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:
Da Silva v Ontario Flue-Cured Tobacco Growers’ Marketing Board
Da Silva v OFCTGMB 2004 ONAFRAAT 32
STATUTE:
Ministry of Agriculture, Food and Rural Affairs Act
HEARING:
September 15, 2004
DATE OF DECISION:
September 29, 2004
2004-32
NEUTRAL CITATION:
2004 ONAFRAAT 32
Da Silva 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 by Arthur Da Silva, Princeton, Ontario from a decision of the Ontario Flue-Cured Tobacco Growers’ Marketing Board to deny his request that it exempt him from a regulation which prevents him from renting out 100% of his 2004 marketing quota.
Before: Murray Cardiff, Chair; Doug Flook, Member; Jane Sadler Richards, Member
Appearances:
Scott Campbell, counsel to the appellant, Arthur Da Silva
Barry Bresner, counsel to the respondent, the OFCTGMB
Arthur Da Silva, appellant
Vicky Malcolm, witness
DECISION OF THE TRIBUNAL
This appeal was heard in Guelph, Ontario on Wednesday, September 15, 2004. Mr. Da Silva sought an exemption from regulations of the Ontario Flue-Cured Tobacco Growers’ Marketing Board (OFCTGMB) which prohibit the rental of marketing quota, except as specifically allowed by the regulations.
Statutory Context
The appeal comes to the Tribunal by way of Subsection 16(2) of the Ministry of Agriculture, Food and Rural Affairs Act, which states:
Idem
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 4 allows for the Tribunal to refuse to hear the appeal under certain circumstances. Subsection 5 requires that appellants first apply to the marketing board for a hearing, unless both parties waive their right to a hearing.
Under the Farm Products Marketing Act, local boards such as the OFCTGMB may be granted powers and authorities, including the authority to make regulations. The OFCTGMB has been granted the authority to make regulations requiring tobacco to be marketed by way of a quota system (Regulation 435, as amended).
The sections of the OFCTGMB General Regulations 2004-2005 which are most pertinent to the matter under appeal are:
Subsection 11(2) which states:
(2) All rentals of marketing quota are prohibited, except for: (a) such spring and fall rentals as are permitted under Sections 19 and 20 hereof; (b) such rentals between members of an immediate family as are permitted under Section 12 hereof; (c) such rentals between a partnership and a partner thereof as are permitted under Section 13 hereof, provided that the partnership was an allottee of basic production quota and was in existence on or before March 17, 2003; and (d) such rentals between a corporation and a shareholder thereof as are permitted under Section 13 hereof, provided that the corporation was an allottee of basic production quota and that the shareholder was a shareholder of that corporation on or before March 17, 2003.
Subsection 14 (3) which states:
(3) Where any application made pursuant to this Section discloses that an allottee of basic production quota does not intend to produce tobacco in 2004 and does not intend to market tobacco produced by said allottee in prior years, the local board shall fix but not allot marketing quota to that allottee, unless that allottee’s application discloses an intention to apply to the local board to transfer basic production quota or to apply to surrender basic production quota under the Transitional Assistance Plan.
Procedural Matter
Mr. Campbell asked that a document brief prepared for the appellant which was not filed by the date ordered by the Tribunal be accepted. Mr. Bresner indicated he had read the document brief and had no objection. The Tribunal accepted the document brief. Subsequently, the Tribunal ordered that the document brief submitted by the appellant not be accessible to the public as the brief contained sensitive financial and personal information.
The Evidence
Appellants’ Case
Mr. Arthur Da Silva told the Tribunal he was 53 years old and had been in tobacco production since he was 16 years old, first as a labourer for his brother, then as a sharegrower and ultimately as a quota holder. He explained he and his wife owned two farms, one in their own names and one through a corporation, A. and R. Da Silva Farms Ltd. He said that there was no tobacco grown on either farm in 2004. He explained rye had been harvested but nothing else had been planted in 2004.
