Sunnybrook Farms v Chicken Farmers of Ontario, 2002 ONAFRAAT 3

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

Sunnybrook Farms v Chicken Farmers of Ontario

Sunnybrook Farms v CFO 2002 ONAFRAAT 3

Ministry of Agriculture, Food and Rural Affairs Act

December 13 and December 14, 2001

DATE OF DECISION:

January 31, 2002

2002-03

2002 ONAFRAAT 3

Sunnybrook Farms v Chicken Farmers of Ontario

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 Agriculture, Food and Rural AffairAppeal Tribunal by Sunnybrook Farms from a decision of the Chicken Farmers of Ontario (CFO) to refuse to hold a hearing into the entitlement of Sunnybrook Farms for a periodic allocation base of 100,000 kilograms (live weight) per quota period for slaughter.

Before:

Paul Gillen, Vice Chair; Mary Field, Member; Ralph Huckle, Member.

Appearances:

Ken Holstein appellant.

Ron Folkes, counsel to Sunnybrook Farms.

Geoff Spurr, counsel to CFO.

Kevin Thompson on behalf of the respondent CFO.

Robert Shapiro on behalf of the AOCP.

DECISION OF THE TRIBUNAL

This appeal was heard in Guelph, Ontario on Thursday December 13th and Friday December 14th, 2001. Sunnybrook Farms appealed to the Agriculture, Food and Rural Affairs Appeal Tribunal (the Tribunal) from a decision of the Chicken Farmers of Ontario (CFO) not to hold a hearing into the entitlement of Sunnybrook Farms for a periodic allocation base of 100,000 kilograms (live weight) per quota period for slaughter.

The Background

Chicken production in Ontario is regulated under a quota system by the CFO. The total allocation of chicken to be produced in Ontario, per quota period is set by the Chicken Farmers of Canada (CFC) for each quota period. The CFO distributes the allocation to each producer in Ontario based on the quota held by each producer. Producers grow their allotment of chicken and market it to an approved chicken processor. Processors request an allocation based on the capacity of their slaughter plants and market demands. Processors contract with the producers based on their periodic allocation (live weights) to slaughter. The Association of Ontario Chicken Processors (AOCP) assists the CFO in recommending the periodic allocation for processors. Several systems have been implemented over the years by the CFO, to assist producers and processors in growing and marketing chicken.

Preliminary Matters

A pre-hearing conference motion was disposed of on November 2, 2001. The motion dealt with the scope of the stay imposed by the CFO for increased allocations, pending the outcome of the decision of the Tribunal in the matter of the CFO’s appeal relating to the system for the allocation of live chicken to Ontario processors. The result of the pre-hearing conference was to proceed to hear the matter of Sunnybrook’s entitlement to a periodic base allocation of 100,000 kg (live weight)

The Issue

Should the CFO hold a hearing into the entitlement of Sunnybrook Farms for a base allocation of 100,000 kg (live weight) in each allocation period?

The Evidence and Findings

Mr. Ron Folkes told the Tribunal that in June of 1996 when processor allocations were being negotiated, Sunnybrook Farms had requested a base supply of 50,000 kg to be increased to 100,000 kg over a few quota periods. Mr. Folkes explained that Sunnybrook Farms was undergoing a retro-fit at its plant and anticipated being able to handle less capacity until the renovations were completed. Mr. Folkes said that the appeal before the Tribunal was a result of miscommunication and misunderstanding. Mr. Folkes said, that at no time did Ken Holstein, the principal of Sunnybrook Farms relinquish his original base allocation of 100,000 kg. Mr. Folkes referred to the CFO Quota Policy 129-96 wherein Sunnybrook Farms was defined as a “smaller processor” (allocation of less than 1.6 million kg per quota period) and to the accompanying Appendix A which set out the incremental allocation increases for Sunnybrook Farms to reach the base of 100,000 kg for quota period A-16, which ran from October 26th to December 20th , 1997. Mr. Folkes maintained that Sunnybrook Farms was still entitled to a base allocation of 100,000 kg and that the CFO policies do not provide a “use it, or lose it clause”. Mr. Folkes maintained that no one from the Association of Ontario Chicken Processors (AOCP), the Ontario Independent Poultry Processors (OIPP), the CFO nor the Farm Products Marketing Commission (FPMC) contacted Sunnybrook Farms to indicate that Sunnybrook’s base allocation would be held to 50,000 kg per quota period under the new allocation system. Mr. Folkes told the Tribunal that Sunnybrook was not a member of the AOCP in 1997.

