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: AFRAAT@ontario.ca
Guelph (Ontario) N1G 4Y2 Tél.: (519) 826-3433, Téléc.: (519) 826-4232 Email: AFRAAT@ontario.ca
AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL
APPEAL:
Lopes v Ontario Flue Cured Tobacco Growers’ Marketing Board
Lopes v OFCTGMB 2014ONAFRAAT15
STATUTE:
Ministry of Agriculture, Food and Rural Affairs Act
HEARING:
May 22, 2014
May 29, 2014
2014-15
NEUTRAL CITATION:
2014ONAFRAAT15
Lopes v Ontario Flue Cured Tobacco Growers’ Marketing Board
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 Armindo Lopes of Harley, Ontario from the decision of the The Ontario Flue-Cured Tobacco Growers’ Marketing Board denying his licence to produce.
Before: Paula Lombardi, Vice-Chair; Richard Smelski, Member; Tim Mousseau, Member
Appearances:
Armindo Lopes, Appellant/Witness
Alastair McNish, Co-counsel for the Appellant
Daniel Chitiz, Co-counsel for the Appellant
Harry Vergeer, for the Respondent, Ontario Flue-Cured Tobacco Growers’ Marketing Board\Witness
Geoffrey Spurr, Counsel for the Respondent
Cam Eberlin, Witness for the Respondent
Ryan Eagles, Witness for the Respondent
Eric Gravel, Witness for the Respondent
REASONS FOR DECISION
This appeal was heard by the Agriculture, Food and Rural Affairs Appeal Tribunal ( “Tribunal”) on May 22, 2014, in the Tribunal Boardroom, Guelph, Ontario. The appellant, Armindo Lopes (“Mr. Lopes”), appealed the decision of The Ontario Flue-Cured Tobacco Growers’ Marketing Board ( “Tobacco Board”) denying his 2014 application for a licence to produce tobacco.
Preliminary Matters
At the request of counsel for the Appellant the Tribunal issue an order excluding witnesses from the hearing until their evidence was tendered with the exception of Mr. Vergeer, advisor for the Board and Mr. Lopes, the Appellant.
The parties consented to the filing of the letter dated May 21, 2014 from Norfolk Leaf Company (“Norfolk Leaf”) Limited with the Tribunal. The parties also agreed that representatives from the Ministry of Finance could remain in the hearing room along with two Ministry inspectors who were allowed to observe the hearing after the Appellant had completed giving his testimony.
Background Information
Prior to 2012 the Tobacco Board had exclusive responsibility for regulating the production of flue-cured tobacco (“tobacco”) in Ontario. Following a transition period, on October 1, 2012 the Tobacco Board’s oversight and regulation of flue-cured tobacco was assumed by the Ministry of Finance (“Ministry”) pursuant to the provisions of the Tobacco Tax Act (“Act”). The Act provides that Ministry inspectors are authorized to examine any land on which tobacco is produced and may inspect any inventory of raw leaf, partially or fully processed tobacco. These inspectors also have the authority to seize the tobacco if the person is not in compliance with the Act.
As part of the transition of oversight to the Ministry, the Tobacco Board’s General Regulations (“General Regulations”) were revised on October 1, 2012 for the 2013-2014 year. The revisions to the General Regulations included, among other things, a requirement to affix a sticker provided by the licensee’s buying company to each bale of tobacco immediately as tobacco is baled.
Section 6 of the General Regulations require a licence holder to:
(d) Affix a sticker, provided by the licensee’s buying company, to each bale of tobacco immediately as the tobacco is baled. The following information is to be recorded immediately on each sticker: local board grower, identification number, kiln number, unique bale number;
(e) Keep a record book, in a form acceptable to the local board in which the information from each bale sticker must be accurately recorded. The book must be available for board inspectors upon request;
(g) Ensure that if bales of tobacco are taken apart and re-worked, the unique bale number(s) that are torn apart are noted and the unique bale number(s) of the replacement sticker(s) are also recorded;
Mr. Lopes is a second generation tobacco farmer whose family has been involved in the tobacco industry since the 1960s. Mr. Lopes was granted a licence by the Tobacco Board to grow tobacco for the 2013 crop year.
