Agriculture, Food and Rural Affairs Appeal Tribunal

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:

Sweda Farms Ltd. Vs Egg Farmers of Ontario and Ontario Farm Products Marketing Commission [Tribunal Reasons for Decision]

Sweda Farms Ltd. Vs Egg Farmers of Ontario 2022ONAFRAAT15

STATUTE:

Ministry of Agriculture, Food and Rural Affairs Act

HEARING:

February 28, 2022

DATE OF DECISION:

April 13, 2022

003Sweda21

NEUTRAL CITATION:

2022ONAFRAAT15

FILE NO.: 003Sweda21

DATE: 2022/04/13

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 (“Tribunal”) by Sweda Farms Ltd., regarding a decision of the Egg Farmers of Ontario (“EFO”) directing where egg producers market.

BETWEEN:

Sweda Farms Ltd. Appellant

– and –

Egg Farmers of Ontario Respondent

– and –

Ontario Farm Products Marketing Commission Participant

Norman Bourdeau, Agent

Geoffrey P. Spurr, counsel for the Respondent Kirk Andrews, counsel for the Participant

HEARD: February 28, 2022, by video conference

Before: Glenn C. Walker, Chair; Judy Dirksen, Member and Steve Moutsatsos, Vice-Chair

Appearances:

Geoffrey P. Spurr, Counsel for the Respondent Norman Boudreau, Agent for the Appellant

TRIBUNAL REASONS FOR DECISION

1On February 28, 2022, a Pre-Hearing Conference (“PHC”) continuation was held by video conference to receive oral submissions by EFO and Sweda Farms Ltd. (“Sweda”) with respect to the jurisdiction of the Tribunal and whether this appeal should be dismissed before a hearing.

2The appeal was dismissed on March 1, 2022, with reasons to follow. These are our reasons.

Procedural Background

3Sweda filed four appeals with the Tribunal pursuant to section 16 of the Ministry of Agriculture, Food and Rural Affairs Act, R.S.O. 1990, M-16 as amended (“Act”) concerning decisions of EFO.

4A joint PHC for all four appeals was held on January 10, 2022. The Tribunal raised two preliminary issues at the PHC with respect to the Tribunal’s jurisdiction and whether the appeals should be dismissed without a hearing and invited written submissions from the parties regarding all four appeals.

5The Ontario Farm Products Marketing Commission (“Commission”) sought participant status in three of the four appeals. Participant status was granted to the Commission by Order dated January 12, 2022. In view of the fact that the Commission is not a party, no written submissions were requested from the Commission on these issues.

6Written submissions were received from the appellant and the respondent. Oral submissions were also received by the Tribunal on February 28, 2022, at the continuation of the PHC.

7After the joint PHC held on January 10, 2022, Sweda withdrew three of its four appeals. These reasons relate to the dismissal of the fourth appeal.

Factual Background

8Sweda asserts that it is a federally registered egg grading station and has been certified by the Canadian Food Inspection Agency (“CFIA”) since 1993. Sweda also asserts that it is an egg quota holding corporation.

9EFO states that Sweda has not engaged in commercial egg production for a considerable period of time and that, although it holds a small amount of egg quota, Sweda has reduced its flock to one or two fowl per year. EFO therefore argues that Sweda is neither an active egg producer nor an active grading station. These allegations are not disputed by Sweda.

10Under the present supply management system for eggs in Ontario, egg producers are free to contract for the sale of their eggs to the grading station of their choice without interference from EFO.

11Sweda states that there are approximately 8.4 million egg laying hens in Ontario and that the egg production from those hens is primarily divided between the two largest egg graders, namely: Burnbrae Farms Limited (“Burnbrae”) and L. H. Gray & Son Limited (“Gray”).

12The appellant argues that Burnbrae and Gray have created a “duopoly” to shut the smaller grading stations out of the market.

13Sweda commenced an action in the Superior Court of Justice against EFO and others in 2005 and another action in 2008 against Burnbrae, Gray and others. The actions made many allegations, including, conspiring to lessen unduly, competition in the production, grading, sale and/or supply of eggs in Canada. These actions were consolidated in 2011 and are hereinafter referred to as the “Litigation”. The case against Burnbrae and its related companies was dismissed in 2014 on a summary judgment motion. A Fresh as Amended Statement of Claim in the consolidated actions was issued on August 9, 2017 and the matter has still not proceeded to trial.

14On April 5, 2021, Sweda requested that EFO hold a special hearing to redirect the production of approximately 200,000 hens to the Sweda grading station. As its reason, Sweda stated that EFO had the authority and the obligation to direct egg producers to market their eggs to a certain party under Regulation 407 of the Farm Products Marketing Act, R.S.O. 1990, c. F.9 (“FPMA”). The policy which Sweda wishes EFO to adopt will be referred to herein as “directed marketing”.

