Manitoba Judge Dismisses Final Lawsuit Over Dismantling of Canadian Wheat Board

A Manitoba judge has dismissed the last outstanding lawsuit stemming from Ottawa’s dismantling of the Canadian Wheat Board’s marketing monopoly.

In an Oct. 7 decision, Manitoba Court of King’s Bench Justice Chris Martin rejected a class action brought by Manitoba farmer Edward Andrew Dennis against the federal government and the Canadian Wheat Board’s (CWB’s) successor, G3 Canada Limited, over money farmers alleged was improperly withheld during the board’s transition away from its marketing monopoly.

The dispute arose from the former Conservative government’s 2011 decision to eliminate the CWB’s monopoly over wheat and barley marketing in Western Canada.

Under the previous system, farmers delivered grain to the CWB, which marketed it and distributed proceeds through pooling arrangements. The board also operated non-pool programs, including arrangements involving fixed prices.

Dennis filed the class action in 2017 on behalf of farmers who participated in the CWB’s pooling programs from August 2010 to July 2012. He alleged that Ottawa improperly redirected money that should have gone to farmers into a contingency fund that ultimately benefited the privatized board.

Dennis alleged misfeasance in public office by the federal government and breach of contract by the CWB. The farmers sought up to $85.3 million in allegedly withheld profits and $5.88 million in expenses, totalling approximately $91.2 million.

Arguments

Dennis argued that the federal government improperly increased the contingency fund, and objected to farmers being charged restructuring expenses, and said the CWB breached its contractual obligations.

The Wheat Board maintained a contingency fund to cover potential losses from its non-pool grain trading programs. The fund had previously been capped at $60 million. However, the federal government increased the maximum to $100 million on Oct. 18, 2011, and to $200 million on Nov. 14.

Dennis argued the government increased the fund more than necessary and directed the CWB to deposit trading gains into it. He alleged that money that should have been distributed to farmers was instead retained to improve the CWB’s financial position before privatization.

Dennis also challenged $5.88 million in transition costs, arguing that Ottawa had promised to cover privatization expenses but improperly charged some of them to farmers’ pooling accounts in violation of the Canadian Wheat Board Act.

Dennis also argued that farmers had contractual relationships with the CWB when they delivered grain. He maintained that the board had a legal obligation to distribute proceeds according to the terms of those transactions.

By allegedly diverting trading gains into the contingency fund instead of distributing the money, Dennis argued, the CWB breached those contractual obligations.

He also argued that regulations enacted in October and November 2011 could not lawfully apply to the financial year ending July 31, 2011, without retroactive authority.

The federal government argued that the minister’s actions were lawful and consistent with the CWB’s longstanding financial practices.

It maintained that non-pool marketing profits had historically been placed in the contingency fund to cover potential losses, rather than distributed to farmers participating in pooling programs. It also maintained that the fund continued serving its authorized purpose throughout the period covered by the lawsuit, even as officials prepared for the board’s transition.

G3 separately argued that the farmers’ relationship with the CWB was governed by legislation, not ordinary contract law, and that the disputed accounting decisions complied with the statute.

Judge’s Decision

Martin ruled that the minister acted within his legal authority when recommending the increases to the contingency fund and directing the allocation of profits. The judge noted that the CWB itself had requested an increase from $60 million to $90 million in March 2011 because of growing participation in non-pool marketing programs.

Although the board had not requested an increase beyond $90 million, Martin found that this did not make the government’s subsequent decisions improper. Although the CWB had requested an increase only from $60 million to $90 million, Martin found that the government’s larger increases were justified by the need to manage financial risks and prepare the board for its future operations.

“The Minister’s actions were within the ambit of the CWB Act and within a range of a reasonable exercise of discretion,” Martin wrote.

The judge also rejected the allegation of misfeasance in public office, finding no evidence that the minister knowingly engaged in wrongdoing.

“There is no proverbial smoking gun nor any other direct evidence showing the Minister knew or intended to act unlawfully or impermissibly and subvert the CWB Act,” Martin wrote.

Martin also determined that grain receipts issued to farmers were not enforceable contracts because the relationship between producers and the Wheat Board was governed by legislation.

He rejected Dennis’s argument about the retroactive application of the regulations, noting that the CWB’s financial statements were not finalized until Nov. 24, 2011, after the government increased the fund’s limits.

Martin also found that the disputed $5.88 million covered payments to retain employees completing the CWB’s final pooling operations and was properly charged to the pooling accounts. The judge noted that Ottawa reimbursed the CWB for $177.3 million of its $183.2 million in transition-related expenses but considered the remaining employee payments operational costs.

Martin granted summary judgment to the federal government and G3, dismissing the class action. The court left the question of legal costs to the parties to resolve.