On May 15, 2013 the Tobacco Board circulated Acreage Confirmation Forms and Field Sketch Sheets (“Acreage Confirmation Forms”) to tobacco producers. Mr. Lopes completed these forms and submitted them to the Tobacco Board on May 24, 2013. On the Acreage Confirmation Forms, Mr. Lopes identified the lands; including lands both owned and leased, upon which he would be growing tobacco for the 2013 crop year. These lands included the farms he owns at 273 Concession 8 Road identified as the home farm, and three rented properties located at 331 Brant Road 25, 243 Concession 6 Road, and 101 Concession 6 Road. The Acreage Confirmation Forms also included identification of the kiln locations at the Appellant’s home farm and 101 Concession 6 Road. The only storage facility location identified on the Acreage Confirmation Forms was the home farm.
On February 28, 2014 the Tobacco Board held a hearing to determine whether Mr. Lopes, a producer of tobacco, contravened the Tobacco Board’s General Regulations 2013 – 2014 by failing to attach a sticker, provided by Mr. Lopes’ buying company Norfolk Leaf, to each bale of tobacco immediately as the tobacco is baled. The Board concluded that Mr. Lopes had contravened the Tobacco Board regulations and proceeded to seize all baled tobacco that was not stickered and, in addition, refused to issue a license to Mr. Lopes for the 2014 tobacco crop year.
The decision of the Tobacco Board noted that Mr. Lopes advised that the bales without stickers had been set aside in bale form in September with the intention of reworking them at a later date, since they contained dark leaves, stones and other debris. Mr. Lopes was of the understanding that once a bale was stickered it had to be recorded in the inventory book and that a producer only stickered a bale when it was ready for sale. The Tobacco Board concluded that the regulations requiring that bales be stickered are clear and precise and because of this Mr. Lopes contravened the regulatory requirements.
The Issues
The issues to be determined on this appeal are:
Did Armindo Lopes violate General Regulations 2013 – 2014 by failing to affix a sticker to the baled tobacco?
Is the penalty imposed by the Tobacco Board being the seizure and sale of the bales of tobacco that were not stickered and denying the issuance of a licence for the 2014 tobacco crop year reasonable in the circumstances?
Should Mr. Lopes be granted a licence to grow tobacco for the 2014 crop year?
The Evidence
The Appellant, Mr. Armindo Lopes
Mr. Lopes testified that he lives at the home farm at 273 Concession 8 Road in Burford, Ontario and has been tobacco farming for approximately forty (40) years. Mr. Lopes is married to Janet Lopes and has two children; a son and a daughter. Both his son and son-in-law are involved in the tobacco growing operation. Ms. Janet Lopes, his wife, oversees the tobacco grading barn operation and will help out wherever and whenever needed.
Mr. Lopes farms approximately 240 acres of land for tobacco crop and employs twenty-five (25) individuals as part of his tobacco growing operation.
Mr. Lopes testified that prior to the events of 2013 he has never had any issues or problems with the Tobacco Board nor has he ever been charged with a regulatory offence by the Tobacco Board or any other regulatory agency.
Norfolk Leaf contracted with Mr. Lopes to purchase his tobacco for the 2013 crop year (“Norfolk Contract”). The Norfolk Contract was for 589,225 pounds of tobacco (“Contracted Pounds”) and also gave Norfolk Leaf the right to purchase up to 100% of tobacco grown by Mr. Lopes exceeding the Contracted Pounds. The letter dated May 21, 2014 from Norfolk Leaf outlined the Norfolk Contract and confirmed that Norfolk Leaf intended to purchase all of the tobacco grown by Mr. Lopes prior to October 1, 2013. Mr. Lopes confirmed that in 2013 he had not sold tobacco to anyone other than Norfolk Leaf and has never sold tobacco to anyone other than a buyer licensed by the Tobacco Board.
Mr. Lopes testified that in the 2013 growing season he expanded his operations to include additional rented acreage. Mr. Lopes submitted the Acreage Confirmation Forms to the Tobacco Board indicating that he would, in addition to his own acreage, be growing tobacco on leased acreage. The Acreage Confirmation Forms completed by Mr. Lopes also identified a total of 32 kilns on the home farm and 14 kilns at the rented property located at 101 Concession Road 6.
Mr. Lopes provided detailed testimony about the tobacco planting and harvesting process. The planting process begins in mid- to late May and lasts for approximately two (2) weeks. After planting, cultivation begins in early June leading to irrigation from late June to early July. In mid-July they break the flower off to help the plant to mature and at this time decide how many leaves will remain on the plant. In early August they begin to harvest the lower leaves of the tobacco plants. Mr. Lopes uses an automatic harvester and picks leaves in four passes. The leaves are harvested from the bottom of the tobacco plant moving upwards to the tip.