Mr. Geoff Spurr told the Tribunal that Sunnybrook Farms had not raised the issue of base allocation until the present appeal. Mr. Spurr maintained that the time for Sunnybrook to have raised the issue had passed. Mr. Spurr explained that the basis for the CFO allocating 50,000 kg to Sunnybrook was based on Sunnybrooks requests at the beginning of several quota periods. Mr. Spurr said that there were no submissions that could indicate that Sunnybrook believed all along that it’s base allocation remained at 100,000 kg. Mr. Spurr said that the allocation in dispute was made under the old system known as the “1996 System” and that the time to bring forth the issue was long past.

Mr. Rob Shapiro represented the AOCP interests at the hearing. Mr. Shapiro told the Tribunal that the present appeal was made on the basis of a June 1996 recommendation by the AOCP that Sunnybrook Farms be allowed a maximum quota of chicken of 100,000 kg. by the end of quota period A-17 (December 21, 1997 to February 14, 1998). Mr. Shapiro concurred with counsel for the CFO in that, the time for bringing forth the issue of 100,000 kg base allocation was past. Mr. Shapiro stated that at the time that Sunnybrook made the initial allocation request, the OIPP was not in existence and that all processors were notified of the new allocation system. Mr. Shapiro explained to the Tribunal that the recommendation of the AOCP was made under the old allocation system, which expired in 1998.

Mr. Ken Holstein testified before the Tribunal on behalf of Sunnybrook Farms. He told the Tribunal that he is the principal of Sunnybrook Farms a family owned and operated chicken producer/processor. Mr. Holstein testified that:

Mr. Holstien Senior owns the chicken quota that supplies production for some of the chicken processed by Sunnybrook Farms.
Sunnybrook processes custom chicken for the Hamilton Market and contracts with two producers, Basil and Rod Gillyatt for custom slaughtering.
A unique feature that Sunnybrook offers is a guarantee that live birds brought to the plant for slaughter, will be the very birds that are sold back to the producer after slaughter.
Sunnybrook Farms began renovations to its plant in 1997. The plant now slaughters some 75,000 to 80,000 kg per quota period, with the average live weight being 3.2 kg.
Sunnybrook Farms joined the OIPP in the spring of 2001. Prior to that it was not a member of any processing association.
In 1996 Sunnybrook advised Bill Doyle (past president of the CFO) at his request, of the business plan, the proposed renovations to increase plant capacity and the supply requirements for future quota periods.
According to the business plan it was thought that Sunnybrook would need a supply of 50,000 kg per quota period increasing to 100,000 kg by the end of 1997.
Sunnybrook anticipated completing the renovations by the spring/summer of 1996, but there was a delay due to unexpected problems.
In period A-08 (August 4 to September 28, 1996) Sunnybrook’s supply was 19,000 kg. By period A-16 (October 26,1997 to December 20, 1997) the supply was increased to 100,000 kg.
The supply request for period A-14 submitted to the CFO by Sunnybrook Farms on February 3, 1997, stated that 50,000 kg were required per quota period unless Sunnybrook notified the CFO otherwise. There was no reference to relinquishing the 100,000 kg base allocation.
In correspondence to the CFO dated June 14, 1996 the AOCP recommended the increase of supply to Sunnybrook up to 100,000 kg by quota period A-17.
No one from Sunnybrook Farms was able to attend a May 23, 1996 meeting at Bill Doyle’s office to discuss supply because; in addition to managing the processing plant Sunnybrook farms 350 acres of cash crops and the meeting was held at the height of the planting season.
No one from CFO questioned Sunnybrook’s request for 50,000 kg in February1997.
Sunnybrook was getting the supply it requested and it was not until August 1998 that more kilograms were requested.

