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:
The Saratoga Potato Chip Company Inc., o/e Olde York Potato Chips v Ontario Potato Board
The Saratoga Potato Chip Company Inc., o/e Olde York Potato Chips v OPB [Pre-Hearing Conference] 2002 ONAFRAAT 8
STATUTE:
Ministry of Agriculture, Food and Rural Affairs Act
HEARING:
February 4, 2002
February 18, 2002
2002-08
NEUTRAL CITATION:
2002 ONAFRAAT 8
The Saratoga Potato Chip Company Inc., o/e Olde York Potato Chips v Ontario Potato Board [Pre-Hearing Conference]
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 by The Saratoga Potato Chip Company Inc, o/e Olde York Potato Chips from a decision of the Ontario Potato Board, dated September 1, 2000, by which it determined that Olde York inappropriately applied an excessive rate of “dockage” to below-standard potatoes it received from certain suppliers.
AND IN THE MATTER OF:
A pre-hearing conference in this matter the by Agriculture, Food and Rural Affairs Appeal Tribunal to hear argument as to whether or not the Tribunal should hear this appeal since the appellant was aware of the decision for more than one year before filing a notice of appeal.
Before:
Andrew Osyany, Vice Chair; Doug Flook, Member.
Appearances:
Donald Short, counsel to Olde York Potato Chips; assisted by William Georges
Geoffrey Spurr; counsel to the Ontario Potato Board
DECISION OF THE TRIBUNAL ON PRELIMINARY MATTER
This pre-hearing conference in this matter was heard in Guelph, Ontario February 4, 2002.
The Background
Subsection 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.
Subsection 16(4) of the Ministry of Agriculture, Food and Rural Affairs Act is as follows:
16 (4) 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
(c) the appellant has not a sufficient interest in the subject-matter of the appeal.
The Issue
The issue before the Tribunal was:
Should the Tribunal exercise its discretion to refuse to hear the appeal, given that the appellant had knowledge of the order under appeal for more than one year?
The Evidence and Submissions
Mr. Geoffrey Spurr told the Tribunal that both parties agreed that the appeal related to a contractual dispute between appellant and the potato producer RJM Farms and that the quality of potatoes this producer sold to Olde York Potato Chips in May 2000 and June 2000 was not the best. He explained that the regulatory environment was such that the Ontario Potato Board (the Board) negotiates with processors to determine minimum prices and terms and conditions of sale and that annual agreements or arbitrated awards are brought into force by the Ontario Farm Products Marketing Commission (the Commission). He said the dispute was whether the level of dockage applied to the potatoes in question was allowed by the marketing agreement.
Mr. Spurr said that the Board held a meeting with the producer and the processor and the Board concluded that dockage rates exceeded the amount allowed in the agreement. He said that on September 1, 2000 the Board ordered Olde York Potato Chips to pay the producer $96,800.25 and this is the relevant date in terms of whether or not the appeal should be heard by the Tribunal. He said the amount of the payment required was later reduced.
Mr. Spurr acknowledged that one board member was a principal of RJM Farms. He submitted that since the Board did not hold a formal hearing, and as the appellant did not raise a bias issue at the operative time or pay without prejudice, he could not now argue that the board member had a conflict of interest.
Mr. Spurr suggested that the Tribunal should consider the conduct of the appellant in determining whether or not to hold the appeal. He submitted the Tribunal should not hold the appeal because the appellant did not initially ask for a hearing before the Board or the Tribunal and did not sue the producer. He said the appellant paid the money as ordered and continued its relationship with the producer. He said that in the next crop year, the appellant took the deliveries of potatoes and then deducted the exact amount of money it had previously paid. He said the appellant did nothing to try and clarify the 2001 marketing agreement either before or after he undertook to withhold monies in 2001. Mr. Spurr said the appellant only raised the issue with the Commission after the Board asked the Commission not to renew the appellant’s licence.
Mr. Spurr told the Tribunal that the Commission had held a hearing into whether or not the appellant’s licence to process should be renewed and had issued the appellant a licence on the condition that it re-pay the monies it withheld from the producer in 2001. He said this had been done. Mr. Spurr argued that the Commission could not have settled the dockage dispute at the licensing hearing as that was not the purpose of that hearing. He said the licensing hearing was delayed because the Commission was concerned about the adequacy of the notice it gave, and that this was not the fault of the Board.
Mr. Spurr asked that the Tribunal consider the question of prejudice to parties. He submitted that the appellant would still have the option of suing the producer if the Tribunal used its discretion to decline to hear an appeal. He said that the regulatory environment in the potato industry was such that it operates on a crop year basis. He said that if the Tribunal were to hear the matter it would be dealing with an issue that happened two years earlier.
In response to questions of the Tribunal Mr. Spurr gave further explanations of the regulatory environment in the potato industry. He also indicated:
It would be difficult for the Tribunal or the Board to obtain money from the producer and the appellant may need to go to civil court to recover monies paid if the Tribunal were to rule in its favour.
Potatoes are graded in house unless there is a dispute, at which point a Ministry of Agriculture Food and Rural Affairs inspector is used.
