When the Drainage Act and Conservation Authorities Clash

In a case decided in September, 2015, the Agriculture, Food and Rural Affairs Appeal Tribunal examined the interplay between the Drainage Act and conservation authorities in Ontario.  The matter involved a farmer who wanted to drain cleared, cultivated agricultural land through a low, wet bush and a cattle-tramped low run that happened to contain 28 minnows.  The farmer initiated a process under the Drainage Act, and was then assessed a bill of nearly $50,000 for an "environmental impact study" that was allegedly required for a permit from the local conservation authority ("CA").

Under the Drainage Act, a conservation authority or government may request an "environmental appraisal" for a new drain, but the party making the request is responsible for the cost.  In this case, the farmer did not request the "environmental impact study" and did not apply for any permits from the CA.  However, as the Tribunal noted, "the CA took over jurisdiction, admittedly ignorant of certain parts of the Drainage Act.  The CA prosecuted its own CA mandate over the farmer and his drain request with great earnestness, if not zealously."

In the hearing of the farmer's appeal of the assessed cost, the CA argued essentially that the Tribunal had no jurisdiction over it.  The CA candidly pleaded its ignorance of the drainage laws and, furthermore, that the CA's statutes are more recent and consequently take precedence.  Lastly, the CA argued that its work related to an "environmental impact study" and not an "environmental appraisal".

The Tribunal found that it did not have jurisdiction over the CA in this case.  It also found that the Municipality involved (which sought to put the cost of the "environmental impact study" on the landowner) should bear the cost of the environmental study.

In examining the jurisdiction issue, the Tribunal noted that the CA had notice of the Drainage Act process initiated by the farmer, but waited more than a year later to demand an "environmental impact study" under its own legislative regime.  The CA did not request an "environmental appraisal" under the Drainage Act.  The tribunal concluded the following:

What the Tribunal has ascertained under law (rather than equity) is that there are 2 parallel regulatory schemes.  Neither is inconsistent with the other.  Technically phrased: obedience to one does not necessitate disobedience to the other.  The CA has the right to request an environmental appraisal under the Drainage Act or its own regulatory scheme.  There is no overt or even nuanced conflict between the regulatory regimes.  Even though the CA dithered regarding the petition process under the Drainage Act, it could still invoke the processes under the Conservation Authorities Act.

 The tribunal is acutely aware that this interpretation allows the CA to potentially circumvent or thwart the Drainage Act processes.  It makes the petition process, especially section 6 moot.  That means the CA can avoid the intrinsic balance of costs and demands legislatively fixed in the Drainage Act with over a century of experience.  Then again the Tribunal expects that the knowledge of this decision will become wide spread amongst the drainage and conservation communities.  Ignorance and indifference can no longer be pled.  Perhaps as is the case with maintenance of drains, the drainage and conservation communities can establish policies that are respectful of both mandates.

Having no jurisdiction over the CA, the Tribunal then decided the issue of responsibility for the cost of the environmental report between the farmer and the municipality.  The Tribunal ordered that the municipality bear the full cost of the report, finding that the excessive cost could have been avoided if the municipality had properly facilitated the drainage proposal.

There was a dissenting opinion from one of the members of Tribunal.  That member would have found that the Tribunal did have jurisdiction over the CA and would have ordered the full cost of the report to be borne by the CA.

Read the decision at: Darmar-Tamlin Municipal Drain (RE).

Landowners succeed on appeal of assessment for municipal drain maintenance work

Little Creek Municipal Drain services a watershed in the Municipality of the Town of Lakeshore. Little Creek itself drains approximately 2,700 hectares (or 6,650 acres) of mostly farmland into Lake St. Clair.  In 2011, the Town instructed a drainage Engineer to prepare a new updated assessment schedule for Little Creek for the purposes of future maintenance.  Several landowners who farm within the watershed disputed the results of the Engineer’s new assessment schedule primarily on the basis that his ratio of “benefit” to “outlet” assessment was disproportionate and unfairly burdened their lands with a higher assessment.

On the appeal of the Engineer's assessments, the Agriculture, Food and Rural Affairs Appeal Tribunal (the "Tribunal") concluded that the Engineer's method of assigning benefit assessments to the landowners relied too heavily on previous reports and not enough on his own objective determinations.  As this was a drain repair or maintenance project, the assessment process was not the same as it would be for a new drain construction.  The Tribunal said the following about the determination of "benefit" to the landowners and its role in setting the assessment of costs to the landowners:

According to the definition of “benefit” in Section 1 of the Act, benefit assessments apply to new work or improvement work where it can be easily justified that the construction, in fact, “… will result in a higher market value or increased crop production or improved appearance or better control of surface or subsurface water, or any other advantages …”. However, once that initial benefit has been paid by those lands, they should not have to pay a higher assessment every time it is maintained or repaired; that is, those lands should not have to pay over and over again for those initial benefits. Using the outlet assessment schedule is the fairest way to charge properties for maintenance and repair because, as stated in Section 23(3) of the Act, it is “…based upon the volume and rate of flow of the water artificially caused to flow … into the drainage works from the lands and roads …” as well as the length of the drainage works used by those lands and roads.

