


COURT OF APPEAL FOR ONTARIO

CITATION:
Thompsons
    Limited v. 617987 Ontario Inc., 2012 ONCA 178

DATE: 20120321

DOCKET: C52504

Rosenberg, Cronk and Watt JJ.A.

BETWEEN

Thompsons Limited

Plaintiff

(Defendant by
    Counterclaim)

(Respondent)

and

617987 Ontario Inc.

Defendant

(Plaintiff by
    Counterclaim)

(Appellant)

Raymond G. Colautti, for the appellant

John M. Skinner, Q.C., for the respondent

Heard: December 6, 2011

On appeal from the judgment of Justice Kelly Anne Gorman,
    of the Superior Court of Justice, dated September 16, 2010.

Cronk
    J.A.:

I.        Background

[1]

617987 Ontario Inc. carries on a farming and crop-spraying business
    under the trade name Triple P Farms (Triple P) near Chatham, Ontario.  Triple
    P is owned and operated by three brothers: James, Jerry and Dario Prelaz. 
    Thompsons Limited (Thompsons) runs a grain elevator and other agriculture-related
    enterprises in various locations throughout southwestern Ontario.

[2]

For more than two decades, Triple P and Thompsons enjoyed a mutually
    beneficial business relationship.  Triple P purchased farming inputs (items
    such as fertilizer, seeds and pesticides required for its farming operations)
    from Thompsons.  In turn, Thompsons contracted with Triple P from time to time
    to buy various of Triple Ps future grain crops for resale by Thompsons to
    third parties.  For many years, Thompsons also hired Triple P to provide custom
    pesticide spraying to some of Thompsons farming customers in the spring of
    each year.

[3]

At the beginning of January 2007, the parties long-standing
    relationship took a turn for the worse.  In May 2006, the parties had entered
    into two soybean contracts (the Soybean Contracts) under which Triple P agreed
    to grow 203 acres of two varieties of soybeans  Renwick and Respond
    soybeans  for Thompsons.  Under the terms of the Soybean Contracts, Thompsons
    agreed to pay Triple P a seed premium of $1.35 per bushel if the soybeans met
    stipulated quality standards.

[4]

In December 2006, after testing the soybeans, Thompsons concluded that
    the Renwick, but not the Respond, soybeans failed to meet the contracted
    quality standards required for payment of the seed premium.  As a result, in
    early January 2007, it informed Triple P that it would not pay the seed premium
    on the Renwick soybeans.  It was prepared to do so, however, in respect of the
    Respond soybeans.

[5]

Triple P disagreed with Thompsons assessment of the quality of the Renwick
    soybeans.  It raised various objections to the testing relied on by Thompsons
    and sought payment of the seed premium on both the Renwick and the Respond soybeans. 
    Angry and heated remarks were exchanged between one of the Prelaz brothers and
    a Thompsons employee.  A meeting held at the end of January 2007 between the
    parties, attended by some of Thompsons senior staff, failed to resolve the
    matter or alleviate the hard feelings that had developed on the part of the
    Prelaz brothers.

[6]

Unfortunately, the dispute widened in February 2007 when Thompsons
    informed Triple P that its pesticide spraying contract for the 2007 crop year
    (the 2007 Spraying Contract) would not be awarded to Triple P.  Triple P was of
    the view that a Thompsons representative had orally agreed with, or
    represented to, Triple P in late December 2006 that it would be business as
    usual with respect to Thompsons 2007 spraying work.

[7]

Apart from the Soybean and the 2007 Spraying Contracts, the parties had
    also entered into a series of nine written contracts whereby Triple P agreed to
    grow corn and wheat for Thompsons, to be delivered in 2007 or 2008, for resale
    by Thompsons to its customers (the Futures Contracts).  When the disputes
    concerning the Soybean and the 2007 Spraying Contracts erupted, Triple P
    threatened that it would not deliver the agreed-upon crops to Thompsons under
    the outstanding Futures Contracts.  In early March 2007, one of the Prelaz
    brothers confirmed this position to Thompsons in a discussion with Bill Foran,
    a Thompsons local branch manager with whom Triple P had dealt for many years. 
    In the event, Triple P did not deliver the crops contracted for under the
    Futures Contracts.

[8]

Litigation soon followed.  Thompsons sued Triple P in two separate
    actions for damages arising from Triple Ps breaches of the Futures Contracts. 
    Triple P defended the actions and also counterclaimed for damages that it
    claimed to have suffered as a result of Thompsons alleged breaches of the
    Soybean and the 2007 Spraying Contracts.

