Charlie,
Interesting thought:
"Name a company business failure in Canada"... there have been some... in the 'special crops' industry... but as you say it has been a very low amount by %. If growers didn't deliver... even if it was contracted... there was no obligation under Canadian law to fill the contract at a lower value... growers are first in line under the Canada Grain Act... even before banks other secured creditors.
Once growers don't settle/cash cheques beyond the 90 days of delivery... that is where problems with losses have generally mounted.
Isn't this interesting...
"LAW OF THE LAND
July 24, 2003
Grain Dealer and Bonding Company go to Court
Anders Bruun LLB
Grain dealers are required under The Canada Grain Act to post a bond or other
security with The Canadian Grain Commission to ensure that their obligations to
producers will be satisfied. This system has worked fairly well in recent years to ensure
that farmers do not suffer a loss if the grain dealer that they have been dealing with goes
out of business leaving them unpaid.
However, a judgment recently issued by the Court of Queen’s Bench for
Saskatchewan shows that the matter does not end when farmers have been paid the
money owing to them from the proceeds of a bond. The case before the Court in
Saskatchewan involves Naber Seed & Grain Co. Ltd. Here the bonding company,
London Guarantee Insurance Company, is suing Naber Seed, several related companies
and a number of individuals for the $1,000,000.00 which London Guarantee was obliged
to pay to the Canadian Grain Commission when Naber Seed failed to honour obligations
to producers.
In 1997 London Guarantee issued a bond in favour of the Canadian Grain
Commission with a value of $100,000.00 on behalf of Naber Seed. In October of 2000,
the amount of the bond was increased to $400,000.00 and effective October 31, 2001, the
bond was increased to $1,000,000.00.
It appears that the original $100,000.00 bond was supported by an Indemnity
Agreement signed by Naber Seed, the related companies and the individuals. LondonGuarantee alleges that Naber Seed and the related companies and individuals are obliged
under this Indemnity Agreement to reimburse it for the money which London Guarantee
paid to the Canadian Grain Commission. However several endorsements increasing the
amount of the bond, first to $400,000.00 and then to $1,000,000.00 were signed by only
one of the individuals and one of the companies, Naber Seed & Grain Co. Ltd. None of
the other persons being sued signed the endorsements to increase the amount of the bond.
From here on it gets more complicated. It appears that the Indemnity Agreement
contained a clause which allowed London Guarantee to make changes to the terms of the
bond without giving notice to the persons providing the indemnity. It would probably
come as an enormous surprise to most people to hear that an obligation which they
assumed to be a $100,000.00 obligation had turned into a $1,000,000.00 obligation.
To complicate matters further, the individuals did not read the Indemnity
Agreement which they signed. They said that they were given only the signature page of
the document for their signature; which they provided. They did not ask for or obtain any
explanation with respect to the Indemnity Agreement, nor did they obtain independent
legal advice. The one individual who did have the entire document stated that he did not
understand it, but did not seek any additional clarification of its meaning because,
apparently, a representative of London Guarantee had told him that the Indemnity
Agreement was like an insurance policy.
London Guarantee argued that because the individuals did not pay careful
attention to the contents and meaning of the document they had been careless and for that
reason should not be excused from their obligations. The individuals in turn argued that
whether or not they were careless was irrelevant because London Guarantee hadmisrepresented the document to them as being like an insurance policy which has no
personal liability attached to it.
These arguments and counter-arguments came forward in a preliminary hearing
intended to determine whether this matter should go to a full trial. London Guarantee had
argued that a full trial was not necessary and that they should be given a Judgment in
their favour for the $1,000,000.00 plus interest and costs. Naber Seed and Grain Co., the
related companies and the individuals had argued that a trial was essential so that the
defenses which they wish to raise could be put forward properly. Following the hearing
the trial judge ordered that a trial be held as the dispute could only be properly
adjudicated upon with a trial.
This case highlights the risks that are being assumed by individuals and
companies who are required to post bonds for the purpose of carrying on their business.
More generally, the case highlights the risks of signing documents without reading or
understanding them.
This article is for general information purposes only and should not be taken as
legal advice on any specific subject."
VERY INTERESTING WHAT GOOGLE BRINGS UP!