 

For the reasons mentioned above, when both a benefit assessment schedule and an outlet assessment schedule exist within a report prepared under Section 4 or Section 78, it seems most reasonable that only the outlet assessment schedule be used for maintenance purposes, after the new or improved drain has been constructed. In this case, the Engineer has prepared a benefit schedule that totals $11,000 and an outlet schedule that totals $39,000. The Tribunal does not find the 1981 Brewer-Terry Drain Decision to be comparable as the report under consideration in that hearing was an improvement report, prepared under Section 78 of the Act, wherein the appellant’s lane crossing was being extended. It was not a report prepared under Section 76 of the Act.

 

Accordingly, the Tribunal agrees with the Appellants that, given the facts of this case, benefit assessments should not be considered when apportioning assessments for maintenance.

[emphasis added]

The Tribunal ordered the Engineer to revise the Schedule of Assessment so that assessments would be based only on revised outlet assessments (rather than on the standard categories of "special benefit", "benefit" and "outlet").

Read the decision at: Little Creek Drain (Re).

Enbridge pipelines drive up farm drainage costs

A recent case before the Agriculture, Food and Rural Affairs Appeal Tribunal dealt with a municipal drain affected by three Enbridge pipelines that cross it.  Both the main drain and Branch "A" tiles from the drain cross three Enbridge pipelines (Line 7, Line 8 and Line 9) through manholes that function as siphons.  Siphons are often the only solution (sometimes effective and sometimes not) for the installation and maintenance of tile drains when a pipeline company decides to build through the drainage area. 

The drainage engineer in this situation noted that the siphon reduced capacity in the tiles across the pipelines.  New tiles were to be installed as part of the project under review by the Tribunal; the engineer found that crossing the pipelines at the existing locations would not be feasible without siphons, but that it would be possible to cross underneath the pipelines in higher ground at the "centre location". 

The appeal before the Tribunal dealt with the assessment costs to various landowners.  The engineer had applied a modified "Todgham Method" to calculate the assessments.  He calculated the assessments on the basis of a "natural route" which would have been the assessments if the drains did not have to cross the Enbridge ROW.  He then did a second assessment for the "revised route" based on the presence of the Enbridge ROW and the additional cost to traverse it.  The "natural route" assessment was then modified in conjunction with the "revised route" assessment.

The Tribunal accepted the appeal of one landowner and reduced that landowner's assessment.  The Tribunal found that, in determining the benefit derived by the proposed drainage works to that landowner, it would have been more appropriate for the engineer simply to have made new calculations for the "revised route" rather than modifying the "natural route" calculations (which would not apply because the "revised route" was being used). 

Read the decision at: Re Wakem-Weir Drain.

Sask Court of Appeal orders solicitor-client costs for landowner wrongfully expropriated

The appellant succeeded in obtaining an order in the Court of Queen’s Bench quashing a municipal bylaw expropriating a portion of his farm land. In consequence, he asked the Chambers judge to order the municipality to pay him the costs he had incurred in having the bylaw set aside. His solicitor-client costs, he said, amounted to $64,498.92. The Chambers judge declined to award him costs on a solicitor-client basis and instead, awarded him the fixed sum of $3,000 payable by the municipality. He then brought an appeal to the Court of Appeal for Saskatchewan.

Saskatchewan courts had already confirmed that it is within the discretion of the Chambers judge to award solicitor-client costs in the context of expropriation and related matters.  The Court of Appeal in this decision noted that, while there was no authority for the proposition that solicitor-client costs must be awarded in expropriation cases, "there is, however, a substantial body of literature suggesting, as a matter of fairness, that persons whose private land has been taken from them by means not of agreement but of compulsory expropriation should generally be able to recover their reasonable legal and other costs, responsibly incurred, in responding to the expropriation."

The Court of Appeal remitted the matter back to the Chambers judge to assess the landowner's reasonable solicitor-client costs, concluding: "The appellant’s land was taken from him through no fault on his part pursuant to a process in which he had no input. As it turns out, the land was unlawfully expropriated, yet the appellant had to go to court at his expense to establish the wrongdoing and recover his land. As in Sask Water, equity cries out that the appellant should get some relief."

Read the decision at: Goodtrack v The Rural Municipality of Waverley No 44.