15Sweda then reframed its request in a document dated May 2, 2021, in which it stated that it was requesting that EFO exercise its authority under Regulation 407 to make regulations and policies permitting EFO to direct to which grading stations egg producers must market their eggs and direct producers or partial production to grading stations that demonstrate a market or a developing market.

16EFO responded on June 1, 2021, refusing the request on the basis of the lack of standing of Sweda as either an egg producer or grading station operator and on the grounds that the issues raised were the same as or similar to issues that remain unresolved in the Litigation described above.

17Sweda requested a reconsideration hearing on July 30, 2021. EFO denied a reconsideration hearing for the same reasons on September 7, 2021.

The Notice of Appeal

18The Notice of Appeal asks that the decision of the EFO be set aside and substituted with the following:

a) EFO implement the regulations as set out in the FPMA, Regulation 407 and that EFO purchase all producers’ eggs by means of a pool and direct egg producers to market eggs geographically to all Grading Stations including Sweda and other smaller graders;

b) In the alternative, as per the FPMA, Regulation 407, EFO direct egg production from 200,000 hens to Sweda and any smaller graders on request; and,

c) In the further alternative, an Order that the Farm Products Marketing Commission investigate the issues contained in this appeal under Section 3(1)(b) of the FPMA.

Legislation and Rules Governing the Jurisdiction and Powers of the Tribunal

19Section 16 of the Act is the provincial legislation which governs the jurisdiction of the Tribunal and its powers on this type of appeal. The following are the subsections relevant to this decision.

20“Subsection 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.”

21“Subsection 16(4)

The Tribunal may refuse to hear the appeal or, after a hearing has commenced, refuse to continue the hearing, or make a decision if it relates to any order, direction, policy, decision, or regulation of which the appellant has had knowledge for more than one year before the notice is filed under subsection (2.1) or, if in its opinion,

(a) The subject-matter of the appeal is trivial;

(b) The appeal is frivolous or vexatious or is not made in good faith; or

(c) The appellant has not a sufficient interest in the subject-matter of the appeal.”

22“Subsection 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 FPMA 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.”

23The Tribunal has also adopted rules, pursuant to the Statutory Powers Procedure Act, R.S.O. 1990, c. S-22, dealing with a dismissal without a hearing.

Rule 33.01 of the Rules of Procedure provides: “The Tribunal may dismiss an appeal without a hearing on its own motion, if, in the Tribunal’s opinion,

(a) The proceeding is frivolous, vexatious, or commenced in bad faith;

(b) The proceeding relates to matters that are outside the jurisdiction of the Tribunal; or,

(c) Some aspect of the statutory requirements for bringing the proceeding has not been met.”

24Rule 33.02 provides:

“In addition to the reasons for dismissing a proceeding without a hearing described in Rule 33.01, the Tribunal may dismiss a proceeding under the Ministry of Agriculture, Food and Rural Affairs Act or, after a hearing has commenced, refuse to continue the hearing or make a decision if it relates to any order, direction, policy, decision or regulation of which the appellant has had knowledge for more than one year before the notice of appeal is filed or, if in the Tribunal’s opinion, the appellant does not have a sufficient interest in the subject matter of the appeal.”

Proposed Grounds for Dismissal

25EFO has proposed the following grounds for the dismissal of this appeal without a hearing:

(a) Sweda is not an aggrieved person;

(b) The relief requested is beyond the jurisdiction of the Tribunal;

(c) Sweda has known about the matter for more than one year;

(d) The matter is part of the Litigation.

Sweda is Not an Aggrieved Person

26EFO argues that Sweda is not an aggrieved person for these reasons:

• Sweda has not engaged in commercial egg production for a considerable period of time. Although it holds a small amount of egg quota, it has reduced its flock to one or two fowl per year.

• Sweda has not operated as a commercial egg grader for several years.

• Sweda has not established how it is directly aggrieved or is sufficiently interested in relation to the “directed marketing” issue so as to enable it to have any standing to raise the issue by way of a Tribunal appeal.

• Sweda wants EFO to fundamentally reorganize the regulated system for eggs so as to create an instant operational and viable grading facility for Sweda by obliging producers to market eggs to it.

27The appellant responds to these points as follows:

• Sweda is an aggrieved person as it has a sufficient interest in the subject-matter of the appeal as required under section 16(4)(c) of the Act.

• The decision to deny Sweda’s request for a producer allocation impacts Sweda’s investment in its grading facilities and affects Sweda’s rights to enter the retail egg market.

• Sweda further submits that it is an aggrieved person based on the apprehension of bias and implicit bias of the EFO board, which requires a de novo hearing before the Tribunal.

28The first question to be answered is: what is the “order, decision, policy or regulation” that constitutes the matter being appealed.