Processors have the right to completely reject any load. Growers know the same day a load is delivered if it is going to be rejected.
Processors and producers require the authorization of the Board in order to contract for the transfer of potatoes at a price below the minimum price established by negotiation/arbitration.
Mr. Donald Short told the Tribunal that the issue which led to the licensing hearing before the Commission was the same issue that Olde York Potato Chips wanted the Tribunal to resolve. He submitted that it was reasonable for the appellant to believe it was going before the appropriate body. He said that the licensing hearing was originally scheduled to be heard August 7, 2001 which was within one year of the date of the order in question. He said that Olde York Potato Chips had not objected to two adjournments and submitted that the company should not be penalized as a result of these delays. He noted that the Commission decision would have been released within one year of the Board’s order if the licensing hearing had been held on the original date.
Mr. Short submitted that the onus should be on the Potato Board to prove to the Tribunal that it should not hear the appeal as the wording of the Ministry of Agriculture, Food and Rural Affairs Act allowed the Tribunal the discretion to hear appeals. He said this was unlike some other statutes which required appellants to prove that their appeals should be heard. Mr. Short said that the overall intent of the legislation was that the agricultural world should resolve marketing problems. He said the issue in dispute was when dockage can be applied in the potato industry. He disagreed with Mr. Spurr’s submission that the Tribunal could not order re-payment of the monies in dispute. He said that if the Board had the authority to order the payment, the Tribunal also has the authority to order payment. Mr. Short also pointed out that if the parties do not pay in accordance with the Tribunal decision, the appellant could go to court over the issue. He said that the findings of fact by the Tribunal would be binding on all parties.
Mr. Short provided a brief description of the events that led to the dispute. He said that Olde York Potato Chips had originally rejected shipments of the 1999 crop of the Mononas species of potato delivered by RJM Farms between March 2000 and May 2000. He said that Mr. MacKenzie, a principal of RJM Farms asked Olde York to accept the potatoes at a discounted price. He said that his client maintains that a price was struck at that time, but that Mr. MacKenzie disagrees. He said that Olde York approached the Board to try to resolve the matter in July 2000 because it wanted to contract for more potatoes to be grown by RJM Farms. He said it was apparent the producer would not negotiate as it was unhappy with the payment made for the 1999 crop.
Mr. Short said that both Mr. MacKenzie and his brother were members of the Board in July 2000 and both attended the meeting with Olde York Potato Chips. He said the minutes of that meeting did not indicate that Messieurs MacKenzie recused themselves from discussions on the dispute. Mr. Short said that Olde York Potato Chips offered to have the matter resolved by arbitration on August 25 2001, and that the company said it was not accepting or agreeing to the Board’s interpretation of the marketing agreement. He said that the Board issued its order the following week and that the company had no choice but to pay it in order to be able to contract for potatoes to be grown. He said that at the time that Olde York Potato Chips took back the payment the industry was in the midst of an uncharacteristic dispute regarding the 2001 marketing agreements.
Mr. Short told the Tribunal that the decision of the Commission stated that there was a lack of common understanding of board regulations and contracts and issues regarding dockage and commitment dates need to be clarified. He said that the Commission pointed out that appealing to the Tribunal or pursuing the matter in the courts were options for Olde York. Mr. Short submitted that the Tribunal is the appropriate body to deal with the issue of clarification of industry contracts and regulations. He said that the policy of the Ministry of Agriculture, Food and Rural Affairs is to resolve marketing issues in an expeditious and cost efficient manner. He said that he expected that all parties would honour the decision of the Tribunal.
Mr. Short summarized the reasons for the Tribunal to hear the appeal were:
It is useful for the industry to have a neutral body decide the matter. There was a potential bias on the Board.
No party would be prejudiced if the appeal were to be heard. If RJM Farms loses it will be because it should not have received the money the Board ordered the appellant to pay.
The appeal was initiated only three months after the time period set out in the statute and there was good reason for the delay as there were other hearings going on at the same time.
There is no increasing degree of proof as all the evidence was in existence.
There is a significant amount of money involved.
The statute contains no limitation period. The Tribunal has the discretion to hear the appeal. The statute should be interpreted with reasonable regard to the objective purpose of legislation.
The appellant thought that the Commission could settle the dispute on the basis of Subsection 3(1) of the Farm Products Marketing Act.
Mr. Short also submitted that the producer should be made a party to the Hearing.
In response to questions Mr. Short indicated:
Olde York Potato Chips annual business was approximately $3.5 million.
Typically processors deal with several producers. RJM Farms deals with other processors but Olde York purchases more than 50% of the RJM Farms crop.
Normally payment is due 20-30 days after each load is received. Amounts are payable each month for potatoes shipped the previous month.
The appellant recouped the monies paid in April 2001 or May 2001. The portion deducted from an invoice due was equivalent to the amount in dispute.
The appellant did not immediately inform the Board that it disagreed with its order of September 1, 2000 as it was trying to negotiate a contract at that time. The appellant gave no written notice that it would take back the monies paid, but it was within one year of the date of the Board’s order when it did so.
