Jason and Melissa Wesselson v. Dairy Farmers of Ontario, 2021 ONAFRAAT 3

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 Courriel: AFRAAT@ontario.ca

AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL

APPEAL:

Wesselson v DFO

Wesselson v DFO 2021ONAFRAAT3

STATUTE:

Ministry of Agriculture, Food and Rural Affairs Act

HEARING:

December 17, 2020 and December 18, 2020

DATE OF DECISION:

February 08, 2021

001Wesselson20

NEUTRAL CITATION:

2021ONAFRAAT3

FILE NO.: 001Wesselson20

DATE: 2021/02/08

IN THE MATTER 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 (the “Tribunal”) by Jason and Melissa Wesselson of Embro, Ontario from the decision of the Dairy Farmers of Ontario (“DFO”) denying their eligibility for the New Producer Program and denying an exemption pursuant to paragraph 3, Section H of the Quota Policy.

BETWEEN:

Jason and Melissa Wesselson Appellants

– and –

Dairy Farmers of Ontario Respondent

Represented by Paula Lombardi

Represented by Geoffrey Spurr

HEARD: December 17 and 18, 2020

Before: Glenn Walker, Chair; Tricia Schouten, Vice-Chair; and David Stevens, Member.

Appearances:

Paula Lombardi, counsel for the Appellants

Geoffrey Spurr, counsel for the Respondent

Larry Batte, witness for the Appellants

Jason Wesselson, Appellant

Lloyd Wesselson, witness for the Appellants

Carol Mascaro, witness for the Respondent

Albert Fledderus, witness for the Respondent

DECISION

1This is an appeal by Jason (“Jason”) and Melissa (“Melissa”) Wesselson (“the Appellants”) from the reconsideration decision of the Dairy Farmers of Ontario (“DFO”) dated November 8, 2019.

THE EVIDENCE

2The Tribunal heard evidence from Larry Batte, Lloyd Wesselson and Jason on behalf of the Appellants and from Carol Mascaro and Albert Fledderus on behalf of DFO. Written final submissions were received on January 21, 2021.

Larry Batte

3Larry Batte presented the following evidence.

4Mr. Batte is a business advisor who has been assisting farmers with audits, reviews, compilations and preparation of tax minimization strategies for 36 years, previously with Collins Barrow and now since 2018 with MNP.

5In the fall of 2011, he met with Lloyd and Elaine Wesselson, whom he described as being the owners, operators and directing minds of Wesvalley Holsteins Inc. (“Wesvalley”), to discuss, among other things, the source deductions required by Canada Revenue Agency and the Workplace Safety and Insurance Board premiums payable on any wages to their children employed by Wesvalley.

6He advised them that the best approach to minimize these costs would be to issue shares to these children to allow the company the option of paying them dividends in lieu of, or, in addition to wages.

7Subsequently, Wesvalley’s corporate solicitors were instructed to and carried out a corporate reorganization in January 2012. The value of the existing common shares in the company were exchanged for fixed value special shares and 100 new common shares purchased by Lloyd and Elaine Wesselson.

8Lloyd and Elaine Wesselson subsequently transferred 20 voting common shares to Jason. Jason also received 5 non-voting Class H special shares. As some of the new special shares had voting rights, his share of the voting shares in the company was approximately 0.12%.

9Mr. Batte stated that at no time was Jason ever the President or a director of Wesvalley or considered to be the directing mind of Wesvalley.

Jason Wesselson

10Jason then testified as follows.

11Jason is the son of Lloyd and Elaine Wesselson and the husband of Melissa. He has worked for Wesvalley for approximately 14 years. He does the usual work around a dairy operation as instructed by his father. His goal is to become a dairy farmer and hold his own quota one day.

12Wesvalley is owned and operated by his parents and they are solely responsible for all decisions relating to its operations.

13His brother, Ryan, worked for other dairy operations but since 2018 now also works for Wesvalley.

14He acknowledged receiving 20 common shares from his parents but previously understood that they were non-voting shares.

15He was not aware that since 2011 he was the Vice-President and the Chair of Wesvalley, nor was he aware that on March 6, 2015, the corporate solicitors had forwarded a letter to DFO confirming that he, his parents and his grandmother, Freda Wesselson, were all voting shareholders of the company.

16He did not recall signing the “Application to Update Quota Ownership” on March 6, 2015, which document he signed as a “New Owner”. The purpose of the document was to remove his deceased grandfather’s name from the quota.

