Buhler Versatile facing $35M breach of contract lawsuit from Australian farm equipment distributor

UPDATE DEC. 20, 2022: Buhler Versatile has settled the breach of contract lawsuit. Read the update here.

Read the previous story below:

A deal to ship Winnipeg-built tractors to Australia has resulted in a lawsuit alleging breach of contract, after Buhler Versatile Inc. decided to stop exports outside North America, according to a statement of claim filed in Manitoba's Court of Kings Bench.

PFG Australia Pty Ltd., headquartered in a suburb of Melbourne, says Winnipeg-based Buhler Versatile knew the damage it would cause when it decided to halt shipments, according to court documents. 

In mid-September, Buhler Versatile said in a letter to PFG that it "had decided to completely stop its export operations, projects and plans related to the supply of equipment outside North America," says the lawsuit, dated Oct. 25.

It does not indicate whether Buhler Versatile provided a reason for that decision, but alleges the company "is acting in bad faith in refusing to comply with the terms of the contracts for an ulterior purpose, namely, in attempting to advance its own interests in the North American market."

Buhler Versatile "acknowledged the negative impact the discontinuation of sales would have on [PFG's] business," reads the statement of claim.

Buhler Versatile has been selling tractors to PFG for more than 20 years, and the latest order, the bulk of which was placed in March, was for more than 100 units, the suit says.

According to its website, PFG is the largest privately owned and independent agriculture distributor in the Southern Hemisphere and has more than 40 locations in its Versatile dealer network. 

The Australian company says it has made a "significant financial investment" in developing and marketing Buhler Versatile's brand in Australia. 

PFG is seeking damages for alleged breach of contract totalling about $35 million Cdn ($40.9 million Australian dollars), including:

• Nearly $4 million Cdn for PFG's investment in a new "state-of-the-art" facility in Melbourne, which partially assembles, services and distributes Buhler Versatile products.
• More than $7.5 million for lost retail and wholesale profits.
• Just under $13 million for injury to PFG's reputation.
• Unspecified special damages to cover layoff costs under Australian employment law.
• More than $430,000 for punitive damages.

None of the allegations in the lawsuit have been proven in court and Buhler has yet to file a statement of defence. 

"Buhler Versatile has no comment on the merits of the claim but will be defending the action," the company wrote in a news release Wednesday.

Buhler Versatile — a wholly owned subsidiary of Buhler Industries Inc. — manufactures tractors in its Winnipeg-based factory.

Buhler's website says it employs 700 workers in Canada and 50 in the United States.

Russian manufacturer holds bulk of company's shares

Since 2021, Russian tractor manufacturer Combine Factory Rostselmash Ltd. —  headquartered about 100 kilometres from the Ukrainian border — has held 97.6 per cent of Buhler's publicly traded shares.

Rostselmash is a subsidiary of a company owned by Russian nationals Yuri Ryazonov (who is Buhler's CEO) Dmitry Udras (a Buhler director) and Konstantin Babkin (a former director), according to its website. 

Babkin resigned in March due to his support for the Russian invasion of Ukraine.

No sanctions have been imposed on Rostselmash or its owners, according to Buhler's latest quarterly report, which also says Buhler "has not paid dividends to [Rostselmash]" and "has had limited sales and purchases in the region and is not materially impacted by the conflict."

In the past, Buhler has stated it strongly opposes the invasion of Ukraine by the Russian Federation and it stands with the people of Ukraine.