Equipment Company had no right not to renew dealer agreement: Appeal Tribunal

In 1987, CFEI became a dealer with Ford New Holland Inc., CNH's predecessor. In June 1999, Ford New Holland sent CFEI a letter advising that it would not renew the existing Dealer Agreement and that it would terminate effective December 31st, 1999. Ford New Holland then offered CFEI the opportunity to continue as a dealer under a new Dealer Agreement.  The new Dealer Agreement created a one-year renewable term. The term renewed automatically unless either party gave at least ninety days written notice of its intention not to renew.

Both the 1987 and 1999 version of the Dealer Agreement are very similar. Both Dealer Agreements are standard form contracts drafted by the farm implement manufacturer. CFEI had no opportunity for input into any of the terms. The reality for CFEI was that if it wished to be a CNH dealer, it was obliged to sign the standard form Dealer Agreement without any changes.

In late September 2006, CFEI received a letter from CNH dated September 30th, 2006 advising CFEI that CNH would not renew the Dealer Agreement at the end of 2006.  That letter explained that CNH based its decision not to renew on "serious breaches" of the Dealer Agreement.  That letter also explained that CFEI had failed to "achieve and maintain a reasonable market share" during the previous four years. The letter included a chart giving an illustration of CFEI's performance in select product categories.

CFEI challenged the non-renewal of the relationship before the Agriculture, Food and Rural Affairs Tribunal pursuant to the Farm Implements Act.  The parties characterized the end of the relationship differently. CFEI characterized it as a termination while CNH characterized it as non-renewal. Regardless of the characterization, the practical result was the same, the end of the business relationship.

Section 35(c) of the Act provides that the Minister of Agriculture, Food and Rural Affairs may make regulations prescribing information to be included in a dealer agreement and setting out legal rights and obligations for parties to the agreement.  The Minister prescribed Ontario Regulation 123/06.  The Regulation came into force when filed on April 25th, 2006.  The Regulation created mandatory terms that must be included in any dealer agreement and that the Regulation deems are part of any dealer agreement. The Regulation provides that any provision in a dealer agreement contrary to the prescribed mandatory terms is void.

The Appeal Tribunal found that, despite any contractual wording to the contrary, CFEI has a prescribed right to renew the Dealer Agreement by giving CNH that written notice. Both counsel agreed that in this case the Dealer Agreement itself, which contemplated annual "auto-renewal", would satisfy the requirement from the Regulation for written notice. It was clear from the Dealer Agreement that the annual term starts January 1st and concludes December 31st.  While CNH had a contractual right not to renew the annual term before April 25th, 2006, the effect of the Regulation was to remove CNH's contractual right not to renew from paragraph 22 of the Dealer Agreement. The Regulation replaced that right with a regulated approval. Therefore, beginning April 25th, 2006, CNH no longer had any right not to renew the Dealer Agreement.

The consequence flowing from CNH's liability remains to be determined in the second phase of the proceeding.

Read the decision at: Chesterman Farm Equipment Inc. (CFEI) vs. CNH Canada Ltd. (CNH).

National Energy Board Easement and Control Zone Enforcement

The National Energy Board has invited pipeline companies and industry and other "stakeholders" to participate in an information and consultation session on April 28, 2011 in Calgary.  The session will deal with excavation and construction near NEB-regulated facilities and, more particularly, enforcement activities related to safety violations.  A table below shows the NEB's proposed response matrix.  Note the Board's statement that "depth of cover over pipeline may vary".  You can read the NEB letter and discussion document at: Information Session.

Farmer acquitted in another "self-propelled implement of husbandry" case

Justice of the Peace W. Rojek at Guelph, Ontario has acquitted an Ontario farmer, John Luymes, of several counts under the Highway Traffic Act (HTA) related to his use of a modified dump truck for farming purposes.  Luymes was charged after the following exchange with a Ministry of Transportation (MTO) officer:

On October 31st, 2008 the Ministry of Transport Officer Andrew Brown observed a vehicle travelling normally on Wellington Road 12 approaching Wellington Road 7 in the County of Wellington. The vehicle displayed a triangular slow moving motor vehicle sign at its rear driver’s side. The vehicle had three axles, a cab located behind the engine compartment and a dump box with a tailgate on it. The large tires mounted on the vehicle are commonly known as flotation tires. There were no licence plates attached to the vehicle. Officer Brown stopped the vehicle and spoke to the driver. The driver telephoned the vehicle’s owner, who is the defendant, John Luymes, and Mr. John Luymes then attended at the location where the vehicle was stopped. The defendant, John Luymes, told Officer Brown that he was the owner of the vehicle and described to Officer Brown the changes he made to the vehicle. The defendant, John Luymes, told Officer Brown that because of the changes of the characteristics and changes, he believed that the vehicle was a self-propelled implement of husbandry. Officer Brown examined the vehicle and told the defendant that the vehicle was a commercial motor vehicle. The defendant was then served with the summonses for the offences before the court.

