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:
Peetsma v Ontario Broiler Hatching Egg and Chick Commission
Peetsma v OBHECC 1998 ONAFRAAT 52
STATUTE:
Ministry of Agriculture, Food and Rural Affairs Act
HEARING:
December 1, 1998
DATE OF DECISION:
December 11, 1998
1998-52
NEUTRAL CITATION:
1998 ONAFRAAT 52
Peetsma v Ontario Broiler Hatching Egg and Chick Commission
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 Nico and Jacoba Peetsma, Simcoe, Ontario from a decision of the Ontario Broiler Hatching Egg & Chick Commission, dated November 5, 1998:
denying Nico and Jacoba Peetsma just cause to terminate contract obligations for growing with Kenneth A. Smith for the 1999 flock for Barn 3048-31, and
requiring the completion and submission of a Standard All Purpose Contract between Jarvis Chick Sales Inc., Nico and Jacoba Peetsma, and Kenneth A. Smith no later than December 1, 1998, and
allowing the grower, Kenneth A. Smith, until January 31, 1999 to meet all minimum compliance standards which is one week prior to placement.
Before:
James Rickard, Chair; Charles Broadwell, Vice-Chair; John Lammers, Member; Karen Ratcliffe, Member.
Appearances:
Nico Peetsma, appellant.
Jacoba Peetsma, appellant.
Ralph Harris, on behalf of the respondent, the Ontario Broiler Hatching Egg & Chick Commission.
Paul Trudell, counsel for the respondent, the Ontario Broiler Hatching Egg & Chick Commission.
DECISION OF THE TRIBUNAL
This appeal was heard in Guelph, Ontario on Tuesday, December 1, 1998. Nico and Jacoba Peetsma appealed to the Farm Products Appeal Tribunal (the Tribunal) from a decision of the Ontario Broiler Hatching Egg & Chick Commission (O.B.H.E.C.C.), dated November 5, 1998:
denying Nico and Jacoba Peetsma just cause to terminate contract obligations for growing with Kenneth A. Smith for the 1999 flock for Barn 3048-31, and
requiring the completion and submission of a Standard All Purpose Contract between Jarvis Chick Sales Inc., Nico and Jacoba Peetsma, and Kenneth A. Smith no later than December 1, 1998, and
allowing the grower, Kenneth A. Smith, until January 31, 1999 to meet all minimum compliance standards which is one week prior to placement.
Background
Nico and Jacoba Peetsma (Peetsma) hold Hatching Egg Production Quota # 3048-31. Ken Smith (Smith) is a licensed Breeder Grower holding Quota # 2030.
All Broiler Hatching Egg Production in Ontario must have an associated contract between producer, hatchery, and grower(s) by O.B.H.E.C.C. regulation. Many Hatching Egg Producers, including the Peetsmas, contract the growing of their flocks from day old to 20 weeks of age with a grower other than themselves through Schedule PG201 of the O.B.H.E.C.C Standard All Purpose Contract.
Once one contract is signed the Regulation guarantees both parties two flocks further than the one being signed for, unless there is mutual agreement for early termination or just cause for early termination.
Contract # 196 was in place between the two parties as of February 15, 1997 for the growing of 7,461 day old pullets and 936 day old cockerels placing February 28, 1997. At that time Peetsma held 8,000 units of H.E.M.S. from which the allocation of the 7,461 pullets was derived.
Smith held 10,405 units of 20 Week Growing Right and had 15,289 square feet of licensed pen area which was sufficient to grow the 1997 flock.
In October of 1997 Peetsma bought 3,660 additional units of production quota. The resulting allocation for the 1998 flock, originally scheduled for February 3, 1998 would have been 12,213 females and 1,700 cockerels. The size of the flock was too large for Smith to handle with the present facilities. Those facilities were limited (by space available) to a maximum placement of 10,511 day old chicks. As part of the quota purchase approval process, the parties agreed, in order to give Smith time to adjust, to split the 1998 flock between two different growers. A further agreement was made to adjust allocation for February 3, 1998 placement.
On January 3, 1998, Peetsma gave written notice to Smith that they wished to terminate the contracting arrangements for growing of the flocks. A contract had not yet been signed for the 1998 flock. By regulation PG 201 E-10, once notice was given, there would be two more flocks grown by Smith for Peetsma, the February 3, 1998 flock, and one to follow.
