Mar 18, 2014

Summary of Tkachuk Farms Ltd. v. Le Blanc Auction Service Ltd.

Tkachuk Farms Ltd. v. Le Blanc Auction Service Ltd., 2008 SKCA 31 (CanLII)
This is an appeal from a judgment after trial in the Court of Queen's Bench. The action raised a number of issues in relation to the sale of the plaintiff's entire inventory of farm equipment at a reserve auction bid. The defendant auctioneer had guaranteed a minimum net return to the plaintiff of $577,500. However, following the sale the auctioneers refused to pay the plaintiff the guaranteed price, taking the position that the plaintiff had breached a contractual condition that he was not to bid or to permit another to bid on his behalf, and that the defendants were therefore entitled to invoke a contractual clause that made the guarantee unenforceable at the option of the auctioneers and entitling the auctioneers to a 14% commission on the gross proceeds. The defendants also withheld funds equal to the amount spent in preparing the equipment for sale, which they claimed were the contractual liability of the plaintiff. In the result, the plaintiff received considerably less than the originally guaranteed proceeds. The trial judge held that Orval Caruk was purchasing for the benefit of the plaintiff in breach of the agreement, and held that the defendants were therefore entitled to invoke the contractual clause making the guarantee unenforceable and entitling the auctioneers to a 14% commission. The trial judge found the plaintiff was not liable for the costs of preparing the equipment for sale and the plaintiff was awarded damages of $1,316.64.HELD: Appeal dismissed by Madam Justice Smith for the majority. Mr. Justice Richards wrote in dissent.Madam Justice Smith: 1) The trial judge did not err in finding the action was determined by the Contract to Auction. This is a finding of fact fully based in the evidence and is reasonable. There is no basis for interfering with the determination of the trial judge on this point. 2) The trial judge did not err in finding that the plaintiff allowed Orval Caruk to bid on the owner's behalf. The plaintiff actively facilitated the bidding by lending Mr. Caruk up to $100,000 for that express purpose. Mr. Caruk frankly admitted that he had no money to buy the equipment and could not have otherwise bid at the auction. The plaintiff knew or ought to have known that this arrangement ought to have been disclosed to other bidders at the auction, for this gave Mr. Caruk a significant advantage at the auction. The equipment would assist Mr. Caruk in fulfilling his obligations under the lease with the plaintiff and the purchase was therefore clearly for the benefit of the plaintiff. Had the relationship gone undiscovered by the defendants, the plaintiff would have secured a guaranteed price for the equipment, while procuring the commercial advantages of having the cattle lease fulfilled using equipment the nephew could not otherwise have afforded to purchase. The trial judge did not err in interpreting the phrase 'on the owner's behalf' to include purchases 'for the benefit of the owner'.Mr. Justice Richards (in dissent): 1) The Court agrees with the decision of Smith J.A. on all issues except one. In the Court's opinion the plaintiff did not contravene the prohibition against owner buybacks in the Contract. The clauses in the contract should be read as being aimed at the same issues which underlie s. 57 of The Sale of Goods Act. They should be read as being aimed at preventing the seller of property at an unreserved auction from either bidding for the purpose of inflating prices generally or ensuring minimum prices for specific items. Accordingly, although the words 'on behalf of' might, as a matter of abstract semantics, be capable of being read as including 'for the benefit of', in the context of the Contract it is necessary to be very cautious about giving that notion an overly generous effect. The parties should not be taken to have intended the clauses would apply to situations where the participation of a third party bidder in an auction results in only some collateral commercial benefit to the seller because of the use the third party makes of the property after it is purchased. Seen in context, the clauses are concerned more narrowly with situations where a seller participates in a sale either directly or through the services of an employee agent or other surrogate.