Executive Summary: Key Legal and Evidentiary Issues

• The central issue on appeal was whether the trial judge erred in characterizing the parties' 2010–2012 contracts as joint venture agreements rather than a partnership, with the Tomcalas arguing that a partnership classification would have altered both liability findings and the damages calculation.
   
• Contract interpretation was contested, with the Tomcalas asserting they had not read the Initial Contracts and had relied on representations by Gord Nystuen that the relationship was a partnership, while each contract contained an express "no partnership" clause (Clause 10.07).
   
• Unconscionability under the Unconscionable Transactions Relief Act, RSS 1978, c U-1, was established for the 2015 Restructuring Agreement and all subsequent agreements, the trial judge finding that the Tomcalas' severe financial position and the improvident terms of those deals satisfied both the inequality of bargaining power and improvident bargain requirements from Uber Technologies Inc. v Heller, 2020 SCC 16.
   
• Damages quantification was disputed on cross-appeal, with SSC Security arguing the trial judge erred by not applying The Sale of Goods Act, RSS 1978, c S-1 to all post-2014 undelivered canola obligations; the Court of Appeal dismissed this ground as moot given the unconscionability findings.
   
• The trial judge's application of unjust enrichment as the basis for the monetary award was found by the Court of Appeal to be a misnomer, though harmless in result, as the proper doctrinal basis was equitable compensation or restitution available under the doctrine of unconscionability itself.
   
• Both the Tomcalas' appeal and SSC Security's cross-appeal were dismissed, with each party bearing its own costs.

Facts of the case

Frank, Laurie, and Ryan Tomcala are Saskatchewan farmers who, beginning in 2010, entered into a series of contracts with Assiniboia Capital Corp. (ACC) and Input Capital Limited Partnership (ICLP) — entities that were predecessor names or related entities of what later became SSC Security Services Corp. — for the provision of input capital in exchange for the delivery of canola. Frank and Laurie Tomcala signed one initial contract, and Ryan Tomcala executed another, both with ACC/ICLP as the counterparty. Under those Initial Contracts, ACC/ICLP agreed to provide a total upfront payment of $457,000, and the Tomcalas covenanted to deliver canola grown on specific acreage, with crop insurance proceeds to be shared equally.

The 2010 crop year was unusually wet; the Tomcalas were unable to seed much of their land and produced little canola, resulting in unfulfilled obligations on both sides. Their cumulative shortfall — beginning at $270,341 under the Initial Contracts — was carried forward through restructured agreements in 2011 and 2012. In 2013, Input Capital Corp. (ICC), which had replaced ICLP as the Tomcalas' counterparty, introduced a new financing vehicle: the streaming agreement. On February 4, 2013, the Tomcalas and ICC executed the first Streaming Contract for funding of $2,528,000 in exchange for 1,500 tonnes of canola per year for six years (2013–2018 inclusive), secured by mortgages and collateral security over the Tomcalas' land and equipment. Subsequent streaming contracts and ad hoc "Side Deals" were entered annually through 2017, with ICC advancing progressively larger sums — including $2,200,000 on March 31, 2015, $500,000 on May 12, 2016, and $1,449,242.49 on January 13, 2017. By the end of 2016, ICC had advanced a total of approximately $10,007,148 to the Tomcalas but had received deliveries of canola with a market value of only $6,675,180.

In 2016, despite what the trial judge described as a "very good year" for the Tomcalas' canola crop, they produced 6,256 tonnes but 2,964.45 tonnes had been stolen, leaving them unable to meet their contracted delivery obligations. The parties' relationship deteriorated and, in early 2017, the Tomcalas commenced an action against SSC Security and associated parties, seeking compensation for alleged misrepresentations in the marketing of the input-capital arrangements. SSC Security counter-sued for damages for non-delivery of canola and, in a separate action, moved to enforce its mortgages and collateral security over the Tomcalas' land and equipment.

