Agriculture, Food and Rural Affairs Appeal Tribunal

Agriculture, Food and Rural Affairs Appeal Tribunal 1 Stone Road West Guelph, (Ontario) N1G 4Y2 Tel: (519) 826-3433, Fax: (519) 826-4232 Email: AFRAAT@ontario.ca

Tribunal d’appel de l’agriculture, de l’alimentation et des affaires rurales 1 Stone Road West Guelph (Ontario) N1G 4Y2 Tél.: (519) 826-3433, Téléc.: (519) 826-4232 Email: AFRAAT@ontario.ca

AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL

APPEAL:

Frey’s Hatchery Ltd. v Ontario Broiler Hatching Egg and Chick Commission

Frey’s Hatchery Ltd. v OBHECC 2002 ONAFRAAT 21

STATUTE:

Ministry of Agriculture, Food and Rural Affairs Act

HEARING:

May 17 and 18, 2002

DATE OF DECISION:

June 10, 2002

2002-21

NEUTRAL CITATION:

2002 ONAFRAAT 21

Frey’s Hatchery Ltd. v Ontario Broiler Hatching Egg and Chick Commission

IN THE MATTER OF THE FARM PRODUCTS MARKETING ACT AND SECTION 16 OF THE MINISTRY OF AGRICULTURE, FOOD AND RURAL AFFAIRS ACT.

IN THE MATTER OF:

An Appeal to the Agriculture, Food and Rural Affairs Appeal Tribunal by Frey’s Hatchery Ltd. from decisions of the Ontario Broiler Hatching Egg and Chick Commission (OBHECC) to:

1. Assess a fine of $1,000 to the appellant for obstructing an OBHECC inspector from entering a hatchery.

2. Assess a fine of $2,500 to the appellant for failing to report the sale of 1,200 birds.

3. Assess a fine of $10,000 to the appellant for failing to produce accurate information demanded by OBHECC.

AND IN THE MATTER OF:

A request by Frey’s Hatchery Ltd. that the Agriculture, Food and Rural Affairs Appeal Tribunal order OBHECC to issue Hatching Egg Market Share to all special dual purpose hatching egg flocks in production currently, or, as were in production in the qualifying period and include any or all increases that were made available to holders of Hatching Egg Market Share during OBHECC’s existence.

Before:

Denis O’Connor, Vice Chair; Doug Flook, Member; Ralph Huckle, Member.

Appearances:

Brian Kelly counsel, to the appellant. Dave Frey, appellant. Scott Snider, counsel, to the Ontario Broiler Hatching Egg and Chick Commision. Jerry Waugh, witness. Ralph Harris, witness.

DECISION OF THE TRIBUNAL

This appeal was heard in Guelph, Ontario on May 17 and 18, 2002. Frey’s Hatchery Ltd. (Frey’s Hatchery) appealed the decisions of the Ontario Broiler Hatching Egg and Chick Commission, (OBHECC) to assess fines for: obstructing an OBHECC inspector from entering the hatchery, failing to report the sale of 1,200 birds and failing to provide accurate and timely information pursuant to an order of OBHECC. Frey’s Hatchery Ltd. also requested the Tribunal to order OBHECC to issue Hatching Egg Market Share (HEMS) for dual purpose hatching egg flocks currently in production and to issue additional HEMS for any hatching egg flocks that were producing in the period for which increases were available to hatching egg quota holders, since the existence of OBHECC.

Preliminary Matters

Mr. Scott Snider, counsel to OBHECC made a motion to dismiss the portion of the appeal by Frey’s Hatchery requesting that the Tribunal give HEMS for special dual purpose birds.

Mr. Snider told the Tribunal that Frey’s Hatchery had not made a request for HEMS to OBHECC and so OBHECC had not made a decision to either grant or to deny such a request. Mr. Snider cited the Notices of Appeal for Frey’s Hatchery from the decisions of OBHECC dated, July 27, 2001 and October 26, 2001. Mr. Snider said that HEMS was not a subject of either the hearings or the resulting decisions by OBHECC. Mr. Snider told the Tribunal that the request for consent by OBHECC for Frey’s Hatchery to make appeals directly to the Tribunal were not for the HEMS issue. Mr. Snider drew attention to Sections 16(2), 16(5)(a) and (b) of the Ministry of Agriculture, Food and Rural Affairs Act which state:

16(2) Subject to subsections (4) and (5), if a person is aggrieved by an order, direction, policy, decision or regulation made under the Farm Products Marketing Act by a local board or under the Milk Act by a marketing board, that person may appeal to the Tribunal by filing with the Tribunal and sending to the local board or marketing board written notice of the appeal.

