Schouten v Dairy Farmers of Ontario, 2005 ONAFRAAT 28

Agriculture, Food and Rural Affairs Appeal Tribunal

1Stone 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:

Schouten v Dairy Farmers of Ontario

Schouten v Dairy Farmers of Ontario

2005 ONAFRAAT 28

STATUTE:

Ministry of Agriculture, Food and Rural Affairs Act

HEARING:

October 20, 2005

DATE OF DECISION:

November 8, 2005

2005-28

NEUTRAL CITATION:

2005 ONAFRAAT 28

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 Arnold Schouten, Richmond, Ontario from the decision of the Dairy Farmers of Ontario (DFO) not to make adjustments to payment for production against quota during the month of July 2004.

Before:

Gene Trotman, Vice Chair; Jane Sadler Richards, Member; Bill Schaefer, Member

Appearances:

Mr. Arnold Schouten, appellant

Mr. Adrian Schouten, on behalf of the appellant

Mr. George MacNaughton, on behalf of the Dairy Farmers of Ontario, respondent

Mr. Alex Hamilton, witness for the respondent

Mr. Jeff Hyndman, witness for the respondent

Mr. Bruce Saunders, witness for the respondent

DECISION OF THE TRIBUNAL

This appeal of Arnold Schouten was heard in Carleton Place, Ontario on October 20, 2005. He appealed to the Agriculture, Food and Rural Affairs Appeal Tribunal (the Tribunal) from the decision of the Dairy Farmers of Ontario (DFO) not to adjust his payment for milk produced against quota in the month of July 2004.

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

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. 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.

Preliminary Matter

At the commencement of the hearing, Mr. Schouten informed the Tribunal that he had not received the DFO’s document submission. Documents should have been exchanged by the parties to the hearing on October 11, 2005.

Mr. George MacNaughton, Director of Production for DFO, told the Tribunal that he was certain the documents were sent to Mr. Schouten as directed in the Notice of Hearing.

Mr. Schouten was provided with a copy of the DFO submission and the hearing adjourned in order to provide him with an opportunity to review the DFO brief and to determine if he was prepared to respond to the materials.

After a brief adjournment Mr. Schouten advised the Tribunal that he had reviewed the DFO brief and that he was prepared to respond. The hearing continued.

At the close of the hearing Mr. George MacNaughton confirmed with the Tribunal that the DFO hearing documents had indeed been sent to Mr. Schouten in a timely fashion, but that they had been lost in the mail.

The Issue

Should two days of quota be reinstated to Mr. Schouten for production against quota for the month of July 2004?

The Evidence

Arnold Schouten

Mr. Arnold Schouten told the Tribunal that:

• During the month of July 2004, he and his brother Adrian, both partners in A. & A. Schouten Ltd., realized that their production would exceed quota during the month of July 2004.
• They decided that it would be necessary to dump production from two days of milking in order to bring their production in line with quota.
• He spoke to his Field Representative, Mr. Jeff Hyndman, to advise him of the overproduction, and the plans to rectify the situation by not shipping production from two days of milking at the end of July 2004. Mr. Hyndman explained that milk production cannot be transferred from one month to the next. He did not explain anything else during the conversation.
• At the last pick-up in July 2004, he instructed the trucker to pick-up only what the truck would carry. The rest of the milk was to be run down the drain. He believed 2,000 to 3,000 litres were dumped. Approximately 6,000 litres of milk, or the production from one milking, was accidentally carried over from July 2004 to August 2004.
• He called for a truck that was picking up milk at a neighbouring farm to stop and pick-up his extra milk on August 1, 2004.
• Two trucks picked up milk from the Schouten farm on August 2, 2004. One pick-up occurred at the usual time of 7:30 a.m. and the second in the afternoon of August 2, 2004. The afternoon pick-up was needed because the first truck could not take all their milk, due to overproduction.
• Milk was carried over from July 2004 to August 2004; however, it occurred accidentally. There was no malicious intent to deceive the DFO.
• Transportation costs for the extra milk had been paid.
• No one from the DFO informed him that quota producing days would be deducted from July 2004 as a result of not shipping on the last shipping day of the month.
• It should be clear to the DFO that although 30 cows were dried off during August 2004, there was no need to carry over milk to fill the quota in August 2004, thus proving that there was no malicious intent to carry over milk from one month to the next.
• In hindsight, he understands that had he shipped as few as 100 litres on July 31, 2004, the payment for quota days would not have been adjusted.
• The loss of quota days for non shipment is an unfair technical error in the system.

