Farmers who sell equipment on consignment at a dealership are not eligible for compensation under Alberta’s Farm Implement Act if something goes wrong.
Adrian Driessen found that out the hard way.
He lost $36,000 when he wasn’t paid for three tractors sold through Blocker II Equipment in Westlock, Alta., even though the Farmer’s Advocate office assured him he would receive compensation from a farm implement compensation fund designed to protect farmers.
When Driessen went before the Farm Implement Board, which is in charge of the compensation fund, the board’s lawyer said consignment equipment wasn’t mentioned in the act and therefore wasn’t covered.
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Driessen is the first person to apply for compensation for consignment equipment sold through a dealer.
“Lawyers hate to cough up money. Nobody likes to hand out money. They think it’s theirs,” said Driessen, who consigned a dozen pieces of farm equipment to the Westlock dealer.
Three tractors were sold, but Driessen was never paid. Shortly after the sale the dealership was placed under bankruptcy protection.
Dennis Budney, a Farm Implement Act inspector with the provincial Farmer’s Advocate office, said the act, which was proclaimed in 1973, doesn’t mention the word “consignment” and therefore it is not deemed to be covered.
Budney said when the act was written, consignment sales on dealer lots were probably not a common practice. The act was designed to ensure dealers provide warranty on new equipment, make parts available on new equipment and ensure the fulfilment of retail agreements.
The board confirmed this in a written ruling.
“The act provides protection in respect to sales, leases or lease-purchases of farm equipment to farmers for use in their farming operations. It does not provide security or protection for sellers or consignors of farm implements.”
More than 30 farmers lost money in Blocker II Equipment. Budney said the compensation fund compensated two farmers who paid for equipment but never received it.
He said the compensation fund has more than $800,000, and the annual number of claims on it has varied since it was established Jan. 1, 2004.
“There was lots in the Blocker II case, but most were denied,” he said.
In an appeal letter, Driessen wrote: “How can you justify coverage for one set of farmers and not the farmers whose equipment was sold and actually lost monies. Is that fund not there for a reason?”
Equipment dealers had previously been required to have a security bond, but the Sept. 11, 2001, terrorist attacks on the United States increased the cost of insurance, prompting the provincial government to eliminate the need for a bond and instead establish the compensation fund.
About 400 dealers, distributors and manufacturers pay $300 to $500 a year into the fund.
Farmer’s advocate Jim Kiss said the board is bound by legislation and can’t make flexible decisions on how the money is paid.
It heard applications from 47 farmers between January 2007 and March 2008 and made awards to five.
No payments were made in 2006 and two payments were made in 2005.
Kiss said the Farmer’s Advocate office encourages farmers to apply to the compensation fund but doesn’t guarantee an award.
“Everyone has the absolute right to put an application forward.”
In the news release that announced the new compensation fund, then provincial agriculture minister Shirley McClellan said “the new compensation fund will ensure farmers are better protected. The amendment will mean that farmers, as well as dealers and distributors in the farm equipment business, are treated fairly in their business.”
Driessen said his only recourse now is to appeal through the Court of Queen’s Bench, but doubts he can afford to continue his fight.
“I don’t have another $20,000 to $25,000 to lose. I’ve lost enough.”
Budney said the Farm Implement Act is up for review in 2009.
“If there’s a need expressed by the general public, we’ll have to look at it and put consignment equipment under the act.”
