Nacewicz v. Ontario Flue-Cured Tobacco Growers’ Marketing Board, 2002 ONAFRAAT 42

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

AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL

APPEAL:

Nacewicz v Ontario Flue-Cured Tobacco Growers’ Marketing Board

Nacewicz v OFCTGMB 2002 ONAFRAAT 42

STATUTE:

Ministry of Agriculture, Food and Rural Affairs Act

HEARING:

November 15, 2002

DATE OF DECISION:

November 25, 2002

2002-42

NEUTRAL CITATION:

2002 ONAFRAAT 42

Nacewicz 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, FOOD AND RURAL AFFAIRS ACT.

AND IN THE MATTER OF: An Appeal to the Agriculture, Food and Rural Affairs Appeal Tribunal (the Tribunal) by Alexander Nacewicz, Rodney, Ontario from decisions of the Ontario Flue-Cured Tobacco Growers' Marketing Board (OFCTGMB) dated August 29, 2002 by which it:

1. Denied his request that the time allowed for him to install heat exchangers in his kilns be extended beyond August 1, 2002.

2. Denied his request that he be allowed to rent out 100% of his 2002 Marketing Quota.

3. Denied his appeal of its decision to reduce his 2002 Marketing Quota.

Before:

Murray Cardiff, Chair; Paul Gillen, Vice Chair; Bill Olsen, Member; George Klosler, Member

Appearances:

Alexander Nacewicz, appellant

Barry Bresner, counsel to the respondent, the OFCTGMB

Rudy Stickl, Vice Chair, OFCTGMB, witness

DECISION OF THE TRIBUNAL

This appeal was heard in Guelph, Ontario on Friday, November 15, 2002. Mr. Alexander Nacewicz appealed from a decision of the Ontario Flue-Cured Tobacco Growers' Marketing Board (OFCTGMB) to deny him exemptions from two board regulations affecting marketing quota and from a decision not to extend the time in which he could be eligible for grants to assist in the conversion of his kilns to indirect heat.

Statutory Context

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

Idem

(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.

Subsection (4) outlines conditions under which the Tribunal may refuse to hear an appeal. Subsection (5) provides for an opportunity for the parties to resolve the matter prior to an appeal to the Tribunal.

The Issues

The issues before the Tribunal were:

1. Should the time in which Mr. Nacewicz must convert his kilns to indirect heat to be eligible for grants be extended beyond August 1, 2002?

2. Should the Tribunal order the OFCTGMB to allow Mr. Nacewicz to rent out all of his 2002 marketing quota, as a fall rental?

3. Should the Tribunal reverse the OFCTGMB decision to reduce Mr. Nacewicz's 2002 marketing quota to the amount of tobacco carried over from 2001?

The Evidence

Facts Not in Dispute

The parties agreed that Mr. Alexander Nacewicz had, for a number of years, combined quota he owned with quota held by his parents, Wanda Nacewicz and Stanley Nacewicz (deceased), and grown the tobacco as one crop on land owned by his parents. For the 2002 crop year, Mr. Alexander Nacewicz was entitled to 19,891 lbs. of marketing quota and his parents were entitled to 31,362 lbs. of marketing quota. However, when no crop was grown in 2002, the OFCTGMB reduced the total marketing quota available to Mr. Nacewicz to 2,420 lbs. This was the amount the OFCTGMB deemed he would need to market tobacco in storage.

It was also agreed that Mr. Nacewicz had converted three of his ten kilns to indirect heat in 2001 and had converted a fourth kiln in July 2002. Mr. Nacewicz was eligible and received a grant of $1,500 per kiln for the four converted kilns. The source of the grant money was the government of Ontario but the OFCTGMB was responsible for administering the program.

Marketing Quota Issues

Mr. Alexander Nacewicz told the Tribunal he had intended to grow a tobacco crop in 2002 but that circumstances beyond his control prevented it. He said he had arranged to rent in the quota held in his parents' names and had started tobacco plants in the greenhouse. Mr. Nacewicz explained that he did not transfer the seedlings to the field as a longstanding financial dispute had resulted in his parents' farm being put up for sale by auction. He was concerned that he would not be able to harvest the crop if the farm were sold. Mr. Nacewicz explained that the financial dispute was resolved on July 24, 2002, well past the date by which he could have planted a tobacco crop. Mr. Nacewicz explained that he made numerous attempts to resolve his parents' financial dispute in 2002 but that representatives of their bank refused to deal with the Farm Debt Review Board on the matter.

Mr. Nacewicz explained that the tobacco carried over from 2001 was not saleable and he planned to destroy it. He said that he would notify an OFCTGMB inspector when he was ready to destroy this tobacco.

