Ontario Dairy Council v Deputy Director, 2006 ONAFRAAT 18

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:

Ontario Dairy Council v Deputy Director

Ontario Dairy Council v Deputy Director 2006 ONAFRAAT 18

STATUTE:

Ministry of Agriculture, Food and Rural Affairs Act

HEARING:

May 10, 2006

DATE OF DECISION:

June 20, 2006

2008-18

NEUTRAL CITATION:

2006 ONAFRAAT 18

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 the Ontario Dairy Council, Mississauga, Ontario from a decision of the Deputy Director to amend the license for the operation of a plant issued to Mornington Heritage Cheese and Dairy Cooperative Inc., Millbank, Ontario. The decision allowed for the processor to process cow’s milk, subject to a number of conditions being satisfied.

Before:

Rod Stork, Chair; Bill Schaefer, Member; John Rudics, Member

Appearances:

Mr. Tom Kane, on behalf of the Ontario Dairy Council, appellant

Ms. Christina Lewis, on behalf of the Ontario Dairy Council, appellant

Mr. Jim Cushing, on behalf of the Ontario Ministry of Agriculture, Food and Rural Affairs, party

Ms. Brenda Mitchell, on behalf of the Ontario Ministry of Agriculture, Food and Rural Affairs, party

Mr. Brad Lindner, on behalf of Mornington Heritage Cheese and Dairy Co-operative Inc., party

Mr. Larry Kupecz, witness for Mornington Heritage Cheese and Dairy Co-operative Inc.,

Mr. Donald Good, on behalf of Portuguese Cheese Co., party

Mr. George Demelo, witness for Portuguese Cheese Co., party

Fernando Massalin, on behalf of Toronto International Farms Corporation, party

Mr. Amarjeet Singh, on behalf of Local Dairy Products, party

DECISION OF THE TRIBUNAL

This appeal was heard in Guelph, Ontario on Wednesday May 10, 2006. The Ontario Dairy Council (ODC) appealed to the Agriculture, Food and Rural Affairs Appeal Tribunal (Tribunal) from the decision of the Deputy Director to amend the license for the operation of a milk processing plant for Mornington Heritage Cheese and Dairy Co-operative Inc.

Statutory Context

Subsection 16(1) of the Ministry of Agriculture, Food and Rural Affairs Act states that:

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 Matters

At the commencement of the hearing, several parties made requests for party status to the panel hearing the matter. The appellant, and other participants were canvassed for objections to party status for those requesting it. No one objected to the requests for party status, and as it was determined that those seeking party status demonstrated sufficient interest in the matter. The following were made parties to the hearing:

The Ontario Ministry of Agriculture, Food and Rural Affairs,(the Ministry).

Mornington Heritage Cheese and Dairy Co-operative Inc. (Mornington Dairy)

Portuguese Cheese Co., (Portuguese Cheese)

Toronto International Farms Corporation, (TIFCO)

Local Dairy Products (Local Dairy)

Mr. Rod Stork, Chair of the Tribunal, raised the issue of apprehension of bias. He explained to the parties, that Mr. John Rudics, a Tribunal member sitting on the panel hearing the matter, had considerable experience working in the dairy processing industry. Mr. Stork explained that Mr. Rudics experience pertained to the technical aspects of dairy processing, however, he had no direct connection with any of the parties involved in the matter presently before the Tribunal. No objections to Mr. Rudics’ remaining on the panel were raised.

None of the parties took issue with the contents of, or the accuracy of the Ministry of Agriculture, Food and Rural Affairs Inspection Reports for Mornington Dairy submitted into evidence. As there were no objections, Mr. Cushing decided not to call a witness to defend the Inspection Reports.

The Issue

Should the license of Mornington Dairy be amended to allow it to process cow's milk for the manufacturing of Latin American Cheeses, in a co-packing arrangement with TIFCO.

The Evidence

In his opening statement to the Tribunal Mr. Tom Kane stated that the ODC wanted the decision of the Deputy Director to be overturned. He said that the Deputy Director decided to amend Mornington Dairy’s license, however the decision was made based on a misinterpretation of Section 100 (k), of Ontario Regulation 761 of the Milk Act. He further stated that the Deputy Director erred in her estimation of the impact the decision would have on other license holders within the industry. He stated that the Deputy Director did not fully understand the implications of legal access to milk supply.