[9]

The actions were consolidated and tried together in January 2010.  The
    trial judge concluded that: (1) Thompsons had established its claims in respect
    of the Futures Contracts; (2) Thompsons was not obliged to pay the claimed seed
    premiums under the Soybean Contracts because the Renwick soybeans fell below
    grade and Triple P had sold the Respond soybeans to a third party; and (3) no
    binding 2007 Spraying Contract had been entered into by the parties.

[10]

Accordingly,
    by judgment dated September 16, 2010, the trial judge awarded Thompsons damages
    in the amount of $108,046.39, inclusive of prejudgment interest, on account of
    Triple Ps breaches of the Futures Contracts, together with costs in the sum of
    $60,000. She dismissed Triple Ps counterclaim.

[11]

Triple P
    appeals.  For the reasons that follow, I would dismiss the appeal.

II.       Facts

[12]

The trial
    judge thoroughly reviewed the evidence at trial in her reasons.  It is
    unnecessary to repeat that review here.  I will refer to the relevant evidence,
    and the pertinent facts as found by the trial judge, as needed in the course of
    my discussion of the grounds of appeal.

III.      Issues

[13]

I would
    frame the issues advanced on appeal by Triple P as follows:

(1)

Did the trial judge err by
    failing to address essential elements of Triple Ps defence to Thompsons
    claims on the Futures Contracts?

(2)

Did the trial judge err by
    failing to address Thompsons duty to mitigate its damages under the Futures
    Contracts and by failing to reduce the damages awarded to Thompsons
    accordingly?

(3)

Did the trial judge err in
    her assessment of the merits of Triple Ps counterclaim: (a) by failing to find
    that Thompsons breached the Soybean and 2007 Spraying Contracts; and (b) in the
    alternative, by failing to address Triple Ps claim that Thompsons negligently
    misrepresented that the 2007 Spraying Contract would be awarded to Triple P?

IV.     Analysis

(1)

Triple Ps Defence to Thompsons Claims on the Futures Contracts

[14]

Triple P
    advances three related submissions in support of its claim that the trial judge
    erred by failing to address essential elements of its defence to Thompsons
    claims on the Futures Contracts.

[15]

First, Triple
    P argues that the parties engaged in a single overall course of dealing, over
    many years, manifested by numerous related and interconnected contracts to
    which a general requirement of good faith dealing applied.  As a result, Triple
    P says, the breach by one party of one of the component contracts entered
    into as part of the parties overall business arrangement precluded the
    breaching party from relying on or seeking redress as against the non-breaching
    party under the other component contracts.  Triple P contends that since Thompsons
    breached the Soybean and 2007 Spraying Contracts, the Futures Contracts were
    discharged and Thompsons was estopped from seeking relief in respect of
    Triple Ps non-performance of the Futures Contracts.

[16]

Triple P next
    submits that, in early March 2007, the parties mutually agreed to terminate all
    their business dealings and go their separate ways (the Termination Agreement).
    In essence, Triple P asserts that Thompsons orally: agreed to sever all
    dealings between the parties; waived its right to insist on performance of or
    otherwise rely on the Futures Contracts; and released Triple P from its
    obligations to perform the Futures Contracts.

[17]

Finally, Triple
    P maintains that the trial judge failed to address and make requisite factual
    findings concerning this defence theory.  In effect, Triple P says that the
    trial judge failed to come to grips with Triple Ps defence to Thompsons
    claims on the Futures Contracts.

[18]

There are
    several difficulties with this argument.  I will first address Triple Ps overall
    business arrangement theory.

[19]

It is
    undisputed that the parties business relationship extended over many years. 
    Thompsons argues, however, that the parties dealings involved numerous
    discrete contracts, each of which stood on its own.  As a result, it says, the
    trial judge was required to consider Thompsons claims on the Futures Contracts
    on a stand-alone basis.

[20]

As I read
    her reasons, the trial judge accepted this characterization of the essential
    nature of the parties relationship. In my view, on the record in this case, it
    was open to her to do so.

[21]

The trial
    judge was mindful of the lengthy duration of the parties dealings and of the
    fact that they had entered into many contracts over the years, including the
    contracts at issue. She considered the evidence relating to the parties
    competing claims in respect of each of the disputed contracts and evaluated the
    merits of the claims advanced based on that evidence.

[22]

I see no
    error in this approach.  On the contrary, in my opinion, it was both justified
    and required by the pleadings and by the evidence concerning the contracts at issue.

[23]

In its
    Statement of Defence and Counterclaim, Triple P alleged that Thompsons conduct
    in relation to the Soybean and 2007 Spraying Contracts amounted to a repudiation
    and a fundamental breach of the contractual relationship between the parties,
    as a result of which Triple P advised Thompsons in March of 2007 that it would
    not be delivering on the Futures Contracts.  Triple P further alleged that,
    At that time [Thompsons] accepted the termination of the contractual
    relationship between the parties.