Adrian Schouten

Mr. Adrian Schouten testified before the Tribunal stating that:

• He was in charge of the farm at the end of July 2004 because Arnold was away. He did not usually run the milking operation at the farm.
• After he and Arnold decided not to ship the last scheduled pick-up for July 31, 2004, Arnold called the Field Services Representative for advice.
• The Field Services Representative did not inform Arnold that there would be no payment for two days of quota production if they did not ship on July 31, 2004.
• The DFO mistook the quantity of milk that was carried over from July 2004 to August 2004.
• Production in July 2004 was approximately 30,000 litres every two days. In an attempt to bring production in line with quota, approximately 3,000 litres per pick-up were not shipped as the truck can only carry 27,000 litres without spillage.
• During August 2004 they wished to ship all their production of approximately 30,000 litres per pick-up, as they wished to take advantage of their allotment of incentive days in August.
• There would be no financial gain from any plan to carry over milk from July 2004 to August 2004 as they still had sufficient production to meet their incentive days.
• The DFO had incorrectly calculated that approximately 13,000 litres of milk were carried over from July 2004 to August 2004. The amount carried over was approximately 6,000 litres.

Arnold and Adrian Schouten

In response to questions, Messrs Arnold and Adrian Schouten told the Tribunal that:

• They understand that quota is allocated on a daily basis for milk butter fat measured in kilograms of production. Producers are paid for the milk on a monthly basis.
• By way of letters dated November 2, 2004, and January 18, 2005 the DFO was advised that milk produced over the last two days of July 2004 was dumped down the drain.
• Cows are milked three times daily. Under normal circumstances milk from six milkings are picked-up every other day of the month. Approximately 15,000 litres are produced per day; each pick-up contains approximately 30,000 litres.
• Milk from one milking in July 2004 was carried over to August 2004.
• There was never any attempt to misinform the DFO with respect to the milk that was carried over.
• There may have been a miscommunication with respect to informing the DFO about the carried over milk, but the DFO was certainly verbally informed of it at the February 28, 2005 hearing attended by Mr. Arnold Schouten.
• The first pick-up of milk that was scheduled to occur after the missed pick-up of July 31, 2004 was August 2, 2004. Milk was picked up on August 4, 2004 but the truck carried one milking short of what would normally be shipped.
• On August 1, 2004 there was a pick-up of 3,196 litres; on August 2, 2004, 37,113 litres for a total of 40,309 litres of milk.
• A load of milk was shipped August 1, 2004 as they were not prepared to dump milk at the time. Cows were dried off in August 2004 to bring production in line with quota.
• The purpose of the telephone call to the Field Services Representative in July 2004 was to inform him that production was approximately one truck load over quota for the month and that they would not ship milk on the last scheduled pick-up for July.
• They were not told by the Field Services Representative that they would not be paid for two quota days if they did not ship milk.
• The DFO’s position that there was intended wrongdoing arising out of the circumstances does not make sense as no producer would put himself into a position where he cannot meet quota, and where he does not get paid for milk that was produced.
• DFO Field Services Representatives are paid to provide expert advice to producers.
• Their production has usually been within quota or slightly above.
• If they had been made aware of the consequences they would never have decided not to ship milk on July 31, 2004.

Alex Hamilton

Mr. Alex Hamilton told the Tribunal that he is a Field Services Supervisor for DFO. He said that he supervises six Field Services Representatives. He explained that the monthly quota days for payment of milk is based on the last shipment of milk from the prior month, to the last shipment of milk in the current month, and includes all shipments during the current month but does not include the last shipment of the prior month. He referred the Tribunal to examples of the calculation of quota days in the exhibits filed. Mr. Hamilton referred to milk statements submitted into evidence to illustrate that the total quota days for the months of June, July and August 2004 were 92. Mr. Hamilton read into the record the DFO policy with regard to irregular shipments.

In response to questions Mr. Hamilton told the Tribunal that:

• If as few as 100 litres were shipped on July 31, 2004; all the quota days would have been allocated for that month.
• A sharp decline in shipment volumes is recorded in the system for tracking shipments. Such a circumstance is called an irregular shipment.
• As stated in DFO policy, producers may be called before the Board for its determination of the matter, if they are found to be carrying milk over from one month to the next.
• There is no prescribed penalty for carrying milk over from one month to the next. With regard to Mr. Arnold Schouten’s circumstances, it is not the job of the DFO to calculate his production on the basis of a telephone call.
• Mr. Schouten has not been penalized as the two days of no quota from July 2004 have been added to the month of August 2004.