Several different charges were laid.  For most of the charges, the salient issue was whether or not the vehicle was a "self-propelled implement of husbandry" as described in the HTA.  Luymes testified about the changes he made to the vehicle:

The defendant testified that they made the following changes to the vehicle in question: designed and manufactured a silage box, Exhibit Numbers 21 and 22, and how the vehicles are used. The photographs filed as Exhibits 23 and 24 show that the trucks are working together with the combines receiving harvested forage. Mr. Luymes explained that the tires were changed so the vehicle would not “sink” in the fields ground. The defendant told the court that when the harvested forage is blown onto these vehicles they transport the load to the farm’s bunker silo and the product is rear-discharged into that bunker silo and packed in firmly and the feed is preserved for the cattle as shown on the photo filed as Exhibit Number 26. That was the reason for designing and manufacturing specific boxes with the different type of gate which would allow the rear-discharge directly into these bunker silos. And this is why the boxes are called silage boxes. The vehicles needed also to be able to move alongside a forage harvester safely. They needed also to travel from the field to the farm relatively quickly. They needed to be operated safely on the highway day or night time.

Mr. Luymes advised the court that the vehicles he described are better equipped and definitely safer on the highway than most farm trailers, farm tractors and dump trailers. Mr. Luymes testified that if there was a need to haul grain to a commercial elevator on a highway he is using licensed trucks, farm-plated with the proper insurance policy attached to each vehicle. The vehicles used to collect forage are marked with slow vehicle signs as required for the self-propelled implement of husbandry. These vehicles do not travel at high rate of speed, are equipped with tires of limited speed and that they trying to operate within speed range of the tires. Mr. Luymes explained that on the day in question it was his son who operated the vehicle on its way to the farmstead to do the forage harvesting.

J.P. Rojek agreed with Luymes that, following the modifications to the vehicle originally purchased, it became a "self-propelled implement of husbandry":

It was then redesigned in the manner which can be summarized as follows: The box was designed and manufactured for accepting harvested forage from a combine or forage harvester and to be able to discharge such forage into the bunker silo. The rear two axles were redesigned from the original either highway wheels to four wheels fitted with flotation tires. The said tires had speed limits depending on load and air pressure from 10 miles per hour to 30 miles per hour (16 kilometres per hour to 48 kilometres per hour).

I am finding that the changes made to the tires and axles had met the criteria of objective change to that vehicle in the sense that it would be impossible to use that vehicle for its previous purpose which was hauling the loads on the highway. As I understand, the dump trucks (which apparently that vehicle was before) can travel with their load at regular highway speeds. This vehicle, as I said before, due to its tires limitations would not be able to do so. The mere fact that it was able to travel at approximately 80 kilometres per hour when empty would still be within “retaining some of its other capacities part of the test.” That change, in my understanding, is an objective one, does not depend on the end user. That vehicle was objectively changed from the highway dump truck to the forage harvesting vehicle. The mere fact that any kind of bulk goods could be still transported by it still fits in that objective change category. One could put anything in it but still could not travel on a highway as a regular dump truck would.

On this basis, J.P. Rojek acquitted Luymes of the charges for which the vehicle being a "self-propelled implement of husbandry" would be a defence.  However, one charge stuck:

With respect to charge number one, the vehicle was a motor vehicle when it was purchased by the defendant. The defendant did not apply for a permit on becoming an owner. This fact was not disputed by the defendant and found to be proven beyond reasonable doubt. Until the changes had been made to transforming it into the self-propelled implement of husbandry, the defendant was dealing with a motor vehicle and under section 11(2) of the Highway Traffic Act had the obligation to apply for the permit. Mr. Luymes did not do that. I am satisfied therefore that the Crown has proven it’s case with respect to count number one beyond reasonable doubt and in that case there is finding of guilt and conviction registered.

Read the decision at: R. v. Luymes.

Saskatchewan farmer loses court case over front-end loader problems

The Provincial Court of Saskatchewan has dismissed a claim by Garry Beutler related to his purchase of a front-end loader purchased from Leon's Manufactuing Company Inc.  Beutler had the loader installed on his Case 2294 tractor and planned to use the loader to move large round bales.  He experienced "operational difficulties" with the unit.  Following some repairs by the dealer, he told the manufacturer that he wanted his money back.

Beutler claimed from the manufacturer the cost of the loader he had purchased plus the cost of a new Versatile 276 bi-directional tractor he purchased to replace the loader.  The Court found that Beutler was not entitled to recover any damages from the defendant.  The judge found that Beutler's use of the front-end loader he had purchased exceeded the use for which it was designed.  The manufacturer's position was that the loader was appropriate for moving one single bale at a time.  The judge rejected Beutler's comparison of the front-end loader's performance with that of the new Versatile machine he had purchased:

In my opinion, the Plaintiff used this FEL for a function that it was clearly not designed to perform in an effort to save himself both time and money. The Defendant at all times tried to make the Plaintiff happy with his purchase and demonstrated to him the proper use of the FEL. If the Plaintiff insists on using an implement in a fashion for which it is clearly not designed, it is difficult to see how the Defendant can be liable in contract. The Plaintiff called Mr. Edwards to indicate that in his opinion, the Plaintiff operated the FEL properly. The evidence on this point is not particularly useful as the Plaintiff would often be using the FEL where it could not be observed by Mr. Edwards and I do not accept that Mr. Edwards would have authorized the use of this particular FEL in lifting two bales vertically or even one bale vertically. The design speaks for itself.

