Berscheid v Federated Co-operatives Date:, 2018 MBCA 27

Citation: Berscheid v Federated Co-operatives Date: 20180319 et al, 2018 MBCA 27 Docket: AI17-30-08759 IN THE COURT OF APPEAL OF MANITOBA Coram: Mr. Justice Michel A. Monnin Madam Justice Freda M. Steel Madam Justice Diana M. Cameron BETWEEN : TIMOTHY M. BERSCHEID ) T. M. Berscheid ) on his own behalf (Plaintiff) Appellant ) ) R. A. McFadyen and - and - ) K. M. McIntyre ) for the Respondents federated co-operatives limited ) and SWAN VALLEY CONSUMERS ) Appeal heard: CO-OPERATIVE LIMITED ) January 29, 2018 ) (Defendants) Respondents ) Judgment delivered: ) March 19, 2018 On appeal from 2017 MBQB 25 STEEL JA [ 1 ] This is an appeal from an order dismissing a motion for

summary judgment. It is also a good example of the warning by the Supreme Court of Canada in Hryniak v Mauldin , 2014 SCC 7 , that sometimes a motion for

summary judgment can have the opposite effect intended and unduly complicate matters. Facts [ 2 ] The plaintiff (Berscheid) is a farmer who operates a cattle operation. Federated Co-operatives Limited (Federated) carries on a number of businesses, including the manufacture and sale of supplements for cattle.

Swan Valley Consumers Co-operative Limited (Swan Valley) is a local retail cooperative that, among other things, sells supplement for cattle, manufactured by Federated, to producers such as Berscheid. [ 3 ] Berscheid bought mineral supplements (the supplements) for cattle manufactured by Federated and sold to Berscheid through Swan Valley between approximately March 2009 and February 2011. In the spring of 2012, Berscheid stopped feeding his cattle the supplements manufactured by Federated altogether.

There is no dispute that the supplements were defective and not manufactured according to the specifications provided by Berscheid. This was admitted in the amended statement of defence. At the hearing, Federated and Swan Valley (collectively, the defendants) repeated that they were admitting a breach of contract on all the supplements supplied to Berscheid including those supplied in 2011. [ 4 ] Berscheid submits that the defective supplements have had a significant negative impact on his cattle herd.

He has provided a 68 page “Amended Supplementary Report on Damages” which calculates his claim as of November 2015 (including amounts for future damages) in excess of $810,000. He submits that this is an appropriate case for

summary judgment. [ 5 ] The defendants’ position is that, while they have admitted liability, there is very much a genuine issue as to the extent and quantum of damages sought. The defendants also submitted that they require further disclosure and production of information in order to be in position to properly evaluate and assess the claim for damages.

Decision of the Motion Judge [ 6 ] The motion judge held that Berscheid had not met his prima facie burden to show that he was entitled to the damages claimed. The key issue in this case is causation, in particular, the nature and extent of the harm caused to the cattle herd as a result of exposure to the defective supplements and the financial damages that flow from that.

These causation issues are matters beyond the ordinary knowledge or skill of a layperson and there was no admissible expert opinion before the motion judge on that issue. [ 7 ] In addition, he also held that, if he was incorrect on the first part of the test, he was satisfied that the defendants had demonstrated their defence to the claim for damages and could “survive a hard look on its merits” (at para 22).

He also agreed that the defendants had been prevented from putting their best evidentiary foot forward due to Berscheid’s refusal to provide the further records requested by the defendants. [ 8 ] He stated in his reasons as follows (at paras 3-4): In the main, the theory behind [Berscheid’s] calculation as to damages is that inadequate nutrition made his cattle sicker than they would have otherwise been and this delayed their growth and reproduction cycles and lead to premature death of some animals that otherwise could have been sold.

Due to the fact that his herd was sicker and smaller in size than it otherwise would have been, [Berscheid] had to feed them over longer periods of time to prepare them for market and this increased his variable operating costs and reduced his cash flow. The reduced weight of the animals actually sold also reduced his income. In his own words, [Berscheid] could not “crank out the pounds” in the same way he could have had the animals received proper nutrition. The defendants have not only conceded that their conduct constituted a breach of contract and The Sale of Goods Act , RSM 1987, c.

S10, but that certain damages flow from this breach. The main point of contention between the parties is causation and quantum of damages. The defendants argue that not all of the health problems described by [Berscheid] in his herd can be tied to nutrition alone and that his methodology in calculating damages is flawed. [ 9 ] In denying Berscheid’s motion for

summary judgment, the motion judge also ordered: 1. That the matter proceed to trial only as to the issues of causation of damages and quantum of damages; 2. That given the admissions made by the defendants, that there be a finding against the defendants on the issue of liability for breach of contract with respect to the purchase and sale of the deficient supplements and also a breach of The Sale of Goods Act , CCSM c S10; 3.

