COURT FILE NO.: 115/07

DATE: 20080325

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

CUMMING, SWINTON AND ECHLIN JJ.

B E T W E E N:

AYLMER MEAT PACKERS INC.

Applicant

• and -

HER MAJESTY IN RIGHT OF ONTARIO, MINISTER OF AGRICULTURE AND FOOD (ONTARIO), AGRICORP, THE NATIONAL CAIS COMMITTEE - ONTARIO APPEALS SUB-COMMITTEE

Respondents

Paul Michell and Amy Salyzyn, for the Applicant

Robert Ratcliffe, for the Respondents

HEARD at Toronto: February 26, 2008

SWINTON J.:

1The applicant Aylmer Meat Packers Inc. (“Aylmer”) has brought an application for judicial review of the Recommendation of the National CIAS Committee – Ontario Appeals Sub-committee (the “Committee”) dated September 28, 2006, which upheld the decision of the Canadian Agriculture Stabilization (“CAIS”) Administration awarding the applicant a benefit of $274,313 for the 2003 program year.

2The applicant challenges the Recommendation on two grounds: first, the Committee made a jurisdictional error in making findings of fact without evidence; and second, a reasonable apprehension of bias has arisen from the way in which the Committee conducted its deliberations.

Background

3The applicant carries on operations as a brokerage and beef feedlot operation in Ontario. It made an application in 2003 for benefits under the CAIS program, a joint federal-provincial program designed to stabilize farm income. Feedlot cattle, but not brokered cattle, are eligible to be included under the program.

4The Government of Canada delivers the CAIS program in six provinces and two territories. However, the Ontario government has elected to administer the program provincially. Agricorp, a Crown corporation and agent of the Crown, has the responsibility to deliver the CAIS program in Ontario (the “Administration”).

5The purpose of the CAIS program is to provide protection to farmers from income fluctuations resulting from risks outside their control, such as weather, disease and low market prices. CAIS payments are made to farmers when their income in the year of application has fallen below their average income in past years.

6The formula for the award of compensation is complex. First, the income of a farmer in the year of application (“program year income”) is measured by deducting production expenses from farm sales. This gives the “production margin.”

7Second, the “reference margin”, or historic income, must be determined. The CAIS program looks at the farmer’s production margins for each of the last five years and then takes an “olympic average” – that is, the highest and lowest margins are dropped, and the remaining three margins are averaged.

8Finally, if the production margin falls below the reference margin, a payment is triggered.

9To account for changes in income that are within a farmer’s control (for example, an increase in the number of cattle or acreage used), a “structural change adjustment” is made to the reference margin. The reference margin is modified based upon the change in the farmer’s “productive capacity” between the program year and the previous five years. “Productive capacity” is defined as the “productive units” of the farm – here, for example, the number of cattle.

10The structural change calculation is achieved by looking at each year in the reference period and calculating the difference between the productive units in that year and the number of units in the program year. This difference is then converted into a dollar amount by using the “Basic Production Unit” (“BPU”) in that reference year for the commodity being dealt with. That figure is then added to or subtracted from the margin for the applicable reference year.

11The BPU is described by the CAIS program as representing the typical or expected production margin (a dollar amount resulting from subtracting production expenses from farm sales) that could be generated from one unit of a particular commodity. The BPU is said to be based upon industry averages.

12The CAIS program initially rejected the applicant’s claim for benefits for the 2003 program year. In a decision dated May 4, 2005, the Administration indicated that there was a lack of satisfactory evidence for the breakdown between brokered cattle and feedlot cattle for the reference period and the 2003 program year.

13The applicant’s agent, Don Lindsay, an accountant, wrote to the Administration on June 2 and June 13, 2005 seeking information about the criteria used to determine eligibility and the appropriate payments for those with a feedlot as well as some brokered cattle.

14On June 20, 2005, Mike McMorris, Director, Operations, Agricorp sent a letter in response, referring to a Canada Revenue Agency bulletin which he indicated was followed by the CAIS program. The bulletin defined feedlot cattle as those which are held for an average of 60 days or which experience a weight gain of at least 200 pounds.

15Relying on this information, the applicant submitted an amendment request on October 4, 2005 and provided additional information to the Administration. The applicant calculated that it was entitled to a benefit of $756,997.

16The Administration accepted the applicant’s submission that the number of feedlot cattle was properly established. In a decision dated January 16, 2006, the Administration informed the applicant that it would be eligible for a program benefit of $274,313. The letter stated that “[t]he number of cattle fed on your feedlot was based upon an average gain of 600 pounds”.

17The use of a 600 pound standard had the effect of dividing the eligible production units in the 2003 program year and in each reference year by approximately a third for the purpose of the structural change calculation. As a result, the applicant appealed to the Committee on the basis that the Administration had wrongly applied a standard of 600 pounds of weight gain in its calculations. Mr. Lindsay, the applicant’s agent, testified during cross-examination on an affidavit in this proceeding that in his experience with approximately 60 CAIS applications, the applicant’s claim was the only one in which the standard of 600 pounds of weight gain was used.

18The Administration filed an Appeal Brief in which it explained the calculation. While the 200 pound weight gain is used to determine eligibility for the program, the program also uses a BPU standard based on one production unit equating to 600 pounds of weight gain when it performs its structural change calculations. Therefore, it was necessary to divide the eligible production units in the application by three, given the 200 pound weight gain.