When the leaves are harvested they are transported using a converted school bus to the kiln yard where the employees transfer the leaves into a bin that fits inside the kiln for drying. The leaves are then left in the kiln for drying for six to eight days. Once the leaves are dry the bins are removed from the kiln and transported to the barn where the grading process begins to separate the bright leaves from the dark leaves. Grading tables are situated in the home barn where the employees sort the dark leaves from the bright. The dark leaves are thrown on the floor behind the sorters as are the suckers, stones, nuts, bolts and any other foreign matter. The bright leaves remain on a conveyor that leads to an auto-baler which then automatically compacts the leaves into a square bale. The better leaves are the brighter leaves that are baled first and represent the bulk of what is in the kiln. Mr. Lopes testified that after baling the bright leaves they were stickered and classified. In August 2013 the dark leaves would then be placed back on the conveyor and sorted to remove any suckers and foreign matter then baled and stickered. The foreign material was logged, weighed and subsequently discarded.
Mr. Lopes testified that the tobacco harvest in September 2013 was a “mad house” and describe it as “mayhem” because of the weather conditions coupled with the amount of tobacco that needed harvesting. During this time Mr. Lopes indicated that he was working 10 – 12 hours per day; up at 5 a.m. working until 11 p.m.
The evidence showed that Mr. Lopes had increased the amount of tobacco being grown considerably between 2010 to 2013. In 2010 Mr. Lopes grew tobacco on 146.75 acres and contracted 323,000 pounds while in 2013 he grew tobacco on 240.5 acres and contracted for 589,225 pounds. In both 2010 and 2013 Mr. Lopes sold more pounds of tobacco than what he had contracted.
According to Mr. Lopes, the first threat of frost occurred on September 5th with frost warnings throughout the week. Frost can results in a considerable amount of harm to the tobacco plant and puts the crop at risk. In September 2013 Mr. Lopes and his staff were picking approximately 6 kilns a day and because of this, changed the leaf separation process. Instead of placing the dark leaves on the conveyer for resorting to remove foreign material they were instead baled to be graded at a later date. Mr. Lopes baled the dark leaves immediately in an effort to store the tobacco without the risk of it going dry.
Mr. Lopes was harvesting so much tobacco in September 2013, he generated three loads per week notwithstanding that Norfolk Leaf was only able to pick up one load per week. Mr. Lopes used the barn on the home farm and the rented property at 101 Concession 6 for storage. However, when these locations became full he directed his employees to store the dark bales that were going to be resorted at 243 Concession Road 6. Although Mr. Lopes did testify that he stored 78 bales at this location he indicated that it was not his preference as the building is not designed for storing tobacco, it is damp and does not have an alarm.
Mr. Lopes testified that while he was aware of the new General Regulation requirement that bales be stickered prior to selling he had not stickered the dark leaf bales because they had to be re-graded and were not ready for sale. Mr. Lopes indicated that at no time did a Ministry inspector discuss the new regulatory requirements with him.
Mr. Lopes met Inspector Eagles for the first time on August 8, 2013 when Inspector Eagles attended at the home farm to conduct a tobacco general inspection. Mr. Eagles introduced himself and they had a very brief meeting. During this meeting, Mr. Lopes advised Mr. Eagles that all of his tobacco is sold to Norfolk Leaf. The new regulatory requirements were not discussed at this meeting.
The second inspection of Mr. Lopes’ tobacco operation occurred on August 26, 2013. Inspector Eagles reviewed the tobacco binder with Ms. Lopes. During this inspection, Inspector Eagles observed a bale of tobacco that did not have the required sticker affixed to it. Inspector Eagles accepted the explanation that the bale would be stickered later that day. Mr. Lopes indicated that this inspection was fine, they did a bale count and compared it to the log book and confirmed that everything matched. According to Mr. Lopes it was a simple, quick, cordial visit.
On October 9, 2013, Mr. Lopes observed Inspector Eagles parked in the ditch just east of the home farm. The home farm is situated immediately across the street from the rented property at 278 Concession Road 6. Mr. Lopes indicated that when he met Inspector Eagles he was yelling and accusing him of running an illegal marijuana growing operation. Mr. Lopes testified that he had advised Inspector Eagles that it was a licensed facility.