Mr. Cushing told the Tribunal that it was the Ministry’s intention to present to the Tribunal, an overview of the licensing process. He stated that the Ministry had no criticism of the Deputy Director’s decision. Mr. Cushing said that the Ministry intended to call two witnesses.

Mr. Amarjeet Singh told the Tribunal that he had attended the hearing for the amendment of Mornington Dairy’s license. He said that questions were asked of Mornington Dairy’s representatives at the hearing, but that, the answers to the questions were deferred.

Tom Kane

Mr. Tom Kane told the Tribunal that the ODC is a provincial association that serves the interests of the dairy processing sector. He said that the ODC membership processes all types of dairy foods including, ice cream, cheese, butter and yogurt. Mr. Kane said that ODC members process 97 percent of the milk that is produced in the province of Ontario. He stated that the ODC was started in 1971. Mr. Kane explained that the ODC elects a 15 member Board of Directors from its membership. Mr. Kane said that the ODC is solely funded by its membership.

Mr. Kane told the Tribunal that the ODC appeal was made on behalf of the dairy processing industry. Mr. Kane said that the Deputy Director relied upon an incorrect interpretation of the manner in which the domestic dairy system operates. He referred the Tribunal to Section 100 (k) under Regulation 761 of the Milk Act. Mr. Kane submitted to the Tribunal that:

• Section 100 (k) which provides for the discretion of the Director to issue a license, or refuse to issue a license if, in the Directors opinion, the plant is not necessary or desirable.

• Section 100 (k) has withstood numerous reviews as the Regulation has undergone several amendments. Section 100 (k) still remains as an important criterion for dairy plant licensing.

• The Tribunal decision with respect to an appeal by Mr. Paul Lalonde Jr., dated July 26, 1998 gave consideration to the desirability and necessity of a dairy processing plant. In this instance Section 100 (k) was properly interpreted by the Director and the Tribunal.

• Existing dairy processors are affected by new licenses within the industry.

• The acting Manager of the Dairy Food Safety Program prepared an interpretation of Regulation 761 Section 100 (k) at the initial application hearing for Mornington Dairy, however the Farm Products Marketing Commission not the Food Inspection Branch staff, are responsible for policy development.

• The Deputy Director’s decision to amend the license of Mornington Dairy was influenced by the interpretation that was prepared by a staff member from the Dairy Food Safety Program.

• The same Deputy Director who approved the amendment to the license for Mornington Dairy, supported the revocation of Section 100 (k) in 1998.

• The Ministry of Agriculture, Food and Rural Affairs is a signatory to the National Milk Marketing Plan, the Agreement on All Milk Pooling and the Comprehensive Agreement on Pooling of Milk Revenues: the co-signatory is the Dairy Farmers of Ontario (DFO). The agreements permit the DFO to set prices for milk, and the amount of milk allocated to each processor.

• There is a limited milk supply in Ontario that must be re-apportioned each time a new license is issued. In this manner the issue of a new license affects existing licensees.

• The application for Amendment of a Plant License from Mornington Dairy was based on a co-packing agreement with TIFCO, however there is no parallel provision in the decision of the Deputy Director; thus, the decision has the effect of permitting Mornington Dairy to process cow’s milk without the inclusion of TIFCO in the license.

• Due to reductions in consumption of milk products, milk supply to Ontario’s processors has also been reduced by approximately 76 million litres since August 2005.

• Under the Domestic Dairy Product Innovation Program (DDPIP) the Canadian Milk Supply Management Committee (CMSMC) allocates milk to processors who have successfully applied for the plant quota to manufacture a new product that will positively impact the consumption of milk. Under the DDPIP processors receive milk to their plant(s) for a period of five years.

• Processor applicants under the DDPIP must meet four criteria, the criteria are:

• The product must be made with milk

• The product must introduce to the marketplace a new or innovative factor not currently available in Canada.

• There must be a reasonable expectation that the net demand for Canadian milk will increase or net demand for imported dairy products will decrease.

• The applicant must already be a licensed processor or have submitted a licensing application to the provincial authorities before a project can be approved. In any event, no milk will be delivered until the license is issued to the company.

• Mornington Dairy did not make application to the DDPIP for milk supply.

• TIFCO made application to the DDPIP for milk supply, however, it is not a licensed dairy processor; the successful applicant under the DDPIP must be a licensed processor in order to receive milk.

• Mornington Dairy does not have legal access to milk supply under the DDPIP because it is not the applicant.

