Appeal Tribunal denies request to waive chicken over-production levy

The Ontario Agriculture, Food and Rural Affairs Appeal Tribunal has denied an appeal by La Primavera Farms of an over quota levy imposed by the Chicken Farmers of Ontario (CFO).  When La Primavera produced 78,513Kg of chicken in quota period A-99 (July 16 - September 11, 2010), it exceeded its quota allotment by 24,671Kg.  La Primavera was assessed an Excess Production Levy ("EPL") of $21,978.99 by CFO, pursuant to CFO Regulation BQ-2010.  La Primavera objected, and in a decision of CFO dated December 16th, 2010, CFO affirmed the EPL.  CFO was requested by La Primavera to reconsider its decision. CFO denied La Primavera's request for a waiver of the EPL and affirmed its previous decision. La Primavera then appealed to the Appeal Tribunal from the decision rendered by CFO and seek a waiver, or a reduction of the EPL.            

The owner of La Primavera has been involved in the production of chicken under the current supply management system for the last 30 to 35 years.  In 2010, the owner decided to entrust to his daughter the responsibility to plan and order chicks from the hatchery to stock La Primavera's barn for the quota period at issue on the appeal.  When a Notice of Maximum Crop Quota Allotment arrived from CFO, the owner did not explain the significance of the notice to his daughter.  She attempted to calculate the number of chicks needed to fill the quota allotment. 

A second document was sent by CFO later in the same month in an envelope labeled in bold Important Crop Quota Enclosed.  This was the official communication from CFO determining the net allotment of quota for La Primavera for the period.  The owner's daughter did not appreciate the significance of this document and did not look at the document in deciding upon the number of chicks to be ordered.  The owner was not involved in reviewing the document with his daughter.  Production by La Primavera ended up based on an assumed quota of 65,240 kg when it should have been only 53,842 kg.  An excess production levy of almost $22,000 was imposed.

La Primavera asked for the levy to be waived on the basis that the over production resulted from a "clerical error".  However, in the Tribunal's view, the responsibility rested on the President of La Primavera to properly guide his daughter/employee through the process to calculate La Primavera's needs to fulfill its quota allotment for the quota period in question. In failing to properly guide her      to take over the responsibility, La Primavera assumed the risk which resulted from her lack of knowledge and familiarity with this process.  The appeal was denied.

Read the decision at: La Primavera Farms vs. Chicken Farmers of Ontario (CFO).

Appeal tribunal dismisses Manitoulin Island farmer's bid for chicken quota

Max Burt, a second generation poultry farmer from Gore Bay on Manitoulin Island, has lost his appeal to the Agriculture, Food and Rural Affairs Tribunal on the issue of chicken quota.  He had requested that the Tribunal reverse the refusal of the Chicken Farmers of Ontario (CFO) to give him 2,040 units of quota to produce and market chicken to satisfy what he believes to be a local market demand.  In the alternative, Burt sought an exemption from the requirement for quota.  In asking to be provided with quota, Burt relied on the historical production of his father, Edward Burt, during the original qualifying period for broiler chicken quota in 1964-65. 

The Tribunal saw the essence of the appeal as a request either for free quota or an exemption from quota.  In its view, the absence of a compelling and satisfactory reason for the 46-year delay alone was sufficient reason to deny the request for a qualifying period chicken quota allotment.  Further, the Tribunal found that Max Burt failed to prove qualifying production during the 1964-65 period and that he was not actually a producer during that time (his father was).  The Tribunal was unable to find any authority on which it could extend the qualifying quota from father to son.

On the issue of the exemption, the Tribunal found that the request for an exemption was based on financial reasons - affordability.  In dismissing this request, the tribunal wrote:

In our view, affordability cannot be the basis for the Tribunal to grant Max Burt an exemption from the Regulation, so as to permit him to produce and market 2,040 units of chicken. If we were to use affordability as an exemption criterion, it would render CFO's existing exemption policy, as reflected in section 2.02 of the Regulation, meaningless. Further, treating affordability as an exemption criterion could open a flood of exemption applications from some, if not all the other 14,000 registered chicken growers in the province. Finally, treating affordability as an exemption criterion would eventually undermine the chicken quota system, which is the foundation of the chicken supply management system in Ontario.

Read the decision at: Max Burt vs Chicken Farmers of Ontario.  The decision includes a useful summary of the history of chicken supply management in Ontario.