Jeff Hyndman

Mr. Jeff Hyndman appeared before the Tribunal. He said that he is the Field Services Representative for the areas of Carleton, Renfrew, Lanark and Dundas. Mr. Hyndman testified that:

• In his position with DFO his duties include: Quality Inspector and Advisor, Quota Policy Advisor, and he acts as a resource for producers.
• He spoke with Mr. Schouten by way of telephone on July 28, 2004. He discussed the number of quota days in July 2004 with him i.e. likely 32 quota days based on pick-ups per Schouten’s normal month and in response to Mr. Schouten’s question, advised him that producers may not carry milk over from one month to the next.
• As stated in the minutes of the DFO meeting to reconsider Mr. Schouten’s quota allocation, he does not recall advising Mr. Schouten that he would lose quota days as a result of not shipping any milk on July 31, 2004.
• He made notes about the July 28, 2004 telephone call on August 4, 2004 under the direction of his supervisor. His supervisor was investigating the matter of irregular shipments at the time.

In response to questions Mr. Hyndman said that:

• His duties as Field Services Representative include the management of questions such as those asked by Mr. Schouten on July 28, 2004.
• Mr. Schouten specifically asked him if carrying over milk from one month to the next was permitted.
• He told the Marketing Officer on duty the weekend of July 31, 2004/August 1, 2004, that Mr. Schouten would not be shipping milk on July 31, 2004.
• He warned Mr. Schouten of the consequences of carrying over milk from one month to the next.
• On August 1, 2004, 3,196 litres of milk was picked-up at the Schouten farm. The pick-up was not authorized by the DFO.
• He was of the opinion that milk was carried over from July 2004 to August 2004.
• When speaking with Mr. Schouten on July 28, 2004, it did not occur to him that July 2004 would be shortened to only 30 quota days if Mr. Schouten did not ship milk on July 31, 2004. He did not tell Mr. Schouten that he would lose two quota days for July if he did not ship milk on July 31, 2004.
• In his experience, there has never been a manual adjustment to the systematic allocation of quota days.
• He believes that he provided Mr. Schouten with good information in answer to his questions on July 28, 2004.
• He described to Mr. Schouten how a “flag” would be raised in the systematic recording of producer volumes if he did not ship milk as scheduled.
• With regard to the consequences for carrying milk over from one month to another, he told Mr. Schouten that the Board would deal with it.
• When speaking to Mr. Schouten about not shipping milk he did not refer to any precedent circumstances with any other producer.
• He believed that Mr. Schouten was treated fairly and without prejudice.

Bruce Saunders

Mr. Bruce Saunders, Chair of the DFO, testified before the Tribunal. Mr. Saunders referred to the minutes of the meeting by the DFO Board to hear Mr. Schouten’s request for reconsideration. Mr. Saunders also referred to the findings of the DFO Quota Committee. He explained to the Tribunal that:

• The DFO Board is comprised of 12 members, all of whom must be licensed milk producers during the time of their tenure.
• A producer may request a reconsideration of any DFO Board decision. Requests for reconsideration are considered by the DFO Board at its meetings and/or by way of face-to-face meeting with the producer.
• At the meeting before the DFO Board in February 2005, Mr. Arnold Schouten responded to questions about carry over milk stating that he was not present at the farm on August 2, 2004 and August 4, 2004, so he could not specifically state what took place.
• Due to the non shipment of milk on July 31, 2004 the system that records production was alerted to the irregularity of shipments from Mr. Schouten’s farm.
• The DFO Quota Committee reviewed the circumstances surrounding no milk shipment on July 31, 2004 and shipments in August 2004.
• The Quota Committee found that the high volume of milk that was shipped from the Schouten farm on three occasions ending August 2, 2004 could only be explained as milk carried over from July 2004 to August 2004.
• There is no set penalty for irregular shipments of milk. The DFO assesses penalty for irregular shipments based on the merits of each situation.
• The Quota Committee decided to send a letter of reprimand to Mr. Schouten and to charge him $315.00 for the cost of the second truck that picked up milk on August 2, 2004. However there was no charge for the unscheduled pick-up on August 1, 2004.
• Mr. Schouten’s July 30, 2005 letter of appeal to the Tribunal contained the first written confirmation from Mr. Schouten indicating that milk from one milking was carried over from July 2004 to August 2004.
• The DFO Board may take into account any vagueness or ambiguity in its policies when it determines matters that come before it.