Interesting thought:
"Name a company business failure in Canada"... there have been some... in the 'special crops' industry... but as you say it has been a very low amount by %. If growers didn't deliver... even if it was contracted... there was no obligation under Canadian law to fill the contract at a lower value... growers are first in line under the Canada Grain Act... even before banks other secured creditors.
Once growers don't settle/cash cheques beyond the 90 days of delivery... that is where problems with losses have generally mounted.
Isn't this interesting...
"LAW OF THE LAND
July 24, 2003
Grain Dealer and Bonding Company go to Court
Anders Bruun LLB
Grain dealers are required under The Canada Grain Act to post a bond or other
security with The Canadian Grain Commission to ensure that their obligations to
producers will be satisfied. This system has worked fairly well in recent years to ensure
that farmers do not suffer a loss if the grain dealer that they have been dealing with goes
out of business leaving them unpaid.
However, a judgment recently issued by the Court of Queen’s Bench for
Saskatchewan shows that the matter does not end when farmers have been paid the
money owing to them from the proceeds of a bond. The case before the Court in
Saskatchewan involves Naber Seed & Grain Co. Ltd. Here the bonding company,
London Guarantee Insurance Company, is suing Naber Seed, several related companies
and a number of individuals for the $1,000,000.00 which London Guarantee was obliged
to pay to the Canadian Grain Commission when Naber Seed failed to honour obligations
to producers.
In 1997 London Guarantee issued a bond in favour of the Canadian Grain
Commission with a value of $100,000.00 on behalf of Naber Seed. In October of 2000,
the amount of the bond was increased to $400,000.00 and effective October 31, 2001, the
bond was increased to $1,000,000.00.
It appears that the original $100,000.00 bond was supported by an Indemnity
Agreement signed by Naber Seed, the related companies and the individuals. LondonGuarantee alleges that Naber Seed and the related companies and individuals are obliged
under this Indemnity Agreement to reimburse it for the money which London Guarantee
paid to the Canadian Grain Commission. However several endorsements increasing the
amount of the bond, first to $400,000.00 and then to $1,000,000.00 were signed by only
one of the individuals and one of the companies, Naber Seed & Grain Co. Ltd. None of
the other persons being sued signed the endorsements to increase the amount of the bond.
From here on it gets more complicated. It appears that the Indemnity Agreement
contained a clause which allowed London Guarantee to make changes to the terms of the
bond without giving notice to the persons providing the indemnity. It would probably
come as an enormous surprise to most people to hear that an obligation which they
assumed to be a $100,000.00 obligation had turned into a $1,000,000.00 obligation.
To complicate matters further, the individuals did not read the Indemnity
Agreement which they signed. They said that they were given only the signature page of
the document for their signature; which they provided. They did not ask for or obtain any
explanation with respect to the Indemnity Agreement, nor did they obtain independent
legal advice. The one individual who did have the entire document stated that he did not
understand it, but did not seek any additional clarification of its meaning because,
apparently, a representative of London Guarantee had told him that the Indemnity
Agreement was like an insurance policy.
London Guarantee argued that because the individuals did not pay careful
attention to the contents and meaning of the document they had been careless and for that
reason should not be excused from their obligations. The individuals in turn argued that
whether or not they were careless was irrelevant because London Guarantee hadmisrepresented the document to them as being like an insurance policy which has no
personal liability attached to it.
These arguments and counter-arguments came forward in a preliminary hearing
intended to determine whether this matter should go to a full trial. London Guarantee had
argued that a full trial was not necessary and that they should be given a Judgment in
their favour for the $1,000,000.00 plus interest and costs. Naber Seed and Grain Co., the
related companies and the individuals had argued that a trial was essential so that the
defenses which they wish to raise could be put forward properly. Following the hearing
the trial judge ordered that a trial be held as the dispute could only be properly
adjudicated upon with a trial.
This case highlights the risks that are being assumed by individuals and
companies who are required to post bonds for the purpose of carrying on their business.
More generally, the case highlights the risks of signing documents without reading or
understanding them.
This article is for general information purposes only and should not be taken as
legal advice on any specific subject."
VERY INTERESTING WHAT GOOGLE BRINGS UP!
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