Bodnar v. Ontario Flue-Cured Tobacco Growers’ Marketing Board, 1999 ONAFRAAT 29

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

Bodnar v Ontario Flue-Cured Tobacco Growers’ Marketing Board

Bodnar v OFCTGMB 1999 ONAFRAAT29

Ministry of Agriculture, Food and Rural Affairs Act

November 15, 1999

DATE OF DECISION:

December 13, 1999

1999-29

1999 ONAFRAAT29

Bodnar v Ontario Flue-Cured Tobacco Growers’ Marketing Board

IN THE MATTER OF 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 Paul and Linda Bodnar, Langton, Ontario from a decision of the Ontario Flue-Cured Tobacco Growers’ Marketing Board (the Board) dated September 9, 1999, wherein the Board denied a request for exemption from General Regulation 1999-2000, Section 18(1) to process Spring Rental past the deadline of May 21, 1999 and Section 18(3) to rent out in excess of 30% of the 1999 marketing quota.

Before:

Nick Doelman, Vice-Chair; Jim Rickard, Chair; Denis O’Connor, Alternate-Chair; Karen Ratcliffe, Member.

Appearances:

Paul and Linda Bodnar, appellants.

Scott Campbell, counsel to the appellant.

Barry Bresner, counsel to the respondent, the Ontario Flue-Cured Tobacco Growers’ Marketing Board.

DECISION OF THE TRIBUNAL

This appeal was heard in Guelph, Ontario on Monday, November 15th, 1999. Paul and Linda Bodnar appealed to the Farm Products Appeal Tribunal (the Tribunal) from a decision of the Ontario Flue-Cured Tobacco Growers’ Marketing Board (the Board) dated September 9, 1999, wherein the Board denied a request for exemption from General Regulation 1999-2000 (the Regulation), Section 18(1) to process Spring Rental past the deadline of May 21, 1999 and Section 18(3) to rent out in excess of 30% of the 1999 marketing quota. The issue to be decided is whether the decision of the Board to deny the Bodnars request is reasonable.

The pertinent sections of the Regulation are as follows:

Rental of Marketing Quota

11.(1) All rentals of basic production quota are prohibited.

11.(2) All rentals of marketing quota are prohibited, except for:

(a) such spring and fall rentals as are permitted under Sections 18 and 19 hereof;

(b) such rentals between members of an immediate family as are permitted under Section 12 hereof;

(c) such rentals between a partnership and a partner thereof as are permitted under Section 13 hereof, provided that the partnership was an allottee of basic production quota and was in existence on or before March 17, 1998; and

(d) such rentals between a corporation and a shareholder thereof as are permitted under Section 13 hereof, provided that the corporation was an allottee of basic production quota and that the shareholder was a shareholder of that corporation on or before March 17, 1998.

11.(3) No person is eligible to rent in marketing quota pursuant to the exceptions granted by subsection (2) of this Section unless that person is a licensed producer who is an allottee of a basic production quota of not less than 10,000 pounds who produces tobacco on his own account pursuant to a marketing quota derived from that basic production quota allotted for 1999.

11.(4) An allottee of marketing quota who rents in marketing quota pursuant to the exemptions granted in any of sections 12, 13 or 18 hereof may not rent out marketing quota under any other of those sections and an allottee of marketing quota who rents out marketing quota pursuant to the exemptions granted in any of those sections may not rent in marketing quota under any other of those sections.

Spring Rental of Marketing Quota

18.(1) Subject to Section 11(3) hereof and to subsections (2) through (7) of this Section, an allottee of marketing quota who was eligible to rent in or rent out marketing quota in the Fall of 1998 pursuant to the provisions governing the Fall rental of marketing quota contained in Section 19 of the General Regulations 1998-1999 or who would have been eligible for such Fall rental but for the prior rental of the allottee's 1998 marketing quota pursuant to Section 12 or 13 of the General Regulations 1998-1999, may apply to the local board to cancel the marketing quota and to fix and allot the marketing quota to a lessee by filing with the local board an application in Form 93, completed and executed by the lessor and the lessee, at the Head Office of the local board, during the period from May 12, 1999 to 4:30 p.m. Friday, May 21, 1999.

18.(2) The local board may refuse to grant an application under this Section if the lessor or lessee is not in compliance with all requirements of these General Regulations.

18.(3) The local board shall not grant an application under this Section where the amount of marketing quota in respect of which the application is made exceeds thirty percent (30%) of the marketing quota fixed and allotted to either the lessor or the lessee as of 4:30 p.m. on Friday, May 7th, 1999.

