Executive Summary: Key Legal and Evidentiary Issues

• Characterization of the July 22, 2023 Purchase Agreement as a conditional sale under s. 3(1) of The Personal Property Security Act, 1993 (PPSA), creating a security interest in favour of KF that required registration.
• Determination that Royal Bank of Canada (RBC) held a prior perfected security interest over all of Purely Canada Foods Corp.’s present and after-acquired personal property, including the 4,200 tonnes of Canadian Western Amber Durum stored in KF’s bins.
• Rejection of KF’s argument that the Purchase Agreement was merely an option and that Purely never acquired rights in the Durum, with the court finding that Purely obtained an interest in the grain despite title retention and storage with KF.
• Analysis of “value” and “rights in the collateral” for attachment under s. 12(1) PPSA, and the court’s conclusion that consideration flowed between KF and Purely even though no cash was paid and the contract was later unwound.
• Dismissal of KF’s procedural and evidentiary objections (venue, insolvency panel, timing of affidavits, and hearsay) and acceptance of late expert evidence that reduced RBC’s claimed damages.
• Bifurcation of the damages issue, placing the onus on KF to disclose documentation and account for the sale, price, and deductions relating to the Durum, with the quantum of damages (RBC claimed $1,237,698) left to be determined in a subsequent phase.

Factual background

Purely Canada Foods Corp. operated grain terminals in Saskatchewan and purchased Canadian Western Amber Durum (Durum) from KF Kambeitz Farms Inc. under a Purchase Agreement dated July 22, 2023. The agreement covered 5,000 tonnes of Durum at a specified price, with a delivery window from August 1 to September 30, 2023, and payment due within 15 business days. Purely’s elevator licence was revoked in August 2024 and, amid financial distress, the court appointed a receiver over Purely and its assets on March 19, 2025, followed by an adjudication in bankruptcy on April 24, 2025. Royal Bank of Canada was Purely’s first-ranking secured creditor under a general security agreement over all present and after-acquired personal property, and it relied on searches of the Personal Property Registry (PPR) to show that no competing registration by KF was on file. RBC maintained that the Durum—approximately 4,200 tonnes stored in bins leased and controlled by KF at the Lajord terminal—formed part of Purely’s personal property and thus fell within RBC’s perfected security. KF acknowledged that it later sold the Durum (or at least grain stored in the same bins) to third parties but did so without notifying RBC in advance.

The grain contracts and title retention

The core commercial instruments were the July 22, 2023 Purchase Agreement and a later Unwind Agreement dated August 12, 2024. The Purchase Agreement expressly recorded a “purchase” by Purely from KF, describing the parties as Buyer and Seller, specifying the quantity, grade and price of Durum, and including statutory declarations required under the Canada Grain Act, which the court noted are typical of actual grain sales rather than options or other contingent arrangements. A key clause was the title retention provision in paragraph 3 of the Terms and Conditions, which stated that title to the grain “shall remain with the Seller until such time as the Buyer has paid to the Seller the full Purchase Price.” This reservation of title made the arrangement a conditional sale for PPSA purposes, because the PPSA looks at substance and treats retention of title as the taking of a security interest that secures payment of the price. The court rejected KF’s reliance on the final, un-numbered paragraph of the Purchase Agreement—dealing with storage, a right to end storage on notice, and the contract becoming null and void if delivery was not taken within 30 days after such notice—as transforming the transaction into a mere option to purchase. Rather, that clause was interpreted as allocating storage risk and providing a mechanism to bring the storage period to an end, not as rewriting the deal into an option.

The Unwind Agreement and the nature of Purely’s interest

In August 2024, KF and Purely entered into the Unwind Agreement. Its recitals described the Purchase Agreement as “an agreement for the sale of 5000 tonne Canadian Western Amber Duram” to Purely, confirming that the grain had been “sold” and that KF had “not been paid any of the purchase price” and was owed $2,755,800. The Unwind Agreement further recited that 4,200 tonnes of the Grain covered by the Purchase Agreement were being stored in specified bins at the Lajord terminal, that Purely was unable to pay for the “Unsold Grain,” and that in exchange for a release of “any and all interest in the Unsold Grain by Purely,” KF was prepared to unwind the transaction and credit Purely’s accounts receivable by $2,314,872. For the court, these recitals were powerful contemporaneous evidence that both KF and Purely understood the Purchase Agreement as an actual sale under which Purely had acquired rights in the Durum, even though title remained with KF as security and the grain was still stored in KF’s bins. If the arrangement had been only an unexercised option, there would have been no need for an unwind: Purely could simply have let the option lapse or surrendered it. Instead, the parties spoke of a sale, an outstanding “purchase price,” and a need for Purely to relinquish its “interest” in the Unsold Grain in exchange for an accounts receivable credit.

