Agriculture, Food and Rural Affairs Appeal Tribunal
1Stone Road West Guelph, Ontario
Tribunal d’appel de l’agriculture, de l’alimentation et des affaires rurales
N1G 4Y2 Tel: (519) 826-3433, Fax: (519) 826-4232 Email:Tribunal@OMAF.gov.on.ca
1, chemin Stone Ouest Guelph (Ontario) N1G 4Y2 Tél.: (519) 826-3433, Téléc.: (519) 826-4232 Email:Tribunal@OMAF.gov.on.ca
AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL
APPEAL:
Berendsen v Dairy Farmers of Ontario
Berendsen v DFO 2004 ONAFRAAT 27
STATUTE:
Ministry of Agriculture, Food and Rural Affairs Act
HEARING:
July 23, 2004
DATE OF DECISION:
August 16, 2004
2004-27
NEUTRAL CITATION:
2004 ONAFRAAT 27
Berendsen v Dairy Farmers of Ontario
IN THE MATTER OF THE MILK 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 Affairs Appeal Tribunal by Ben Berendsen, Chepstow, Ontario from a decision of the Dairy Farmers of Ontario (DFO) to deny his request that he be allowed the continued use of 10 kg of quota until such time as litigation with the Crown regarding waste asphalt on his Teviotdale farm goes to trial.
Appearances:
Donald Good, counsel to the appellant, Ben Berendsen
Gordon Coukell, for the respondent, Dairy Farmers of Ontario
Ben Berendesen, appellant
DECISION OF THE TRIBUNAL
This appeal was considered in Guelph, Ontario on July 23, 2004. Mr. Ben Berendsen appealed to the Agriculture, Food and Rural Affairs Appeal Tribunal (the Tribunal) from the June 14, 2004 decision of the Dairy Farmers of Ontario (DFO) not to lend him 10 kg of milk quota until such time as litigation concerning the presence of asphalt waste on his Teviotdale farm has been resolved.
Statutory Context
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.
The Background
Mr. Berendsen purchased a farm at Teviotdale in 1981 and operated a dairy farm there until abandoning the property in 1994. He purchased a farm near Chepstow in 1995 and moved the dairy operation to the Chepstow farm.
Asphalt had been used as landfill on the Teviotdale farm. The Berendsen family dairy farm experienced production losses from sickness and death of dairy cattle at the Teviotdale farm. Test results and expert reports were prepared on the cows, water and land at the Teviotdale site. This information and additional reports that are presently being prepared form the body of evidence for litigation that is currently before the courts.
The case was dismissed at the provincial court level but was restored by the Supreme Court of Canada. Evidence is currently being prepared in anticipation of the commencement of the court action sometime within the next six months. It is not known what the outcome of the litigation will be, nor is it known when the court will decide the matter.
The DFO assisted the the Berendsen family by covering portions of over quota shipments beginning in 1990 and most recently in May 2003 with the loan of 10 kg of quota. The assistance was requested by the Berendsen family to offset the increased financial burden of loss of production due to the alleged contamination of the Teviotdale farm, the subsequent purchase of the Chepstow farm, and moving the dairy operation while retaining ownership of the Teviotdale property.
Preliminary Matter
Mr. Good requested that the media be excluded from the hearing as the Berendsen evidence included sensitive financial and personal information.
The Tribunal considered the appellant's request for media exclusion. It decided that the subject of the appeal was of interest to the agricultural community. The Tribunal determined that pursuant to the Statutory Powers Procedure Act and to Tribunal Rule 12.01, the hearing is open to the public; but in consideration of the sensitive nature of some of the evidence, Mr. Good was directed to organize his submissions so that a portion of the evidence could be presented in camera.
Tribunal Rule 12.01 states that:
Oral hearings to be public
12.01 All oral hearings shall be open to the public except where the Tribunal determines that an appeal should be heard in the absence of the public.
Mr. Good opted not to present evidence in camera.
The Evidence
Ben Berendsen
Mr. Berendsen told the Tribunal that he lives on a dairy farm near Chepstow, Ontario.
He stated that:
He milks 45 cows and holds 23.5 kg of quota, not including 10 kg that was loaned to him by the DFO.
The 10 kg loan of quota was for the period July 1, 2003 to June 1, 2004.
He participated in the Contract Export Market (CEM) where he was able to export milk without holding domestic quota. When the CEM was shut down in 2003 due to a World Trade Organization (WTO) ruling, he approached the Chair of DFO with a request for assistance. The Chair directed him to make his request through the quota committee. His request was initially denied by the quota committee.
After his request was denied by the quota committee he brought his request before the board and was granted the loan of 10 kg of quota.
