Broken promises over 10,000 kilos of hemp

Published on May 28, 2021 by David Wylie

EnCann CEO Lincoln Johnson says his company has been scratching to survive after a valuable hemp deal fell apart.

A Kelowna extraction company won a battle over a deal gone bad for tons of high-CBD hemp.

A British Columbia arbitrator has ruled that Abbotsford-based BC Hop Company Ltd. breached its December 2018 contract for the purchase and sale of 10 metric tonnes of industrial hemp to Kelowna-based EnCann Solutions.

Arbitrator Joe McArthur, with Blake, Cassels & Graydon LLP, delivered a Partial Final Award in the dispute. He found BC Hop Co. “took the right to sell the biomass reserved for EnCann, without negotiating with EnCann for the right to do so,” according to a news release from EnCann. McArthur awarded $760,763 in damages and the return of the $100,000, plus GST, deposit; that doesn’t include potential interest and costs.

The BC International Commercial Arbitration Centre wouldn’t release a copy of the decision to the oz., saying it’s a confidential document.

EnCann says it will now turn to the BC Supreme Court to enforce the decision.

EnCann could barely keep the lights on

“This has been a hard-fought two-year battle for us,” says EnCann CEO Lincoln Johnson.

In an email to the oz., Johnson laid out his side of the story about the deal that fell apart in 2019.

“I’ve got a story to tell you, and it’s about the thing that’s been consuming every spare moment that we at EnCann have been able to afford during the past two years, two months, and zero days, to the minute,” he begins.

BC Hops Co. CEO Dwayne Stewart

Johnson said Dwayne Stewart, founder and CEO of BC Hop Co., contacted EnCann in August 2018, saying he had 8% CBD hemp for sale. Johnson says he knew it was likely to be a rare commodity at the time so they entered into a deal to buy 10,000 kilos at a price set by BC Hops Co. They paid a $100,000 down payment, which Johnson says was 90% of the cash they had in the bank.

Then they started making sales based on the contract.

“Eventually, in mid-March of 2019, the rarity of this specific crop became obvious to us all. Demand far outstripped the available supply as most farmers were not prepared to produce a high-CBD crop that year. As time went on, we heard of sales happening at over $1,000 per kilogram,” said Johnson.

“Around this time, Dwayne finds out that he could be selling his hemp for at least twice what we had contracted to pay in November of 2018.”

Johnson says BC Hop Co. contacted EnCann on March 25, 2019, notifying them in writing that they were going to breach the contract.

EnCann’s CEO says the company has been in survival mode ever since, even to the point of turning off the heat at their building and not taking pay.

BC Hop Co.’s response

We reached out to BC Hop Co.

Dwayne Stewart, CEO and founder of BC Hop Company Ltd., declined an interview, and instead sent a statement to the oz.

“This is a legal dispute between two companies that has no impact on consumers, suppliers and partners, or the public, and so we are surprised to see that Encann is trying to engage the media in this evolving situation.

“We disagree wholeheartedly with the Arbitrator’s decision and will appeal it. Given today’s attempt to discredit me and BC Hop Company Ltd. we are also exploring other legal options.

“BC Hop Company has always worked with our business partners and vendors ethically, professionally and collaboratively and we will continue to do so.”

Meanwhile, EnCann says it’s still moving ahead, and its application for a standard processing license is under review by Health Canada.