



COURT OF APPEAL FOR ONTARIO

CITATION: Eureka Farms Inc. v. Luten, 2016 ONCA 969

DATE: 20161221

DOCKET: C60015

Sharpe, Lauwers and Miller JJ.A.

BETWEEN

Eureka Farms Inc.

Plaintiff

(Respondent)

and

Roelof Geuchien Luten also known as Roel Luten
    and Roelofje Femmigje Remmelts-Luten also known as Roelofje Femmigje
    Remmells-Luten

Defendants

(Appellants)

AND BETWEEN

Roelof Geuchien Luten also known as Roel Luten
    and Roelofje Femmigje Remmelts-Luten also known as Roelofje Femmigje
    Remmells-Luten

Plaintiffs by
    Counterclaim

(Appellants)

and

Eureka Farms Inc., Renatus Boerkamp also known as
    Rene Boerkamp and Eva Boerkamp

Defendants to the Counterclaim

(Respondents)

G. Edward Oldfield, for the appellants

David Medcalf, for the respondents

Heard: December 19, 2016

On appeal from the judgment of Justice R.D. Reilly of the
    Superior Court of Justice, dated January 23, 2015.

ENDORSEMENT

[1]

This appeal arises from an agreement of purchase and sale of a swine
    farm. The appellant purchasers submit that the trial judge erred by dismissing
    their claim for damages for the loss they suffered when they were forced to
    sell the farm at a loss when they could not secure a supply of pigs.

[2]

In our view, the trial judge properly dismissed the appellants claim on
    the basis of the terms of the written contract between the parties.

Duty of Good Faith

[3]

The appellants submit that the respondent breached its duty of good
    faith, citing
Bhasin v. Hrynew
, 2014 SCC 71, [2014] 3 S.C.R. 494, by
    failing to advise the appellants well in advance of closing that there would be
    no pigs in the barn when the transaction closed.

[4]

Prior to closing, the principal of the respondent became gravely ill and
    market conditions for pigs took a turn for the worse. As a result, the vendor
    did not enter a new turn by turn arrangement with his supplier and there were
    no pigs in the barn at the time of closing.

[5]

The agreement of purchase and sale contained a condition that gave the
    appellants the right to extract themselves from the agreement if they were
    unable to satisfy themselves as to the supply of pigs. The appellants met with
    the respondents supplier who told them that he was prepared to supply them
    with pigs but only on the basis of an oral turn by turn agreement. He
    declined to enter any written or long-term agreement. Following that meeting,
    the appellants waived the condition.

[6]

After learning that the barn was empty prior to closing, the appellants
    did not ask for an extension of the closing date to verify their source of
    supply, nor did they refuse to close on the basis that the respondent was in
    breach.

[7]

We agree with the appellants that at the time the agreement was
    concluded, both parties expected that there would be pigs in the barn at the
    time of closing. However, the appellants knew that they had no assurance of an
    on-going supply of pigs and by waiving the condition in their favour prior to
    closing, they assumed the risk that market conditions could change and that the
    supply of pigs could dry up. Even if the respondent should have told the
    appellants in a more timely fashion that the barn would have no pigs at the
    time of closing, we do not agree that that amounts to a breach of the duty of
    good faith sufficient to trigger a remedy for the appellants given the terms of
    the contact and the way it allocated the risk of market change.

[8]

We conclude that the allegation of bad faith is insufficient to overcome
    the fact that the appellants knew they had no guaranteed source of supply and
    they assumed that risk by waiving the condition and closing the transaction
    with full knowledge of the fact that the barn was empty.

Negligent Misrepresentation

[9]

The appellants submit that the respondent made a negligent
    misrepresentation when he failed to disclose that under the arrangement with
    the third party supplier in place at the time the agreement of purchase and
    sale was entered, the respondent was financing the supply of pigs by purchasing
    them when they came to the barn and reselling them to the third party supplier
    when they left.

[10]

We agree with the respondent that any failure on its part to disclose
    the details of its arrangements with the supplier does not assist the
    appellants. First, the agreement of purchase and sale contains an entire
    agreement clause. Second, and in any event, the appellants met with the
    supplier and discussed with him the details of the arrangement the supplier was
    prepared to offer them if they purchased the farm. The appellants decided to
    proceed with the transaction on that basis and the terms of the respondents
    arrangements with the supplier are irrelevant.

Contractual obligation to have pigs in the farm on closing

[11]

We do not accept the argument that the agreement of purchase and sale
    required the respondent to have pigs in the barn at the time of closing. There
    is no provision to that effect in the agreement. The trial judge made a finding
    that the provisions providing for an adjustment on closing regarding the
    proceeds of the hog contract and to provide management guidance for a four week
    period following closing could not be interpreted as creating a contractual
    obligation to ensure that there were pigs in the barn at the time of closing.
    That finding, in our view, was entirely consistent with the overall effect of
    the agreement. It was reasonable and is entitled to deference on appeal.

[12]

Finally, we are not persuaded that the loss the appellants suffered was
    caused by the fact that there were no pigs in the barn at the time of closing.
    The supplier could not supply the appellants with pigs because of the adverse
    market conditions, and there is no evidence that the supply problem was
    causally related to the fact that appellants had acquired the farm with an
    empty barn.

[13]

The real cause of the appellants loss was the significant rise in the
    price of pigs, an adverse market condition for which, on a fair reading of the
    agreement of purchase and sale, they had assumed the risk.

Disposition

[14]

Accordingly, the appeal is dismissed with costs to the respondent fixed
    in the amount agreed to by the parties, namely, $15,000 inclusive of
    disbursements and taxes.

Robert J. Sharpe
    J.A.

P. Lauwers J.A.

B.W. Miller J.A.