The interpretation of one clause of the industry agreement was in dispute. The appellant did not agree that it was necessary for the Board to approve an agreement to transfer potatoes at a price that is below the minimum price. The clause refers to deducting the weight of the potatoes if they do not meet quality standards.
The private agreement was not in writing but the grade sheets show hundred weights that were delivered, whether they were rejected or not, and the amount of dockage applied. The producer kept shipping potatoes to the appellant after receiving these grade sheets.
The arrangement was to apply a 70% discount to the poor quality potatoes. The marketing agreement allows for 15% dockage.
In reply, Mr. Spurr said that it was relevant that payment was made by the appellant in response to the Board’s order without any protest being advanced. He also said that the meeting in July 2000 was clearly not a hearing, so there was no opportunity to deal with the conflict of interest issue.
Mr. Spurr said the issue of whether or not it was appropriate for the appellant to deduct monies from the payments for potatoes delivered in 2001 was the matter before the Commission. He said that the Commission indicated that it was not the body that should determine the appropriateness of the dockage. He said that it was appropriate for the appellant to ask the Tribunal to rule on that matter, but that it was out of time.
The Findings
The evidence is that the potatoes delivered by RJM to the appellant in 1990 were not of the greatest quality. Based on the contract established under the Act and the Regulations, the appellant had the right to apply dockage at the contractual rate or to reject the entire series of shipments. The appellant says that, in effect, the appellant and RJM made a series of contracts that the appellant would apply dockage at the rate of 70%. This the parties were not entitled to do, without the approval of the Potato Board. It is clear on the evidence that RJM does not agree and never did agree that there was any such contract. Nor did the appellant’s documents ever clearly refer to the existence of such a contract, apart from the receiving documents showing the defects and the 70% dockage.
When the appellant did not pay RJM, RJM refused to enter into a new contract for the following season and the appellant responded in its fax of August 25, 2000 as follows:
Any disputes over potatoes supplied last year can be dealt with by a mutually agreed dispute settlement mechanism, referee or court of law.
The contract amounts verbally offered by you were 20,000 cwts. Of Snowden and 15,000 of Mononas under the pre-condition that Olde York pay to RJM Farms the disputed sum of $96,800.25 prior to the execution of any written contracts. Therefore, in effect, no amount of potatoes is being offered in good faith.
On September 1, 2000, the Potato Board made a determination that the appellant owed the money to RJM. The appellant promptly paid the money to RJM, without any protest, and a new contract was entered into. It is agreed that the amount of money paid, $86,278.55, was the correct amount.
When deliveries were made by RJM in the following year, the appellant simply held back $86,278.55 from the moneys due to RJM. The appellant never gave RJM any notice that the appellant proposed to do this. The appellant simply refused to pay for the goods that had been delivered to the appellant.
The appellant’s refusal to pay led to a licensing hearing, and the Ontario Farm Product Marketing Commission’s decision of October 3, 2001 went against the appellant, requiring the appellant to pay the $86,278.55 to RJM again as a condition of continuing the appellant’s licence. The appellant has once again paid the moneys to RJM and filed a notice of appeal against the September 1, 2000 decision of the Potato Board.
The panel was advised that there are no current contracts between the appellant and RJM.
While the appellant is beyond the target one year period established by s. 16(4) of the Act, the delay is very short. All of the points raised on behalf of the appellant are telling points, and would normally lead to the Tribunal’s discretion being exercised in favour of the appellant. However, this panel is deciding against the appellant.
The Tribunal finds that the regulated marketing system in the potato industry is structured in a manner to allow participants in the industry to work out their problems within the system.
In this case the appellant basically ignored the system set up and resorted to self-help. The whole purpose of the system is to regulate how matters are resolved between producers and processors and to avoid self-help. There can also be an economic disparity between some of the producers and processors and the system places the parties on a fair footing regarding each other.
There is a public interest in having matters resolved within the framework of the system set up, and to have the resolution expeditiously. There is no evidence whatsoever of the appellant wanting to have the matters resolved within the system (as opposed to the appellant’s self help) until the appellant discovered that his self help was not going to succeed. This took the appellant beyond the one year target period.
While for the parties the immediate cost of a hearing by this Tribunal may be lower than civil litigation; there is additional cost in that the public bodies appearing before the Tribunal are funded by processors, producers and taxpayers. This panel sees no good reason in this case to put those parties to the expense of a full scale Tribunal hearing.
It should also be noted that if this panel had been inclined to allow the appeal to go forward, it would have added RJM as a party to the proceedings.
Decision and Reasons
After due consideration to the evidence presented and submissions made, the Tribunal has decided that the appeal should not be heard but should be dismissed.
The reasons for this decision are:
The appeal relates to an order of which the appellant has had knowledge for more than one year before the notice of appeal was filed.
The Tribunal is not inclined to use its discretion to allow the appeal to proceed because of the conduct of the appellant.
Dated at Shelburne, Ontario the 18th day of February, 2002