Inspector Eagles called the Ontario Provincial Police ("OPP") who attended at the property and subsequently advised the Ministry Inspectors that it was a legal marijuana growing operation. Inspector Eagles then went to the rented property located at 101 to conduct a bale count. Mr. Lopes testified that when Inspector Eagles returned to the home farm from the 101 property he started yelling at Mr. Lopes and accusing him of selling tobacco to the First Nations. Mr. Lopes advised that all tobacco he produces is sold to Norfolk Leaf and tried to explain that the bales were not stickered as they were full of suckers and foreign matter and needed to be resorted. Mr. Lopes testified that Inspector Eagles was intimidating him and made several accusations when reviewing the books.
Mr. Lopes testified that he had temporarily stored tobacco on the rented property located at 278 but had requested his employees bring it back to the home farm. The employees had not moved the tobacco at the time of the inspection and Inspector Eagles found an additional 32 bales of unlabelled tobacco. The bales of tobacco that were not stickered were neither concealed nor hidden from view.
Mr. Lopes testified that when he met with Inspector Eagles in August he advised him that if something were to happen he would store tobacco at the rented properties. After Inspector Eagles had left the property, Mr. Lopes called Inspector Eagles to advise that there were also 9 bales without stickers that Inspector Eagles had not seen because they were located in the bus. Mr. Lopes was advised not to move any of his tobacco including both the labelled and unlabelled bales.
When the inspectors returned to Mr. Lopes property with a tractor trailer, to remove the seized bales of tobacco, Mr. Lopes provided skids and assisted in loading all of the seized tobacco. Mr. Lopes was present when the seized tobacco was sold and indicated that all the proceeds from the sale went to the Tobacco Board.
After the seizure of the bales without stickers in October 2013, Mr. Lopes continued to sell tobacco to Norfolk Leaf in accordance with the Norfolk Contract into early December 2013.
On cross-examination Mr. Lopes admitted that in the spring of 2013, Norfolk Leaf gave him a roll of stickers and an Instruction and Record Binder (“Instruction Binder”) at the start of the tobacco growing season. The Instruction Binder sets out the procedure for pre-scheduling and delivery of tobacco and states:
- Grower will be provided stickers (labels) by NLC (as shown on the “Labels Instructions” information sheet) which are to be affixed to each bale of tobacco immediately when the tobacco is baled. …
Mr. Lopes agreed that baled tobacco had to be labelled immediately but if it was not ready for sale then, in his opinion, a label did not have to be affixed to the bale. Mr. Lopes advised the Tribunal that he had not listed the rented properties at 278 or 101 as storage locations on the Acreage Confirmation Forms because, at that time he completed the form, he had no idea that he would require additional storage. Although Mr. Lopes testified that he did verbally advise Inspector Eagles of the other storage locations. Mr. Lopes acknowledged that the grading varied on the seized bales and explained that it was because they contained the harvest from a 4 ½ acre plot of a variety of tobacco that he was testing.
Inspector Cam Eberlin
Inspector Eberlin is the Manager of Operations with raw leaf tobacco and held that position for the 2013 tobacco crop year. Inspector Eberlin testified that there are 243 growers that are licensed. The Ministry divided the growing area into east – west – north – south and each inspector was assigned a portion of the territory and then the acreage of each farm was taken into consideration to ensure that each inspector had approximately the same amount of responsibilities.
Inspector Eberlin testified that at the beginning of the 2013 season the focus was on education and ensuring that the growers understood the change in the regulatory requirements in terms of baling and labelling. Inspector Eberlin indicated that there was a high compliance level amongst the various growers with the requirement that labels be affixed immediately to the bales. The Ministry placed a heavy emphasis on the labelling of the bales as it represented a key component of the inventory program. Inspector Eberlin testified that in the event a bale was reworked it would be required to be re-labelled in accordance with the General Regulation. According to Inspector Eberlin, if the tobacco was going to be sold it had to be stickered and put into the log book the only exception would be for waste tobacco that was going to be destroyed.
During cross-examination, Inspector Eberlin acknowledged at the start of the 2013 growing season the inspectors were instructed to be more lenient and tolerable in terms of getting compliance with the new regulatory requirements which would explain why Inspector Eagles did not seize the unlabelled bale of tobacco discovered at Mr. Lopes’ farm on August 26, 2013. Inspector Eberlin testified that weekly staff meetings and training sessions were held with the inspectors to reinforce education as a key component of the inspection process.
