A Saskatchewan grower is seeking major damages from the Canadian Wheat Board after losing a contract when one of its grain shipments was found to contain an ineligible variety of wheat.
The suit by Hudye Farms Inc. Norquay, Sask., and two associated companies seeks more than $50 million in damages in a case stemming from the Wheat Board’s actions.
According to the grower’s statement of claim, just 122.5 tonnes of the contracted 8,625 tonnes, or about 1.4 per cent, contained 23 per cent of an ineligible hard red spring variety called 606/Granite and thus failed to meet the marketing board’s standards.
Hudye said the grain had already been tested — and accepted — by the board before shipments began in March and that the downgrading of its wheat to feed status, plus penalties and additional storage and other costs, left Hudye $247,699 out of pocket.
It also claims the board admitted that it was readily able to blend the small amount of ineligible wheat into larger shipments to place it below the statutory tolerance, establishing that it ultimately did not suffer a significant financial loss.
Hudye is asking the court for $25 million in damages because of harm to its reputation, $10 million for breach of fiduciary duty at the board and $15 million in punitive damages.
“The board has imposed virtually impossible conditions that Hudye Farms must meet in order to sell its 2010 wheat,” the grower adds its it statement of claim.
“It requires that it be notified well in advance of any proposed delivery” and that each truckload be binned separately, tested for unregistered varieties at Hudye’s expense and held until test results are received.
“Hudye has not been able to find an elevator willing to go through these procedures,” the company complained.
Maureen Fitzhenry, a spokeswoman for the board, the exclusive marketing agency for Prairie producers, said she was unable to comment directly on the specific Hudye allegations, but defended the board’s policies and procedures.
“We certainly deny that anything improper has occurred in this case and we believe there are no grounds for the allegations contained in this statement of claim,” Fitzhenry said.
She said that when farmers deliver to grain elevators their samples are assessed only for grade and protein, and no tests are made for class and variety.
“What happens is a farmer is signing a declaration and that declaration is averring that what they are delivering is a variety that is eligible for the class for which they are seeking payment,” she said.
She said contract terms clearly spell out that delivering a non-registered variety that has been represented by the producer as being a registered variety “may void the contract for the wheat and any other contract between the Canadian Wheat Board and the producer” and that the board “may restrict the producer’s delivery opportunities under such contracts.”
In fact, she said the declaration of eligibility has a clause saying that if an ineligible varieties is delivered “the producer acknowledges and agrees that the representation has been made frauduently and or negligently and that the producer is accountable for that.”
Asked how much contamination by another variety is permitted, Fitzhenry said: “It’s none.”
“That’s the whole basis of our quality control system in Canada, is that when a customer is buying grain from Canada that they can be assured that what they’ve contracted for is what they’re getting,” she said.
Fitzhenry said what grains are eligible for a class is set buy an industry-wide committee that includes the wheat board, representatives of the growers, grain companies, seed breeders and scientists.
She said the vast majority of producers are extremely careful about what they deliver and support the quality control system because “they know themselves the benefits it accrues to them in the competitive world marketplace.”
“It’s one of the Canadian Wheat Board’s top selling points is to be able to say to customers — unlike most other grains you’re buying everywhere else in the world — our quality control system can do things and guarantee things that other counties and other originators can’t.”