Mr. Nacewicz told the Tribunal that the OFCTGMB had allowed him to rent out marketing quota in the past when his crop had been damaged by hail. He said he believed that his current situation was similar to that in which a crop is not harvested due to weather damage or personal illness.

Mr. Barry Bresner told the Tribunal that the OFCTGMB was a supply management board and that it assigned a fixed amount of basic production quota to tobacco growers. He explained the amount of marketing quota assigned each year was tied to the basic production quota but varied with the market demand. He said that a grower's marketing quota determined how large a crop he could grow. Mr. Bresner explained that Mr. Nacewicz's marketing quota had been reduced in 2002 because an OFCTGMB regulation requires that tobacco growers plant the tobacco they say they will plant or their marketing quota will be reduced to the amount needed to market carryover tobacco. He said that marketing quota that is cancelled in 2002 is re-distributed, free of charge, to growers who did plant a crop in 2002.

Mr. Bresner said that the OFCTGMB had restricted quota rentals since 1987. He explained the current OFCTGMB regulations allow producers to rent out up to 30% of their marketing quota each spring and an additional 20% in the fall. He said that rentals within a family were also allowed. He explained the rationale for the OFCTGMB regulations is to keep costs down to tobacco growers who are actively involved in the industry. He said that prior to 1987, non-growers held tobacco quota and leased it to growers.

Mr. Bresner told the Tribunal that the OFCTGMB has never exempted a grower from its quota rental restrictions for financial reasons. He said growers had been exempt if a serious illness or weather problem prevented them from bringing a crop in the ground to market. He said he was not aware of any case where a grower who did not plant a crop was allowed to rent out marketing quota. Mr. Bresner cited a number of instances where the Tribunal had upheld OFCTGMB decisions to turn down requests for regulatory exemptions based on financial hardship. He submitted that economic issues always involve a certain amount of control by the individual farmer and that Mr. Nacewicz had opportunities to resolve his parents' financial dispute prior to 2002.

Kiln Conversion Issue

Mr. Nacewicz told the Tribunal that the sheriff who was undertaking to sell the Wanda and Stanley Nacewicz farm had listed ten kilns which he owned in the notice of sale. He explained that he made efforts in April, May and June 2002 to correct this, going so far as to involve law enforcement agencies. He said the question of his ownership of the kilns was not resolved until July 24, 2002. He said he tried to obtain a loan from the Farm Credit Corporation to convert the kilns but that the lack of a crop in 2002 and the ownership dispute made it impossible for him to obtain financing. He said the kilns were portable but that he had no contingency plan to move them in the event that his parents' farm had been sold.

Mr. Nacewicz explained that he would have to convert the kilns to indirect heat in order to use them and that he would lose $9,000 in grant funding if the Tribunal did not allow him more time to convert his six remaining kilns. He said his ten kilns were included in a survey as to the total number of kilns in the province undertaken by the OFCTGMB. Because his kilns were counted, he thought there should be money set aside for the conversion of all his kilns. Mr. Nacewicz told the Tribunal that he believed that he could obtain financing to convert his final six kilns if it allowed his appeal with regard to leasing marketing quota. He said he needed to show income to financiers in order to receive a loan.

Mr. Bresner explained that the OFCTGMB had to require that kilns be converted to indirect heat as buyers would no longer purchase tobacco cured in the conventional manner. He said there were funds remaining from the grant program and that the OFCTGMB hoped to be able to distribute an additional $300 per kiln to growers who converted kilns under the program. However, he pointed out that the residual money belonged to the government of Ontario and the marketing board required government approval.

Mr. Bresner said the grant program ended August 1, 2002 but that growers had until November 15, 2002 to submit paperwork. He acknowledged that the Tribunal could order an exemption to these deadlines in this case. He pointed out that the grant covered approximately 25% of the cost of quota conversion and he said there was no indication that Mr. Nacewicz would be able to obtain the remaining funds required.

Mr. Rudy Stickl clarified the OFCTGMB quota rental policy. He said that each spring a grower can opt to rent out 30% of their marketing quota if they are not going to grow a crop and that they would then not be allocated the rest of their marketing quota. He said a grower who is growing a crop receives 100% of his marketing quota can rent 30% out in the spring and rent 20% out in fall. He also explained there was a great deal of variation in kiln size but that the size of the kiln does not greatly influence the cost of kiln conversion.