29The Tribunal finds that the appeal is from the decision of EFO not to enact a policy or regulation that would establish the “directed marketing” regime sought by the appellant. The appeal cannot be from EFO’s present policy, which it is argued by EFO that Sweda has had knowledge of for more than a year, as there is no present policy with respect to “directed marketing”.

30The Merriam-Webster dictionary defines aggrieved person as “a person sufficiently harmed by a legal judgment, decree or order to have standing to prosecute an appellate remedy”.

31Sweda’s argument that it owns a CFIA inspected grading station, though admittedly non-operating since 2008, and retains some egg quota, has some merit and gives it standing to bring this appeal as an aggrieved person. It has established to our satisfaction that EFO’s decision has the potential to sufficiently harm it. In not enacting such a policy or regulation, Sweda might continue to be side-lined by Burnbrae and Gray.

32The Tribunal therefore finds that Sweda has standing to bring the appeal as an aggrieved person.

Jurisdiction of the Tribunal

33EFO submits that the Tribunal has no jurisdiction to grant the relief sought by Sweda and that it would not be appropriate for the Tribunal, when exercising its authority under section 16(11) of the Act, to effectively fashion a new allocation system at the Tribunal in the absence of any previous underlying decisions, regulations and policies made by the local board relating to that issue.

34Sweda responds by stating that it is not asking for the Tribunal to fashion a new allocation system.

35However, it argues, that EFO has the authority under Regulation 407 to enact a “directed marketing” policy or regulation and that EFO is obligated to use those powers to develop such a policy or regulation.

36EFO replies that although it may have been granted certain authority it has no obligation to use of the powers delegated to it.

37The Tribunal’s jurisdiction on this appeal is circumscribed by the wording of section 16(11) of the Act. Briefly stated, the Tribunal may order EFO to take such action as it is authorized to take under the FPMA, and for this purpose may substitute its opinion for that of EFO.

38Section 5 of the FPMA provides for the making of regulations establishing marketing boards like EFO and prescribing their powers, duties, and functions.

39In Regulation 407, made under the FPMA, the Commission delegates to EFO certain powers that it may use in the establishment of an egg supply management plan. It is admitted that those powers include the authority for EFO to do what Sweda is asking for and that those powers have never been used.

40In argument, Sweda conceded that it was not expecting the Tribunal to fashion a new allocation system. But it expected the Tribunal to order or direct the EFO board to do so on the grounds that they were obligated to carry this out pursuant to Regulation 407.

41This is not a case where there has been a decision of the Commission in relation to EFO obliging it to exercise its delegated authority in a certain fashion which EFO has declined to follow. In the words of counsel for EFO, there is a notion that local boards are given a “toolbox” of powers to work with to design their particular marketing systems. There is no expectation that they must use all of those powers. The use of these powers is in the discretion of each local board, subject to the supervision of the Commission.

42The Tribunal finds that nothing in Regulation 407 obliges the local board to use all of the powers that are delegated, vested, or authorized.

43This begs the question: does the Tribunal have jurisdiction to order or direct EFO to exercise powers which are not obligatory? The answer has to be no.

44The Tribunal has no jurisdiction to fetter EFO’s discretionary powers or to require that they be exercised. Any use of those powers must be exercised by the local board and not by the Tribunal; nor can the Tribunal direct that they be exercised or the manner in which they are exercised.

One Year Limitation Period

45EFO argues that Sweda has known about EFO’s policy with respect to the non-interference in dealings between producers and grading stations for many, many years; certainly, more than one year before the filing of this appeal. Consequently, the Tribunal should refuse to hear the appeal pursuant to subsection 16(4) of the Act.

46The Tribunal accepts that as a fact. However, the Tribunal has found that the matter appealed from is the decision of EFO not to enact a policy or regulation with respect to “directed marketing”; it is not the present policy or lack thereof that is being appealed.

47The EFO board decision, with respect to the request from Sweda and the reconsideration decision, are the subject of the appeal and are both within the one-year period.

Matter Part of the Litigation

48EFO alleges that the issues of “directed marketing” and alleged bias of the EFO board have already been raised by Sweda in the Litigation. Sweda responds that the issues it requests be considered by the Tribunal are not the issues before the court in the Litigation.

49The only evidence that the Tribunal has before it relating to the Litigation is the Fresh as Amended Statement of Claim, amended on August 9, 2017.

50In that Statement of Claim the Plaintiffs claim against the Defendants, including EFO, damages in the amount of $32,000,000.00; aggravated, exemplary, and punitive damages in the amount of $10,000,000.00; a declaration that EFO is not entitled to payment of an invoice in the amount of $45,000.00 and full restitution of amounts received from the Plaintiffs by the Defendants for eggs which were not as represented to the Plaintiffs.

