Max Burt v. Chicken Farmers of Ontario, 2011 ONAFRAAT 32

Agriculture, Food and Rural Affairs Appeal Tribunal

1Stone Road West

Tribunal d’appel de l’agriculture, de l’alimentation et des affaires rurales

1, chemin Stone Ouest

Guelph, (Ontario) N1G 4Y2

Tel: (519) 826-3433, Fax: (519) 826-4232

Email: appeals.tribunal.omafra@ontario.ca

Guelph (Ontario) N1G 4Y2

Tél.: (519) 826-3433, Téléc.: (519) 826-4232

Email: appeals.tribunal.omafra@ontario.ca

AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL

APPEAL:

Max Burt v. Chicken Farmers of Ontario

Burt v. CFO 2011 ONAFRAAT 32

STATUTE:

Ministry of Agriculture, Food and Rural Affairs Act

HEARING:

November 1, 2011

DATE OF DECISION:

November 8, 2011

2011-32

NEUTRAL CITATION:

2011 ONAFRAAT 32

IN THE MATTER OF SECTION 16 OF THE MINISTRY OF AGRICULTURE, FOOD AND RURAL AFFAIRS ACT, R.S.O. 1990, CHAPTER M.16, AS AMENDED.

AND IN THE MATTER OF: An Appeal to the Agriculture, Food and Rural Affairs Appeal Tribunal by Max Burt, Gore Bay, Ontario, from a decision of Chicken Farmers of Ontario denying his request for an allotment of basic quota for the production and marketing of chicken based on historical production of chicken by his father during the qualifying period, or alternatively, denying his request for an exemption from the application of CFO General Regulation No. 2293-2010 with respect to the production and marketing of chicken.

Before:

John O’Kane, Vice Chair; Claire Belluz, Member; John Rudics, Member

Appearances:

Max Burt – appellant

Edward Burt – witness for appellant

Geoff Spurr – counsel for the respondent, Chicken Farmers of Ontario

John Maaskant – witness for respondent

Sandy Roulston – witness for respondent

DECISION OF THE TRIBUNAL

OVERVIEW

Max Burt is a second generation farmer on Manitoulin Island near Gore Bay, Ontario and he wants the provincial chicken regulator, the Chicken Farmers of Ontario (CFO) to give him 2,040 units of quota to produce and market chicken to satisfy what he believes to be a local market demand. If the CFO will not give him quota, as an alternative, he seeks an exemption from the regulation that requires him to have quota.

Max Burt first took his request for quota or a quota exemption to the CFO, who denied his requests.

Max Burt then appealed from the CFO’s denials to this Tribunal under section 16 of the Ministry of Agriculture Food and Rural Affairs Act, R.S.O. 1990, c. M.16, (the Act).

On appeals such as these, the Tribunal conducts a new hearing and under subsection 16(11) of the Act, the Tribunal “stands in the shoes” of CFO and can make any decision that CFO was authorized to make.

The two issues that the Tribunal must resolve are summarized as follows:

1. Is Max Burt entitled to 2,040 units of chicken quota, based on his father Edward Burt’s historic chicken production during the qualifying period between 1964 to 1965?

2. Is Max Burt entitled to an exemption from CFO Regulation No. 2293-2010, so that he can produce and market chicken?

BACKGROUND

Chicken Supply Management

John Maaskant testified that he has been a chicken producer in Huron County since 1965, a past Chair of the CFO as well as a CFO Director since 1989. His father had been a chicken producer before him and was involved in the creation of the chicken supply management system in Ontario. He testified that before the creation of the supply management system, chicken production in Ontario was plagued with wild swings in over-production and prices that made it hard to make a living as a chicken farmer. Those issues in the market spurred farmers and legislators to create a regulatory system over chicken production, marketing and pricing that is known as “supply management”.

The first phase of chicken supply management in Ontario began in 1965 when farmers had the opportunity to apply to CFO’s predecessor agency to obtain, at no charge, one unit of chicken quota for each square foot of production barn space, where the farmer had proof that they had “qualified production”, meaning producing “broiler” chickens (under 5½ pounds) during the “qualifying” period, which was a twelve month period between 1964 and 1965. A “unit” of quota translates into about 1.86 kilograms and a quota holder is entitled to produce a unit as many times in a year as the birds’ growth cycle will permit, and typically that will vary from an eight week to twelve week cycle.

Presumably, as a result of the success with supply management of broiler chickens, pressure developed within the industry to bring the heavier “roaster” chickens (over 5 ½ pounds) into supply management, and that pressure lead to a second phase in 1972 that brought roasters within the supply management system. There was a similar requirement for proof of qualifying production and a twelve month roaster quota qualifying period between 1971 and 1972.

