Agriculture, Food and Rural Affairs Appeal Tribunal
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.omafra@ontario.ca
APPEAL: Schnurr v Chicken Farmers of Ontario Schnurr v CFO 2012 ONAFRAAT 42
STATUTE: Ministry of Agriculture, Food and Rural Affairs Act
HEARING: November 23, 2012
DATE OF DECISION: December 21, 2012
2012-42
NEUTRAL CITATION: 2012 ONAFRAAT 42
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 Mark Schnurr of Walkerton, Ontario appealing the Chicken Farmers of Ontario (CFO) decision denying his request to fix and allot basic quota to another premises separate from his existing registered premises.
Before: Marthanne Robson, Vice-Chair; Mary Field, Member; Tim Mousseau, Member
Appearances: Mr. Mark Schnurr, appellant Mr. Jeff Gerber, witness for the appellant Mr. Fred Grein, witness for the appellant Mr. Geoff Spurr, counsel for the respondent Mr. Frank Fortuna, witness for the respondent Mr. Ryan Vantil, witness for the respondent
DECISION OF THE TRIBUNAL
The appeal was heard in Guelph, Ontario, on Friday, November 23, 2012. Mark Schnurr appealed to the Agriculture, Food and Rural Affairs Tribunal (the “Tribunal”) from the decision of the Chicken Farmers of Ontario (the “CFO”) to deny his request to fix and allot basic quote to another premises separate from his existing registered premises.
Background
On July 11, 2012, a hearing was held before the Chicken Farmers of Ontario Board of Directors (the “Board”) for the purpose of reconsidering a decision dated March 29, 2012, in which the Board denied the request by Mr. Schnurr that the Board fix and allot basic quota of 6,500 units in respect of premises owned by Mr. Schnurr and his wife, Tammy, on highway No. 9 approximately 2.65 km from their existing registered premises. The specific request was for relief from CFO Board Quota Policy No. 170-2005 Section 6.04 now Quota Policy No. 183-2012 Section 6.04. In a decision dated August 14, 2012, the Board denied the request. Mark Schnurr appealed to the Tribunal from that decision and seeks an exemption from the Quota Policy.
The Parties to the Appeal
Mark Schnurr, appellant, and the CFO, respondent appeared as parties to the appeal.
The Issue to be Determined
The issue in this appeal is whether the appellant, Mark Schnurr, is entitled to an exemption from the Chicken Farmers of Ontario Quota Policy based on special circumstances. The Tribunal finds that he is not.
The Evidence
Evidence of Appellant
Mark Schnurr has been a chicken producer since 2001, and in his own words, has been involved in chicken production since he was a kid. He owns two properties about 2.5 km apart. His existing chicken barn is on one property and he lives with his family on the other farm (the “home farm”). He has 23,000 Basic Quota Units allotted to him by the Chicken Farmers of Ontario.
Mr. Schnurr would like to expand his business and build a new barn. He proposes building a new ten thousand square foot barn on his home farm, rather than expanding the existing barn on his other property. His existing barn is located next to environmentally sensitive land and expansion would cost about $60,000 more than building a new standalone barn on the home farm. A significant part of the additional cost is due to the grading that would be required to construct on this property.
In order to carry out the proposed expansion, Mr. Schnurr wants to transfer 6500 units of his existing basic quota to the new barn. The quantity was adjusted to 7200 units on appeal to reflect an 8% allocation of basic quota made to Mr. Schnurr in the interim. This request does not conform to the Chicken Farmers of Ontario (CFO) Quota Policy No. 183 – 2012 which sets out a minimum quota per premises under section 6.04:
The Board will not fix and allot quota of less than 14,000 units in respect of the premises.
Mr. Schnurr requested an exemption of the application of the Quota Policy under section 1.02:
In special circumstances, the Board may provide persons with an exemption to, or relief from the application of, all or part of this quota policy. Persons may apply at any time but must file a written request with reasons prior to the Board considering the matter.
Specifically, Mr. Schnurr requested permission to relocate 6500 units of quota to another location. The Board described this as a "request that the board fix and allot basic quota of 6500 units in respect of the premises owned by Mark Anthony Schnurr on Highway number nine approximately 2.65 km from his existing registered premises". The Board denied the request. The Board held a hearing to reconsider Mr. Schnurr's request, and confirmed its decision to deny the exemption.
In its reasons, dated August 14, 2012, the Board noted that it had considered Mr. Schnurr's submissions as well as the documentary evidence presented by CFO staff.
The Board understands the serious impact of the "Environmental Protected" zoning restrictions may have on a farmer's ability to expand his operations, but felt that such circumstance was not unique to Mr. Schnurr. The Board considered Mr. Schnurr's oral submissions that securing financing for expansion would cause them financial hardship, however no documentary evidence in this regard was submitted.
The Board was not persuaded that Mr. Schnurr had presented a compelling basis to vary the 14,000 unit requirement. The Board was also concerned that granting the exemption in this case could make it challenging to enforce the 14,000 units requirement against other farmers, in other circumstances.
Mr. Schnurr testified before the Tribunal, and presented calculations showing that to build a larger barn on the home farm and to purchase additional quota to reach 14,000 units would add a debt load that would not enable him to earn sufficient living to support his family. His projected net income would go from the current $65,000 per year to $14,600 per year. These financial details were not presented at the Board hearing. He also testified that he wished to have fewer kilograms of birds per square foot in order to increase his gross margin per kilogram. Fred Grein of Maple Leaf Foods, Mr. Schnurr's processor, testified that as a processor they supported Mr. Schnurr's plan and that there would be minimal efficiency impact.
