Murray v Ontario Flue-Cured Tobacco Growers’ Marketing Board, 1999 ONAFRAAT 34

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:

Murray v Ontario Flue-Cured Tobacco Growers’ Marketing Board

Murray v OFCTGMB 1999 ONAFRAAT 34

STATUTE:

Ministry of Agriculture, Food and Rural Affairs Act

HEARING:

November 15, 1999

DATE OF DECISION:

December 21, 1999

1999-34

NEUTRAL CITATION:

1999 ONAFRAAT 34

Murray 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.

AND IN THE MATTER OF:

An Appeal to the Farm Products Appeal Tribunal by Michael Murray, LaSalette, Ontario, from a decision of the Ontario Flue-Cured Tobacco Growers’ Marketing Board (the Board) dated September 8, 1999 wherein the Board determined that Mr. Murray had marketed tobacco in a manner contrary to Section 5 of Regulation 435, R.R.O. 1990 and/or subsections 9(3), (4) or (5) of the General Regulations by selling, transferring or disposing of tobacco during 1993 and 1994 other than through the Board. As a consequence of this finding the Board revoked Mr. Murray’s licence to produce tobacco and cancelled 10,000 pounds of Basic Production Quota (BPQ) together with the 1999 Marketing Quota derived from that BPQ.

Before:

Jim Rickard, Chair; Denis O’Connor, Alternate Chair; Ed Mailloux, Vice-Chair; Robert McKim, Member.

Appearances:

Michael Murray, appellant.

Norman Peel, 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 15, 1999. Michael Murray 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 8, 1999 wherein the Board determined that Mr. Murray had marketed tobacco in a manner contrary to Section 5 of Regulation 435, R.R.O. 1990 and/or subsections 9(3), (4) or (5) of the Board’s General Regulations by selling, transferring or disposing of tobacco during 1993 and 1994 other than through the Board. As a consequence of this finding the Board revoked Mr. Murray’s licence to produce tobacco and cancelled 10,000 pounds of Basic Production Quota (BPQ) together with the 1999 Marketing Quota derived from that BPQ.

The pertinent sections of the Regulations are as follows:

Regulation 435, R.R.O. 1990:

5. Subject to paragraph 6 of subsection 6 (1), no person shall market tobacco except through the local board. R.R.O. 1990, Reg. 435, s. 5.

General Regulations 1999-2000 made under the Farm Products Marketing Act, Subsections 9:

9.(1) No person shall buy or offer to buy tobacco from any person other than the local board or a person to whom the local board has fixed and allotted a marketing quota.

9.(2) No person shall buy or offer to buy tobacco in any place other than a tobacco exchange operated by the local board.

9.(3) No person shall sell, transfer or dispose of tobacco or offer to sell, transfer or dispose of tobacco to any person other than the local board or a licensed buyer at a tobacco exchange operated by the local board.

9.(4) Except as otherwise expressly provided by the local board no person shall process, pack or package any tobacco that has not been sold through the local board to a licensed buyer at a tobacco exchange operated by the local board.

9.(5) Without the prior consent in writing of the local board, no person shall ship or transport tobacco to any place other than a tobacco exchange operated by the local board.

21. The local board may cancel or reduce or refuse to increase a basic production quota or a marketing quota where the licensed producer to whom the said quota or quotas have been fixed and allotted has entered into a transaction or a series of transactions that has the effect of circumventing the provisions of these General Regulations or for any other reason that the local board deems proper.

The Background

Michael Murray grows tobacco near LaSalette. He has been producing tobacco for decades and has served as a Director on the Board of Directors for the Board for a total of 12 years. On March 31, 1999, he pled guilty in the Superior Court of Justice, General Division, to three charges under the Excise Act relating to the sale of tobacco by him to Grand River Enterprises in 1993 and 1994. At the time Grand River Enterprises was an unlicensed tobacco manufacturing business situated in Ohsweken on the Six Nations of the Grand River Indian Reserve. As a consequence of the guilty plea the Court levied fines totalling $56,273.18 for the offences.

On August 4, 1998 the Board held a hearing to enquire whether Mr. Murray had marketed tobacco contrary to the Board’s regulations. Mr. Murray did not dispute that he had sold tobacco to Grand River Enterprises in 1993 and 1994. As a result of the hearing the Board found that Mr. Murray had sold tobacco contrary to the Board’s regulations and as a consequence:

1. Cancelled the entirety of Mr. Murray’s 10,000 pounds of Basic Production Quota together with the 1999 Marketing Quota derived from that Basic Production Quota, and

2. Revoked Mr. Murray’s licence to produce tobacco.

The Issue

The issue before the Tribunal is as follows:

Is the cancellation of the entirety of Mr. Murray’s Basic Production Quota along with the 1999 Marketing Quota and revocation of his licence to produce tobacco an appropriate penalty to apply for the violation of the Board’s regulations?