With the completion of that structure of the supply management system, the control of production, marketing and pricing introduced stability for chicken farmers, chicken processors and the consumer.

Mr. Maaskant testified that when supply management was first established there were about 600 quota holders and while that number has been as high as around 1,200, there are currently about 1,100 quota holders in the province.

Mr. Maaskant confirmed that the current value of chicken quota is in the range of $100-$105 for each unit. In addition, he confirmed that CFO’s general policy required a minimum quota level of 14,000 units, meaning that if a farmer wished to acquire chicken quota today, the farmer would need to invest between $1.4 million to $1.47 million to buy that quota. He also explained that despite that general policy, CFO had other policies that provided for smaller quota levels for specialty niche markets, such as grass fed chicken or organic chicken and for farmers wishing to self-market, such as to restaurants, where CFO has permitted quota holdings as low as 500 units.

Mr. Maaskant testified that, in addition to those 1,100 quota holders, there are about 14,000 registered chicken growers in Ontario who, while not holding quota, can produce up to 300 chickens each year for either personal consumption or for sale at the farm gate. He explained the level of 300 chickens was an “exemption” that CFO developed as a result of pressure from the farming community who wanted to supply their own tables as well as family and friends and also sell through the farm gate. He explained that CFO recognized that those birds were being produced but that CFO had no means of knowing where they were. The solution that CFO developed was to provide a 300 chicken exemption to every grower that registered with CFO.

Sandy Roulston, CFO’s Manager of Regulation and Chief Compliance Officer testified that she was responsible for administering CFO’s small flock grower program. She explained that there was no fee to any participating farmer. She also explained that there was no requirement that a farmer hold quota to participate. Any participating farmer receives an “exemption” from quota and can produce up to 300 chickens annually. The only requirements to receive the exemption are:

• file a CFO Form 300;
• slaughter the chickens at a provincially or federally licensed processing facility;
• if the chickens are marketed, they must be marketed on-farm

That registration mechanism provides CFO with an ability to create GPS coordinates of that small flock for emergency planning purposes and presumably, for enforcement.

Ms. Roulston testified that in 2011, CFO had 14,552 farmers registered under the small flock program and so far in 2011, CFO had received 13,313 of the Form 300. She testified that 57% of those registrants are repeat filers and 43% are new filers. She testified that CFO records revealed that there are 20 registered small flock growers on Manitoulin Island.

Edward Burt’s Chicken Production

Edward Burt is Max Burt’s father and testified that in the 1950s he raised chickens and turkeys on rented land on Manitoulin Island that allowed him to save enough money for a down payment to purchase his own farm. During the 1950s and 1960s on his own farm, Edward Burt built or renovated several brooding barns that he used in his chicken and turkey farming operation. He testified that he raised as many chickens and turkeys as he could.

Edward Burt was also involved in the cooperative development of a livestock slaughter facility in Gore Bay that was known as the “Turkey Co-Op”. He attributed that name for the processing facility because the people involved, himself included, were primarily turkey farmers. He testified that he was also involved in the cooperative construction of a 9,600 square foot brooder house next to the processing facility in Gore Bay. He did not recall for sure, but felt that construction had been in the 1960s. Edward Burt also testified that he held turkey quota. The development of a supply management system for turkey was, in all material respects, similar to the development of the chicken supply management system.

In addition to working at his own farm, Edward Burt also worked as the foreman at the processing facility. He testified that they raised turkey poults in the co-op brooder house until they were eight weeks old, at which point they were moved to range pens and the balance of the year they raised chickens in that brooder house. Although he could not recall a date other than “around 1967”, he testified that the processing facility went into receivership in the mid 1960s, and at some other time during the mid 1960s, a chicken hatchery on Manitoulin Island burned down. Presumably, the loss of a source of hatching eggs and the loss of a chicken processing facility contributed to Edward Burt ceasing to be a chicken farmer.

Edward Burt could not recall specifically about his chicken production during the quota qualifying period. He did confirm aiming for the production of about a 6 pound bird.

Edward Burt identified a production ledger for the co-op processing facility and that he recognized the handwriting of the now deceased secretary of the co-op. That ledger from the co-op showed Edward Burt’s chicken production for only three days from the Fall of 1961 and two days from the Spring of 1963. The only record from the co-op ledger relevant to the quota qualifying period is a page that shows, in dollar amounts, “Producer Payments as at January 31, 1965” for the period “1964-65”. One of the three producers shown as receiving a payment is Edward Burt.

Edward Burt did not testify about his own farm production records but Max Burt did file, as part of his documentary evidence, income and expense statements for his father’s farm for the years 1961 to 1968.