Summations

Mr. Nacewicz submitted that he would be put at a competitive disadvantage to other tobacco growers if he does not receive the $1,500 per kiln conversion grant available to all growers. He reiterated that his kilns were included in the OFCTGMB survey and there were still funds available in the program. He said that his kilns were put up for sale illegally and that he could not convert them by the deadline due to the ownership dispute and related financing difficulties.

Mr. Nacewicz said he understood the OFCTGMB position that quota rentals should be kept to a minimum to prevent non-growers from increasing the costs to tobacco growers. However, he submitted that his case was unusual in that he was a grower and had intended to grow a crop in 2002 but was prevented by circumstances beyond his control. He said he had no opportunity to settle his parents' financial dispute as their bank was unwilling to settle. He said his situation was different than the cases cited by Mr. Bresner as there had been no allegations of criminal activity in those cases.

Mr. Nacewicz said it was up to him as to how he would obtain financing to convert his remaining kilns to indirect heat but that it would be difficult to obtain a loan if he could not show income in 2002. He asked that the Tribunal grant all three of his appeals.

Mr. Bresner submitted that Mr. Nacewicz was treated no differently than any other grower with regard to the kiln conversion program. He said no other grower was being given the opportunity to undertake kiln conversions in 2003 and have money set aside for them in the grant program. He noted that Mr. Nacewicz did receive grant money for the four conversions he completed before August 1, 2002.

Mr. Bresner submitted that documents provided by Mr. Nacewicz showed that he could have settled with his parents' bank on a number of occasions but that he chose not to do so. He agreed that the financial situation may have been out of Mr. Nacewicz's control for one month in 2002 but said the dispute was years in the making. He suggested that Mr. Nacewicz was to some extent the author of his own misfortune as his past decisions led to his current situation.

Mr. Bresner suggested that the OFCTGMB had assisted Mr. Nacewicz in the past when it allowed him to rent out marketing quota due to crop damage and by allowing him to grow a crop on land he does not own. Mr. Bresner said the OFCTGMB policy on quota rentals was designed to avoid having producers who are not growing crops subsidized by those producers who are growing crops. Mr. Bresner submitted there was no reasoned basis for granting Mr. Nacewicz an exemption from the no rental policy or changing the kiln conversion program.

Mr. Nacewicz withdrew from the hearing before the completion of Mr. Bresner's summation.

The Findings

On the question of whether or not the date by which Mr. Nacewicz should be required to convert his remaining kilns and remain eligible for financial assistance should be extended, the Tribunal finds in favour of the respondent. The Tribunal accepts Mr. Bresner's arguments that Mr. Nacewicz was not treated differently than any other producer applying for assistance under the kiln conversion program. The evidence was clear that Mr. Nacewicz was well aware of the conversion deadline and in fact attempted to have all his kilns converted by the deadline. The Tribunal is persuaded there must be some finality to funding programs.

With regard to the questions of whether or not Mr. Nacewicz's marketing quota should be increased and whether or not he should be able to rent out 100% of his marketing quota, the Tribunal also finds in favour of the OFCTGMB. The Tribunal accepts that the financial dispute described by Mr. Nacewicz prevented him from planting his crop on his parents' farm in 2002. But, the Tribunal does not accept Mr. Nacewicz's argument that his situation is similar to a crop that is damaged by adverse weather or which cannot be harvested due to illness. The Tribunal notes that the financial difficulties on the Nacewicz farm were not sudden or unforeseeable, as would be the case with weather damage. Mr. Nacewicz was aware of the ongoing financial dispute and he should have been aware of the possibility that his parents' farm would be sold. Prior to the 2002 planting season, Mr. Nacewicz could have made arrangements to have his crop grown elsewhere or to rent a portion of his marketing quota. He chose to take a chance that his parents' land would be available. The Tribunal finds that the rationale behind the OFCTGMB regulations restricting the lease of quota is sound. The Tribunal finds that the OFCTGMB did not act unfairly or arbitrarily in this case and it is inclined to uphold the marketing board's decision.

Decision and Reasons

After careful consideration of the evidence filed and the submissions made the Tribunal orders the appeals of Alexander Nacewicz are denied.

The reasons for this decision are:

1. Mr. Nacewicz was not treated any differently than any other tobacco grower with regard to the kiln conversion program and the OFCTGMB quota regulations.

2. Mr. Nacewicz was aware of the deadline for converting his kilns in order to be eligible for financial assistance.

3. The financial dispute which came to a head in 2002 was not an unforeseeable circumstance.

4. The rationale that tobacco growers who produce a crop should not be required to incur the expense of leasing quota from growers who do not grow a crop is reasonable.

Dated at Guelph, Ontario the 25th day of November, 2002.