• Portuguese Cheese has informed the Canadian Dairy Commission (CDC) that it has been manufacturing the types of cheese that TIFCO wishes to produce for many years.

• At the February 24, 2006 hearing to amend Mornington Dairy’s license, Local Dairy and Portuguese Cheese submitted that the new types of cheeses that would be processed under the DDPIP plant milk supply had been on the market for over 17 years.

• The DDPIP Selection Committee did not know that the types of cheeses it approved for TIFCO’s application were already on the market. The DDPIP Selection Committee will meet to review the application.

• There is no contract in place between TIFCO, the CDC and the DFO to indicate that TIFCO has an allocation of plant milk supply. If such a contract were issued to TIFCO, it would not permit Mornington Dairy to process milk that was allocated to TIFCO.

• Section 100 (k) of the Regulation must be correctly interpreted and applied in this matter because the amendment to the license of Mornington Dairy affects other plants operating in Ontario: the limited supply of milk in Ontario will have to be divided among more processors.

In response to questions, Mr. Kane told the Tribunal that:

• The 1998 decision of the Tribunal to which he referred was from an appeal made from an individual in Northern Ontario who wished to operate a cheese processing plant. At the time of the appeal the DFO supplied milk to plants in Ontario based on a regional system. Similar regulations for licensing were in place at the time.
• The milk supply that is purported to be allocated to TIFCO is administered by the CDC in cooperation with other milk marketing agencies national and provincial.
• He sat on the DDPIP Selection Committee that accepted TIFCO’s application, however, he is not at liberty to disclose the details of the Selection Committee’s deliberations.
• With regard to a letter submitted to Mr. Létourneau, of the DDPIP Innovation Committtee from Portuguese Cheese dated March 24, 2006, Portuguese Cheese stated its objections to the approval of TIFCO’s milk supply application under the DDPIP. Portuguese Cheese based its objections on the grounds that; they had been manufacturing the cheeses that TIFCO had applied to process and that TIFCO could not legally receive milk because it was not a licensed processor in Ontario. The DDPIP had already approved TIFCO’s application, when the letter was written, however, there was no contract in place to indicate that TIFCO would receive delivery of milk.
• The DFO was not opposed to Mornington Dairy’s application for amended license or terms for delivering milk to the plant, as indicated in a letter from DFO to Ms. Brenda Mitchell dated December 19, 2005.
• The DFO implemented the Artisan Cheese Program whereby it agreed to supply small sized processors using traditional methods of cheese making, with milk. The DFO Artisan Cheese Program milk supply was separate from the milk supply allocated to processors under the DDPIP.
• The ODC was consulted by DFO before the Artisan Cheese Program was implemented. The ODC did not support the Artisan Cheese Program.
• The dairy processing industry relies on a supply managed commodity, which involves a host of considerations beyond safety and quality regulations within dairy processing plants.
• Under the DDPIP, processing plants are supplied with milk for a five year period; this supply is separate from the established Canadian supply quota. If the production of dairy products continues beyond the five years when milk was supplied under the DDPIP, farm supply quota is increased to accommodate the additional requirements.
• Mornington Dairy has no right to process milk obtained from TIFCO’s application under the DDPIP regardless of whether or not the milk supply under the DDPIP is in addition to the provincial supply allocation.
• Under Section 100 (k) of the Regulation, the Director may refuse to issue a processing license if it is determined that doing so is not in the best interests of other plants or it does not serve the needs of dairy farmers in the region where the processing is proposed.
• The amended license for Mornington Dairy to co- pack dairy products contains no provisions or restrictions with respect to the milk supply obtained under the auspices of TIFCO’s DDPIP application, therefore, Mornington Dairy’s position is like that of a new processor.

Brenda Mitchell

Ms. Brenda Mitchell testified before the Tribunal; she stated that she is the acting Manager of Food Safety and Inspection for the Food Inspection Branch, Ministry of Agriculture, Food and Rural Affairs. Ms. Mitchell submitted that the DFO was responsible for administering the Raw Milk Quality Program (cow’s milk) however, OMAFRA was responsible for the administration of raw milk quality for goat’s milk. Ms. Mitchell submitted that:

• Staff from OMAFRA’s Dairy Food Safety Program license and inspect dairy processing plants in Ontario. Dairy processing plant operations must be in compliance with the Milk Act and Regulations.
• Directors appointed under the Milk Act have the authority to make decisions with respect to licensing dairy processing plants under Regulation 761 to the Milk Act, in particular, Sections 100 and 107 prescribe the scope, authority and criteria that may be applied by the Director in making determinations regarding dairy processor licensing.
• Mornington Dairy has been licensed to operate a plant at 72 Church Street, Millbank Ontario, since September 2004. Mornington Dairy received a federal registration April 1, 2006, permitting it to market products outside Ontario.
• Mornington Dairy requested an amendment to its license so that it could process cow’s milk in a co-packing arrangement with TIFCO. Mornington Dairy’s existing license permitted the processing of goat’s milk. Goat’s milk is not a supply managed commodity.
• In addition to TIFCO’s approved application to produce Latin American cheeses there are a few other processors who are currently licensed and producing Latin American cheeses.
• The Inspection Branch is satisfied that Mornington Dairy has met the technical requirements necessary to be licensed to process cow’s milk.
• OMAFRA would not object to conditions being placed upon the supply of milk to Mornington Dairy.
• OMAFRA recognizes the implicit issue of supply to processors because the exercise of a license depends upon a supply of milk.

Ms. Mitchell responded to questions, stating that:

• There are no conditions on Mornington Dairy’s amended license.
• She is not aware of any discussions with respect to the interpretation of Section 100 (k) that occurred among staff of the Food Inspection Branch.
• The Food Inspection Branch is interested in assisting processors wishing to meet licensing requirements.
• The DDPIP approvals for processing Latin American cheeses is an indication of an industry wide trend that supports new dairy processing businesses.
• Consumer demand for dairy products may have been considered at the hearing to to amend Mornington Dairy’s license.
• Mornington Dairy operates in premises that are owned by Millbank Cheese and Cold Storage Inc. (Milkbank) and shared with Monforte Cheese (Monforte). Millbank and Monforte are also licensed processors. Monforte however, makes cheese from sheep’s milk.
• The Milk Act governs the production of dairy food from cow’s and goat’s milk only.
• The Food Inspection Branch of OMAFR has authority over the process of manufacturing dairy food, however it does not have any jurisdiction over the definition of any types of dairy foods.
• Mornington Dairy has approved policies and procedures in place to avoid the mixing of goat and sheep milk from Monforte and Millbank’s operations.
• The DFO stated in its letter dated December 19, 2005 that it did not object to the amendment of Mornington Dairy’s license, therefore it can be expected that DFO will deliver milk to Mornington Dairy subject to its usual procedures and requirements.
• By definition, a processor is someone who holds a license to operate a dairy food manufacturing plant.
• Under the Milk Act, the Director has a broad scope of authority with respect to licensing.
• There are some licensed dairy food processors in Ontario whose licenses contain conditions for operation. She is not aware of any licensing conditions, however, that pertain to milk volume restrictions.
• A processor may manufacture any products he/she wishes to unless a condition of the license explicitly states otherwise.
• Section 100 (k) of the Regulation pertains to licensing, therefore, the interpretation and application of its meaning is at the discretion of the Director appointed under the Milk Act.
• Millbank is licensed to process cow’s milk at the same premises as Mornington Dairy, however, Millbank cannot legally transfer its cow’s milk Plant Supply Quota (PSQ) to Mornington Dairy.
• The legislation pertaining to licensing of dairy processing plants contains provisions that involve the jurisdiction of the Director appointed under the Milk Act and the requirements of the Dairy Food Safety Program.
• With regard to business issues that arise in consideration of license applications, the staff from the Food Safety Program may liaise with staff from the Food Industry Competitiveness Branch.
• The legislation does not provide for a distinct separation between matters pertaining to licensing and the use of supply managed commodities in licensed premises, therefore, a Director appointed under the Milk Act must also consider the issue of supply, in addition to the technical aspects of dairy plant licensing.
• The DFO supports applications for processing under the DDPIP. The Artisan Cheese Program is available to processors who are unsuccessful in their applications to the DDPIP.