Mr. Da Silva testified that he had injured his back in 1988 and had taken pain killers since that time. He explained that his back problem intensified in cold, wet weather but normally improved in hot, dry weather. He said he had continued to grow a tobacco crop since his injury, except in 2002 when he marketed carryover tobacco. He also said he used a sharegrower one year, but was not satisfied with the work of that individual. Mr. Da Silva explained that buyers require high quality tobacco and that the crop required constant attention. He had accommodation on his farm for a sharegrower.
Mr. Da Silva testified that in December 2003 his back hurt more than usual and in January 2004 he began to lose feeling in his legs. He then sought further medical attention and subsequently saw a specialist in Toronto. The specialist, Dr. Rampersaud, scheduled surgery for Mr. Da Silva for September 2004. Documentation regarding his medical condition was presented.
Mr. Da Silva told the Tribunal that in January 2004 he hoped and expected that his condition would improve enough by spring, as it had in previous years, to allow him to plant his crop. However, when his condition did not improve and, in fact, became worse, it took some time for him to accept this. He said he spoke to Ms. Vicky Malcolm to find out how to appeal to the OFCTGMB for a regulatory exemption regarding his 2004 crop and she advised him to try to get a sharegrower. He said his daughter then drew up a form for him and helped him approach several neighbours about sharegrowing his crop, but without success. He explained he had only a few neighbours still growing tobacco and other tobacco growers would not come from Tilsonburg or Delhi to his farms as they had many, closer farms, with lighter soil, to choose from if they wished to sharegrow. He also said that uncertainty about the crop size and price made it more difficult to find someone to sharegrow a tobacco crop in 2004. Mr. Da Silva did not find a sharegrower.
Mr. Da Silva said he had a hearing before the OFCTGMB in early March and the marketing board told him he had not tried hard enough to find someone else to grow the crop. He said he then advertised in two local papers but received only one response, from an unsuitable candidate. Mr. Da Silva said he normally hired a combination of Jamaican and Mexican farm workers but that none would be capable of managing the crop. He said his wife helped out on the farm but could not manage it herself.
Mr. Da Silva told the Tribunal that he expected he could make 50 cents – 80 cents/pound by renting his quota, depending on crop yield and how many tobacco growers grew extra crop on speculation. He said that growing costs are fixed and if a larger than normal yield was achieved, then it was profitable to rent in quota to market the extra crop. He explained the planned production covered the growing costs. Mr. Da Silva said the 2004 crop looked like it was doing well and he expected growers would be interested in renting quota in the fall. He acknowledged that if he were not given an exemption from the regulation, his marketing quota would be redistributed to other growers through a pool. He said he had benefited from the pool in the past, but had not known where the extra quota came from.
Mr. Da Silva said if his surgery went well he expected to continue growing tobacco but if it did not, he would have to make a difficult decision. He said he had a modern farm and had invested heavily into retrofitting his new bulk kilns when the OFCTGMB wanted tobacco cured with indirect heat. He said he was concerned that his bank would take his farm if he could not continue to grow tobacco.
In response to questions, Mr. Da Silva also indicated:
He and his wife had two farm numbers with marketing quota of 116,536 lbs assigned to one number and 50,602 lbs marketing quota to the other.
In 2003 he grew the minimum required crop size.
He grew ginseng for six or seven years but gave it up in the early 2000s when his back condition worsened.
Before he met with Ms. Malcolm he had spoken to other farmers about sharegrowing his crop, when he saw them at the warehouse when he was marketing tobacco. He did not have any forms with him at that time.
He had intended to grow the crop himself. He bought enough seed in 2003 for that crop and the 2004 crop. His trays were washed and ready to go, but he could not plant the seed.
If he could get a good sharegrower then he preferred to grow the crop; if a bad sharegrower then he preferred to rent the quota.
His family doctor advised him not to grow a crop in 2004 in January or February.
He was sure the OFCTGMB would exempt him from the ‘no rental policy’, as it had exempted a neighbour from the policy a few years before.
He tried to rent out 30% of his marketing quota in the Spring. He listed it with four realtors who were in the business of brokering quota rentals. However, he listed it late and was unable to rent it out. He did not know he could rent out 30% until he spoke with Ms. Malcolm a second time, when he applied for a second hearing before the OFCTGMB.
It was very risky to rent quota in the Spring; there was a very low risk to rent quota in the Fall.
