Klijn v Dairy Farmers of Ontario, 2005 ONAFRAAT 8

Agriculture, Food and Rural Affairs Appeal Tribunal 1 Stone Road West Guelph, Ontario N1G 4Y2 Tel: (519) 826-3433, Fax: (519) 826-4232 Email:Tribunal@OMAF.gov.on.ca

Tribunal d’appel de l’agriculture, de l’alimentation et des affaires rurales 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: Klijn v Dairy Farmers of Ontario

Klijn v Dairy Farmers of Ontario 2005 ONAFRAAT 08

STATUTE: Ministry of Agriculture, Food and Rural Affairs Act

HEARING: March 15, 2005

DATE OF DECISION: March 8, 2005

2006-08

NEUTRAL CITATION: 2005 ONAFRAAT 08

IN THE MATTER OF THE MILK 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 Peter Klijn, Wainfleet, Ontario from decisions of the Dairy Farmers of Ontario (DFO). The Tribunal will confine its consideration to the following issues:

1. Did the DFO fairly apply its over-quota credit policy in its calculation of the amount of the final milk cheque issued to Mr. Peter Klijn?
2. Should the DFO be ordered to refund monies collected from Mr. Klijn and transferred to the Fund for Milk and Cream Producers, upon his exit from the dairy industry?
3. Should the DFO be ordered to allocate 100 kg of quota to Mr. Klijn on the basis that he has been unfairly treated?

Before: Rod Stork, Chair; Corry Martens, Member; Blake Bexon; Member.

Appearances: Mr. Peter Klijn, appellant. Mrs. Jane Klijn, witness for the appellant. Mr. Geoffrey Spurr, counsel to the DFO. Mr. Peter Gould, on behalf of the DFO.

DECISION OF THE TRIBUNAL

This appeal was heard in Guelph, Ontario on March 15, 2005. Mr. Peter Klijn appealed to the Agriculture, Food and Rural Affairs Appeal Tribunal (the Tribunal) from the Dairy Farmers of Ontario (DFO) application of the over quota-credit policy, in calculating his final milk cheque; levy refund from the Fund for Milk and Cream Producers and the allocation of 100 kg of quota based on his being treated unfairly.

Statutory Context

16. (1) Subject to subsection (4), if a person is aggrieved by an order, direction, policy or decision of the Commission or Director, made under the Farm Products Marketing Act or the Milk Act, that person may appeal to the Tribunal by filing with the Tribunal and sending to the Commission or Director written notice of the appeal. R.S.O. 1990, c. M.16, s. 16 (1).

Preliminary Matter

Mr. Geoffrey Spurr, counsel to the DFO submitted to the Tribunal that the appeals for refund of monies collected from Mr. Klijn for the Fund for Milk and Cream Producers and the allocation of 100 kg of quota to Mr. Klijn because he had been unfairly treated, were not properly before the Tribunal.

Mr. Spurr submitted that the allocation of 100 kg of quota to Mr. Klijn had been addressed at a previous Tribunal hearing and therefore should not be heard again. Mr. Spurr stated that Mr. Klijn knew about the matter of the 100 kg for more than one year and that, pursuant to Section 16(4) of the Ministry of Agriculture, Food and Rural Affairs Act, the Tribunal had the discretion to refuse to hear matters that were known of by the appellant for more than one year prior to the appeal being brought forth.

Mr. Spurr submitted that Ms. Sue Gillespie, Manager of the Tribunal wrote to Mr. Klijn, July 30, 2004 to clarify several issues with respect to his requests for appeals on nine different matters. Mr. Spurr submitted that Ms. Gillespie had identified the items that were to be appealed to the Tribunal. He submitted that Ms. Gillespie also identified issues that had already been addressed at hearings before the Tribunal.

Mr. Spurr stated that Mr. Klijn’s request for 100 kg of quota was tantamount to a claim for damages; he submitted that the Tribunal did not have the jurisdiction to award damages. Mr. Spurr stated that 100 kg of quota is worth approximately 2.9 million dollars. He said that Mr. Klijn is no longer a dairy producer so that any award of quota for damages would be converted to capital.

