Howe Farms et al. v. Chicken Farmers of Ontario, 2016 ONAFRAAT 17

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: AFRAAT@ontario.ca

Guelph (Ontario) N1G 4Y2 Tél.: (519) 826-3433, Téléc.: (519) 826-4232 Courriel: AFRAAT@ontario.ca

AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL

APPEAL: Howe Farms et al. v CFO (RE) [MOTION ON JURISDICTION]

Howe Farms et al. v CFO (RE) [MOTION ON JURISDICTION] 2016ONAFRAAT17

STATUTE: Ministry of Agriculture, Food and Rural Affairs Act

HEARING: June 16, 2016

DATE OF DECISION: July 22, 2016

002Howe Farms et al.16

NEUTRAL CITATION: 2016ONAFRAAT17

MOTION ON JURISDICTION

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 Howe Farms (Ontario) Ltd., Glen Ridge Farms Ltd., Slegh Farms Ltd., Jeff and Cathy Dibble, Maple Hill Farms Zorra Ltd., Pondview Farms Ltd., and Van De Camp Farms Ltd. from the Chicken Farmers of Ontario’s (CFO) decision dated March 14, 2016 denying compensation for losses as a result of a quarantine imposed by the Canadian Food Inspection Agency for the placement of broiler chickens during quota period A-130.

AND IN THE MATTER OF: The hearing of a motion by the CFO seeking a determination that some of the relief being sought by the appellants is beyond the jurisdiction of the Tribunal.

Before: Dr. Stan Benda, Vice-Chair; Arnold Strub, Member; Sharon Weitzel, Member

Appearances by Conference Call: Geoff Spurr – Counsel for CFO Paula Boutis – Counsel for Howe Farms et al.

DECISION OF THE TRIBUNAL

Motion for Determination on Tribunal Jurisdiction

The Agriculture, Food and Rural Affairs Appeal Tribunal heard this motion by conference call on June 16, 2016.

Background

Seven chicken producers, Howe Farms et al. (the “Appellants / Producers”), filed an appeal with the Tribunal under Section 16 of the Ministry of Agriculture, Food and Rural Affairs Act (“MAFRAA”). The appeal arose from the Chicken Farmers of Ontario (“CFO”) decision dated March 14, 2016. In that decision, the CFO denied compensation to the Appellants / Producers for their losses resulting from the alternative housing of their broiler chickens necessitated by a quarantine imposed by the Canadian Food Inspection Agency during quota period A-130.

Compensation sought by the Appellants / Producers includes the following:

a) Out-of-pocket expenses incurred as a result of bird placements;

b) Lost profits as a result of bird placements;

c) Any fees or penalties levied related to under or over-marketing as a result of bird placements; and

d) Such further and other relief as the Tribunal deems just.

The Respondent, CFO, filed a preliminary motion seeking a determination that some of the relief sought by the Appellants / Producers is beyond the jurisdiction of the Tribunal.

The majority of the Tribunal agrees with CFO. Some of the relief sought by the Appellants is beyond the jurisdiction of the Tribunal.

Position of the Parties

While the Appellants’ representatives have used various terms to describe their requested remedy, including damages, compensation and relief, counsel for the Appellants stressed at the motion hearing that her clients were seeking compensation for lost profits and expenses incurred as a result of being forced to place their birds on host farms due to a CFIA imposed quarantine. Two of the appellants made other claims: Maple Hill Farms seeks relief from an over marketing levy, and the Dibbles seek compensation for under marketing.

The Appellants / Producers had to adapt to a quarantine that affected their facilities. The only option other than a complete stoppage was to move production to a leased premise. For the purposes of this preliminary motion only, the Tribunal finds that the evidence suggests that the CFO agent told the Appellants / Producers to grow their chicks on other farms under a 50/50 split in profits using a lease document provided by the CFO. Purportedly, the CFO agent also told the Appellants / Producers that the Appellants / Producers would be compensated for any losses.

Essentially, the Appellants / Producers are seeking damages or compensation specified above as: out-of-pocket expenses and lost profits; and relief from over marketing fees levies and compensation for under marketing, almost all of which is traceable to the 50/50 split in profits agreed to in the lease arrangement.