[24]

However,
    nowhere in its pleading does Triple P assert, as it now claims, that the
    relationship between the parties was governed by an overall business arrangement
    consisting of interdependent constituent contracts. Instead, while adverting to
    the lengthy ongoing business relationship between the parties, Triple Ps
    pleading specifically and separately addresses the Soybean, 2007 Spraying and
    Futures Contracts.  Thompsons defended Triple Ps counterclaim on the same
    basis.

[25]

Nor is
    there any suggestion in Triple Ps pleading, as Triple P also now claims in its
    factum, that Thompsons breached an overriding duty of good faith performance
    of contractual duties that imposed an obligation on Thompsons to refrain from
    breaching one set of contractual responsibilities while at the same time trying
    to enforce another.

[26]

Further,
    in its pleading, Triple P claims no damages or other relief on the basis of an
    alleged repudiation and breach by Thompsons of an umbrella business arrangement
    of which the disputed contracts formed but a part.

[27]

Triple Ps
    overall business arrangement theory also lacks support in the language of the
    disputed contracts themselves. The thrust of this theory is that the contracts in
    issue were interdependent  the breach of one contract materially affected the
    rights and obligations of the parties in respect of all the remaining
    contracts.

[28]

But there
    is nothing in the language of the Soybean or Futures Contracts, or in the
    evidence adduced at trial regarding the 2007 Spraying Contract, that indicates
    such interconnection among the contracts. There was no evidence at trial that
    any of these contracts was agreed by the parties to be related or subject to any
    of the other disputed contracts or, indeed, to any other contract at all.

[29]

Finally,
    and importantly, Triple Ps overall business arrangement theory rests on the
    contention that Thompsons breached the Soybean or 2007 Spraying Contracts. The
    trial judge rejected this contention. As I will discuss later in these reasons,
    it is my view that, on the evidentiary record before her, she was correct to do
    so.

[30]

I turn now
    to consideration of the alleged Termination Agreement.

[31]

In
    contrast to the overall business arrangement posited by Triple P, Triple P did
    plead the Termination Agreement.  As I have mentioned, in its Statement of Defence
    and Counterclaim, Triple P alleged that when Thompsons was informed in March
    2007 of Triple Ps decision not to deliver on the Futures Contracts, Thompsons
    accepted the termination of the contractual relationship.

[32]

The trial
    judge was alert to this allegation. She noted in her reasons that Triple P
    claims it advised [Thompsons] of its intention to terminate the [Futures
    Contracts]. Later, when describing Triple Ps position at trial, she stated:

When [Thompsons] refused to pay the seed premium, [Triple P]
    sought to terminate its agreements and relationship with [Thompsons] and
    subsequently did not deliver the contracted commodities. [Triple P] maintain[s]
    that the parties agreed to sever their relationship, and never believed that
    [Thompsons] intended to hold them to the delivery of the relevant commodities.

[33]

The trial
    judge also referred to the provisions of the Futures Contracts, including a term
    thereof that required the written consent of both parties to the cancellation
    of the Futures Contracts. She also alluded to Bill Forans evidence, on behalf
    of Thompsons, that he was informed on March 1, 2007 by Jerry and Dario Prelaz
    that they were all done dealing with us and that they probably wouldnt be
    doing any future business with Thompsons.

[34]

In these
    circumstances, it is simply incorrect to say that the trial judge failed to
    take account of Triple Ps claim of the existence of the Termination Agreement. 
    Triple Ps real complaint is that the trial judge failed to find that the
    parties in fact agreed to sever all their business dealings.  In this regard,
    the trial judge accepted that Triple P had sought to terminate the Futures Contracts
    and all other dealings between the parties at the beginning of March 2007 and,
    further, that it had informed Thompsons of this intention.  However, it is
    implicit in her reasons that she rejected the suggestion that Thompsons agreed
    to this course of action, or that it otherwise accepted Triple Ps repudiation
    of its obligations under the Future Contracts.

[35]

There was
    evidence at trial supporting the rejection of the existence of the alleged
    Termination Agreement.  Triple P claimed that the Termination Agreement was
    entered into in early March 2007 during two telephone discussions between Jerry
    Prelaz of Triple P and Wes Thompson, President of Thompsons.  I agree with
    Thompsons submission that nothing in the words attributed by Jerry Prelaz to Wes
    Thompson constituted an agreement by Mr. Thompson that the parties would simply
    walk away from all their existing obligations or a release by him of Triple Ps
    obligations under the Futures Contracts.