Mr. Spurr told the Tribunal that the Milk and Cream Producers’ Fund was established as an indemnity fund that was administered by the DFO. He explained that claims were paid out of the fund in circumstances where, for example, a processor was in default of payment to the DFO. Mr. Spurr stated that the Fund for Milk and Cream Producers was created by Regulation 446 to the Farm Products Payments Act. He explained that the Regulation designated the DFO as a “producer” to whom payment from the fund could be made. He informed the Tribunal that the Farm Products Marketing Commission was appointed to oversee disbursements from the fund. Mr. Spurr pointed out that although Regulation 446 was revoked, it was replaced by an agreement that set out the terms and conditions for the administration of monies from the fund. Mr. Spurr stated that the agreement dated March 3, 1999 was held between the Minister of Agriculture, Food and Rural Affairs (OMAFRA), the DFO and the Ontario Dairy Council (ODC).

Mr. Klijn did not make any legal arguments in response to Mr. Spurr but he indicated to the Tribunal that he wanted all three aspects of the appeal heard.

Ruling on Preliminary Matters

The Tribunal decided not to hear the appeal with respect to the refund of monies contributed to the Fund for Milk and Cream Producers because it had no jurisdiction to do so. The Tribunal considered the submissions from the parties and examined Regulation 446 to the Farm Products Payments Act, under which the Milk and Cream Producers Fund was created and the subsequent agreement to replace the revoked regulation. The Tribunal is satisfied that the Milk and Cream Producers’ Fund was created under legislation from which the Tribunal has no jurisdiction to hear appeals.

The Tribunal decided to hear the evidence for the appeal for the allocation of 100 kg of quota and the application of the DFO policy for the calculation of the final milk cheque.

With respect to the appeals for allocation of 100 kg of quota and the calculation of the final milk cheque, the Tribunal recognized that there is an historical context with respect to the merits of the issues that were argued in whole or in part, at previous Tribunal hearings from appeals from Mr. Klijn in 1989, 1992 and 1993.

The Chair of the Tribunal reminded the parties that although there may be some overlap with respect to circumstances and evidence to be presented in support of the appeals, it expected the parties to lead only the evidence that was germane to the appeals it was prepared to hear.

The Tribunal recognizes that it does not have the authority to award damages. It decided to hear the merits of the appeal for allocation of 100 kg of quota with respect to Mr. Klijn’s claim that he was treated unfairly by the DFO.

The Issues

1. Did the DFO unfairly apply its over-quota credit policy in its calculation of the amount of the final milk cheque to Mr. Klijn?

2. Should the DFO allocate 100 kg of quota to Mr. Klijn on the basis that he was treated unfairly?

The Evidence

Mr. Klijn told the Tribunal that he was an immigrant to Canada from the Netherlands. He stated that he did not speak English when he came to Canada and began to operate his dairy farm. He said that he knew little about the regulated market system that he was participating in and that he did not receive much information about the system from the DFO. Mr. Klijn stated that the limited information that he did receive came from farmers in his area who spoke the same language. Mr. Klijn told the Tribunal that he wished to carry on the family dairy business.

Mr. Klijn stated that Mr. Ron Harrison had been the DFO field-man for his farm. Mr. Klijn said that Mr. Harrison had retired from the DFO and that at the time of his retirement, Mr. Harrison visited his farm and apologized to him with respect to how he had been treated by the DFO. Mr. Klijn stated that Mr. Harrison gave him certain documents at the time of his retirement. Mr. Klijn submitted the:

• Record of Quota Changes for the period April 1980 to August 1988.
• Licence to Produce Milk dated December 31, 1979.
• Letter dated May 22, 1980 from the DFO requesting that he submit in writing, his request to have his MSQ (Market Share Quota) Maintenance Requirement waived.
• Letter dated June 30, 1980 from the DFO granting the request for waiver of MSQ Maintenance Requirement for the dairy year August 1, 1979 to July 31, 1980.