16(5) No appeal may be taken from an order, direction, policy, decision or regulation of a local board or a marketing board unless,

(a) the appellant has first applied to the local board or marketing board for a hearing and the local board or marketing board has refused to grant, in whole or in part, the relief requested by the appellant or has not decided the matter within sixty days of the application for a hearing; or

(b) the appellant and the local board or marketing board have waived their respective rights under clause (a) in writing.

Mr. Snider, said that by way of a letter dated November 29, 2001 from Jan Gallagher, Executive Assistant, OBHECC granted Frey’s Hatchery permission to appeal directly to the Tribunal regarding the OBHECC decision of July 27, 2001 as provided for in Section 16 (5)(b) of the Ministry of Agriculture and Food Act. Mr. Snider submitted that the Tribunal has no jurisdiction to hear any portion of the appeal with regard to HEMS.

Mr. Brian Kelly, counsel to Frey’s Hatchery, told the Tribunal that the underlying issue of the appeal is the OBHECC policy not to issue HEMS for special dual purpose birds. Mr. Kelly said that the provision for the Tribunal’s jurisdiction with regard to the motion before it, could be found in Section 16(11) of the Ministry of Agriculture Food and Rural Affairs Act which states:

16(11)Upon an appeal to the Tribunal under subsection (1) or (2), the Tribunal may by order direct the Commission, the local board, the marketing board or the Director, as the case may be, to take such action as it or he or she is authorized to take under the Farm Products Marketing Act or the Milk Act and as the Tribunal considers proper, and for this purpose the Tribunal may substitute its opinion for that of the Commission, the local board, the marketing board or the Director.

Mr. Kelly explained to the Tribunal that the issue of HEMS permeated the hearings held by OBHECC and that the Tribunal had the jurisdiction to direct OBHECC to set aside the decisions of OBHECC in favour of its own ruling. Mr. Kelly told the Tribunal that a transcript had been taken of the hearings before OBHECC but was never usable due to equipment malfunction. Mr. Kelly said that it was necessary for the Tribunal to hear all the evidence of the case before deciding on the motion as it would bear out his contention that the issue of HEMS was implicitly dealt with at the hearings held by OBHECC.

Mr. Kelly asked the Tribunal to give consideration to altering the procedure of the hearing by permitting the respondent to give evidence first that would be followed by evidence given by the appellant.

Decision on Preliminary Matters

The Tribunal decided to grant the motion that the request for HEMS should not be part of the appeal presently before it. The Tribunal decided to grant the motion, because under the provisions of the Ministry of Agriculture Food and Rural Affairs Act Section 16,(11) an application to the local board must be made and dealt with by that board before an appeal could be made to the Tribunal. The Tribunal found that Frey’s Hatchery had not made application to OBHECC for HEMS, hence OBHECC had made no decision regarding the HEMS request which could be substituted by a decision of the Tribunal.

With the consent of the respondent the Tribunal agreed with Mr. Kelly’s request that the usual procedure of the hearing be altered to allow the respondent to present the evidence of OBHECC and its witnesses first, followed by the submissions for Frey’s Hatchery.

Statutory Context

Section 16 (2) of the Ministry of Agriculture Food and Rural Affairs Act is as follows:

16(2) Subject to subsections (4) and (5), if a person is aggrieved by an order, direction, policy, decision or regulation made under the Farm Products Marketing Act by a local board or under the Milk Act by a marketing board, that person may appeal to the Tribunal by filing with the Tribunal and sending to the local board or marketing board written notice of the appeal.

Section 4 (e) of Ontairo Regulation 396 as amended states that:

4. The Commission delegates to the Egg and Chick Commission its powers to make regulations,

(e) providing for the imposition, amount, disposition and use of penalties where, after a hearing, the local board is of the opinion that the applicant or licensee has failed to comply or has contravened any condition of a licence or the Act or the regulations, the plan or an order or direction of the local board;

Section 4(b), 4(C),(i) and (ii) of Ontario Regulation 407 as amended, states that:

Powers of Local Board

4. The Commission delegates to the local board the power,

(b) to require persons engaged in producing for marketing chicks-for-placement, eggs, hatching eggs or fowl to furnish such information relating to the production or marketing of chicks-for-placement, eggs, hatching eggs or fowl, including the completing and filing of returns, as the local board determines;

(c) to appoint persons to,

(i) inspect the books, records, documents, lands and premises and any chicks-for-placement, eggs, hatching eggs and fowl of persons engaged in producing or marketing chicks-for-placement, eggs, hatching eggs or fowl, and

(ii) enter on lands or premises used for the producing of chicks-for-placement, eggs, hatching eggs or fowl and perform a count of chicks-for-placement, eggs, hatching eggs or fowl;

The OBHECC Regulation D-1, - 1998, PART II, 5 states that:

Every hatchery which markets broiler chicks shall, in connection with all of those chicks, not later than Monday of each week in which the marketing took place, file with the Commission a fully completed Weekly Broiler Placement Report on Form 1A, as amended from time to time. The provision of incorrect information in connection with this report shall be construed by the Commission as a breach of this section.

