New Brunswick appeal court upholds recovery after cross-company set-off fails

A grain buyer could not pay one company's invoice by reducing a different company's debt without an established legal basis for doing so, the New Brunswick Court of Appeal has ruled in a dispute over two purchases of oats.

In Grand Falls Agromart Ltd. v. PricewaterhouseCoopers Inc., 2026 NBCA 43, the unanimous court upheld relief under New Brunswick's Debtor Transactions Act after the motion judge found that Hillspring Warehouse and Logistics Inc. had not authorized Agromart's claimed set-off against money owed by Hillspring Farms Ltd. The court also rejected a limitation defence raised for the first time on appeal, deciding it on the existing evidence rather than refusing to consider it merely because it was new. Reasons, paras. 1–14, 100–117

The April 30 decision arose from a New Brunswick Court of King's Bench proceeding. Justice French wrote for Justices Quigg and LeBlanc. The appeal concerned recovery for the two March 2020 transactions, not a determination of every disputed balance between the businesses. (Cover; paras. 1–7, 27–37.)

The difference between two companies mattered

Agromart supplied agricultural products and services and also bought grain for resale. Its storage arrangement with Warehouse involved selling oats to Warehouse on credit, then buying them back as needed for customers. Ordinarily, Agromart paid for the returned oats by crediting amounts Warehouse owed it. (Paras. 15–21.)

The March 2020 purchases were different: Warehouse was not then indebted to Agromart. Agromart instead claimed to have satisfied its obligation by reducing a debt owed by Farms. The two corporations had different principals, who were father and son. That relationship did not make the corporations' debts interchangeable. (Paras. 3–7, 17–21, 107–110.)

CIBC had demanded repayment from the companies before the transactions. An ensuing management agreement expressly described them as insolvent. They were adjudged bankrupt in June 2020. PricewaterhouseCoopers, later appointed Warehouse's receiver and the bank's collection agent for Farms, sued Agromart to recover outstanding accounts. It added statutory transaction claims after learning how Agromart had recorded the disputed payments. (Paras. 22–35.)

PWC sought summary judgment under both the federal Bankruptcy and Insolvency Act and the provincial statute. The BIA preference claim failed because the judge accepted Agromart's evidence that it was not Warehouse's creditor when the transactions occurred, an essential condition for that claim. PWC withdrew its appellate contention seeking to sustain the result on the BIA ground. (Paras. 7, 13, 36–40.)

The provincial claim succeeded on a different basis. Under the DTA provisions applied by the judge, Warehouse had received no consideration for the transactions while insolvent. The court ordered Agromart to pay the value of the property received. (Paras. 6–7, 113–116.)

A signed letter did not resolve the authorization dispute

Agromart relied on its manager's affidavit and a May 7, 2021 letter signed by Warehouse's former president. The letter purported to confirm a previous direction to apply payments for oats against Farms' debt, acknowledging that this had been done in 2019 and until the end of March 2020. The dispute was whether it reliably established authorization. (Paras. 33, 41–43; embedded letter at PDF p. 12.)

The motion judge assessed the letter in context. It was produced after litigation began and correspondence had made the set-off a live issue. Warehouse's former president said he had been misled into signing it on the understanding that it was needed for income-tax accounting. The judge noted that Agromart had not answered that account with affidavit evidence despite a lengthy adjournment. The earlier dealings also showed set-offs against Warehouse's own debts, not a practice of using Farms' debts. The judge rejected the alleged authorization, and the appeal court upheld that assessment. (Paras. 43, 81–88, 111–112.)

Agromart argued that accepting its manager's evidence on creditor status while rejecting his evidence on authorization was inconsistent. The appeal court disagreed: accepting evidence on one issue did not prevent the judge from rejecting it on another, with reasons. Neither party had requested cross-examination of the affiants, and the absence of examinations for discovery did not make the motions inherently premature. (Paras. 79–88.)

The statute did not bypass procedural safeguards

A substantial part of the appeal addressed how the order had been made. PWC argued that the DTA itself authorized the relief without resort to the summary-judgment rule. The lower judge had not expressly identified the procedural route for that order. (Paras. 10–12, 44–45.)

Reading the reasons with the pleadings, submissions and other dispositions, the Court of Appeal concluded that the judge had granted summary judgment under Rule 22. PWC had sued by statement of claim and moved on the basis that no genuine issue required a trial. Its request for statutory relief was tied to that motion. (Paras. 46–54, 64–78.)

The court did not accept that a statutory power to make an order on application silently dispensed with the applicable procedural rules. Even a proceeding brought as an application can require a trial where there is a substantial factual dispute under Rule 38. The DTA was not a general shortcut around that inquiry. On this record, however, the judge was entitled to assess the evidence and conclude that a trial was unnecessary. (Paras. 55–63, 79–88.)

The limitation defence was considered and rejected

Agromart had neither pleaded the DTA limitation defence nor raised it before the motion judge. On appeal, it argued that the evidence did not establish when PWC actually learned of the transactions and that another hearing was needed. (Paras. 89–99.)

Under the provisions considered by the court, an application generally had to be brought within one year of the transaction. Where the transferee conceals or assists in concealing the transaction or material facts, section 27(2) starts the one-year period when the applicant knows of them, subject to a five-year outer limit. Agromart's appellate argument focused on when knowledge arose; it did not dispute concealment as the precondition for that provision. (Paras. 90–95.)

The appeal court found the record sufficient to decide the new issue. PWC's officer explained that the receiver learned of the cross-company accounting in or around April 2021, when Agromart provided Farms' account statement. PWC amended its claim in August 2021. (Paras. 95–104.)

Knowing that oats had changed hands was not enough in these circumstances. The material fact grounding the claim was Agromart's unauthorized application of its debt to Warehouse against Farms' debt. The court found that this was not discovered until April 2021 and dismissed the limitation defence. It did not establish a general rule that every DTA claim begins only on discovery. (Paras. 101–104.)

Finally, Agromart identified no separate factual foundation for a contractual set-off once the alleged authorization was rejected. Nor did the record establish an equitable set-off. The court found no error in applying the DTA; good faith was not relevant to the particular provisions used. (Paras. 105–116.)

The appeal was dismissed with $3,000 in costs. (Para. 117.)