[36]

At trial,
    when describing his March 2007 conversations with Wes Thompson, Jerry Prelaz
    testified that they discussed the Soybean and 2007 Spraying Contracts. 
    Although Mr. Prelaz claimed he understood from Mr. Thompsons remarks that Mr.
    Thompson was suggesting that Triple P might as well do business somewhere else,
    he also agreed that Mr. Thompson
did not
mention the Futures Contracts
    or whether or not he was looking for [Triple P] to fulfill those.  Nor did
    Mr. Prelaz suggest that he had raised the matter of the Futures Contracts, or
    the termination of all the parties contractual arrangements, with Mr.
    Thompson.  His trial evidence on this matter was consistent with his testimony
    on discovery, which was read-in at trial during his cross-examination,
    regarding the nature of his discussions with Mr. Thompson.

[37]

Thus, based
    on Jerry Prelazs own evidence, Wes Thompson did not discuss, let alone
    expressly agree to terminate, the Futures Contracts during his conversations
    with Mr. Prelaz.  While Mr. Prelaz may have assumed that this was the result of
    his discussions with Mr. Thompson, it was certainly open to the trial judge to
    conclude, as she implicitly did, that Wes Thompson had not committed Thompsons
    to a Termination Agreement of the type posited by Triple P.

[38]

Finally, I
    underscore that the Futures Contracts expressly provide for cancellation in
    writing.  They state, in capital letters: CANCELLATION OF ALL OR ANY PART OF
    THIS CONTRACT REQUIRES THE WRITTEN CONSENT OF BOTH PARTIES. Written consent to
    the cancellation of the Futures Contracts was never provided by either party.

[39]

The Futures
    Contracts also provide that the waiver by Thompsons of any breach by Triple P,
    shall not be construed as a waiver of any future such breach
nor affect or
    limit in any way Thompsons right thereafter to enforce and compel strict
    compliance by [Triple P] with every term and condition hereof
 (emphasis
    added).

[40]

I would
    reject this ground of appeal.

(2)

Thompsons Duty to Mitigate its Damages

[41]

The
    evidence at trial established, and the parties accept, that Triple P informed Thompsons
    in early March 2007 of its intention not to deliver the crops purchased by
    Thompsons under the Futures Contracts. In its Statement of Defence, Triple P
    pleaded that: (1) the relevant market commodity prices in March 2007 were less
    than the prices stipulated in the Futures Contracts; (2) Thompsons had the
    opportunity to fully mitigate its losses and damages by purchasing the
    required commodities at the prevailing market prices when it became aware that
    Triple P would not be delivering on the Futures Contracts; and (3) Thompsons
    would have been better off if it had taken reasonable steps to mitigate its
    damages by purchasing the commodities at the lower prices.

[42]

There was
    no evidence at trial of the prevailing market prices for substitute commodities
    contracts in March 2007.  However, Triple P filed a mitigation chart at
    trial, detailing the prices received by Triple P when it sold the crops forming
    the subject matter of the Futures Contracts to third parties. Based on this
    chart, Triple P argues that Thompsons overstated its damages on some of the
    Futures Contracts and that Thompsons would have suffered no damages on most of
    the Futures Contracts had replacement crops or substitute future grain
    contracts been purchased by Thompsons at market prices in March 2007.

[43]

Triple P
    submits that the trial judge erred by failing to take account of this evidence,
    by failing to make requisite findings regarding Thompsons duty to mitigate
    and, more generally, by failing to consider Triple Ps case on mitigation. I
    disagree for several reasons.

[44]

First, on
    the record before this court, it appears that Triple Ps mitigation chart was
    simply filed at trial and, we were advised during oral argument, referenced by
    Triple Ps counsel during closing submissions.  However, the chart does not
    address the availability of substitute future grain contracts, or the value of
    such contracts, if available, as of March 2007.

[45]

Moreover,
    it does not appear that the contents of the chart were supported by any expert
    or other testimony at trial.  And, no cross-examination of any of Thompsons
    witnesses appears to have been conducted regarding Thompsons alleged failure
    to mitigate its damages.  Since it was Triple Ps position that Thompsons could
    reasonably have avoided some, if not all, of the damages claimed, Triple P bore
    the burden at trial to establish Thompsons failure to mitigate:
Michaels
    v. Red Deer College
, [1976] 2 S.C.R. 324, at p. 332;
Barber v. Vrozos
,
    2010 ONCA 570, 269 O.A.C. 108, at paras. 94-95.

[46]

Second, the
    trial judges reasons indicate that she was aware of Triple Ps claim that
    Thompsons was obliged to mitigate its damages under the Futures Contracts and
    that it failed to do so. She referred to Triple Ps mitigation argument near
    the outset of her reasons.