Mrs. Klijn assisted Mr. Klijn in explaining aspects of his submissions. Mr. Klijn told the Tribunal that:

• He initially purchased 2000 lbs of Group #1 quota and 400,000 lbs of MSQ, however he could not account for some of the production against his initial purchase of MSQ during March of 1980.
• Although he employed a bookkeeper he was not aware of the discrepancy at the time of the hearing before the Tribunal in 1989.
• He and his wife received their application for a license to produce milk while they still lived in the Netherlands. It was signed by them in the Netherlands and witnessed by legal counsel. Though it is indicated on the license application that he received the DFO information kits, he did not receive any materials from the DFO except the license application.
• When he immigrated and began to operate the dairy farm, he was not aware of the DFO regulations and policies. No information was sent to him. He was unable to speak English well but was assisted somewhat, by his veterinarian and neighbouring farmers who spoke the same language. He first received a DFO policy booklet on March 2, 2005.
• Contrary to the terms of purchase of the dairy operation the herd was in poor health, many cows were infected with mastitis, and many were not bred as scheduled. The previous owner left little feed for the livestock; the farm and the equipment were in poor repair.
• Cows were slaughtered and replacements were purchased in an effort to control the mastitis problem.
• He did not realize that he had one year to bring production into line with the quota he held.
• His first request to the DFO for exemption from producing to meet quota was granted; however, only for the period of time from March 1, 1980 when he took possession of the farm, until July 31, 1980, the end of the dairy year.
• The DFO policy is to make exceptions to policy to grant relief to producers who request relief due to catastrophic circumstances. Over time the DFO changed its definition of ‘catastrophe’ and former Board member Mr. Peter Oosterhoff indicated to me that in fact, that was the case.
• Mr. Oosterhoff was also from the Netherlands and he spoke his language however they had differences of religious views and education.
• He read of a dairy farmer who was assisted by the DFO on four occasions.
• He attempted to realize a capital gain by selling and buying quota. He knew that speculation was against the DFO policy but he had been having serious financial difficulty.
• He had held a milk truck on his property refusing to let it leave. He did so in protest to the DFO because he was frustrated at its unfair treatment. As a result of holding the milk truck, he was required to sign an undertaking so that there was a written record of his agreed upon conduct. The DFO used the Undertaking to prevent his son from being licensed as a dairy producer. Though he was never charged by the police, the DFO required that that he post a $100,000 bond as security against re-occurance.
• He has kept his farm and dairy production premises up to the DFO standard for many years.
• He met with Mr. Gordon Coukell, DFO Chair and Mr. Peter Gould, DFO Director of Marketing & Production, with respect to numerous issues but no issues were resolved at the meeting.
• He was afraid to permit his son to become a dairy producer because he feared the DFO would make it difficult for his son to be a dairy producer.
• He was not allowed to transfer quota to family members because he had no family in Canada. He was aware of other producers falsely transferring quota to people who were not genuine family members.
• The DFO did everything in its power to push him and his family out of the dairy industry as evidenced when Mr. Grant Kennedy tried to make deals with him for the purchase of his quota, outside of the quota exchange system.
• Due to health reasons he had exited the industry but kept the minimum 5 kg of quota required by the DFO to be a licensed producer.
• He did not disagree with the amount of his milk cheque but he thought that, he would receive a cheque after he had stopped shipping milk, as he believed that he would be paid for the period when he had shipped milk over-quota.

Mr. Klijn responded to questions that:

