grown from that seed.

In these circumstances, negligence must rest on an objectivefinding that by not warning the appellant of the “dangers” of applying glyphosate herbicide to Nexera 828 canola the respondent createdan unreasonable risk of harm.

In other words, the respondent will be liable if, on the facts, it failed to exercise the standard of care thatwould be expected of an ordinary, reasonable and prudent person in the same circumstances. [17] As the measure of what is reasonable depends on the facts of each case, including the likelihood of a known or foreseeable harm,the analysis of whether the respondent had a duty to warn the appellant in the circumstances first looks to identify the dangers likely tobe encountered in the ordinary use of Nexera 828 canola seed.

On this point, the appellant submitted that the judge erred by finding thatcanola was not inherently dangerous. However, nothing in the evidence before the judge or before this Court indicated that canola seed,whether identity-preserved Nexera 828 canola seed or otherwise, was inherently dangerous or hazardous, or even potentially dangerousor hazardous (in that it might be made so through misuse or abuse by a grower).

Further, the Nexera 828 canola seed acquired by theappellant in this case was neither dangerous nor hazardous by reason of any defect or hidden danger.[1] The seed performed as expectedin that it germinated and produced plants. And, but for the appellant’s post-emergence application of glyphosate herbicide, presumablythose plants would have matured and ripened and the appellant would have harvested his crop, all without any danger or hazard arisingby reason of the seed or its use.

In this sense, while the appellant’s Nexera 828 canola plants were the subject of the harm done, neitherthe seed itself nor the appellant’s use of the seed were the proximate cause of that harm. As such, I find no basis to interfere with thejudge’s finding (at para. 52) that “canola seed is not a dangerous or hazardous product.” [18] The appellant submitted that the judge’s finding that “canola seed is not a dangerous or hazardous product” does not end theinquiry into whether a duty to warn arises in these circumstances.

What the appellant has asked this Court to accept then is that thesusceptibility of Nexera 828 canola plants to desiccation from the application of glyphosate herbicide is the “danger” of which therespondent had a duty to warn; however, in this sense, such susceptibility is neither a defect nor a hidden danger because most plants arenot naturally tolerant to glyphosate herbicide.

The appellant’s position is also confined to the susceptibility of Nexera 828 to glyphosatedesiccation because he has not claimed that the harm or any part of it resulted from any negligence (failure to warn or otherwise) on thepart of the manufacturer or distributor of the glyphosate herbicide which he applied to his Nexera 828 canola crop. [19] Regardless, even if I accept the appellant’s premise, I find no traction to his argument on the facts as found by the judge.

Thejudge found that: a. the appellant was an experienced canola grower with considerable knowledge of Roundup Ready canola and the applicable herbicideprotocols (at para. 54); b. the appellant held an “unwavering”, “mistaken” belief that Nexera 828 canola seed was Roundup Ready (at paras. 50 and 55), butthat the appellant never mentioned this belief, and did not tell the respondent that he wanted Roundup Ready canola seed in any of hisdealings with the respondent (at para. 51); c. the respondent sold Nexera 828 canola seed to the appellant in accordance with the terms of the appellant’s Grower Contract, withthe added Helix Xtra treatment, as specifically requested by the appellant (at para. 52); d. the appellant chose not to buy his herbicide and fertilizer from the respondent (at paras. 19 and 48), as was his right; however, hisdecision necessarily limited the context of his commercial relationship with the respondent (para. 19); and e. on the whole of the evidence, nothing would have indicated to the respondent that the appellant did not know which herbicides to useon Nexera 828 canola plants (at para. 55).

Given his findings, the judge concluded that the appellant received what he asked for and what he needed to fulfill the Grower Contractand, in the circumstances, the respondent did not have a duty to warn that the Nexera 828 canola seed was not Roundup Ready (at para.55). I find no error in the judge’s findings or conclusions in this respect. [20] However, the appellant also submitted that the judge failed to give appropriate consideration to the sales protocols of other seedretailers. As Major J. noted in Ryan, a court may look to custom and industry practice as external indicators of reasonable conduct.

Theappellant argued that the judge failed to consider the evidence of the other retailers’ protocols as “corroborat[ing] the requirement towarn the farmer of the characteristics of Nexera as it relates to herbicides.” [Factum of the Appellant, para. 40] Generally speaking, theevidence tendered indicated that the appellant’s witnesses each followed a protocol of investigating a grower’s knowledge, experienceand skill and the history and nature of the grower’s farming operations when recommending choices of seed, herbicide, fertilizer, etc. tothe grower.

However, the appellant provided no authority to support the proposition that persons in similar circumstances as therespondent have a legal duty to conduct such an investigation nor is there any case law imposing liability on such persons for failing toconduct an investigation or for negligently conducting an investigation. So, the fact that other retailers have established protocols mayconstitute evidence of reasonable conduct in a given situation, but is not, in and of itself, determinative of the legal requirementsunderlying the obligation of reasonableness imposed on the respondent on the facts of this case.

In other words, the fact that the

respondent did not have or follow a protocol similar to that of another retailer does not automatically give rise to liability; similarly, mere compliance with such a protocol would not, in and of itself, preclude a finding of liability. The evidence of the protocols followed by other retailers, as tendered by the appellant, allowed the judge to consider the operational framework in which at least two seed retailers carry out their business.