Brad Lindner

Mr. Brad Lindner testified before the Tribunal. He stated that he is the Plant Manager for Mornington Dairy. Mr. Lindner said that he is familiar with the business and consumer aspects of the dairy processing industry. He said that Mornington Dairy was started in April 2000. He told the Tribunal that:

• Mornington Dairy is licensed to process goat’s milk in Millbank, Ontario.
• Mornington Dairy is licensed by OMAFRA and the Canadian Food Inpsection Agency.
• In November, 2005, TIFCO approached Mornington Dairy with respect to co-packing dairy products made from cow’s milk.
• Mornington Dairy determined that its facilities and equipment suited TIFCO’s proposal, so it applied for an amendment to its license to include the processing of cow’s milk.
• Mornington Dairy has always complied with the rules and regulations necessary to obtain and operate a licensed plant.
• Mornington Dairy is prepared to conform to the requirements of the CDC with respect to TIFCO’s successful application under the DDPIP.
• Mornington Dairy is not a member of the ODC, however it is a member of the Ontario Cheese Society.

In response to questions, Mr. Lindner told the Tribunal that:

• Mornington Dairy does not own PSQ.
• Mornington Dairy did not make an application to the DDPIP.
• Mornington Dairy has made arrangements with TIFCO with respect to the financial requirements for receiving milk.
• By regulation, DFO must sell milk to a licensed plant operator.
• Mornington Dairy has the capacity to process 12,000 litres of milk in its three vats. Each vat has a capacity of 4,000 litres.
• At present Mornington Dairy is operating six days a week. Mornington Dairy expects to process 4,000,000 litres of milk per year under the co-packing agreement with TIFCO and the amended license.
• Mornington Dairy has two refrigerators, each one has a capacity of approximately 600 square feet.
• The licensed plant is 4,0000 square feet in size, with a receiving area of 3,000 square feet.
• He has had experience in processing cow’s milk.
• TIFCO made its application to DDPIP prior to approaching Mornington Dairy.
• In general, small scale processors are able to supply niche markets with product.

Larry Kupecz

Mr. Larry Kupecz testified before the Tribunal and he stated that he is a dairy sheep farmer and founding member of the Ontario Cheese Society. He explained that the Ontario Cheese Society is an organization that supports the manufacture and enjoyment of specialty cheeses in Ontario. Mr. Kupecz told the Tribunal that the Ontario Cheese Society membership is made up of individuals who work in the cheese industry and people who enjoy fine cheeses, including processor members with small scale production and large scale processors. Mr. Kupecz told the Tribunal that The Ontario Cheese society advocates the manufacture of specialty cheeses within Canada. He said that, Canada imports approximately 20,000 tons of cheese.

Mr. Kupecz responded to questions that he understands that the dairy processing industry relies on a supply managed commodity. He stated in response to questions that:

• The supply management system provides for an obligatory level of imported dairy products.
• Canada’s imported cheese is not specifically identified as specialty cheese.

Fernando Massalin

Mr. Massalin made submissions to the Tribunal. He said that he is the President of TIFCO. Mr. Massalin told the Tribunal that TIFCO markets approximately 800 Latin American grocery items. Mr. Massalin told the Tribunal that:

• TIFCO is a grocery distributor; its customers include all sizes of grocery retailers as well as restaurants and food services operations.
• When the application for processing under the DDPIP was approved, TIFCO had to decide whether to process dairy products in its own plant, or to use an existing facility. TIFCO chose Mornington Dairy as it had the capacity to accommodate TIFCO’s proposed production.
• There is consumer demand for the types of cheeses TIFCO proposes to process.

Mr. Massalin responded to questions stating that:

• TIFCO is not licensed to process cow’s milk.
• TIFCO will build its own processing plant if it cannot come to a suitable arrangement with Mornington Dairy for processing cow’s milk under the DDPIP program.
• TIFCO has an informal arrangement with Mornington Dairy to co-pack cheeses: there is no signed contract in place between TIFCO and Mornington Dairy.
• He has a thorough understanding of the requirements for dairy processing licenses.
• It was TIFCO’s intention to build its own plant after being supplied with milk, for five years under its approved application to the DDPIP.
• In December 2005 he met with representatives of the CDC and was given to understand that he must obtain a license to process cow’s milk at the end of the five year period..
• The CDC made a ruling in February 2006 requiring that TIFCO obtain a processing license by year end 2006.
• TIFCO is prepared to build its own processing plant if it becomes a requirement of receiving milk to do so.
• TIFCO wishes to manufacture its own cheeses to insure that it had a consistent and reliable supply for its customers.
• The cheeses that TIFCO proposes to manufacture are unique: there are no similar cheeses on the market.
• In 2004 TIFCO approached Portuguese Cheese with a request that it process Latin American cheeses, however, Portuguese Cheese could not produce the types of cheeses that TIFCO customers wanted. TIFCO distributed a few varieties of cheeses manufactured by Portuguese Cheese.

