Denby v. Ontario (Agriculture, Food and Rural Affairs Appeal Tribunal)

Ontario Superior Court of Justice – Divisional Court

Denby v. Ontario (Agriculture, Food and Rural Affairs Appeal Tribunal)

Date: 2006-05-17

Donald R. Good, for the applicants;

Geoffrey P. Spurr, for the Agriculture, Food and Rural Affairs Appeal Tribunal and Dairy Farmers of Ontario;

D. Kloeze, for the Minister of Agriculture and Food.

(04-DV-974)

Nature of the Proceedings

[1] By the Court: This is an application for judicial review pursuant to the Judicial Review Procedure Act and rule 68 of the Rules of Civil Procedure. The applicants seek judicial review of:

a) the decision of the Minister of Agriculture and Food dated January 12, 2004;

b) the revised decision of the Agriculture, Food and Rural Affairs Appeal Tribunal dated December 4, 2003; and,

c) the decision of the Dairy Farmers of Ontario (DFO) dated May 5, 2003.

[2] The applicants specifically seek an order quashing the decisions referred to above and a finding that Regulation 08/03 was stayed from April 1, 2003 to April 17, 2003 with respect to the applicants. In essence, the applicants seek an order overturning the decision of the tribunal dated December 4, 2003 and an order that they are entitled to maintain their milk licences and the operation of their milk quota. The applicants seek, as well, the usual order as to costs.

[3] The decision of the Agriculture, Food and Rural Affairs Appeal Tribunal (the Tribunal), as subsequently confirmed by the Minister of Agriculture and Food, essentially confirmed the decision of the Dairy Farmers of Ontario to sanction the conduct of the applicants for a violation of Regulation 08/03 passed pursuant to the Milk Act, R.S.O. 1990, c. M-12, as amended. Specifically, the applicants were found by the DFO and by the Appeal Tribunal to be in violation of s. 3 of Regulation 08/03 for "marketing" milk other than through the DFO. As a result of this finding by the DFO and by the Appeal Tribunal, the applicants were penalized by loss of milk quota and by the cancellation of their licences to produce milk. The applicants were, as well, directed to dispose of their remaining milk quota by March 31, 2004 or to surrender it to the DFO. Essentially, the applicants were "terminated" as dairy farmers.

[4] The applicants appeal by way of judicial review to this court as to the finding that they were in violation of s. 3 of Regulation 08/03 and as to the sanctions imposed as a result thereof.

Overview

[5] The applicants are dairy farmers. William Denby, together with his parents, Betty and John Denby, farm a herd of some 100 dairy cows and hold a licence by the DFO to do so. (With respect to this licenced dairy operation, we will refer principally to Mr. William Denby who, it may be fairly said, is the "principal" applicant on this request for judicial review.) Mr. Denby holds 52 kilograms of milk quota fixed and allotted from the DFO. Dale McFeet-ers operates Darmar Farms Inc. and is, as well, a licenced dairy farmer holding 43.33 kilograms of milk quota fixed and allotted from the DFO. Isobel Hope and Wayne Hope are the operators of the third licenced dairy farm as applicants in this case and, with a dairy herd of 120 cows, hold a 120 kilogram milk quota fixed and allotted from the DFO.

[6] The Dairy Farmers of Ontario (DFO) is the milk marketing board which has essential authority to control and regulate the production, quality and marketing of milk by dairy producers in the Province of Ontario. It is the DFO which found the applicants in violation of Regulation 08/03 by decision of its board, which decision was approved as varied by the decision of the Agriculture, Food and Rural Affairs Appeal Tribunal and confirmed by the Minister.

[7] The Minister of Agriculture and Food essentially adopted a passive approach on this application for judicial review, simply supporting the decision of the Appeal Tribunal.

[8] In order to understand the events which led to this application for judicial review, it is necessary to understand in a very real sense the global context. Prior to 2003, there existed in Ontario a Commercial Export Milk (CEM) program. This involved the operation of the Export Contract Exchange (ECE) which was, in effect, an electronic bulletin board administered by Deloitte & Touche on behalf of the DFO and the Ontario Dairy Council. Essentially the CEM program permitted private contracts, albeit under the supervision of the DFO, between dairy farmers and purchasers for export. However, a decision of the appellate body of the World Trade Organization in December 2002 (largely as a result of pressure from New Zealand and the United States) found that Canada was in violation of her international commitments with respect to fair market prices for exported milk. The criticism was largely directed towards subsidization of dairy farmers for quota milk, which (at the risk of oversimplifying the issue) reduced the price of exported milk on the world market. As a result of the decision of the appellate body of the World Trade Organization, the Government of Canada, in co-operation with the provinces, including Ontario, attempted to ensure compliance with the World Trade Organization appellate body's conclusions. To summarize these initiatives, the DFO determined to re-regulate milk marketing in Ontario. Several months prior to April of 2003, the Commercial Export Milk (CEM) program was terminated and the Export Contract Exchange (ECE) operated by Deloitte & Touche was eliminated. Deloitte & Touche announced that it was accepting no new CEM contracts.

[9] Instead, the DFO decided to re-regulate marketing, both for domestic consumption and for export in the Province of Ontario. On February 27, 2003 the DFO enacted General Regulation 05/03 pursuant to the Milk Act, R.S.O. 1990, c. M-12, as amended, which was to come into effect on March 1, 2003. This regulation provided a comprehensive plan for the production, marketing and delivery of milk. It provided in s. 3 of the regulation:

"3(1) Every producer shall offer to sell and sell the milk produced by the producer to the DFO.