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).

Quebec farmer wins appeal against fines for exceeding poultry quota

Ferme Avicole Rodier Bombardier Inc. and Rock Bombardier have successfully challenged quota penalties imposed by the "Éleveurs de volailles du Québec" (the poultry marketing board in Quebec) in the Quebec Court of Appeal.  Bombardier was charged penalties for having exceeded chicken quota production levels by producing chickens for export from Quebec without a purchase contract in place.  In other words, with no contract in place, all of the production was counted against the quota and resulted in over-production in the eyes of the marketing board.

Bombardier contested the allegations on the basis that there was an export contract in place with a company called Volaille Giannone Inc.  Before the marketing tribunal in Quebec, Bombardier sought to have Giannone added to the case (interpleaded) to exercise a "recourse in warranty" against Giannone.  The Tribunal rejected this request and rejected a request by Bombardier to have the penalties dismissed on the basis that they were imposed outside of the applicable limitation period.  Bombardier argued that the penalty imposed falls under the authority of the Penal Code of Procedure in Quebec (rather than the Civil Code of Procedure) so that the limitation period is one year.

The Quebec Court of Appeal has found that the marketing tribunal (la Regie) was not expressly authorized by its constituting statute (the Act of the Legislature that creates the tribunal and delegates to the tribunal its powers) to impose a penalty set by the marketing board.  It did not have authority to be seized of the board's claim for a penalty.  Neither could the tribunal be seized of the producers' claim that they had a valid contract with Giannone.  On this basis, the Court of Appeal allowed the application for judicial review and overturned the decision of the Quebec Superior Court that upheld the penalties imposed by the tribunal.

However, the Court of Appeal declined to award costs to any party of the appeal/judicial review.  The Court rejected the primary argument of the producers that the fines were a penal matter that had to be addressed according to Quebec's Penal Code of Procedure (and, therefore, the board would be out of time to impose the penalties).  In the Court's view, the cost of making this argument did not facilitate the Court's study of the case. 

The decision in French is available at: Bombardier c. Éleveurs de volailles du Québec.

Chicken Processors denied party status in Tribunal Appeal

The Agriculture, Food and Rural Affairs Tribunal in Ontario has denied a request by the Association of Ontario Chicken Processors (AOCP) to be a party in an upcoming appeal by Henry Bos.  Bos has appealed decisions by the Chicken Farmers of Ontario (CFO) denying his request for the revocation of a policy and a regulation related to restrictions on extra-provincial marketing of poultry.  The appeal hearing is scheduled to begin this Monday.  AOCP has been granted intervenor status and can make submissions to the Tribunal.  However, it cannot file evidence and will not be permitted to cross-examine witnesses. 

AOCP's request was denied in large part because it was not made until the eve of the hearing.  AOCP is an organization that represents 11 chicken processors who reflect 95% of the Ontario chicken processing industry.

Read the decision at: Henry Bos v. Chicken Farmers of Ontario (CFO) AOCP Request for Party Status.

Appeal Tribunal refuses to reinstate tobacco quota

Gubbels Farms Ltd. has grown tobacco under the marketing-system-of-the-day in Ontario since 1962. In 2008, Gubbels Farms Ltd. was licensed to produce approximately 418,000 lbs of basic production quota ("BPQ"). Gubbels Farms Ltd. did not participate in the Tobacco Transition Program ("TTP") and intended to continue producing tobacco for market. In 2009, the Ontario Flue-Cured Tobacco Growers' Marketing Board ("Board") removed the existing quota-based system for the control of production and marketing of tobacco and moved to a licensed-based system. The effect of this change was that the 418,000 lbs of BPQ associated with Gubbels Farms Ltd. ceased to exist. Also, before a licence to produce tobacco could be issued under the new system to Gubbels Farms Ltd., they had to be an eligible applicant and meet criteria set out in the General Regulations 2009 - 2010. Although Gubbels Farms Ltd. did not agree with the implementation of the licensed-based system, they complied with the new requirements and were issued licenses to produce tobacco in 2009 and 2010.