The CFO says there is no jurisdiction to grant the envisioned compensation as it is a claim for damages and, as such, the Tribunal is without jurisdiction to order it to do so.

Issue to be Decided

Does the Tribunal have jurisdiction to order compensation as envisioned and requested by the Appellants / Producers – namely compensation for lost profits and expenses arising from the quarantine? With the exception of the over marketing levy, and perhaps the compensation claim related to under marketing, the majority of the Tribunal finds that it is without jurisdiction.

Analysis

The Tribunal’s authority in this instance flows from s. 16(1) & (11) of the Ministry of Agriculture, Food and Rural Affairs Act (“MAFRAA”).

(1) Subject to subsection (4) and (5), a person who is aggrieved by any of the following orders, directions, decisions, policies or regulations made under the Farm Products Marketing Act and the Milk Act may appeal the matter to the Tribunal.

1. Any order, direction, decision or policy made by a Director

2. Any order, direction, decisions, policy or regulation made by a local board or marketing board

3. Any order, direction or decision made by the Commission that applies specifically to the aggrieved person, to a group of persons of which the aggrieved person is a member or with respect to a particular dispute or incident involving the aggrieved person.

(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.”

Upon an appeal to the Tribunal, the Tribunal steps into the shoes of the local board and can make any decision the local Board could have made. A condition precedent for the Tribunal asserting jurisdiction is that the board must properly have jurisdiction at the first instance.

The Tribunal has no inherent jurisdiction as that which is found in a superior court, namely no equitable powers. So the Tribunal is unable to temper or stretch statutory language. It can only do that which the law clearly authorizes it to do. The law does not authorize the Tribunal to order compensatory damages to parties who suffered a loss of profits due to a quarantine and the attendant necessary leasing of alternative premises. The majority of the Tribunal do not consider this an especially punctilious or hidebound interpretation.

The Appellants / Producers are seeking damages, namely lost profits and out of pocket expenses from a lease scenario necessitated by a quarantine. There is no claim arising from tort, contract or unjust enrichment.

The Appellants / Producers say the CFO has legal and equitable jurisdiction under the Infectious Poultry Disease Isolation Policy (in particular para. 2.05) and s. 12(1) of O. Reg. 402. According to the Appellants / Producers, the source of the compensation can be the CFO from its authorized license fees and service charges payable to CFO by producers.

But this is the position of the Appellants / Producers. Their claim is couched as “compensation”.

Perhaps an equitable jurisdictional argument could be fashioned about the CFO ordering parties to lease; but there is no statutory or regulatory authorization in this regulatory context dealing with the commercial fallout of a quarantine and the renting of premises.

The Appellants / Producers argue that s. 12(1) of O.Reg. 402 bestows jurisdiction on the CFO , and the CFO Infectious Poultry Disease Isolation Policy, No. 205-2014, section 2.05 recognizes that jurisdiction. The crux of that argument hangs on section 2.05 which reads as follows:

Where the application of this policy has consequences in relation to contracting or utilization requirements as provided for in the Processor Regulation, or causes an over or under marketing by a producer then the Board will provide relief from such consequences to the extent the circumstances may warrant.” [Emphasis added]

Firstly, the Tribunal understands that the policy was not engaged on these facts. Rather, the matter was initiated by the CFIA. Even if the majority of the Tribunal is wrong on this point, for producers, the policy relates to relief from the consequence of under or over production and not compensation or reimbursement of lost profits arising from exigent leasing of alternative premises or other consequential acts.

The CFO has been delegated a number of powers under the Farm Products Marketing Act, in particular s. 7(1) 18-21. None of those sections contemplate the remedy of damages sought by the Appellants. The most pertinent is Section 7(1) 20 which reads:

Authorizing a local board to use any class of license fees, service charges and other money payable to it, for the purposes of paying the expenses of the local board, carrying out and enforcing this Act and the regulations and carrying out the purposes of the plan under which the local board is established.

