Farmers who lost thousands of dollars when a Manitoba mustard seed dealer was placed in receivership may take legal action against the Canadian Grain Commission unless the federal government fully reimburses them.
It has been nearly two years since the demise of Venture Seeds Ltd., a mustard seed dealer from Brunkild, Man., that owed farmers $536,726.24 when it went out of business on Aug. 31, 2004.
Twenty-seven farmers who delivered grain to Venture Seeds received 28 percent of what they were owed because the company’s $150,000 bond with the grain commission didn’t cover the total.
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Some of those producers are planning legal action against the commission for what they think was negligence on the part of the federal regulator.
“I’ll be filing a small claim or something,” said Judy Honess, a producer from Lomond, Alta., who lost nearly $17,000 in the demise of Venture Seeds.
Jim Baker, a farmer from Raymond, Alta., who received about $20,000 of the $70,000 he is owed for three B-trains of mustard, said he has also consulted a lawyer about possibly suing the commission.
“It looks like they were negligent in the licensing of these people. I would think they should be responsible and pay the producers what they have coming,” Baker said.
But both producers have been advised that launching a lawsuit against the agency would be futile because the Canada Grain Act stipulates the commission is not liable for any shortfall in compensation.
Reg Gosselin, director of corporate services with the grain commission, said the agency has brochures and information on its website explaining that there is no guarantee farmers will receive full compensation in the event of a business failure.
He said the commission encourages producers to conduct their own due diligence on companies they deal with and to take steps to minimize their financial risks, such as requesting receipts, seeking prompt payment and cashing cheques as soon as possible.
This isn’t the first time farmers have lost money in this manner. Producers who delivered grain to Naber Seed and Grain Co. Ltd. of Melfort, Sask., received 51 percent of what they were owed.
But Gosselin said those are the only two cases in recent history. Farmers involved in six other defaults since the May 2002 demise of Naber have received full payment.
The commission contends it has done nothing wrong in the Venture Seeds case and will not top up payments to affected producers.
Honess said the commission fell down on the job in this case. She has a letter from a senior grain commission official showing the agency received an estimated 29 payment inquiries from farmers involving Venture Seeds dating back to 2002.
“I have evidence for two years they knew that Venture Seeds was having producer payment problems,” she said.
But when her husband phoned the agency’s toll-free number to check on the company before delivering his grain, he was left with the impression everything was OK.
“We were told they were bonded and were not (given) any indication that they were having problems,” said Honess.
The decision to deliver a load of mustard to the Manitoba company ended up costing the couple $16,734.77 in unpaid claims.
“We’d have been better not having a bonded dealer because we would have (demanded) a certified cheque,” she said.
Baker is equally frustrated.
“I was always led to believe that if you’re bonded with the grain commission, you’re covered. I thought everything was fine,” he said.
“I don’t know why they’re telling everybody to be bonded when their bond isn’t no good.”
Baker said he could use the money he lost in the Venture Seeds fiasco.
“Fifty thousand dollars would help me out a whole bunch right now. Things are really tight.”
Gosselin said the commission did receive complaints from producers about slow payment from Venture Seeds but those were resolved to the commission’s satisfaction. He added that it is not unusual to receive complaints about a company, but that doesn’t mean there is evidence of financial difficulty.
Honess said the commission should have known something was wrong with the company long before Venture Seeds was forced into receivership, and should have realized that a $150,000 bond was inadequate when one producer alone had a claim for nearly half that amount.
Gosselin said the commission is forced to rely on reports from the companies it regulates and in this case there were irregularities with those reports that are under investigation by the RCMP.
Honess said even if the investigation shows the company was filing improper reports, the commission accepted them as true.
She can’t understand how a system that is supposed to protect farmers from default ends up paying them 28 cents on the dollar and provides no recourse for recouping the rest.
Honess is frustrated that the commission will not acknowledge any fault and that her legal options appear to be limited. As a last resort she has called on federal agriculture minister Chuck Strahl to intervene.
“I want him to realize they need to give us our money,” she said.
An Agriculture Canada spokesperson said Strahl’s office was not interested in commenting on the Venture Seeds case.
“Because of the issue of possible legal action, we’re not really going to comment further,” said Stephen Keough.