Spring rentals were allowed until July 9, 2004.
He was aware the ‘no rental policy’ was a longstanding policy of the OFCTGMB.
He met with Ms. Malcolm in person; he did not receive any advice or guidelines in writing.
Respondent’s Case
Mr. Barry Bresner gave an overview of the OFCTGMB regulations as they pertained to quota and quota rentals. He said the OFCTGMB had allowed quota rentals in the past but this had not been beneficial to the industry because people without a stake in the tobacco industry had received the rents from quota, which were paid by active growers. He said the OFCTGMB allowed limited quota rentals to provide growers the flexibility to deal with yield fluctuations. He said exemptions to the ‘no rental policy’ had only been granted in extraordinary circumstances.
Ms. Vicky Malcolm testified that she was the Secretary of the OFCTGMB, had held that position for five years and had worked for the OFCTGMB in various capacities for 30 years. She said she attended most OFCTGMB hearings and had been present when it heard requests for exemptions to the ‘no rental policy’. Ms. Malcolm stated the board of directors considered things such as: was there any intention to grow a crop; was there an attempt to obtain a sharegrower or farm manager; was there a home for a sharegrower to live in; was the land and greenhouse prepared or not. She said it was usual for the OFCTGMB to request a doctor’s certificate when poor health was the reason an exemption was sought.
Ms. Malcolm said Mr. Da Silva was not treated differently than any other grower with a similar appeal to the OFCTGMB. She recalled meeting with him and said she gave him the same advice she has given other growers in his situation. She explained she advised him to look for a sharegrower, as she knew the OFCTGMB would want to know what steps he had taken to try to have the crop grown.
Ms. Malcolm provided the Tribunal with written records of production, sales, carryover and quota rentals on both Da Silva farms. She said one farm had no crop grown or marketed in 2002, while the other had no crop grown but had carryover tobacco which was marketed. She said Mr. Da Silva grew 67 acres of tobacco in 2003, which was less than in previous years, excluding 2002. She said her records showed that Mr. Da Silva met with her on February 27, 2004 and appeared before the OFCTGMB on March 9, 2004; then he met with her on June 22, 2004 to discuss a second appeal on this matter, and appeared before the marketing board on June 29, 2004.
In response to questions, Ms. Malcolm verified that the size of the tobacco industry had been decreasing and provided statistical information as follows:
Year
No. Growers
Crop Size
No. Sharegrowers w/o their own quota
2000
999
124 million lbs.
2001
981
117.1 million lbs.
223
2002
869
108.1 million lbs.
197
2003
777
94.1 million lbs.
151
2004
752
87.9 million lbs.
Ms. Malcolm explained that there were several quota holding tobacco growers who were also sharegrowers but the OFCTGMB did not track the number. She said records were kept on sharegrowers who did not have their own quota, but a list was not available to other growers, as the information was considered confidential.
Ms. Malcolm told the Tribunal that negotiations with buyers had been difficult in 2004 and that agreement on the final crop size was not reached until June 10, 2004. She said growers were notified the next day and zone meetings were held shortly thereafter. Ms. Malcolm said spring quota rental arrangements could be made between June 30, 2004 and July 9, 2004. She verified that it was usual for realtors to handle quota rental transactions and said she was familiar with two of the realtors used by Mr. Da Silva.
Ms. Malcolm also told the Tribunal:
The OFCTGMB had considered sudden illness and catastrophic crop damages to be extraordinary circumstances which would warrant an exemption from the ‘no rental policy’.
She did not discuss past applications with Mr. Da Silva as each case is dealt with on its own merits.
The OFCTGMB did not have written guidelines to indicate when a request for an exemption will be granted and when it will be denied.
Mr. Da Silva was not eligible under the regulations to make fall rentals as he did not grow a crop in 2004.
Unused marketing quota would be pooled and given to growers who grew a crop in 2004; however Mr. Da Silva would retain his basic production quota and would be allocated marketing quota in 2005 if he grows a crop in 2005.