Mr. Holstien told the Tribunal that in August 1998 he was not aware of the change to the new allocation system, and he still believed that his base allocation was 100,000 kg per quota period as he had never formally relinquished it. Mr. Holstein said that he did not recognize the significance of the memo of April 1998, which stated that the CFO and the FPMC had reached agreement on the new system and that a meeting date had been set for April. Mr. Holstien told the Tribunal that he did not recall getting the letter or being advised of the meeting. Mr. Holstein submitted to the Tribunal that an August 1998 note to the CFO requesting 80,000 kg was sent before the September 27, 1998 implementation date of the new system.

Mr Holstein testified that he did not become alarmed with regard to his supply requests not being met, until October 1998 when he received a letter from Kevin Thompson stating that Sunnybrook’s allocation was 46,000 kg for quota period A-23 and that Sunnybrook had over-contracted for period A-23.

Mr. Holstein said that:

He sent a response to the October , 1998 letter, advising the CFO that there was an error in Sunnybrook’s allocation.
There was no response directly from Kevin Thompson, nor the AOCP who had been previously copied by the CFO on Sunnybrook’s supply requests even though Sunnybrook was not a member at the time.
In June 1999 Kevin Thompson visited the plant and barns at Sunnybrook Farms and discussed Sunnybrook’s allocation.
The discussion did not reveal the full misunderstanding with regard to the new allocation system and Mr. Holstein’s impression that Sunnybrook still had a base allocation of 100,000 kg.
A July 2, 1999 letter from Kevin Thompson to Sunnybrook indicated that the CFO and other processors were still dissatisfied with the allocation system and that the FPMC had become involved. This letter did not mention Sunnybrook’s right to a hearing before the CFO.
Correspondence from Kevin Thompson that was copied to the AOCP in July 2001 stated that Sunnybrook Farms had over-contracted for period A 41 and in prior periods. It stated that the oversupply must be released to other processors or the CFO could draw from Sunnybrook’s letter of credit.
Sunnybrook brought its increased supply requests before the CFO Board in August 2000. A response was promised within 10 days of the meeting; it was not forthcoming for several months.
The response when it came was to deny the request for a minimum of 75,000 kg.
The response letter indicated that many other processors were also requesting more supply and that the matter of supply to processors was before the Tribunal therefore, the CFO took the position that it would be imprudent for it to make any changes to processor supply until the conclusion of the hearing. The letter also advised that the Tribunal was accepting submissions from interested parties until November 6, 2000.

Mr. Holstein testified that the letter denying his increased allocation request was received several months after his meeting with the CFO Board and that it left him only four days to prepare a submission to put before the Tribunal in preparation for its allocation and export hearings. Mr. Holstein said that he was very frustrated by the late letter and the assumption made in the letter that his request for more kg was made under similar circumstances as other processors who were requesting more chicken. Mr. Holstein said that he was advised by the CFO that he should inform all other processors, the OIPP and the AOCP of his situation and if there was a positive consensus, the CFO as a neutral party would allocate the 100,000 kg. Mr. Holstien explained that the CFO was of the opinion that his handwritten note of February 1997 requesting 50,000 kg per quota period until further notice, effectively relinquished his base allocation of 100,000 kg. Mr. Holstien said that he believed that it was the role of the CFO to contact the other processors and the associations; he requested this and was told that the CFO would not do so. Mr. Holstein said that he requested a full hearing before the board on September 20, 2001 and when this was denied he launched his appeal to the Tribunal.

In response to questions Mr. Holstein responded that:

He holds a Bachelor of Arts Degree with a specialization in Economics and that he worked for Coca Cola from 1974 to 1983 and for Playtex from 1983 until 1985, when he began to manage Sunnybrook Farms.
He understands that the present allocation system under which he is operating is known as the “1998 System”.
He conceded that contrary to his previous testimony, there was a response to his February 3, 1997 note requesting 50,000 kg until he advised the CFO differently.
The plant renovations restricted Sunnybrook’s capacity.
Whereas Section 15 of Quota Policy 129-96 states that “all processors must slaughter the quantity of chicken forming their supply requirement for the crop quota period” he was not aware of Section 15 at the time he requested 50,000 kg per quota period and that no one from the CFO raised the “ must kill” interpretation of Section 15.
50,000 kg was Mr. Holstein Senior’s production quota at the time he requested that amount and the business had not yet expanded to include the custom kill contracts with Basil and Rod Gillyatt.
Sunnybrook was never advised that attendance was mandatory at meetings of producers and/or processors; that is why he did not attend or send a representative.
He did not raise the issue of the 100,000 kg base allocation in writing until August 2001, but this was because he believed that the base allocation remained at 100,000 kg.
He was not aware of the stipulation in the CFO regulations that a processor’s line of credit could be drawn upon, if there was non-compliance with CFO regulations.
Neither he nor Mr. Holstein Sr. attended the February 5, 1999 or the February 12, 1999 meetings to further discuss improvements to the processor supply allocation system.
He was aware that discussions were underway to improve the processor supply allocation system.
He did not know the reason why his supply was capped at 50,000 kg until August 2001.
He has discussed his situation with Mr. Henry Bos who called him as a witness at the supply allocation and export hearings presently before the Tribunal. He considered his testimony at the hearings to be strictly on behalf of Mr. Bos.
Mr. Kevin Thompson of the CFO first warned him that the letter of credit would be drawn from in July 2000, if Sunnybrook continued to over-contract.
With regard to invitations to attend an AOCP meeting to discuss periods A-12, A-13 or A-14, he did not attend as he believed that it would have resulted in the reduction of the price for live chicken; as a producer he wishes to keep the live price for chicken as high as possible.
A June 13, 1996 letter to the AOCP from Sunnybrook requesting 50,000 kg in A-9 and A-10, increasing to 100,000 kg in period A-11 was copied to Kevin Thompson at the CFO (formerly the Ontario Chicken Producer’s Marketing Board), Guy Gillyatt of Grand River Poultry, Tom Beischlag former Board Member from Hagerville, Peter Preston M.L.A. Cayugag office and Frank Brown, Sunnybrook’s lawyer.
The June 13, 1996 letter was copied to the parties because of Mr. Holstein’s concerns over supply allocation.
In period A-42 when Sunnybrook was in receipt of an excess supply advisement, an arrangement was made with another processor whereby the excess kg were signed over, but still slaughtered in the Sunnybrook plant for a paid premium.

Mr. Kevin Thompson testified before the Tribunal that he is the Operations Manager for the CFO. Mr. Thompson said that in his position with the CFO he assisted with the development of regulation and policies as well as administering the processor allocation system. Mr. Thompson said that he was also responsible for administering the quota system for producers. He explained that the CFO employs nine Field Representatives whose function is to communicate and explain policies, assist growers and processors, inspect plants and ensure full and proper completion of documents. Mr. Thompson told the Tribunal that:

In the “1998 System” the processor supply is determined by a base level which is related to total Ontario production and that processors may ask the CFO Special Request Panel for more supply when there is more available than initially allocated.
Approximately 60 million kg of chicken are produced in Ontario every 8 weeks.
The total number of kilograms to be produced in the province is determined by industry stakeholders, producers and producer/processors in consultation with the Chicken Farmers of Canada (CFC).
The chicken is allocated every quota period with growth being distributed as a function of base allocation market share.
The February 3, 1997 note from Mr. Holstein to the CFO requesting 50,000 kg until he advised otherwise, was copied to Mr. Rob Shapiro at the AOCP a practice with supply requests for member and non-member processors.
The February 3, 1997 note was perceived as Sunnybrook’s wish to forego an increase in supply when it was available in a growth period.
The “new system” was to be effective for period A-22. As there is a 20-week lead time for supply allocation, contracting for period A-22 would take place sometime in late May or early June 1998. Chicks would be ordered in mid-July depending on the finished size of bird.
The base allocation for Sunnybrook submitted to the Tribunal for the “1998 System” is the supply received by Sunnybrook at the end of the “1996 system”.
Letters were sent to processors to keep them abreast of the discussions facilitated by the FPMC on allocation and export.
The CFO monthly newsletter announced the agreement when it was reached.
Mr. Paul Glenney of the FPMC was asked to hold a meeting to inform the stakeholders and the processors who were non-AOCP members of the results of the discussions.