A subsequent request for an extension of the loan of 10 kg of quota was denied therefore, he appealed to the Tribunal.
If the assistance by way of the loan of 10 kg of quota is discontinued, his dairy operation will fail within two months.
His practice is to adjust cow ratios to bring his production into line with the quota he holds.
The 10 kg of loaned quota constitutes one third of his present production. Ten kg of quota generates approximately $4,500 in gross revenue per month
He paid for numerous costly tests and expert reports on samples taken from cattle, water and soil at the Teviotdale farm.
By 1992, the Teviotdale farm had no value because a mortgage could not be obtained due to the asphalt contamination.
The rate of cull in a normal dairy herd is 15% per year. He replaced two thirds of his herd each year due to sickness and death from the contamination at the Teviotdale farm.
During the first 14 years that he was in the dairy industry, he had to replace sick or dead cows with money that could have been spent to purchase more quota. He needs the use of more quota or his operation will not survive.
Analysis of his business at Teviotdale indicated that his dairy operation had one of the highest production records in the province and that his management of the operation was impeccable despite the burden of loss from the asphalt contamination.
It is generally recognized that the production problems on the Teviotdale farm are the result of asphalt contamination.
It is difficult to specifically quantify the loss of production due to contamination at the Teviotdale farm.
Producers were paid a few cents per litre for over quota milk prior to April 1, 2004; but there was currently no monthly payment for over quota milk.
In response to questions, Mr. Berendsen told the Tribunal that:
He lived at and operated the dairy farm at Teviotdale from November 1981 to December 1994. He moved in 1994 but continued to cash crop the Teviotdale farm. He incurred expenses in excess of $150,000 at Teviotdale to import drinking water for the cows, test for asphalt contaminants and prepare expert reports.
He was not able to obtain financing from the Farm Credit Corporation or from the Bank of Commerce to purchase the Chepstow farm. He arranged to rent the land, milk cows and cash crop the Chepstow farm, eventually purchasing it with a vendor take back mortgage.
In the past he sold quota to keep his farm operational. He was able to operate under the CEM without assistance, but has had difficulty since it shut down.
The DFO has a policy to assist farmers with financial difficulties and it has been their practice to do so in his case in the past.
Gordon Coukell
Mr. Coukell told the Tribunal that he is the Chair of the DFO. He stated that the DFO did not dispute the Berendsen evidence with regard to the alleged contamination, expert reports and financial burden of dealing with the court case and decline in production at the Teviotdale farm.
He told the Tribunal that:
Mr. Berendsen obtained his producer license to ship milk from the Teviotdale farm in 1981. The previous owner of the farm was a dairy producer with no record of production difficulties at that location, nor did the previous owner make requests for assistance similar to Mr. Berendsen.
Mr. Berendsen moved to Chepstow in Bruce County in 1994 and has shipped milk from there since that time.
Mr. Berendsen participated in the CEM, increasing his production in the 2000/2001 dairy year and the 2001/2002 dairy year. Mr. Berendsen did not tailor his production to fit his quota holdings after the WTO ruling; he asked the Board for more quota instead.
DFO sympathized with Mr. Berendsen's difficulties at the Teviotdale farm, assisting by covering over quota shipments in 1990/1991 and 1991/1992. The Board decided to cover 50 percent of over quota production in the 1991/1992 dairy year with the understanding that no further requests for assistance would be made.
If Mr. Berendsen had left the industry in 1994 the Board was prepared to exempt him from the 15% transfer assessment. He did not leave the industry but requested 1,500 kg of quota that the Board, and subsequently the Tribunal denied.
The DFO agreed to cover 75% of over quota production in the 1994/1995 dairy year but again, on the understanding that further relief would not be requested. Mr. Berendsen was reminded that he should tailor his production to fit his quota holdings.
The Board alloted 10 kg of quota for use by Mr. Berendsen from June 2003 to May 2004.
Mr. Berendsen purchased 2 kg of quota in 2004.
Mr. Coukell responded to questions that:
He knows nothing of Mr. Berendsen's financial situation beyond what has been stated; he takes Mr. Berendsen at his word that his dairy operation will fail in two months without the loan of 10 kg of quota.
He understands that the speed at which Mr. Berendsen's litigation is progressing is not due to any deficiency on the part of Mr. Berendsen.
DFO policy provides a sleeve of 50 days where producers may produce over or under their quota holdings without penalty. This policy is meant to assist producers to accommodate situations beyond their control such as early calving, or herd health management issues.
Except the University of Guelph which milks a research herd, Mr. Berendsen is the only producer who receives free quota. Assisting with over/under quota production, is the same as lending quota.