Edward Burt testified that he could not recall ever being contacted by anyone about the development of the chicken supply management system, and if he had been contacted, he would have applied to get chicken quota. He testified that he was contacted about the turkey supply management system and that he applied for and received turkey quota.

Edward Burt confirmed during cross-examination that he became aware of the chicken supply management system in the mid 1960s.

Max Burt’s Chicken Production

Max Burt purchased the farm from his father Edward Burt and began operating around 1994. Between 1994 and 1996, he received a provincial license to operate a livestock processing facility on his farm. In 1996, he began raising chickens and selling them on Manitoulin Island. Between 1996 and 2004, Max Burt’s annual production increased from about 558 chickens to a maximum of just over 1,500 in 2003.

Max Burt testified that while he felt he would be within his rights to seek quota units based on the total square footage of production barns used by his father in the 1964 qualifying period, he only wanted quota units based on his own historical production between 1996 and 2004 of about 1,500 birds, plus the 300 bird exemption, plus a 2% annual increase between 2004 and 2011, for a total quota of 2,040 units.

Max Burt testified that he had support from local consumers as well as locally elected parliamentarians for chicken production on Manitoulin Island. He testified that the supply management system and CFO’s policies have created barriers to developing chicken production in Northern Ontario. Max Burt testified, using archival research from local media sources and the only local veterinarian from around 1965, as well as using anecdotal illustrations from his discussions with other prospective chicken producers, as well as his own interactions with CFO, about what he described as the following barriers:

• Manitoulin Island chicken producers were omitted from the public communications in 1965 about the process to apply for chicken quota
• CFO’s current general policy that a new entrant must buy a minimum of 14,000 units
• During the 1986 quota lottery, CFO did not tell any individuals in Northern Ontario to apply
• CFO’s attitude that commercial chicken production in Northern Ontario is not viable
• CFO’s requirement that if he purchased quota he would need to complete an on-farm safety program at a cost of $1,000

Max Burt testified that he became aware of the chicken supply management system around 2001 when Reg Patterson, a CFO representative, visited his farm.

ANALYSIS AND FINDINGS

Max Burt, as the appellant, has the onus of satisfying the Tribunal that he is entitled to the relief that he asked for in this appeal. The essence of what he seeks is to receive free quota or be exempt from the regulatory regime. For the four reasons set out in detail below, Max Burt has not discharged that onus and he has failed to satisfy the Tribunal that he should receive the requested relief. Therefore, we answer in the negative to both question 1 and 2, posed above.

1. Max Burt Failed to Satisfactorily Explain the 46 Year Delay

In 1965, the predecessor agency to CFO, established a mechanism to allot production and marketing quotas among chicken producers who were able to prove to its satisfaction that they produced broiler chickens (under 5 ½ pounds) during the twelve month qualifying period between 1964 and 1965. Qualified producers received a quota allotment at no cost.

This Tribunal stands in CFO’s shoes, and therefore presumably, if a person came before us proving that they had been a broiler chicken producer during that 1964-65 qualifying period, or a roaster chicken producer during the 1971-72 qualifying period, then the Tribunal has the authority to allot that person quota, at no cost, based on their proven production square footage.

However, having that authority would not necessarily mean that the Tribunal would be obliged to act on that authority. In our view, one of the principle considerations for such an applicant would be to explain their delayed application to the Tribunal’s satisfaction. In the circumstances of this case, the delay spans 46 years.

While we accept Edward Burt’s evidence that no one from CFO’s predecessor agency contacted him in 1965 to invite him to apply for chicken quota, he confirmed that he was aware of the chicken quota system since around the mid-1960s. He also was a turkey quota holder and from that we infer that he knew and understood the model for the supply management system. In our view, it is inconsistent for Edward Burt to say, on the one hand, “if I had been contacted about the quota system, I would have applied for quota”, while on the other hand saying that, “I was aware of the chicken quota system by the mid-1960s”. That inconsistency might well be resolved by an appropriate explanation; however, Edward Burt offered us no such explanation about that inconsistency. Therefore, in these circumstances, we draw an adverse inference from that unexplained inconsistency. Our inference is that Edward Burt knew about the chicken quota system within the first few years of its organization and made a conscious decision not to apply, albeit late, for chicken quota.

