Levac v Chicken Farmers of Ontario, 1997 ONAFRAAT 32

Agriculture, Food and Rural Affairs Appeal Tribunal 1 Stone 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

Levac v Chicken Farmers of Ontario

Levac v CFO 1997 ONAFRAAT 32

Ministry of Agriculture, Food and Rural Affairs Act

July 22, 1997

DATE OF DECISION:

August 11, 1997

1997-32

1997 ONAFRAAT 32

Levac v Chicken Farmers of Ontario

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

An appeal to the Farm Products Appeal Tribunal by Mr. Jean Levac from a May 28, 1997 decision of the Chicken Farmers of Ontario finding that Mr. Levac was in violation of General Regulation No.402 and General Regulation No. 1343-1996 of the Chicken Farmers of Ontario by producing and marketing 2,000 kilograms of chicken that was not reported. The Chicken Farmers of Ontario decided to apply the normal license fees, CCMA levies and production quota policies to this production and to reduce Mr. Levac’s crop quota for Quota Period A-16 by 10,000 kilograms for not reporting this production.

Before:

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

Appearances:

Mr. Jean Levac, appellant.

Mr. Kevin Thompson, on behalf of the respondent the Chicken Farmers of Ontario.

Mr. Ron O’Connor, on behalf of the respondent the Chicken Farmers of Ontario.

Mr. Don MacAllister, on behalf of the respondent the Chicken Farmers of Ontario.

Mr. Geoffrey Spurr, counsel to the respondent the Chicken Farmers of Ontario.

DECISION OF THE TRIBUNAL

This appeal was heard in Alfred, Ontario on July 22, 1997. Mr. Jean Levac appealed to the Farm Products Appeal Tribunal (the Tribunal) from a May 28, 1997 decision of the Chicken Farmers of Ontario (the Board) finding that Mr. Levac was in violation of General Regulation No.402 and General Regulation No. 1343-1996 of the Board by producing and marketing 2,000 kilograms of chicken that was not reported to the Board. The Board decided to apply the normal license fees, CCMA levies and production quota policies to this production and the Board also decided to reduce Mr. Levac’s crop quota for Quota Period A-16 by 10,000 kilograms for not reporting this production. Mr. Levac appealed the penalty that has been applied.

The Background

At the beginning of the hearing, Mr. Levac admitted that he had marketed 2,000 kilograms of chicken to Abattoir Plantagenet in April 1996 that was not reported to the Board. Mr. Levac asked the Tribunal to review the amount of quota reduction imposed by the Board in light of the circumstances of the case.

The facts of the case are as follows:

Mr. Jean Levac is a licensed chicken producer with the Board and has been fixed and allotted a basic quota of 6,500 units. He has been a producer for the past six years.

Abattoir Plantagenet was a chicken processor located at Plantagenet, Ontario processing chicken during April 1996, the time the unreported marketing took place. Abattoir Plantagenet applied for bankruptcy in early 1997 and is no longer in business.

On April 21, 1996, Jean Levac marketed 11,330 kilograms of chicken to Abattoir Plantagenet. However the weight was reduced by 2,000 kilograms by changing the numbers on the weigh ticket. The reduced weight of 9,330 kilograms was reported to the Board by Abattoir Plantagenet on Form 68 and by Jean Levac on Form 6. The Board office staff noticed the weigh ticket had been altered and Field Officer Don MacAllister investigated the matter.

After initially denying the allegations, all parties admitted to the marketing of the 2,000 unreported kilograms. Mr. Levac was paid for this chicken by Abattoir Plantagenet at the time of the marketing.

Abattoir Plantagenet pled guilty in provincial court and was fined $400.00 each on six related charges for violations of the Board’s regulations.

The Board added the production to Mr. Levac’s reported production for Period A-06, with all normal licence fees, over production levies and production adjustments being made. The Board then decided to reduce a future crop quota of Mr. Levac by an amount equal to five times the unreported production, or 10,000 kilograms, for contravention of its regulations.

