McBride v Dairy Farmers of Ontario, 1997 ONAFRAAT 18

Agriculture, Food and Rural Affairs Appeal Tribunal 1 Stone Road West Guelph, (Ontario) N1G 4Y2 Tel: (519) 826-3433, Fax: (519) 826-4232 Email: AFRAAT@ontario.ca

Tribunal d’appel de l’agriculture, de l’alimentation et des affaires rurales 1 Stone Road West Guelph (Ontario) N1G 4Y2 Tél.: (519) 826-3433, Téléc.: (519) 826-4232 Email: AFRAAT@ontario.ca

AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL

APPEAL: McBride v Dairy Farmers of Ontario McBride v DFO 1997 ONAFRAAT 18

STATUTE: Ministry of Agriculture, Food and Rural Affairs Act

HEARING: May 16, 1997

DATE OF DECISION: May 23, 1997

1997-18

NEUTRAL CITATION: 1997 ONAFRAAT 18

McBride v Dairy Farmers of Ontario

IN THE MATTER OF: THE FARM PRODUCTS MARKETING ACT AND SECTION 16 OF THE MINISTRY OF AGRICULTURE AND FOOD ACT.

AND IN THE MATTER OF: An Appeal to the Farm Products Appeal Tribunal by Andrew McBride, Harwood Holsteins, Kippen, Ontario from a decision of the Dairy Farmers of Ontario dated April 30, 1997 denying his request for relief from the 15 per cent transfer assessment on quota sales.

Before: Mr. James Rickard, Chair; Mrs. Nancy McGill, Alternate Chair; Dr. Denis O’Connor, Vice-Chair; Mr. Murray Cardiff, Member.

Appearances: Mr. Andrew McBride, appellant. Mr. Gordon Couckell on behalf of the respondent, the Dairy Farmers of Ontario. Mr. Tom Graham, counsel to the Tribunal.

DECISION OF THE TRIBUNAL

This appeal was heard in Guelph, Ontario on May 16, 1997. Mr. Andrew McBride appealed to the Farm Products Appeal Tribunal (the Tribunal) from a decision of the Dairy Farmers of Ontario (the DFO) dated April 30, 1997 denying his request for relief from the 15 per cent transfer assessment on quota sales.

The Background

Mr. McBride came to Canada from Scotland in 1989 with his wife and family as a landed immigrant. In Scotland, he farmed in partnership with his two brothers operating a business called Harwood Holsteins. They had a dairy farm and milked 150 holstein cows three times per day in a loose housing system. Andrew was the oldest of the three of them and had run the operation as the senior manager since 1975 when his father had been killed in an automobile accident.

Due to a combination of circumstances, Andrew and his wife, Lorraine, and their children came to Canada, purchased a dairy farm near Kippen and, in 1989, began their dairy farm operation in Ontario. Financing for the operation came partially from selling the farm in Scotland and partially from a mortgage held by the Royal Bank.

Lorraine McBride took no active part in the farm other than looking after the books. The original title to the farm was joint as was the case with the quota.

Mr. McBride claimed that since the beginning, Lorraine seemed to resent coming to Canada and had difficulty accepting it as her new home. She did not integrate herself into the community or become involved in any way. Andrew became heavily involved in community work and, in particular, with the holstein and dairy industry soon developing a reputation as a breeder and judge of high quality stock.

Mr. McBride stated that Lorraine developed medical problems just after arriving in Canada and became more removed and acted differently. She frequently took trips to Scotland without notice. She bought a new car for herself. She opened a personal bank account and obtained a separate postal box to receive mail.

Lorraine left the family home in August of 1995 for the last time. Following that, the McBrides ultimately obtained a divorce.

He told the Tribunal that Lorraine had done the financial bookkeeping for the farm and after she left Andrew found out that there were serious discrepancies in the record keeping and there were problems with the financing arrangements at the Royal Bank

The day that the April 1994 milk cheques arrived at the bank, Lorraine attended the bank and emptied the bank account before the bank could take the payments for its loans. Subsequently, the Bank called the loans and on May 27, 1994, Mr. McBride sold his cows and began to sell part of his quota to pay the bank in full. Mr. McBride was out of production until Mr. John Walker loaned him some cows to begin shipping milk again in August of 1994.

In November 1996 Mr. McBride applied to the DFO for reinstatement of the transfer assessment charged on the quota that he sold. Mr. McBride claimed that his was a unique situation brought about by the divorce from his wife causing the Bank to call his loans. The DFO considered this request and denied the application. Mr. McBride then appealed to the Tribunal

The Issue

The issue before the Tribunal is, considering all of the circumstances, should the DFO return to Mr. McBride the 15% quota transfer assessment levied on the sale of his quota in 1994? Later in the hearing, additional requests were made by Mr. McBride and accepted by the DFO and the Tribunal to be a part of this hearing.

The Evidence and the Findings

Mr. McBride told the Tribunal that his situation was unique. He said that the Royal Bank has an unwritten policy that it cannot hold a mortgage for someone who is living out of the country. When Lorraine left the family home, the Bank was concerned that she would flee to Scotland and they would have difficulty realizing their security and therefore called the loans.

