REGINA — Monette Farms Ltd. has moved to foreclose on Purely Canada Foods Corp.’s facility in Avonlea, Sask., claiming it defaulted on a $2.5 million mortgage dated Aug. 20, 2024.
That mortgage was signed less than a week before the Canadian Grain Commission revoked Purely Canada’s licences in Avonlea, Kindersley, Sask., and Lajord, Sask., meaning it can no longer legally accept grain from producers.
Farmers who had delivered and weren’t paid are to contact the CGC immediately, said Eve Froehlich, the grain commission’s acting executive director of innovation and strategy.
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“The CGC is processing claims for individual producers as they come forward,” she said last week.
However, farmers who have contracts with the company are wondering if they are still bound by the terms if it is no longer licensed.
John C. Stewart, a lawyer at D’Arcy & Deacon in Winnipeg who focuses on agricultural business, said contract holders can contact Purely Canada and ask them to agree, in writing, to let them out of the contract. If the company agrees, farmers can then sell their grain to another company. If it doesn’t, they remain bound by the terms.
Purely Canada did not respond to a request for comment on the matter of contracts.
Neither did its parent company, Above Foods, the publicly traded Regina-based company led by president Lionel Kambeitz and associated with KF Kambeitz Farms. Above Foods went public on NASDAQ earlier this year and was trading around 60 cents Sept. 16.
However, a document filed with the U.S. Securities and Exchange Commission Aug. 30 states Purely Canada is “currently not participating in the Canadian Grain Producer Program, which insures payments to select Canadian growers qualifying under the program, due to not renewing bond coverage.”
The filing said Purely Canada was looking for replacement insurance coverage from surety bond providers.
“In the interim, Purely Canada’s Canadian terminals will continue to operate as normal with the exception that the terminals will not be purchasing or receiving grain from select producers until Purely Canada has successfully obtained replacement coverage. Purely Canada will continue to receive grain as normal from commercial grain suppliers and continue to fulfill customers sales contracts.”
The statement of claim filed Sept. 9 by Monette, one of the province’s largest farm operations, adds to Purely Canada’s problems.
It lists Purely Canada, the Bank of Nova Scotia and KF Kambeitz Farms as defendants. Those parties have not yet filed a statement of defence.
Monette claims the principal amount of $2,522,182.24 plus interest at 12 per cent for a total of $2.531,303.56 as of Sept. 1. The claim also asks for foreclosure, sale and possession of the mortgaged land and the appointment of a receiver of rents, issues and profits of the land.
The claim said the defendants covenanted in the mortgage to pay the money owing.
“The Limitation of Civil Rights Act does not preclude the Plaintiff from suing on the covenant because the mortgage does not secure the purchase price of the mortgaged land,” the statement said, adding the mortgage expressly excludes the use of the act.
There are no further details on why Purely Canada is in default. It purchased the Avonlea terminal for $7.3 million in 2022.
Documents also show Scotiabank holds a $15 million first charge collateral mortgage against the property.
A group of farmers took Purely Canada to court earlier this year after the company tried to invoke force majeure on gluten-free oat contracts from 2022. The company said it couldn’t take the oats due to equipment failure but the 27 farmers disagreed.
In a presentation to investors Sept. 10 posted on its website, Above Food says it is a US$273 million differentiated food ingredient and consumer product company. It lists a variety of statistics, including volume of 644,000 tonnes per year and three divisions: disruptive ag, specialty ingredients and private label manufacturing.