The Evidence and the Findings

Mr. Norman Peel, counsel to Mr. Murray, told the Tribunal that the only issue being appealed is the severity of the penalty. He argued that the penalty was too severe considering the following mitigating factors:

• Mr. Murray has served the industry as director for 12 years.

• Murray had worked to get Grand River Enterprises an excise license so it could operate lawfully and ceased his involvement with Grand River Enterprises when it appeared that the company was intending to operate unlawfully.

• At the time that the transfer of tobacco took place, Mr. Murray had an honest belief that the company was seeking licensing and would be licensed to buy his tobacco.

• The tobacco sold to Grand River Enterprises was of poor quality and was used to start the machinery. This was a finding of fact at the Court but is recognized by Mr. Murray that it is not a defense.

• More than 50,000 pounds of tobacco was sold to Grand River Enterprises for a total consideration of $10,000. This is the best indication of the grade of the tobacco.

• At the material time Mr. Murray was in debt and motivated by desperation rather than greed.

• Mr. Murray’s only remaining asset which has equity is the 10,000 pounds of quota. He is facing a fine of more that $50,000 and can only pay small monthly payments toward the fine. As a result, at this age, both he and his spouse are back in the fields working.

• At the time of the infraction Mr. Murray, in his own opinion, was working in the best interests of the tobacco industry trying to develop a domestic market for tobacco and stem the tide of smuggled tobacco products. He was open in this endeavour approaching local politicians, meeting in Ottawa with the Federal Government and appearing in the news media expressing his support of the marketing board and the need to develop the market to Grand River Enterprises.

• The original conspiracy charges against Mr. Murray took a long time to resolve – from selling the tobacco in 1994 to the filing of charges in 1997 until the Court decision in 1999. In the interim he grew and marketed tobacco as a sharegrower, and from 1995 on with his 10,000 Basic Production Quota, following the rules of the Board.

• The impact of the total quota cancellation is to deny Mr. Murray the opportunity to sell tobacco legally grown under license of the Board and currently in storage in his barn and this is unfair.

• In matters relative to this case Mr. and Mrs. Murray have been fully cooperative with the authorities – the RCMP investigators, the Court officials as well as the Board – at no time have they given any indication that they are or will be ungovernable by the Board.

• Mr. Murray admits to making a mistake, a costly mistake, but asks for mercy in the administration of the penalty.

Mr. Barry Bresner, speaking on behalf of the Board argued that:

• The Board is a supply managed board. The fact that no one can:

1. produce tobacco without a licence from the Board;

2. purchase or offer to purchase tobacco without a license form the Board;

3. transport tobacco, even from farm to farm, without a transportation permit from the Board;

4. even with a licence to buy, cannot sell or transfer or dispose of tobacco except at the Board auction exchanges;

is fundamental to the plan and has been from the onset.

• The violations of the Board’s regulation admitted are:

• selling tobacco other than through the Board exchange, and

• selling tobacco to a person other than a licensed buyer.

• Even if Mr. Murray had been successful in obtaining licence for Grand River Enterprises under the Excise Act it would not make a difference as a licensed buyer can only buy at the Board auction and cannot go to the farm and buy tobacco.

• Mr. Murray holds 10,000 pounds of basic production quota, a relatively small amount. The average producer holds 150,000 pounds of basic production quota.

• Quota is a privilege not a right. The privilege granted to Mr. Murray was abused because it was used in a way that is contrary to the regulations. The plan only works if the quota has value. Selling tobacco out of the barn contrary to regulations devalues all producers’ quota. The board has been harsh on those who abuse the quota privilege.

• While the Board has no means of verifying the amount, the Court transcript indicated an illegal sale of 50,764 pounds of tobacco. If Mr. Murray was to sell this amount legally, through the Board’s exchange, based on his quota, it would take many years.

• Because Mr. Murray was a director of the board and a roll model for other producers he has a higher standard of duty to the industry. Despite his knowledge of the industry and board regulations he decided to contravene the regulation and market tobacco other than through the exchange.

• In reaching a decision on penalty the Board reviewed previous cases. In the Sion case Mr. Sion sold 28,000 pounds of tobacco to a new processor in PEI. There it was also alleged that the tobacco was junk product used only to start up and test the machinery. The Board adopted the tax evasion model. 28,000 pounds were sold illegally, the Board doubled that to be 56,000 pounds of marketing quota, which equated to 143,774 pounds of basic quota and cancelled that amount. The Tribunal upheld the Board decision as did the Court on a judicial review application.

• Mr. Murray’s illegal sales substantially exceeds the other cases and the penalty applied is much lighter than the other cases because Mr. Murray only has 10,000 pounds of Basic Production Quota. Anything less than the cancellation of the 10,000 pounds would be inadequate to reflect the seriousness of the offense.