Mr. Saunders responded to questions stating that:

• At the time of the events leading to Mr. Schouten’s appeal, there was no monetary penalty for over quota production.
• In circumstances where a producer’s milk exceeds the capacity of the transport truck, the DFO will send as many transport trucks as are necessary to transport the milk.
• It is his understanding that an unscheduled pick-up occurred on August 1, 2004 so that the bulk tank would be emptied in preparation for the expected volume of milk from the next two milkings.
• In Mr. Schouten’s situation the DFO would have been more lenient, had it been informed immediately that some milk was carried over from July 2004 to August 2004.
• The DFO Board would tend to show leniency toward any producer who, in its opinion, had received incorrect advice.
• The DFO estimates that the volume of milk that was carried over was almost equal to the volume produced from two milkings.
• The DFO was aware of the implications of the financial adjustment to Mr. Schouten when it made its decision.

Summations

In summation, Mr. Arnold Schouten told the Tribunal that there is a discrepancy with the DFO’s calculation of the carry over milk and what actually occurred. He stated that the 13,000 litres alleged by the DFO to have been carried over was inaccurate and that only 6,000 litres were accidentally carried over from July 2004 to August 2004.

Mr. Schouten stated that the DFO should have made an exception to its policy in his case as it turned out there would have been no penalty for milk withheld from shipping in the middle of the month and he had telephoned the Field Services Representative for advice in advance of taking any action. Mr. Schouten asserted that the Field Services Representative should have been able to inform him of the consequences of not shipping milk on the last shipping day of the month. He said that he was not told that he would lose two days of production quota for July 2004. He told the Tribunal that he had never previously dumped milk.

Mr. Schouten reminded the Tribunal that there should be an opportunity for irregular shipments to be dealt with on an individual basis. He stated that the DFO imposed the penalty against the quota because of the milk that was carried over. Mr. Schouten argued that two issues had been unfairly connected in the matter.

Mr. George MacNaughton argued the DFO’s position stating that the calculation of quota days for July 2004 was issued fairly, and that the computer system had made the correct adjustments. He stated that there was an intention to move milk forward.

Mr. MacNaughton told the Tribunal that the DFO Board did associate the two issues, which it had rightful authority to do. He argued that 8,000 litres of milk were carried over and that the DFO was not provided with written acknowledgement of the carry over until the filing of Mr. Schouten’s July 30, 2005 letter of appeal to the Tribunal. He referred to the extra milk shipments of August 1, 2004 and August 2, 2004. Mr. MacNaughton argued that the DFO Board may have determined the request for reconsideration differently if it had been informed from the outset that milk was carried over from July 2004 into August 2004.

The Findings

Based on the evidence of Mr. Hyndman, the Tribunal finds that he had superior knowledge of DFO policy and procedures. He was charged with providing producers with advice on such matters as the administration of quota and DFO policy.

The Tribunal finds that Mr. Schouten found himself in a situation where he anticipated production exceeding quota by the end of July 2004, and so exercised due diligence by contacting his Field Service Representative by way of telephone for advice. The evidence indicates that the discussion focused on the impact of carrying milk over from one month to another and the option of not shipping production as scheduled on July 31, 2004. The Tribunal finds that the Field Services Representative did not fully explain to Mr. Schouten all of the consequences of his not shipping milk on July 31, 2004. The omission by the Field Services Representative precipitated events that followed including, the removal of two days of quota from July 2004, which resulted in a 30 day month for payment for production. The non shipment of milk on July 31, 2004, created an alert of “irregular shipment” in the systematic recording of producer production which resulted in the issuance of a letter of reprimand and charges of $315.00 in extra trucking charges.

The Tribunal accepts Mr. Schouten’s description of what he believed went on at the farm with respect to the carry over that occurred and his verbal acknowledgment that carry over had occurred when he was before the DFO at a hearing on February 28, 2005. The Tribunal finds that Mr. Schouten would have shipped milk on July 31, 2004 if he had known the consequences of not shipping on that date.

Decision and Reasons

After careful consideration of the evidence filed and the submissions made the Tribunal orders:

1. That the DFO:

• adjust forthwith the appellant’s number of quota days for payment to 32 days in July 2004 and 30 days in August 2004; and
• make the appropriate administrative adjustments, including financial adjustments, arising from the reallocation of two quota days.

The reasons for this decision are:

1. Mr. Schouten exercised due diligence with respect to seeking advice about his proposal not to ship milk on July 31, 2004.
2. Mr. Schouten was not provided with adequate advice regarding this instant matter, in the circumstance, with which to assess the impact that his decision not to ship milk at the end of the month would have on his allocation of quota days for July 2004.