The Issue

The issue before the Tribunal is whether or not a penalty of 10,000 kilograms of chicken is an appropriate penalty for not reporting 2,000 kilograms of production given the circumstances of this particular case.

The Evidence and the Findings

Mr. Jean Levac told the Tribunal that he has been a chicken producer for the past six years and was associated with the Abattoir Plantagenet slaughter house. He works in a nine week cycle - 40 days for the chicks to grow. He said if the slaughter house comes in 45 days to get the chicken he has no control over that. The slaughter house knows when the chicks came in and when the chicken should go out of the barn.

He said this time was difficult for him. He outlined his difficulties with Abattoir Plantagenet as follows:

At times he waited five or six weeks to be paid, even then some cheques were not honoured by the bank and he had to return to the back door of the plant to get a new cheque. He said he had to do this at least 50 times.
He had problems with the number of birds the slaughter house reported as killed. The numbers did not correspond to what he thought the numbers should be - they were never off by 1,000 birds but there was always a difference.
The birds were often picked up late so they were marketed heavier than they should have been and he was often over his allotted quota and had to use the 5% production sleeve and on occasion had to pay over production levies.

Mr. Levac told the Tribunal that he was very frustrated by the actions of Abattoir Plantagenet. He has had no problems since changing to Maple Leaf as his processor.

He said that, in April 1996, he knew that the birds were heavy. He had asked Abattoir Plantagenet to come and pick up the birds but they were late. When he complained to Mr. Jacques Drouin, at Abattoir Plantagenet, Mr. Drouin told him not to worry that he would fix it. Mr. Levac said when the birds were loaded he gave his Form 6 book to the driver and said he was absolving himself of responsibility and Mr. Drouin was going to fix things. He said when he found out that the slaughter house had not reported the total production to the Board, he did not know what to do to fix it so he did nothing until Mr. MacAllister arrived at his farm asking questions about the weigh ticket. He said he told Mr. MacAllister about the 2,000 kilograms and provided banking information to prove what had gone on.

Mr. Levac told the Tribunal that:

He knew that the chicken was not reported.
He was paid for all his production.
Once the paperwork had been sent to the Board he did not know how to resolve the problem so he did nothing.
He knew he had contravened the Board regulations.

Mr. Levac said that, considering the circumstances and the problem he had with Abattoir Plantagenet, he felt the penalty was too high.

Mr. Kevin Thompson, Marketing Co-ordinator for the Board, told the Tribunal the Board has been delegated authority by the government to make sure that chicken is produced in the province under a quota system. This is primarily for the benefit of chicken farmers so the Board considers unreported chicken production as a very serious offence. It attacks the heart of the system. He said there is a financial incentive for producers to produce extra chicken - it is profitable. Mr. Thompson said that it is very difficult to catch the individuals involved. According to Mr. Thompson if the Board staff had not noticed the discrepancy in the weigh ticket for this case, this production would have been marketed and no one would have known. He said that once confronted with the Board’s information, Mr. Levac admitted to the marketing and co-operated with the Board.

Mr. Thompson said that for this quota period Mr. Levac had under-marketed 1,050 kilograms. If he had reported the proper number of kilograms of chicken, he would have been over-marketed by 950 kilograms and would have been within his 5% production sleeve and there would have been no penalties or other consequences of the action. Mr. Levac’s crop quota for a future period would have been reduced by the 950 kilograms of over-marketing. However, once production is not reported the producer’s marketing position is irrelevant as far as the Board is concerned. This is illegally marketed chicken and when found the kilograms are added to the production records of the producer and the licence fees, CCMA levies and over-production levies (if any) are calculated and charged to the producer. He said, in this case, the Board also decided to apply a crop quota reduction of 10,000 kilograms or 5 times the number of kilograms of chicken not reported.

