Input Capital to appeal streaming contract ruling

Saskatchewan judge found canola contracts 'unconscionable'

(Photo courtesy Canola Council of Canada)

A “virtual” grain firm whose canola contracts with a Prairie farmer were set aside as “unconscionable” in a recent court ruling plans to challenge parts of that decision on appeal.

Regina-based Input Capital Corp. said Monday it has filed a notice of appeal with the Saskatchewan Court of Appeal over a May 17 ruling by Court of Queen’s Bench Justice Jeffery Kalmakoff.

Input had taken Terry Gustafson, a southeastern Saskatchewan farmer, to court in 2015 and again last June, alleging breach of contract over his unmet canola delivery obligations against several upfront payments made by the company.

Publicly-traded Input deals in canola obtained from farmers by way of “multi-year streaming contracts,” generally involving upfront payments in return for agreed-upon tonnage over an agreed-upon time frame.

For farmers, the company bills itself as acting “like a virtual grain company, buying canola and providing financial solutions.”

Past what it described as its “successful outcome” in the court case against Gustafson, Input said Monday it “believes the trial judge erred on several accounts with respect to the interpretation of the streaming contracts and security.”

In its June 2017 action, Input had sought judgment against Gustafson worth $7.43 million plus foreclosure of a mortgage or judicial sale of mortgaged lands.

Kalmakoff on May 17 instead ordered Gustafson to repay the company $4.4 million — representing almost all of what Input had fronted to Gustafson — plus interest and “taxable costs.”

Although Kalmakoff found Gustafson was “unjustly enriched” by the upfront payments and must repay that money, the judge also ruled the various agreements between Input and Gustafson “must be set aside as unconscionable” — thus invalidating the other security interests Input sought to claim.

As its agreements with Gustafson piled up in 2014 and 2015, Input wound up in a position of “increasing strength while driving Mr. Gustafson into a position of increasing weakness in their contractual relationship,” Kalmakoff wrote, ruling the contractual relationship to be “substantially unfair.”

As of March 31, Input reported a total of 353 active streaming contracts with farmers across the three Prairie provinces, including 260 in Saskatchewan. — AGCanada.com Network

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