The OBHECC Regulation D-1, - 1998, PART VII

HATCHING EGGS AND BROILER CHICK TRANSACTIONS

12. (b) Hatcheries marketing broiler chicks to other than a licensed hatchery, a licensed broker dealer or a broiler produce shall limit each transaction to a small lot.

(c) “small lot” means a placement of no more than 300 broiler chicks (plus 2% extras) marketed by a hatchery or a broker dealer to a customer for growing at any one location.

The OBHECC Regulation E-7, 1998 1. and 2. (d)

CONTRAVENTION OF REGULATIONS AND ORDERS

1. Through Regulation 396 of the Farm Products Marketing Act the OBHECC will from time to time make such orders and issue such directions as are necessary to enforce the due observance and carrying out of the Act, the regulations, the plan, or any order or direction of the Farm Products Marketing Commission or the O.B.H.E.C.C.

2. Contravention of the Farm Products Marketing Act or of a regulation, direction or order of the Commission by any person may result in one or more of the following.

(d) such monetary penalties as may be permitted pursuant to the provisions of the Farm Products Marketing Act;

The Background

Frey’s Hatchery appeared at two hearings before OBHECC. The first hearing took place on July 27, 2001 and the second hearing took place on October 26, 2001. Frey’s Hatchery Ltd. was called to the hearings to answer to charges by OBHECC that Frey’s Hatchery:

• Obstructed an inspector from entering the premises.
• Failed to report the sale of more than 800 birds.
• Failed to produce information regarding its operation at the request of an order of OBHECC. A request to waive a hearing before OBHECC on these matters was made and agreement to proceed directly to a hearing before the Tribunal was given in writing.

The Issues

The issues before the Tribunal are:

Should OBHECC be ordered to reverse its decisions to:

1. Assess a fine of $1,000 to Frey’s Hatchery for obstructing an OBHECC inspector from entering the hatchery?
2. Assess a fine of $2,500 to Frey’s Hatchery for failing to report the sale of more than 800 birds?
3. Assess a fine of $10,000 to Frey’s Hatchery for failing to produce accurate information as requested in the order of OBHECC dated March 28th, 2001?

The Evidence and the Findings

Mr. Jerry Waugh testified on behalf of OBHECC. Mr. Waugh told the Tribunal that he had been a Hatchery Inspector for seven years and that his job entailed inspecting hatchery premises, hatching eggs and verifying the number to be hatched.

Mr. Waugh testified that:

• He inspects breeder chick placements and investigates the re-distribution of chicks.
• He had previously inspected the premises at Frey’s Hatchery; he usually inspected the premises once per year.
• Frey’s Hatchery is a small licensed hatchery that hatches and distributes chicks in Ontario and inter-provincially.
• Frey’s Hatchery issues a catalogue that describes the chicks for sale.
• On February 15, 2001 he went to inspect Frey’s Hatchery premises, as his supervisor had instructed him to do based on allegations of the sale of large numbers of male chicks. He was to gather information regarding the Frey’s Hatchery’s special dual purpose breed.
• Upon arrival at the hatchery he asked to speak with Mr. David Frey to whom he presented his business card with photo, and he asked Mr. Frey if he recognized him. Mr. Frey said that he recognized Mr. Waugh.
• He told Mr. David Frey that he was interested in inspecting the special dual purpose breed, to which Mr. David Frey replied, that they were registered with the Ontario Egg Producers Marketing Board.
• Mr. David Frey showed him the set sheet which indicated that Shaver, special dual purpose and Red Sussex eggs, were set for hatching that day.
• Mr. David Frey said that no males from this hatch would be sold for broilers, but would go to feed raptors and minks.
• Mr. David Frey told him that he could not enter the hatchery. He told Mr. Frey that there may be consequences to denying access.
• Mr. David Frey said that he would deal with any consequences that may arise.
• Mr. Waugh said that in seven years of being an inspector, he had never been refused access to a hatchery or a hatching egg production facility.
• Mr. David Frey told him that nothing was being hatched at the Wallenstien hatchery but that the hatchery is used for overflow hatching as needed.
• Mr. David Frey said that the special dual purpose birds at his hatchery were not under the jurisdiction of OBHECC.