Inspector Ryan William Eagles
Inspector Eagles testified that he was the Ministry of Finance Inspector assigned to Mr. Lopes’ tobacco growing operation for the 2013 crop year. August 8, 2013 was the first time that Inspector Eagles had attended at the Lopes farm. The purpose of that attendance was to introduce himself, review the farm, its location and processes and get to know the farmer as well as responding to any questions from the grower and reviewing the rules and regulations.
Inspector Eagles testified that during the August 8, 2013 inspection of Mr. Lopes’ farm he left a copy of the General Regulations in his vehicle and had no recollection of reviewing the regulatory requirements with either Mr. Lopes or his wife, Janet Lopes.
Inspector Eagles returned to Mr. Lopes farm on August 26, 2013 as part of the second round of inspections being conducted of the thirty tobacco farms he was assigned. Inspector Eagles noted that Mr. Lopes had informed him that the 273 location is where all tobacco is stored and baled but that he has another location that has kilns which he also uses for storage.
Inspector Eagles recalled having a discussion during the August 26, 2013 inspection with Ms. Janet Lopes, about an unlabelled bale of tobacco but was unable to recall what exactly was discussed. Inspector Eagles then recalled having a discussion with Ms. Lopes about the bale that was not stickered and trusted that she was being forthright in advising that the sticker would be affixed later that evening. Inspector Eagles had no recollection of a discussion with Mr. Lopes about storing bales of tobacco at the 278 property. Inspector Eagles testified that the first time he learnt that 278 was being used for storage was during the third inspection of Mr. Lopes’ operation on October 9, 2013.
Inspector Eagles testified that on October 9, 2013 he arrived at the 273 Concession 8 Road location and found 143 bales in the tobacco barn one being a rejected bale. During the inspection of the kilns Inspector Eagles found an additional four (4) bales without stickers. Inspector Eagles contacted Inspector Eberlin to advise him of the tobacco bales without stickers and then contacted Inspector Gravel to ask for assistance with the remainder of the inspection.
During the October inspection, Inspector Eagles noticed marijuana being grown on the property and contacted the Ontario Provincial Police (“OPP”). The OPP officers confirmed to the inspectors in the presence of Mr. Lopes that it was a licensed marijuana growing operation. Inspector Eagles advised Mr. Lopes that his tobacco was being placed under detention. Inspector Eagles also testified that he was concerned with the information contained on the large bale charts that had been retrieved from the house.
Inspector Gravels found thirty-two (32) bales of unlabelled tobacco in the barn at the 278 location. Inspector Eagles testified that the 278 Concession 8 Road location was not disclosed by Mr. Lopes as a storage location. Mr. Lopes advised Inspector Eagles that he was not aware of any other locations where his tobacco was being stored. However, while doing his paperwork following the inspection, Inspector Eagles received a telephone call from Mr. Lopes stating that his son had neglected to advise him that 9 additional bales without stickers were being stored in the bus.
Inspector Eagles testified that when he asked Mr. Lopes why the bales did not have the stickers affixed, Mr. Lopes indicated that it was because he was going to rework them at a later date.
Inspector Eagles confirmed that this was the first season that the Ministry of Finance was overseeing raw leaf tobacco and his first introduction to the General Regulations. Inspector Eagles understood that he had a responsibility to educate growers on the application of the new regulations and wanted the tobacco growers to be comfortable and aware of the rules and regulations. and was not aware of when exactly the labelling requirement had come into effect.
During cross-examination Inspector Eagles acknowledged that certain communications were not captured in his inspection report dated August 26, 2013. Specifically Inspector Eagles had no recollection of Mr. Lopes advising him in August 2013 that he may have to store tobacco at other locations.
Inspector Eagles recalled that when he arrived at the property on October 9th Mr. Lopes was not present and that before Mr. Lopes got there he had contacted the OPP about the discovery of the marijuana. Inspector Eagles denied advising Mr. Lopes that he was in trouble because of the marijuana and did not request an explanation of the marijuana from Mr. Lopes. Inspector Eagles explained that he contacted the OPP for safety reasons and denied yelling at Mr. Lopes.
During cross examination Inspector Eagles acknowledged that Mr. Lopes never denied that the bales were not stickered. Inspector Eagles testified that during the October 2013 inspection Mr. Lopes explanation for the unlabelled bales was of no concern.
