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:appeals.tribunal@omaf.gov.on.ca
Guelph (Ontario) N1G 4Y2 Tél.: (519) 826-3433, Téléc.: (519) 826-4232 Email: appeals.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 Ontario Flue-Cured Tobacco Growers’ Marketing Board 2005 ONAFRAAT 27
STATUTE:
Ministry of Agriculture, Food and Rural Affairs Act
HEARING:
October 14, 2005
October 26, 2005
2005-27
NEUTRAL CITATION:
2005 ONAFRAAT 27
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 for an exemption from its regulations so that he and his wife could rent out 100% of their 2005 marketing quota.
Before: Rod Stork, Chair; Corry Martens, Member; Ron Gelderland, Member
Appearances:
Scott Campbell, counsel to the appellant
Barry Bresner, counsel to the respondent
Arthur Da Silva, appellant
Jason Lietaer, General Manager, OFCTGMB respondent
Rosa Da Silva, witness
Carla DiFelice, witness
Stanley Symons, witness
Jerry VanDeVelde, witness
Christine Jacob, witness
Vicky Malcolm, witness
DECISION OF THE TRIBUNAL
This appeal was heard in Guelph, Ontario on Friday, October 14, 2005. Mr. Arthur Da Silva sought an exemption from regulations of the Ontario Flue-Cured Tobacco Growers’ Marketing Board (OFCTGMB) such that he and his wife could rent out 100% of their 2005 marketing quota (MQ) which they held under two farm numbers – 3325 and 3370. The OFCTGMB denied the request but allowed Mr. and Mrs. Da Silva to rent out 30% of their MQ, as a spring rental. Mr. Da Silva appealed that decision to the Agriculture, Food and Rural Affairs Appeal Tribunal (Tribunal).
Statutory Context
This appeal comes to the Tribunal by way of Section 16 of the Ministry of Agriculture, Food and Rural Affairs Act. Subsection 16(2) reads 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. R.S.O. 1990, c. M.16, s. 16 (2).
Subsection 4 outlines conditions under which the Tribunal may refuse to hear an appeal. Subsection 5 requires that appellants first apply to the local board for a hearing, unless both parties waive their right to a hearing.
The OFCTGMB is a local board empowered to make regulations under the Farm Products Marketing Act. The 2005-06 OFCTGMN general regulations provide that:
- (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, 2004; 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, 2004.
Section 20 of the regulations allow for tobacco producers who are marketing a crop in 2005-06 to rent out MQ after SE 06 05. Section 19 of the regulations allow for tobacco producers who were eligible to rent out MQ in Fall 2004, to rent out MQ in Spring 2005.
The Evidence
Both parties submitted document briefs in advance of the hearing.
Appellant’s Case
Mr. Arthur Da Silva testified that he was 53 years old and had grown tobacco all his life. He said he and his wife purchased their first farm in 1978 and continued to buy quota and land to maintain, and then expand their farm. He said his farm was in good condition and he had 15 modern bulk kilns, converted to a new burner system.
Mr. Da Silva told the Tribunal he had injured his back in 1983 and that in September 2004 he underwent surgery on three lower discs, as his condition had deteriorated to the point he was having difficulty walking. He explained that without the surgery he would have needed a wheelchair and that there was a risk he would be in a wheelchair even with the surgery, had the surgery not been successful. Mr. Da Silva said it took 4-6 months to recover from the surgery, and although he was much improved, he was only 40% as fit as he had been prior to hurting his back.
Mr. Da Silva testified that before his surgery he had intended to grow a tobacco crop in 2005, but that in October or November 2004 he concluded that he would not recover quickly enough. He said he advertised for a sharegrower on a bulletin board at the OFCTGMB auction facility and also spoke to approximately 15 farmers that day. He said he returned to the warehouse periodically in Fall 2004 to speak to more farmers about the possibility of sharegrowing and ensure his notice was still posted on the bulletin board. Mr. Da Silva told the Tribunal his wife had to drive him to the auction facility and he was using a walker at that time. A letter from Mr. Da Silva’s doctor was filed with the Tribunal.
Mr. Da Silva said there were fewer tobacco growers in the Princeton area, where his farms are located, than in Delhi or Tillsonburg which are 45 minutes away, and that the soil is heavier on his farms so it was more difficult for him to attract a sharegrower. He said that it was more difficult to grow tobacco on heavier soil but that it was possible to grow the top grades on this soil. He said he had accommodation for a sharegrower. Mr. Da Silva said he received no replies to his posted notice or his face-to-face enquiries. Mr. Da Silva theorized that uncertainty in the tobacco industry made it difficult to find a sharegrower. He said he had one bad experience with a sharegrower in the past but that he would still prefer to use a sharegrower than exit the industry. He said he did not think his standards were too high.