A plain and purposeful reading of this section does not contemplate collateral or consequential commercial damages arising from the federally imposed quarantine. Perhaps a superior court could stretch the meaning of those words to envelop the present fact situation. The majority of the Tribunal thinks it cannot.

And the purposes in s. 7(1) 20 speak to expenses of the board, costs of enforcing the Act and regulations and carrying out the purposes of the plan. Improving marketing is one of the purposes. But quarantine costs do not obviously fall within those parameters. Neither do commercial compensatory damages or claims for lost profits. The plan and regulation are not about quarantine, even remotely. The Tribunal must give statutory provisions their plain, ordinary meaning and not abuse the language.

The CFO further argues that s. 7(1) 22 of the Act was not delegated to it, thus stifling the funding of s. 7(1) 20 activities. However, upon review, the Tribunal notes that s. 7(1) 22 of the Act was indeed delegated to CFO and is captured in s. 12(2) of O. Reg. 402. Regardless, the activities outlined in s. 7(1) 20 do not capture that which the Appellants are seeking, which is money for lost profits and expenses. Section 7(1) 22 reads:

Authorizing a local board to establish a fund in connection with any plan for the payment of any money that may be required for the purposes mentioned in paragraph 20

The Appellants’ / Producers’ claims also fall outside of the Farm Products Payments Act whose thrust is buyer default. Put bluntly, although raised by counsel for CFO, this Act is irrelevant to this matter.

The case law cited by both parties while helpful, is not determinative. The environmental decisions are not about jurisdiction or the bestowing of jurisdiction. Rather, they deal with fairness. Fairness is a facet of equity which does not vest in the Tribunal although admittedly fairness is judicially grafted onto the Environmental Protection Act. More particularly, the environmental decisions cited deal with judicial tempering or softening of statutory strictures in specific circumstances, namely, where the statutory language contradicts the “polluter pays” principle. That power lies outside of the Tribunal.

The Black decision was a wholesale attack on the chicken marketing legislative scheme. The appellant there asked the Tribunal, in effect, to wipe away the entire regulatory scheme. Black sought damages for higher level matters – he didn’t like the supply management system for chicken and felt it stifling and thought, therefore, that compensation in the form of damages ought to be provided. The Tribunal in that decision declined the motion. The Tribunal declined to assert jurisdiction to award damages allegedly caused by the supply management system, but allowed the matter to proceed regarding one of the requested remedies, the small flock exemption. The request here pivots on commercial losses arising from a federally imposed quarantine. The outcome is the same, the Tribunal is without jurisdiction since the CFO is without jurisdiction.

Nonetheless, the facts in this case that can be dealt with on the basis of jurisdiction are those related to over marketing levies. The surviving claims are Maple Hill’s over marketing levy, and the Dibbles’ under marketing compensation claim. The Board has jurisdiction over relief from over and under marketing penalties. Furthermore, Counsel for CFO acknowledged that the CFO has the jurisdiction to deal with the issues of over and under marketing by a producer. In particular, CFO Counsel conceded jurisdiction regarding the over marketing levy, but asserted that there was no under marketing levy. The only ‘penalty’ regarding under marketing was stated to be a limitation in the number of quota periods under production kg’s can be carried forward. Thus, there is some uncertainty with regard to the claim by the Dibbles for compensation for under marketing. If that claim relates to some penalty imposed by the CFO, then the Tribunal clearly has jurisdiction. If that claim is really a lost expected profits claim resulting from the host farm under-producing, then the Tribunal is without jurisdiction to award it per the reasons above.

The Tribunal agrees and feels that under and over marketing penalties could have been dealt with by CFO in their decision, but they were not. The Tribunal finds that those issues were properly before the CFO, so that the lack of a CFO decision on the Maple Hill levy and on the Dibble under marketing claim is not a bar to jurisdiction per s. 16(5) of the MAFRAA as 60 days have elapsed.

Order of the Tribunal

For the above reasons, the Tribunal orders as follows:

1. CFO’s motion is granted with respect to all claims seeking compensation and lost profits (civil damages); and

2. The issue of over and under marketing levies and any under marketing penalties are within the jurisdiction of the CFO and the Tribunal.