Inspector Eagle confirmed during cross-examination that in his inspection report of October 9, 2013 he had failed to include the following explanation given by Mr. Lopes “Armando said he didn’t have space at the time to sort the tobacco so he baled them and stored the in several of his kilns until he had time to rework them. He was informed that all bales need to be tagged immediately”. This information was set out in Mr. Gravel’s handwritten notes from the inspection, which were in evidence.
During his testimony Inspector Eagles denied accusing Mr. Lopes of selling tobacco to the First Nations, and that Mr. Lopes wanted to sell tobacco illegally. Inspector Eagles admitted that he was not aware that Norfolk Leaf had contracted to purchase all of the tobacco grown by Mr. Lopes and had no recollection of reviewing the Norfolk Contract. Inspector Eagles also admitted that Mr. Lopes had contacted him after he had left the property to advise of 9 bales of tobacco that did not have labels affixed to them in the school bus.
On October 15, 2013 Inspector Eagles returned to Mr. Lopes’ property with inspectors Thornbury, Halls and Gravel to transport the seized tobacco bales. Inspector Eagles confirmed that Mr. Lopes was cooperative and assisted with the loading of the seized bales of tobacco onto the Ministry’s transport truck.
Inspector Gravel
Inspector Gravel testified that the first time he attended at the Lopes farm was on October 9, 2013. Inspector Gravel confirmed his hand written notes from the day of the inspection indicating that Inspector Eagles had advised Mr. Lopes that all bales need to be tagged immediately and that Mr. Lopes explained that he did not have any space to sort the tobacco so he baled and stored them until he could rework them.
Mr. Vergeer, Vice-Chair of the Tobacco Board
Mr. Vergeer is a former tobacco producer and was a committee person with the Tobacco Board for numerous years under the quota system as well as a director. He no longer produces tobacco due to participation in the Tobacco Transition Program.
Prior to the changes being implemented and oversight of tobacco growing being shifted to the Ministry the Tobacco Board was elected. The 2009 quota system was eliminated and replaced by direct contracting and as a result representatives of the Tobacco Board were appointed by the Commission. The Tobacco Board has changed considerably since the prior quota system and is currently administrative in nature, and oversees the licencing of all producers and legitimate buyers approved by the Canada Revenue Agency. The Tobacco Board is conscious of maintaining integrity of production, including the monitoring and mapping acreage of tobacco crops.
Mr. Vergeer explained that the General Regulation changed in 2013 to implement a sticker system that represented an evolution in the way the Tobacco Board monitors and tracks bales. The Tobacco Board is trying to better monitor the flow of processed tobacco in terms of where it is, how it is being moved with the goal of implementing components of integrity into the system.
Mr. Vergeer testified that 2013 was the very first year the General Regulation included a requirement that stickers be affixed to bales immediately. According to Mr. Vergeer Norfolk Leaf and Alliance One are the two major buyers in the tobacco industry. Alliance One for years, since 2010, had implemented a system of requiring their growers to label bales with the required information in an effort to track the bales of tobacco. This labelling system was adopted by the Tobacco Board when it updated is regulation for the 2013 growing year.
Mr. Vergeer provided a detailed overview of the system used to grade tobacco. In making the decision as to whether or not Mr. Lopes contravened the General Regulations, the Tobacco Board considered the grading information of the seized tobacco and concluded that 25 of 75 bales seized exhibited grades of lower leaf pullings. Mr. Vergeer indicated that he was not present when the tobacco bales seized by Mr. Lopes was graded and on cross examination confirmed that the Inspectors did not go through the bales.
Mr. Vergeer testified that at Mr. Lopes’ Tobacco Board hearing evidence was provided by Inspectors Gravel and Eagles and that the Tobacco Board had a copy of Mr. Gravel’s notes. Mr. Vergeer could not recall the extent to which the Tobacco Board discussed the differences between Inspectors Eagles’ and Gravel’s recollection of the events that took place during the inspection of the Lopes property on October 9, 2013.
During cross-examination Mr. Vergeer admitted that Inspector Gravel did not file a report with the Tobacco Board and confirmed that it is common practice for inspectors to assist growers in understanding the regulations. Mr. Vergeer also confirmed that Inspector Eagles’ report neglected to indicate that Mr. Lopes provided an explanation for the bales that did not have stickers. The Tobacco Board made its decision based on the evidence before it and the verbal submissions from the people involved. According to Mr. Vergeer the Inspectors read their notes at the Tobacco Board hearing.