Read the decision at: Beutler v. Leon's Manufacturing Company Inc.

CEPA responds to NEB questions about crossing pipelines for farming activities

A couple of weeks back, the National Energy Board wrote to CEPA (the Canadian Energy Pipeline Association) to request an update on the pipeline industry's progress in dealing with the issue of safe crossing for farming equipment and activities.  On April 28, 2010, CEPA responded by letter addressed to the Board's Secretary: CEPA Letter to NEB April 28, 2010.

Currently, farming activities over pipelines and in the 200 foot "control zone" created by the NEB Act are governed by the Act and the Pipeline Crossing Regulations.  Certain activities in the control zone, including deep tillage or tile repair, require the permission of the NEB itself.  Alternatively, landowners may seek permission from the pipeline company involved under the Regulations.

However, permission to cross a pipeline and pipeline easement with farming equipment (including in the course of activities such as cultivation, planting, spraying, harvesting, etc.) can only be granted by the pipeline company pursuant to Section 112(2) of the NEB Act.  In its letter to the NEB, CEPA says of Section 112(2) that leave is "not necessary for the operation of a vehicle or mobile equipment across a pipeline if the pipeline company has assessed the operation and the operation does not have the potential to damage the pipeline."  Apparently this must be the practice of CEPA-member companies, because neither the Act nor the regulations provide this guidance.

The letter also refers to an "innovative self-screening tool" to be rolled out by Enbridge Pipelines Inc. in the "near future".  In crossing the pipeline or conducting activities in the control zone, it looks like it will still be up to individual landowners to decide whether or not permission from the pipeline company and/or NEB is required to carry out their farming operations, leaving liability for making the wrong decision with the landowner. 

“Self-propelled implement of husbandry” - Conviction Upheld

The Ontario Court of Appeal has upheld the convictions of Petrus Van Berlo on charges related to the unlicensed use of an alleged farm vehicle on the highway.  The appellant was convicted of offences that required the vehicle in question to be a “motor vehicle”, such as permitting the operation of motor vehicle on a highway without a permit. The definition of “motor vehicle” in the Highway Traffic Act (HTA) excludes a “self-propelled implement of husbandry”. Thus, the appeal turned on whether Mr. Van Berlo’s vehicle came within this exception, as a self-propelled implement of husbandry. If so, the parties agreed that the appeal must succeed and the convictions must be set aside. If not, the appeal would fail.  The Court of Appeal dismissed the appeal.

The term “self-propelled implement of husbandry” is defined in s. 1.1 of the HTA.:

“Self-propelled implement of husbandry” means a self-propelled vehicle manufactured, designed, redesigned, converted or reconstructed for a specific use in farming.

The Court agreed that the vehicle in question was self-propelled, but found that it had not been "coverted ... for a specific use in farming".  The appellant purchased the vehicle on August 11, 2002 for $2,000.  It was a 1976 Chevrolet pick-up truck.  His intention was to modify it for use in his irrigation operations.  He then spent $16,000 on the vehicle so it could tow farm equipment from farm to farm and from field to field, and so it could be used in the fields for irrigation purposes.  He had the gasoline engine replaced with a diesel engine for more power.  The gearing was changed and the two-wheel drive was converted to four-wheel drive. Large tread snow tires were installed to facilitate driving through fields of mud and sand.  Finally a hitch, ten times heavier than a regular trailer hitch, was installed at the rear of the vehicle to allow for the pulling of various pieces of farm equipment.

In the Court of Appelal's view, to be “converted for a specific use in farming” a vehicle must be changed significantly enough that, viewed objectively, its essential character or function has been transformed for that specific use, although it may retain some limited capacity for other functions.  The transformation cannot just be for general use in farming, it must be for a specific use.  In this case, the Court found that the changes were not of the sort that creates a "self-propelled implement of husbandry":

When this interpretation is applied to the facts of this case, I conclude that the appeal must fail. As the Ontario Court of Justice found, the changes made by the appellant really do not change the character of the vehicle. The appellant installed a more powerful engine, changed the gearing, converted the vehicle from two to four-wheel drive, and installed large tread snow tires and a stronger rear hitch. Whether taken separately or together, these modifications do not change the vehicle from a truck into something different. Although these changes make the vehicle more powerful and therefore better able to perform some functions, such as pulling loads, these functions remain essentially the same. Nor do the changes point to the specific use of irrigation. At best, they are for general use in farming. Viewed objectively rather than through the lens of the subjective intention of the appellant, the changes are neither significant enough to change the essential character or function of the vehicle, nor can they be described as for the specific use of irrigation in the appellant’s farming operation. In other words, the appellant cannot bring the vehicle within the defined exception.

Read the decision at: R. v. Van Berlo.

Farm Guide - Farm Equipment on the Highway (Ontario)

With planting season quickly approaching, you may want to take time to review the MTO's rules of the road for farm equipment: Farm Guide - Farm Equipment on the Highway.