Max Burt referred the Tribunal to the case of Gilbert Labre, which he described as a precedent for CFO giving quota to a northern Ontario chicken producer in 2001. No one produced to the Tribunal an actual decision related to the Labre case, but the anecdotal evidence concerning Gilbert Labre was that between 1975 and 1985 he had been producing chicken for family and friends. In 1985, as his business grew, he contacted CFO to enquire about quota and was told that quota was not required in the north. As his chicken production expanded he called the CFO again in 1988 and 1993, each time receiving information from CFO that quota was not required in northern Ontario. On January 5th, 2001, CFO allotted Gilbert Labre 3,000 units of “non-transferable” quota. In our view, the Labre case does not assist Max Burt as a precedent since the facts are too different. Labre received misleading information that he did not require quota, directly from the provincial regulator on multiple occasions, over the course of a decade. In those circumstances, where the provincial regulator’s advice led Labre deeper and deeper into illegal chicken production, the CFO decision to regularize that production by bringing it within the system with non-transferrable quota is sensible and reasonable. However, the facts related to Max Burt are distinguishable. CFO’s information to Max Burt did not lead him astray into illegal chicken production.

Both parties made reference to the 1991 case of Jean-Paul Piche that was heard by the predecessor to this Tribunal. Mr. Piche had been a chicken producer during the 1971-72 roaster qualifying period. Piche had experienced a barn fire that destroyed his production barn space and most of his business records. Piche’s 1991 request to CFO’s predecessor for a basic quota allotment was received by that agency in a context where it had adopted a policy in 1985 that it would not make any further qualifying period quota allotments because, in the thirteen years elapsed since the qualifying period “sufficient time had been available for producers to apply for quota”.

While decisions by this Tribunal or its predecessor are not binding precedents, the Piche decision is instructive because it provides additional historical context about the evolution of the chicken supply management system in a pattern of facts that are very close to the facts before us. It is apparent that in the Piche case, the Tribunal, in addition to being unsatisfied with the evidence of qualifying production, was unable to reconcile Mr. Piche’s twenty year delayed application for quota.

In this case, Edward Burt offered no explanation why he did not apply for quota at any time since becoming aware of the chicken quota system in the mid 1960s. Without a compelling explanation why it took 46 years to apply, the Tribunal is left to draw an inference about that delay. The inference we draw is that Edward Burt made a conscious decision that he was not going to participate in the chicken supply management system.

In our view, the absence of a compelling and satisfactory explanation for the 46 year delay alone is sufficient reason to deny the request for a qualifying period chicken quota allotment.

2. Max Burt Failed to Satisfactorily Prove Qualifying Production

The only oral evidence that we had about Manitoulin Island chicken production from that era is the evidence of Edward Burt. Edward Burt, while undisputedly a chicken producer from the era of the qualifying period, is not the appellant before the Tribunal. However, even if Edward Burt had been the appellant, the evidence, largely his own, militates against allotting qualifying period chicken quota.

The records of the processing plant relevant to Edward Burt’s production are not satisfactory proof of broiler chicken production during the qualifying period. While the processing plant ledger is some evidence, albeit scant, we accept that it proves Edward Burt had chicken production in 1961 and 1963. However, the ledger contains no direct evidence supporting Edward Burt’s vague recollections of chicken production during the qualifying period 1964-65. The ledger records are something of a two-edged sword as they relate to Edward Burt’s evidence. For two of the three 1961 production days, the average bird weight was 5.85 pounds and 6.616 pounds respectively, and both are greater than the qualifying broiler chicken weight of under 5 ½ pounds. In addition, Edward Burt testified that he was aiming for a production weight of about 6 pounds. Taken together, that evidence supports the inference that we draw, that Edward Burt was not producing broiler chickens during the 1964-65 qualifying period.

The records from Edward Burt’s own farm production from 1964 are even less helpful than the processing plant ledger since, while they record sales from turkey and cattle production, they reflect no entries relevant to chicken production on either the revenue or the expense side of that statement. Edward Burt gave no evidence to explain why his own business records did not reflect qualifying chicken production during the qualifying period. There is an inconsistency between Edward Burt’s understandably vague recollections about his chicken production in 1964-65 and his own business income and expense statement for that same year. In the absence of an explanation about Edward Burt’s 1964-65 farm income and expense statement, we conclude that those records provide a more objective historical record than Edward Burt’s memory.

Based on Edward Burt’s own testimony, his own business records and the records of the processing plant, we find that the appellant failed to prove qualifying production during the qualifying period for broiler chicken quota.

3. Max Burt Was Not a Chicken Producer During the Qualifying Period

Most of the two above reasons relate to evidence about Edward Burt as if Edward Burt was in some sense, the appellant before the Tribunal. However, that is not the case. Max Burt characterized his application for a quota allotment as a “grandfathered application”.

Max Burt did not provide us with any legislative authority or policy authority or jurisprudential authority supporting the principle that someone who was not a chicken producer during the qualifying period has any right to seek an allotment of quota.