[47]

It is true
    that the trial judge did not use the term mitigation again in her reasons.  However,
    in her review of the evidence adduced by Thompsons at trial, she summarized
    part of the testimony of Thompsons merchandising manager, Darcy Oliphant,
    regarding the Futures Contracts:

Mr. Oliphant testified that ... once contracts are entered into
    with farmers for the purchase of a specific commodity, Thompsons would sell the
    contract at the locked-in price. [Thompsons] would then gain or lose depending
    on the fluctuating market. However, if the farmer did not deliver the commodity
    on the agreed upon day, Thompsons would be required to buy it from another
    grower in order to satisfy its contract to the third party. The price might be
    higher or lower than the initial contract.

Mr. Oliphant testified that Thompsons expects, and relies on,
    producers to physically deliver the crop contracted for. If there was a crop
    shortage, or drought, the contracts contain terms for its cancellation.
    However, if the crop was simply not delivered, [Thompsons] would wait until the
    last possible date for delivery  as stipulated in the contract, and calculate
    a buy-out price and charge an administrative fee.

[48]

Then, at
    the outset of the analysis section of her reasons, the trial judge returned to
    Mr. Oliphants testimony.  She stated:

Darcy Oliphant took the court through the price contracted with
    [Triple P] versus the market prices for the specific commodities on (generally)
    the last day for buy-out.
[Thompsons was] required to wait until the last
    day for delivery on the contracts before [it] could obtain the commodities
    elsewhere. In each instance the CBOT price per bushel was higher than the
    contracted price. Accordingly, [Thompsons] suffered a monetary loss in having
    to replace the various commodities for resale
. There appears to be no real
    issue as to the quantum of damages [Thompsons] alleges it suffered. Rather, the
    issue appears to be set-off.  [Emphasis added.]

[49]

Contrary
    to Triple Ps submission, these passages reveal that the trial judge was alive to
    Triple Ps mitigation argument. They also indicate, again, that she was
    cognizant of the terms of the Futures Contracts, which included this valuation
    provision:

The producer [Triple P] agrees that if, for any reason, he is
    unable to completely fulfill his obligations as specified by this contract, by
    [a stipulated delivery date], the contract will be valued at the market less 15
    cents bushel administration fee.

[50]

Thus, the
    Futures Contracts themselves provided for the time when the value of each contract
    was to be calculated  the contracted delivery date  and for a valuation
    formula  market price less 15 cents bushel administration fee  in the event
    of non-performance by Triple P.

[51]

According
    to Mr. Oliphant, the effect of this provision if the crop was simply not
    delivered was to require that Thompsons wait until the last possible date for
    delivery  as stipulated in the contract, and calculate a buy-out price and
    charge an administrative fee.  As I read her reasons, the trial judge accepted
    Mr. Oliphants testimony on this issue.  She was entitled to do so.

[52]

The above-quoted
    valuation provision of the Futures Contracts indicates that the parties turned
    their minds, at the time of contract formation, to the consequences of
    non-performance by Triple P, including the timing and method for quantifying
    Thompsons consequent losses, if any.  In light of this express bargain, it is
    my view that Thompsons was entitled to rely on the valuation provision to
    forestall any obligation to purchase replacement commodities contracts or crops
    at an earlier date.

[53]

And that
    is precisely what occurred in this case. Triple P unilaterally repudiated the
    Futures Contracts in early March 2007 by declaring its intention not to deliver
    the goods required under those contracts.  In accordance with the valuation provision
    set out in the Futures Contracts, Thompsons then waited, in the case of each contract,
    until the contracted delivery date to value the contract and, hence, to ascertain
    its damages, if any.  It then sued Triple P to recover those damages.

[54]

In these
    circumstances, it cannot be said that the trial judge erred by ignoring or
    failing to deal with the issue of mitigation.  Based on the terms of the
    Futures Contracts and Mr. Oliphants evidence, which she accepted, the trial
    judge rejected Triple Ps mitigation argument.  It was in this context that she
    stated, [t]here appears to be no real issue as to the quantum of damages the
    Plaintiff alleges it suffered. Rather, the issue appears to be set-off.

[55]

The trial
    judge then went on to hold, in effect, that no question of set-off arose in
    this case. On her findings, Thompsons did not breach the Soybean Contracts and
    it never entered into the 2007 Spraying Contract with Triple P.   Consequently,
    Thompsons was not liable to Triple P and Triple P had no damages recoverable
    against Thompsons that could be set-off against any damages owed by Triple P to
    Thompsons.

[56]

I find
    support for the conclusion that the trial judge did not err in her approach to
    the issue of mitigation in the general principles governing mitigation of
    damages.  In
Red Deer College
, at pp. 330-331, the Supreme Court
    explained the duty to mitigate in breach of contract cases in these terms:

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 in if there
    had been proper performance by the defendant, is subject to the qualification
    that the defendant cannot be called upon to pay for avoidable 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 this 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 on
    whether he has taken reasonable steps to avoid their unreasonable accumulation.

