Tribunal upholds rejection of milk from farm's bulk tank

The Ontario Agriculture, Food and Rural Affairs Tribunal has dismissed an appeal by an Ontario dairy farm from the rejection of milk from its operation by the Dairy Farmers of Ontario ("DFO").  The farm has operated for 30 years and, in the fall of 2010, was carrying out three milkings a day.  A transport company picked up the milk from a farm bulk tank on every second day, representing six milkings.

On November 28, 2010, the transporter (a certified Bulk Tank Milk Grader) arrived to pick up milk.  He rejected the milk "because of an off odour "malty" smell".  He took two samples and declined to pick up the milk, leaving a "Red Tag" at the farm.

The farm appealed the rejection of the milk on the basis that the DFO had not followed the proper procedure.  However, the Tribunal ruled that procedural errors made by DFO and its agent, the transporter (not properly filling out the Red Tag and not proving that DFO had adopted a policy of "no second opinions" with respect to the rejection of milk), did not negate the determination that the milk should be rejected. 

Read the decision at: La Gantoise Inc. vs. Dairy Farmers of Ontario (DFO).

Appeal Tribunal allows partial transfer of dairy quota from son back to father

Steven Baes is a dairy farmer.  Adjacent to his dairy operation is another dairy farm owned by a corporation called Baeverdale Farms Ltd. The owners of the farm corporation are Steven's father and mother, Leon and Bernadette Baes, and his brother and sister-in-law, Michael and Melissa Baes.  In 1994, Leon Baes transferred approximately 11 kgs of quota to his son Steven in an effort to get him started in dairy farming. The elder Mr. Baes' transfer arrangement was that in the event of any changes in Steven's circumstances, the quota would be returned to the father for his own dairy operation which is now Baeverdale Farms Ltd. (Baeverdale).

Steven subsequently purchased additional quota for his own dairy farm operation.  According to Baeverdale, a similar verbal agreement was made to transfer such additional quota to the family held operation should Steven ever run into problems in the future or decide to leave the dairy business.  Over the years some quota was returned to the father.  Steven Baes requested an exemption from DFO's policy to allow him to transfer all of his remaining quota to Baeverdale, and to allow the merger of the quota under one licence.  The Dairy Farmers of Ontario (DFO) denied the request to transfer the quota.  Baes appealed to the Agriculture, Food and Rural Affairs Appeal Tribunal.

DFO contended that the proposed transfer was not permitted under the current quota transfer policy, saying that this type of transfer has not been allowed since 2006.  The DFO witness outlined three alternative options for the transfer of quota:

1.  Baes could sell his quota on the exchange, and Baeverdale could buy quota from the exchange, recognizing this would be a slow accumulative process.

2.  Baes could transfer his quota to Baeverdale and Baeverdale could continue to operate two different barns with two different licences. This would prevent the merger of the quota to operate under one licence.

3.  Baes could sell his quota and Baeverdale could sell their dairy farm and buy a dairy farm with more quota if they wanted a larger dairy operation.

The Tribunal ruled that two different amounts of quota were in play in this case.  First, there was quota initially bought by the father and transferred to the son in 1994.  Second, there was quota purchased by the son directly from the exchange and not part of the original transfer from the father. 

The Tribunal found that the son had actually begun to transfer back quota to his father beginning in 2003 pursuant to their agreement, prior to the DFO policy changes that now prohibit the transfer of quota.  Of 11 kg in total first transferred by the father, 7 kg had already been returned.  The Tribunal determined:

The uniqueness as it applies to this situation is that it involved a transfer back agreement made in 1994, which DFO accepts; and it is shown to have been an ongoing transfer back since 2003 only interrupted by DFO's policy change in 2006. Such a transfer back between the parties would have been allowed under policies prior to 2006, and the appellant and his father anticipated that this policy would continue. To the Tribunal Panel's knowledge, there have been no cases before the DFO Board that involved a son to father transfer that had its original transfer agreement prior to 2006 and had been in the process of being completed.  The uniqueness and extenuating aspect in this case is that it involved a verbal agreement between the father and son that predates the limiting policy change by 12 years, and was in the ongoing process of completion.