Policy, legislative, and contractual provisions at issue

The Tomcalas argued that the parties' relationship constituted a partnership governed by The Partnership Act, RSS 1978, c P-3, which would have required dissolution proceedings rather than straightforward liability for non-delivery. Each of the Initial Contracts, however, contained a "no partnership" clause (Clause 10.07), which provided: "No partnership is created by this Agreement. Nothing contained in this Agreement shall be or shall be deemed to constitute the parties hereto as partners nor as agents for the other, nor any other relationship whereby either could be held liable for any act or omission of the other." The Tomcalas also asserted that ICC was required to be licensed or registered under The Trust and Loan Corporations Act, 1997, SS 1997, c T-22.2, and that certain transactions were independently unconscionable under The Unconscionable Transactions Relief Act, RSS 1978, c U-1. On the damages side, SSC Security argued that undelivered canola should be valued pursuant to The Sale of Goods Act, RSS 1978, c S-1 (SGA), which the trial judge applied in part but ultimately displaced in favour of an equitable remedy following his unconscionability findings. The unconscionability analysis was conducted under the two-part test from Uber Technologies Inc. v Heller, 2020 SCC 16, requiring both an inequality of bargaining power and a resulting improvident bargain.

Reasoning and analysis

On the partnership issue, the Court of Appeal upheld the trial judge's finding that the Initial Contracts, the 2011 Agreement, and the 2012 Agreement were joint venture agreements, not partnerships. The judge had applied the interpretive principles from Sattva Capital Corp. v Creston Moly Corp., 2014 SCC 53, and found the text of the contracts unambiguous: each established a joint venture in which ACC/ICLP provided input capital and the Tomcalas grew and delivered canola, with risks allocated between the parties. The express "no partnership" clause reinforced this reading. Caldwell J.A. found no palpable error in this interpretation and dismissed the Tomcalas' argument that the factual matrix — including their testimony that Nystuen had described the relationship as a partnership — should have overridden the unambiguous contract language.

On the unconscionability issue, the court affirmed the trial judge's conclusion that the 2015 Restructuring Agreement rendered the entire post-2015 relationship unconscionable. By September 2015, the Tomcalas' cumulative obligations were extremely large, lenders were not willing to provide them the funding they needed to continue farming, and they had no realistic alternative but to accept ICC's terms — including an obligation to deliver 7,692 tonnes of canola at $390 per tonne when the prevailing market price was $468.81 per tonne. The trial judge found this to be both an inequality of bargaining power and an improvident bargain within the meaning of Heller. SSC Security's cross-appeal argued there was nothing unconscionable about the Streaming Contracts because the Tomcalas were experienced farmers who had knowingly signed the agreements. The Court of Appeal rejected this, finding that the judge had considered all the relevant factors — including the Tomcalas' farming experience, their capacity, their prior dealings with financial advisors, and the fact that they had knowingly granted security — and had not palpably erred in his assessment of the overall circumstances.

On damages, the trial judge in the Damages Award found the Tomcalas had received $4,882,217 from ICC under the post-2015 unconscionable agreements ($3,000,000 in September 2015, $500,000 in May 2016, and $1,449,242.49 less $67,025.50 in January 2017). He deducted $387,382 (representing 916 tonnes of canola delivered by the Tomcalas at the market price of $468.81 per tonne) to arrive at a net amount of $4,494,385, which he awarded to SSC Security plus interest at 5% from the time the funds were advanced. On appeal, the Tomcalas challenged the doctrinal basis for the award, arguing that unjust enrichment — which the judge had described as the basis for the remedy — had not been pleaded by SSC Security. Caldwell J.A. agreed the label was a misnomer but found the error inconsequential: the remedy was properly available as equitable compensation or restitution under the doctrine of unconscionability itself, since rescission of the contracts was impractical given the long and complex evolution of the parties' relationship, the initial validity of several contracts, and the comprehensive security interests held by SSC Security. SSC Security's cross-appeal on damages — arguing the judge should have applied the SGA to calculate losses based on all post-2016 undelivered canola — was dismissed as moot once the unconscionability findings stood.

Ruling and overall outcome

The Court of Appeal for Saskatchewan dismissed both the Tomcalas' appeal and SSC Security's cross-appeal. The trial judge's findings that the 2010–2012 contracts were joint ventures, that the 2015 Restructuring Agreement and all subsequent agreements were unconscionable, and that the Tomcalas were liable to repay the funds advanced under those unconscionable agreements were all affirmed. SSC Security was the successful party, with the $4,494,385 damages award plus interest at 5% from the time the funds were advanced remaining in place. Because neither side succeeded on appeal, no costs order was made — each party was required to bear its own costs of the appeal and cross-appeal.