"(2) No producer shall offer to sell or sell the milk produced by the producer to any person other than DFO.

"(3) No person other than DFO shall buy milk from a producer.

"(4) No person shall market any milk except by, from and through DFO."

[10] In the meantime, Mr. William Denby had become involved with another initiative. In company originally with a partner, he had begun a business known as International Dairy Direct (IDD). By the time relevant to the issues which concern this court, International Dairy Direct had become International Dairy Direct Broker Agent (IDDBA) and was a sole proprietorship. Mr. Denby, on behalf of IDDBA, had entered into negotiations with the Liberty Milk Co-operative Association located in Augusta, Wisconsin (apparently a milk brokerage business) to export milk from Ontario. At the same time, perhaps through the latter part of 2002 and certainly into 2003, Mr. Denby was negotiating with the DFO for approval to allow him to market, at the very least, non-quota milk for export without selling directly to the DFO, which the re-regulation of marketing of milk in Ontario required.

[11] At a meeting of the DFO, which apparently was considered a "hearing" of his application to permit IDDBA to market milk for export outside the re-regulation scheme created by the DFO, the DFO rejected his proposal.

[12] Mr. Denby, on behalf of IDDBA, immediately appealed the decision of the DFO to the Agriculture, Food and Rural Affairs Appeal Tribunal. The Tribunal held a full hearing on the issues before it at which Mr. Denby testified. The appellant, IDDBA, was represented by counsel. The decision of the Appeal Tribunal was released on July 17, 2003. IDDBA was noted as the appellant and the DFO was noted as the respondent. The focus of the appeal was noted in the title of proceedings which state:

"In the matter of the Milk Act and s. 16 of the Ministry of Agriculture and Food Act.

And in the matter of: an appeal to the Agriculture, Food and Rural Affairs Appeal Tribunal by International Dairy Direct, Sunderland, Ontario from a decision of Dairy Farmers of Ontario dated March 14, 2003 by which it refused to change its plan for complying with the World Trade Organization ruling relating to Canada's Milk Export Practices, which was released February 25, 2003."

[13] Simply put, as the detailed decision of the Tribunal makes clear, what was at issue was the DFO's refusal to accept IDDBA's proposal for an export marketing scheme outside the re-regulation for milk marketing created by the DFO which required all marketing to be done directly to the DFO. At the hearing, counsel for IDDBA argued that its ruling in another case which it had recently considered, an appeal by Georgian Bay Milk Company (GBMC), should serve as a precedent. In the GBMC appeal, the Tribunal ruled that GBMC should consult with the DFO and agree upon a plan for export milk produced by non-quota holding producers and then submit this plan to the Department of Foreign Affairs and International Trade (DFAIT). Pending such events, the GBMC would be permitted to continue to honour its contractual commitments then in existence for export milk. At page 11 of the Tribunal decision in the instant case the Tribunal states:

"In this case, the appellant and the respondent disagreed as to whether the IDDBA appeal and the GBMC appeal were similar. The Tribunal finds that while both appeals related to proposals to allow for the export of unsubsidized milk, there are separate and distinct differences in the two appeals. The producers that might become involved in the IDDBA proposal would be comprised of both quota holding and non-quota holding producers. The Tribunal hears each appeal on the merits of its evidence. The Tribunal does not agree that the June 4, 2003 decision in the GBMC appeal was made upon considerations of matching evidence or, that it sets a precedent that obliges this panel to make a corresponding order."

[14] The decision of the Appeal Tribunal makes it clear that it carefully weighed the evidence before it and the respective positions of the parties. The decision of the Tribunal was as follows:

"After carefully considering the evidence filed and the submissions made, the Tribunal decided to deny the appeal.

The reasons for the decision are:

1. The proposal to allow for over-quota milk to be exported by IDDBA will negatively impact the supply management system in Ontario.

2. The DFO's March 14, 2003 decision not to change its policy for complying with the WTO ruling was not made with prejudice to IDDBA and it was not inconsistent with the application of its policies to any other milk broker.

3. The IDDBA proposal was not clearly defined."

[15] It may be noted that the principal issue raised on this application for judicial review is the question of whether the appeal launched by IDDB A from the decision of the DFO on March 14, 2003, which resulted in the decision of the Appeal Tribunal on July 17, 2003, served as a "stay" of the regulation passed by the DFO which prohibited the sale of any milk by a producer to other than the DFO. As noted above, DFO Milk General Regulation 05/03 came into effect on March 1, 2003. The DFO saw fit to enact a new regulation, DFO Milk General Regulation 08/03, signed on March 27, 2003. By s. 55 of the Regulation, it came into force on April 1, 2003 and pursuant to s. 54, revoked DFO Regulation 05/03. Regulation 08/03 appears to be identical word for word with Regulation 05/03, including s. 3, which prohibits the sale of milk by any producer to any person other than the DFO. No reason was put before this court as to why Regulation 08/03 was enacted to replace Reguluation 05/03. If this court were to speculate, it might conclude that the DFO was concerned about the stay of Regulation 05/03 that may have been caused by IDDBA's appeal of the March 14 decision on the effect of Regulation 05/03. However, such speculation serves no purpose. The bottom line is that as of April 1 Regulation 08/03 had been validly enacted and was intended to control the activity of dairy farmers in Ontario. To restate the position of the appellants, they maintain that the appeal of the DFO decision of March 14, 2003 created a stay of s. 3 of Regulation 08/03 and that they were, therefore, entitled to export milk in circumstances which would otherwise be in contravention of s. 3 of Regulation 08/03.