That Berscheid will provide full and fair disclosure of the requested documents, current to the end of the most recent year for which those records are available, within 30 days of the date of his judgment; and 4. That full examinations for discovery follow the above-noted disclosure. [ 10 ] Besides appealing the motion judge’s denial of his motion for

summary judgment, Berscheid appeals the motion judge’s order of disclosure. He also alleges that the motion judge’s order should be set aside on the basis of bias. Law [ 11 ]

Summary judgment is available to either a plaintiff or defendant under r 20.01 of the Manitoba, Court of Queen’s Bench Rules , Man Reg 553/88 (the QB Rules ). The test to be applied on a motion for

summary judgment by a plaintiff is set out in the oft- quoted Homestead Properties (Canada) Ltd v Sekhri et al , 2007 MBCA 61 (at para 15 ): When a plaintiff moves, he must prove, on a prima facie basis, that his action will succeed. If he meets that burden, then the defendant has the burden to establish that there is a genuine issue for determination. If he fails to do so,

summary judgment granting the claim will follow. As was made clear in Blanco et al. v. Canada Trust Co. et al. , 2003 MBCA 64 , 173 Man.R. (2d) 247 at para. 62 , regardless of who is the moving party, the analysis is a two-step process. [ 12 ] This Court has repeatedly commented on the applicable standard of review for

summary judgment decisions. It is a discretionary decision by the motion judge.

It is a discretionary decision because it requires the judge to apply her or his judicial experience and expertise to all of the relevant facts and applicable law and then to make a judgment as to whether the required burden of proof has been met (see Lenko v The Government of Manitoba et al , 2016 MBCA 52 at para 35 ). [ 13 ] It should not be interfered with by the appellate court unless there is a finding of misdirection on the law or the facts or unless the decision is so clearly wrong as to yield an unjust result (see Perth Services Ltd v Quinton et al , 2009 MBCA 81 at para 28 ; and Lodge et al v Red River Valley Mutual Insurance Company et al , 2017 MBCA 76 ). [ 14 ] The same is true of the motion judge’s order with respect to disclosure of further financial and business records.

Orders relating to disclosure and production of information in civil proceedings are discretionary and the same standard would apply (see Ben- Ron Farms et al v The Canadian Wheat Board , 2009 MBCA 75 at para 12 ).

Analysis and Decision [15] Despite Berscheid’s claims with regard to the straightforward nature of this matter, the volume of materials attest to itscomplexity. To Berscheid, his lengthy affidavits speak for themselves. They do not. [16] In fact, his factum, written in sentence fragments, is very difficult to understand. His affidavit sworn April 2015 is 140pages long and contains six pages of defined terms.

In an exhibit to his affidavit sworn November 3, 2015, it sets out ten factors thatdescribe various losses or increased variable operating costs including, but not limited to, reduced rate of weight gain in each animal,delays in pregnancy of each cow, premature death and burial costs. [17] Again, the damage calculations provided by Berscheid are anything but straightforward. They call for the analysis ofmassive amounts of data.

Berscheid made numerous assumptions in calculating his losses, assumptions with respect to fluctuations inpast and future fertility rates, delays in pregnancies and the future price of beef in the market place. These assumptions need to besupported by expert evidence. The issue of the extent of the harm done to the cattle by the defective supplements and the amount offinancial loss occasioned, is one that cries out to be tested by viva voce evidence and cross-examination. [18] I agree with the motion judge when he commented, “To say these calculations are complex is a considerableunderstatement.

Apart from the constellation of factors affecting weight and reproductive cycles that I have already touched on in thesereasons, the calculations offered by [Berscheid] build in various assumptions that need further analysis” (at para 19). [19] Berscheid argues that the motion judge did not understand the affidavit evidence and drew incorrect inferences. Thatsimply confirms the motion judge’s opinion that these are matters beyond the ordinary knowledge or skill of a layperson, certainlybeyond the knowledge of a judge.

Expert scientific evidence is required on the issue of the physical harm to the herd and the properquantification of damages requires expert financial analysis. [20] So, for example, for reasons unrelated to the defective supplements, Berscheid implemented a change in his operation inthe 2008 production year. Did this have an impact on the weight gain of the cows? During the summer months, the defectivesupplements were not fed to the cows. Did this have an impact on the weight gain and subsequent financial loss?

Obviously, the partieshave differing views on this, none of which is clear from the documentary evidence filed, especially in view of Berscheid’s refusal toprovide complete disclosure of his financial records. Berscheid’s own consultant, Lyle McNichol (McNichol), in his affidavit swornApril 24, 2014, opined that, “I am of the opinion that trace mineral deficiencies are very complex”. [21] Articles and academic publications dealing with the potential impacts of mineral deficiencies are hearsay. In hisaffidavit, McNichol relied on a

summary of total financial losses provided to him by Berscheid, as well as letters received from otherindividuals in forming his opinion. Berscheid is an experienced farmer, and as a party to the action, he can certainly testify. However,he cannot provide independent or external expert testimony in support of his own case (see Kon Construction Ltd v TerranovaDevelopments Ltd, 2015 ABCA 249; and Kaul v The Queen, 2017 TCC 55). [22] The motion judge did make certain errors in his reasons.