Gubbels Farms Ltd. appealed to the Board on April 1, 2010, asking for an exemption from the licensing requirements under the General Regulations 2009 - 2010 and for a refund of license fees paid to the Board for 2009 and 2010. The Board denied the request on April 22, 2010.  Gubbels Farms Ltd. appealed to the Agriculture, Food and Rural Affairs Appeal Tribunal for relief from the April 22, 2010, decision of the Board with the following request:

Gubbels Farms requests that their permanent BPQ be reinstated and that, as a result, they be licensed to grow tobacco under the previous system. Furthermore, Gubbels Farms requests that the Board refund to Gubbels Farms all monies that it paid to the Board for the redundant licences (#65) for the 2009 and 2010 growing seasons.

The Tribunal found that the legislative and regulatory framework relative to the Board's absolute authority over quota, which included the BPQ, was in effect when the Board made its decision to drop the quota-based system and move to the license-based system. In short, the Board had the authority to remove the BPQ.  The Tribunal also found that the relief sought by the Appellant to have their BPQ reinstated was impossible to grant under this appeal. Pursuant to the Ministry of Agriculture, Food and Rural Affairs Act, the Tribunal could direct the Board to take any action that it is authorized to take under the Farm Products Marketing Act, and for this purpose may substitute its opinion for that of the Board.

This appeal, however, requested the reinstatement of the BPQ previously associated with Gubbels Farms Ltd. The Board's authority to issue tobacco quota was removed by the Farm Products Marketing Commission under the Farm Products Marketing Act Ontario Regulation 208/09 Tobacco - Powers of Local Board effective June 1, 2009. Furthermore, since the previous quota-based system no longer exists, there is no present or future opportunity for the Appellant to be licensed to grow and market tobacco under that previous system. Therefore, the licenses issued to the Appellant for the 2009 and 2010 growing seasons were not redundant. The fees associated with said licenses complete the licensing requirements of the Board and were authorized by Ontario Regulation 208/09.

Read the decision at: Gubbels Farms Ltd v. Ontario Flue-Cured Tobacco Growers' Marketing Board.

Nova Scotia Court upholds cap on dairy quota prices

Some Nova Scotia dairy producers applied to the Supreme Court of Nova Scotia challenging the authority of the Dairy Farmers of Nova Scotia (DFNS) to decrease the price of quota in the province.  DFNS regulations provide mechanisms to adjust a producer’s non saleable and saleable milk quota. They also create a capped price for the exchange of saleable milk quota. The capped price is being phased in over the period commencing in August 2009 through July 2012 and eventually will set a maximum value that is below the value currently being obtained in trading on the quota exchange.

The applicants’ principle challenge was to the purported authority to decrease the quota price. While they maintain support for a supply management system, they favor a quota exchange price that is market driven and not capped. They also seek to ensure that they do not otherwise lose valuable saleable quota already acquired.

At the heart of the dispute was a conflict between some dairy producers who seek to preserve the value of their investment in the dairy industry through unrestricted quota pricing, and those who fear that an unregulated quota price will render the financial structure of the industry unsustainable in the long term.  It is suggested, among other things, that an unrestricted quota price exchange will make it prohibitively expensive for new entrants to the industry.

The Court examined two issues: 1) whether the quota regulation was, prima facie, a proper exercise of the DFNS authority; and, 2) whether the effect of the regulations was to expropriate property without compensation (which can be done, but only where the legislation expressly permits expropriation without compensation) - de facto expropriation.  With respect to these issues, the Court ruled:

• the power to adjust quota has been properly delegated to the DFNS under the Dairy Industry Act (DIA);
• Regulation 21, fixing a price cap, is authorized by section 14(1)(e) of the DIA,  and in particular clause (iii) which authorizes  “...setting the terms and conditions on which the transfer [of quota among producers] may take place”;
• Milk quota is not "property" for the purposes of the de facto expropriation argument;
• Alternatively, if quota is "property", it has not been expropriated because the uses of quota have not been destroyed by the price cap;
• Further in the alternative, if quota is property and has been expropriated, the legislation expressly provides for the price cap without any compensation (i.e. expropriation without compensation).

Read the decision at: Taylor v. Dairy Farmers of Nova Scotia.

Burford, Ontario farmer denied permission to exceed quota to make up for past undermarketing

Victor Osztrovic farms in the Burford area. The farm is a mixed cash and specialty crop operation (including tobacco) and since 2002 Osztrovic has been a chicken producer holding production and marketing quota of 66,841 kilograms (kgs.) in each quota period. The quota is issued to him by the provincial regulator, Chicken Farmers of Ontario (CFO).