[16] It may be important to note that the issues before this court do not involve the merits of the appeal of IDDBA before the Tribunal which resulted in the decision of July 17, 2003. The only relevance of that appeal is whether its launching served as a stay of Regulation 08/03 and whether such stay, therefore, gave the appellants the right to act as they did during the first two weeks of April 2003.

[17] Turning then to this period, on April 10 the appellants were served with a notice of hearing by the DFO alleging contraventions of s. 3 of DFO Milk General Regulation 08/03 with respect to the picking up of milk at their respective farms and further activities which were in contravention of s. 3 of Regulation 08/03. These activities were alleged to have occurred with respect to Betty, John and William Denby (licence number 58543), with respect to Dale and Ruth McFeeters (Darmar Farms) (licence number 604984) on April 2, 3, 5 and 6, 2003 and with respect to Isobel and Wayne Hope (licence number 604984) on April 3, 5 and 6, 2003.

[18] The evidence is generally clear and was conceded by the applicants that on April 2 and 3, 2003, a private truck not licenced by the DFO did indeed pick up milk at the three farms operated by the applicants. This milk was apparently dumped on a field of the farm owned by William Denby. Mr. Denby was subsequently advised on April 4, 2004 by the Ministry of the Environment that he was to refrain from dumping any more milk onto his fields. On April 5, perhaps as a result of the DFO's refusal to send a truck to pick up milk from at least one of the farms, the same non-licenced trucker picked up milk from the applicants' farms. On April 6 further milk was picked up from Mr. Denby's farm. This load, comprising milk from all three farms, was intended for transportation to Wisconsin. This truck, however, was detained at the border and ultimately returned to Mr. Denby's farm, where a portion of the milk was again dumped on his fields on April 8 and 9. This truck was filled from Mr. Denby's bulk tank, together with his morning milkings of April 9, 2003. On that day, April 9, the truck travelled to the U.S. It apparently arrived in Augusta, Wisconsin and was held in a storage shed for approximately 22 days until its load of milk was dumped in a field under FDA supervision and at the applicants' cost.

[19] It was accepted however at the DFO hearing, at the Tribunal hearing and before this court by way of judicial review that the applicants would have preferred that the milk in the tanker truck which arrived at Augusta, Wisconsin be sold and used for a viable purpose, whether as whole milk or on a secondary market, for cheese or animal food. Otherwise expressed, it seems clear that each of the applicants anticipated that the milk which they had contributed to the load in the tanker truck which arrived in Wisconsin, might well be "marketed" within the definition of "marketing" in the Milk Act and inconsistent with s. 3 of Regulation 08/03. That intention is quite clear from the uncontested evidence at the hearing before the DFO and before the Appeal Tribunal as well as before this court. Such evidence includes the affidavits of Mr. William Denby, sworn June 10, 2004, Mr. Dale McFeeters, sworn June 11, 2004, and the affidavit of Wayne Hope, sworn May 31, 2004.

[20] It was on this evidence that the DFO based its decision as a result of a hearing on May 2, 2003 and so advised the appellants on May 5, 2003. The DFO concluded that each of the applicants had contravened ss. 3(1), 3(2), 3(3) and 3(4) of DFO Milk Regulation 08/03. As a result of this determination, the DFO cancelled the licences of all three farms (that is, all the appellants who were the licence holders) to engage in the production or marketing of milk, effective June 1, 2003. Further, the DFO determined that ten kilograms of quota fixed and allotted to John, Betty and William Denby were to be cancelled effective June 1, 2003. All remaining quota was to be sold or offered for sale on the June and/or July 2003 quota exchanges. Any quota remaining unsold after the July quota exchange would be cancelled. The same sanction was applied to Dale and Ruth McFeeters (Darma Farms Inc.) and to Isobel and Wayne Hope, with the exception that their quota cancellations were limited to five kilograms of quota fixed and allotted.

[21] Counsel agreed on the application for judicial review that the value of one kilogram of quota fixed and allotted is worth at least $26,000 on the exchange. Therefore, Betty, John and William Denby were financially sanctioned in the amount of $260,000 as a result of their loss of quota. The other applicants were sanctioned in the amount of $130,000 with respect to each of their five shares of quota fixed and allotted. Of arguably greater importance, all of the applicants lost their right to carry on their businesses as dairy farmers as a result of the cancellation of their licences. This loss of the right to carry on their livelihood is obviously a severe sanction for their conduct over and above the "financial penalty" imposed.

[22] The applicants all appealed this decision of the DFO to the Agriculture, Food and Rural Affairs Appeal Tribunal. At a pre-hearing conference held on April 16, 2003 the Appeal Tribunal directed on consent that "the automatic stay resulting from the IDD appeal of the DFO decision dated March 14, 2003 is suspended as it effects these parties, IDD and DFO. This order does not affect the effect of the stay on other parties". This order was apparently intended to deal on an interim basis with the issue of any stay of Regulation 08/03 as a result of the appeal by IDDBA from the earlier (March 14) decision of the DFO to reject IDDBA's proposal for an export scheme.