17Jason explained that there are 3 ways that he could acquire quota and his own dairy operation. Firstly, he could purchase an existing dairy operation, the cost of which would be prohibitive; secondly, he could be given or bequeathed quota from his parents; or, thirdly, he could enter the DFO New Producer Program (“NPP”).

18On April 13, 2016 Jason and Melissa signed an application for the NPP. The 1-page form asks 7 questions including whether the applicants or their spouses have been licensed to produce and market milk in Canada in the previous 5 years and whether the applicants or their spouses presently hold quota. Jason and Melissa answered these specific questions in the negative. Prior to answering these specific questions, Jason asked his parents if this was correct and they confirmed that it was.

19Jason stated that he was not aware that he was an owner and a producer relating to the quota assigned to Wesvalley at that time.

20The application was submitted to DFO together with the non-refundable $1000.00 application fee. Shortly thereafter Jason and Melissa received a letter from DFO indicating that they had been accepted into the program.

21Approximately every 6 months they received more letters from DFO advising them where they stood in the queue of NPP applicants and when they might be able to start purchasing quota on the quota exchange. The last of these letters arrived on or about September 3, 2019 advising that they would be eligible to bid on quota through the NPP on the July or August, 2020 quota exchange and requesting that they immediately send DFO a $10,000.00 cheque as a deposit.

22After applying for and being acknowledged as joining the NPP, Jason began making plans for a new dairy barn on a farm located approximately 1 km from the Wesvalley operation including having blueprints prepared and arranging for the demolition of an older barn. The demolition of the old barn was commenced in May or June of 2019 and the construction of the new barn started at the beginning of May 2020 after he had been advised that they had been removed from the queue.

23On or about September 9, 2019, before they had forwarded the requested cheque, Jason and Melissa received another letter from DFO advising them that they had been removed from the queue as they were no longer eligible for the NPP. It had come to the attention of DFO that Jason held quota under Licence #599719, Wesvalley Holsteins Inc., with Freda, Lloyd and Elaine Wesselson.

24Jason and Melissa then made a formal request to DFO requesting an exemption to DFO’s Quota and Milk Transportation Policies (“Quota Policy”) Section G 1(d) (New Producer Applicants Requirements) or, in the alternative, to substitute Jason’s brother, Ryan Wesselson, in their place in the queue.

25On October 1, 2019, the DFO Board (“Board”) denied both requests.

26Jason and Melissa then asked for a Reconsideration Hearing before the Board and the requests were again denied on October 30, 2019. The Appellants subsequently appealed to this Tribunal.

Lloyd Wesselson

27Lloyd Wesselson, Jason’s father, also testified on behalf of the Appellants. He confirmed the information contained in the testimony of Mr. Batte and Jason, specifically that he did not understand, until recently, that the shares in Wesvalley which he and his wife gave to Jason were voting shares and that he and his wife were the controlling minds of Wesvalley and that Jason took no part in decision making with respect to the company.

Carol Mascaro

28Carol Mascaro, of DFO’s Economics Division and previously Quota Manager for DFO, gave evidence on behalf of the Respondent DFO.

29She explained the operation of the monthly quota exchange and the New Entrant Quota Assistance Program compared to the NPP. The amount of quota under the NPP has consistently exceeded the amount of quota available for acquisition on a per capita basis and accordingly DFO has operated a queue mechanism by which NPP applicants are granted their opportunity to bid on the exchange in the order in which their applications are received and approved. Applicants under the NPP may be in the queue for several years.

30An important underlying premise of the quota exchange is that the opportunity to transfer quota is equally available to all producers and that no producer has an advantage over another in terms of the opportunity to acquire quota. Accordingly, the rules in relation to the NPP emphasize the importance of the applicant not being licensed to produce and market milk in Canada in the previous 5 years prior to submitting the application under the NPP.

31The Quota Policy defines “producer” as a person, partnership, corporation or other form of business enterprise, licensed by DFO for the production and marketing of milk. In the case of a corporation, DFO considers all parties to the business enterprise to be producers.

32On March 6, 2015 when corporate counsel for Wesvalley advised DFO that Jason held voting shares in Wesvalley, Jason was added as a producer to Licence #599719.

33During a visit to the Wesvalley farm, the Field Services Representative for DFO noted that Jason was on Licence #599719 and conveyed this information to DFO, which resulted in Jason and Melissa being removed from the NPP.