Mr. Thompson explained to the Tribunal that processors could request additional supply, when it was available, from the Special Request Panel. Mr. Thompson said that the Special Request Panel was made up of individuals with experience in the chicken industry. Mr. Thompson referred to a letter sent to processors in June 1998 inviting processors to make application to the Special Request Panel. Mr. Thompson stated that a memo, accompanied by Regulations 1555-1998, 1556-1998 and the Supplemental Quota Policy 138-1998, which explained the Special Request Panel, supply determinations and the posting of credit letters was sent to all processors in early January 1999. Mr. Thompson told the Tribunal that Sunnybrook did not make any requests for more supply through the Special Request Panel.

Mr. Thompson explained that the CFO:

Issues a letter to processors to confirm supply for each quota period.
Reconciles the agreements between producer/processors to match the kilograms grown with those contracted for slaughter.
Confirms by letter, 13 weeks before the production period begins whether a processor is over-signed or under-signed.
Allows a processor to contract for additional supply to make up for any under-signed kilograms.
Defines “authorized supply” as the entitlement per quota period.
Imposes a financial penalty for processors who contract outside the size category that they initially requested.
Policy states that any over-contracting above 10,000 kg of authorized supply must be released to processors requesting it.
Ratified the “new 1998 system” in May of 1998.

Mr. Thompson sent a letter to Mr. Ken Holstein on December 22, 1998 advising that Sunnybrook was over-contracted for period A-25. Mr. Thompson explained to the Tribunal that a response from Mr. Holstein dated January 4, 1999 stated that according to Regulation 1556-1998 Sunnybrook was within the 10,000 kg sleeve of authorized supply. Mr. Thompson explained that he inferred from this correspondence that Mr. Holstein understood the policy regulations regarding the new “1998 System”.

Mr. Thompson stated that:

He met with Mr. Holstein at the farm in June 1999.
He believed that Mr. Holstein was aware of his rights and privileges as a processor within the new “1998 System”.
He was aware that Mr. Holstein was in contact with his lawyer and Member of Parliament regarding his situation as a processor.
The 100,000 kg. base allocation issue was not raised until August 2001.
It seemed that Mr. Holstein was refusing to co-operate by releasing the excess kilograms when he had over-contracted.
He is certain that he sent the Policy Regulations to Sunnybrook Farms, on at least three different occasions.
The CFO Board took the position that Mr. Holstien’s request for more supply was similar to that of other processors at the time and denied the request as it was felt that the new “1998 system” was stayed, pending the outcome of the hearings before the Tribunal.
He met with Mr. Holstein on August 7, 2001 at which time he was shown a copy of a spreadsheet from the AOCP from the old “1996 System” which indicated that his entitlement was 100,000 kg.
He reviewed his files at the CFO offices and found the February 1997 note from Mr. Holstein that asked for a supply of 50,000 kg until further notice.
The CFO took the position that should Mr. Holstien contact all other processors and if they were agreeable that his allocation be adjusted to 100,000 kg then the CFO would endorse it as his base allocation.
This is what was referred to as the CFO taking a neutral position with regard to processors.
CFO regulations set out the rules of the system under the Farm Products Marketing Act, whereas the policies set out the intent of the regulations and are more flexible.
Sunnybrook Farms was considered a small processor under the Quota Policy 129-1996, this policy allowed a small processor to slaughter less than the maximum kg as set out in Appendix A.
The Quota Policy 129-1996 was effective in periods A-7 to A-21; a sunset clause allowed it to continue beyond period A-17.
There had been many changes to the allocation systems in the last decade and it is important that everyone in the industry keep up with the changes.
At the beginning of the new “1998 System” the base supply of small processors was carried forward from the supply in period A-21.
Nowhere in the new “1998 System” policy does it state that there is a deadline that must be met by processors requiring more supply. Processors should take action in a reasonable amount of time.
The nature of the consultative process involving the FPMC is one where industry stakeholders have input and are invited to participate and thereby learn of the changes to the system.
Mr. Holstein admitted that he may have missed some opportunities to inform himself of changes in the industry, and this is understandable, but Mr. Holstein had informed him on several occasions that he understood his rights.
None of the notes written by Mr. Holstein prior to the October 6, 1998 rescinding of the old “1996 System” contained any reference to a base allocation under the old “1996 System”.