[23] The appeal before the Tribunal was heard on September 15, 18, 19 and 22, 2003 and on November 5, 6 and 7, 2003. The appeal was once again in accordance with s. 16(2) of the Ministry of Agriculture, Food and Rural Affairs Act. Extensive evidence was put before the Appeal Tribunal, though the essential facts relating to the alleged contravention of s. 3 of Regulation 08/03 were not in dispute. The Tribunal provided thorough written reasons for its decision. To summarize, the Tribunal concluded that there was no stay in effect of Regulation 08/03 with respect to the applicants which would allow them to ship milk to Wisconsin with the intent that it be marketed or in any other way to market milk with impunity except to the DFO. The Tribunal found, however, that the sanctions imposed by the DFO were too harsh in the circumstances. At page 21 of its reasons for decision the Tribunal stated:

"After careful consideration of the evidence filed and the submissions made the Tribunal orders:

1. The DFO is to cancel 6 kilograms of the quota fixed and allotted to Producer #585343 (Betty, John and Bill Denby).

2. The DFO is to cancel 2.5 kilograms of the quota fixed and allotted to Producer #604984 (Isobel and Wayne Hope).

3. The DFO is to cancel 2.5 kilograms of the quota fixed and allotted to Producer #621561 (Darmar Farms Inc.).

4. All remaining quota held by the producers referenced in points 1, 2, and 3 of this order is to be offered for sale or sold through the DFO quota exchange by MR 31 04. Any quota not sold on the quota exchange is to be cancelled by the DFO, effective MR 31 04.

5. No production credits may be accumulated or used by the appellants.

6. The DFO is to cancel the producer licences #585343, #604984, #621561 effective the last date on which the producers hold quota, or MR 31 04, whichever comes first.

The reasons for this decision are:

1. The Tribunal finds that the producers in question did contravene DFO regulations, and did disregard 'cease and desist' orders by the DFO.

2. The Tribunal finds that the regulatory infractions were deliberate and were of a serious enough nature to warrant the cancellation of these producers' licenses to produce and market milk and the cancellation of a portion of their quota."

[24] In accordance with s. 18 of the Ministry of Agriculture, Food and Rural Affairs Act, the decision of the Tribunal was automatically reviewed by the Minister (The Honourable Steve Peters) who, on January 12, 2004, notified the parties of his confirmation of the Tribunal's decision. It is from these decisions and, most specifically, the decision of the Appeal Tribunal, that the applicants seek the reconsideration of this court by way of Judicial Review. It is within the context of the mildly convoluted circumstances detailed above that this court must consider whether the relief sought by the applicants is appropriate.

The Law and Analysis

The Legislative Framework

[25] The legislative framework governing milk marketing in Ontario was analyzed in some detail in a case reported as Allan et al. v. Ontario (Attorney General) et al. (2005), 2005 25770 (ON SCDC), 201 O.A.C. 18; 70 O.R.(3d) 616 (Div. Ct.) (a decision of the Divisional Court of the Superior Court of Justice). We adopt the analyses of the Divisional Court with respect to the legislative framework in that case and need not repeat it for purposes of our decision. Simply put, the production and marketing of milk in Canada and in Ontario is subject to a complex federal and provincial regulatory scheme pursuant to ss. 91 and 92 of the Constitution Act 1867. At the federal level, there is the Canadian Dairy Commission Act, R.S.C. 1985, c. C-15 and the Dairy Products Marketing Regulations, S.O.R./94-466 as well as the Agricultural Products Marketing Act, R.S.C. 1985, c. A-6. At the provincial level, the principal legislation is the Milk Act, R.S.O. 1990, c. M-12 as amended and its regulations, together with the Ministry of Agriculture, Food and Rural Affairs Act, R.S.O. 1990,c.M-16. Specifically, the Ontario Farm Products Marketing Commission under the Ministry of Agriculture and Food Act has authority pursuant to s. 7(8) of the Milk Act to delegate to a marketing board such of its powers under subs. (1) of s. 7 as it considers necessary. Taking into account paragraph 14 and paragraph 35 of subs. (1), the marketing board (in this case the DFO) had full authority to regulate marketing in accordance with Regulation 08/03, passed by it effective April 1, 2003. Simply put, Regulation 08/03, and specifically s. 3 of that regulation, prohibited the admitted conduct of the appellants during the relevant period in early April 2003.

[26] The definition of "marketing" is found in s. 1 of the Milk Act. It includes "advertising, assembling, buying, distributing, financing, offering for sale, packing, processing, selling, shipping, storing and transporting … ". This definition is extremely broad and includes not only "selling" and "offering for sale", but, as well"storing and transporting". This court concludes that simply "storing" or even "transporting" milk with the intention to dispose of it by dumping it, for instance, on Mr. Denby's fields would not constitute "marketing" and would not be in violation of s. 3 of Regulation 08/03. However, the "storing" and subsequent "transporting" of milk from the three dairy farms of the appellants, during and shortly after the dates noted in their notices of hearing before the DFO, would clearly constitute marketing and would be in violation of s. 3 of Regulation 08/03. While milk from the applicants' farms may have ultimately been "dumped" in Wisconsin, the evidence clearly supports a conclusion that the applicants hoped it would ultimately be sold on a primary market as whole milk or, as on a secondary market, for cheese or animal feed.