Mr. Waugh told the Tribunal that he picked up a copy of the Frey’s Hatchery brochure on February 15, 2001. Mr. Waugh said that the brochure contained a description of the special dual purpose birds and indicated that the pullets are not recommended for egg laying. Mr. Waugh said that in his mind the special dual purpose bird was to be raised for meat production and therefore the production regulation of special dual purpose birds was under the jurisdiction of OBHECC. Mr. Waugh explained to the Tribunal that he concluded from the denial of his access to Frey’s Hatchery and the demeanor of Mr. Frey, that two inspectors should attend at all future inspections. Mr. Waugh referred to the OBHECC regulation A-1-1998 definition of a “Chick” which: “means a newly hatched pullet or cockerel intended to be grown into a chicken for the purpose of producing meat to be consumed”; he believed that the special dual purpose birds fit this definition. Mr. Waugh said that he obtained a copy of the Frey’s Hatchery price list which listed the special dual purpose birds under the heading of Meat Breeds and indicated that they were sold sexed and non-sexed.

Mr. Waugh told the Tribunal that:

• He attended at Frey’s Hatchery on February 21, 2001 with inspector John Groen.
• He asked Mr. David Frey if he could see the set sheets for February 15, 2001 and was provided with them.
• He obtained an invoice dated January 24, 2001 for the sale of 500 pullets and 300 cockerels to a customer in Surrey, British Columbia. A follow up with the Ontario Egg Producers Board confirmed that there was a ledger entry for the birds, but he could not distinguish which birds were the special dual purpose birds as entered in the ledger.
• He returned to Frey’s Hatchery in St. Jacobs on May 8, 2001 accompanied by inspectors from the Chicken Farmers of Ontario and the Ontario Egg Producers Marketing Board. Inspectors from the three ‘feather boards’ conducted inspections at the St. Jacobs main hatchery, the Wideman farm, and the home of Ken Frey where Frey’s Hatchery operates its business.

Mr. Waugh said that he laid a charge against Frey’s Hatchery regarding his being obstructed on February 15, 2001 which resulted in a conviction and fine. Mr. Waugh explained that he investigated the sale of birds to the Surrey British Columbia customer, invoiced January 24, 2001 with the help of Ralph Harris and found that the sale listed on the invoice was not reported to the OBHECC. Mr. Waugh said that Frey’s Hatchery was convicted and fined with regard to this matter also. Mr. Waugh explained that he personally served an Order of OBHECC requesting information on Frey’s Hatchery. Mr. Waugh said that Frey’s Hatchery did not comply with the order in full, which resulted in a fine.

In response to questions Mr. Waugh told the Tribunal that:

• Frey’s Hatchery brochures and price lists are readily available at their office and he has kept brochures from several years, going back to 1997.
• In Frey’s Hatchery catalogue the special dual purpose birds are described as “an alternate meat bird”; there is no specific use for the birds listed in the Frey’s Hatchery brochure.
• A special dual purpose bird was expected to lay eggs in the first part of its adult life and then be slaughtered for meat.
• He was not aware of any hatchery/producer who had HEMS for special dual purpose birds.
• He was not involved in the formulation of the OBHECC Policy Direction #43, nor did he act within the stated directives of the policy prior to March 28, 2001.
• He was aware that the category of the special dual purpose bird had become a concern to OBHECC with regard to regulating its production.
• On the second inspection visit to Frey’s Hatchery, birds which had been reported to the Ontario Egg Producers Marketing Board were not identifiable as being special dual purpose from the description given in the report.
• He cannot say with certainty, that all the eggs and chicks that he inspects are reported to the appropriate boards.
• The end use of the birds sold from Frey‘s Hatchery on January 24, 2001 to a British Columbia customer was investigated by Mr. Harris.
• The growing of special dual purpose male chicks can only result in their use as meat, therefore, it is a concern to OBHECC to find that they have been sold in quantities separated as to sex.
• The production of special dual purpose birds is investigated on a case-by-case basis and reported to OBHECC.
• Birds that were inspected at the property of Clare Frey were believed to be old style Red Sussex, whereas the birds identified by David Frey as Red X Col. Rock were believed to be a special dual purpose breeder flock.
• Although Mr. Frey stated that he was not hatching broilers on February 15, 2001, this was not verifiable, as an inspection was not permitted.
• OBHECC terminology for a “small lot” is any amount of birds numbering less than 300. Producers must hold quota to grow birds in larger numbers.
• All birds sold for use as meat consumption must be reported to OBHECC on a form 1A, even if only one bird is sold.
• Birds used for meat consumption means human consumption.
• The Frey’s Hatchery price list included the price of cockerels; he did not feel he could comment on whether or not OBHECC was concerned with the production of cockerels for meat prior to February 15, 2001.
• The volume of production has no effect on an inspector’s obligation to do his/her job.
• The 500 pullets and 300 cockerels that were sold to a British Columbia customer do not fall under the definition of a small lot.
• Quota gives permission to produce chicken for meat consumption under the Chicken Farmers of Ontario’s (CFO) jurisdiction. Exempt from CFO quota is the amount of chicken to be produced for personal consumption.