Mr. Da Silva said he went to the OFCTGMB head office twice, speaking to the Secretary once. He said he was looking for help as he did not think he could grow a crop in 2005. He testified that he was told there would be no more OFCTGMB meetings until the contract negotiations were concluded and there was some uncertainty as to whether there would be a 2005 contract at all. He said he submitted a bid to a federal quota buyout program but his quota was not purchased. He indicated he did not think the program had an impact on the availability of sharegrowers.
Mr. Da Silva said he ran advertisements in two newspapers. He confirmed that an advertisement ran in the Delhi News Record on MR 30 05, AP 06 05 and AP 13 05 and that it advertised a farm for rent. He said an advertisement ran in the Brantford Expositor from MY 18 05-MY 25 05 which advertised for a sharegrower. Mr. Da Silva said renting a farm and seeking a sharegrower meant the same thing and that he wanted a large tobacco farmer to sharegrow his farm. He said he received two enquiries in June, but that it was too late to plant a crop by then. Mr. Da Silva said he thought if he could not get a sharegrower by word of mouth then it was unlikely he would get one through an advertisement.
Mr. Da Silva said his son had prepared the land in the spring of 2005 but that a fungicide had not been applied as it was normally applied 2-3 weeks before planting. He said tobacco could be planted anytime after May 16th, but that May 20th was his usual start date and that it took two weeks to plant his farms. He explained that he did not seed the greenhouse in 2005 as that was the sharegrower’s responsibility but said he expected that plants would have been available from neighbours. He said his fields were planted in soybeans, rather than tobacco, in 2005.
Mr. Da Silva said his wife helped with physical work on the farm but did not make management decisions. He said he was able to drive a tractor for short periods in May 2005 and had worked his way up to 8 hour days by October 2005. He said he could not perform certain tasks such as lifting heavy rocks. Mr. Da Silva said he had been taking morphine since his operation and it affected his ability to make decisions.
Mr. Da Silva testified that he was able to rent out some MQ in the spring of 2005, but not the full 30% that the OFCTGMB permitted him to rent out. He listed the quota with Brian McBride, a realtor in Tilsonburg. He said he was aware the OFCTGMB would re-allocate unused MQ to active growers and submitted this was not fair as those growers already have substantial amounts of MQ. He said farmers who were unable to grow a crop or obtain a sharegrower should be allowed to rent out all of their MQ. He pointed out he still has to pay taxes and make payments to his bank.
Mrs. Rosa Da Silva verified that she had driven Mr. Da Silva to the OFCTGMB auction facility more than once in the fall of 2004 and that he had been able to drive himself in March 2005. She said she helped with the tobacco crop but could not grow it on her own as her husband made decisions regarding irrigation, fertilizer and the like. She said their son helps out when he can but has a full time job as a mechanic. Mrs. Da Silva said she anticipated that her husband would take some time to recover from surgery as three discs were involved. She said he recovered slowly at first but she was now seeing more rapid improvements. Mrs. Da Silva said they had spoken to a potential sharegrower about the 2006 crop and hoped to grow tobacco in 2006.
Mrs. Carla DiFelice testified that she was the youngest daughter of Mr. and Mrs. Da Silva and was a teacher and a certified fitness instructor. She said she could not remember her father not having problems with his back but that they worsened in 2000 and were much worse by 2004. She said he had a difficult recovery from his surgery until mid-November 2004 when he started to improve; she saw another marked improvement in January 2005, when he started taking walks; and another in Spring 2005. Mrs. DiFelice said she had not discussed her father’s anticipated recovery time with his doctor but knew that the surgery would either improve his health or he would end up in a wheelchair. She understood that it was Mr. Da Silva’s back problems that led to the surgery, not his leg problems. She said she had recommended stretching exercises for her father. She said he had difficulty bending but could lift his grandchildren.
Mr. Stanley Symons testified that he was a tobacco grower who farmed not far from Mr. Da Silva and that he had been approached and asked to sharegrow Mr. Da Silva’s farm. He said he was already planting and his plans were made for the year by the time he was approached. Mr. Symons said the industry was shrinking and there were noticeably fewer tobacco growers in the area but indicated this did not make it more difficult to find help or equipment. He said Mr. Da Silva’s tobacco crop size – 75-80 acres – was medium sized by industry standards and that large producers grew approximately 150 acres of tobacco. He said there were pros and cons to renting MQ in the spring and fall. Mr. Symons said he was a Director on the OFCTGMB but had not participated in the hearing of Mr. Da Silva’s appeal.