Early in 2009, Osztrovic experienced higher than usual bird mortality and as a result, he ended that quota period marketing 12,783 kgs. below his quota of 66,841 kgs.  The chicken industry describes the marketing result Osztrovic experienced as "undermarketing".  Undermarketing is significant to chicken producers because in the usual course of business they cannot make up the lost opportunity represented by that 12,783 kgs. due to the operation of the quota system.  As an example, in the usual course of business Osztrovic could not simply increase his production in a future quota period by the lost 12,783 kgs. since doing so would put him over his quota and expose him to penalty levies on his excess production and a corresponding quota reduction.

However, CFO has enacted Quota Policy 170-2005 that addresses undermarketing.  Section 2.22 of that Policy permits an undermarketed producer like Osztrovic to re-grow up to 10% of his quota allocation, or 6,684 kgs., spread over two future quota periods.  The Policy operates to "exempt" that 10% production "re-grown" from the otherwise strict operation of the quota, which would entail penalty levies and a quota reduction.

Osztrovic, however, wanted the opportunity to re-grow all 12,783 kgs. that he lost.  He applied to CFO seeking relief above and beyond the 10% allowed in section 2.22 of the Policy.   CFO denied Osztrovic's requested policy relief and he then appealed to the Agriculture, Food and Rural Affairs Appeal Tribunal under section 16(1) of the Ministry of Agriculture, Food and Rural Affairs Act (MAFRAA).

In denying his appeal, the Tribunal said the following:

In the circumstances and facts of this case, the Tribunal declines to grant Victor the requested relief.

CFO developed the undermarketing policy as a "fault free" entitlement. Producers can access the 10% re-grow entitlement if they undermarket for any reason [emphasis added]. The evidence is clear that CFO developed that policy to address undermarketing arising from weather conditions, among other factors. However, the policy contains no threshold criteria. Producers who undermarket due to laziness or negligence or poor chick quality or bad feed or mechanical failures or weather conditions can all access the undermarketing policy and re-grow up to 10% of their quota.

In a quota based regulatory system, exemptions are the exception rather than the norm. In the case of chicken quotas, the CFO has created a standing exemption arising from undermarketing through its Quota Policy 170-2005, section 2.22. That Policy allows producers who undermarket to re-grow the lost kilograms to a maximum of 10% of quota over two future quota periods.

If everything that happened to cause undermarketing gave rise to an exception, the quota policy would become meaningless and that would undermine the regulatory regime. That is even more so where there is a standing exemption as in section 2.22 of the Quota Policy.

Therefore, the Tribunal concludes that to obtain relief above and beyond the undermarketing Policy, Victor must satisfy us, on a balance of probabilities, that something truly unique and exceptional occurred to cause the undermarketing.

Probably more than any other businesses, farmers are particularly at the mercy of the weather. However, weather conditions, even extreme weather conditions such as Victor experienced, are not unique and exceptional in Ontario.

The Tribunal is not satisfied that there was anything truly unique and exceptional about the weather event that resulted in the barn conditions that caused Victor's crop loss.

Read the rest of the decision at: Victor Osztrovic vs Chicken Farmers of Ontario (CFO).

Appeal Tribunal dismisses part of Ontario Chicken Farmer's appeal of CFO policies

Part of an appeal launched by Henry Bos against a decision of the Chicken Farmers of Ontario (CFO) has been dismissed by the Agriculture, Food and Rural Affairs Tribunal on a preliminary motion by the CFO.  The Bos appeal is described in a previous post on this blog. 

The CFO based its preliminary challenge of the appeal of 2005 policies on three grounds:

1.The appellant has known of the 2005 policies for more than a year and the Tribunal should therefore exercise its discretion to refuse to hear the appeal under subsection 16(4) of the MAFRAA.

2.The appellant is not aggrieved by the 2005 policies within the meaning of subsection 16(2) of the MAFRAA.

3.The appeal of the 2005 policies is vexatious within the meaning of subsection 16(4)(b) of the MAFRAA.

In allowing the motion, the Tribunal concluded that the following factors combined to militate against permitting Mr. Bos to continue with this appeal of the 2005 policies:

• the fact that CFO developed the 2005 policies in a negotiated process directed by the Commission and involving the regulator representing producers (CFO) and the processors (OIPP and AOCP)
• producers and processors alike have ordered their business affairs based on the 2005 policies and have operated under that system for the past four years
• the fact that at least four years have passed since CFO enacted the 2005 policies
• the fact that Mr. Bos did not appeal the 2005 policies before the introduction of the 2009 policies suggests that his real complaint lies with the 2009 policies and not the 2005 policies
• the prospect of a fundamental change in the processor allocation system after sixteen years of some form of assurance of supply

Read the decision at: Henry Bos v. Chicken Farmers of Ontario.

