Appeal Court agrees auctioneer not liable for selling cattle subject to security agreement

The Saskatchewan Court of Appeal has upheld the dismissal of a claim against an auctioneer for the tort of conversion for selling livestock that was subject to a security interest.  A secured creditor, Lloydminster Credit Union Limited, brought an action against an auction company, 324007 Alberta Ltd., which operates Heartland Livestock Services. The Credit Union had a security agreement, securing demand and other loans on livestock, with Robert Burroughs, a farmer.   Mr. Burroughs sold the livestock, using Heartland’s auction services, and did not account for the proceeds to the Credit Union.  The Credit Union sued Heartland in conversion.

Following a trial to resolve the dispute, Justice Pritchard of the Court of Queen’s Bench found that Heartland acted as an agent or intermediary between Mr. Burroughs and the buyers at the auction sale and could not be found liable for conversion in an action brought by the Credit Union.  Justice Pritchard held, in the alternative, that the Credit Union was unable to sustain an action in conversion against the auctioneer because the Credit Union was not entitled to immediate possession of the livestock covered by the security agreement.  As part of this latter proposition, the learned trial judge found that the Credit Union had consented to the sale of the livestock, albeit on the condition that the proceeds be deposited with it.

The Appeal Court upheld the trial judge's decision, but only on the basis that the Credit Union had consented to the sale of the livestock.  Where consent to the disposition of property can be proven, no liability in conversion can be found.  Conversion is an intentional tort (converting someone else's property to your use), and consent is often referred to as a "defence" because the defendant typically bears the burden of proving that the plaintiff had consented to the interference with the property. 

Read the decision at: Lloydminster Credit Union Limited v 324007 Alberta Ltd.