51EFO has called this appeal a collateral proceeding. It is not a collateral attack as there has been no final decision yet made in the Litigation with respect to EFO.

52EFO asks us to consider, paragraph 38 of the Statement of Claim which states as follows:

“38. By allowing the Duopoly increasing influence and control over the workings of the Board, the Board has abused its position created by law. The individuals who effectively select and serve on the Board and the employees of the Board, come from a small group of individuals who are disproportionately directly or indirectly related to, or influenced by, the Duopoly. The acts and omissions of the Board and Pelissero referred to above were caused by, or contributed to, by such conflicts of interest and had the intended consequence of favouring the Duopoly over its direct, but much smaller, competitor: Sweda.”

53EFO then asks us to compare that paragraph in the Fresh as Amended Statement of Claim to paragraphs 12 and 13 of Sweda’s Written Submissions, dated February 22, 2022:

“12. Egg Producers of the regulated system are elected to manage the industry. LH Gray and Burnbrae Farms are the largest Grading Stations, Processors and Egg Producers in Ontario and have senior employees as Directors on EFO Board. It is also believed that most, if not all of EFO Directors ship their eggs to either LH Gray or Burnbrae Farms Grading Stations.

13. It is believed that certain EFO Directors would also not want a competitive Grading Station in operation based on their own self interests. Clearly Sweda has their own “self interests” in having a competitive viable Grading Station, which EFO raises as a negative against Sweda.”

54The Tribunal agrees that there are certain aspects of the appeal which have been raised in the Litigation. There is a danger that the Tribunal and the court might arrive at different conclusions with respect to certain issues.

Compelling the Commission to Investigate

55Lastly, Sweda seeks an order, in the alternative, requiring the Commission to investigate the issues contained in this Appeal under Subsection 3(1)(b) of the FPMA.

56Sweda did not make the Commission a party to the appeal which is a requirement where relief is being sought against it. The Commission was made a participant in the proceedings at its request; however, a participant as defined in the Tribunal Rules is not a party. (Rule 8.06)

57Subsection 3(1)(b) states that the Commission may investigate any matter relating to the producing, marketing, or processing of a regulated product. Eggs are a regulated product under the FPMA.

58Whether the Commission undertakes an investigation under subsection 3(1)(b) is in the discretion of the Commission and the Tribunal has no jurisdiction to compel it to undertake such an investigation.

59Furthermore, the appellant is not appealing from an order, direction or decision of the Commission which would engage subsection 16(1)(3) of the Act and, in any event, such an appeal would be of general application and not subject to appeal to the Tribunal pursuant to subsection 16(2) of the Act.

Summary and Findings

60With respect to the issue of standing, the Tribunal finds that Sweda has standing to bring this appeal.

61The Tribunal also finds that the appeal was brought within one year of the appellant having knowledge of the decisions appealed from.

62The Tribunal finds that it does not have jurisdiction to grant any of the relief requested by the appellant, including ordering the EFO board to adopt a “directed marketing” policy and ordering the Commission to conduct an investigation. Accordingly, the Tribunal is entitled to dismiss the appeal without a hearing pursuant to Rule 33.01(b).

63The Tribunal also finds that bringing this appeal during the ongoing Litigation is an act which is both vexatious and in bad faith by causing EFO to be put to the expense of defending itself on two fronts.

64The bringing of this appeal, for which there is no jurisdiction, when viewed in the context of three other appeals, filed in close proximity in time to this one and now withdrawn, reinforces the intention of Sweda to harass EFO by bringing this appeal. For this additional reason this appeal should be found to be vexatious and in bad faith and be dismissed without a hearing pursuant to Rule 33.01(a).

65For these reasons, this appeal was dismissed on March 1, 2022.

Costs

66EFO requested the opportunity to make submissions for costs of this proceeding. Submissions for costs were requested by the Tribunal after making its decision but before providing its reasons.

67Concerning this point, Sweda pointed out that EFO’s costs submissions had anticipated success on each of the issues raised and that consequently it would respond on the same basis. The Tribunal finds that because of this there has been no breach of natural justice.

68Rule 34 of the Tribunal’s Rules of Procedure provides that where a party believes that another party has acted unreasonably, frivolously, vexatiously or in bad faith it may ask for an award of costs.

69This appeal should have never been brought as the Tribunal lacked the jurisdiction to grant the relief claimed. It is plain and obvious that it had no chance of success.

70For this reason and for the reasons given above in paragraph 64, the Tribunal finds that Sweda has acted vexatiously and in bad faith in bringing this appeal and that EFO is entitled to costs of the proceeding.

71Costs, fixed in the amount of $8,842.25, are awarded to the Respondent payable within 30 days by the Appellant, together with interest after 30 days in accordance with Section 129 of the Courts of Justice Act.