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).

Ontario Chicken Producer denied stay of out-of-province processing moratorium

Mr. Henry Bos filed a motion under section 25 of the Ministry of Agriculture, Food and Rural Affairs Act (the MAFRAA) for a stay of the Chicken Farmers of Ontario (CFO) Regulation 2274-2009 (the Regulation) and Policy 175-2009 (the Policy).  Mr. Bos proposed the stay operate until the Agriculture, Food and Rural Affairs Tribunal disposes of his appeal of the Regulation and Policy, and that the stay operate to exempt all kilograms allocated to him by CFO.

The Regulation imposed a moratorium on approval for any new processing contracts between Ontario chicken producers like Mr. Bos and out of province chicken processors. The Policy suspended chicken production quota allocations to Ontario chicken producers who entered into new processing contracts with out of province chicken processors. As part of the moratorium, CFO grandfathered any existing processing contracts between Ontario chicken producers and out of province processors.

The Tribunal commented in its decision on the nature of a "stay":

The parties appear to agree that the controlling authority in Ontario in a fact situation with some parallels is the Divisional Court decision in Denby v. Ontario 2006 CanLII 63736. At paragraph 40, the Court stated:

A "stay in the matter" may refer to a maintenance of a status quo in terms of the conduct or entitlement of a party. It does not, to repeat ourselves for emphasis, result in the automatic "suspension" of legislation validly enacted or to be enacted in the future. To suggest otherwise would be patently illogical.

It is clear from that authority, that a stay is intended to preserve a "status quo". The Tribunal finds the corollary of that principle is that a stay is not intended to expand beyond the status quo prevailing when the appeal was commenced.

The Tribunal dismissed Bos' motion for a stay.  It found that a stay was not required to preserve the "status quo" for Bos as it existed at the time he filed his appeal of the Regulation and Policy.  Even though Bos' Ontario processor (which took 80% of his production) cancelled his contract, CFO maintained that it would be required to find a new processor to take up the slack. 

Note that this is an interim decision on the motion for a stay.  No decision has yet been made on the actual appeal of the Regulation and Policy.
Read the decision at: Henry Bos v. Chicken Farmers of Ontario - Motion Hearing.

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.

Quebec poultry producer's appeal of quota penalties goes to Court of Appeal

Ferme Avicole Rodier Bombardier Inc. and Rock Bombardier are taking their appeal of quota penalties imposed by the "Éleveurs de volailles du Québec" (the poultry marketing board in Quebec) to the Quebec Court of Appeal.  Bombardier was charged penalties for having exceeded chicken quota production levels by producing chickens for export from Quebec without a purchase contract in place.  In other words, with no contract in place, all of the production was counted against the quota and resulted in over-production in the eyes of the marketing board.

Bombardier contested the allegations on the basis that there was an export contract in place with a company called Volaille Giannone Inc.  Before the marketing tribunal in Quebec, Bombardier sought to have Giannone added to the case (interpleaded) to exercise a "recourse in warranty" against Giannone.  The Tribunal rejected this request and rejected a request by Bombardier to have the penalties dismissed on the basis that they were imposed outside of the applicable limitation period.  Bombardier argued that the penalty imposed falls under the authority of the Penal Code of Procedure in Quebec (rather than the Civil Code of Procedure) so that the limitation period is one year.

Bombardier then asked the Quebec Superior Court to undertake a judicial review of the Tribunal decision and overturn it.  The Superior Court rejected this application.  Bombardier then went and obtained leave to appeal that decision from the Court of Appeal.  Bombardier's appeal was being heard June 9, 2010 before the Quebec Court of Appeal (coincidentally, the day before Guy Lafleur's appeal on a charge of perjury was to be heard in the same courtroom).

Read the Tribunal decision rejecting the request to add Giannone as a party at: Ferme avicole Rodier Bombardier inc. (French-language only).

Read the original Quebec Superior Court decision dismissing the application for judicial review at: Bombardier c. Régie des marchés agricoles et alimentaires du Québec (French-language only).