Mr. McBride said that he did the only thing that he could do at the time and that was make an application to the Farm Debt Review Board pursuant to Section 20 of the Farm Debt Review Act to give him time to try and rearrange his affairs. With the aid of the Queen's Bush Rural Ministry and upon the advice of H. Alan L. Emerson, the Farm Debt Review application was undertaken. At the Farm Debt Review Board, a deal was struck which included interest relief from the Royal Bank. Andrew said that Lorraine did not attend at the meeting even though it affected her indebtedness and after the meeting, she refused to sign the agreement.

Mr. McBride said that it was his belief that Lorraine had been counselled to take the position she took to force the sale of the farm so that she could get whatever money she could and flee to Scotland with their children. He said that he could not communicate with her because she had lodged herself and the children in a women's shelter in Goderich and he was not allowed to see his children. Lorraine had made allegations about his suitableness as a parent and subsequently, he did not see the children for three months. Mr. McBride said that all of the allegations have since been disproved in their entirety and his son has now come home to live with him.

According to Mr. McBride, when Lorraine refused to sign the Farm Debt Review documentation, the Royal Bank served a Notice of Sale upon them. He said he sought advice from Mr. Emerson. The only thing left to do that did not require Lorraine’s signature was to dispose of the milk quota. There was a signed direction on file with the DFO directing the proceeds of the sale of the milk quota to be paid to the Bank.

Mr. McBride told the Tribunal that he believed that the reason the Bank called the notes was its concern that Lorraine would flee to Scotland and the Bank would not be able to protect its interests. Mr. McBride said that Lorraine has finally agreed upon a property settlement.

Mr. McBride said that he was asking this tribunal to consider his request in this appeal on two grounds:

1. the compassionate circumstances that his situation spells out;

2. the uniqueness of the situation;

Mr. McBride told the Tribunal that he intends to continue dairy farming as demonstrated by his struggle to continue throughout this ordeal. He said that the loss of the 1,555 kg. of milk quota made his farming operation perilous and he is hard pressed to continue. If the quota is returned, he has approval from the CIBC to borrow to purchase more quota. He said he intends to return to the 10,000 kilogram quota level he had prior to this problem.

Mr. McBride pointed out that he had approached Mr. Eric McLeod, fieldman for the DFO and inquired about reinstatement of the 15% transfer assessment prior to selling the quota. Mr. McBride said that he believed he should not make the application until he had repurchased some quota to demonstrate to the DFO his sincerity in his desire to continue operating a dairy farm.

Mr. McBride said that the fairness of reinstatement is even greater considering that the DFO abandoned the 15% transfer assessment on November 14, 1996.

At the conclusion of the presentation, Mr. McBride asked the Tribunal to grant three requests:

1. reinstatement of 1,555 kg. of unused quota;

2. 2% additional allocation on the 1,555 kg. or 31 kg.;

3. full price for all over quota milk shipped during the dairy year 1996/97;

Mr. Allen Emerson testified on behalf of Mr. McBride. Mr. Emerson said that he has been a financial advisor to Mr. McBride for some time and he confirmed the evidence given by Mr. McBride. Mr. Emerson said that he believed the only reason the Royal Bank called Mr. McBride’s loans was a concern that Lorraine McBride would flee to Scotland and the Bank would have difficulty collecting its money. He said that, in his opinion, the reason the farm was not making money was that Lorraine had taken money from the farm account for her personal account and that left insufficient money to operate the farm. This problem has been corrected.

Mr. Jim Ginn, chair of Huron County Dairy Producer Committee, spoke on behalf of Mr. McBride. Mr. Ginn said that Mr. McBride had the confidence of the milk producers in Huron County so much that the County Dairy Producer Committee passed a resolution in support of his application for return of the 15% transfer assessment. This position was transmitted to the DFO in a letter dated December 16, 1996. Mr. Ginn expressed to the Tribunal his complete confidence that Mr. McBride remains committed to the dairy industry and intends to continue dairy farming. Mr. Ginn explained that, in his opinion, the industry needs young, committed farmers like Andrew if the industry is to prosper.

Mr. Glen McNeil, a milk producer from Huron County, told the Tribunal that he has known Andrew since be began to produce milk in Huron. He said that Andrew is respected by colleagues in the industry and is the kind of dairy producer the industry needs. Mr. McNeil said that there is considerable benefit to the industry for a favourable decision on Andrew’s request. Mr. McNeil emphasised that there is nothing for him to gain in making these statements.

Neither Mr. Ginn nor Mr. McNeil was aware of any situation where the DFO had returned the transfer assessment to a producer.

Mr. Gordon Couckell, milk producer and chair of the DFO Quota Committee, spoke to the Tribunal on behalf of the DFO. Mr. Couckell told the Tribunal that when the appeal was before the Board, Mr. McBride had only requested the return of the transfer assessment and now he is asking for additional relief. These requests have not been dealt with by the DFO.