The Standard of Judicial Review

[27] The standard of review to be applied by a court on judicial review (or on an appeal) of a Ministry's decision was analyzed recently by the Ontario Court of Appeal in the case of Stetler et al. v. Agriculture, Food and Rural Affairs Appeal Tribunal (Ont) et al. (2005), 2005 24217 (ON CA), 200 O.A.C. 209 (C.A.), which judgment was released on July 8, 2005. The court adopted the method for determining an appropriate standard of review as directed by the Supreme Court of Canada in the case of Dr. Q., Re, 2003 SCC 19, [2003] 1 S.C.R. 226; 302 N.R. 34; 179 B.C.A.C. 170; 295 W.A.C. 170; 2003 SCC 19. These principles were also enunciated by the Supreme Court of Canada in Pushpanathan v. Canada (Minister of Citizenship and Immigration), 1998 778 (SCC), [1998] 1 S.C.R. 982, addendum 1998 787 (SCC), [1998] 1 S.C.R. 1222; 226 N.R. 201; 160 D.L.R.(4th) 193, in Monsanto Canada Inc. v. Superintendent of Financial Services (Ont.) et al., 2004 SCC 54, [2004] 3 S.C.R. 152; 324 N.R. 259; 189 O.A.C. 201, in Cartaway Resources Corp. et al., Re, 2004 SCC 26, [2004] 1 S.C.R. 672; 319 N.R. 1; 195 B.C.A.C. 161; 319 W.A.C. 161; 2004 SCC 26 and in Society of Composers, Authors and Music Publishers of Canada v. Canadian Association of Internet Providers et al., 2004 SCC 45, [2004] 2 S.C.R. 427; 322 N.R. 306. The court in Stetler applied the "pragmatic and functional approach" required to determine the legislative intent of the statute that creates the administrative tribunal. The court adopted three standards reflecting different degrees of relative deference to the Tribunal:

1. correctness, an "exacting review";

2. reasonableness, a "significant searching or testing";

3. patent unreasonableness, where the issue is "left to the near exclusive determination of the decision-maker".

[28] This pragmatic and functional approach in determining the degree of deference to be accorded to the Appeal Tribunal involves a consideration of four contextual factors:

a) the presence or absence of a privative clause or statutory right of appeal;

b) the expertise of the Tribunal relative to a court on the issue in question;

c) the purposes of the legislation and the provision in question; and,

d) the nature of the question as one of fact, of law, or of mixed fact and law.

[29] We are guided and directed by the analysis of the Ontario Court of Appeal in Stetler and need not repeat that analysis in any greater detail. We appreciate the fact that the members of the board of the DFO, which heard this application, have a special expertise in the area of milk marketing, as do the members of the Appeal Tribunal. That, in itself, mandates a deference to which their decisions are entitled by this court. As well, the privative clause set out in s. 18 of the Ministry of Agriculture, Food and Rural Affairs Act requires that particular deference be paid to a decision of the Tribunal.

[30] Taking into full account the above noted principles, we conclude that the standard of review applied to a pure question of law is one of "correctness" and that the standard of review applied to questions of fact or mixed fact in law is one of "reasonableness simplicitor".

The Principal Issue - The Stay of Regulation 08/03

[31] The facts are essentially not in dispute. The evidence is clear and the applicants essentially concede that their conduct on the days in question in early April 2003 would constitute a contravention of s. 3 of Regulation 08/03 if such regulation was in effect during the relevant period. As noted above, the applicants plead that Regulation 08/03 had no force or effect and did not bind them with respect to their activities as a result of the appeal launched by IDDBA from the decision of the DFO on March 14, 2003, at least until the "stay in the matter" was suspended by the Appeal Tribunal at the prehearing conference on April 17, 2003. We disagree.

[32] The Appeal Tribunal ruled that any "stay in the matter" impacted only the named appellant on that appeal before the Appeal Tribunal, that appellant being IDDBA. Otherwise, expressed, the Tribunal concluded that the appeal launched by IDDBA (notwithstanding that IDDBA was a sole proprietorship operated by William Denby) did not shelter William Denby's activities as a dairy farmer or the activities of any of the other appellants. This court would go further. We conclude that the appeal by IDDBA did not, in fact, serve to "suspend" the restrictions or obligations imposed upon milk producers by s. 3 or any other provision of Regulation 08/03.

[33] The appellants rely upon s. 16(6) of the Ministry of Agriculture, Food and Rural Affairs Act and s. 25 of the Statutory Powers Procedure Act, R.S.O. 1990, c. S-22. Section 25(1) of the Statutory Powers Procedure Act provides as follows:

"25(1) An appeal from a decision of a Tribunal to a court or other appellant body operates as a stay in the matter unless,

a) another Act or a Regulation that applies to the proceeding expressly provides the contrary; or

b) the Tribunal or the court or other appellate body orders otherwise."

[34] Section 16 of the Ministry of Agriculture, Food and Rural Affairs Act is the authority for an appeal to the Tribunal, which decision is now before us for our consideration. Though reference was made in the material filed to an appeal to the Tribunal pursuant to subs. (1) of s. 16, this clearly was an appeal pursuant to subs. (2). Section 16(6) states as follows:

"Where, by virtue of subsection 25(1) of the Statutory Powers Procedure Act, an appeal under subsection (1) or (2) operates as a stay in the matter, the Tribunal may limit or define the scope of the stay."

[35] The appellants take the position that "a stay in the matter" means that Regulation 08/03 (or at least s. 3 thereof) was of no force and effect with respect to the appellant IDDBA or any of the parties (these appellants) who purported to shelter under the stay caused by IDDBA's appeal.