In early September of 1998 Jarvis Chicks (Jarvis) realized that Smith had not added enough space to accommodate the 1999 Peetsma flock which had an allocation of 11,759 day old females placing January 12, 1999. Also, flock scheduling was such that the flock in the Smith barn placed August 25, 1998 would not reach 20 weeks of age until January 11, 1999, leaving no time for cleanout.
On September 24, 1998, inspector Jerry Waugh of O.B.H.E.C.C. went to the Smith farm to measure potential space on the third floor of the Smith facility. His finding was that 6,040 square feet of pen area could be feasibly renovated for licensing to Commission standards.
On Friday, September 25, 1998, Mr. Peetsma drafted a just cause notice of contract termination to Ken and Linda Smith. The Smiths challenged the just cause application, a hearing was held by the O.B.H.E.C.C. on October 16, 1998, and a decision not to grant the application was made.
This decision is now being appealed to the Tribunal.
The Issue
The issue before the Tribunal is:
Should Nico and Jacoba Peetsma be granted their application for just cause termination of their contract obligations with Kenneth A. Smith, for growing their pullets for the 1999 crop immediately?
The Evidence and the Findings
Jacoba Peetsma told the Tribunal that the Smiths have had plenty of time to build since they knew fourteen months ago that more space was required. She said that in September 1998, the Realtor for the Smiths, who were in the process of selling their farm, asked Peetsmas to sign an acknowledgment that the new growers would take over existing growing contracts. That is when it came to light that the Smiths had not yet begun building to accommodate the flock for January 12, 1999. Also it came to light that the Peetsma flock and the flock now in the barn would be overlapping by a day. Therefore, Smith would have no time to disinfect, sanitize and clean the barn properly.
Mrs. Peetsma said that the Smiths asked to move the flock back three weeks and she felt they had no choice but to accommodate Smith and place their flock February 5, 1999 instead of January 12, 1999. This translates into three weeks of financial loss for Peetsma. She said that splitting the 1999 flock between two growers was discussed and Peetsma objected to that because it costs them more money to manage split flocks and so they advertised for growing space. However, there was no response. The Commission gave them addresses to call but to no avail. She said she then contacted John Kraay, pullet director, and he too was unable to help. Brian and Michelle Snyder called Fleming Chicks and Cuddy Chicks. They too could not accommodate the Peetsma’s request. Ben Depew has an empty barn in January 1999, but he did not want a split flock because his barn is too big for a small flock, and thus it would not be financially suitable. Mr. Depew can accommodate the whole Peetsma flock. She said that, for these reasons they had filed a just cause action with the Smiths on September 25, 1998.
She said they had a just cause meeting with O.B.H.E.C., and it was decided that the Smiths should grow the entire flock because the Smiths committed themselves to providing sufficient space. The entire flock consists of 13,103 day old chicks @ $3.50 = $45,860.50 U.S. funds, plus 1890 cockerels @ $3.50 = $6,615.00 U.S. for a total of $52,475.50 U.S. She said that day old birds with high values should be placed with the best quality facility, which the Smiths don’t have in the attic of their barn. She is concerned that O.B.H.E.C. is not allowing enough time to ensure the quality of the facility especially with the 5% increase just announced. O.B.H.E.C. was aware of this problem when the last flock was grown at the Smiths and they did not sufficiently warn Smith that another contract would not be available unless their facilities were large enough to grow future flocks. The Smiths tried to sell their farm without success. Smith has chosen to modify their facility with the least amount of space necessary under O.B.H.E.C. rules. Mrs. Peetsma said she is concerned that the Smiths untested facilities will be ready only one week before placement. There is a flock in the existing barn until three weeks before the Peetsma flock is due to arrive. She told the Tribunal that the Smiths will be trying to complete renovations in the worst weather of the year which could mean the renovations will not be completed in time. She said that last year they placed their flock on two farms partially to accommodate the Smiths lack of space, and this cost them a great deal of money. A split flock is not an option for the Peetsma flock this year as no one has found a second barn for a small flock. She said they have tentatively asked Depew if he would take their flock if the Smiths fail to have their renovations completed on time.