OFCTGMB Case
Mr. Jason Lietaer told the Tribunal he had been the General Manager of the OFCTGMB for almost three years, held a degree in economics and a background in politics, and had been raised on a tobacco farm.
Mr. Lietaer said the OFCTGMB had implemented its no rental policy in the late 1980s due to a concern that active tobacco growers would face higher production costs if they were required to rent quota, and that subsequent Directors of the Board had retained the policy. He said the tobacco industry in the United States had been uncompetitive until it eliminated a policy which allowed for quota rentals. He agreed that the policy also helped discourage speculation in tobacco quota.
Mr. Lietaer said he normally attended OFCTGMB board meetings and was aware of three requests for exemptions to the no rental policy in 2005. Of those, he said one was granted to a producer who had unexpected triple bypass heart surgery at planting time, one producer was allowed to rent out 30% of his MQ in the spring (Mr. Da Silva) and a producer who had participated in the federal buyout program was allocated sufficient MQ to market carryover tobacco and allowed to rent out 30% of his MQ in the spring. Mr. Lietaer said the OFCTGMB hears appeals as soon as possible when it receives them and hears appeals before the crop size is fixed.
Mr. Lietaer said he believed the OFCTGMB looked at each request for an exemption to its no rental policy individually but that in general considered whether the grower had intended to grow a crop and whether there was an extraordinary circumstance which prevented the crop from being grown. He said the OFCTGMB also looked at efforts made by the grower to find a sharegrower.
Mr. Lietaer said a federal buyout program had removed 150 tobacco growers from the industry, with the result that remaining growers could grow more tobacco with their basic production quota (BPQ). He said there should have been a large pool of potential sharegrowers as a result of the buyout as some sharegrowers were left without a grower, and some growers had started crops in the greenhouse but subsequently accepted the buyout. He knew of 12 ex-growers who had become sharegrowers as a result of the buyout. Mr. Lietaer said there were 106 registered sharegrowers in 2005, and 115 in 2004. He said the OFCTGMB did not maintain a list of potential sharegrowers, but registered shareholder agreements for payment purposes. He stated that tobacco producers usually look for sharegrowers in the winter, as plants had to be seeded in greenhouses in March.
Mr. Lietaer said uncertainty was usual in the tobacco industry and the OFCTGMB did not normally communicate to growers during negotiations with buyers on the crop size. He explained that due to grassroots demand the OFCTGMB did indicate that it expected the 2005 crop size to be similar to the 2004 crop at winter meetings in February and through direct mailings to producers in March. He confirmed there had been rumours in the countryside before the OFCTGMB released this information.
Mr. Lietaer said Mr. Da Silva’s farms were located in District 2 which had an average number of tobacco producers, an average concentration of growers, slightly larger than average tobacco crops and was roughly average in geographical size. Mr. Lietaer agreed that there were likely tobacco plants available to purchase in Spring 2005 but said it was not usual to attempt to grow an acreage the size of Mr. Da Silva’s farms with plants purchased in the spring.
Mr. Lietaer said he had heard that MQ was renting in the 55-75 cents per lb range in the spring and 68 cents per lb in the fall. He said that producers’ costs of production varied but that most would not clear 60-70 cents per lb in profit. He said there was a clear economic advantage to renting MQ rather than growing a crop. He pointed out that if MQ were rented out then land could be used to generate income from another crop. Mr. Lietaer said realtors told him what quota was renting for and he had seen it advertised at these prices as well.
Mr. Lietaer said normally only active growers who produced a crop in 2005 would be eligible to rent out MQ in the fall. He said Mr. Da Silva would not normally have been allowed to rent out MQ in either the spring or the fall, given that he did not grow a crop in 2004 or 2005. He said unused MQ is issued as supplemental quota to active growers on a pro rata basis. He explained that producers could grow more than their MQ, and carry over tobacco to the next year.
Mr. Jerry VanDeVelde told the Tribunal he had been a tobacco farmer all his life and a committeeman for the OFCTGMB since 1993. He said he had worked in the OFCTGMB warehouse from 1972-1993 and had been a grower advisor for part of that time. He also worked in a realtor’s office.
Mr. VanDeVelde said producers usually start looking for sharegrowers in late October and early November and start planning very quickly. He said planning is important as sharegrowers change residences on March 1st, to be near the greenhouse. He agreed there had been uncertainty in 2005 due to the possibility of a buyout program, but said that producers continued to operate as usual and seeded greenhouses in March. He said there was a general consensus among growers he spoke to that they plan their 2005 crop based on the hope it would be the same size as the 2004 crop. He said he had received the OFCTGMB communications regarding the progress of negotiations.
