Community Pork Ventures Inc. took full control of its financially troubled network of hog barns last week but its legal battles may not be over.
Community Pork owns 16 farrow-to-finish hog operations in Saskatchewan and Manitoba that can produce 250,000 pigs a year. However, the company and its affiliated barns owe more than $37 million to lenders and have been embroiled in a legal battle with Quadra Group, which provided management services for the barns.
Late last week, Community Pork announced that all contractual relationships with Quadra and its affiliates had been terminated.
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“Quadra Group will no longer provide management or administrative functions,” said Brian Scherman, a Saskatoon lawyer representing Community Pork.
“They will now be provided directly by Community Pork and its subsidiaries.”
Community Pork and its affiliated barns are operating under a forbearance agreement with creditors while the company attempts to restructure. The main lenders include the Canadian Imperial Bank of Commerce, Bank of Nova Scotia, National Bank of Canada, Bank of Montreal and Farm Credit Canada. According to court documents, the forbearance agreement has been extended until Dec. 15.
Community Pork indicated last week that it intended to take more direct control of its assets and to reduce production costs. The severing of contractual relationships with Quadra was described by John Hicke, president and chief executive officer of Community Pork, as a step in that direction.
“Rather than having them operate it, we’re going to be dealing with it directly, (with) more direct contact with our barn managers. Then we can implement things, we believe, quicker and better as we go through the process,” Hicke said.
Community Pork and Quadra had filed legal actions against one another before the events of last week.
Hicke said Community Pork had not yet decided whether it would continue a claim against Quadra that alleges Quadra committed several breaches of contract, such as failing to maintain proper and accurate accounts for the barns it managed, signing cheques without authority and misappropriating funds from the production barns and directing them elsewhere.
The key people involved with Quadra who are included as defendants are Richard Wright, Garth Larson and Darren Swanson.
Larson had little to say about the legal dispute other than to note that Quadra may continue with legal action of its own against Community Pork.
Quadra has withdrawn an application for a court order that would have prevented Community Pork from terminating its management contracts with Quadra.
However, Timothy Hodgson, a lawyer representing Quadra, said Quadra was still considering court action against Community Pork that would allege breach of contract and wrongful termination of contracts.
He said Quadra can prove the allegations against it are unfounded.
Court documents give a glimpse of the power struggle between Community Pork and Quadra. A statement by Hicke states that Quadra operated as though it was entitled to manage Community Pork barns without controls by Community Pork Ventures and its affiliated barns.
Wright, one of the three original partners in the Quadra Group, said it was Quadra that created Community Pork in the first place and there was even an effort under way earlier this year to try to merge the two.
Although Quadra has left itself the possibility of suing Community Pork for damages, that would be a costly undertaking, said Wright, and his company also has suffered financially.
“Quadra has made concessions to the barns and to Community Pork that have severely impacted Quadra’s balance sheet,” he said.
Wright also said the allegations made by Community Pork Ventures against Quadra are false. “If someone was to dig into the facts over the last two or three years, or five years, even, they would find just the opposite is true, that Quadra has put the barns and Community Pork a way ahead of its own interests.”