On this basis, the Tribunal permitted the completion of the transfer back to the father that was contemplated in the original 1994 agreement.  This transfer back was limited to the quota that was originally transferred from father to son.  It cannot include the quota that was purchased by the son on the exchange.
Read the decision: Steven Baes vs. Dairy Farmers of Ontario (DFO).

Appeal Tribunal denies Dougal Lea Ltd.'s request for review of DFO decision

The Ontario Agriculture, Food and Rural Affairs Appeal Tribunal has rejected a Smithville farmer's request for review of an earlier dismissal of his appeal of a DFO quota transfer assessment.  The Tribunal had found earlier that the circumstances of Paul MacDougall's case (in particular, the death of his wife, Maryanne, from cancer and his need to care for her) did not warrant relief from the 15% assessment levied on the proceeds of the sale of his dairy quota. 

On review, the Tribunal ruled against several legal arguments made by MacDougall, and made the following comment about the applicability of another case with similar facts:

Dougal Lea argued that the evidence was "almost identical" to the evidence from the Haleyview decision and there is no basis for differentiation between the decision outcomes and therefore Dougal Lea should receive an exemption as was granted in Haleyview.

However, in Haleyview, Paul Haley's incapacity due to illness and injury resulted in the decision to leave the dairy industry where Paul Haley had been the primary operator.

In this case, the McDougalls (Paul and Maryanne) were joint operators and there was not a primary operator. Maryanne became incapable of dairy farming due to illness and Paul ceased farming in order to care for Maryanne. I find that to be a significant distinguishing factor.

As the Tribunal explained in Dougal Lea, it is required to consider each situation and develop a set of expectations and criteria to explain why an exemption should apply in one case and not another. This explanation provides farmers insight about successful exemption applications.

It is clear to me that the Tribunal carefully considered the evidence presented in Dougal Lea against the facts from all previous instances where exemptions have been granted. In that analysis the Tribunal found there were several facts that made the Dougal Lea case different from any of the previous cases.

Read the decision at: Dougal Lea Ltd. vs. Dairy Farmers of Ontario (DFO).

Appeal Tribunal upholds 15% dairy quota assessment against widower

The Agriculture, Food and Rural Affairs Appeal Tribunal has upheld the imposition of a 15% quota transfer assessment by the Dairy Farmers of Ontario (DFO) against a Smithville farmer.  DFO policies require an assessment of 15% on certain dispositions of quota by a producer. Dougal Lea Ltd., owned by Paul MacDougall and his late wife, Maryanne, disposed of its quota on the quota exchanges of May and June 2008, and a total transfer assessment of 7.186 kg was charged on the disposition. This means that 15% of the assessment was not offered for sale, but was retained by DFO, whose usual practice is then to distribute it to other producers as a general increase in quota or to use it to manage the overall volume of quota. The remainder of the production quota that had been held by Dougal Lea was then offered for sale on the exchange and purchased by other producers.

Dougal Lea appealed the application of the transfer assessment on the grounds that special circumstances exist that made the application of the assessment inappropriate. The special circumstances were that one of the two primary operators of the dairy farm, Maryanne, had died unexpectedly shortly after learning that she had an aggressive cancer, while the operators' plan had been to continue to operate the farm for many years.

This was obviously a tough case for the Tribunal to decide.  In the end, though, it erred on the side of limiting the circumstances in which an exemption would be granted.  As the Tribunal noted:

The Tribunal has a great deal of sympathy for Mr. McDougall's circumstances. We are not about to second-guess his choice to manage his circumstances as he did, nor to assess or finely measure the impact of his wife's illness on his willingness to operate the farm. We can understand completely his decision to spend his time with her, and his decision to leave the operation if she was not going to be part of it. [...]

These are difficult choices to make, but in deciding to give up the operation, Mr. McDougall was not choosing to exit the industry because of his own incapacity, or because the operation had lost its only primary operator. To grant relief in these circumstances would in our view expand the concept of special circumstances in such a way as to make a decision to exit the industry as a result of a significant operational change a ground for relief from the transfer assessment, and would negate the policy. We do not find that Mr. McDougall's decision was unreasonable, merely that this reason for exiting the industry is not one that should be exempt from the assessment policy.

Read the decision at: Dougal Lea Ltd. v. DFO.