[57]

These
    principles gained further support in
Asamera Oil Corporation Ltd. v. Sea
    Oil & General Corp.
, [1979] 1 S.C.R. 633.
Asamera
holds that
    in the event of an anticipatory breach or anticipatory repudiation of a
    contract, the innocent party is required to take reasonable steps to avoid
    further loss.  Those steps, however, need not be taken immediately.

[58]

The issue,
    then, is how these principles apply to non-performance of a contract for the
    sale of goods.  The applicable authorities recognize that in the face of an
    anticipatory repudiation or anticipatory breach of contract, the innocent party
    may elect either to affirm the repudiation and sue for damages immediately,
    or to disaffirm the repudiation and treat the contract as subsisting for the
    benefit of both parties.  In the latter event, the innocent party is entitled
    to wait to sue for relief until the performance date specified in the contract. 
    S. M. Waddams in
The Law of Damages, Looseleaf Edition
(Toronto: The
    Cartwright Group Ltd., 2008) explains, at 15.400:

Where a party announces in advance an intention not to perform
    a contractual obligation, the innocent party may sue immediately for damages or
    may await the date of promised performance and sue then.  If the innocent party
    sues immediately or otherwise accepts the repudiation, the plaintiff is bound
    to mitigate the loss, a result often expressed by holding that damages
    crystallize at that time.  [Citations omitted.]

[59]

Elsewhere in
    the same text, at 1.1570, Professor Waddams indicates:

Where non-delivery of goods is in question, the usual problem
    is to choose between alternative dates; when the market price changes between
    the date of repudiation and the date of promised delivery, there is an added
    problem.  Even if the argument made elsewhere is accepted to the effect that
    the innocent party is bound to act reasonably in the case of anticipatory
    breach, it is by no means clear to what result this principle would lead in the
    case of an anticipatory repudiation by a seller of goods and a rise in market
    price between repudiation and date of due delivery.  Although, in retrospect,
    it may have become apparent that the market was steadily rising, this is seldom
    obvious in advance because the current market price at any time itself
    represents predictions about the future.  Thus, one can rarely say the market
    is sure to rise and similarly, it is submitted, it can rarely be unreasonable
    to fail to predict market changes.
Where the price rises after the
    repudiation, the cases have generally held that the buyer can recover damages
    based on the higher price at the date of promised delivery
.  Though the
    analytical foundations may be open to attack,
there is, it is submitted,
    considerable practical sense in the rule that a buyer can ignore a repudiation
    and recover the difference between contract and market price at date of due
    delivery, even if this is higher than the market price at the date of repudiation
. 
    [Citations omitted; Emphasis added.]

[60]

In this
    case, it was Thompsons unchallenged evidence at trial, provided by Mr.
    Oliphant, that if a farmer failed to deliver on a Thompsons futures contract,
    Thompsons was obliged to purchase the crop in question from someone else in
    order to satisfy its own contractual commitments to its customers. 
    Consequently, if non-delivery was foreshadowed, it was Thompsons custom to
    discuss an early buy-out of the futures contract with the defaulting farmer. 
    If the defaulting farmer clearly indicated its acceptance of an early buy-out,
    Thompsons would attempt to purchase a substitute commodities contract or
    substitute crop at prevailing market prices.  Failing such instructions,
    Thompsons was obliged under the terms of its standard form futures contracts,
    to wait for the last possible crop delivery date set by the applicable contract
    and to then buy-out the contract in accordance with the valuation provision
    agreed upon by the parties.

[61]

In other
    words, on Thompsons undisputed evidence, its futures contracts determined both
    the timing and the price for the buy-out of a futures contract in the event of
    non-performance by a producing farmer, unless Thompsons and the farmer agreed
    otherwise.

[62]

Under this
    approach, as the market prices for grain crops are constantly in flux, the
    defaulting farmer might benefit financially.  Mr. Oliphant testified that if,
    at the contract delivery date, the contract price to be paid to the farmer was
    more than the market price for the crop in question, Thompsons would buy-out
    the contract by purchasing replacement grain at market price and paying the
    defaulting farmer the difference between the market and contract prices, less
    an administration fee.  Conversely, if, at the contract delivery date, the
    contract price to be paid to the farmer was less than the market price,
    Thompsons loss, to be paid by the defaulting farmer, was the difference
    between the contract and market prices, plus an administration fee.

[63]

There was
    evidence at trial that inquiries were made by Triple P in the spring of 2007
    regarding an early buy-out of the Futures Contracts.  However, Triple P did not
    pursue this option.  Nor did it provide instructions to Thompsons, at any time,
    to complete an early buy-out of the Futures Contracts prior to the specified
    contract delivery dates.  Instead, it simply treated the Futures Contracts as
    terminated and disposed of its crops elsewhere.