In this respect, one of the seed retailers gave evidence to the effect that a grower who requested a specific variety of canola seed might receive less information from the seed retailer than a grower who had not requested seed of a specific variety. [ 21 ] The judge considered this evidence of custom and industry practice in his determination of whether the respondent had satisfied the requirement of objective reasonableness on the facts of this case; albeit not with the result intended by the appellant.

The judge took this evidence as corroborating the respondent’s evidence and, rather than supporting a conclusion of negligence, the judge found that the external indicators rendered reasonable the omission which the appellant saw as negligent. The judge’s analysis was consistent with the principle stated in Ryan and was a proper exercise of his role as the finder of fact. I find no basis upon which to conclude that the judge committed a palpable and overriding error in his assessment of this evidence.

Therefore, in my judgment, there is no reason to interfere with the judge’s decision on this ground. [ 22 ] In sum, the judge’s findings are supported by the evidence and are consistent with his conclusion that the respondent exercised the standard of care that would be expected of an ordinary, reasonable and prudent person in the same circumstances.

The fact that the Nexera 828 canola was susceptible to desiccation from the application of glyphosate herbicide did not give rise, on the facts of this case, to circumstances in which an ordinary, reasonable and prudent retail seller of Nexera 828 seed would have a duty to warn the buyer of that susceptibility. As I find no error in the judge’s conclusion that the respondent had no duty to warn the appellant in the circumstances of this case, I would dismiss this arm of the appeal. 2.

Did the judge err in concluding that the Interest Act did not apply on the facts of this matter? [ 23 ] Under s. 4 of the Interest Act , where a loan agreement made other than in respect of real property does not disclose the interest payable by the borrower as an annual rate, the interest rate is restricted to no more than 5% per annum : 4.

Except as to mortgages on real property or hypothecs on immovables, whenever any interest is, by the terms of any written or printed contract, whether under seal or not, made payable at a rate or percentage per day, week, month, or at any rate or percentage for any period less than a year, no interest exceeding the rate or percentage of five per cent per annum shall be chargeable, payable or recoverable on any part of the principal money unless the contract contains an express statement of the yearly rate or percentage of interest to which the other rate or percentage is equivalent. [ 24 ] The undisputed evidence at trial was that the respondent set out the 26.8% annual rate of interest payable under its vendor- financing arrangements on an 8½” x 11” sheet of paper titled “Part III – Acceptance/Rejection by Sharpe’s” (the “cost of credit insert”).

The cost of credit insert was designed to be placed between the pages of an “Agreement for Credit” made from a 17” x 11” sheet of paper single folded to form four separate 8½” x 11” panels or pages (the “body of the agreement”). Under the heading “Part II – Application and Terms of Credit” in of the body of the agreement,

section 2 “Interest Rate” set the interest rate payable by the appellant at 2% per month. The body of the agreement contained no reference to an equivalent annual rate of interest. The cost of credit insert confirmed the interest rate of 2% per month and disclosed that the equivalent annual rate of interest was 26.8%. [ 25 ] At trial, and on appeal, the appellant submitted that the cost of credit insert did not form part of the “contract” between the appellant and the respondent as constituted by the body of the agreement. The respondent said otherwise.

The judge assessed the evidence before him in this regard and found as follows: [64] I agree with [the respondent] that the credit disclosure forms part of the agreement and that based upon the evidence Mr. Scraba was aware of the per annum interest rate as set out in the cost of credit disclosure. As such, s. 4 of the Interest Act does not apply. [ 26 ] There is no question that the judge correctly identified and applied the law to the facts as he found them.

Key to the appellant’s appeal is the identification of a reviewable error in the judge’s finding that the cost of credit insert formed part of the contract between the appellant and the respondent. This means the appellant must point to a palpable and overriding error committed by the judge in his assessment of the evidence (see: H.L. v.

Canada (Attorney General) , 2005 SCC 25 , [2005] 1 S.C.R. 401 (“ H.L. ”)); a reliably difficult task made all the more exigent because the key finding would appear to follow from a finding of credibility adverse to the appellant, and the judge did not review the evidence that led him to make the key finding. [ 27 ] Nevertheless, the appellant submitted that the judge erred by failing to accept the appellant’s testimony to the effect that he did not receive the cost of credit insert (Transcript, at p. 60) and had neither signed nor acknowledged that insert. At trial Mr.

Popowich testified that he reviewed and filled out the Agreement for Credit, including the cost of credit insert, and other credit documents in his office with the appellant (Transcript, at pp. 311-18) and the trial exhibits evince that the appellant did sign the Agreement for Credit.

Given this conflicting evidence, it was open to the judge to find that the cost of credit insert formed part of the contract between the appellant and the respondent if he preferred the respondent’s evidence to that of the appellant on this issue. In this respect, the judge’s finding is neither “unreasonable” nor “unsupported by the evidence” (see H.L. , at para. 56 ). As to the issue of credibility, nothing in the evidence suggests the judge’s decision to prefer the evidence of Mr.

Popowich over that of the appellant was a manifest error or that he otherwise ignored conclusive or relevant evidence, misunderstood the evidence or drew an erroneous conclusion from it. As such, I find no reason to intervene and would dismiss this arm of the appeal as well. [ 28 ] The appellant shall pay the respondent’s costs in this appeal. DATED at the City of Regina, in the Province of Saskatchewan, this 19 th day of May, A.D. 2011. “Caldwell J.A.” ______________________ Caldwell J.A. I concur. “Vancise J.A.” Vancise J.A. “Richards J.A.” Richards J.A.