Agriculture, Food and Rural Affairs

Appeal Tribunal

1Stone Road West

Tribunal d’appel de l’agriculture, de l’alimentation et des affaires rurales

1 Stone Road West

Guelph, (Ontario) N1G 4Y2

Tel: (519) 826-3433, Fax: (519) 826-4232

Email: AFRAAT@ontario.ca

Guelph (Ontario) N1G 4Y2

Tél.: (519) 826-3433, Téléc.: (519) 826-4232

Email: AFRAAT@ontario.ca

AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL

APPEAL:

Ducharme v Ontario Egg Producers’ Marketing Board

Ducharme v OEPMB 1997 ONAFRAAT 30

STATUTE:

Ministry of Agriculture, Food and Rural Affairs Act

HEARING:

July 16, 1997

DATE OF DECISION:

July 25, 1997

1997-30

NEUTRAL CITATION:

1997 ONAFRAAT 30

Ducharme v Ontario Egg Producers’ Marketing Board

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 Mr. Claude Ducharme, New Liskeard, Ontario from a decision of the Ontario Egg Producers’ Marketing Board denying him the right to sell 1,304 units of quota that was allotted to him on a non-transferable basis.

Before:

Mr. Jim Rickard, Chair; Dr. Denis O’Connor, Vice-Chair; Mr. Armand Bechard, Member.

Appearances:

Mr. Claude Ducharme, appellant.

Mr. Fern Trottier, advocate for the appellant.

Mr. Brian Ellsworth, on behalf of the respondent, the Ontario Egg Producers’ Marketing Board.

DECISION OF THE TRIBUNAL

This appeal was heard in New Liskeard, Ontario on July 16, 1997. Mr. Claude Ducharme, appealed to the Farm Products Appeal Tribunal (the Tribunal) from a decision of the Ontario Egg Producers’ Marketing Board ( the Board) denying him the right to sell 1,304 units of quota that was allotted to him on a non-transferable basis.

The Background

The Board regulates the production of eggs in Ontario. It was given quota authority in 1972. As a result, the Board set up a quota system and issued quotas to all egg producers. On February 1, 1973, the Board enacted Quota Policy Statement # 1. This policy statement defines Basic Quota as:

“This will represent a holder’s share of the total basic quota allotted to producers in Ontario based upon the application of the guidelines adopted by the local board and stated in numbers of dozens of eggs a producer can market at 100% in any twelve month period.”

The statement sets out the requirements for eligibility for basic quota as follows:

“3. Qualification for Allotment of Basic Quota

The local board has proposed the following qualifications for the allotment of basic quota.

1. Egg production facilities must have been in use during the base period viz. January 1, 1969 to April 20, 1972 or any twelve consecutive months between these two dates.

2. The applicant must have completed and filed an accurate Egg Industry Return Form accompanied by the submission of supporting documents as may be required from time to time by the local board.

3. The applicant must have kept a flock of 500 or more hens during the base period January 1, 1969 to April 20, 1972 or for a period of any 12 consecutive months between these two dates.

4. All facilities reported must be in operation as egg production facilities or in immediately operable condition on April 20, 1972.”

Mr. Ducharme did not apply for basic quota in 1972. In 1983, the Board considered Mr. Ducharme’s situation and in a letter dated August 9, 1983, the Board informed Mr. Ducharme of its decision as follows:

“The Ontario Egg Producers’ Marketing Board at their meeting of August 4th approved the allotment of a special egg quota #05025 in your name for 1325 hens.

This allotment was based on the documentation you submitted and is non transferable. In other words it is for your use only and when you cease keeping hens for egg production, the quota will come back to the Board.

This allotment is conditional upon the receipt of a certified copy of the registered title deed to the premises located at Lot 9, Concession 2, Township of Casey and County of Timiskaming.”

October 17, 1983, the Board further wrote to Mr. Ducharme saying:

“In reply to your telephone request of October 13th you have been allotted egg quota No. 05025 for 1325 hens on premises located at Lot 2, Concession Plan M 133 N.B., Township of Casey and County of Timiskaming. You may not keep any other hens on these premises nor are you as an egg quota holder eligible for any exemption to keep hens on any other premises.

The Board has agreed to exempt two premises which were believed to be in business on July 4, 1983 for tenants on these premises.”

Since 1983, Mr. Ducharme has operated the 1325 hen quota plus two unregulated flocks of 500 hens at his premises. The non-transferable quota has the same rights and obligations as all other quota and has been adjusted by the same factors as all other egg producers’ transferable quota holdings have been adjusted over the years. Mr. Ducharme has also purchased quota to supplement his quota holdings to the point where he now operates an 11,000 hen egg laying operation on his farm.

On February 20, 1997, Mr. Ducharme informed the Board that he intended to retire from egg production and wanted the Board to provide a letter of permission for him to sell the 1325 hen non-transferable quota. The Board considered this request and denied the request. Mr. Ducharme requested a hearing before the Board and a hearing was held on May 7, 1997. After the hearing, the Board issued a decision dated May 12, 1997 which reads as follows:

“After serious deliberations of all the circumstances and review of its March 6th decision, the Board denied your appeal. The Board upholds its March 6th decision to not allow the transfer of 1,304 units of your present quota which were allotted to you in September, 1983 on a non-transferable basis with the condition that upon the sale of the farm, the units would be returned to the Ontario Egg Board.