While a qualifying chicken producer may have had a right to make an application for a quota allotment to CFO, we are unable to find any authority to extend that right to someone who was not a chicken producer during the qualifying period, even where, as here, that person is the son of a chicken producer.

Therefore, we conclude that Max Burt is not entitled to an allotment of chicken quota.

4. Max Burt Failed to Prove He Should Be Exempt from CFO Regulation No. 2293-2010

CFO General Regulation No. 2293-2010 (the “Regulation”) provides in section 3.02 that “no person to whom a quota has not been fixed and allotted for the producing of chicken… shall produce any chicken”. Similarly, section 4.02 provides that “no person to whom a quota has not been fixed and allotted by the Board for the marketing of chicken…shall market chicken”. Therefore together, those sections provide the regulatory prohibition on either producing or marketing chicken without quota from CFO.

Starting since as early as 1994 and as late as 1996, through to and including 2004, Max Burt was both producing and marketing chicken, contrary to those regulatory provisions.

Max Burt testified that he first became aware of the chicken supply management system around 2001 when Reg Patterson from CFO visited his farm and discussed how he could operate within the regulatory system. Max Burt filed in his document book his own typed notes dated August 10th, 2001, reciting his version of Patterson’s farm visit. The following passage from Max Burt’s notes is instructive.

After much discussion I determined that there would be no positive action on his part to accommodate me, or my consumers.

Therefore, one contextual finding that we make is that Max Burt has, quite knowingly produced and marketed chicken illegally, and that once educated about the system, he took no steps to operate legally for several years. That finding is reinforced by Max Burt’s acknowledgment that in 2004, he pleaded guilty to a charge of illegal chicken production.

The chicken supply management system was established in Ontario in 1965. Since that time, all producers in Ontario have been subject to the same set “rules”. The Tribunal heard evidence that satisfies us that in appropriate circumstances, CFO has developed special policies or rules, one of which is an exemption from the basic prohibition on production and marketing without quota, for up to 300 chickens. That exemption is reflected in section 2.02 of the Regulation. Max Burt’s exemption request would require the Tribunal to approve expanding that 300 bird exemption to 2,040, an increase of almost 600%.

The evidence is that while there are just 1,100 quota holders in Ontario, there are over 14,000 registered chicken growers in Ontario who regularly utilize that exemption provision. That numeric evidence, coupled with CFO’s evidence about the rationale behind developing the 300 bird exemption, informs an inference that the 300 bird limit is reasonable and appropriate in the context of the chicken regulatory regime. That then begs the question: “Why expand the exemption from 300 to 2,040?”

One, if not the first, of Max Burt’s written communications with CFO about finding a way of bringing his chicken production within the regulatory regime is filed in his documentary evidence and dated February 2006. In that letter addressed to Chris Vanderkoy at CFO Max Burt wrote the following:

Even with increased production costs such as chick price, and feed, I can still produce chicken at a competitive price here on Manitoulin Island and still achieve a satisfiable (sic) margin. When entering the full cost of quota at $60 / unit, the increased cost of production, however, drives the price above any reasonable price point and will drive me out of the market place.

In our view, that passage captures the essence of the rationale of Max Burt’s case for an exemption. While Max Burt characterized elements of the chicken supply management system as barriers to chicken production in Northern Ontario versus Southern Ontario, the real essence of his case is that the cost of chicken quota is unaffordable for him. It was unaffordable for him at $60/unit, when he wrote that letter in 2006, and we infer that today, with quota trading above $100/unit, it is even more unaffordable for him.

In our view, affordability cannot be the basis for the Tribunal to grant Max Burt an exemption from the Regulation, so as to permit him to produce and market 2,040 units of chicken. If we were to use affordability as an exemption criterion, it would render CFO’s existing exemption policy, as reflected in section 2.02 of the Regulation, meaningless. Further, treating affordability as an exemption criterion could open a flood of exemption applications from some, if not all the other 14,000 registered chicken growers in the province. Finally, treating affordability as an exemption criterion would eventually undermine the chicken quota system, which is the foundation of the chicken supply management system in Ontario.

Therefore, we conclude that Max Burt is not entitled to an exemption to produce 2,040 units of chicken without quota.

Tribunal Order

The Tribunal Orders that:

1. The appeal from CFO’s refusal to grant Max Burt chicken production quota, based on his father Edward Burt’s historic chicken production during the qualifying period between 1964 to 1965 is hereby dismissed.
2. The appeal from CFO’s refusal to grant Max Burt an exemption from CFO Regulation No. 2293-2010, so that he can produce and market chicken, is hereby dismissed.