Mr. Couckell said that the DFO is sympathetic with the problems that Andrew has dealt with but the DFO has to be in a position to deal with other members of the industry in the same manner. Mr. Couckell said the DFO deals with applications for relief arising from marriage difficulties almost monthly. The DFO was looking for something unique in this situation.. He said that the issue of Lorraine leaving being the cause of the bank calling the loans is something that is talked about but not in writing. He said that if the DFO could verify this fact, it could make the case unique. The DFO was unable to get written confirmation of this allegation. While the DFO recognises that the situation is tragic for Andrew and Lorraine, it could not find anything unique about the case and therefore denied the request.

Mr. Couckell said that he could not recall a situation where a marriage break-up resulted in a request to the Quota Committee for waiver or return of the transfer assessment. He said that the request normally involved a waiver of quota maintenance requirements.

Mr. Couckell said that, to his knowledge, the DFO has never given quota to any producer. He recalled only one instance where the quota transfer assessment was waived and that situation was where two geographically isolated producers were being encouraged by the DFO to exit the industry. He said that once the 15% transfer assessment has been taken off any producer’s quota sale, it has never been returned. He also said that, now that the transfer assessment has been eliminated, the DFO has no ability to give quota without taking it away from the other producers. There is no quota bank.

Mr. Couckell said that the transfer assessment was withdrawn after the November 13, 14th 1996 board of directors meeting. There were several reasons for making this decision but this has no impact on the current appeal since this quota was sold in 1994.

Mr. Couckell told the Tribunal that there was a general increase in quota in October 1996. Each producer was allotted a 2% increase on the quota held on October 1. He said that Andrew has requested that he be given the 2% quota increase on 2,650 kg. of quota purchased on the December 1996 quota exchange. The producer who sold that quota received the increase and it is not reasonable to apply a second increase.

Mr. Couckell said that the request for full price of milk produced over quota has not been made to the DFO but he said since the hearing had proceeded to this point, the Tribunal should decide on this request as part of its overall decision. Mr. Couckell told the Tribunal there was precedent at the DFO for granting such a request where circumstances warrant relief. He said that, when considering the request, the DFO would look at what is different about this case and the next person’s case - was there extreme hardship caused by things Andrew could not control; how badly does he need this relief to maintain the farm. The relief granted would be for a set amount of production.

In response to questions from the panel, Mr. Couckell said that when the Quota Committee deals with requests for relief from quota maintenance requirements, it usually grants relief. The length of time granted depends on the circumstances of the individual case.

Under normal circumstances, the Tribunal would decide only the issue that had been brought before the DFO. However, Mr. Couckell agreed that the Tribunal deal with all of the issues raised even though the DFO had only officially considered the request to return the 15% transfer assessment. The Tribunal accepted this request and examined all of the evidence before it.

The Tribunal was impressed by the sincerity of Mr. McBride’s presentation and his commitment to the dairy industry. The Tribunal also gave weight to the testimony of Mr. Ginn and Mr. McNeil and the fact that his fellow producers in Huron County support Mr. McBride’s application to the DFO for assistance. However, the Tribunal believes that Mr. McBride must bear some of the responsibility for the situation that he found himself in. Nonetheless, the Tribunal has sympathy with the situation and is of the opinion that the circumstances warrant application of compassion. The Tribunal was told that payment for over quota production at the present level of production is about the same level of assistance as providing Mr. McBride with the return of the 15% transfer assessment. The Tribunal was also told there is precedent at the DFO for making such a concession but not for the giving of quota. Therefore, the Tribunal decided to deny the request for return of the transfer quota but directs the DFO to cover the over quota milk produced during the 1996/97 dairy year on the farm of Mr. McBride. The eligible volume of shipments for the remainder of the dairy year is calculated using the current average daily shipments made in the months of April and May until the 16th.

Decision and Reasons

After careful consideration of the evidence presented and submissions made, the Tribunal decided to:

1. Deny the request that the DFO return to Mr. McBride the 1,550 kg. of quota that formed the 15% transfer assessment on his quota sales.

2. Deny the request for a 2% additional allocation on this 1,550 kg. of quota .

3. Grant the request that the DFO pay full price on the milk shipped from the McBride farm in the dairy year 1996/97 to a maximum of 11,500 kg.

The reasons for this decision are:

1. In the opinion of the Tribunal, the circumstances of this case warrant compassion on the part of the DFO.

2. The Tribunal was convinced that Mr. McBride intends to continue production in the dairy industry.

3. Purchase of over quota milk at full price to provide assistance is an option previously used by the DFO is dealing with hardship cases.

ORDER OF THE TRIBUNAL

The Tribunal directs the DFO to purchase, at full price, the over quota milk produced during the 1996/97 dairy year on the farm of Mr. McBride. The eligible volume of shipments for the remainder of the dairy year is to be the volume of the shipments already made the month of April and until May 16 but is not to exceed 11,500 kg.

Dated at Guelph, Ontario this 23rd day of May, 1997.