To reiterate Mr. Ducharme, should you decide to sell your farm with the quota, the sum of 9,696 birds will be the allowable amount of quota to be transferred to the new owner. Also, the two 500 units flocks you house at your farm location are classified as unregulated, and upon the sale of the farm these unregulated exemptions will cease.”

This is the decision of the Board that Mr. Ducharme is appealing.

The Issue

The issue before the Tribunal is whether or not the Board should be directed to allow Mr. Ducharme to sell the 1304 units of basic quota allotted to him in 1983 on a non-transferable basis?

The Evidence and the Findings

Mr. Ducharme told the Tribunal that he started egg production in 1961. His only source of income is the sale of eggs from his two acre farm. He sells about half of his egg production in Quebec and half in Ontario. He said he lives in an isolated area and when he started in business there were no other producers in the area and he did not know about the Board. He said he is connected with the French network of farmers in the area and maybe their publications did not inform him very well about the Board. He said that Mr. Wally Chaulk, inspector for the Board, came to the farm in 1983 and told him he would have to stop because his production was illegal. Mr. Ducharme said that Mr. Chaulk told him to find as many receipts as he could to prove his production. Mr. Ducharme told the Tribunal that, prior to 1983, he had discussed his situation with Mr. Raymond, a board director from Moonbeam. Mr. Ducharme claimed that Mr. Raymond advised him to destroy all his receipts and everything because it would cost him too much money in fines because he was operating an illegal operation. He said he destroyed all the receipts he could find at that time.

Mr. Ducharme said that Mr. Chaulk proposed to him that he establish flocks of 500 hens and be an unregulated producer so he began to purchase materials to build buildings to house separate flocks.

Mr. Ducharme said that when he was stopped he had 2,400 birds and the Board closed him for a while. The Board considered his case and decided to allow him to retain two unregulated flocks of 500 hens and a balance of 1,325 birds that was not supposed to be saleable. Mr. Ducharme said that the Board should have taken another avenue and made him pay the back levy that he had not paid and allot him quota just as the Board had allotted to all other producers in 1972. He said it was not fair to the other producers that he produced eggs but did not pay levy between 1972 and 1983. He said it was also not fair that he was not allotted basic quota in 1972 when he was in production at that time and he should have the same rights as all the other egg producers.

Mr. Ducharme told the Tribunal that he understands he cannot sell the two 500 hen non-regulated flocks. He said he has been negotiating with a buyer who wanted to purchase the entire operation and when he told the buyer that he could only sell quota for 9,696 hens the deal changed. Mr. Ducharme told the Tribunal he needed the 1304 quota units to be able to sell the farm and retire from the industry. Mr. Ducharme said that a couple of years before he retired (1987 or 1988) Mr. Chaulk told him the Board changed the rules and the quota would be his to sell.

Mr. Ducharme said that he feels he was not treated right in 1983. He said he should have been offered to pay the arrears and be registered as a quota holder for what he had at that time. He wants to retire because no one in the family wants the farm and if he misses this sale there are not too many people who want to buy a farm in the north.

Mr. Brian Ellsworth, General Manager of the Board, told the Tribunal to the best of the Board’s knowledge Mr. Ducharme did produce eggs during the qualifying period but the Board is not sure how many eggs were produced. He said that the Board did not have any application filed with the office and did not have any contact with Mr. Ducharme until the 1983 visit by the Board’s fieldman, Mr. Wally Chaulk. Mr. Ellsworth filed with the Tribunal documents indicating that, at the time of Mr. Chaulk’s visit, Mr. Ducharme had 2,166 birds on the farm. Mr. Ellsworth told the Tribunal there are many producers in this area who are unregulated with 500 birds or less and the Board had assumed that Mr. Ducharme was one of them until the birds were counted.

Mr. Ellsworth said that a special presentation was made at the Board August 3 and 4, 1983 and the whole situation of Mr. Ducharme was discussed. At that time two invoices for chicks purchased by Mr. Ducharme were filed with the Board. The two invoices were February 1970 for 675 birds, and October 10, 1969 for 650 birds. These were the only records Mr. Ducharme produced to indicate he had production during the qualifying period. The Board was trying to determine if Mr. Ducharme qualified for quota during the qualifying period. The Board was asked to sort this problem out and decided to approve the allotment of 1325 hens, non -transferable, based on the documentation that was submitted, and at the same time, the Board permitted him, because he had two small barns, to carry on two 500 hen unregulated flocks, one in his wife’s name and one in his daughter’s. Mr. Ellsworth said this decision brought Mr. Ducharme into compliance with the Board’s regulations at the time. Mr. Ellsworth said that Mr. Ducharme reported his egg production to the Board and paid the Board’s levy in the normal course ever since. Mr. Ellsworth told the Tribunal that, during the years since 1983, Mr. Ducharme has bought other quota and carried on his business. During all this time, Mr. Ducharme was allowed to keep two 500 hen unregulated flocks even though this is technically incorrect since he ran these hens all together and he is supposed to have them separate and since a regulated producer cannot also have an unregulated flock.