Mr. Thompson said that since he started working at the Board there have been various guidelines followed for crop quota reductions when illegally marketed chicken is the offence. He said that the penalty for first offences has varied from:

(1) 2 times the kilograms involved with a minimum of 5,000 kilograms in quota reduction.

(2) 3 times the kilograms involved.

(3) 5 times the number of kilograms of chicken involved.

(4) Cancelling basic quota.

According to Mr. Thompson, during the past year the Board has set quota penalties at 3 times and at 5 times the unreported kilograms and has cancelled basic quota, depending on the facts of the case.

Mr. Ron O’Connor, chicken producer and chair of the board of directors for the Board, told the Tribunal that he was chair at the hearing for Mr. Levac and took part in the decision. Mr. O’Connor said that, from a farmer’s view point, unreported production is the most serious violation of the Board’s regulations. He said that the system was put in place for the benefit of all chicken farmers and when a farmer uses the system to try to cheat his fellow farmers that is viewed as serious. He said the Board was concerned that if the penalty system does not act as a deterrent to illegal production the system will not be sustainable. He said that the Board gives the farmer all the flexibility it possibly can within the supply managed system.

Mr. O’Connor said that when he first came on the Board the penalty guideline for unreported production was 3 times the amount of kilograms involved. He heard from the producers that this penalty was just a cost of doing business. He said the Board took a tougher stand and has gone the range of cancelling basic quota and a heavier assessment on production quota in order to act as a deterrent to illegal production.

Mr. O’Connor said that the Board had considered the fact that:

Mr. Levac is a smaller producer.
The case involves a small amount of unreported production.
It was a one time occurrence.
It was a first offence.

According to Mr. O’Connor, after considering all of these facts, the Board decided an appropriate penalty was 5 times the amount of kilograms involved.

In response to questions from Mr. Levac, Mr. O’Connor said that in cases where a smaller producer had a substantial penalty, the Board has spread the penalty out upon request from the producer. Mr. O’Connor said that the Board’s decision on such a request would depend on the circumstances of the individual case. Mr. O’Connor said that Mr. Levac had chosen not to attend at the Board hearing and had not requested the Board to consider spreading the penalty over more than one quota period or in a different quota period.

The Tribunal considered the evidence. The Tribunal agrees with the Board that:

Illegal production is a serious breach of the Board’s regulations.
The Board has a mandate to uphold the integrity of the marketing system in the industry.
The magnitude of the penalty for illegal production should serve as a deterrent to both the individual producer as well as the industry as a whole.

In the opinion of the Tribunal, the penalty is severe and may be exaggerated especially when one considers that most of the excess production would have been covered by Mr. Levac’s quota had the production been properly reported. Clearly Mr. Levac contravened the Board’s regulations, but the Tribunal believes this was an act of omission caused by frustration with the processor rather than a deliberate attempt by Mr. Levac to circumvent the production regulations.

Having considered all of the factors, the Tribunal concluded that while Mr. Levac did contravene the regulations and market chicken without reporting to the Board the penalty imposed by the Board ought to be adjusted.

Decision and Reasons

After carefully considering the evidence presented and submissions made, the Tribunal decided to deny the appeal but adjust the penalty for marketing unreported chicken from 10,000 kilograms of chicken to 6,000 kilograms of chicken. This penalty is to be applied in a future quota period or periods at the discretion of the Board.

The reasons for this decision are:

This is the first offence for Mr. Levac.
Mr. Levac co-operated fully with the Board once the issue was identified by the Board.
In the opinion of the Tribunal this was a one time occurrence warranting a penalty at the lower end of the range applied recently by the Board for illegal production offences. A penalty of 3 times the kilograms involved appears to be consistent with other decisions the Board has reported to have made in the past year.
This penalty is about 50% of Mr. Levac’s crop quota for a quota period and, in the opinion of the Tribunal, ought to act as an individual deterrent to illegal production.

Dated at Guelph, Ontario this 11th day of August, 1997.