Mr. Peetsma said moving their placement date to February 5th ,1999, affects them financially as they have commitments at the bank on certain dates. He said they order the chicks from the hatchery and they say they are coming a certain day. A conflict can happen when different hatcheries do not coordinate dates.
Mr. Peetsma told the Tribunal that with the J-virus, the more stress the more mortality while the more space the healthier the flock. He said with the last flock the 5,000 birds that were raised by Smith he put on one floor in his barn; and 5,000 on another floor and 2,000 in the old barn. This increased their costs as they had to hire more people to cover the work. They do not want to do that again. They would like to place their birds in a proven tested facility.
In response to questions of counsel for O.B.H.E.C., the Peetsma’s said:
Ben Depew can place their birds February 5th, 1999 provided he gets the contract on time.
Their main concern is whether or not the renovations contemplated by the Smiths will be satisfactory and completed on time.
The Smith’s facilities will not be able to accommodate the 5% sleeve which means they will lose that option.
In response to questions of the Tribunal, Mr. Peetsmas said that:
Mr. Depew sent them a fax saying he could have his barn ready if bedding and shavings are ordered by January 15th, 1999.
He needs to know if the barn needs to be cleaned by January 12th, 1999 when the present flock leaves.
O.B.H.E.C.C. will inspect the Smiths barn a week before the chicks are placed to make sure it is acceptable.
The hatchery, Jarvis Chicks, also inspects the facility the day before the chicks are delivered.
Ralph Harris, data coordinator testified on behalf of O.B.H.E.C. He said that O.B.H.E.C. standards require that for every day old breeder there is 1.6 square feet of space available. A 10% sleeve is allowed for mortality. He said if the Smith’s complete the renovations, they will have enough space to accommodate the February 5, 1999 placement. The O.B.H.E.C. has two staff who inspect the facilities of the hatching egg producers and breeder growers. He said if a grower does not provide space as required the hatching egg producer can ask to cancel the contract for just cause. He said the Peetsmas requested early termination of contract for just cause.
He said the Smith facility has two contracts. The other producer’s flock is also larger than Smith can handle and the Penners have given notice of terminating their contract. As a result, the Smiths notified them they were investigating options of expanding their facility. He said that Smith proposed renovating the third floor of the barn. O.B.H.E.C. inspected the facility and looked at the proposed renovations. The Smith proposal meets the minimum space standards to handle the February 5th, 1999 placements with the exception of the 5% increase just given to producers who could meet the criteria. The 5% decision was taken only this past week to allow hatching egg producers to increase production next year if facilities allowed. O.B.H.E.C. knew that not all producers would be in a position to take advantage of this.
Mr. Harris told the Tribunal that he had contact Mr. DePew and was assured that if the Smith renovations were not completed on time that DePew could take the flock on short notice.
He said that the problem with split flocks is the difference in management styles of pullet producers who grow the flock. Out of the 140 flocks grown probably 10 per year are split. He said some people do not have a choice on whether or not to split their flock.
He said the scheduling and allocation are completed by O.B.H.E.C. Mr. Penner and Mr. Peetsma receive chicks from different hatcheries resulting in an overlap in these flocks. Thus there is a small delay in placing the Peetsma flock, but adjustments like this are common.
Gerry Waugh, inspector with O.B.H.E.C., visited the Smith farm on September 24, 1998 to determine if it was possible to grow birds in the upper portion of the three story barn. He said he viewed and measured the attic space. The inspection was based on whether or not the birds could be housed under O.B.H.E.C. husbandry rules. He said he advised O.B.H.E.C. that the proposal met the husbandry requirements. The numbers from the first visit were 13,325 birds up to 20 weeks of age. At that time Peetsma was looking for space for 13,300 birds. He said he revisited the farm on November 25th, 1998, and some work had been completed. He said the plywood is in place on the floor but was not fastened down so as not to disturb the birds below. Lights had been hard wired in. The flock presently housed on the Smith farm will leave January 11, 1999, and the rest of the renovation can begin as soon as these birds leave. He said O.B.H.E.C. can observe the renovations and monitor progress.
In response to questions of the Tribunal, Mr. Waugh said:
This is the first breeder grower barn he has seen with 2 ½ floors used.
O.B.H.E.C. only looks at the square feet and whether waters, feeders and ventilation are in place.
A final inspection is completed a week before the birds are placed.
