Bonnefield Canadian Farmland Evergreen LP v Fat Cat Farms Ltd, 2022 MBCA 77

Citation: Bonnefield Canadian Farmland Evergreen LP v Fat Cat Farms Ltd, 2022 MBCA 77 Date: 20220914 Docket: AI21-30-09695 IN THE COURT OF APPEAL OF MANITOBA Coram: Madam Justice Freda M. Steel Madam Justice Janice L. leMaistre Madam Justice Karen I. Simonsen BETWEEN : bonnefield canadian farmland ) F. J. Trippier and EVERGREEN LP ) I. Vakurova ) for the Appellant (Plaintiff/Defendant by Counterclaim) Respondent ) ) M. L.

Grande - and - ) for the Respondent ) FAT CAT FARMS LTD. ) Appeal heard and ) Decision pronounced: (Defendant/Plaintiff by Counterclaim) Appellant ) September 14, 2022 On Appeal from 2021 MBQB 202 SImonsen JA (for the Court) [ 1 ] Fat Cat Farms Ltd. (the defendant) appeals a decision of the trial judge granting the claim of Bonnefield Canadian Farmland Evergreen LP (the plaintiff) and dismissing the defendant’s counterclaim, both relating to a written lease (the lease) of farmland (the property) between the parties.

The plaintiff’s claim was for unpaid rent and damages due to the condition in which the defendant left the property. Although the defendant conceded that the rent was unpaid, it disputed the claim for damages of over $87,000 for remediation to the property. The defendant’s counterclaim was for losses and damages it says arose from the plaintiff’s alleged breach of the lease related to aeration fans. [ 2 ] After the appeal hearing, we dismissed the appeal with reasons to follow.

These are those reasons. [ 3 ] A landlord-tenant relationship for the property existed between the plaintiff and the defendant or corporations associated with the principal of the defendant, Duanne Taylor, since 2012. Effective May 2019, the parties entered into the lease, in which the plaintiff again rented the property to the defendant, for the 2019 crop year.

The lease was made pursuant to a written offer to lease signed by the parties in May 2019 (the offer to lease). [ 4 ] The lease contained clauses requiring the defendant to leave the property in the same condition as it was at the commencement of the lease and to follow normal farming practices; and requiring the plaintiff to “repair the existing aeration fans on or before the 1 st day of September, 2019.” [ 5 ] The defendant did not deliver the lease, signed, to the plaintiff until September 2019, at which time it claimed that the plaintiff had breached its terms by failing to repair the aeration fans.

Although the lease provides that it supercedes the offer to lease, the defendant had farmed the property throughout the summer of 2019 pursuant to the offer to lease. [ 6 ] The trial judge accepted the plaintiff’s evidence regarding the condition of the property when vacated by the defendant, finding that “at the end of harvest in November 2019 and the spring of 2020, the Property was not left in a condition which

came close to being in compliance with [the defendant’s] obligations under the Lease” (at para 24). She also accepted the plaintiff’s evidence regarding the cost of remediation and ordered damages in the amount sought. [ 7 ] The counterclaim raised a question of contractual

interpretation relating to the clause in the lease requiring the plaintiff to “repair the existing aeration fans on or before the 1 st day of September, 2019.” The trial judge found that this meant that the plaintiff would ensure that each of the nine fans on the property was in working order, in that, when each one was switched on, it ran. She rejected the defendant’s position that the lease obligated the plaintiff to upgrade the hydro service to the property from 200 amp to 600 amp service so that all nine fans could operate simultaneously.

She concluded that the plaintiff had not breached the lease. [ 8 ] In any event, the trial judge found that the defendant had not led sufficient evidence to substantiate the losses and damages it claimed it had suffered as a result of the alleged breach. [ 9 ] On appeal, the defendant asserts that the trial judge erred by: (1) finding that the defendant was to accept the property in “as is, where is” condition, when the plaintiff undertook to repair the aeration fans on the property on or before September 1, 2019; (2) granting the plaintiff’s claim for damages with respect to the condition in which the property was left; and (3) dismissing the defendant’s counterclaim. [ 10 ] Errors of law are reviewable on a standard of correctness.

For errors of mixed fact and law, or of fact alone, the standard of review is palpable and overriding error, unless an error of mixed fact and law involves an extricable legal question in which case the standard of correctness applies to that extricable legal question (see Housen v Nikolaisen , 2002 SCC 33 at paras 8 , 10, 37). [ 11 ] Contractual

interpretation generally involves a question of mixed fact and law subject to a standard of review of palpable and overriding error, except the standard of correctness applies where there is a readily extricable question of law or where the

interpretation of a standard-form contract is at issue (see Albo v The Winnipeg Free Press et al , 2020 MBCA 50 at para 18 ). [ 12 ] Turning first to the second ground of appeal which deals with the trial judge’s decision to allow the plaintiff’s claim for damages, the defendant says that the trial judge, in concluding that the property was left in unacceptable condition, erred in her reliance on the evidence of Derek Wilson (Mr.

Wilson), a farmer who testified for the plaintiff, and on hearsay, namely, information from a realtor, Stacey Hiebert, and agronomist reports commissioned by the plaintiff for the years 2014-2019 (while the defendant was under a continuing maintenance obligation). [ 13 ] As for the defendant’s position regarding hearsay, documents and photographs from the realtor and the agronomist reports were admitted into evidence by way of a book of agreed documents.