Mr. Ellsworth said that presently Mr. Ducharme has room for 8,000 birds in one barn and 3,000 birds in another. He also has two small buildings capable of housing 500 birds each and a small grading station. Mr. Ellsworth said that in September 1983, the Board allotted 1,325 hens; then, there was a province-wide decrease in quota that brought this down to 1304 hens; then, Mr. Ducharme bought more quota to make a total of 11,000 birds plus the two 500 hen unregulated flocks currently on the farm. Mr. Ducharme is the only regulated producer in this area. There are 27 unregulated producers.

Mr. Ellsworth said that the Board’s position is that:

• Mr. Ducharme did not apply for quota in 1973.

• Barns like the ones Mr. Ducharme had in 1972 would be loose housed hens and one would hold about 800 hens and the other about 500 hens but, in 1983, Mr. Ducharme wanted 2300 hens to be viable.

• The Board found him 10 years later and in an attempt to get Mr. Ducharme within the regulations, the Board allowed two 500 unregulated flocks and allotted him 1325 quota on a non-transferable basis to be returned to the Board when he sold the farm and ceased operation.

• The Board’s decision was accepted by Mr. Ducharme. He carried on producing eggs since 1983 using this non-transferable quota, the two unregulated flocks and, apparently using this flock as a base, expanded his quota base to the present size.

• Mr. Ducharme has paid his levies over the years.

• The last official price for quota sold without premises was $63.00 per hen but there are time lags between the transaction and the report. Only during the last year and a half has the north been able to sell quota to the south and prior to that time quota in the north was transferring for about $25.00 per hen.

• Mr. Ellsworth said that the Board considered all of the circumstances and allowed Mr. Ducharme to continue production without interference but the Board does not believe Mr. Ducharme should have a windfall profit on the 1304 non-transferable quota because it was given to him on a non-transferable basis.

• The quota will cease to exist when it is returned to the Board.

Mr. Ellsworth said that up until a year ago the Board’s policy was that quota in northern Ontario had to remain in northern Ontario. He pointed out that this policy has been changed allowing quota holders in northern Ontario to sell their quota anywhere in the province. This has resulted in a sharp increase in the northern quota values.

The Tribunal examined the evidence and made the following findings:

• Mr. Ducharme was an egg producer during the qualifying period of 1969 to 1972. The evidence on how many laying hens he had during that time is inconclusive.

• It is difficult, at this late date, to question the decision of the Board in 1983. There was no explanation of why the Board provided 1,325 units of non transferable basic quota and allowed two unregulated 500 hen flocks. Why not exempt the entire flock? Why not issue 2,300 units of non-transferable quota? The end result of either decision is the same for the producer - when the producer exits the industry the flock ceases to exist and the quota is canceled.

• The Board had difficulty in determining how much quota Mr. Ducharme was eligible to receive in 1983 and the Tribunal has greater difficulty now that another 14 years have passed.

• Mr. Ducharme accepted the 1983 decision of the Board and proceeded to use the quota and non-regulated flocks since 1983 without questioning the status of his quota.

The Tribunal looked at the evidence with particular attention to the issue of equity and fairness among all of the egg producers. In the opinion of the Tribunal, the Board acted in a reasonable and compassionate manner in 1983 when it allowed Mr. Ducharme to continue egg production at the level he was at when discovered by the Board inspector. Mr. Ducharme, by not objecting to the condition on the quota, accepted the restriction that the quota must be returned to the Board when he ceased egg production and he utilized that quota for the past 14 years. In the opinion of the Tribunal, fairness and equity indicate that the original restrictions on this quota, accepted by both parties, should remain. However, since Mr. Ducharme wishes to retire from the industry and since he is the only regulated egg producer in this area, the Tribunal feels that the Board should make an effort to ensure that the production facilities can be transferred to a new owner with a full 11,000 hen production allotment.

Decision and Reasons

After careful consideration of the evidence presented and the submissions made, the Tribunal decided to deny the appeal.

However, the Tribunal directs the Board to facilitate the transfer of up to 1,304 quota units to the purchaser of Mr. Ducharme’s production facilities at the time of the sale of the production unit and at the value of quota at the time the transaction is completed. This direction is conditional on Mr. Ducharme selling the land, buildings and quota intact as a production unit within one year of the date of this decision subject to any extension of time that may be given by the Board.

The reasons for this decision are:

In the opinion of the Tribunal, given the available information, the Board acted in a responsible manner in 1983 when it issued non-transferable quota to Mr. Ducharme.

In the opinion of the Tribunal, since the Board issued a non-transferable quota, there is some responsibility on the Board to facilitate the transfer of this production unit to a new owner with sufficient quota to make the new owner’s regulated production as efficient as the existing owner’s regulated production.