• He should have received a cheque in June 2004. He calculated that the $65.00 price per hectoliter should be multiplied by 16.99 kg to arrive at a figure of $1104.00
• He still lives on the farm that he operated his dairy business from. He presently owns 80 dairy cows three of which are producing milk.
• He sold 50 kg of quota in 2004 at an average of approximately $27,000.00 per kg of quota.
• If he is granted the requested 100 kg of quota per his appeal, his son could produce against the 100 kg.
• In his first year of production he was not paid for 100,000 litres of milk. He held 208,636 litres of MSQ in March 1980 when he began producing however, he cannot account for the discrepancy between what he purchased initially and the amount paid to him by the DFO during the first year of production. In his first year of production he was forced to sell quota at a loss of 15 percent of its value.
• He initiated litigation against the vendor of the farm because it was not in the agreed upon condition when he moved to Canada and commenced production in March 1980. The lawyer who handled the purchase of the farm gave him bad advice.
• At the time he purchased the farm he was aware that milk was produced in Canada within a regulated marketing system.
• He is Catholic and he believes that Mr. Oosterhoff and the DFO discriminated against him based on religious differences.
• Mrs. Klijn spoke on the telephone to Mr. Kennedy on February 3, 2003. Mr. Kennedy pressured them to sell all their quota and it seemed that he would bend the rules to assist with the sale as soon as possible.
• The DFO had no policies in place governing the amount of quota a producer might offer for sale; neither was there a policy with regard to detaining milk transport vehicles.
• He was obligated to operate the farm for two years after purchasing it. The DFO held such a policy to discourage quota speculation. However he was aware that a producer friend of Mr. Peter Oosterhoff was permitted to sell his farm after only one year.
• His personality conflict with Mr. Peter Oosterhoff resulted in his being treated badly by the DFO.

Mr. Peter Gould testified on behalf of the DFO. He stated that he is employed by the DFO as Director of Marketing and is appointed under the Milk Act as the Director of Regulatory Compliance. Mr. Gould stated that:

• Quota can be obtained through purchase on the exchange, through transfer from a family member or through the purchase of an existing dairy operation.
• Milk transporters are regulated by the DFO under Regulation 761 of the Milk Act. Milk is picked up by licensed Bulk Tank Graders who are qualified to sample milk for testing.
• Producers are paid for milk shipped in the month following the shipment. Payment is based on the components in the milk which include butter fat, protein and solids.
• Over production and under production is accommodated through a system of credits. If there are unused under production credits the producer is not paid if he exits the industry because the DFO cannot pay a producer for milk that was not produced.
• Production credits can be earned, but they can only be applied to reconcile production in the month following the month in which the credit was earned. In the case of Mr. Klijn, no milk was produced in the month following his last earned credits, before exiting the industry.
• With regard to Mr. Klijn’s March 1980 milk statement, there were 112,085 litres of MSQ representing a total of production remaining to be produced in the 1979 – 1980 dairy year. The previous owners of the farm would have produced against the difference between 112,085 and the total production for the year.
• Mr. Klijn earned under-production credits in May 2004 but he did not produce milk in June 2004, therefore, he was not paid for milk that was not produced. Mr. Klijn owed the DFO $2512.44 for repayment of over-production credits carried forward and the usual transport and administrative fees for milk produced before June 2004.
• When quota is sold milk cannot be shipped.
• He met with Mr. Klijn and Mr. Gordon Coukell during the week of May 13, 2002 in an effort to discuss and resolve some of Mr. Klijn’s issues. The meeting was not productive in resolving the issues.

Mr. Gould responded to questions that:

• He discussed issues with Mr. Klijn by way of telephone every three months or so.
• The DFO had never made a decision to order Mr. Klijn to sell all or part of his quota.
• Bids may be submitted to the quota exchange by way of telephone, the Internet and through arrangements with the DFO field staff. All quota exchange bids must be submitted by the first day of each month.
• He had never instructed Mr. Grant Kennedy to convince Mr. Klijn to sell his quota.
• There is a 15 percent transfer assessment levied on the sale of quota over the exchange. The 15 percent levy is not applicable to quota transferred between family members or the purchase of an existing dairy operation.
• Though the Dairy Herd Improvement (DHI) services are not used on all dairy farms, a fee is deducted in support of the service from all dairy producers’ milk cheques.
• He does not believe that there are any barriers to Mr. Klijn’s son being added to a producer licence held by Mr. Klijn, however Mr. Klijn’s son would have to be bound by the Undertaking signed by Mr. Klijn in 1992.
• There are less than 10 other producers who are similarly bound to undertakings following offensive actions.
• All who are registered against a dairy license are considered bound by any undertakings applicable to the license.
• The DFO communicates with producers through the Internet, a producer magazine, annual conferences and meetings and, if matters are urgent, through inserts in the milk cheque.
• The DFO Quota Policy Book is mailed to producers annually.