Mr. Thompson told the Tribunal that he did not consider Mr. Holstein’s requests for increased supply to be any different than that of any other processor, some of whom had taken their issues to the Tribunal hearings on supply allocation and export. Mr. Thompson stated that he had no idea whatsoever that Mr. Holstein was not aware that the system had changed. Mr. Thompson said that he recalled that some small processors had been successful with their requests before the Special Request Panel, though he could not say if Sunnybrook’s request, if there had been one, would have been granted. Mr. Thompson explained to the Tribunal that because any increase to Sunnybrook’s supply would necessitate a reduction in the supply of other processors, the AOCP and the OIPP would be working against the interests of other members should they recommend it. Mr. Thompson told the Tribunal that he does not remember when he forgot about the existence of the February 3, 1997 note requesting “50,000 kg until further notice”, though Mr. Holstein had said that he was going to contact the board about his supply problems back in 1998.

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

The old “1996 System” ended when the FPMC ratified the new “1998 System in May 1998.
Processors would be contracting in late-May 1998 for period A-22 under the new “1998 System”.
He recalled that Niagara Poultry and Farm Fresh Poultry sent representatives to the FPMC meetings that were facilitated by the FPMC.
Of the processors who did make presentations to register their objection to the new system, he does not believe that any were granted their requests.
It was difficult to believe that any participant in the chicken industry was not informed of the pending Tribunal hearings into the allocation/supply and export system in November of 2000 when Sunnybrook received the letter from the CFO denying a request for more chicken.
In quota period A-23 Sunnybrook was over-contracted by 2,875 kg. Mr. Holstein was informed of this by letter dated October 2, 1998. Regulation 1367-1996 was refernced.
In quota period A-24 Sunnybrook was under-contracted by 9,399 kg. Mr. Holstein was informed of this by letter dated October 30, 1998. Regulation 1556-1998 was referenced.
The Regulation governing the new system was not passed until October 30, 1998.
The base allocation of 50,000 kg is not an absolute; it is the market share held by Sunnybrook in relation to the total amount of chicken that is supplied by producers that contracted with Sunnybrook. To be over or under-contracted is to sign with producers for kg that are above or below an authorized market share.
In growth periods the smaller processors were assigned more supply first with the larger processors getting a supply increase last.
During the current Tribunal hearings, it would take extraordinary circumstances for the CFO to alter any processors share.
The CFO did not find that Sunnybrook’s product was particularly unique in that there are other producer/processors with animal by-product free diets, low levels of antibiotics use and the slack scald method of removing feathers.
Though the Sunnybrook-Gillyatt agreement ensures that the Gillyatts get back the same birds they bring to the plant for slaughter, the CFO does not view the Sunnybrook operation as particularly unique.

Mr. Robert Shapiro, President of the AOCP, made a submission to the Tribunal on behalf of the AOCP, an interested party. Mr. Shapiro asked the Tribunal to reject Sunnybrook’s argument that it has a right to 100,000 kg per quota period of supply allocation. Mr. Shapiro wished the Tribunal to consider that:

Sunnybrook believes it has a right to a supply allocation of 100,000 kg based on a recommendation made by the AOCP dating back to June 1996.
Quota Policy 129-1996 indicated that Sunnybrook’s supply should be increased from 20,000 kg in September 1996 to 33,000 kg. by October 1997.
A fax was sent to Sunnybrook in June of 1996 to confirm the increase.
In each subsequent quota period a fax was sent to all non-AOCP processors to confirm the supply and was copied to the CFO.
In February 1997 the CFO advised the AOCP of Sunnybrook’s request for 50,000 kg per period until further notice.
Neither Mr. Holstein nor anyone else from Sunnybrook Farms contacted the AOCP between February 1997 and April 1998. The FPMC contacted Sunnybrook to invite them to a meeting scheduled for May 7, 1998 to ask for input into the new Allocation Agreement.
The new agreement set Sunnybrooks supply at 50,000 kg.
No written response was forthcoming from Sunnybrook at the ratification of the new agreement.
The AOCP recommendation for 100,000 kg per period expired in period A-21 so there was no necessity to rescind it.
The FPMC sent a copy of the new Allocation Agreement to Sunnybrook on April 22, 1998, yet there was no request for more supply until August 1998 when Mr. Holstien requested 80,000 kg from the CFO. There was no mention of the AOCP recommendation of 100,000 kg at this time.
The letter of October 2, 2001 from Mr. Ron Folkes to the AOCP is the first time the 100,000 kg allocation was mentioned.
The statement made by Mr. Holstein that he was first made aware of the “new system” on July 2, 1999 is not accurate, as the FPMC notified Sunnybrook in April 1998 and the CFO practice was to send all processors notification of their allocations.
The complaints regarding Sunnybrook’s supply were not pursued until July 2001.
If the CFO had granted Sunnybrook more supply then there would have been numerous appeals from other processors who also wanted increases.
The AOCP does not believe that Sunnybrook’s market is unique.
The chicken industry has long lead times yet Mr. Holstein did not make reference to the 100,000 kg until 40 quota periods after it had first been recommended under the old “1996 System”.