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.

N.B. Court quashes Minister's attempt to require that all chickens produced in province be processed in province

Nadeau Poultry Farm Limited ("Nadeau") owns and operates the only federally licensed chicken processing plant in New Brunswick.  Westco is a consortium that produces live chickens for processing and owns approximately 51% of New Brunswick's chicken production quota.  Westco holds a federal licence to market chicken interprovincially and in 2007 entered into a partnership with a Quebec company to build a new processing plant in New Brunswick (having failed to secure the purchase of the Nadeau plant).  In 2008, Westco notified Nadeau that it would no longer be supplying chickens to Nadeau's plant. 

Nadeau, facing the loss of its entire supply of chickens for processing, launched several administrative and court processes aimed at blocking the Westco plan.  An appeal to the Federal Competition Bureau failed, but an appeal of that decision is still pending before the Federal Court of Appeal.  Court challenges in New Brunswick also failed.

That was when the Minister of Agriculture and Aquaculture in New Brunswick stepped in.  On June 3, 2008, the Minister introduced Bill 81, An Act to Amend the Natural Products Act, (“Amendment”). The object of Bill 81 was to add a provision to the NPA which would authorize the Minister to designate the plants where chicken may be processed in New Brunswick.  On January 19, 2010, the Minister issued a Ministerial Order which decreed as follows:

SUBJECT: Ministerial Order to Designate Chicken Processing Plant

Pursuant to subsection 41.1(2) of the Natural Products Act, chapter N-1.2 of the Acts of New Brunswick, 1999, the following plant is designated as the federal inspected abattoir where chicken grown in New Brunswick shall be processed : 

Nadeau Poultry Farm Limited
222 Commercial Street
Saint-François-de-Madawaska,
New Brunswick E7A 1B6

This Order is effective January 31, 2010.

The Ministerial Order designated a single plant as the federal inspected abattoir for the processing of chicken grown in New Brunswick. The legal effect of the Ministerial Order was to require producers of chicken in New Brunswick to process their entire product at that plant only. Unless it was the intention of a producer to stop processing chicken, the result of the Ministerial Order was that the only option presently available for processing of chicken grown in New Brunswick would be the single plant designated by the Minister. The practical effect of the Ministerial Order was to restrict the ability of chicken producers in New Brunswick to sell their live chickens to processors outside of the Province. In the present case the intent was to prevent Westco from exporting their chicken to Olymel’s processing plant in the Province of Quebec.

In both purpose and effect, the Ministerial Order was directed towards interprovincial trade. The legal effect to producers of chicken in the Province was a prohibition to export their chicken outside the Province of New Brunswick. The Ministerial Order, therefore, was not within the authority granted to the Minister by the Amendment.  On this basis, the Court of Queen's Bench in New Brunswick quashed the order.

Read the decision at: Westco v. New Brunswick.

BC Court rejects challenge of marketing board ruling that farmers cannot rent out milk quota

Lilian and Sandy Stewart (the “Stewarts”), are dairy farmers and owners of milk quota. They had a contract milking agreement with a third party, Steven Verdonk, to “milk” their lower mainland quota rather than milk it themselves, in contravention of the rules of the quota system in British Columbia.  The British Columbia Farm Industry Review Board (the “BCFIRB”) and the B.C. Milk Marketing Board (the “Milk Board”), became aware that many quota holders, like the Stewarts, were renting out their quotas contrary to the rules of the quota system, and therefore began a process of regularizing the system, including dealing with the non-compliant quota holders and those who rented from them.  On November 7, 2008, the Milk Board made a decision to retract the Stewarts’ milk quota due to their non-compliance with the rules and to allocate the quota to Mr. Verdonk. The Stewarts appealed the Milk Board’s decision to the BCFIRB.  In a decision released on February 26, 2009, the BCFIRB dismissed the Stewarts’ appeal.  The Stewarts then made an application for judicial review of the Board's decision.

In its hearing of the judicial review application, the B.C. Supreme Court found that:

• the treatment of the Stewarts' issues by the Board was not unfair;
• the procedural aspects of the hearing by the Board did not demonstrate unfairness; and,
• the decision itself of the Board was not patently unreasonable (or unreasonable at all).

On this basis, the judicial review application was dismissed. 

Read the decision at: Stewart v. British Columbia Farm Industry Review Board.

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