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:
1046980 Ontario Ltd o/a La Primavera v Chicken Farmers of Ontario
1046980 Ontario Ltd v CFO 2012 ONAFRAAT 4
STATUTE:
Ministry of Agriculture, Food and Rural Affairs Act
HEARING:
February 15, 2012
DATE OF DECISION:
March 9, 2012
2012-04
NEUTRAL CITATION:
2012 ONAFRAAT 4
1046980 Ontario Ltd o/a La Primavera v Chicken Farmers of Ontario
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 1046980 Ontario Limited o/a La Primavera Farms appealing the Chicken Farmers of Ontario (CFO) decision to deny the corporation’s request for relief from an over quota levy for quota period A-99.
Before: Harold McNeely, Vice Chair; Richard Smelski, Member; Tim Mousseau, Member
Appearances:
Mr. Juan Feddes, appellant
Mr. Geoff Spurr, counsel for the respondent,
Mr. Frank Fortuna, witness for the respondent
Mr. Murray Opsteen, witness for the respondent
AMENDED DECISION OF THE TRIBUNAL
The appeal was heard in Guelph, Ontario, on Wednesday, February 15, 2012. 1046980 Ontario Limited o/a La Primavera Farms (“La Primavera”) appealed to the Agriculture, Food and Rural Affairs Tribunal (the “Tribunal”) from the decision of the Chicken Farmers of Ontario (“CFO”) to deny the corporation’s request for relief from an over quota levy for quota period A-99.
Background
When La Primavera produced 78,513Kg of chicken in quota period A-99 (July 16 – September 11, 2010), it exceeded its quota allotment by 24,671Kg. La Primavera was assessed an Excess Production Levy (“EPL”) of $21,978.99 by CFO, pursuant to CFO Regulation BQ-2010. La Primavera objected, and in a decision of CFO dated December 16th, 2010, CFO affirmed the EPL. CFO was requested by La Primavera to reconsider its decision. A hearing was scheduled and took place on September 12, 2011. CFO heard representations from La Primavera and following this hearing, CFO denied La Primavera’s request for a waiver of the EPL and affirmed its previous decision. La Primavera appeals to the Tribunal from the decision rendered by CFO and seek a waiver, or a reduction of the EPL.
The Parties to the Appeal
La Primavera, as appellant, and the CFO, as respondent both appeared as parties to the appeal.
The Issue to be Determined
Should La Primavera be granted a waiver or a reduction of the EPL imposed by CFO?
The Evidence
John Feddes also known as Juan Feddes (“John”) is the President and sole shareholder of La Primavera. La Primavera holds a production and marketing quota for the production of chickens in Ontario. John was the only witness who testified on behalf of the appellant at the hearing.
John has been involved in the production of chicken under the current supply management system for the last 30 to 35 years. In April 2010, John and his daughter Joanne Feddes (“Joanne”) were the only employees of the corporation involved in the operation of the business. Sometime in 2010, John had decided to entrust to his daughter the responsibility to plan and order chicks from the hatchery to stock La Primavera’s barn for quota period A-99. John stated that he subscribed to a management style in which he believed in “empowering people to make decisions”. For this reason, he was not involved in ordering, or planning the purchase of chicks from the hatchery for quota period A-99. Accordingly, when the company received a notice from CFO entitled Notice of Maximum Crop Quota Allotment dated April 12, 2010 (“the Notice”), John stated he did not sit down with his daughter to explain the significance of the Notice. The Notice contains handwritten notations of Joanne in which she purports to calculate the number of chicks La Primavera must purchase to fill what she believes is the quota allotment for quota period A-99. In fact, this document, as explained by Frank Fortuna (“Frank”), who gave evidence for CFO, is the CFO response to a document known as Notice of Intent to Produce Chicken sent by La Primavera to CFO. In this document, the producer declares the square footage of the barn which houses the chickens. The answer from CFO, consisting of the Notice, establishes the maximum stocking density for this barn. John knew the significance of this document but claims in his evidence that Joanne ordered chicks based on the maximum crop weight of 65,240Kg for the production area of 18,480 square feet contained in the Notice.
A second document dated April 20, 2010 entitled Crop Quota for Producing Chicken for Quota Period A-99, also referred to by the witnesses at the hearing as “Schedule 1” was sent by CFO to La Primavera in an envelope labeled in bold IMPORTANT CROP QUOTA ENCLOSED. This document, hereinafter referred to as “Schedule 1”, is the official communication from CFO determining the net allotment of quota to the producer for the period in question. This document sets the net allotment for La Primavera at 53,842Kg for quota period A-99. According to John, his daughter did not appreciate the significance of this communication, and did not look at this document in deciding on the number of chicks La Primavera needed to order to fill its net allotment of quota for quota period A-99. Furthermore, John admits that he was not involved in reviewing Schedule 1 with his daughter at any time during the process.