In response to questions, Mr. Shapiro told the Tribunal that:

The CFO has the discretion to maintain its policies or adopt the production schedules set out by the AOCP.
To his knowledge the CFO never changed the allocations set out in Appendix A which accompanied Quota Policy129-1996.
Mr. Holstein’s testimony that he did not understand that the 100,000 kg allocation was not authorized under the new “1998 System” until five years after it was initially recommended by the AOCP is suspect, given that he has operated a producer/processor business in a highly complex industry for some time.
The time to raise the issue has passed as it should have been dealt with under the old “1996 System when the allocation was made.

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

All processors have a base supply allocation, Sunnybrook’s is 50,000 kg.
The base allocation is adjusted to accommodate market trends, growth, shrinkage and export.
Sunnybrook is not entiltled to export market allocation.
The allocation systems are constantly undergoing changes to render them more flexible.
Under the current system, the Special Request Panel has allocated some 800,000 extra kg but it has not been active since period A-28.
The current system is the seventh that has been implemented since 1990, with each new system contributing to an improved allocation plan.
In the current system 99% of authorized supply is actually slaughtered.

Mr. Ron Folkes, counsel to Sunnybrook Farms, stated that the CFO has determined that there is no merit to the appeal without hearing it. Mr. Folkes stated that the timeliness of the appeal is irrelevant because under the policy regulations there is no statute of limitation and that:

Sunnybrook’s product is unique in that no other processor duplicates the product and method in all aspects, for example the guarantee of the same birds returned to the processor and the small lots, slaughtered on a weekly basis.
The submissions before the Tribunal indicate that the CFO struggled with Mr. Holstein’s requests. This conflicts with CFO’s position not to hold a hearing into the matter because of timeliness or merit.
The definition of supply in Quota Policy 129-1996 is ambiguous. The definition can be interpreted in three different ways, for this reason alone the CFO should grant the request for a hearing.
Mr. Holstein had made three requests for a review of his allocation by the time the old “1996 System” was rescinded.
Mr. Holstein did not understand why he was not getting an increase in supply until August 2001. Mr. Thompson should have told Mr. Holstein the reason long ago.
The CFO submitted that increasing the allocation to Sunnybrook would stimulate a flood of other requests from processors. This is not a valid reason to deny Sunnybrook a hearing.

Mr. Geoff Spurr, counsel to the CFO, explained to the Tribunal that the evidence submitted in the appeal is not in dispute. Mr. Spurr stated that the CFO decided that the Tribunal was the most appropriate forum for resolving the matter before it, with the knowledge that Sunnybrook would appeal its decision not to hold a hearing. Mr. Spurr submitted that:

