Companies ordered to pay up

Friday, July 1, 2011

by SUSAN MANN

Tillsonburg-area farmer John Vieraitis plans to sue a Costa Rican equipment manufacturer for the refund of a faulty colour sorter plus costs for damages.

His decision comes on the heels of an Agriculture, Food and Rural Affairs Appeal Tribunal ruling released June 20 that terminated the purchase agreement between himself, manufacturer Xeltron S.A. of Costa Rica and Phair Systems Ltd. of Dresden. The two companies were also ordered to refund Vieraitis money for the MV-90 sorter. Xeltron is to refund $95,872.06 (U.S) while Phair is to refund $10,300 (U.S.).

The actual commission for Phair was $13,042.94 (U.S.). But Phair and Vieraitis reached an agreement this spring and money Vieraitis owed Phair was subtracted from the commission resulting in the $10,300 (U.S.) amount Phair was to pay.

Vieraitis says he hasn’t determined yet if he’ll also launch a lawsuit against Phair Systems Ltd.

Phair decides against appeal

Bill Phair says he won’t appeal the tribunal’s decision. His role in the matter was to get a price for the colour sorter because Vieraitis was unable to get a response from a Michigan-area equipment dealer that recommended it. Phair and Vieraitis have a working business relationship.

Phair says he has never been a dealer for Xeltron. In fact “I’ve never been involved with color sorters in any of my sales career.”

Phair says from the beginning he’s contested that he has been labeled as a dealer for Xeltron because he doesn’t carry that company’s equipment. “We just put this together for John because I knew the people at Xeltron somewhat and I knew the contact person. John wanted this for quoting purposes.”

Phair says he lost almost $45,000 through the deal, including the commission plus costs for providing technical support to Vieraitis at his farm. “We did our very best to support him and get this thing going.”
 
Will manufacturer pay?

The tribunal can’t force Xeltron to pay, Vieraitis says, and that’s why he’s going to Superior Court. Xeltron has told Vieraitis in writing that he’s not to sell the sorter. If he does sell it the company says it won’t support the sorter nor sell the buyer parts or service.

Even through the tribunal ruled Xeltron has to provide a refund, Vieraitis doesn’t think the company will pay. As for Phair, it has already refunded the $10,300 (U.S) and the money is in a lawyer’s trust account, Vieraitis says.

Tribunal chair Kirk Walstedt says by email their decision is to be implemented immediately. If a party to a hearing has trouble enforcing a tribunal decision, a copy of the decision can be filed with the Ontario Superior Court of Justice and it can be enforced as a court order.

Vieraitis says he actually paid $125,000 (U.S.) for the MV-90 sorter, which included the cost of the equipment, insurance, customs charges and transportation to get it to Ontario from Costa Rica. He hoped to recover that money by going to the tribunal.

But the tribunal can only order the refund for the actual piece of equipment and not any additional costs, such as transportation, or damages.

Sorter problems incur $700,000 in costs

Vieraitis, who owns 300 acres and rents 2,900 acres to grow a variety of crops, says he incurred about $700,000 in costs, including lost business plus legal fees to get his equipment money refunded, because the MV-90 failed to perform to specifications.

He lost income because the sorter didn’t work. His customers cancelled contracts plus product had to be thrown out because it was piled up on his farm and couldn’t be sorted before it spoiled. In addition, Vieraitis says he had to spend additional time getting his product sorted. “We sometimes worked around the clock because we had to multi-sort it several times just to generate cash.”

Vieraitis says he’ll have to work night and day for the next four to five years to get where he was before he encountered problems from the faulty sorter.

From the first day of actual use about November 5, 2008, the MV-90 was unable to sort soybeans to the tolerance levels demanded by the marketplace, it says in the tribunal’s written decision.

Vieraitis needed a high capacity colour-sorting machine that could separate yellow from black beans to supply food grade specialty export and domestic markets. These markets have extremely low tolerances for contamination, it says in the tribunal’s written decision released after two days of hearings on March 23 and May 3.

Vieraitis says since he won the tribunal hearing “we have a lot more teeth because we have the government behind us.” But it’s yet to be determined if that’ll help him, he notes.

The MV-90 sorter currently sits idle on Vieraitis’s farm. He bought another sorter from a different manufacturer in August 2009 and it works fine.

Provincial legislation needs change, farmer says

Vieraitis says there should be changes to provincial legislation that would make equipment dealers more responsible for the equipment they sell. There should also be stricter importation laws possibly requiring foreign equipment makers to post bonds to do business in Canada. That way anyone who’s owed a refund because of faulty equipment can collect it through the bond, he explains.

This experience has made Vieraitis very leery of buying foreign-made farm equipment. “I wouldn’t buy anything foreign unless we knew we had tremendous support,” he explains.

From the first day of use, the MV-90 sorter failed to sort Vieraitis’ beans at the capacity required and to the required colour tolerances. In the context of the Ontario Farm Implements Act, “the colour sorter was a defective farm implement,” it says in the tribunal’s written decision.

Vieraitis told Phair and Xelton the MV-90 failed to perform to the manufacturer’s specifications within the first 10 days or 100 hours of actual use. From January 2009 to March 24, 2009 Phair and Xeltron unsuccessfully tried to make the defective farm implement perform to the manufacturer’s specifications. Starting on March 24, 2009, Vieraitis gave Phair and Xeltron repeated written notices requesting the purchase agreement be cancelled and his money be refunded.

Vieraitis says Xeltron’s technician was on his farm for a total of 53 days trying to get the sorter working.  

Mediation is required under the act but Vieraitis, Xeltron and Phair were unable to resolve their dispute that way. Phair says the mediation failed because no one had a clear-cut feeling of what the tribunal was willing to do in terms of financial remuneration and assessment of damages beyond the actual cost of the machine.

The tribunal says the provincial act applies to farm implements sold in Ontario regardless of where they are manufactured. The tribunal was also satisfied it has “the requisite subject matter jurisdiction,” it says in the written decision.

It isn’t known if Xeltron will appeal the tribunal’s decision. BF