Evidence of Respondent
Frank Fortuna, Quota Transfer Administrator, in testimony before the Tribunal, reviewed the CFO policies and gave the history of the minimum quota requirement, which had been at or near 14,000 units since the early 1990s. He described exemptions to the minimum requirement: farmers who had been grandfathered with less than 14,000 units, such as specialty producers of organic and pasture raised chicken.
Mr. Fortuna explained that the minimum quota requirement was in response to the objection of processors to small producers because it created inefficiencies. Mr. Ryan Vantil, a CFO Director, confirmed that the minimum quota was more of a processor issue and the opinion of an individual processor did not carry any weight; processors as a group carry weight.
In its decision, the "Board was also concerned that granting the exemption in this case could make it challenging to enforce the 14,000 units requirement against other farmers, and other circumstances. " The CFO's 2011 Performance Report (page 32) listed 108 producers or 11% of total producers with a farm size of 1 to 14,000 units. Mr. Spurr, counsel for CFO, indicated that in 2012, fewer producers had less than the minimum quota, but no evidence was provided.
At the Board hearing, Mr. Schnurr proposed that both his properties be considered as one premises for the purposes of quota. Mr. Vantil, who attended the hearing and gave evidence before the Tribunal, confirmed that the Board did consider whether Mr. Schnurr's two properties could be considered as one. The Board declined to do so because it was clear from the material that there were two separate premises and the properties were too far apart.
Mr. Vantil described his own personal experience of having two properties approximately 2.5 km apart and wanting to expand and build a new barn. He would have liked to build a smaller size but he knew the minimum requirements. He built a second barn and transferred 15,000 units of quota from an existing registered property, in compliance with the Quota Policy.
Findings and Analysis
In his appeal, Mr. Schnurr asked the Tribunal to "reverse the decision of CFO and rule that both our properties should be treated as a single premise". Counsel for CFO argued, though not strenuously, that the appeal was improperly formulated. The Notice of Hearing set out the appeal as an appeal from the "decision denying his request to fix and allot basic quota to another premises separate from his existing registered premises".
On appeal, the Tribunal may substitute its own decision for that of the Board: Ministry of Agriculture, Food and Rural Affairs Act, section 16 (11). The Board did consider whether the two properties could be treated as one; likewise the Tribunal might consider such a remedy, notwithstanding the apparent change in the formulation of the issue being appealed.
It was certainly open to the Board to consider both premises as one. The definitions of "premises" and "registered premises" in the CFO Words and Meanings Regulation No. 2383-2012 are very generic:
"premises" means the land and buildings appurtenant thereto
"registered premises" means the land and buildings appurtenant thereto in respect of which the Board has fixed and allotted quota
Section 3.14 of the Quota Policy requires "receipt of a copy of the registered deed of the premises to which the quota is to be allotted showing the transferee to be the beneficial owner thereof". The CFO argued that there must be one deed per registered premises in the name of the producer. In the case of Mr. Schnurr, the home farm is jointly registered to him and his wife, while the existing registered premises is in his name alone.
Those definitions are sufficiently broad to allow the Board to consider both properties as one "registered premises". The requirement for a deed does not specify that the transferee be the sole owner, or a named owner, only a "beneficial owner".
The Board, in its decision noted a concern that granting an exemption in these circumstances would make it challenging to enforce the 14,000 units requirement against other farmers in other circumstances. In 2011, 108 producers (11%) had 14,000 units of quota or less. The report does not indicate how many producers are below 14,000 units. This may be a significant enough percentage of producers that the floodgates argument is somewhat disingenuous on the part of the CFO. However, from the evidence, it appears that the smaller producers were historical rather than on a moving forward basis. As the Tribunal has decided to uphold the Board's decision for other reasons, it will not address the floodgates argument.
An exemption may be granted under "special circumstances". In Mr. Vantil's opinion, to qualify for an exemption, the "special circumstances" have to be "extraordinary ", for example a barn fire. The Board decision and Mr. Spurr referred to "unique" circumstances.
The Tribunal does not find that the circumstances must be unique in order to qualify for an exemption. In fact, the example given by Mr. Vantil of a barn fire is surely not unique. In the Tribunal's opinion, special circumstances must be something outside of the producer's control such as a barn fire, death, or catastrophic illness, which are not necessarily unique circumstances.
In this case, Mr. Schnurr's plan to expand his operation in a more limited way was due to financial considerations. Even though the quality of land adjacent to environmentally protected areas and the particular grade of the property are outside the control of a producer, it is the decision to expand that posed the problem, not the quality of the land per se. Mr. Schnurr's expansion plan makes sense in his own personal circumstances. However, as the Board decided, it is not sufficient to entitle him to an exemption.
CFO referred the Tribunal to Bendzsel v. Sytsma, CanLII 22826 (ON SC), a judicial review from a decision of the Farm Products Appeal Tribunal (predecessor to the current Tribunal). This was also a case regarding quota and the Chicken Producers Marketing Board (predecessor to the CFO). The Court quoted the decision of the Tribunal:
Much of the problem comes from the fact that the appellants constructed a barn which under the local boards' policies could not be filled with birds in the manner the appellants wanted to… In a regulated system, producers cannot make production decisions and expect the local board to distort the system in order to accommodate those decisions.
Mr. Schnurr is likewise asking the CFO to adjust the Quota Policy to suit his particular financial circumstances. The Tribunal agrees with the Board that this does not amount to special circumstances which would entitle Mr. Schnurr to an exemption.
Order of the Tribunal
The Tribunal upholds the decision of the Board to deny the request for an exemption. The appeal is dismissed.
Dated at Ottawa, Ontario this 21st day of December, 2012.