Joanne did not give evidence at the hearing. However, according to John, Joanne based all her calculations on what she believed to be a net allotment of quota of 65,240Kg, the figure which appears in the Notice. John admits that, had he been the person who reviewed the Notice and Schedule 1, he would have known to base La Primavera’s calculations on Schedule 1 instead of the Notice, and the “clerical error” as indicated by John would not have occurred.
The use of the Notice and the information contained therein, as the basis for the calculation of the chicks required to produce the allotted quota for period A-99, is a fundamental error by La Primavera. This error led to ordering more chicks than required for La Primavera to meet its quota obligations. This led to the over production of 24,671Kg for quota period A-99. As a consequence of the over production, La Primavera was assessed an EPL of $21,978.99 calculated pursuant to Regulation BQ-2010, passed by CFO and dated March 10, 2010.A 5% late payment interest charge has been added since the EPL was not paid before November 11, 2010, and the current amount owing by La Primavera to CFO is $23,077.94.Upon further questioning, John agreed that after reviewing the historic pattern of chicks ordered, a base of 25k would have been a better base than 28k, initially stated.
Evidence of CFO
CFO is the regulatory authority which regulates production of chicken in Ontario. It allots quota to producers in the supply management system in place in Ontario. Ontario forms part of a federal program overseen by the national body known as Chicken Farmers of Canada (“CFC”).
A production year for the production of chicken is divided into quota periods of approximately 56 days. Frank Fortuna (“Frank”), Quota Management Administrator for CFO, described the system in place to confirm the allotment of production quota to producers, known as Crop Quota, for a quota period.
CFC allots Ontario its share of the national quota which CFO proceeds to divide between approximately 900 CFO producers. The allotment of Crop Quota by CFO is done by means of a Schedule 1 which is sent by ordinary mail to each producer. This system has been in place since the 1970s. The notice is sent in an envelope of the type identified and described above. It is this document on which the producer should base his calculations to order chicks for the quota period in question. The net allotment to La Primavera for quota period A-99 was 53,842Kg. EPLs are established by regulations passed by CFO. The relevant regulation for quota period A-99 is known as Regulation BQ-2010. Section 2 provides as follows:
Every producer shall pay to the commodity board, in addition to licence fees imposed under The Farm Products Marketing Act, levies at the rate of 50 cents per kilogram of chicken produced and marketed by the producer that is in excess of 104% but not in excess of 106% of the production quotas allotted to the producer and levies at the rate of one dollar per kilogram of chicken produced and marketed by the producer that is in excess of 106% of the production quotas allotted to the producer by the commodity board for the period July 18, 2010 – September 11, 2010 (A-99).
As stated by Frank in his evidence, the producer is given “a generous sleeve” which allows for over production up to 104% of quota before levies kick-in. CFO recognizes that various factors such as weather conditions, quality of feed, higher or lower mortality than normal can lead to fluctuations in production. The sleeve is there to allow for these factors. Any excess below 104% is adjusted on the subsequent quota period and not subject to an EPL.
As a participant in the national program, CFO is subject to levies at the national level if Ontario producers exceed quota production in the Province for two consecutive quota periods. The EPL on Ontario producers are imposed by CFO in a quota period, notwithstanding that it may not be required to pass these on to CFC during the relevant quota period. These levies are accumulated in a contingency fund, and are applied to EPLs imposed by CFC on CFO in subsequent quota periods. For this reason, CFO does not consider it material to its decision that CFO was not the subject of an EPL at the hands of CFC resulting from the over production by La Primavera, or other producers who exceed the sleeve. Over production occurs quite often in Ontario’s production, likely 150 to 200 times per year, of various proportions.
Frank admitted that from time to time, CFO has granted a waiver of EPL to producers when the over production is as a result of what could be termed a force majeur. The examples cited by Frank were, the sudden loss of a processing facility as a result of a fire or similar disaster, or conditions such as severe snowfall in the area known as the snow belt making it impossible for transporters to pick up chickens from the producer at the appointed time.
The EPL imposed on La Primavera was calculated in accordance with Section 2 of Regulation BQ-2010 as follows:
(a) production excess between 104% and 106% @ $0.50 per Kg = $538.42
(b) production in excess of 106% @ $1.00 per Kg = $21,441.00
$21,978.99
The Tribunal also heard from Murray Opsteen (“Murray”), a producer and also a director of CFO. Murray has been a director of CFO for the past 4 years. He was elected by District 6 producers to serve as director of CFO. Murray has been producing chickens for the past 21 years and served as a committee man before his election as director.
Murray stated that he is familiar with EPLs as they have been imposed on him by CFO at various times. He has paid levies between $32 and approximately $5,000 at various times. In the situation where the fine was in the vicinity of $5,000, he stated that the chicks grew exceptionally well, that there was below normal mortality during the quota period and that this resulted in an excess of production.