During his tenure as DFO Chair for 19 years and a previous posting on the quota committee, he has never encountered the type of assistance that Mr. Berendsen has received. He is not aware that the DFO has any legislative obligation to provide it.
The DFO policy includes a 'catastrophe clause' that permits producers to own quota without producing for up to a year after suffering serious loss such as a barn fire. In the meantime the suspended quota would be filled by other producers in the province to prevent penalization to DFO by the federal body that allocates quota to the provinces.
Approximately five percent of producers leave the industry each year and approximately 55 new licensees start operating every year.
DFO does not make a practice of inquiring as to why producers leave the industry.
There is no specific policy with regard to loaning free quota; rather, producers make their requests to the Board and each case is decided on its merits, similar to Mr. Berendsen's case.
Mr. Berendsen requested the loan of 10 kg of quota in June 2003 after the closure of the CEM. No other producers who participated in the defunct CEM requested assistance from the DFO.
There is no third party who would be prejudiced or stand to gain from the DFO's decision not to continue the loan of 10 kg of quota to Mr. Berendsen.
Summation
In his closing remarks, Mr. Coukell told the Tribunal that the DFO does not have a policy for assisting producers in financial difficulty, nor does it have authority to do so, under the Milk Act. He stated that Mr. Berendsen increased his production to participate in the CEM but that he had not decreased production since the CEM shut down. Mr. Coukell said that in early 2003, a higher than average number of producers left the industry. He stated that the DFO must treat all producers equitably. He said that the DFO had to decide if Mr. Berendsen's case merited continued action based on extenuating circumstances, or if sufficient assistance had been rendered in relation to the nature of the matter and its 15 year duration.
Mr. Coukell argued that the DFO decided that it had acted generously and fairly in its dealings with Mr. Berendsen. He said that it was not the DFO who polluted water by burying asphalt at the Teviotdale site and that the issues Mr. Berendsen faced as a result, were societal issues that society should assist with.
In summation, Mr. Good told the Tribunal that the DFO encouraged Mr. Berendsen to bring his appeal before the Tribunal. He said that Mr. Berendsen had not reduced his herd in the hope that his appeal would be granted and that he would be permitted to produce to meet 10 additional kg.
Mr. Good pointed out that all parties recognize that any delays in the litigation process are beyond Mr. Berendsen's control. He stated that Mr. Berendsen has not asked that the DFO write to the Minister in an effort to expedite his case before the courts but that he may request DFO assistance when an expert report by Dr. Boermans D.V.M. is completed.
Mr. Good said that other aspects of society have contributed to assist Mr. Berendsen he pointed out his legal account is being held in abeyance. He stated that the DFO is in a singular position to assist Mr. Berendsen as no other body can mitigate production losses from quota losses.
Mr. Good argued that the relief requested was humanitarian and that Mr. Berendsen's position was unique. He said that Mr. Berendsen has spent almost $200,000 to resolve the situation. He stated that the Ontario total quota was over 260,000 kg and while Mr. Berendsen was duly grateful for the assistance, 10 kg represented a very tiny percentage of the Ontario total. Mr. Good told the Tribunal that Mr. Berendsen's operation will fail without the loan of 10 kg of quota. He stated that Mr. Berendsen was able to benefit from the CEM program because he needed the additional revenue.
Mr. Good argued that the DFO had the jurisdiction to make a loan of 10 kg of quota in 2003/2004 so that it could loan the quota again. He stated that loaned quota would be returned to the DFO when the period of loan expired. Mr. Good requested that the Tribunal grant the request for the loan of the quota until such time as Mr. Berendsen's legal challenges were resolved, or for at least one more year. He said that the loan of quota had been helpful to Mr. Berendsen and that it would be wasteful to discontinue it at this time when the resolution of Mr. Berendsen's legal matters was forthcoming.
The Findings
The principal issue before this Tribunal is whether the DFO decision to discontinue the loan of 10 kg of quota to Mr. Berendsen is justified. There is not much about the factual background of this case that is in dispute. One of the few matters that the DFO could not express full agreement on, is the extent of the adverse financial conditions that its decision will have on the appellant, although it acknowledges there will be some.
The Tribunal recognizes that the evidence presented by the DFO came principally from Gordon Coukell, who is the Chairman of the DFO and who participated in the decision that is under review. Generally testimony from such a witness should not be accepted or preferred by the appellate body over the evidence of other witnesses. Counsel for Mr. Berendsen did not particularly object to the Tribunal receiving Mr. Coukell’s evidence. The Tribunal finds no particular disagreement between the evidence of the appellant and that of Mr. Coukell. Mr. Coukell’s evidence about the type and number of similar requests received by the DFO and other matters of historical perspective was particularly informative and was not in conflict with any evidence presented by the appellant. As Chairman of the DFO, this was probably the best source of such information, however the Tribunal is not overly persuaded by this evidence that the views and policies of the Board of Directors of the DFO are the correct ones, nor should they be followed as a matter of course. Rather, the focus of the Tribunal should be on the mandate of the DFO as well as the legislation that creates it. The Tribunal wishes to emphasize that it takes only a limited view of the evidence presented by Mr. Coukell.