Albert Fledderus

34The last witness, Albert Fledderus, also testified on behalf of the Respondent DFO. He has owned and operated his own dairy farm from 1988 to the present and serves on the DFO Board as a Director for Region 7. He also serves on the DFO Quota Committee.

35He also took part in the Board Reconsideration Hearing where Jason and Melissa’s requests were again denied.

36According to Mr. Fledderus, DFO did not “miss anything” when they allowed Jason and Melissa to join the NPP. They just relied on the answers to the questions in the NPP application.

37The Board felt that there was no compelling evidence to grant the exemption or special consideration as Jason had other ways to enter the milk market in view of the fact that Wesvalley held quota and was controlled by his parents.

NATURE AND SCOPE OF THE TRIBUNAL’S JURISDICTION

38The jurisdiction for an appeal of this nature is found in subsection 16(1) of the Ministry of Agriculture, Food and Rural Affairs Act, R.S.O. 1990, M.16 (“MAFRA Act”) which provides as follows:

16 (1) Subject to subsections (4) and (5), a person who is aggrieved by any of the following orders, directions, decisions, policies or regulation 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, decision, policy or regulation made by a local board or marketing board.

3. An 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.

39Subsection 16(5) of the MAFRA Act sets out pre-conditions for an appeal:

(5) No appeal may be taken from an order, direction, policy, decision or regulation of a local board or a marketing board unless,

(a) the appellant has first applied to the local board or marketing board for a hearing and the local board or marketing board has refused to grant, in whole or in part, the relief requested by the appellant or has not decided the matter within sixty days of the application for a hearing; or

(b) the appellant and the local board or marketing board have waived their respective rights under clause (a) in writing.”

40Subsection 16(11) of the MAFRA Act describes the powers of the Tribunal on an appeal:

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.

REQUESTED RELIEF AND ISSUES

41The Appellants seek the following relief as set out in their final written submissions:

1. A declaration that the Appellants be returned to the NPP queue in the exact position they were in immediately prior to DFO’s letter dated September 9, 2019 declaring Jason and Melissa ineligible for the NPP;

2. In the alternative, that Ryan Wesselson take the place of the Appellants in the NPP queue as if it was his application submitted in April 2016 and be confirmed eligible to bid on quota in accordance with the NPP requirements on the next quota exchange;

3. In the further alternative, that DFO be responsible for all damages and costs incurred by the Appellants as a result of DFO accepting and processing their application for the NPP in April 2016 to September 2019, including but not limited to the costs of constructing a new barn and purchasing robotic milking equipment.

42The Appellants raise 4 issues in their final submissions which may be summarized as follows:

a. Jason and Melissa are not producers within the meaning of the Quota Policy;

b. If they are producers within the meaning of the Quota Policy, they are entitled to an exemption or special consideration under section H.3 of the Quota Policy and should be placed back in the NPP queue;

c. If they are producers within the meaning of the Quota Policy, they are entitled to an exemption or special consideration under section H.3 of the Quota Policy and Jason’s brother Ryan should be allowed to replace them in the NPP queue; or

d. If the foregoing relief is not granted, they are entitled to damages and costs against DFO as a result of DFO accepting and processing their application for the NPP from April 2016 to September 2019.

ARE THE APPELLANTS PRODUCERS?

43The definitions can be found under Section I of the Quota Policy. The definitions relevant to this issue are as follows.

44Section I (26) defines producer as “a person, partnership, corporation or other form of business enterprise, licensed by DFO for the production and marketing of milk. In the case of a partnership, corporation or other business enterprise, DFO considers all parties to the business enterprise to be “producers” for the purposes of the application of these policies”.

45Section I (11) states that Licensee “means a producer who has been issued a licence to produce and market milk by DFO”.

46Section A (15) (a) of the Quota Policy also stipulates the obligations of all “parties on a licence”. They are to be actively involved in the operation of the dairy business enterprise, to contribute assets in addition to quota to the dairy business enterprise, to share in the risk of profit or loss of the dairy business enterprise, to be jointly and severally liable to DFO for compliance with all applicable policies, orders, directions or regulations made under the Milk Act and other relevant statutes and to provide quota ownership verification from a certified accountant or lawyer for all applications.