Landowner loses bid to shift drainage costs to Highway 401

An Oxford County farmer asked the Agriculture, Food and Rural Affairs Appeal Tribunal to increase the assessment of drainage costs to the Ontario Ministry of Transportation related to a widening of Highway 401.  An engineer's report had been prepared for various improvements to the Laister Drain required in connection with the widening of the 401 from four lanes to six lanes in the area.  The work would include construction of a section of tile drain from the southern limit of Highway 401, northward under the highway and then approximately 450 metres through agricultural land to an outlet in an open channel on the side of Blandford Road. 

Dunford Royal Cattle Company Inc. asked the Tribunal to amend the assessment against its lands and to allocate a higher assessment against the MTO drainage area (i.e. the highway).  On the issue of the amount of assessments allocated to the various property owners, the drainage engineer stated that he had used the Todgham Method to distribute the cost of the work. This method involves breaking the drain up into sections and assigning the cost of each section as benefit and outlet assessments to the lands using each section of the drain.

The Tribunal found that Dunford did not provide any evidence to contradict the findings or the testimony of the Engineer nor was any evidence put forward to show that the MTO watershed area had been inappropriately assessed.  It ruled that Dunford failed to provide the Tribunal with sufficient evidence that would support any amendment to the Schedule of Assessments for the project and, therefore, the appeal was dismissed.

Read the decision at: Laister Drain.

Alberta farm land tax assessment case sent back for re-hearing

Madam Justice J.M. Ross of the Alberta Court of Queen's Bench in Edmonton has allowed an appeal of a property tax assessment decision involving farm land.  She granted leave to appeal to the Applicant, Associated Developers (AD), from a 2010 decision of the Composite Assessment Review Board (CARB) assessing AD's land as industrial property rather than as farm land.  Justice Ross then heard the appeal, overturned the decision of the CARB and sent the case back to the Board for re-determination.

The Property in question, located in Edmonton, was assessed as industrial property at a value of $6,723,500 in the 2010 assessment year for the 2009 taxation year.  The relevant valuation period for the 2010 assessment was therefore 2009.  Had the Property been assessed as farm land, the assessed value would have been $863,000.   The Applicant complained to the CARB, asserting that the property should have been assessed as farm land.  The Applicant had filed with the CARB annual leases between AD and a farmer for the years 1999-2010.  The leases included terms that the lands would be used solely for agricultural purposes. 

The City of Edmonton (arguing for the industrial land assessment) argued that the crop of hay on the property had not been harvested in 2009.  The City's position was that if the crop was not cut, it could not be said to have been produced and, therefore, was not used for farming operations and could not be classified as farm land.  AD argued in response that the land could still be farm land even if not hayed in 2009, as there are many circumstances in which people leave land idle for a year for a variety of sound agricultural reasons.

Justice Ross allowed the appeal because the CARB failed to provide adequate reasons for its decision and failed to identify the appropriate legal tests in its reasons.  These were breaches of the principles of natural justice and the duty to be fair.  She cancelled the decision and sent the matter back to the CARB to be re-heard.

Read the decision at: Associated Developers Ltd. v. Edmonton (City).

Assessed landowners argued they could have done drainage work for less

Two Southwest Middlesex landowners appealed a drainage assessment to the Ontario Agriculture, Food and Rural Affairs Tribunal on the basis that they could have done the required maintenance work themselves at a lower cost.  The Municipality of Southwest Middlesex had been petitioned by the County of Middlesex Road Authority under Section 4 of the Drainage Act to carry out various maintenance work, including the creation of an open drain.  The estimated cost of the work was $22,540.

Two affected landowners appealed the assessment of their shares of this cost.  One argued that from the beginning he had told the Municipality that he was willing to do the work required without the cost of the engineering report.  However, neither landowner appealed the work ordered itself.  The Tribunal found that the Municipality was compelled by the County's petition to have an engineer's report prepared and the work completed.  Given that the work was required, the assessment of costs could not be challenged on the basis that the work was unnecessary (or could have been done differently at a lower cost).  The appeals were dismissed.

Read the decision at: Proctor Drain.

Farm loses bid for appeal of MPAC tax assessment decision

Lorentz Farms Limited owns a 2.66 acre parcel of land located in Wellesley Township.  As part of the applicant’s adjacent farm operations, machinery and equipment used to dry alfalfa and turn it into pellets is located on this property.  The Municipal Property Assessment Corporation (“MPAC”) classifies land use for tax purposes.  MPAC classified the subject property as industrial and commercial.  Believing the proper classification to be agricultural, and thus subject to a lower rate of tax, the applicant appealed this classification before the Assessment Review Board ("ARB") in 2009.  During the ARB hearings, valuation of the property was conceded and it was agreed that the only issue between the parties was classification of the property.  The ARB determined that the treatment of the Alfalfa on the property amounted to “processing” within the meaning of s.6(1)(1)(i) of the Act and therefore, the MPAC’s classification was deemed to be correct.