18.(4) For purposes of this Section, an allottee of basic production quota who was eligible to rent marketing quota in the Fall of 1998, but whose application for marketing quota discloses an intention to not produce or market tobacco in 1999 and to not apply to transfer basic production quota in 1999, may apply to rent out marketing quota under this Section and, for that purpose, shall be allotted 30% of the marketing quota fixed under Section 14(3) of these General Regulations.

18.(5) An allottee of marketing quota whose application for marketing quota discloses an intention to grow a crop in 1999 or to market only carryover tobacco in 1998 may apply to rent in or rent out marketing quota under this Section, but not both. All other allottees of marketing quota may only apply to rent out marketing quota under this Section.

18.(6) A rental of marketing quota pursuant to this Section shall not affect the calculation of the minimum number of acres to be planted by each allottee of marketing quota pursuant to Section 15 of these General Regulations.

18.(7) A non-refundable administration fee of $100.00 for late filing shall be paid to the local board on the filing of any application for rental under this Section after 4:30 p.m. Friday, May 21, 1999. The local board, in its discretion, may refuse any such late filed application.

Fall Rental of Marketing Quota

19.(1) Subject to Section 11(3) hereof and to subsections (2) and (3) of this Section, an allottee of marketing quota who is marketing tobacco on his own account in the 1998-1999 crop year who wishes to rent out marketing quota on or after September 3, 1999, may apply to the local board to cancel the marketing quota and to fix and allot the marketing quota to a lessee by filing with the local board an application in Form 95, completed and executed by the lessor and the lessee at the Head Office of the local board on or before the final day of the marketing of the 1999 crop at the local board's exchanges.

19.(2) The local board may refuse to grant an application under this Section if the lessor or lessee are not in compliance with all the requirements of these General Regulations.

19.(3) The local board shall not grant an application under this Section where the amount of marketing quota in respect of which the application is made exceeds twenty percent (20%) of the marketing quota or the aggregate of the marketing quota held by either of the lessor or the lessee on September 3, 1999, as shown by the quota records of the local board.

19.(4) For the purposes of calculating the marketing quota held by an allottee on September 3, 1999, the local board may take into account any marketing quota derived from basic production quota which is in the process of being transferred to said allottee pursuant to an application for that purpose filed with the local board on or before September 3, 1999.

19.(5) An allottee who is only marketing carryover tobacco and whose carryover represents 70% or more of the marketing quota initially allotted to that allottee for the 1999-2000 crop year, shall be eligible to rent out up to 20% of that marketing quota on and after September 10, 1999.

19.(6) Notwithstanding subsection (3) of this Section an allottee of supplementary marketing quota under Section 7 hereof may rent out the pounds of supplementary marketing quota so allocated to another allottee of supplementary marketing quota by filing with the local board an application in Form 95 on or before the final day of marketing of the 1999 crop at the local board's exchanges, provided that the local board shall not grant an application under this Section where the total amount of marketing quota and supplementary marketing quota being rented in by the lessee exceeds twenty percent (20%) of the marketing quota or the aggregate of the marketing quota held by the lessee on September 3, 1999 as shown by the local board's records.

The Background

The Bodnars reside in Norfolk Township and operate a small farm there. They have 37 workable acres. They are the owners of 49,260 pounds of Basic Production Quota (BPQ) which they purchased in 1994 from the father of Mr. Bodnar. In March 1999, the RCMP seized the tobacco on the Bodnar farm as part of an ongoing investigation into illegal sales of tobacco. The Bodnars have since been charged with violations of the Excise Act. These charges have not been pled in court. In May of 1999, the Bodnars negotiated the sale of their BPQ to another tobacco grower. The BPQ is encumbered by Farm Credit Corporation and it consented to the conveyance. On June 9, 1999, the Board advised the Bodnars of its decision to defer a decision on the transfer of quota until such time as it can determine whether the Bodnars are in good standing with the Board regulations. The Bodnars then applied to the Board requesting an extension of time for applying for spring rental and for approval to rent out 100% of the marketing quota that could be fixed and allotted to their BPQ. The Board denied both of these requests and the Bodnars appealed these decisions to the Tribunal.

The Issue

The issue before the Tribunal is: Should Mr. & Mrs. Bodnar be granted an extension of the deadline for applying for spring rental of marketing quota and an exemption from the Regulation that would allow them to rent out 100% of the Marketing Quota that would have been allotted to them in the spring of 1999 had they indicated an intention to grow tobacco in 1999?