Analysis and Discussion
The Appellant filed an appeal with the Tribunal on April 25, 2014 following a decision by the Tobacco Board on March 11, 2014 that the Appellant, Mr. Lopes, had contravened the General Regulations. Because of this contravention the Tobacco Board refused to issue a licence to Mr. Lopes to produce tobacco for the 2014 tobacco crop year.
Section 16(11)1 of the Ministry of Agriculture, Food and Rural Affairs Act gives the Tribunal the jurisdiction to direct the Tobacco Bard to take such action as the Tobacco Board is authorized to take under the Farm Products Marketing Act and as considered proper by the Tribunal. The Tribunal has the jurisdiction to substitute its opinion for that of the Tobacco Board.
The Appellant, Mr. Lopes, has a forty year history of growing tobacco and an unblemished record. There was no evidence provided by the Tobacco Board showing that Mr. Lopes had ever engaged in the illegal sale of tobacco, been accused of regulatory violations, or even given a reprimand over the past forty years.
The General Regulations came into effect in late 2012 for the 2013 growing year and this was the first time the requirement for affixing stickers immediately to baled tobacco was implemented. The Inspectors acknowledged in their testimony that education was an important component of their inspections, particularly early in the growing season. However, there is no clear evidence that Inspector Eagles reviewed or discussed the change in the regulatory requirements with Mr. Lopes. Inspector Eagles recalled leaving the regulations in his vehicle during his first inspection in early August 2013.
Mr. Lopes interpreted the regulations as meaning that when the bale was ready for sale a sticker had to be affixed to the bale. This however by no means excuses Mr. Lopes as it is his obligation as a tobacco grower to be aware of any changes in the regulatory requirements. This interpretation was also given despite the Appellant acknowledging that he had been provided with stickers and an Instruction Binder from Norfolk Leaf indicating that stickers had to be affixed immediately to baled tobacco. The Appellant’s interpretation also ignores the application of section 6(1)(g) of the General Regulations requiring that if bales of tobacco are taken apart and re-worked a replacement sticker be affixed. A reasonable interpretation of the General Regulations taking into consideration section 6(1)(g) is that a sticker must be affixed immediately after the tobacco is baled regardless of its quality.
It is unclear from the evidence whether or not Inspector Eagles discussed and/or educated Mr. Lopes on the new regulatory requirements. During the inspection on August 26, 2013 when Mr. Eagles discovered baled tobacco without a sticker at the Lopes property he accepted Ms. Janet Lopes explanation that Mr. Lopes was going to deal with it at the end of the night. This incident could have provided the Inspector with an opportunity to outline the regulatory requirements and educate the Lopes on the requirement that a sticker be affixed to the bale immediately regardless of grade and whether or not it was going to be re-worked at a later date. Perhaps if this bale of tobacco had been seized or Mr. Lopes severely reprimanded for failing to comply with the regulation or even a stern warning given, the situation on October 9th could have been avoided entirely.
The relationship between Mr. Lopes and Inspector Eagles is unclear. Mr. Lopes testified that during the October 9, 2013 inspection Inspector Eagles yelled, made accusations and intimidated him. While Inspector Eagles testified that he had no recollection of yelling or making any accusatory remarks to Mr. Lopes. Inspector Eagles did however leave, whether intentionally or unintentionally, key details from his inspection report including that Mr. Lopes provided an explanation as to why he had not stickered the bales.
- Did Armindo Lopes violate General Regulations 2013 – 2014 by failing to affix a sticker to the baled tobacco?
Upon consideration of the evidence and submissions of the parties the Tribunal concludes that the Appellant, Mr. Lopes, violated the General Regulations by failing to affix a sticker immediately as tobacco is baled as required by section 6(1)(d).
The evidence clearly shows that Mr. Lopes was baling tobacco faster than Norfolk Leaf was able to pick up, according to Mr. Lope it was “mayhem”. The weather conditions coupled with long hours and pressure to harvest the tobacco as quickly as possible to avoid any frost damage led Mr. Lopes to make an “executive decision” that he would bale some tobacco that in his opinion was of lesser quality, to re-work at a later date, and then affix the label when the bale was ready for sale.
For the reasons outlined above, this is an incorrect interpretation of the General Regulation, specifically section 6(1)(d) of the new regulatory regime requiring that as soon as tobacco is baled, regardless of quality, a sticker be affixed immediately.