The Tribunal makes the following unchallenged findings:
Mr. Berendsen purchased a farm near Teviotdale in 1981 and thereafter began operating a dairy farm.
He immediately began experiencing shortfalls in milk production
expectations. His cattle refused to take in appropriate quantities of water generated from his farm well. Cattle became sick and he experienced an abnormal number of cow deaths. He derived less milk than his herd size and quota allotment justified.
Eventually, the presence of an asphalt-dumping site on the farm was determined to be the likely source of the contamination of his farm water supply.
He bought new cattle and a new farm at a location near Chespstow where his dairy operation has flourished.
The move has been very costly because his Teviotdale farm was not easily resalable and the financing of his new purchase required him to sell off much of his milk quota.
The cost of replacement cows combined with the extraordinary expense of determining the cause of the contamination put Mr. Berendsen under great financial stress.
He has brought litigation against the alleged contributors to the problem, which litigation has been impeded by legal challenges of the defendant to the point that the Supreme Court of Canada has had to restore his right to continue the litigation. It is not known when the litigation will be finalized.
Over the course of years between 1990 and 1995, the DFO allowed Mr. Berendsen to over-ship his quota allowances in order to assist in his financial dilemma. Between the years 2001 and 2003, Mr. Berendsen participated in a milk export program (called CEM) which allowed him to produce and sell milk for which no quota licence was needed. At December 31, 2002 this program was discontinued because of a ruling of an appellate body of the World Trade Organization (WTO).
Large numbers of Ontario dairy farmers, including Mr. Berendsen had to curtail their milk production. Other than to buy milk quota on the market, these farmers had no choice but to curtail production to keep in line with their own quota.
Mr. Berendsen made an appeal to the DFO to borrow from them 10 kg of quota. His application was granted for a one year term only. His was recognized as “special case”. No other similar privileges were granted to any of the other 5,300 dairy farmers in Ontario, particularly those affected by the CEM shutdown.
The 10 kg of loaned quota represented a nearly 50% increase in Mr. Berendsen’s 2003 quota.
Mr. Berendsen requests DFO to extend this accommodation, or at a minimum the loan of 8 kg of quota, for as long as the court case remains pending or for at least one year.
The Tribunal further observes that while the DFO has power to grant variances in quota allowances or other conditions, its only history of doing so are in instances of individual catastrophic events such as a barn fire or an accidental herd loss. The DFO is but only one segment of the Canada-wide dairy industry which limits the marketing of dairy milk for any particular province. Likewise, the DFO has to maintain the confidence and trust of all 5,300 dairy farmers in Ontario, most of whom would like an increase in their allowable production. It is common knowledge that when the CEM program was discontinued after the year 2002, many dairy farmers had to curtail their operations to keep their production in line with the allowable quota. Mr. Berendsen was lucky to receive an allowance for 10 kg of quota that was loaned to him by the DFO.
The DFO has provided generous assistance to Mr. Berendsen through the forgiveness of overproduction on three separate occasions and the loan of 10 kg of quota in the 2003/2004 production year. The covering of over quota production by the DFO was made with the DFO’s stated expectation that Mr. Berendsen would bring his production into line with his allowable quota. With the exception of the purchase of 2 kg of quota in 2004, it does not appear that Mr. Berendsen brought his production into line with his quota. It has not been conclusively established that Mr. Berendsen’s financial difficulties are caused solely by his pursuit of legal remedy to the alleged environmental contamination of the Teviotdale property and, in no way, by the circumstances resultant from the WTO appellate body decision. As much as the Tribunal sympathizes with Mr. Berendsen’s situation, it agrees with the DFO that it is not necessarily the sole responsibility of the DFO to alleviate his financial difficulties.
The mandate given by the dairy farmers of Ontario and the legislature to the DFO board is to regulate the dairy industry for the benefit of all concerned without favoritism. The extension on humanitarian grounds of a license for 10 kg of milk quota is not part of that mandate.
Decision and Reasons
After careful consideration of the evidence filed and the submissions made, the Tribunal has decided to deny the appeal of Ben Berendsen.
The reason for this decision is it is not the explicit mandate or responsibility of the DFO to alleviate the financial difficulties of individual milk producers.
Dated at Tilbury, Ontario this 16th day of August, 2004.