The Evidence and the Findings

Mr. Campbell, counsel to the Bodnars, told the Tribunal that:

There is no dispute that the Bodnars decided not to grow a crop in 1999 and instead they decided to sell their BPQ. They had all of the papers signed and witnessed on April 8, 1999 and submitted to the Board with a closing date in May 1999. The Board’s decision to defer a decision on the application to transfer the BPQ was made after the deadline to request spring rental, so the Bodnars had to make a request to the Board for an extension of the time to apply for spring rental.
The Bodnars are in difficult financial circumstances.
The Board has declined the application for spring rental for the same reason as it deferred the application for transfer – because the Board is of the opinion that it cannot determine if the Bodnars are in “good standing”.
This decision of the Board is punitive in nature. The opportunity to rent the quota will be lost if the Bodnars are exonerated of the charges. In effect the Board has imposed a penalty before there has been a conviction by the Courts or the Board.
The parties came to a mutual release from the agreement of sale otherwise the Bodnars could have faced a breach of contract loss as well.

Mr. Bodnar told the Tribunal that he and his wife used to have off-farm income. They purchased the farm on the basis that the first fifteen years of farm income would pay the mortgage. After three years of farming he quit his off-farm job but his wife continued to work off-farm. Both he and his wife had the misfortune of breaking their legs in the same year and neither could work. Then his wife lost her off-farm employment and there was no income to support the farm. They have used their savings to make the payments on the farm. His children work off the farm and he is now self employed. He rented his land to a farmer to grow carrots. He said that up to the time that they decided to sell their PBQ, they were considering growing tobacco in 1999 but the numbers did not work out. They decided to sell the BPQ and pay the mortgage so they could stay on the farm.

Mr. Bresener, counsel to the Board, told the Tribunal that:

The Board decision to defer its decision on the BPQ transfer was made because the Board is not in a position to determine if this producer is in good standing with the Board’s regulations.
The Board is prepared to conduct a hearing into the merits of the situation as soon as the producer wants a hearing. The Bodnars do not want the Board hearing until after the criminal case is heard.
The Board is not in a position to approve the exemption from the regulations to grant a benefit to a producer in Bodnar’s position without determining if there has been a violation of the regulations. Section 18(2) of the Regulation states that producers who are in compliance with the regulations are entitled to a spring rental of 30% of the marketing quota derived from their BPQ, but are not entitled to rent out 100% of their marketing quota.
Spring rental of quota is used to adjust crop size.
An exemption for 100% rental is granted only in extreme circumstances such as a crop failure after the crop is in the ground, severe health problems, or circumstances of a catastrophic nature.
The Board is not exacting a penalty. It is not granting a request for exemption from the regulations because the circumstances are not considered to be extraordinary.
This is not a matter of compensation for a loss of income. Had Mr. Bodnar sold his quota in the spring he would not have any marketing quota to rent out. If he is exonerated of the charges he can still sell his BPQ. If he is allowed to rent and to sell BPQ later, then he will receive more. That would be a benefit, not a penalty.
If Mr. Bodnar had completed his application for marketing quota and produced a crop he would be treated with presumption of innocence and would be allowed to produce and sell a crop so long as he did not have to ask the Board for an exemption.

Mr. Gilvesy, chair of the Board of Directors of the Board, told the Tribunal that the Board is aware of two other producers who are charged in the same investigation as Mr. Bodnar and who are growing tobacco and selling tobacco in the current market. The current market is about 40% completed. These two producers were treated in an administrative manner as they indicated they were growing tobacco and so did not require a decision from the Board. Mr. Duval also asked to sell his quota and had a deferred decision from the Board. He then asked for an extension to apply for spring rental and an exemption so he could rent out 100% of the marketing quota and the Board denied that request, just as it has for Mr. Bodnar.

Mr. Gilvesy said that the sale of tobacco illegally is a sensitive issue within the community. The community is watching the situation and how the Board is handling it. For the Board to take the position of wanting to know all of the facts is deemed to be prudent. Selling tobacco illegally is the greatest offence to the regulations that can be committed, so the growers are watching the Boards’ actions very carefully.

The Tribunal informed the parties that it had a concern as to whether the Board is treating the four producers known to be involved in this investigation in a fair manner. It appears that two producers who have allegations of misconduct are allowed to produce and sell tobacco in 1999 and two others similarly accused have been denied ability to derive income from their quota in 1999. Is this fair? The Tribunal asked the parties to specifically address this concern.