Mr. Massalin submitted to the Tribunal in camera, documents that he believed indicated that the CDC directed TIFCO to use existing facilities for processing dairy products under the DDPIP application or to build its own plant. Mr. Massalin submitted documents in camera that he believed indicated that TIFCO was assured a supply of cow’s milk under its successful application to the DDPIP.

Amarjeet Singh

Mr. Amarjeet Singh made submissions to the Tribunal. He stated that:

• He operates Local Dairy, a licensed processing plant located in Ingersoll, Ontario.
• Local Dairy manufactures cream cheeses and Latin American cheeses for the Spanish market. Local Dairy’s customer base is similar to TIFCO’s.
• In December 2005, TIFCO approached Local Dairy with a request for processing Latin American type cheeses. TIFCO received no response to its request.
• Local Dairy was already manufacturing the types of cheeses for which TIFCO’s application under the DDPIP was approved.
• TIFCO will not be granted PSQ as a result of co-packing with Mornington Dairy for the duration of 2006.
• Dairy processors wishing to enter the industry should follow the same process as he and other processors have followed.
• Local Dairy, Portuguese Cheese, and International Cheese Co. Ltd. are processors of Latin American type cheeses similar to the types of cheeses that TIFCO proposes to manufacture.

Mr. Singh responded to questions stating that:

• Local Dairy has the capacity to process 7,200 litres of milk per day.
• Due to restrictions in Canada’s immigration policy the increase in Latin American immigrants is not expected to continue.
• He began his business with an application under the DDPIP for the manufacture of Indian cheeses. He began manufacturing Latin American cheeses from an application to the DDPIP 17 years ago.
• Local Dairy was allocated PSQ.

George Demelo

Mr. George Demelo testified under oath. He told the Tribunal that he operates a licensed cheese processing plant; Portuguese Cheese. He stated that:

• Portuguese Cheese manufactures three types of Latin American cheeses.
• TIFCO distributed cheeses for Portuguese Cheese from December 2004 until November 2005.
• TIFCO acquired customers from Portuguese Cheese without the consent or agreement of Portuguese Cheese.
• A consultant was hired to assist Portuguese Cheese with product quality issues. He resigned abruptly. The consultant had been working with TIFCO assisting with the application under the DDPIP.

Mr. Demelo responded to questions that his sister, a partner in the business at the time, had come to an agreement whereby Mr. Massalin would assist with business expansion plans. He said the results of the agreement were unsuccessful. He stated that Portuguese Cheese had listed its customers on its website; the customer list was removed from the website in 2005. Mr. Demelo explained to the Tribunal that Portuguese Cheese successfully applied for milk volume under the DDPIP for the manufacture of two types of cheeses in May, 2005.

Summation

In closing arguments, Mr. Kane told the Tribunal that ODC’s appeal concerned the supply of milk to Mornington Dairy resulting from the Deputy Director’s decision to amend its license. He argued that the supply of milk and the interpretation of Section 100 (k) of the Regulation were the crux of the issue. Mr. Kane stated that Mornington Dairy did not obtain a supply of milk from the CDC under the DDPIP. He said that the successful applicant under the DDPIP was TIFCO but, that TIFCO is not licensed to process milk in the province of Ontario. Mr. Kane told the Tribunal that pursuant to Mr. Massalin being informed that his application under the DDPIP had been approved; there was never a contract in place for the delivery of milk. Mr. Kane told the Tribunal that the Deputy Director erred in her understanding of the Regulations with respect to the amendment of Mornington Dairy’s license. He reminded the Tribunal that Mr. Singh and Mr. Demelo had testified that they manufacture the types of cheeses that Mornington Dairy and TIFCO propose to make. He stated that the impact on other processors must be considered when licensing decisions are made. Mr. Kane requested that the Tribunal overturn the Deputy Director’s decision to amend the license of Mornington Dairy.

Mr. Cushing made his closing statements stating that; Mornington Dairy is licensed and in good standing as a processor in Ontario, he said that OMAFRA has no objection to the processing of cow’s milk by Mornington Dairy. He said that OMAFRA has no objection to the legal supply of cow’s milk to TIFCO in a legal co-packing arrangement with Mornington Dairy.