The test for causation does not require a plaintiff to show thatthe breach of contract of the defendant was the sole cause of the plaintiff’s loss. See, for example, Bruce MacDougall, Introduction toContracts, 3rd ed (Toronto: LexisNexis Canada Inc., 2016) at 348 and GHL Fridman, The Law of Contract in Canada, 6th ed (Toronto: Carswell, 2011) at 683-84.

Various authorities use different language to describe the causation test in contract, including: whether thebreach of contract was an effective cause of the loss; whether the loss was directly attributable to the breach; or whether the damagewould have occurred but for the breach of contract (see Blackman v Merrill Lynch Canada Inc, 2013 NSSC 87 at para 76; and Water’sEdge Resort Ltd v Canada (Attorney General), 2015 BCCA 319 at para 39).

However, the exact nature of the test and its application tothese facts is best left for the trial judge. [23] As well, Berscheid’s claim for certain increased operating costs is a minor part of his claim, not a significant part as themotion judge’s reasons seemed to indicate. While the motion judge may have made some minor errors, none of them were material to his decision to dismiss the

summary judgment motion. These difficult and complex issues require atrial. [24] Berscheid raises other grounds of appeal in his factum. With respect to the disclosure ordered, he objects to having todisclose when the defendants refused to produce a former employee of Federated as a representative for discovery.

As well, he arguesthat disclosure of his financial documents will result in his competitors having access to information, which will make him lesscompetitive. [25] The threshold for determining relevancy at the discovery stage of an action is very low and differs from the morestringent application of the relevancy test at a trial.

Relevancy at the discovery stage of an action is not determined by what a partyconsiders necessary or helpful in the proof of its claim or defence, but rather by the issues raised in the pleadings (see Williams v ArnoldBros Transport Ltd, 2012 MBQB 143). [26] The records in question are relevant as they relate to the historical performance of Berscheid’s farming operation, bothprior to and during the period of time when Berscheid claims to have suffered financial losses.

Historical performance is relevant inquantifying business losses relating to a claim. [27] As to Berscheid’s desire to examine a particular former employee of Federated and his fear of competitive financialinformation becoming public, both of those issues can be dealt with by an appropriate motion pursuant to the QB Rules (see rr 31.03,31.10 of the QB Rules; and section 77(1) of The Court of Queen’s Bench Act, CCSM c C280). [28] I see no merit in the claim that the order of the motion judge ought to be set aside because of bias.

The test for judicialbias was set out in Metis Child, Family and Community Services v AJM et al, 2008 MBCA 30, citing with approval from R v S(RD), (SCC), [1997] 3 SCR 484 at para 111, in turn citing with approval from the dissenting decision of de Grandpré J inCommittee for Justice and Liberty et al v National Energy Board et al, (SCC), [1978] 1 SCR 369 at 394. That test is as

follows (at para 55): (T)he apprehension of bias must be a reasonable one, held by reasonable and right-minded persons, applying themselves to the question and obtaining thereon the required information …. (The) test is “what would an informed person, viewing the matter realistically and practically – and having thought the matter through – conclude …. [ 29 ] The test contains a two-fold objective element—the person considering the alleged bias must be reasonable and the apprehension of bias itself must also be reasonable in the circumstances of the case.

In addition, the “reasonable person” (at para 56) considering the matter must be informed, with knowledge of the relevant circumstances, including “the traditions of integrity and impartiality that form a part of the background and apprised also of the fact that impartiality is one of the duties the judges swear to uphold” ( S(RD) at para 111 ). [ 30 ] The threshold for a finding of actual or apprehended bias is a high one. There is a presumption that judges will carry out their oath of office. Thus, cogent evidence is required to make out an allegation of judicial bias.

The threshold is high because a finding of bias calls into question not just the personal integrity of the judge, but the integrity of the entire administration of justice. [ 31 ] Berscheid does not refer to any comments on the part of the motion judge which would give rise to a reasonable apprehension of bias. The fact that the motion judge made decisions which were not in his favour does not equate to a conclusion that he was improperly biased against him. Conclusion [ 32 ] The Supreme Court of Canada’s decision in Hryniak did not alter the basic test for

summary judgment in Manitoba. However, it did make courts acutely aware of the need to consider the concept of proportionality in all aspects of the justice system. So,

summary judgment rules should be interpreted broadly to ensure fair access to the affordable, timely and just adjudication of claims. [ 33 ] However, proportionality can cut both ways in these type of proceedings. Hryniak made clear that, “While

summary judgment motions can save time and resources, like most pre-trial procedures, they can also slow down the proceedings if used inappropriately” (at para 32). This is exactly what happened in this case. [ 34 ] Although complexity in and of itself will not necessarily preclude the possibility of

summary judgment, cases which are factually complex, with conflicting evidence from a number of witnesses and a voluminous record, are not generally well-suited to determination on a

summary basis. [ 35 ] I would dismiss the appeal and order costs in favour of the defendants. JA I agree: JA I agree: JA