An eastern Saskatchewan farm’s plans to seek over $50 million in a lawsuit against the Canadian Wheat Board are seen as a test of the four-year-old variety declaration system for grains.
Hudye Farms Inc. and two associated companies at Norquay, Sask., about 100 km northeast of Yorkton, are contesting the cancellation of the farm’s delivery contract over what was deemed to be an ineligible variety of Red Spring wheat.
“The wheat board’s name may be on the statement of claim but it’s a challenge of the wheat quality control system of Canada that all the players in the grain industry strongly support,” CWB spokeswoman Maureen Fitzhenry said in a report on the suit in Thursday’s Manitoba Co-operator.
Under the system’s rules, farmers delivering wheat board or non-board grains to an elevator must sign a legal agreement stating they are not delivering ineligible varieties and acknowledging they can be held liable for the damages if they do.
Hudye, in its statement of claim, says it did not default on its delivery contract and is thus owed over $177,000 for grain, $8,000 in testing fees, $52,000 in losses due to cancelled contracts, $10,000 for losses due to downgrading of 122 tonnes of wheat it delivered, and almost $248,000 in interest.
On top of that the plaintiffs plan to seek $10 million for breach of fiduciary duty, $25 million for defamation, and $15 million in punitive damages.
Fitzhenry told the Co-operator’s Allan Dawson the CWB has done nothing wrong. It cancelled Hudye Farms’s delivery contract when it was discovered the company delivered an ineligible variety of wheat, 606 Granite, to the Canada Western Red Spring (CWRS) wheat class.
606 Granite is registered in Eastern Canada but isn’t registered as a CWRS wheat.
The grain variety declaration system, applied to wheat in 2006, was extended to non-board grains this fall and is expected to hold up in spite of the lawsuit, Wade Sobkowich, executive director of the Western Grain Elevator Association, told Dawson.
“I don’t think it puts our protocol in jeopardy whatsoever,” Sobkowich said. “We’re going on the basis that the individual that causes the damage ought to pay for it. And I don’t think any reasonable person can dispute that.”
The Hudye Farms case is one of the first involving a farmer found to have delivered an ineligible variety, said Fitzhenry.
The suit claims the wheat it delivered was cleared by the CWB’s buying agent, Cargill, and by the Canadian Grain Commission. But Cargill and the CGC merely graded the wheat, according to Fitzhenry.
“By signing the declaration, the farmer is legally responsible for ensuring what they have grown, and what they are delivering, is a variety that’s eligible for the class it’s being delivered into,” she said.
The suit could serve to bring attention to the potential impact that misdeclaring could have on farmers, WGEA’s Sobkowich said in the Co-operator.
“Hopefully it prompts people to take another look at what they’re doing on their farms and know that there can be some real consequences for not having proper practices in place.”
In September 2009, Hudye Farms said in a release last week, it filed a mandatory CWB declaration with a major grain company that all wheat Hudye Farms intended to deliver in the 2009-10 crop year would be of the CWRS class.
After submitting samples to the CGC and “the CWB’s grain agent,” Hudye Farms said, it entered into an 8,625-tonne CWRS wheat delivery contract with the CWB.
But in March this year, Hudye Farms said, it began delivery and was then told subsequent testing had found 122.5 tonnes of its wheat contained 23.6 per cent of an ineligible variety.
The CWB then downgraded 122.5 tonnes of the wheat to feed, deemed Hudye Farms to be in default, cancelled all its delivery contracts and claimed damages on the entire 8,625-tonne contract though about 1,200 tonnes of the wheat had yet to be delivered, the farm said in its release.
The suit contends that by not selling Hudye Farms’ wheat, the CWB failed in its fiduciary duty as the only marketer of wheat on the Prairies.
“What troubles us the most about this dispute is that as a farmer in Western Canada we don’t have a choice on where we can sell our milling wheat,” Hudye Farms president Ben Hudye said in last week’s release.
“I believe that farmers should be able to determine how and to whom we sell the fruits of our labour.”