[36] As noted above, we disagree. A "stay in the matter", as intended by s. 25 of the Statutory Powers Procedure Act and by s. 16(6) of the Ministry of Agriculture, Food and Rural Affairs Act does not mean that a Regulation or any other legislation validly passed is suddenly rendered inoperative simply by virtue of an appeal launched by a litigant before an administrative tribunal. Otherwise expressed, such an appeal does not create a "legal vacuum" within which the litigant may operate with impunity in violation of the statute or regulation in question (see Metropolitan School Board v. Ontario (Minister of Education), 1985 2065 (ON SC), [1985] O.J. No. 1008, Morgentaler v. Ackroyd (1983), 1983 1748 (ON SC), 42 O.R.(2d) 659 (H.C.) and Canada (Attorney General) v. Gould, 1984 5301 (FCA), [1984] 1 F.C. 1133; 54 N.R. 232, affd. 1984 142 (SCC), [1984] 2 S.C.R. 124; 53 N.R. 394). This view is not inconsistent with the approach adopted by the Appeal Tribunal in the GBMC case. In that case, consistent with the Appeal Tribunal's direction that further consideration be given by appropriate regulatory authority to GBMC's position, the Tribunal directed that pending the determination of GBMC's position it be permitted to continue to conduct "business as usual". To direct otherwise could result in irreparable harm to GBMC with respect to its existing contract commitments. In the GBMC case a "stay in the matter" simply maintained the status quo that existed before the hearing by the DFO.

[37] In the case at bar there was no "business as usual" for IDDBA to conduct. It had no contractual commitments to producers or to customers, but simply had a proposal for business to be conducted in the future, subject to approval by the DFO. It was not necessary to "stay" or "suspend" any aspect of Regulation 08/03 to preserve the status quo.

[38] Further, following the decision of the appellant body of the World Trade Organization, the Commercial Export Milk (CEM) program was terminated. The Export Contract Exchange (ECE) no longer existed. The mechanism whereby IDDBA could have previously entered into its export contracts was no longer in operation. Thus, there was no "status quo" with respect to a mechanism for entering into export contracts which IDDBA could rely upon. The new regime was in accordance with Regulation 05/03, which came into effect on March 1, 2003, and then Regulation 08/03, which came into effect on April 1, 2003.

[39] In that regard, the regulation which the applicants say was "stayed" did not come into effect until some weeks after the appeal by IDDBA was launched from the decision of the DFO of March 14, 2003. Such appeal cannot suspend the operation of a regulation validly enacted, much less a regulation validly enacted after the appeal has been filed.

[40] To summarize, we conclude as did the Appeal Tribunal (although for different reasons) that the appeal launched by IDDBA from the decision of the DFO March 14, 2003 did not permit these applicants to "shelter" under a stay and to conduct their activities in violation of Regulation 08/03 with impunity. We conclude that the "stay in the matter" did not serve to suspend the force and effect of any provision of Regulation 08/03 with respect to any person or corporate entity, including IDDBA. A "stay in the matter" refers most certainly to the consequences of a decision of an administrative tribunal (unless pursuant to s. 25(1)(b) "the tribunal or the court or other appellate body orders otherwise"). A "stay in the matter" may refer to a maintenance of the status quo in terms of the conduct or entitlement of a party. It does not, to repeat ourselves for emphasis, result in the automatic "suspension" of legislation validly enacted or to be enacted in the future. To suggest otherwise would be patently illogical.

[41] The determination of whether Regulation 08/03 or s. 3 thereof was suspended as a result of IDDBA's appeal of the DFO decision of March 14, 2003 is purely a question of law. Although we do not concur with the reasons given by the Appeal Tribunal for concluding that these appellants did, in fact, act in contravention of s. 3 of Regulation 08/03, we agree with the result. Regulation 08/03, and specifically s. 3 thereof, did, in fact, bind the conduct of the appellants. A consideration of the evidence before the Tribunal involves a question of fact or, at best, of mixed fact and law. We conclude there was ample evidence upon which the Tribunal could conclude that the appellants were in violation of s. 3 of Regulation 08/03 during the relevant period. Otherwise expressed, the decision of the Tribunal was reasonable and there is no basis for interfering with that decision as to "culpability" by this court.

The Other Grounds of Appeal

[42] The appellants have raised other specific grounds of appeal. They are:

1. the failure to consider relevant evidence (the "letter in the Fennell case");

2. an error in the standard of proof applied by the Tribunal in determining the appellants' violation of Regulation 08/03;

3. procedural unfairness in requiring the appellants to proceed first in their production of evidence before the Tribunal;

4. a reasonable apprehension of bias on the part of the Tribunal (specifically with respect to Dr. O'Connor, a member and vice-chair of the Tribunal, whose brother is a dairy farmer, and permitting Mr. Coukell, the chair of the DFO board hearing, to testify before the Tribunal); and finally,

5. the Tribunal's alleged consideration of evidence relating to impropriety on the part of the applicants outside the dates specified in the notices of hearing.

We conclude that none of these grounds of appeal justify interference by this court with the decision of the Tribunal.

[43] With respect to the allegation of the failure to consider relevant evidence (the "Fennell letter"), this letter was admitted in evidence before the Tribunal but cross-examination upon it was apparently limited. We conclude that the probative value of the letter apparently evidencing the DFO's opinion with respect to the effect of a stay in another matter was completely irrelevant. It was up to the Tribunal to determine the effect of a "stay" in this case, just as it was for this court to determine the effect of such "stay" on this judicial review.