- Is the penalty imposed by the Tobacco Board being the seizure and sale of the bales of tobacco that were not stickered and denying the issuance of a licence for the 2014 tobacco crop year reasonable in the circumstances?
The new labelling requirements came into effect in late 2012 for the 2013 tobacco growing season. Despite Mr. Lopes having forty years of tobacco farming experience, the Tribunal questions whether Mr Lopes could be familiar with the application and interpretation of this regulatory requirement as it was newly implemented for the 2013 tobacco growing season. While it is questionable whether or not the Inspectors explained the labelling requirements to Mr. Lopes, Norfolk Leaf did provide an Instruction Binder outlining the requirement. It is also Mr. Lopes obligation as a tobacco grower to become familiar with any changes in the regulatory requirements and to ask questions of the Tobacco Board if he is unsure of how to interpret a new requirement.
The unlabelled tobacco was seized by the Tobacco Board and disposed of with all the proceeds being retained by the Tobacco Board. Counsel for the Appellant referred the Tribunal to section 2.3(13) being the offences section of the Tobacco Tax Act for producing raw leaf tobacco without having a registration certificate as a raw leaf producer. The Tribunal was referred to this section as an example of the element of proportionality contemplated in the legislative framework when determining the appropriate fine. The maximum fine set for a person’s first conviction under the Tobacco Tax Act is $10,000, $15,000 for a second conviction, and $20,000 for a person’s third or any subsequent conviction. The tobacco seized by the Tobacco Board from Mr. Lopes was sold for approximately $50,000 all of which was retained by the Tobacco Board. According to Mr. Lopes it had an estimated value of $150,000.
The Tribunal was referred to the decision of the Ontario Court of Appeal in Stetler v. The Ontario Flue-Cured Tobacco Growers’ Marketing Board, 2009 ONCA 234, as standing for the principle that there must be some degree of proportionality between the wrongdoing and the penalty imposed.
The Tribunal agrees with the Tobacco Board that a violation of its General Regulations is serious and that the labelling requirements were implemented to monitor and track the bales of tobacco being produced. In determining the fine to be imposed for a violation of the General Regulations, the Tribunal is cognizant that the intent of the regulatory regime is that the penalty be substantial enough to act as a deterrent to others. There is however also an obligation on the Tobacco Board to take into consideration any mitigating factors when determining the appropriate penalty.
In this case, Mr. Lopes’ unblemished record is a mitigating factor. As is his cooperation with the investigation; the fact that he informed Inspector Eagles of the unlabelled bales that had not been found on the school bus; that he assisted the Inspectors in loading the seized bales; has never been charged with any type of offence relating to his tobacco farming business; and, the lost revenue resulting from the Tobacco Board’s sale of the seized bales. There is no indication that the Tobacco Board gave any consideration to these mitigating factors when determining the appropriate penalty.
The Tribunal finds that Mr. Lopes violated the General Regulations by failing to affix stickers to the baled tobacco and was appropriately penalized when the tobacco bales were seized and sold by the Tobacco Board.
The refusal to issue a licence has stripped Mr. Lopes of his livelihood for the 2014 tobacco growing season. There was no evidence that Mr. Lopes had, or has, any other means of livelihood. The Tobacco Board has a large range of possible penalties at its disposal including imposing terms and conditions on the licence such as a weekly reporting requirement or some other monitoring or oversight condition. However, the Tobacco Board choose not to consider any other penalty and in this case seemed to penalize Mr. Lopes twice for the same thing first by seizing and selling his tobacco and secondly by refusing to issue a licence. The Tribunal finds that the refusal to grant Mr. Lopes a licence for the 2014 growing season is too severe in light of the mitigating factors.
- Should Mr. Lopes be granted a licence to grow tobacco for the 2014 crop year?
Taking into consideration the mitigating factors Mr. Lopes should be granted a licence for the 2014 tobacco growing season.
Decision and Order of the Tribunal
For all of the above reasons, the Tribunal orders that Mr. Lopes appeal be granted and that he be granted a licence for the 2014 tobacco growing season.
Dated at London, Ontario, this 29th day of May, 2014.
Footnotes
- 16(11) Upon an appeal to the Tribunal under subsection (1), the Tribunal may by order direct the Commission, the local board, the marketing board or the Director, as the case may be, to take such action as it or he or she is authorized to take under the Farm Products Marketing Act or the Milk Act and as the Tribunal considers proper, and for this purpose the Tribunal may substitute its opinion for that of the Commission, the local board, the marketing board or the Director.