47Section A (15) (b) states that corporations must have their certified accountant or lawyer provide a letter confirming the names of all common and/or voting shareholders of the company and the letter must also indicate who has the authority to bind the corporation.

48Although the Appellants argue that Jason held only a very tiny fraction of the voting shares of Wesvalley (0.12%), they have downplayed the facts that he was the owner at the time the NPP application was submitted of 20% of the voting common shares, which gave him 20% of the equity in the corporation after deducting any debt and the fixed value of the special shares. He was also the Vice-President and Chair of the corporation.

49Wesvalley was the Licensee but Jason was one of the parties on the licence together with his parents and his grandmother, all of whom also held voting shares. He met the requirements in Section A (15) (a) of the Quota Policy. He was actively involved in the dairy operation, he contributed assets to the enterprise by way of his 20 common shares in the equity, he shared in the risk of profit or loss through his ownership of the 20 growth shares, he was liable to DFO for compliance with all policies etc. (even though he may not have realized this), and he did provide quota ownership verification by signing the Application to Update Quota Ownership on March 6, 2015.

50It is unfortunate that the definition of “Producer” in the Quota Policy has not been made clearer by adding that in the case of corporations all voting shareholders are considered to be producers.

51The Quota Policy does not define how many voting shares must be held by a person before they are considered producers. The Appellants’ argument that the minimal amount of voting shares owned by Jason cannot succeed as there is no cut-off percentage in the Policy. In other words, is it 1 %, 5% or 10%? The answer has to be that any voting shares will make him a producer.

52In reading the Quota Policy document as a whole, the Tribunal finds that Jason was a producer for the application of the Quota Policy and that Melissa was the spouse of a producer.

53Under the New Producer Applicant Requirements for the NPP, found at Section G (1) of the Quota Policy, a new producer applicant is not eligible for the quota exchange proration exemption if they and/or their spouse hold quota. This is the basis for 5 of the questions asked on the Application for the NPP. Jason and Melissa answered these questions in the negative when, as a producer and his spouse, they should have answered them in the affirmative.

54If they had answered the questions correctly, they would not have been accepted into the NPP as they were ineligible.

55When completing the application, it would appear that Jason was not sure of the answers as he asked his parents what the correct answers were. What he did not do was to take further action and consult the Quota Policy, call his Field Services Representative or DFO or consult the corporate lawyer.

56The application is simple in appearance, but the applicants are expected to give informed and correct answers.

57DFO is entitled to rely solely on those answers in accepting or rejecting NPP applications without doing further searches or cross-checks.

58DFO did rely upon the answers in the application received from Jason and Melissa and accepted the application. Once the application has been accepted, there should be no expectation from the applicants that DFO will do further searches and cross-checks.

59The Tribunal finds that the Appellants made a mistake. It was an honest mistake with no intent to mislead, misrepresent or deceive DFO.

60That having been said, there are consequences for that mistake and blaming DFO for not discovering the mistake sooner than it did is not justified.

61The Tribunal finds that Jason is a producer within the meaning of the Quota Policy and that Melissa is the spouse of a producer.

EXEMPTION REQUEST TO PUT APPELLANTS BACK IN THE NPP QUEUE

62Section H 3(a) of the Quota Policy, under the heading “Requests for Special Consideration or an Exemption”’ provides that if a producer requires special consideration for reasons of not being able to comply with a particular policy(s) in Part 1, it should advise DFO’s Quota Committee who will consider the request and make a recommendation to DFO’s Board. In this matter, the request to reinstate the Appellants in the NPP or substitute Ryan Wesselson as applicant was denied by the Board and again at a Reconsideration Hearing.

63In support of their request for special consideration or exemption the Appellants offer the following arguments:

a. Jason holds merely 0.12% of the voting shares of Wesvalley;

b. Neither Jason, Melissa nor his parents understood that this minimal shareholding would make the Appellants ineligible for the NPP;

c. The Appellants never intended to mislead or deceive DFO;

d. DFO failed to inform the Appellants within a reasonable amount of time regarding their ineligibility for the NPP;

e. Without the NPP Jason and Melissa cannot own quota without penalizing Wesvalley; and

f. The Appellants meet the requirements for an exemption under Section H 3(a) of the Quota Policy.

64The Tribunal will now consider the case law which the Appellants argue supports their case for special consideration or an exemption being granted to them.