Mr. Ralph Harris testified on behalf of OBHECC. Mr. Harris told the Tribunal that:

• He has been employed at OBHECC for 12 years, as the Data Co-ordinator; it is his job to administer quota and its allocation to Ontario hatcheries. The Canadian Broiler Hatching Egg Marketing Agency (CBHEMA) gives the province an allocation of eggs to produce annually.
• He is a qualified Hatchery Inspector and is familiar with Frey’s Hatchery.
• Frey’s Hatchery is considered a small hatchery with a “seasonal” customer base. Frey’s Hatchery produces White Rock broiler chicks under regulation and duck and pheasant chicks which are not regulated.
• OBHECC Policy Direction #43 states that any eggs set with the intent of hatching chicks for meat must be reported to OBHECC and that the sale of chicks to be grown for meat must be reported to OBHECC.
• In 1999, a hatchery was charged with the distribution of non-White Rock broilers; this incident provided the impetus for the formation of Policy Direction #43 and the subsequent investigation into the use of the special dual purpose birds.
• He and Jan Gallagher visited Frey’s Hatchery in February of 2000, leaving a copy of the draft of Policy Direction #43 with Mr. David Frey.
• At the February 2000 visit, he remarked upon the special dual purpose birds described in the catalogue, telling Mr. David Frey that it appeared that the purpose of the birds was for meat. Mr. Frey replied that the birds were sold unsexed and in small lots, therefore, the end use was not predetermined at the time of sale.
• He became aware of an investigation by the CFO and the existence of an invoice dated June 22, 2000 that indicated that special dual purpose birds in the amounts of 1,200 pullets and 1,200 cockerels were sold to a customer. The birds were sold separated by sex and in amounts that were not considered “small lots”. The June 22, 2000 sale indicated a larger market for the special dual purpose birds than that previously indicated by Mr. Frey.
• On October 4, 2000, Frey’s Hatchery was assessed a fine for the offence of not filing a Weekly Broiler Placement Form 1A for the sale of male chicks for meat consumption. The plea of guilty was entered by Frey’s Hatchery and accepted by OBHECC.
• A document was obtained which indicated that a customer who had purchased special dual purpose birds from Frey’s Hatchery did so for the purpose of using them for meat consumption. It was believed that the intent of the sale was for meat from the outset.
• He wrote to Frey’s Hatchery on October 6, 2000 to explain the criteria for the October 4 charges and to remind Frey’s Hatchery that any chicks that were produced from meat breeds were under the jurisdiction of OBHECC. Frey’s Hatchery was also asked to provide information about the size of the breeder flocks, the placement of breeders for 2001 and the existence of any breeds that may generate broiler chick sales.
• Frey’s Hatchery sent a faxed memo in response to the October 6, 2000 letter; the fax did not answer OBHECC’s questions but indicated that more information was forthcoming. No further information was provided by Frey’s Hatchery.
• An order, dated March 28, 2001 was served on Frey’s Hatchery requesting that information be furnished to OBHECC regarding special dual purpose breeder flocks, hatching eggs and projected use of eggs for 2000 and into 2001.
• Information about the size of flocks and intended end use of eggs is vital to OBHECC for use in projections for future production periods.
• Frey’s Hatchery did not appeal the March 28, 2001 order. Frey’s Hatchery responded to the order on April 6, 2001, stating that the time prescribed for furnishing information regarding the disposition of special dual purpose breeder flocks was too short. Frey’s Hatchery did not indicate how much time it would need to supply the information. It was stated that they did not do projections for egg production or egg use. Frey’s Hatchery responded that all special dual purpose breeders were registered with the Ontario Egg Producers Marketing Board. The Ontario Egg Producers Marketing Board records do not indicate any registration of special dual purpose birds.
• OBHECC concluded that Frey’s Hatchery did not fully comply with the order.
• On April 10, 2001 OBHECC informed Frey’s Hatchery that their response to the order was insufficient and that the information should be supplied no later than April 16, 2001.
• Mr. Frey responded to the notice of insufficient information, but his response did not satisfy the requirements of the order.
• Discussions between OBHECC inspectors and its General Manager resulted in an inspection by personnel of the three ‘feather boards’ of Frey’s Hatchery premises in May, 2001.
• At the Wideman farm, a Frey’s Hatchery breeder flock was observed: the birds were counted and some photographs were taken. Mr. David Frey had previously identified the birds to Mr. Wideman as special dual purpose birds. Mr. Wideman provided the inspectors with some egg production records.
• Following the May, 2001 inspections, Mr. David Frey and OBHECC met to discuss records of production. Frey’s Hatchery agreed to provide some sales records and some computer print-outs recording sales to broker-dealers. Mr. Frey had previously indicated that their records were not available until the end of the season.
• He tried to assemble a spread-sheet of product flow comparing the sale of chicks and egg production. His calculations indicated that the average quota holder would need 4000 HEMS to produce the eggs that Frey’s Hatchery was believed to have produced.
• To date, OBHECC does not have satisfactory answers to the requested information set out in the order, nor does it feel that it has a good understanding of the nature of Frey’s Hatchery business.
• OBHECC has extensive data and analysis collection systems but verification by inspection is vital to the management of this sector of the industry.