Mr. Lindner summarized the position of Mornington Dairy stating that Mornington Dairy intends to co-operate fully with all the regulatory requirements. He said that the application for license amendment was based on the co-packing arrangement with TIFCO for the manufacture of Latin American cheeses from cow’s milk.

Mr. Massalin told the Tribunal in summary, that, TIFCO wished to begin co-packing Latin American cheeses with Mornington Dairy as soon as possible. He said that if the co-packing arrangement is unsuccessful, TIFCO will build its own processing plant. He argued that there will be no impact on other processors because the Latin American population has grown to 800,000 people over ten years; this is the market for TIFCO’s cheeses.

Mr. Donald Good told the Tribunal that Portuguese Cheese supported the appeal by ODC. He stated that Portuguese Cheese is an ODC member. He reminded the Tribunal that there is a finite supply of milk in Ontario that must be distributed among processors. He said that the federal milk supply is allocated to licensed processors, therefore licensing and supply are inextricable. Mr. Good argued that there should be industry wide consultation before changes to the way the system functions. He stated that the intent of the legislation has not been changed. Mr. Good reiterated that his client, Portuguese Cheese, supports the appeal of ODC. Mr. Kane stated that the ODC is opposed to any long-term co-packing arrangement. He said that the DDPIP application process is not for long term arrangements.

Mr. Singh made his closing argument to the Tribunal, stating that he objects to the amendment of Mornington Dairy’s license to permit it to process cow’s milk. Mr. Singh stated that he believes that there should be a restriction on the license permitting the co-packing arrangement for approximately six months. He stated that he would not object if TIFCO built its own processing plant pursuant to the usual licensing and supply processes that other processors have followed. Mr. Singh said that he supports the appeal by ODC

The Findings

The Tribunal heard evidence with respect to the acceptance of TIFCO’s application to process Latin American type cheeses under the DDPIP. While the Tribunal accepts that TIFCO would be permitted to manufacture cheeses under the DDPIP, there is no clear indication from the evidence presented that a contract exists which would provide for the supply and delivery of milk to TIFCO in conjunction with Mornington Dairy for the manufacture of Latin American cheeses.

The Tribunal understands that licensing and milk supply must be considered in combination, as the purpose of holding a license cannot be exercised if no legal supply of milk is obtained, and vice versa. The Tribunal finds that licensed processors in Ontario may obtain a supply of milk and that the supply is governed under contract to licensed processors. TIFCO is not a licensed processor in Ontario and Mornington Dairy does not have a contract for milk supply, nor has it demonstrated that it has purchased Plant Supply Quota.

The parties and the Tribunal accept that the OMAFRA reports indicate that Mornington Dairy has complied with the technical specifications and regulations necessary for operating a plant that processes cow’s milk. Having met the requirements for being licensed to process cow’s milk under the Regulation, Mornington Dairy must obtain a legal supply of cow’s milk through whichever process or program it may choose to avail itself. The Tribunal understands that in order for Mornington Dairy to process cow’s milk, it must obtain a supply through the purchase of PSQ or through a program whereby a supply is allocated such as, the DDPIP or the Artisan Cheese Program.

It was Mr. Lindner’s evidence that TIFCO approached Mornington Dairy with a proposal to co-pack Latin American cheeses with milk supplied by CDC under the DDPIP. Portuguese Cheese and Local Dairy were also approached by TIFCO with a request to process cheeses. It is apparent to the Tribunal that there is extra processing capacity at some processing plants in Ontario and it accepts the evidence of Mr. Massalin with regard to TIFCO’s application under the DDPIP and its customer base, that there is a market for Latin American cheeses. The Tribunal has given consideration to the application of Section 100 (k) of Regulation 761 under the Milk Act and finds that the objections by Local Dairy and Portuguese Cheese with regard to the method of entry to the processing industry by making application under the DDPIP, are not sufficient to persuade the Tribunal that amending Mornington Dairy’s license to process cow’s milk is not necessary or desirable.

Decision and Reasons

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

1. The appeal by ODC is denied.

2. The Deputy Director’s decision dated March 10, 2006 to amend the license permitting Mornington Dairy to process cow’s milk with the three conditions as imposed by the Deputy Director is upheld.

3. Mornington Dairy shall exercise the use of the amended license to process cow’s milk pursuant to the Regulations under the Milk Act and policies governing milk supply in Ontario.

The reasons for this decision are evident in the findings above.

Dated at Guelph, Ontario this 20th day of June, 2006.