Dated at Toronto, Ontario this 22^nd day of July, 2016.

PARTIAL DISSENTING OPINION AND REASONS

I agree with my colleagues that the Tribunal does have jurisdiction with regard to any levies or other penalties applied for over marketing and under marketing.

I do not agree with my colleagues that there is no jurisdiction for the Tribunal to grant the further relief sought by the appellants.

Reasons:

The Chicken Farmers of Ontario (CFO) is a “local board “established under the Farm Products Marketing Act (FPMA) and regulations made under the FPMA.

The Tribunal’s authority in this instance flows from s. 16(11) of the Ministry of Agriculture, Food and Rural Affairs Act (“MAFRAA”).

“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.”

In other words, upon an appeal to the Tribunal, the Tribunal steps into the shoes of the local board and can make any decision it could have made.

Regulation 402 Chickens-Marketing states under Powers of Local Board:

s.4 (d) to stimulate, increase and improve the marketing of chickens by such means as it considers proper.

The definition of “marketing” under the FPMA includes advertising, assembling, buying, financing, offering for sale, packing, processing, selling, shipping, storing and transporting…”

In addition, under s.12 (1) and (2) of Regulation 402 Chickens-Marketing, the Farm Products Marketing Commission (Commission) under the FPMA has delegated authority to CFO for a broad range of activities.

12. (1) The Commission authorizes the local board to use any class of licence fees, service charges and other money payable to it, for the purpose of paying the expenses of the local board, carrying out and enforcing the Act and the regulations and carrying out the purposes of the plan.

12(2) The Commission authorizes the local board to establish a fund in connection with the plan for the payment of any money that may be required for the purposes mentioned in subsection (1).

At issue is whether to interpret the authority of CFO under Regulation 402 Sections 4(d) and 12 (1) very narrowly, or to interpret these provisions in the manner in which I believe they were intended.

I agree with the Appellants that it is reasonable to justify the expenditure of funds for relief from actions intended for the protection of the food supply, as an action which can fall under the authority to “stimulate, increase or improve the marketing” of chickens.

The Ministry of Agriculture Food and Rural Affairs states on its web site under “The Ontario Farm Products Marketing Commission and its Role in Ontario's Regulated Marketing System “ that: “The Farm Products Marketing Act and the Milk Act give very broad ranging powers and authorities to the Commission. Some of these powers and authorities may be exercised by the Commission directly or delegated by the Commission to a marketing board.”(emphasis mine).

That is, each and every CFO expenditure made to carry out the purposes of the plan and to improve the marketing of chickens need not be individually itemized in Regulation 402 in order to be authorized. The authors of these regulations did not outline every conceivable difficulty or problem a local board could encounter, as they intended to give local boards the flexibility they need to operate.

A narrow interpretation of authorized expenditures would call into question other expenditures made by a board. Local boards can and do expend funds for activities that are not expressly and individually authorized in the regulations, but do fall under the authority of “improve the marketing” and/or “the purposes of the plan”.

Section 12 (1) clearly authorizes the power for the board to use “any class” of licence fees, service charges and other money payable to it” and Section 12 (2) allows the CFO to establish a fund for the aforementioned purposes, if it so desires.

In addition, I do not agree with my colleagues on characterizing the remedy sought as “damages”.

Counsel for CFO used the term “damages” to characterize the nature of the Appellants’ appeal. In my view, this is the wrong choice of words for what the Appellants are seeking. Since both parties agreed that there was no negligence or other wrong involved by either party, “damages” does not properly characterize the issue.

The relief sought by the Appellants is compensation for losses incurred as a result of being located in a quarantine zone, and being advised by CFO that it would not authorize the production of chicken at their premises because they were situated in the control zone. Any payment of compensation would be to alleviate the impact of quota decisions made for the benefit of the entire industry.

It is my view that CFO had the ability in Sections 4(d), 12(1) and (2) to grant the relief requested by the Appellants with respect to compensation for losses as a result of the quarantine and, therefore, the Tribunal has the jurisdiction to hear all facets of the Appellants’ appeal.

Dated at Tavistock, Ontario this 22^nd day of July, 2016