Summations
Mr. Campbell said that the exemption sought by Mr. Da Silva was not conventional but was not unheard of and the OFCTGMB did not have particularly well defined criteria to determine when this type of exemption should be granted. He said it appeared the OFCTGMB had turned down Mr. Da Silva’s request because the directors felt he had not tried hard enough to find a sharegrower. Mr. Campbell submitted that it was difficult for Mr. Da Silva to find a sharegrower because the industry is in decline and the crop is not as attractive an option as it had been in the past. He said the late announcement of crop size exacerbated the problem in 2004 as planting decisions had to be made before the size of the market was known. He acknowledged Mr. Da Silva preferred to rent out his quota but said this was partly because of the difficulty finding a good farm manger or sharegrower.
Mr. Campbell submitted that Mr. Da Silva’s situation was an extraordinary circumstance. He said that while the appellant had suffered from back pain since 1988, he had managed the problem for many years. He submitted the problem suddenly became debilitating in 2004 when the pain intensified and Mr. Da Silva was no longer able to grow tobacco as a result. He said Mr. Da Silva now has a diagnosis and surgery scheduled. He said Mr. Da Silva was not nearing retirement age and could continue in the tobacco industry provided his surgery is successful.
Mr. Campbell asked the Tribunal to consider whether Mr. Da Silva’s efforts to have a crop grown were reasonable given that he was ill and the OFCTGMB does not assist growers searching for sharegrowers. He reminded the Tribunal that Mr. Da Silva had approached his neighbours, had advertised in local papers and had attempted to rent out quota in the spring but was unable to have a crop grown on his quota. He argued that Mr. Da Silva had made an effort to find alternatives and asked the Tribunal to allow the appeal.
Mr. Campbell pointed out that the OFCTGMB would redistribute Mr. Da Silva’s marketing quota to other growers with no compensation to him if the appeal were denied.
Mr. Bresner said it was clear that Mr. Da Silva was a good grower and had been for many years. He said he respected his stoicism in continuing to grow tobacco when he was injured but submitted that Mr. Da Silva should not be exempt from the ‘no rental policy’. He said the health problem was not sudden and that Mr. Da Silva had been advised not to grow a crop in January or February. He argued that Mr. Da Silva chose not to search for a sharegrower or farm manager right away and only tried to find one after meeting with Ms. Malcolm in late February. He suggested that Mr. Da Silva did not try very hard to get a sharegrower as he had had a bad experience with one in the past, and as he was a hands-on grower who was reluctant to trust anyone else with his crop.
Mr. Bresner said the OFCTGMB regulations restricting quota rentals were in place for a good reason and no one had suggested the ‘no rental policy’ was a poor policy. He said it was not possible to have defined criteria as to when someone would be exempt from the regulation without opening the door to widespread quota rentals. He stated that it was appropriate that the regulations be stringently applied and that tobacco growers only be exempt in extraordinary circumstances. Mr. Bresner submitted that Mr. Da Silva was not treated any differently than any other grower in a similar circumstance.
Mr. Bresner pointed out that 151 of 752 tobacco growers were able to find bona fide sharegrowers in 2004 and suggested that Mr. Da Silva may have found one if he had sincerely started looking in January.
Mr. Bresner said that part of the OFCTGMB role was to ensure the efficient marketing of the crop. He said renting out quota would help Mr. Da Silva but would not benefit the industry as a whole as it would increase the marketing costs of another producer. He said other producers were not allowed to rent out their quota and argued that granting the exemption could put Mr. Da Silva in a more advantageous position than other growers who were not successful in renting out quota in the spring. He said it was not fair to give Mr. Da Silva two chances at renting out quota.
Mr. Bresner said it had long been established that quota is a licence and that it is not the property of the producer. He explained the OFCTGMB issued quota and could take it away. He said its policy was that marketing quota was issued to growers who were in a position to market a crop, not to growers who had no tobacco to sell. He submitted that a grower such as Mr. Da Silva who did not have a crop to market should not be compensated for marketing quota that he cannot use, particularly when he made voluntary decisions which prevented the planting of a crop.
Mr. Bresner referenced a recent Tribunal decision which he said illustrated the same principles that were the subject of this appeal.