Mr. VanDeVelde said he was not familiar with the Da Silva farm, but based on the amount of MQ he held and having a large block of land it sounded impressive and should be attractive to sharegrowers. He said it was reasonable to look for a sharegrower by word of mouth, posting a notice on the OFCTGMB bulletin board and advertising in the newspaper. In comparing sharegrowing with farm rental he said that sharegrowing was the proper method.
Mr. VanDeVelde said MQ was renting for 58-62 cents per lb in Spring 2005 and he was involved in 25-30 transactions through his realtor work. He said he was only aware of one offering that did not rent and it was offered at 85 cents per lb. He said it was reasonable to rent MQ through a realtor and Mr. Da Silva’s realtor was reputable. Mr. VanDeVelde said he was aware that there had been fall rentals in 2005 and the crop size was likely to be large enough to fill the industry contract.
Ms. Christine Jacob said she was the Assistant Secretary of the OFCTGMB. She said she could not recall speaking specifically to Mr. Da Silva in early 2005 but under no circumstances would she tell a producer it was untimely to bring an appeal for an exemption to the no rental policy. She said appeals are heard at regular board meetings.
Ms. Vicky Malcolm said she was Secretary of the OFCTGMB and had been with the board in various capacities for 31 years. She recalled meeting with Mr. Da Silva and discussing the federal buyout program and the potential crop size. She could not recall when they met but guessed February or March 2005 as crop negotiations did not commence until late January.
Summations:
Mr. Campbell told the Tribunal the OFCTGMB no rental policy was introduced at a time when there was more of a concern with non-growers renting out quota. He pointed out that there were only three requests for an exemption from the policy in 2005 and said allowing Mr. Da Silva to rent out MQ would not open a floodgate. He said Mr. Da Silva was a tobacco grower and would face difficulties if not allowed to rent out MQ.
Mr. Campbell submitted Mr. Da Silva’s circumstance was extraordinary because his recovery from back surgery was not as quick as anticipated, and because his health deteriorated after surgery before improving. He said Mr. Da Silva was not physically capable and may not have been completely mentally capable of growing a crop after the surgery. He noted that Mr. Da Silva intended to grow a crop in 2006.
Mr. Campbell argued that Mr. Da Silva took all reasonable efforts to find a sharegrower and that none of the OFCTGMB witnesses could suggest any better way of finding a sharegrower than posting advertisements and speaking to producers at the warehouse. He said the industry was in difficult times and noted it was described as an industry in chaos in written documentation filed by the OFCTGMB. He said it would not be easy to get a sharegrower in these circumstances. Mr. Campbell said the OFCTGMB criticized Mr. Da Silva for not asking for an exemption until May 17, 2005. He said that date was in dispute but that in any event Mr. Da Silva was still trying to get a sharegrower at the time.
Mr. Campbell submitted that the evidence of the Da Silva family was that Mr. Da Silva was a man of strong spirit who fought back from his health problems and was now back in the business of farming. He said his client intended to grow a tobacco crop in 2006 and if he were allowed to rent out all of his MQ in 2005 he could do so on his own terms. He said tobacco was Mr. Da Silva’s livelihood and his life and he would not do anything to harm the industry.
Mr. Campbell pointed out that the Tribunal had allowed Mr. Da Silva to rent out MQ in 2004 because it found that his health had deteriorated suddenly and he made reasonable efforts to have a crop grown given his deteriorating health. Mr. Campbell said those considerations were still valid in 2005 and asked that the appeal be granted.
Mr. Bresner argued that what was a sudden and catastrophic change in Mr. Da Silva’s health in 2004 could not be said to be sudden or unexpected in 2005. He said Mr. Da Silva knew he was having back surgery and had testified that he was aware it could have resulted in his being confined to a wheelchair. He submitted that the need for recovery time after an operation could be foreseen. Mr. Bresner also pointed out that medical evidence provided in a doctor’s letter indicated that Mr. Da Silva’ leg problem was much improved but that he would continue to have chronic back pain.