Lorentz Farms then applied for leave to appeal the decision of the ARB to the Ontario Divisional Court.  Justice McGarry of the Ontario Superior Court of Justice dismissed the application for leave to appeal, ruling:

In my view, it is clear based upon the agreed facts, that “processing” took place as the treatment of alfalfa by grinding into a powder and producing pellets amounts to “processing”. Therefore, as it is likely that the operations on the subject property amount to “processing” within the meaning of s.6(1)(1)(i), the property was properly was classified as industrial and accordingly, there is no reason to doubt the decision of the ARB.

Read the decision at: Lorentz Farms Limited et al v. MPAC.

Agriculture, Food and Rural Affairs Tribunal comments on Drainage Act principles

In an appeal decision concerning the Thorpe-Ellis Drain in South Dundas, Ontario (first constructed in 1891), the Agriculture, Food and Rural Affairs Tribunal provided the following comment on Drainage Act projects and requirements for assessment reports:

As a general principle, projects constructed under the Act are on a user pay basis. A cost estimate is prepared for the project and then an Assessment Schedule is prepared to recover the cost of the project from the landowners affected by the project. The Tribunal notes that the Assessment Schedule in the Report does not provide the totals for each column in the schedule. These totals are essential to verify that the costs and the assessments balance, especially after appeals have been made that may alter the assessments. Sub totals for land assessments and road assessments are also useful in prorating the final cost of the project and to assist the drainage superintendent in the prorating of future maintenance costs. The Assessment Schedule also does not contain page numbers which are essential to ensure that the schedule is complete and that no pages are missing. It would also be helpful to have the column headings repeated at the top of each page.

In the specific case under appeal, the landowner making the appeal was successful in lowering his assessment by $130.  With his property affected by two municipal drains, the Appeal Tribunal found that as a matter of principle his property could not be assessed an amount that would represent more than 100% of his combined use of the two drains:

The only point in contention is the area of Mr. Barclay's land that outlets into the Thorpe-Ellis Drain. The difference in area determined by the various submissions amounts to a maximum of 3.4 acres (1.4 ha). While the Tribunal accepts that this difference is well within the normal accuracy for determination of drainage areas, the Tribunal also accepts the principle, that for surface drainage projects of this type, the area drained by the Ferguson Drain and the Thorpe-Ellis Drain must not exceed the total area of land owned by Mr. Barclay which is 245 acres (100 ha.). The Tribunal will order that Mr. Barclay's outlet assessments be reduced by $130.00 to account for this discrepancy. This amount will be added to the road assessment of the Municipality in the same manner as the other imbalances resulting from the Court of Revision decision.

Read the decision at: Thorpe Ellis Municipal Drain.

Manitoba introducing provincial surcharge on transfer of marketing quota

A reader of this blog has brought to my attention a budgetary measure being introduced in Manitoba which will see a 2% provincial surcharge imposed on the transfer of dairy, egg and poultry quota in the province.  I have reported on several cases involving the Dairy Farmers of Ontario quota transfer assessment (15%), but the Manitoba plan differs in that the levy is a provincial surcharge on top of any other assessment that may be imposed by the marketing board itself.  Is this a new tax?  Will other provinces follow Manitoba's lead?

The levy was announced as part of Manitoba's provincial budget earlier this year.  Read the AgCanada article on producer response to the levy at: AgCanada.

Read the response of the Canadian Federation of Independent Business (CFIB) at: Letter to Hon. Stan Struthers.

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

"Split Class" property tax assessment appeal dismissed by B.C. Supreme Court

Last week, the B.C. Supreme Court dismissed an appeal from the Property Assessment Appeal Board related to the issue of "split assessment" of farm properties. In this case, but for the farm operations taking place on the properties in question, the lands would have been classed as residential. The question in the case was whether the Appeal Board was correct in upholding the spliting of the assessment between farm use and residential use. In other words, these particular properties did not qualify in their entirety for assessments as farm property. The residence portion of the properties were classed as residential.

The appeal to the B.C. Supreme Court was actually initiated by the Appeal Board itself. Only one of the affected property owners participated, and argued that it was unfair that properties in his area (again, where the land would otherwise have been residential but for the farming operations being carried out) were being "split assessed" whereas properties in other rural areas of the province were not being "split assessed". The Court found that this practice of splitting the assessment was part of the applicable legislation and therefore permissible. On the issue of fairness, the Court found that there was no evidence before the Appeal Board as to how other parts of the province were dealing with this issue.

Read the decision at: http://www.canlii.org/en/bc/bcsc/doc/2010/2010bcsc194/2010bcsc194.html

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

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