In response, Mr. Campbell submitted that the OFCTGMB was using a very high standard in judging the effort made by Mr. Da Silva to have the crop grown in 2004. He suggested that the Tribunal look at what a reasonable effort would be under the circumstances. He argued that the OFCTGMB had already opened the door to regulatory exemptions as it had granted them in other circumstances. He reiterated his position that Mr. Da Silva’s rapidly deteriorating health was an extraordinary circumstance.
Mr. Campbell said he did not dispute that quota was a licence issued by the OFCTGMB but said there were clearly some proprietary rights to the quota. He argued that if there were no value to another grower to renting in quota then there would be no market for it.
The Findings
The Tribunal finds that Mr. Campbell established that Mr. Da Silva has had an ongoing health problem which affected him differently at different times of the year but which usually improved in time for him to plant and harvest a tobacco crop. It was clear that in early 2004, Mr. Da Silva’s health did not improve as it had in the past; it in fact worsened and he became aware that he could not grow a crop. In late February he sought direction from Ms. Malcolm, Secretary to the OFCTGMB, and subsequently attempted to find a sharegrower or farm manager, and attempted to rent out 30% of his quota as allowed by the OFCTGMB regulations.
The Tribunal finds that Mr. Da Silva’s health did change suddenly in January 2004. The evidence was that his health was considerably worse than usual, and it was ultimately determined that he required surgery to correct his condition.
Mr. Bresner argued that Mr. Da Silva had time to make other arrangements to have his crop grown in 2004 and did not make sufficient effort to do so. Mr. Campbell argued that Mr. Da Silva had made reasonable efforts to have the crop grown under the circumstances. The Tribunal agrees with Mr. Campbell on this point. The evidence was that once Mr. Da Silva accepted that he could not grow a crop he contacted the OFCTGMB staff to see what options were available to him. He approached his neighbours regarding sharegrowing within one day of being advised to do so by Ms. Malcolm. He later advertised for a sharegrower or farm help in local newspapers. When he was made aware that he could rent out 30% of his quota in the spring he listed it with several realtors. Given that he also had his deteriorating health to deal with, the Tribunal finds that he did make a reasonable effort to have the crop grown.
The Tribunal also accepts that the declining market and the late announcement of the crop size were factors that made it more difficult to make arrangements to find a sharegrower for a tobacco crop. The Tribunal agrees with Mr. Bresner that Mr. Da Silva preferred not to have a sharegrower but finds that he would have accepted one who was qualified to produce a good quality crop.
The Tribunal notes that its decision in this matter will not change the OFCTGMB ‘no rental policy’, which both parties agreed had merit. The Tribunal is exempting Mr. Da Silva from the relevant OFCTGMB regulations for the 2004 crop year because the Tribunal finds that extraordinary circumstances led to his not being able to grow a crop in 2004.
Mr. Bresner submitted that allowing Mr. Da Silva to rent out 100% of his marketing quota would give him two chances to rent the 30% that he could have rented out in the spring, whereas all other tobacco growers only had one opportunity for spring rentals. The Tribunal finds that the timing of events in spring 2004 coupled with his deteriorating health made it more difficult for Mr. Da Silva to make positive marketing decisions. His focus was clearly on his appeals to the OFCTGMB and he was late in listing his quota with realtors as a result.
Decision and Reasons
After careful consideration of the evidence filed and the submissions made the Tribunal orders:
The appeal by Arthur Da Silva is granted.
The OFCTGMB is ordered to exempt Arthur and Rose Da Silva and A&R Da Silva Farms Ltd. from Subsection 11(2) of its General Regulations 2004-2005. Mr. and Mrs. Da Silva are to be allowed to rent out 100% of their marketing quota for the 2004 crop year. This regulatory exemption is to apply only to the 2004 crop year.
The reasons for this decision are:
Mr. Da Silva’s health deteriorated suddenly and significantly in early 2004
Mr. Da Silva made reasonable efforts, given his health, to secure his crop in 2004, but was unsuccessful
Mr. Da Silva was not able to take full advantage of marketing opportunities in the spring 2004
Mr. Da Silva showed that he intends to continue farming tobacco in the future as he has done in the past, health permitting
Dated at Guelph, Ontario this 29th day of September, 2004.