Murray stated that he reviews carefully Schedule 1 before ordering of chicks for a quota period. He uses the net allotment figure shown in Schedule 1, divides this figure by the estimated weight of a chick at the time of shipping and this gives him the number for the chicks to be ordered from the hatchery. He only orders chicks after he has received Schedule 1 and makes these calculations. The order is normally placed within approximately a week of receiving Schedule 1. Murray stated that he agrees with the Board of CFO that producers should exercise due diligence in calculating their needs to produce the allotted quota. He stated that CFO is of the view that it needs to be consistent in its rulings, and to his mind, only an event such as a force majeur of the type described by Frank would come into play to grant a waiver to a producer who has been assessed an EPL.
Findings and Analysis
La Primavera supports its request for a reduction or waiver of the EPL on the following arguments:
The excess production by La Primavera was due to a “clerical error” and unintentional as a result of the inexperience of Joanne. The sole shareholder, John Feddes claims EPL is too harsh a penalty to impose on an inexperienced person.
CFO should be more flexible and waive, or reduce, the EPL since CFO was not called-upon to pay an EPL to CFC in the quota period in question, or arising from the excess production by La Primavera.
The two documents issued by CFO, namely the Notice and Schedule 1 can lead to confusion for a person such as Joanne, who is not entirely familiar with the Crop Quota allotment process.
The excess production of 24,671Kg has been admitted by La Primavera. La Primavera acknowledges as well that had John been involved directly in ordering chicks for quota period A-99, the error in basing calculations on the Notice instead of on Schedule 1 would not have occurred.
In the Tribunal’s view, the responsibility rested on John, as President of La Primavera to properly guide Joanne through the process to calculate La Primavera’s needs to fulfill its quota allotment for the quota period in question. In failing to properly guide Joanne to take over the responsibility, La Primavera assumed the risk which resulted from her lack of knowledge and familiarity with this process.
The Tribunal does not accept the appellant’s argument that confusion arose from what the appellant views as conflicting information between the 65,240Kg set out in the Notice and 53,842Kg allotted in Schedule 1. La Primavera had submitted a Notice of Intent to Produce Chicken on or about April9, 2010. CFO’s response, by its Notice dated April 12 2010, was a calculation of maximum capacity for the facility based on the square footage of the barn operated by the producer. Once again, adequate communication between John and Joanne, or training as to the purpose of these documents might have avoided this error. As a producer with 30 to 35 years of experience, John knew the purpose of these documents. He also knew the workings of the supply management system and the need to adhere to the allotted quota as well as the consequences of failing to do so. The basic training required to assess these forms in order to comply with the rules was not passed on to Joanne before she assumed the responsibility. In any event, it can hardly be said these documents created confusion for Joanne since it is admitted by La Primavera that Joanne never read Schedule 1.
Finally, the Tribunal notes that under the Commodity Board and Marketing Agencies Act (“CBMAA”) R.S.O., 1990 ch. C19 and Section 2 of Ontario Regulation 80 passed pursuant to this Act; CFO has the authority to fix and administer levies in these terms;
Subject to subsection (2), the Lieutenant Governor in Council hereby grants to the commodity board, in relation to the marketing of chicken locally within Ontario, authority to fix, impose and collect levies or charges from persons engaged in the production of marketing of chicken in Ontario and for such purposes to classify such persons into groups and fix the levies or charges payable by the members of the different groups in different amounts and to use such levies or charges for the purposes of the commodity board including the creation of reserves, the payment of expenses and losses resulting from the sale or disposal of any chicken and the equalization or adjustment among producers of chicken of money realized from the sale thereof during such period or periods of time as the commodity board may determine. R.R.O. 1990, Re. 80, s. 2 (1).
The Tribunal finds that the absence of an EPL imposed by CFC on CFO due to La Primavera’s excess production is not a relevant consideration to the issue of the waiver of the EPL imposed by CFO on La Primavera. CFO’s practice of granting a waiver where excess production arises from the type of events which are described above, and which can best be described as events resulting from a force majeur leaves it open for a producer to get relief from an EPL for excess production arising from exceptional circumstances beyond the producer’s control. La Primavera Farms’ error cannot be said to be such an event since it was preventable with training and basic guidance by John, the producer. Regulation BQ-2010 is consistent with the powers conferred to CFO by Section 2 of Ontario Regulation 80 passed pursuant to the CBMAA.
In the circumstances, the Tribunal denies La Primavera’s request for a waiver or reduction of the EPL for quota period A-99.
Order of the Tribunal
Therefore, the Tribunal orders that 1046980 Ontario Limited o/a La Primavera Farms’ request for a reduction or waiver of the Excess Production Levy is denied and the decision of CFO dated September 15, 2011 confirming the EPL of $23,077.94 (inclusive of interest pending) is affirmed.
Dated at Ottawa, Ontario this 9th day of March, 2012
Amended on the 14th day of March, 2012