[64]

For its
    part, on what I regard as the trial judges findings, Thompsons did not
    affirm Triple Ps anticipatory repudiation of the Futures Contracts.   Instead,
    it elected to await the agreed-upon dates for performance under the Futures
    Contracts and to then value the Futures Contracts and determine contract
    buy-out prices, thereby establishing its losses, if any.

[65]

Read as a
    whole, the trial judges reasons reflect her conclusion that Thompsons did not
    act unreasonably in doing so.  I agree.  By the terms of the Futures Contracts,
    the parties agreed to the allocation of the risks associated with non-performance
    by Triple P in a fluctuating grain market.  The valuation provision in the
    Futures Contracts entitled Thompsons to wait for the last delivery date
    specified to determine its losses, even if, in the interval between the date of
    Triple Ps repudiation (March 2007) and the contract delivery dates in 2007 and
    2008, market prices for the crops in question rose above the agreed contract
    prices.  The trial judges reasons reveal that she appreciated the significance
    of the valuation provision in the Futures Contracts and the evidence as to its
    meaning and effect.

[66]

I conclude
    that the trial judge did not fail to address Triple Ps mitigation argument. 
    Nor did she err in her approach to it.  While her reasons for doing so might
    have been more fully or clearly expressed, she simply rejected Triple Ps
    mitigation complaint, on the evidence.  She concluded, in effect, that
    Thompsons actions in all the circumstances were reasonable.  That was her call
    to make.

[67]

I add this
    final observation.  Thompsons and Triple P were not strangers.  Neither party
    was in a less significant bargaining position than the other.  Indeed, each was
    a valued customer of the other.  By the time of their falling out, they had
    engaged in business together for almost 25 years.  They were at liberty to
    structure their commercial affairs as they thought appropriate.  In these
    circumstances, effect should be given to the terms of the Futures Contracts
    upon which they agreed.

(3)

Triple Ps Counterclaim

[68]

Triple Ps
    remaining ground of appeal concerns the trial judges assessment of the merits
    of its counterclaim.

[69]

Triple P
    argues that the trial judge erred by failing to find that Thompsons breached
    the Soybean and 2007 Spraying Contracts and, in the alternative, by failing to
    consider Triple Ps claim for damages based on negligent misrepresentation in
    respect of the 2007 Spraying Contract.

[70]

In my
    opinion, the trial judges finding that Thompsons did not breach the Soybean
    Contracts was firmly anchored in the evidence.  Thompsons denial of a seed
    premium on the Renwick soybeans was based on its conclusion that these soybeans
    did not meet the contracted quality standards.  The Soybean Contracts provided
    for the payment of a seed premium on a clean seed basis if the seed meets CSGA
    and [Thompsons] minimum quality standards.  They also stated that if the
    soybeans did not grade Canada No. 1, Thompsons had the option of either
    accepting or rejecting the soybeans for seed and/or negotiating a reduced
    price.

[71]

There was
    evidence at trial that, on testing by Thompsons itself and by the Canadian
    Grain Commission at Bill Forans request, the Renwick soybeans fell below the
    seed grade specified in the Soybean Contracts.  Triple P did not conduct its
    own grading or testing of the Renwick soybeans.  Nor did it arrange for testing
    to be done by the Canadian Food Inspection Agency, as was permitted under the
    Soybean Contracts.

[72]

Furthermore,
    when Triple P elected to sell the Renwick soybeans to a third party purchaser,
    Archer Daniels Midland (ADM), in mid-January 2007, ADM assigned the Renwick
    soybeans a grade of Grade 2, below the minimum grade agreed on by Thompsons and
    Triple P in the Soybean Contracts.  Triple P also sold the Respond soybeans to
    ADM, although Thompsons had raised no complaint about their quality.

[73]

Accordingly,
    there was ample evidence to support the trial judges finding that the Renwick
    soybeans fell below grade, thus disentitling Triple P to a seed premium on
    them.  The trial judges finding that Thompsons was prepared to pay the seed
    premium on the Respond soybeans, but was prevented from doing so because Triple
    P unilaterally elected to sell them to a third party, is not challenged before
    this court.

[74]

I also see
    no basis for appellate interference with the trial judges conclusion that
    Thompsons did not agree to award its 2007 spraying work to Triple P.

[75]

Triple Ps
    claim that Thompsons offered and Triple P accepted the 2007 Spraying Contract
    rests on the evidence of a discussion between Jerry Prelaz and Bill Foran that
    occurred in late December 2006.  At trial, Jerry Prelaz testified that, during
    this discussion, he inquired of Mr. Foran about the spraying work for 2007,
    asking: So you think we will be able to carry on business next year as we did
    this year?  Mr. Foran replied Sure, but gave no indication of the number of
    acres to be involved in the work or of any other details concerning the 2007
    spraying work.