[44] With respect to the concerns expressed by the applicants that the Tribunal failed to apply a higher "standard of proof beyond a mere "balance of probabilities", given that the applicants were accused of "quasi-criminal" conduct with potential severe consequences (which consequences ultimately befell them), we conclude that these concerns are without foundation. To put it simply, the conduct which formed the basis for the decision by the Tribunal was essentially admitted by the applicants from the onset. There was no question of establishing that the applicants transported milk with a view to possibly marketing it in the United States. Either on a preponderance of the evidence or beyond a reasonable doubt, the applicants essentially admitted that they had done so. They simply pleaded that they were entitled to do so because the operation of s. 3 of Regulation 08/03 had been stayed. The Tribunal concluded, and this court has concluded (albeit for different reasons), that s. 3 was not stayed. Thus, the issue of standard of proof becomes academic.

[45] With respect to the issue of procedural unfairness, the applicants plead that since this was a quasi-criminal proceeding and since the hearing before the Appeal Tribunal was, in effect, a "trial de novo", the DFO should have been required to produce its case first, with the applicants responding. Instead, the Appeal Tribunal required the appellants (these applicants) to proceed first. Rule 12.02 of the Tribunals Rules of Procedure permits the presiding members of the Tribunal to determine the procedure at an oral hearing. Subject to general compliance with the Tribunals Rules and any applicable statute, we conclude that as long as the applicants were given a fair opportunity to present their case to the Tribunal, whether they proceeded first or second, and if they proceeded first with a fair right of reply, then they cannot complain of procedural unfairness. This court has an obligation to give appropriate deference to the Appeal Tribunal with respect to the manner in which the Tribunal chooses to conduct its proceedings. We see nothing in the material submitted on this application for judicial review which would suggest that the applicants received less than a fair hearing before the Tribunal. We therefore conclude that this ground of appeal is without foundation.

[46] Neither do we see any merit in the context of this case to the applicants' submission that there is a reasonable apprehension of bias on the part of the board of the DFO or, more particularly, on the part of any member of the Appeal Tribunal. The very nature of administrative tribunals and the DFO and Agriculture, Food and Rural Affairs Appeal Tribunal in this case requires that they be composed of persons of special expertise or experience in the related industry. It is inevitable that there will be some connection, some relationship, on occasion between a member of an Appeal Tribunal and someone else in the industry. The mere fact that Dr. O'Connor, a member and vice-chair of the Tribunal, has a brother who is a dairy farmer, is no basis for suggesting a reasonable apprehension of bias on his part. Neither, within the context of the industry, is the fact that the DFO is both the regulatory and disciplinary body a basis for apprehending bias on the part of the hearing board. In any event, the decision of that board is, and was, subject to a hearing of the Appeal Tribunal and ultimately to judicial review by this court. Finally, the fact that the chair of the DFO board hearing, Mr. Coulkell, testified before the Appeal Tribunal does not lead to a reasonable apprehension of bias in the circumstances. Although there is no formal record of the hearing before the Appeal Tribunal, it appears to be conceded that Mr. Coulkell testified principally to the policies of the DFO. Particularly given the admission of facts by the applicants, the conduct of Mr. Coulkell at the Appeal Tribunal hearing could not have affected the ultimate determination by the Tribunal.

[47] Finally, the applicants plead that the Tribunal considered evidence of impropriety or violations of Regulation 08/03 beyond the scope of the dates as set out in the notice of hearing. There may well have been evidence put before the Tribunal of events beyond the specific dates stated in the notices of hearing as served upon the applicants. However, we are satisfied that any evidence related to events outside the dates specifically stated in the notices of hearing was simply to provide context. No evidence was considered by the Tribunal which was unfair to the applicants. We might note paragraph 84 of the factum filed by the applicants on this application for judicial review. Paragraph 84 states as follows:

"At the hearing before the Tribunal, the applicants testified that a tanker of milk was sent to the Windsor border crossing on April 6, 2003, and was eventually shipped to Wisconsin and ultimately disposed of. Subsequent to the hearing, the applicant Bill Denby, reviewed his notes and records, and determined the tanker of milk referred to in paragraph 34 was actually returned to his farm and partially dumped on the field. The tanker was topped up with fresh milk and shipped on or about April 8, 2003 and it was this tanker that reached Wisconsin where it was. eventually dumped."

[48] As noted above, the evidence clearly supports a reasonable conclusion reached by the Tribunal that the very activity stipulated in the appellants' factum was with a view to the possible sale of the milk in the tanker which was at least in some part milk from each of the applicants' dairy operations. Apart from the appropriate deference which this court must accord to the procedure adopted by the Tribunal and its approach to a determination of the issues, given the uncontested facts in this case and this court's determination of the principal legal issue (whether the operation of Regulation 08/03 was stayed during the relevant period), it is clear that none of the other issues raised by the applicants, if dealt with in a different fashion, could have or would have changed the result. The appeal, by way of judicial review by the applicants, with respect to the findings of liability by the Agriculture, Food and Rural Affairs Appeal Tribunal, is therefore dismissed. It now remains for the court to consider the issue of the penalty imposed by the Appeal Tribunal.