No objection was taken when the contents of these documents were referred to and explained during the testimony of Roy Farrer, Vice President Asset Management for the plaintiff. The defendant agreed that these documents be admitted, without insisting that the authors be produced for cross-examination. The trial judge was entitled to give this evidence the weight she saw fit. It is not for this Court to reweigh the evidence.

That is not our role (see Normandeau v Rond’s Marine Ltd et al , 2022 MBCA 62 at para 20 ). [ 14 ] Moreover, we are satisfied that, even without the hearsay, there was sufficient evidence to support the trial judge’s findings regarding the condition in which the defendant left the property and the cost of remediation. Mr. Wilson, who was personally aware of the condition of the property in the fall of 2019, testified in some detail about a number of deficiencies and what was needed to address them.

He explained that, in his negotiations with the plaintiff for rental of the property after the defendant had vacated, there was discussion of a range of between $15 and $30 per acre as the cost that he should be reimbursed by the plaintiff to remediate the property. Ultimately, $20 per acre was agreed upon, and that formed the basis for the plaintiff’s claim. [ 15 ] The defendant puts forward a number of arguments as to why the trial judge erred in relying on Mr. Wilson’s evidence.

However, these same arguments were made to the trial judge, and she was nonetheless satisfied that the plaintiff’s claim for remediation costs had been proven. The trial judge found that the defendant had presented “[n]o persuasive evidence” to refute the evidence tendered by the plaintiff, only “[its] position that the amount should be less” (at para 25). In our view, it was open to the trial judge to conclude that the remediation cost was the amount the plaintiff paid Mr. Wilson to get the property into shape. No palpable and overriding error has been established.

Therefore, the second ground of appeal is dismissed. [ 16 ] As for the first ground of appeal, t he defendant contends that the trial judge erred by determining that the lease did not obligate the plaintiff to ensure that all nine fans on the property would work simultaneously.

More specifically, it alleges that, in interpreting the lease, she erred by failing to consider the objective intention of the parties, and made palpable and overriding errors by finding that the defendant took the property “as is” and by failing to take into account that, during the summer of 2019, the plaintiff did, in fact, work on increasing the power so that more fans would work simultaneously. [ 17 ] We see no reviewable error in the trial judge’s

interpretation of the lease, and her consequent decision to dismiss the counterclaim. Therefore, we also do not accede to the first ground of appeal. [ 18 ] We are satisfied that the trial judge applied the correct legal test for contractual

interpretation. She noted, in her reasons, that “there was no disagreement with respect to the applicable law” (at para 37) and counsel, in their final written submissions, had identified the correct applicable test (see King v Operating Engineers Training Institute of Manitoba Inc , 2011 MBCA 80 at paras 64 , 70-73; and IFP Technologies (Canada) Inc v EnCana Midstream and Marketing , 2017 ABCA 157 at para 79 ). [ 19 ] In coming to her conclusion regarding

interpretation of the lease, the trial judge was well aware that the plaintiff was “endeavouring to increase the amperage at the Property in order to allow for more aeration fans to run simultaneously” but nonetheless concluded that that “did not create a legal obligation for it to do so under the terms of the Lease” (at para 36). [ 20 ] The trial judge did, however, make a palpable error of fact when she stated that “the Lease provided that [the defendant] acknowledged there were no representations, conditions, warranties or collateral agreements made by or on behalf of the [plaintiff] other than expressed in the Offer to Lease,” and also provided that the property was taken on an “As Is” “Where Is” basis (at para 34).

In fact, these provisions were not in the lease, but in the offer to lease and a 2017 lease between the parties (the 2017 lease). That being said, we

are not persuaded that this error was overriding, in that the lease did state that the defendant had examined the property and that it was “satisfactory in all respects for [its] purposes” and that, “[u]nless specifically addressed and identified herein as an obligation of the [plaintiff], the [defendant] shall not require the [plaintiff] to remedy any perceived deficiency of the Property or to otherwise compensate the [defendant] or to adjust the Base Rent for any such perceived deficiency.” As well, the parties had operated under the offer to lease during the summer of 2019. [ 21 ] Furthermore, the trial judge’s

interpretation of the lease is well-supported by evidence of the factual matrix surrounding its execution (see King at para 73). There was evidence that: the 2017 lease not only provided for the property being rented on an “As Is” and “Where Is” basis but, unlike the lease, contained language that specifically dealt with the plaintiff’s obligation to increase the capacity of hydro services; the term in the lease regarding the aeration fans was derived from an offer to lease made by Mr.

Wilson in April 2019, which was silent on hydro service and amperage, as was the offer to lease; and an alternative lease proposal presented by the defendant shortly after the offer to lease was signed (which was rejected by the plaintiff) did not reference aeration fans, hydro service, power or amperage. [ 22 ] Given our conclusion with respect to the trial judge’s

interpretation of the lease, we need not address the third ground of appeal, which deals with her decision regarding the quantum of damages sought by the defendant on the basis of the alleged breach of the lease. [ 23 ] For the foregoing reasons, the appeal is dismissed. Costs of the appeal are granted to the plaintiff. JA JA JA