[76]

Based on
    this exchange, Jerry Prelaz said that he understood that Mr. Foran had
    provided the indication that [Triple P] would be doing the spraying for
    2007.  Mr. Foran also testified at trial.  No questions were asked of him
    concerning this discussion with Jerry Prelaz.

[77]

The trial
    judge concluded that this discussion was insufficient to constitute a contract
    between the parties for the 2007 custom pesticide spraying.  She noted that the
    evidence established that, for several years prior to the discussion in
    contention, Thompsons annual spraying contracts were formalized in writing.

[78]

In his own
    evidence, Jerry Prelaz acknowledged that, commencing in approximately 2000,
    Thompsons required written contracts for its spraying work.  He also said that
    custom spraying contracts with Thompsons were usually all signed, sealed and
    delivered by, in December, even though the formal written contracts were often
    signed later.  He said that, from Triple Ps perspective, this was very
    important because Triple P needed time to hire and train workers and to work
    out all necessary details before the start of the spraying season for the
    spraying work for Thompsons and Triple Ps other spraying customers.

[79]

It is
    undisputed that no written 2007 Spraying Contract was entered into by the
    parties.  In addition, even on Jerry Prelazs account of his December 2006
    discussion with Mr. Foran, no details regarding Thompsons 2007 spraying work
    were ever discussed with Triple P.

[80]

Further, it
    appears that after the December 2006 discussion, Triple P did not pursue a
    written contract for the 2007 spraying work with Thompsons although it knew
    that such contracts were required.  It was not until mid to late February 2007,
    shortly before the spraying work was due to begin, that Jerry Prelaz again
    inquired of Bill Foran about the 2007 Spraying Contract.  And, according to Mr.
    Foran, even in February 2007, he made no commitment regarding the 2007 spraying
    work.

[81]

It is
    important to remember that by February 2007, a serious fissure in the parties
    business relationship had developed, tempers had flared and angry words had
    been exchanged.  It was against this backdrop that Mr. Foran informed Triple P,
    at the end of February, that it would not be doing Thompsons 2007 spraying
    work.

[82]

Viewed in
    this context, and in light of Thompsons admitted post-2000 practice of
    requiring written contracts for its spraying work and the lack of specificity
    in Mr. Forans remark to Jerry Prelaz in December 2006 regarding the 2007
    spraying work, there was ample evidentiary justification for the trial judges
    conclusion that no enforceable 2007 Spraying Contract was entered into by the
    parties.

[83]

Before
    this court, Triple P argues that the trial judge misapprehended its position
    concerning the 2007 spraying work.  It submits that its claim on this issue was
    not based on breach of contract but, rather, on Bill Forans alleged
    misrepresentation, in his December 2006 exchange with Jerry Prelaz, that Triple
    P would receive the 2007 Spraying Contract.  By reason of that alleged
    misrepresentation, Triple P maintains that Thompsons is estopped from denying
    Triple Ps entitlement to damages for its losses associated with the 2007 Spraying
    Contract.

[84]

With
    respect, I have difficulty understanding the basis for this submission.  The
    trial judges reasons must be read in the context of the case before her. 
    Triple Ps claim regarding the 2007 spraying work, as pleaded, was framed
    solely in contract.  Its Statement of Defence and Counterclaim makes no mention
    of misrepresentation, promissory estoppel or, more generally, tort-based relief. 
    There is no suggestion that Triple Ps pleading was amended before or at trial.

[85]

In any
    event, I regard Mr. Forans reply of Sure to Jerry Prelazs December 2006
    inquiry whether the parties would be able to carry on business next year as we
    did this year, as falling far short of the particularity required to make out an
    actionable misrepresentation concerning the 2007 spraying work.

[86]

It follows
    that Triple Ps claim for damages in relation to the 2007 spraying work, whether
    grounded in contract or in tort, was properly rejected by the trial judge.

[87]

Finally, I
    recognize that Triple P also alleges on appeal that Thompsons breached an
    overriding duty of good faith performance of contractual responsibilities.  Assuming,
    without deciding, that this claim is available to Triple P, it must also fail. 
    It depends on a finding of contractual breach by Thompsons, which was not made
    out by Triple P.

V.      Disposition

[88]

For the
    reasons given, I would dismiss the appeal.  I would award Thompsons its costs
    of the appeal, fixed in the amount of $18,000, inclusive of disbursements and
    all applicable taxes.

Signed:        E. A. Cronk J.A.

I agree M. Rosenberg J.A.

I agree David Watt J.A.

Released: March 21, 2012