65From previous decisions of the Tribunal, namely: Senn et. al v. Dairy Farmers of Ontario [Amended], 2015 ONAFRAAT 4, 2015 ONAFRAAT 04, Strik v. Dairy Farmers of Ontario, 2014 ONAFRAAT 5; Ferme Martel Inc. v. Dairy Farmers of Ontario, 2010 ONAFRAAT 6 and Cayer v. Dairy Farmers of Ontario, 2009 ONAFRAAT 7, and other cases referred to therein, we may glean the following considerations in granting an exemption:

a) The existence of unique, exceptional or extraordinary circumstances;

b) Undue hardship;

c) Death or fatal disease of the primary dairy operator;

d) A catastrophic accident ending the farming career of the primary dairy operator;

e) Family circumstances, marriage, intergenerational transfer, family support; and

f) Whether the circumstances were outside of the control of the party seeking the exemption.

66It is trite law that the principle of stare decisis does not apply to administrative tribunals; however, we must strive to continue to develop a body of consistent jurisprudence.

67The authority granted to the Board to grant an exemption is very broad and no attempt has been made in the Quota Policy to restrict its application for the very reason that it would be impossible to anticipate every set of unique, exceptional or extraordinary circumstances which might give rise to the application of this power. This power is in the discretion of the Board, or in this case, in the discretion of the Tribunal.

68The Tribunal steps into the shoes of the Board and may take such action as the Board was authorized to take and the Tribunal considers proper and may substitute its opinion for that of the Board.

69The Tribunal finds that the circumstances here do not meet the requirements of any of the circumstances listed above or any other circumstances that might be considered unique, exceptional or extraordinary.

70There is nothing unique, exceptional or extraordinary about making an error in completing an official form. It happens everyday.

71Any hardship which the Appellants may suffer can be remedied by Jason eventually receiving Wesvalley quota through an intergenerational transfer from Wesvalley.

72These circumstances were within the control of the Appellants. They answered the questions on the NPP Application incorrectly without seeking advice from someone other than Jason’s parents when it appears they were unsure of the correct answers themselves.

73DFO argues that granting this exemption would threaten the integrity of the NPP. It would permit the Appellants to purchase quota while Jason remains a producer which would be contrary to the very purpose of the program which is to allow new producers to acquire quota over the exchange without it being pro-rated.

74As stated by counsel for DFO in his final written submissions: “DFO is responsible to the Ontario dairy industry to be fair in its application of its policies, including the NPP. An existing licenced milk producer simply does not qualify under the NPP”.

75For all the reasons given above, the Tribunal denies the request of the Appellants to set aside the decision of the Board and be placed back in the NPP queue.

SPECIAL CONSIDERATION REQUEST TO REPLACE THE APPELLANTS WITH RYAN

76For many of the same reasons, the Tribunal denies the request of the Appellants to replace them with Jason’s brother, Ryan Wesselson, in the queue.

77Ryan did not testify at the Tribunal hearing. We know from the corporate records that he does not own voting shares in Wesvalley. We do not know, however, whether he is interested in acquiring quota and becoming a dairy producer.

78The facts here do not support a finding that any relief be granted in the nature of special consideration or exemption. Although it was not argued, it may be that such relief insofar as it relates to this request is beyond the authority granted by Section H.3.

REQUEST FOR DAMAGES

79In the further alternative, the Appellants seek to have DFO made responsible for all damages and costs incurred by them accepting and processing their application for the NPP from April 2016 to September 2019, including but not limited to the costs of constructing a new barn and purchasing robotic milking equipment. The Appellants provided no evidence as to the quantum of damages and costs that they are seeking.

80The Tribunal has previously determined on several occasions that it does not have jurisdiction to award damages on appeals under section 16 of the MAFRA Act: Black v. Chicken Farmers of Ontario and Ontario Farm Products Marketing Commission, 2014 ONAFRAAT 12; Howe Farms et al. v. Chicken Farmers of Ontario, 2016 ONAFRAAT 17.

81We agree with the conclusions regarding jurisdiction to award damages in those decisions.

82On this appeal the Tribunal has only the same powers which the Board had pursuant to Section H.3 of the Quota Policy. That section does not support the authority to award damages. Any other interpretation would lead to a ridiculous result in that the Board would be awarding damages against itself.

83This fourth request for relief is also dismissed.

ORDER OF THE TRIBUNAL

84The Tribunal therefore orders that the appeal by Jason and Melissa Wesselson is dismissed.