The Issue of Penalty

[49] As noted above, the Appeal Tribunal reduced the cancellation of milk quota with respect to Betty, John and Bill Denby from 10 kilograms of quota fixed and allotted to 6 kilograms of quota fixed and allotted. With respect to the other applicants, the loss of quota was reduced from 5 kilograms to 2.5 kilograms of quota fixed and allotted. The Appeal Tribunal accorded a greater period of time to the applicants to dispose of their remaining quota but directed that such quota would be offered for sale or sold through the DFO quota exchange by March 31, 2004. Effective that date, any quota not sold on the exchange was to be cancelled by the DFO. As well, no production credits could be accumulated or used by the applicants. Finally, the Appeal Tribunal confirmed the cancellation of the licences to produce or market milk as directed by the DFO but, again, extended the time (from June 1, 2003 as directed by the DFO) to the last date on which the appellants held the quota or March 31, 2004, whichever came first.

[50] The DFO clearly has authority in accordance with Ontario Regulation 354/95 pursuant to the Milk Act to both cancel quota and to cancel the licence of a dairy farmer to carry on his business. Section 5 of Regulation 354/95 provides a delegated authority to suspend or revoke a licence "where the applicant or licensee has failed to comply with or has contravened a provision of the Act, the regulations, the plan or an order or direction of the commission, the marketing board or a marketing agency of Canada;". Section 6, paragraph o delegates authority to the marketing board (the DFO) to cancel a quota fixed and allotted to a person for the marketing of milk or cream "for any reason that the marketing board considers proper".

[51] Particularly in the area of penalty or sanction, this court must accord appropriate deference to the decisions both of the DFO and the Appeal Tribunal. These bodies, and the persons who comprise these bodies, by definition have an expertise in the area of the dairy industry and a particular awareness of penalties that are appropriate and necessary to sanction inappropriate conduct. Applying such deference and respecting the decision of the Appeal Tribunal, which varied the penalty imposed by the DFO, we choose not to interfere with the penalty directed by the Appeal Tribunal with respect to the cancellation of quota fixed and allotted, that being 6 kilograms of quota fixed and allotted to Betty, John and William Denby, and 2.5 kilograms of quota fixed and allotted to Isobel and Wayne Hope, as well as 2.5 kilograms of quota fixed and allotted to Dale McFeeters and Darmar Farms. From submissions of counsel we understand that the value of 1 kilogram of quota fixed and allotted on the exchange is worth a minimum of $26,000. That being so, the penalty imposed by the Appeal Tribunal with respect to Betty, John and William Denby amounts to $156,000. The penalty imposed on Isobel Hope and Wayne Hope, as well as upon Dale McFeeters, is $65,000 with respect to each of their farming operations. This is, indeed, a significant financial penalty. We might note in passing that s. 21 of the Milk Act, which provides the following general penalty for breaches of the Act or regulations, states:

"21. Every person who contravenes this Act or the regulations, or any plan or any order or direction of the commission, the director or any marketing board, or any agreement or award or re-negotiated agreement or award declared to be enforced by the Commission, or any by-law under this Act, is guilty of an offence and on conviction is liable for a first offence to a fine of not more than $2,000 for each day that the offence continues and for a subsequent offence to a fine of not more than $10,000 for each day that the offence continues."

[52] This general penalty, which is or would be insignificant as compared with the penalties imposed upon the applicants, we simply note in passing.

[53] It is clear that the infractions of Regulation 08/03 committed by the applicants, and particularly by William Denby, are significant and deserving of significant sanction. On the evidence, Mr. Denby in particular taunted the DFO, proclaiming loudly his intention not to abide by Regulation 08/03 and brazenly flouted the new scheme to regulate milk marketing in Ontario as enacted by Regulation 08/03. However, neither William Denby nor any other of the applicants has a record for violations of the Milk Act or any other act or regulation governing the production and marketing of milk in Ontario. As well, it was acknowledged in the hearing before this court that having been permitted to keep their licences and to continue the operation of their dairy farms pending the hearing of this application for judicial review, there have been no reported violations of the Act or regulations in the interim (that is, over the past three years).

[54] This court therefore concludes that to prevent these applicants from carrying on as dairy farmers by the forced sale of their remaining quota and by the cancellation of their licences is an unjust and inappropriate penalty. It is, in our view, disproportionate to their violations of Regulation 08/03, which violations were serious but brief in duration. The significant financial penalties imposed by the loss of quota fixed and allotted should serve as sufficient deterrent to these applicants and to other dairy farmers in Ontario. These penalties, we are satisfied, will be a reminder that the regulations crafted by the DFO must be obeyed. The further penalties imposed initially by the DFO and then confirmed by the Tribunal and the Minister are patently unnecessary and unreasonable.

[55] In the result, we direct that the applicants are not required to offer for sale or to sell their remaining quota on the DFO quota exchange and neither is the DFO to cancel their producer licences (number 585343, number 60984 and number 621561) as a result of their violations of Regulations 08/03 April 2003.

The Decision of the Court

[56] For the reasons given above, we conclude the DFO and the Appeal Tribunal were correct in determining that the applicants were in violation of regulation 08/03 as alleged in their notices of hearing. However, we vary the penalty as directed by the Appeal Tribunal, to be imposed on these applicants to be limited to the following:

1. the DFO is to cancel 6 kilograms of the quota fixed and allotted to producer number 585343 (Betty, John and William Denby);

2. the DFO is to cancel 2.5 kilograms of the quota fixed and allotted to producer number 604984 (Isobel and Wayne Hope);

3. the DFO is to cancel 2.5 kilograms of the quota fixed and allotted to producer number 621561 (Darmar Farms Inc.).

[57] If the parties wish to address the issue of costs of this application for judicial review, they may do so in writing within 60 days of publication of this judgment.

Application allowed in part.