Summation

Mr. Klijn told the Tribunal that he understands the calculations on the milk cheques. He stated that Mrs. Klijn also has a very good understanding of the calculations. He told the Tribunal that his family has experienced many difficulties since immigratiing to Canada. He said that the DFO did not adequately explain its processes and it treated him unfairly. Mr. Klijn said that he wished the Tribunal to grant him 100 kg of quota in compensation for unfair treatment.

Mr. Spurr told the Tribunal that Mr. Klijn had collected a series of grievances to bring before the Tribunal. He said that Mr. Klijn blamed the DFO for the poor real estate transaction but that these grievances were dealt with at a Tribunal hearing in 1989. Mr. Spurr told the Tribunal that Mr. Klijn was granted some relief but that it was Mr. Klijn’s belief that the relief received was not adequate. Mr. Spurr argued that the DFO’s requirement for the signing of the 1992 Undertaking was not any different from what the DFO might require of any other producer as a result of similar actions from any other producer. Mr. Spurr reminded the Tribunal that Mr. Klijn stated that he left the dairy industry because of health reasons.

The Findings

The Tribunal accepts Mr. Klijn’s evidence that the farm and the livestock were in very poor condition when he took possession of it in March of 1980, as compared to the condition of the farm when he had seen it and made the offer of purchase. There is no evidence however, that this unfortunate circumstance was the responsibility of the DFO.

Mr. Klijn outlined a series of incidents that had taken place on the farm as a result of activities between himself and the DFO. Mr. Klijn felt that these incidents had led to hard feelings between himself and the DFO which led to his belief that he had been treated differently than other producers, given similar incidents and misunderstandings that had arisen. The Tribunal heard testimony from Mr. Gould that there were other producers who were required to sign a DFO undertaking to substantiate their commitment to govern themselves appropriately. The Tribunal does not accept the hearsay evidence of Mr. Klijn that the signing of the Undertaking, any requests for information with respect to his religious beliefs and the changing of DFO policy to assist producers in difficulty were institutionalized examples of discrimination against him personally that resulted from his personal differences with Mr. Peter Oosterhoff, former DFO Board Member.

Mr. Klijn believed that he should have been paid $65.00 per hectoliter for 16.99 kg of under-production in May 2004, on his final milk cheque. Mr. Gould explained that the DFO does not pay for milk not produced. An under credit represents a carry forward of quota from one period to the next for milk not produced in the first period. This policy, while not explicitly stated in the DFO Policies Booklet, Over-Production Credits section, is sensible and consistent with Mr. Gould’s statement with respect to the underlying aims of providing a production credit system so that producers can adjust for fluctuations in production from month to month.

The Tribunal accepts Mr. Gould’s explanation of the milk statement from March 1980 with regard to the amount of production, against MSQ held. Mr. Klijn did not submit evidence that rebutted the correctness of the explanation, and his submission of Record of Quota Changes corroborated Mr. Gould’s explanation with respect to the amount of quota initially purchased.

Mr. Gould indicated that he discussed issues with Mr. Klijn by telephone from time to time and that a meeting had been held between Mr. Klijn and himself in 2002 however no agreement was reached. The onus is on Mr. Klijn to articulate any issues and to participate in a process whereby his issues may be resolved. It is evident that Mr. Gould attempted to address Mr. Klijn’s concerns by way of telephone and face to face meeting as the issues arose.

Decision and Reasons

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

1. The appeal for the allocation of 100 kg of quota on the basis that Mr. Klijn was unfairly treated is denied.

2. The appeal with respect to calculating the final milk cheque is denied.

The reasons for this decision are that, while the Tribunal recognizes the reality of Mr. Klijn’s feeling that he has been singled out for harsh treatment, there is no compelling evidence to indicate that the decisions of the DFO with respect to Mr. Klijn were inconsistent with the DFO policies of the day. There is no evidence to indicate that the policies were applied to Mr. Klijn’s dairy operation in a manner different from the way they were applied to the operations of other license holders.

Dated at Guelph, Ontario this 8th day of Aril, 2005.