The result of a meeting between the CFO and Mr. Holstein in November 2000 was to stay requests for increased allocation until the conclusion of the hearings into the same that were before the Tribunal.
There is a provision in the Ministry of Agriculture and Food Act that, while not a limitation statute, the Tribunal has the discretion not to hear an appeal that the appellant has knowledge of for more than one year.
The onus is on the appellant to act at his earliest convenience. The present issue has been kept active by the sending of handwritten notes to the CFO.
Mr. Holstein submitted that Mr. Thompson was cold and unfeeling on the occasion of being sent a copy of the regulations, but he did not make mention of his need or understanding of the regulations.
The responses from Sunnybrook to CFO correspondence are often contained in brief notes returned to the CFO by same day fax.
A note faxed to the CFO from Mr. Holstein on October 2, 1998 indicated that Sunnybrook’s regular supply needs were 50,000 kg per period, but on this occasion 80,000 kg were requested. There was no mention of the 100,000 kg base. This note indicates that Mr. Holstein was aware that something was wrong as early as 1998.
By September 1998 all contracts for the rest of 1998 would have been signed under the new “1998 System”. The FPMC consultations, ongoing Tribunal hearings, and meetings with the CFO all dealt with the implementation of the new system.
The appellant did not act expeditiously on his own behalf to resolve his concerns.
It is the CFO’s mandate to treat all processors equally.
Nothing in the submissions before the Tribunal suggested that Mr. Holstein was conducting business with the conviction that he had a 100,000 kg base allocation.
For the Tribunal to refer the matter back to the CFO would be to delay the resolution.

On behalf of the AOCP Mr Shapiro said that there is an obligation on all participants in a regulated marketing system to pay attention to what is going on around them. Mr. Shapiro concurred with Mr. Spurr that the Tribunal should dismiss the appeal in order to maintain the integrity of the industry. Mr. Shapiro said that the issues brought forward by the appellant were identified long after it was timely. Mr. Shapiro stated that the uniqueness of the Sunnybrook’s product was irrelevant in the matter before the Tribunal.

Mr. Ron Folkes stated in his final summation that Mr. Holstein made a number of attempts to resolve his issues with the CFO by fax, notes and meetings. Mr. Folkes said that Mr. Holstein looked to Mr. Thompson for guidance and if he had been advised by the CFO in 1998 with the material that made up the submissions for this hearing, then this appeal would have been heard in 1998. Mr. Folkes said that Mr. Holstein did not ever relinquish his allocation of 100,000 kg per period and that the onus was on the CFO to inform Mr. Holstein earlier with regard to his allocation under the new system. Mr. Folkes maintained that there is no relevance to staying the Sunnybrook matter while another separate chicken allocation matter was before the Tribunal. Mr. Folkes said that he felt that the CFO would give the appeal due consideration should the Tribunal decide in Sunnybrook’s favour.

Findings

The supply allocation system administered by the CFO is complex and frequently modified to better serve the industry stakeholders. The Tribunal recognizes that processors are operating within a highly regulated marketing system and that in the past decade it has been discussed and reviewed by many participants in the industry. The Tribunal finds it understandable that there may arise some confusion with regard to the implementation of new policies and regulations.

The Tribunal finds that as a non-member of any processor organization, Sunnybrook was dependant upon the CFO to represent its interests. The Tribunal feels that there was opportunity for the CFO to investigate more fully the indications made by Sunnybrook, that there was dissatisfaction with its supply allocation. The Tribunal finds that the Sunnybrook-Gillyatt agreement ensuring that the Gillyatts get back the same birds they bring to the plant for slaughter is a unique feature of Sunnybrook’s market.

Decision and Reasons

After careful consideration of the evidence provided and submissions made, the Tribunal decided to grant the appeal and orders that the CFO hold a hearing into the entitlement of Sunnybrook Farms for a period allocation base of 100,000 kilograms (live weight) per quota period for slaughter. Reasons for this decision are:

Though the appeal arises from a CFO policy regulation that was rescinded in 1998, the Tribunal decided to hear the appeal notwithstanding Section 16 (4) of the Ministry of Agriculture and Food Act, which states that:

The Tribunal may refuse to hear the appeal or, after a hearing has commenced, refuse to continue the hearing or make a decision if it relates to any order, direction, policy, decision or regulation of which the appellant has had knowledge for more than one year before the notice is filed under subsection (1) or (2) or, if in its opinion,

(a) the subject-matter of the appeal is trivial;

(b) the appeal is frivolous or vexatious or is not made in good faith; or

The definition of “supply” as stated in Quota Policy Number 129-1996 is open to interpretation
Differing interpretations of the date that Quota Policy Number 129-1996 was rescinded and the date that the 1998 policy was effective, were submitted to the Tribunal.

Dated at Guelph, Ontario this 31st day of January, 2002.