Executive Summary: Key Legal and Evidentiary Issues

• Validity of AGT’s termination of the Terminal Services Agreement (TSA) in light of the Consent Agreement’s notice and consent requirements.

• Interpretation of contractual provisions regarding immediate termination for unlawful acts and the distinction between curable and non-curable breaches.

• Assessment of whether the presence of wood pellets in grain shipments constituted “unlawful acts” under the Canada Grain Act and the TSA.

• Evaluation of Fibreco’s compliance with regulatory orders and cleanout procedures mandated by the Canadian Grain Commission.

• Determination of whether AGT’s reasonable opinion of material negative effect justified termination under the contract.

• Consideration of appropriate remedies, including specific performance versus damages, and the sufficiency of evidence for irreparable harm.

Facts of the case

AGT Food and Ingredients Inc., along with its affiliates, entered into a long-term Terminal Services Agreement (TSA) with Fibreco Export Inc., the owner of a marine terminal in North Vancouver. The TSA, signed in December 2017 and amended in July 2018, required AGT to ship a minimum annual throughput of agriproducts exclusively through Fibreco’s terminal and to pay a substantial fixed monthly fee, regardless of actual shipments. AGT also had to maintain a $15 million irrevocable standby letter of credit as security for its payment obligations. The agreement was part of a broader commercial arrangement that included a Consent Agreement with CIBC, Fibreco’s financier, which imposed additional requirements on AGT regarding notice and consent for any termination of the TSA.

In 2022, the parties confirmed the commencement date of the TSA and adjusted shipping volumes and pricing. The terminal, licensed by the Canadian Grain Commission (CGC), was subject to regulatory oversight under the Canada Grain Act, including specific orders governing the handling of both grain and wood pellets using shared equipment. Between 2023 and early 2025, several shipments of grain handled by Fibreco for AGT were found to contain wood pellets, leading to regulatory intervention and certification issues.

Contractual and regulatory framework

The TSA contained detailed provisions on termination, including section 15.5(a), which allowed AGT to terminate the agreement immediately if Fibreco committed an “unlawful act” that, in AGT’s reasonable opinion, had or could have a material negative effect on AGT. The Consent Agreement with CIBC required AGT to obtain CIBC’s prior consent and provide at least 90 days’ notice before terminating the TSA. Regulatory compliance was also central, as the CGC’s orders set out procedures for handling contamination events and required Fibreco to follow specific cleanout protocols.

Events leading to the dispute

In January 2025, AGT issued a notice purporting to terminate the TSA, citing Fibreco’s alleged failure to comply with the Grain Act and related CGC orders after repeated incidents of wood pellet contamination in grain shipments. AGT ceased shipments, stopped paying the fixed fee, and did not replenish the letter of credit. Fibreco disputed the validity of the termination, arguing that AGT failed to comply with the Consent Agreement’s requirements and that the contamination events did not justify immediate termination under the TSA. The dispute centered on whether AGT’s termination was valid and, if not, what remedies Fibreco was entitled to.

Key legal issues and analysis

The court examined whether AGT’s termination complied with the procedural requirements of the Consent Agreement, specifically the need for CIBC’s consent and advance notice. It found that these requirements were clear, unqualified, and constituted conditions precedent to a valid termination. AGT’s failure to obtain consent or provide notice rendered its termination ineffective. The court also analyzed whether the presence of wood pellets in grain shipments amounted to “unlawful acts” under the TSA and the Grain Act. It concluded that such contamination did constitute unlawful acts but determined that only the most recent incidents (in December 2024 and January 2025) could potentially justify termination, as earlier events were too remote in time.

The court further distinguished between “unlawful acts” justifying immediate termination and “curable events” requiring notice and an opportunity to remedy. While the contamination events were found to be unlawful acts, the court held that AGT’s subjective belief in material negative effect was reasonable, given the regulatory context and reputational risks. However, because AGT failed to comply with the Consent Agreement’s procedural requirements, its termination was invalid.

Outcome and remedies

The court ruled in favor of Fibreco Export Inc., finding that AGT’s purported termination of the TSA was invalid due to non-compliance with the Consent Agreement’s notice and consent provisions. While AGT would otherwise have been entitled to terminate the TSA based on Fibreco’s unlawful acts, the procedural failure was dispositive. The court dismissed Fibreco’s claim for specific performance, concluding that damages would be an adequate remedy and that Fibreco had not proven irreparable harm or the necessity for injunctive relief. The assessment of damages and the determination of costs were reserved for future proceedings, with no specific monetary award made at this stage. Thus, Fibreco was the successful party, but the exact amount of damages or costs, if any, remains to be determined.