In response to questions, Mr. Harris stated that:

• OBHECC was never previously aware of the number of special dual purpose birds that Frey’s Hatchery produced.
• Mr. Frey responded when asked about the market for the special dual purpose birds in February 2001, that the birds were usually sold to the small order customers.
• The reporting of cockerel sales in very small numbers has not been strictly enforced.
• He did not participate in the process of drafting the regulation governing the reporting of broilers chick sales on form 1A.
• OBHECC has the jurisdiction to focus investigation with regard to compliance with its regulations, where and when it sees fit.
• The OBHECC regulations are clear. If a hatchery or a producer has questions regarding policy it is his responsibility to inform himself.
• Chicks sold in lots of mixed sexes are not considered commercially viable.
• OBHECC does not have an official definition for a “commercial broiler” bird.
• There is no provision in the regulations stating that hatcheries must make projections, though they are obligated to complete surveys from time to time.
• Most of the records that have been submitted by Frey’s Hatchery are manually produced.

Mr. Harris said that he had no recollection of any letter issued to Frey’s Hatchery, stating that any information that was provided could be prejudiced against them. Mr. Harris told the Tribunal that he does not really know what is done with the information that Agriculture Canada collects from hatcheries. Mr. Harris told the Tribunal that OBHECC was still in the process of evaluating the size and scope of the special dual purpose bird.

Mr. David Frey testified before the Tribunal on behalf of Frey’s Hatchery. He told the Tribunal that:

• He is president of Frey’s Hatchery. It has been a family run business since 1946.
• Frey’s Hatchery operates in several locations with the main hatchery being located in St. Jacobs.
• Frey’s Hatchery supplies 10,000 customers with unregulated chicken, duck, goose and pheasant chicks across Canada.
• Over 15,000 catalogues are distributed per year.
• Special dual purpose birds have had the same catalogue description for the past 10 years.
• Because of his expertise he had been invited to join the group of producers that was forming OBHECC before it existed.
• OBHECC came into existence as a body to regulate the production and marketing of hatching eggs for the broiler market. These were mainly White Rock birds.
• White Rock birds were inefficient for the type of business that Frey’s Hatchery was operating; Frey’s Hatchery held no quota, nor did it qualify for quota in the time allotted.
• Frey’s Hatchery special dual purpose birds were developed as an alternative bird to the customary broiler bird. They are preferred because of taste and livability. The special dual purpose pullets were inefficient egg layers, but some customers used them for table egg production.
• The nature of Frey’s Hatchery business has changed over the years and there are now more individual customers but they order fewer birds.
• Before October 2000, OBHECC had not concerned itself with the number and location of the customers for the birds that Frey’s Hatchery sells.
• Frey’s Hatchery reports to Agriculture Canada for all its birds and to the appropriate Board/Commission for the egg producing and special dual purpose birds.
• Frey’s Hatchery maintains two breeder flocks.
• Frey’s Hatchery produces approximately 1.3 million table eggs per year.
• Frey’s Hatchery pleaded guilty to the charges of failing to report sales on a Form 1A in October 2000 and paid the fine. Mr. Trudell, counsel to OBHECC had advised him that the charge and the fine were a minor issue.
• If he had known that pleading guilty to the October charges would lead to appearing before the Tribunal, he would not have agreed to plead that way. He was not aware of the implications of disclosure.
• He pleaded guilty to the October charges because he was busy with a hatch at the time and he believed that OBHECC had the same understanding of the nature of his business as he did.
• The OBHECC policies are not crystal clear.
• He sent a letter to OBHECC stating that he wished to be consulted in the process of new policy development for special dual purpose birds. Jan Gallagher told him that there may be a space for him at the discussion table. Mr. Gallagher never telephoned him to ask him to attend; he then concluded that there was no room for him at the meeting.
• He contacted the Ontario Hatcheries Association (OHA) to inform them that policy discussions regarding the special dual purpose birds were underway. Mr. Brian Snider conveyed the concerns of the OHA to OBHECC.
• Frey’s Hatchery was not in possession of the Policy Direction #43 on February 15, 2001, the date that it was charged with obstructing Inspector Waugh.
• Bonnie’s Hatchery and Jarvis Chicks are hatcheries that are similar to Frey’s Hatchery, they do not produce brochures, but they do issue price lists. Cockerel prices are included in those price lists.
• Every cockerel sold should be reported on a Form 1A.
• He does not know what the end use is for Frey’s Hatchery mixed sex chick sales.
• The Policy Direction #43 was not issued to Frey’s Hatchery on the date that the March 28, 2001 order was served.
• Frey’s Hatchery responded to the order by the April 6, 2001 deadline. Frey’s Hatchery disputed the regualtory authority of OBHECC with regard to the special dual purpose birds and it was for this reason also, that Mr. Waugh was denied access to the hatchery in February 2001. Frey’s Hatchery did not have all the information that was requested in the order. Many of Frey’s Hatchery records were established before the use of computers was common. Each year a list of customers and their respective purchases are compiled, sent to the broker dealers and entered into each individual customers file. The records are erased when the following year’s entries are made.
• Frey’s Hatchery does not hold quota for the special dual purpose birds because OBHECC felt it was not a major concern to regulated marketing to issue quota for the special dual purpose birds.
• The White-Rock birds grow very quickly and the meat does not have as much traditional chicken flavour and in addition, the birds have health problems such as heart attacks and weak legs.
• Frey’s Hatchery developed its special dual purpose birds to grow more slowly, stay healthier and suit the market demand.
• Frey’s Hatchery does not make projections but bases its future production on the previous year’s sales.
• The OBHECC Regulations A-1 definition of a “Chick” a regulated product, could be applicable to all of Frey’s Hatchery chicken and chicken eggs.
• Frey’s Hatchery supplied information to the OBHECC before it was informed that the information might be used against them.

