Bankruptcy leaves Alberta farmers in lurch

More than 95 producers are out $4.1 million in crop inputs after Performance Ag Group was declared bankrupt

Dozens of farmers in Alberta are owed millions of dollars in crop inputs after an Edmonton-area agriculture company recently went bankrupt.

Performance Ag Group, which was ordered bankrupt on Aug. 1 in Alberta Court of Queen’s Bench, owes 95 farmers about $4.1 million after failing to provide crop inputs, according to court documents obtained by The Western Producer.

The documents say Performance Ag became unfit to continue operating and that it failed to meet its obligations to creditors.

Farm Credit Canada, a main unsecured creditor, is looking to recover funds through court proceedings for its farmer clients.

“FCC can confirm that it has worked with customers who paid for product using their FCC Crop Input loan, but the product was never delivered,” FCC said in an emailed statement. “We felt supporting customers in this manner was the right thing to do in this circumstance.”

According to the court documents, Har-De Agri Services, which later became Performance Ag, struck an agreement in 2012 with FCC to sell crop inputs to farmers in Alberta.

The agreement allowed Har-De to enrol qualifying producers in a crop input loan program.

It worked like this: FCC would lend money to qualified farmers to pay for crop input supplies, but Har-De was able to arrange to have FCC advance funds on behalf of producers who had crop input loans. Producers would then pay FCC for the amounts that were advanced.

Somewhere along the line, however, Performance Ag stopped supplying producers with inputs, even though funds had been advanced. Its stores closed by the end of April 2019.

In 2018, however, matters became complicated.

According to an affidavit by Gary Stooshinoff of FCC, Har-De created two new business entities that offered the same services.

Stooshinoff, a senior account manager with FCC, said in the court documents that FCC was led to believe Har-De had simply changed its name to Performance Ag. Instead, Har-De created Performance Ag as a new entity, and it also created numbered company 1235962 Alberta Ltd.

Har-De remained but became the sole shareholder of both Performance Ag and 1235962.

Stooshinoff said both Performance Ag and 1235962 carried on business using the crop input loans, relying on the agreement that was originally made with Har-De.

Court documents state that FCC felt the terms of the agreement were breached and is seeking repayment of amounts owing in excess of $1.6 million.

The remaining claims of about $2.5 million were made by farmers who might have also dealt with Scotia Bank or Bank of Montreal, according to Stooshinoff’s affidavit.

It’s unknown if unsecured creditors, such as FCC will be able to recover losses.

The total amounts owed ($4.1 million in inputs for 95 producers) are split by Performance Ag and 1235962. Performance Ag owes 49 producers $2.4 million in inputs, while 1235962 owes 46 producers $1.7 million in inputs.

It’s unclear why Har-De created the two new companies. Harold Zibell, the principal of Har-De, did not return requests for comment in time for publication.

In his affidavit, Stooshinoff said FCC knows of at least five producers who had not agreed to or did not authorize payments or pre-payments that were processed on their crop input loans.

In documents, FCC’s lawyers said these unauthorized transactions were done improperly and perhaps fraudulently.

In his affidavit, Greg Thimer of Thimer Farms said someone from Performance Ag charged the farm for goods worth about $175,000 when he never agreed to a purchase and did not place an order for that amount.

Thimer said in court documents that FCC then advanced the $175,000 to Performance Ag, creating a liability for the farm’s loan account with FCC.

“I contacted FCC by telephone to advise that the transaction that Performance Ag had put through was not based upon a purchase or prepayment by Thimer Farms Inc. and that it was not a valid purchase or prepayment,” Thimer said in the affidavit.

He said the farm never received a delivery of crop inputs from Performance Ag or its affiliated companies that would have been worth $175,000.

The total amount of unauthorized transactions is thought to be worth $335,000, according to Stooshinoff’s affidavit.

Questions have also arisen surrounding a mortgage.

In May 2019, Har-De granted a mortgage worth $1 million to MLS Property Group Ltd. for lands in Calmar, Alta.

In its affidavit, Stooshinoff said MLS Property Group registered a transfer to it of a mortgage and a caveat registered against the same lands from Bank of Montreal for what appears to be $1.7 million.

He said from his discussions with BMO, he learned Har-De was in default with BMO and that BMO was demanding payment.

FCC’s lawyers said the mortgage should be void. Legislation states that if a debtor commits bankruptcy and transfers its property or any part of it, the transfer would be void.

In his affidavit, Stooshinoff said Zibell told him in July that the companies are attempting to sell their assets and their book, which Stooshinoff believed to be the lists of clients.

“He stated that it was his intention to pay all amounts owing to the producers who have not received crop input supplies,” Stooshinoff said.

The companies were unable to do so and the Bowra Group, a financial advisory firm, has been appointed as the bankruptcy trustee.

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