Another DFO Dairy Quota Transfer Assessment Appeal dismissed

Ferme Benoit Lachaine Inc. (FBL) sold its entire milk production quota in six separate transactions.  Under the 15% quota transfer assessment policy of the DFO, FBL did not receive $367,055.21 from those six quota transactions.  An appeal to the DFO was unsuccessful and so FBL appealed to the Agriculture, Food and Rural Affairs Tribunal.  The Tribunal decided the case on the following basis:

While we are not bound by the several previous Tribunal exemption decisions, we feel it appropriate to list the factual differences between the FBL circumstances and those previous cases:

Benoit Lachaine continues as an active farmer

Benoit Lachaine was not killed in an accidentenoit Lachaine did not suffer a catastrophic injury that ended his farming career

Benoit Lachaine does not have a terminal disease

Benoit Lachaine did not have a plan to exit the industry interrupted by the November 2006 policy

A significant part of FBL's case was based on financial hardship. Without deciding that financial hardship could be the basis for an exemption, we find no evidence of financial hardship.

Based on all the evidence we find that FBL has not satisfied us that there is anything sufficiently "special" about Benoit Lachaine's foot condition to warrant an exemption from the 15 percent quota transfer assessment.

Read the decision at: Ferme Benoit Lachaine vs Dairy Farmers of Ontario (DFO)

Agriculture, Food and Rural Affairs Tribunal speaks out on exemptions from dairy quota transfer assessment

Lucien and Murielle Martel operated a dairy herd of about 60 cows until April 2008.  At that time they sold their entire milk production quota of 66.17 kgs. at a price of $31,505.00 per kg.  Under the Dairy Farmers of Ontario (DFO) 2006 regulatory policy, the sale was subject to a 19.06 percent transfer assessment.  In this case, the assessment to be paid to DFO was more than $337,000. 

The Martels requested an exemption from the transfer assessment because they asserted that they were forced to sell the quota because of Lucien's back condition.  He alleged that he could no longer do the job of a dairy farmer and was told that his back condition would not improve. 

After the DFO rejected the request for an exemption, the Martels appealed to the Agriculture, Food and Rural Affairs Tribunal.  At the hearing, the DFO confirmed that it has received about 80 exemption requests since the transfer assessment was introduced in November, 2006.  Of those requests, DFO has granted 4 exemptions, and one other exemption was given as a result of negotiations during an appeal.  I have also already posted this year at least 2 decisions of the Tribunal granting full or partial exemptions where the exemptions had been refused by the DFO.

In this case, the Tribunal found it important that Lucien Martel continued to carry out cash cropping activities on his farm.  On that basis alone, the Tribunal decided, the exemption request must be denied.  In dismissing the appeal, the Tribunal provided some guidance to the DFO on what circumstances might engage the "special consideration" exemption from the transfer assessment:

• death of the primary dairy operator;
• catastrophic accident ending the farming career of the primary dairy operator;
• fatal disease of the primary dairy operator;
• ongoing plan to exit the dairy industry interrupted by the November 2006 policy;
• undue hardship;
• other compassionate grounds

Overall, there must be something unique or extraordinary to warrant an exemption from the policy.

Read the Tribunal's decision at: Ferme Martel Inc. v. Dairy Farmers of Ontario

Another day, another DFO dairy quota transfer assessment appeal decision

The Agriculture, Food and Rural Affairs Tribunal has released another decision on an appeal by a farmer of the 15% transfer assessment levied by the Dairy Farmers of Ontario (DFO) on transfers of quota. In this case, the farmer's appeal was unsuccessful. This decision is actually a review of a decision already made by the Tribunal last November.

Read the decision at: http://www.omafra.gov.on.ca/english/tribunal/shaw-feb10.htm

Rural Affairs Tribunal grants another exemption from DFO 15% quota transfer assessment

Haleyview Farms Ltd. v. Dairy Farmers of Ontario (DFO)

I posted an article a couple of weeks ago about a farmer who was granted a partial exemption from the DFO 15% quota transfer assessment because of disability. Normally, when dairy quota is transferred to another party, a 15% tariff must be paid to the DFO. Now, the Agriculture, Food and Rural Affairs Tribunal has granted a full exemption from the assessment to Haleyview Farms Ltd. (Paul and Margot Haley) of Brantford, Ontario for compassionate reasons.