Mr. Frey told the Tribunal that he felt that certain conditions, such as being allocated HEMS might be an inducement to providing information to OBHECC. Mr. Frey felt that he was in a difficult position as it was possible that the information that was already submitted to OBHECC might be used against him and that there were other hatchery businesses with similar practices to Frey’s Hatchery that had not been singled out for investigation. Mr. Frey said that OBHECC should control and monitor every business to the same degree.

Mr. Frey responded to questions by stating that:

• The Commission was aware of the nature of Frey’s Hatchery business before February, 2001 and took no issue with it, therefore, Frey’s Hatchery operations should remain of no concern to OBHECC.
• He is worried that he will be prosecuted on the basis of information provided to OBHECC.
• Frey’s Hatchery has only sold “small lots” of birds and has always informed its broker/dealers that the volume for “small lot” sales is 300 birds or less.
• A sales invoice dated October, 1999 indicated that birds separated by sex in the amount of 2,500 birds were sold by Frey’s Hatchery to a single customer.
• Frey’s Hatchery sold larger lots of birds to meet the demand from certain customers.
• Frey’s Hatchery pleaded guilty to the October 2000 charges as it was the easiest course of action to take at the time.
• It was not clear that the charges were the result of not reporting, but it was thought that the number of birds sold was the basis for the offence.
• It was believed that the special dual purpose birds did not come under the jurisdiction of OBHECC.
• Though he does not remember exactly when he received the October 6, 2000 letter from Ralph Harris, the questions asked in the letter left no doubt in his mind that OBHECC was interested in the special dual purpose birds.
• He understands that Mr. Waugh should have been permitted to enter the hatchery. To his recollection he was hatching special dual purpose eggs at the time of the February 15, 2001 attempted inspection.
• It is assumed that most of the purchasers of special dual purpose birds use them for meat. Some customers may use them for eggs though it is not recommended.
• Agriculture Canada had instructed Frey’s Hatchery to report the special dual purpose birds in the egg category and Frey’s Hatchery had always complied.
• He was not aware that he could appeal the decisions of OBHECC to the Tribunal at that time (October 2000) nor was he aware that his counsel Mr. Kelly, had made inquiries into the appeal process on behalf of Frey’s Hatchery.
• He was flustered at the time of the May, 2001 inspection by the three ‘feather boards’ and misled the inspector with regard to the type of birds he was hatching. He wanted to protect his special breeding genetics.
• Frey’s Hatchery has two breeder flocks at present; one is located at the Wideman farm and one is located at the St. Jacobs barn.
• The chicks currently being produced are not being sold in lots of more than 300 and their sale is not being reported to OBHECC.
• It was co-incidental that the CFO became aware of the sale of three lots of chicks numbering above 300 per lot, as it has only occurred three times in the history of Frey’s Hatchery.
• Frey’s Hatchery is obligated to do projections for White Rock birds and is able to do so.
• Frey’s Hatchery purchases broiler eggs from other hatcheries as their season is too short to make it profitable to supply them from their own flocks.