• Mr. Murray still works as a share grower and can continue to participate in the industry as a sharegrower. Nothing in the Board decision prevents him from buying basic production quota. He is not being denied a livelihood in the tobacco industry,

In response to questions from the Tribunal Mr. Murray said that:

1. 10,000 pounds is about two to three acres of production. That is only half a kiln of tobacco and not economic. He is in the practice of growing six to seven acres of tobacco in one year and marketing that product over more than one year. He has 5,297 pounds of tobacco carried over from his 1998 production.

2. The tobacco in his storage now was grown under license from the Board in 1998.

3. He applied in the spring of 1999 for marketing quota and indicated that he was not growing tobacco in 1999 but marketing carryover tobacco from 1998.

4. This marketing quota was granted to him by the board in May and then revoked in August after the Board hearing.

In response to questions from the Tribunal Mr. Gilvesy, Chair of the Board of Directors of the Board told the Tribunal:

• The Board was advised on March 31, 1999 by phone call from the Crown attorney, that Mr. Murray had pled guilty to the charges under the Excise Act.

• The deadline for requesting marketing quota was May 7, 1999 and Mr. Murray applied for marketing quota before the deadline.

• The marketing quota application was processed and quota issued in May as a matter of routine by the Board staff.

• As soon as practical after the transcript of the Court evidence was received in May, 1999 a notice of hearing was sent to Mr. Murray by the Board.

• At Mr. Murray’s request the hearing was postponed until August at which time he agreed that he had contravened the Board’s regulations and asked for leniency in the penalty.

The Tribunal examined the evidence filed and submissions made. In making its decision on this matter the Tribunal took note of the fact that Mr. Murray was cooperative with both the criminal investigation and the Board on the issues involved in this lengthy process. It was admitted that Mr. Murray contravened the Board regulation. He sold tobacco to an unlicensed buyer, sold tobacco at a place other than the Board auction house and allowed tobacco to be moved from his storage without a tobacco transportation permit. The Tribunal agrees with the Board that cancellation of all of Mr. Murray’s basic production quota is an appropriate penalty. The Tribunal notes that this does not prevent Mr. Murray from participating in the industry as a sharegrower. He currently is sharegrowing 45 acres of tobacco and, for most of his career in the tobacco industry, he has been a sharegrower. The Tribunal accepts the evidence of the Board and agrees that this infraction of the regulations should not prevent Mr. Murray from purchasing basic production quota in the future.

It is also admitted that while the charges were being processed through the court Mr. Murray continued to operate within the guidelines of the Board and was issued marketing quota by the Board, when appropriate, and he did produce and market tobacco from 1994 through 1998 in compliance with the Board policy. The Tribunal is concerned that the Board knew on March 31 that Mr. Murray had admitted he contravened the regulations yet issued marketing quota for 1999 in April without any notice that this quota may be in peril as a result of his action in 1994. The Tribunal appreciates that this marketing quota was issued as a matter of routine and the Board has authority to cancel this marketing quota. However given the circumstances of the case the Tribunal believes the best course of action is to allow Mr. Murray to utilize his 1999 marketing quota.

While deliberating on the evidence the Tribunal decided that it needed more information from the parties before reaching its decision. Specifically, the Tribunal was concerned that, at the time of the violation of the regulation, Mr., Murray did not own the quota the Board is now canceling. Had the events unfolded in a more timely manner, Mr. Murray might have been charged and convicted before he purchased the quota in 1995 and then the Board would not have had the opportunity to cancel or restrict this quota based on a violation that occurred prior to the quota purchase.

On November 18, 1999, the parties were notified of the Tribunal’s concern and were requested to make submissions to the Tribunal on this issue. Mr. Peel was requested to file written submissions by December 3, 1999. Mr. Bresener was given to December 10, 1999 to respond to Mr. Peel’s submissions and then Mr. Peel was allowed reply on any new issues raised by Mr. Bresener by December 14, 1999. Mr. Peel and Mr. Bresener complied with the Tribunal’s request for submissions.

On December 21, 1999, the panel of Jim Rickard, Ed Mailloux and Denis O’Connor met to consider the submissions and decide the appeal. In their submissions the parties agreed that the Board had the jurisdiction to order cancellation of the quota purchased after the infraction of the regulations. Since the parties agreed to the jurisdiction of the Board, the Tribunal decided that it is appropriate to cancel the basic production quota.

Decision and Reasons

After careful consideration of the evidence filed and submissions made the Tribunal decided to partially grant the appeal. The Tribunal directs that the Board cancel 10,000 pounds of basic production quota allotted to Michael Murray. The Tribunal also directs that Mr. Murray be allowed to market 4,434 pounds of tobacco during the 1999 tobacco market.

The reason for this decision is that the Tribunal is convinced that due to the circumstances of the case and the timing of occurrences during 1999 there was a reasonable expectation on Mr. Murray’s part that he would be allowed to market the eligible portion of his 1998 carryover crop in 1999. The Tribunal believes it is in the best interests of the industry to allow Mr. Murray to utilize his 4,434 pounds of marketing quota in the 1999 tobacco market.