Mr. Smith told the Tribunal they have purchased the plywood and plastic for the renovations. The feeders are to be picked up this week. They have received quotes on the ventilation system. He said:
no building permit is required since no structural changes are being made.
they have 12 people lined up for January 12th, 1999, to complete the renovations.
renovations can be carried out while the facility is being cleaned out.
all of the work to be completed is inside the barn so outside weather is not a concern.
it takes six hours to clean the barn and two days to wash it down.
three days before birds are to come the barn is disinfected. At this time the shavings are in.
Ed Mosterd, board director for O.B.H.E.C., told the Tribunal that he is a breeder grower and hatching egg producer. He said the Board of Directors reviewed the positions of the parties at a hearing and decided that it was reasonable that the Smiths could supply the contract to Peetsma. He said it is a simple renovation. He said he has no concerns that the area will not work nor with the time deadline. He said initially Peetsma was to start their pullets January 12th, 1999 but because of the back up in the Smith barn start up was put off to February 3rd. Because of that the Peetsmas get more pullets. He said in a “worst case” scenario, the birds can be grown in the Depew barn.
Jan Gallagher, executive assistant with O.B.H.E.C. said he spoke with Mr. Depew last week and was assured that his barn could be available for placement February 5th, 1999. He said the 5% additional is being offered providing chicks and space are available,
In summation Mrs. Peetsma told the Tribunal that their main concern was whether the facility could be ready for February placement of the flock. There is a great deal of money involved to place birds into an untested facility and they just want to be assured that their flock will be grown in one location that has been proven suitable for growing pullets.
In his summation Mr. Trudell, counsel for O.B.H.E.C., argued that the O.B.H.E.C.C. canvassed the positions of the parties, reviewed the information at hand and came up with a decision it felt was in the best interest of everyone and in compliance with the regulations. O.B.H.E.C. does not want to arbitrarily cut short some one’s right to earn a living. This is the last flock that the Smiths have with the Peetsma in any event. When confronted with the obligation, the Smiths have gone into the renovation with some vigor, to convince O.B.H.E.C. that they are committed to accept these birds and be good breeder growers. Some work has already been completed. O.B.H.E.C. is prepared to monitor the renovation progress daily. Mr. Peetsma has an honest concern that their birds be placed in a facility that is a proven tested facility. No complaints have been registered about the husbandry practices carried on by the Smiths. In the unlikely event that there is a problem at the Smiths that cannot be corrected between January 12th and February 5th then the Depew facility awaits in the background.
He said it is not unheard of that there is an adjustment in placement date, that is why there are a greater number of birds given to a grower for a delay not anticipated. The Peetsma’s have made it clear that their argument is uncertainty in the facility. He said he did not address the financial difficulty in the delay. The delay is not the fault of the Smiths, there will be no loss because the compensation has been addressed by allowing more birds to make up the difference.
The Tribunal examined the evidence and made the following findings:
Peetsma increased their quota 3,660 quota units. This makes their flock larger than the Smith barn can accommodate in its present condition.
The 1998 Peetsma flock was split and grown in two separate barns. The Tribunal acknowledges that a split flock is less efficient than a single flock.
Peetsma gave notice in January 1998 that he was terminating his contract with Smith.
In September 1998 Peetsma made an application for cancellation of the Smith contract for Just Cause. This application was made in a timely manner.
Smith committed to expanding his growing facilities to accommodate the 1999 Peetsma flock.
The evidence shows that there is a good probably that the Smith barn will be renovated on time to place the flock on February 5th, 1999.
The Tribunal takes comfort that the Commission will be monitoring the progress of the renovations.
Ben Depew has a barn available to grow the 1999 Peetsma flock if necessary.
The Tribunal accepts the evidence that the renovations to the Smith barn, to a size large enough to accommodate the 1999 Peetsma flock that has been allotted by the O.B.H.E.C.C., can be completed in time to place the flock February 5, 1999.
The Decision and Reasons
After careful consideration of all the evidence before it, the Tribunal decided to deny the appeal but direct O.B.H.E.C.C. to monitor the renovation of the Smith barn and take any action necessary for the allotted 1999 Peetsma flock to be grown in a single facility.
The reason for this decision is that the Tribunal found no just cause to terminate the contract between Smith and Peetsma.
DATED at GUELPH, Ontario THIS 11th day of December, 1998.