Mr. Snider made his summations to the Tribunal stating that the supply management system in Ontario cannot function unless participants report and allow inspection of their premises. Mr. Snider said that Frey’s Hatchery was obligated to allow an inspector into the hatchery but refused to do so and the resulting fine is modest and justified. Mr. Snider stated that the October, 2000 conviction and fine for not reporting sales on a Form 1A is a clear violation of OBHECC Regulations. Mr. Snider told the Tribunal that the evidence indicated that Frey’s Hatchery was aware of its obligations, but chose to ignore them. Mr. Snider explained to the Tribunal that the March 28, order asked for information from Frey’s Hatchery so that the OBHECC could better understand the nature of Frey’s Hatchery operation; the order was defied because Frey’s Hatchery did not want OBHECC to have the information. Mr. Snider said that the order did not contain a request for any information regarding genetic breeding secrets. Mr. Snider stated that the $10,000 fine for not complying with the order was appropriate as it is a very serious matter to defy an order. Mr. Snider concluded his summation asking the Tribunal to confirm the fines.

Mr. Kelly told the Tribunal in his summation that the OBHECC Policy Direction #43 and its jurisdiction with regard to the regulation of special dual purpose birds was not clear. Mr. Kelly said that Mr. Frey had explained where the policy was unclear. Mr. Kelly said that Mr. Frey did eventually let Inspector Waugh into the hatchery and allowed him to thoroughly inspect the premises. Mr. Kelly submitted that everyone is expected to know the law but that it was unfair to expect that producers should comply with a retroactive application of the law. Mr. Kelly explained to the Tribunal that Policy Direction #43 was applied retroactively to Frey’s Hatchery in the form of the OBHECC order of March 28, 2001. Mr. Kelly contended that Frey’s Hatchery was in double jeopardy if they provided the information requested by OBHECC as they had been notified that the information could be used against them. Mr. Kelly said that there were still outstanding issues with respect to the production of dual purpose chicken and the application of existing OBHECC policies and jurisdiction over the marketing of dual purpose birds.

In his final submission, Mr. Snider said that the special dual purpose birds are not used for any purpose but meat consumption and therefore, they fall under OBHECC’s jurisdiction. Mr. Snider said that Frey’s Hatchery and OBHECC had a common understanding of the definition of “chick” as set out in the regulations. Mr. Snider told the Tribunal that if Frey’s Hatchery had been conducting its affairs within the provisions of OBHECC policies and regulations, there would be no need to change the notice regarding the prejudice of any information provided to OBHECC. Mr. Snider said that Frey’s Hatchery had confessed to providing misleading information and to disallow the fines would be unfair to all other producers and undermine the scheme of regulated hatching egg marketing.

Findings

The Tribunal finds that Frey’s Hatchery, did obstruct Inspector Waugh from entering the hatchery on February 15, 2001.

There was ample evidence provided for the Tribunal to conclude that Frey’s Hatchery did sell at least 800 cockerels and pullets without reporting the sale on a Form 1A as directed in the OBHECC regulations. Sufficient evidence was presented to the Tribunal to indicate the importance of appropriate and timely reporting within a regulated marketing scheme.

Frey’s Hatchery failed to comply with the request for information in the OBHECC order of March 28, 2001 and within the time limit specified. The evidence before the Tribunal was conclusive that Frey’s Hatchery had numerous opportunities to comply with the substance of the order. There was no evidence that OBHECC intended to treat any information provided by Frey’s Hatchery with prejudice at the time the order was issued.

The Tribunal finds that the hatchery operators governed by OBHECC are obligated to inform themselves of new policies and to abide by its directions.

Decision and Reasons

After carefully considering the evidence presented and the submissions made, the Tribunal decided to deny the appeal of Frey’s Hatchery.

The Tribunal supports the Commission’s decisions of July 27, 2001 and October 26, 2001. Frey’s Hatchery was apprised of its obligations as a producer of a regulated product.

Frey’s Hatchery had ample time and opportunity to comply with the order of March 28, 2001, or alternatively, to approach OBHECC to enter into discussions to resolve any outstanding issues. The Tribunal feels that the failure to report is a serious deficiency of participants within a regulated marketing system.

The penalties imposed on Frey’s Hatchery are appropriate given that the producer knowingly failed to fulfill his obligations with regard to the selling of more than 800 cockerels and pullets. It was noted also, that there was a previous offence for which Frey’s was penalized.

Dated at Stouffville, Ontario the 10th, day of June, 2002.