Competing security interests under the PPSA

RBC’s claim turned on priority under the PPSA. It held a perfected security interest in all of Purely’s present and after-acquired personal property by virtue of its general security agreement and registration. KF, on the other hand, never registered a financing statement in the PPR against Purely in relation to the Durum. Under s. 3(1) PPSA, the Purchase Agreement—because of its title retention clause—was a conditional sale “in substance” creating a security interest in favour of KF, regardless of who held legal title. That meant KF’s interest in the Durum was a PPSA security interest, not some special non-PPSA right. The court then considered attachment under s. 12(1). Attachment requires (a) value to be given, (b) the debtor to have rights in the collateral, and (c) enforceability under s. 10, which is satisfied by a signed agreement that sufficiently describes the collateral. Applying Pettyjohn and related authorities, the judge held that “value” was broader than cash payment: KF gave a binding commitment to extend credit and locked in a grain price; Purely committed to buy and secured a supply of grain. That mutual commitment and credit arrangement were sufficient consideration for “value” to be given, even though Purely never actually paid. As for rights in the collateral, Purely obtained an interest in the Durum by entering into the Purchase Agreement and, at the latest, when that Durum was allocated to the contract and stored in the bins identified in the Unwind Agreement. The requirement of an enforceable security agreement was satisfied because the Purchase Agreement described the commodity as 5,000 tonnes of Canadian Western Amber Durum, which is more than adequate collateral description. On that analysis, KF’s security interest attached under s. 12(1), but it remained unperfected because no registration was ever made. RBC’s security, by contrast, was perfected and first in time, so it had priority over both the Durum itself and the proceeds from its disposition. The court also addressed KF’s argument that possession was crucial—that because Purely never had possession of the Durum, RBC’s security never attached. The judge rejected this, clarifying that attachment under s. 12(1) turns on rights in the collateral, not physical possession by the debtor, and that possession only becomes relevant in certain priority disputes under s. 34 where a properly perfected purchase-money security interest is involved. Here, KF had not perfected at all, so possession could not save its position.

Arguments of the parties and procedural objections

KF raised numerous procedural objections: that RBC improperly commenced the application in Saskatoon (rather than Regina), that RBC sought to have it heard by a judge on the insolvency panel, and that RBC filed amended materials and affidavits (including an expert affidavit and an affidavit from Carmen Balzer attaching the Purchase Agreement) after seeing KF’s response. KF attempted to invoke a “best foot forward” rule from summary judgment practice to argue that RBC should be stuck with its initial evidentiary record. It also alleged “triple hearsay” in respect of information originating in the receiver’s report about statements made by individuals at KF’s site. The court rejected these complaints. Insolvency practice in Saskatchewan routinely centralises such matters in Regina or Saskatoon and before the insolvency panel, so there was nothing improper in RBC’s choice of venue or request for a panel judge. The “best foot forward” principle was held to apply to summary judgment, not to this sort of originating application, and in any event the late expert affidavit actually reduced RBC’s claimed damages by nearly half, which undermined KF’s suggestion of prejudice. The Balzer affidavit was seen as a straightforward and appropriate way of ensuring that the court had the key Purchase Agreement before it. On the hearsay issue, the judge noted that receiver’s reports are not lightly disregarded in closely connected proceedings, but ultimately found that the challenged hearsay was not necessary to resolve the issues and therefore did not rely on it. At the same time, the court did agree to bifurcate the question of damages so that more fulsome evidence could be assembled, although it emphasised that KF had already had ample opportunity to provide information about what it sold, for how much, and on what terms.

The court’s analysis and declaration

On the substantive PPSA issues, the court held that the Purchase Agreement was a conditional sale captured by s. 3(1), and that under its terms Purely purchased Durum from KF while KF retained title solely as security for the price. This meant Purely granted KF a security interest in the Durum that attached once value was given and Purely acquired rights in the grain; but because KF never perfected, its interest ranked behind RBC’s all-asset security. The judge also addressed a “floodgates” concern raised by KF—that such an interpretation would give RBC priority over collateral under every conditional sale between KF and Purely, even for unharvested crops or grain stored far away. The court observed that the PPSA deliberately sets clear and firm rules and that parties can easily protect themselves by registering a financing statement that broadly describes relevant collateral. The fact that a properly perfected general security might outrank unperfected conditional sellers in many scenarios was a feature of the statutory design, not an absurdity. The court therefore granted RBC the declaration it sought, formally confirming that pursuant to s. 66(1)(a) PPSA, RBC had first priority in and to the 4,200 tonnes of Canadian Western Amber Durum that were the subject of the Unwind Agreement, and that RBC’s perfected security interest ranked ahead of KF’s unperfected interest in that same Durum. It also accepted that KF was obliged under s. 59(6)(b)(i) PPSA to give notice before disposing of collateral subject to RBC’s prior security, and that its failure deprived RBC of an opportunity to protect its position.

Damages and outstanding issues

RBC claimed damages of $1,237,698 as compensation for the loss it suffered due to KF’s sale of the Durum without required notice. The court accepted that RBC was entitled to damages in principle but held that the evidentiary record was insufficient to fix a final amount under s. 65(6) PPSA. In particular, the judge did not know what the Durum actually sold for, what grades were involved, or what deductions (storage, transportation, grading, marketing) were properly attributable. Applying authorities such as Snell v Farrell and Pettyjohn, the court placed the onus on KF—because the relevant facts lay uniquely within its knowledge—to prove the value of the Durum and any legitimate deductions. The damages phase was therefore bifurcated. KF was ordered, within 30 days, to disclose and produce to RBC all documentation in its possession or control concerning the sale or disposition of the Durum, as well as documentation relating to any grain it says was not Durum, and to provide an affidavit by an authorised representative accounting for what grain was sold, for what prices, with what deductions, and with what further adjustments KF contends should be made. RBC was given a defined period to decide whether to seek leave to cross-examine on that affidavit, and the court set out a process for scheduling the subsequent damages hearing, including an option to proceed in writing. Overall, the successful party at this stage is Royal Bank of Canada, which obtained a clear declaration that its perfected security interest in the 4,200 tonnes of Durum ranks in first priority over KF’s unperfected interest. However, no specific monetary award, costs figure, or final damages amount has yet been ordered; the quantum of damages remains to be determined in the later, bifurcated phase, so the total monetary recovery in favour of RBC cannot presently be ascertained.