Mr. Campbell said this is the primary concern of the appellant. He argued that, Mr. Bodnar made an application to transfer his quota, the Board deferred its decision past a deadline that he would have otherwise met, and then it denied his request to rent out his quota. The others who are accused and decided to produce are granted a license to produce and given marketing instructions, and do not have to come to the Board and ask for an indulgence. He said the other unfairness is in interpretation of Section 18(2). The Board interprets it to say they may refuse the request if the lessor is not in compliance with all the regulations. But, we do not know whether there is compliance, until the charges are resolved. The Board has reversed the onus – the producer has to prove he is in compliance, not, the Board has to prove he is not in compliance. The rules of natural justice should apply and equality is one of the rules. People should be treated equally, all people in similar situations should be treated the same. A reasonable approach for Bodnar to take is to rent out his quota until such time as the criminal charges are decided.

Mr. Bresner argued that the Board is treating producers in like circumstances in the same way. He said there are two alike, Duval and Bodnar, another two individuals about whom we have little information and they are in different circumstances. They are growing crops within the general regulations of the Board. Until such time as there is a finding that there has been a violation of the regulations they are entitled to do what the regulations entitle them to do. No one has found any wrong doing by Mr. Duval. The difference arises from the fact that Mr. Duval and Mr. Bodnar in the spring decided not to grow crop but to sell out. When that situation gave rise to applications for transfer of quota and those applications were deferred, they applied for an exemption for something the Regulation does not provide them. They ask for the right to late file an application to rent quota and rent more than the regulations provide. In coming to the Board for an exemption, these producers are not being found guilty of an offence at this stage. The other two producers have not come to the Board for anything.

The Tribunal examined the submissions made. The issue for the Tribunal is whether or not the Board acted in a reasonable and fair manner when it decided not to extend the time for applying for spring rental of quota and not to allow Mr. Bodnar to rent 100% of his 1999 marketing quota.

The Tribunal agrees with the Board that selling tobacco in contravention of the regulations is a major violation of the Board’s regulations and must be treated seriously. However, the consequences of this violation should flow after the allegations are proven. The Tribunal understands the position of the Board and supports the decision to defer a decision on the application to sell BPQ until such time as it is satisfied that Mr. Bodnar is in compliance with the regulations. The Tribunal also understands the dilemma of the Board in trying to determine if Mr. Bodnar is in good standing.

However, the Tribunal feels fairness is the primary issue in this case. The Tribunal heard there are two other producers who have allegations of wrong doing against them and the Board has allowed them to continue to produce and market tobacco without sanction. These producers had to come to the Board for a decision on a license to produce, for shipping instructions and for a permit to transport tobacco. Each of these items required a decision of the Board and each was treated in an administrative manner. It appears that the appellant is being treated differently. He too has an allegation of wrong doing levied against him but when he came to the Board requesting an extension of time for filing an application for spring rental he was denied consideration based mainly on the allegations of wrong doing. Until such time as the allegations are proven the Board has to treat each of the producers in a consistent and fair manner.

It was not disputed that there are two other producers who are charged with offences and who are producing and selling tobacco while Mr. Bodnar who applied to sell and then to rent his quota is prevented from utilizing this asset. The late application is not sufficient reason to deny the request to rent out the quota.

The Board decision has not allowed the transfer of his BPQ and he did not intend to produce tobacco in 1999. The Tribunal finds Mr. Bodnar should be allowed a spring rental of 30% of the marketing quota that would have been fixed and allotted to his basic production quota in 1999.

The Tribunal agrees with the Board that the extraordinary relief of allowing a producer to rent 100% of marketing quota should be reserved for extraordinary situations. The Tribunal finds no extraordinary circumstances in this case and therefore denies Mr. Bodnar’s request to be allowed a spring rental of 100% of marketing quota.

Decision and Reasons

After careful consideration of the submissions the Tribunal decided:

To grant Mr. Bodnar’s request to be allowed a spring rental of 30% of the marketing quota that would have been fixed and allotted to his BPQ.
To deny Mr. Bodnar’s request to be allowed a spring rental of 100% of the marketing quota that would have been attached to his BPQ

The reasons for these decisions are:

The Tribunal was not convinced that missing the deadline for applying is sufficient grounds to deny a request for spring rental in this case.
There were no mitigating circumstances that warrant granting an exemption from the maximum spring rental of 30% of the marketing quota.

Dated at Guelph, Ontario this 13th day of December, 1999.