In December, 2006, Paul Haley was diagnosed with Stage 4 prostate cancer and was told that it had spread into his bones. In August, 2007, he suffered serious injuries to his right arm when a bale pinned him against his tractor. By December, 2007, he had sold his herd and his entire quota. By way of a letter in September, 2008, the DFO advised Haley that an exemption from the 15% assessment was not warranted in his case. DFO argued that the quota is "not a retirement, disability or life insurance fund." Later, DFO told Haley that medical conditions were not normally considered as reasons to provide exemptions and that Haley's circumstances were not "sufficiently unique" to allow the exemption.

The Appeal Tribunal disagreed. Read its decision at:
http://www.omafra.gov.on.ca/english/tribunal/haleyview-dc.htm

Berendsen decision overturned by Ontario Court of Appeal

The Ontario Court of Appeal has overturned an award of damages of more than $1.7 million (plus costs of $655,000) to a farm family who claimed that the province of Ontario was liable for the contamination of their well water and the resulting health problems and under-production of their dairy herd. After a five-week trial, the Ontario Superior Court of Justice had ruled that Ontario was liable for the damage as a result of having dumped asphalt from a road project on the Berendsen farm in the 1960's. The Court of Appeal disagreed.

The Berendsens did not purchase the property until 1981. The previous owners of the farm had consented to the dumping by the province. On appeal, Ontario did not take issue with the trial judge's finding that damages were suffered or with the amount of her award. Instead, Ontario contended that it was not the cause of the damage and, in any event, had acted in accordance with the standard of care required (conduct will breach the standard of care, i.e. will be negligent, if it creates an unreasonable risk of harm).

The Court of Appeal found that for Ontario to have been negligent and liable for the damages alleged, the Berendsens needed to have shown that the risk of damage to their cattle was a reasonably forseeable consequence of the deposit of the asphalt on the farm in the 1960's. The Court noted that the risk of harm must be seen through the lens of public understanding of toxicity and contamination in the 1960's, not our understanding of the risk today. The Berendsens were unable to put forward evidence that the risk was forseeable in the 1960's.

What comes next is a decision on costs. The Court of Appeal will need to decide on the costs of the appeal and on what to do with the $655,000 in costs that was awarded to the Berendsens.

Read the Court of Appeal's decision at:

http://www.canlii.org/en/on/onca/doc/2009/2009onca845/2009onca845.html

R. v. Schmidt Unpasteurized Milk Decision now posted online

The decision of the Ontario Court of Justice last week acquitting Ontario farmer Michael Schmidt of all charges relating to the sale of unpasteurized milk is now available online at:
http://www.canlii.org/en/on/oncj/doc/2010/2010oncj9/2010oncj9.html
(Schmidt himself had posted a copy of the decision on his website, but the file size of this publicly available copy is much smaller)

You might find His Worship Kowarsky's comments at the very end of the decision (paragraphs 185 and 186) of particular interest. He makes a point of explaining what his decision does not do: it does make it legal to market unpasteurized milk; it does not invalidate Ontario's milk marketing legislation, etc.

CBC News - Ontario farmer not guilty of selling raw milk

CBC News - Canada - Ontario farmer not guilty of selling raw milk

Dairy farmer Michael Schmidt has been found not guilty of 19 charges related to the sale of unpasteurized milk. Schmidt represented himself against the Ministry of Natural Resources in a trial before the Ontario Provincial Offences Court.

I'll keep an eye out for any written reasons for the verdict in the case and post a link to them if they are available.

Injured Dairy Farmer gets relief and keeps relief

A decision of the Agriculture, Food and Rural Affairs Appeal Tribunal in favour Ontario Dairy farmer Michael Vandergeest has been upheld on a review application. Vandergeest, who was forced to sell out his dairy quota after suffering a serious injury in 2008, was granted a partial exemption by the Tribunal from the 15% quota transfer assessment payable on the sale of dairy quota. In Vandergeest's case, the assessment payable to the Dairy Farmers of Ontario (DFO) would have been nearly $63,000. The Tribunal lowered this amount by half, but the DFO sought a review of the decision. On review, the Tribunal found that its decision was proper. A full assessment exemption was not appropriate because Vandergeest's quota, over 28 years in business, had appreciated considerably. However, his serious injury that cut short his farming career was an extraordinary event and warranted a partial exemption.

http://www.omafra.gov.on.ca/english/tribunal/vandergeest-review-dec.htm