A grain producer (“Pender”) successfully applied for judicial review of a decision of the Canadian Grain Commission (the “Commission”) denying the applicant’s claim against security held under the Canada Grain Act, R.S.C. 1985, C.J. 10

Pender Farms Ltd. v. Canada (Canadian Grain Commission), [2004] F.C.J. No. 798, Federal Court, April 29, 2004, O’Keefe J.

Under the Canada Grain Act, a scheme exists to protect grain producers that sell to grain dealers who are or become bankrupt, or otherwise refuse to pay, by establishing a monetary security system. The Commission is authorized to require grain dealers to post security in order to be issued a grain dealer’s licence. Grain producers who hold a grain ticket or cheque can realize on the security held by the Commission should a grain dealer fail or refuse to pay. Time limitations are in place for the Commission to be notified of such a claim.

In the fall of 2002, Pender, through its agent, contracted to sell wheat to API Grain Processors Limited Partnership (“API”), a grain dealer. Pender delivered wheat worth about $8,000 to API on October 18, 2002. In consideration, API gave Pender a grain receipt. API then mailed a cheque dated October 29, 2002 to the applicant’s address in Saskatchewan. However, the applicant’s president was then resident in Calgary, Alberta, and did not receive the cheque until December 4, 2002 when his mail was forwarded to him.

On December 5, 2002, Pender was informed that API was bankrupt. Pender had not yet deposited API’s cheque, and API’s trustee in bankruptcy advised them not to cash the cheque but to file a claim against API’s security with the Commission.

Pender faxed a claim to the Commission on December 12, 2002. The Commission held security of $750,000 with respect to API.

On April 2, 2003, the Commission denied Pender’s claim on the basis that it was filed after the 30-day limitation period specified in paragraph 49(6)(e) of the Canada Grain Act.

Pender appealed the decision internally, and the Manager of Policy, Planning and Producer Protection of the Commission decided that the Commission was unable to pay the money requested because Pender was outside of the eligibility requirements under the Canada Grain Act.

Pender filed a notice of application for judicial review of this decision.

The court first considered what standard of review should be applied to the Commission’s decision. The court noted that the applicable standard of review should be determined by application of the jurisprudence in the case of Dr. Q. v. College of Physicians and Surgeons of British Columbia, 2003 S.C.C. 19. The court held that the correct standard of review was one of reasonableness simpliciter.

The second issue was whether Pender’s application should be denied because of the limitation argument made by the Commission. Subsection 49(6) of the Canada Grain Act provided that when a cheque was given to a producer, and the bank upon which the cheque was drawn refused to honour it, the licensee’s failure to meet its payment obligations to the producer occurred on the date that the cheque was given to the producer. The court held that in this case, there was no evidence that the cheque had ever been presented to the bank, and further that the trustee’s direction not to cash the cheque was not considered to be a refusal to honour by the bank. As a result, the court held that subsection 49(6) of the Act did not apply in this case to bar Pender’s claim.

The court then went on to consider whether paragraphs 49(3)(a) and (b) ought to apply to Pender’s claim. This section of the Act indicated that if the licensee failed or refused to meet any of their payment or delivery obligations to the producer of the grain, the producer of the grain could make a claim only if they gave notice in writing of the failure or refusal to the Commission within 30 days after that failure or refusal. The court held that the failure or refusal to make payment by the licensee did not occur until on or about December 5, 2002 when the trustee in bankruptcy gave instructions not to deposit the cheque. The Commission had urged the court to find that the date of the cheque, namely October 29, 2002, ought to be the proper starting date for running of the 30-day limitation period. The court rejected this submission, and Pender was held to have made its claim in writing to the respondent on December 12, 2002, well within the time frame of the 30 days provided by the Act.

Pender’s application was allowed and the decision of the Commission was quashed. The Commission was directed to process Pender’s claim against the security of API.

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