Mr. Bresner told the Tribunal that an industry in decline does not come to a full stop and other growers did not wait until the crop size was announced before making decisions regarding their crop. He said Mr. Da Silva did not start plants in his greenhouse in March and waited until May 2005 to approach Mr. Symons and ask him if he was interested in sharegrowing. He pointed out that Mr. Da Silva did not advertise in the newspaper until MR 30 05, and at that time he was looking for someone to rent his farm. He said Mr. Da Silva did not advertise for a sharegrower until MY 18 05, which he submitted was too late as people had made their plans by then. He said Mr. Da Silva had a good farm with a significant block of quota which would have been attractive to a sharegrower and suggested that Mr. Da Silva did not make a sincere effort to have tobacco grown on his farm. He said no witness knew of any other producer who could not get a sharegrower in 2005. Mr. Bresner argued that there was an economic advantage to renting out MQ, compared to growing and marketing a crop, and that allowing Mr. Da Silva to do so would put the industry on a slippery slope. He said 190,820 lbs of MQ, rented at 60 cents per pound would put over $100,000 additional costs on active growers, and that Mr. Da Silva would realize that profit as well as the profit from growing soybeans on his tobacco land. He theorized that putting this volume of MQ on the market could depress the rental price received by active growers who are entitled to fall rentals. Mr. Bresner said there was no evidence of financial hardship.
Mr. Bresner reminded the Tribunal that Mr. Da Silva had been allowed to rent out 30% of his MQ in the spring, even though producers who did not grow a crop in 2004 were not usually allowed to have spring rentals. He asked the Tribunal to deny the appeal.
Mr. Campbell pointed out the evidence regarding financial hardship had not been challenged.
The Findings
The Tribunal notes that the OFCTGMB no rental policy is not being challenged, notwithstanding some testimony and argument as to its continued appropriateness. The issue before the Tribunal is whether Mr. Da Silva should be exempt from the policy and allowed to rent out 100% of the MQ that he and Mrs. Da Silva have been allocated.
The Tribunal is of the view that the purpose of policies such as the no rental policy, and related regulations, is to maintain integrity in the marketing system. Policies must be flexible enough to accommodate special circumstances while maintaining checks and balances in the regulated marketing system. The Tribunal concurs with the position put forward by both parties that exemptions to the no rental policy should only be allowed in extraordinary circumstances.
The Tribunal finds that the state of Mr. Da Silva’s health after his back surgery in September 2004 does not qualify as an extraordinary circumstance. The Tribunal accepts that Mr. Da Silva was in a great deal of pain and was taking medication for that pain. Mr. Da Silva testified that his medication impacted on his ability to make decisions. While the Tribunal acknowledges that Mr. Da Silva was in pain and his ability to make decisions was affected, the Tribunal does not find this constitutes an extraordinary circumstance. There was nothing unexpected in his health condition in the fall of 2004; his back injury had occurred twenty years before and his surgery had been planned. The state of his health could have been foreseen.
Mr. Da Silva testified that he needed money to pay his taxes and his bank and that renting out MQ would provide these funds. However no evidence was presented to suggest that Mr. Da Silva was in a position of extraordinary financial hardship.
With regard to the availability of sharegrowers in 2005, the Tribunal finds that there were sharegrowers available but that Mr. Da Silva did not make a thorough effort to obtain one. The Tribunal finds the timing of the placement of advertisements in newspapers critical and finds that there is a significant difference between the wording “tobacco farm for rent” and “tobacco share grower wanted”. The evidence of Mr. Symons was that he was not approached until May 2005, well after decisions for planting in 2005 had been made. As Mr. Da Silva did not have his fields fumigated or plants in the greenhouse at this time, it would have been difficult for him to find a sharegrower.
There has been uncertainty in this industry for a number of years but that does not appear to have led to a lack of sharegrowers. There was testimony from Mr. Lietaer and Mr. VanDenVelde that sharegrowers were plentiful for the 2005 crop year, due in part to the federal buyout program and other industry conditions. Mr. VanDenVelde indicated that producers normally start making sharegrowing arrangements in October or November and that the Da Silva quota with a block of land would be attractive to a sharegrower.
It was clear to the Tribunal that Mr. Da Silva had high standards as to who would be an acceptable sharegrower, and preferred an individual who also had his own tobacco crop. The Tribunal notes that he is entitled to set his own standards as to who will work on his farm and does not weigh this against him. The Tribunal does not dispute this entitlement.
Decision and Reasons
After careful consideration of the evidence filed and the submissions made the Tribunal orders:
- The appeal by Mr. Da Silva for an exemption from OFTGMB regulations to allow him and his wife to rent out 100% of their 2005 marketing quota is denied. This does not affect the OFCTGMB decision to allow Mr. and Mrs. Da Silva to participate in the 2005 spring rental program.
The reasons for this decision are:
Mr. Da Silva’s health did not constitute an extraordinary circumstance.
Mr. Da Silva had ample time and opportunity to have the crop grown by a sharegrower but did not make an adequate effort to do so.
Dated at Guelph, Ontario this 26th day of October, 2005.