19The CAIS Program Guidelines permit the Administration to use alternative methods when determining structural change. They provide that:

Where the standard structural change adjustment cannot be calculated, or if in the opinion of the Administration, the standard structural change adjustment does not accurately reflect the structural change of the farming operation, alternate methods of calculating structural changes may be applied by the Administration.

20The Committee, composed of five producer members, met on September 13, 2006. Mr. Lindsay and Richard Clare, one of the applicant’s controlling shareholders, attended the hearing and made representations on behalf of the applicant. The CAIS Administration did not make oral submissions.

21Stephen Duff, a senior policy advisor with the Ministry of Agriculture, Food and Rural Affairs, attended the hearing. According to his affidavit, he is the lead staff person at the Ministry responsible for policy development and the implementation of the CAIS program. He also acted as an advisor to the CAIS Administration on policy matters. During the hearing, he sat at the front of the room with the Committee members. He then retired with the members to assist them by answering questions and providing them with information about CAIS policy, as required.

22On September 28, 2006, the Committee issued a “Recommendation” that the decision of the Administration be upheld. It made findings that the applicant agreed with the split between the number of feedlot and brokered cattle, and that the applicant’s animals gained 200 pounds on average. It also found that the BPUs for feedlot cattle are based on 600 pounds of weight gain, and that “[o]ther feedlot producers with over 600 pounds of gain are adjusted upwards, while producers with less than 600 pounds of gain are prorated downwards”. Therefore, the Committee recommended that the decision be upheld, but also recommended that the Administration should communicate more clearly how prorated BPU calculations are arrived at for feedlot cattle.

Issues

23The applicant raises two issues:

1. Did the Committee err in law or make a jurisdictional error by making factual findings in the absence of evidence?

2. Is there a reasonable apprehension of bias arising from the participation of Mr. Duff in the Committee’s deliberations?

Analysis

24I shall deal with the second issue first, as in my view, the applicant must succeed on this ground for judicial review.

25The test for a reasonable apprehension of bias has been articulated by the Supreme Court of Canada as follows:

[T]he apprehension of bias must be a reasonable one held by reasonable and right minded persons, applying themselves to the question and obtaining thereon the required information. In the words of the Court of Appeal that test is “what would an informed person, viewing the matter realistically and practically – and having thought the matter through – conclude. Would he think that it is more likely than not that [the decision-maker], whether consciously or unconsciously, would not decide fairly?

(Committee for Justice and Liberty v. National Energy Board, 1976 2 (SCC), [1978] 1 S.C.R. 369 at 394, quoted with approval in Wewaykum Indian Band v. Canada, 2003 SCC 45, [2003] 2 S.C.R. 259 at para. 60).

26A reasonable apprehension of bias has generally been found where an individual with a connection to one side of a dispute remains with the tribunal during its deliberations (Re Gal Cab Investments and Liquor Licensing Board (1986), 1986 3990 (NWT CA), 34 D.L.R. (4th) 363 (N.W.T.C.A.) at p. 369). At the time of the applicant’s appeal, Mr. Duff was the senior policy advisor on the CAIS program for both the Ministry and Agricorp, the Administrator of the program. Given his role as a policy advisor to the Administration, the fact that he retired with the Committee hearing the applicant’s appeal in order to provide information during their deliberations gives rise to a reasonable apprehension of bias.

27The respondents rely on the decision of the Supreme Court of Canada in International Woodworkers of America, Local 2-69 v. Consolidated Bathurst Packaging Ltd., 1990 132 (SCC), [1990] 1 S.C.R. 282 for the proposition that a quasi-judicial tribunal can discuss policy issues with someone outside the hearing. They submit that there is no appearance of bias here, because the Committee is part of an administrative process only, and Mr. Duff was acting as a member of the Ministry, not of the Administration, when he retired with the Committee to provide policy advice.

28The facts in Consolidated Bathurst are very different from those in the present case. There, a panel of the Ontario Labour Relations Board had conducted a “full board” meeting, in which other members of the Board and staff, who had not participated in the hearing of a particular complaint, discussed the broader policy implications raised by the complaint (at paras. 78, 80). In contrast, in the present case, policy advice is being given by an individual who is a policy advisor to one of the parties to the dispute, and he is giving advice to assist in the determination of a particular appeal.

29While I agree with the submission that the Committee is part of an administrative process, nevertheless, it plays an appellate role. Therefore, it has a responsibility to decide the matters before it impartially and without an appearance of bias. Where the policy advisor to the Administration retires with the Committee hearing the appeal, a reasonable person would conclude that it is likely that the Committee, consciously or subconsciously, is likely to be influenced by his advice, given in the absence of the appellant.

30The respondents submit that there is no evidence that the advisor actually exercised any influence over the Committee or tried to influence their decision in this case. However, it is sufficient that there was an appearance of unfairness resulting from his presence, such that a reasonable person would conclude that there was a reasonable apprehension of bias (Gal Cab, supra at 370).

31Given that there is a reasonable apprehension of bias, the Recommendation of the Committee must be set aside. A decision reached in circumstances where there is a reasonable apprehension of bias is invalid (Newfoundland Telephone Company Limited v. Newfoundland (Board of Commissioners of Public Utilities), 1992 84 (SCC), [1992] 1 S.C.R. 623 at 645).

32Given that conclusion, it is not strictly necessary to deal with the applicant’s alternative argument about the lack of evidence underpinning the Committee’s factual findings. However, it may assist the parties in the future if this issue is addressed at this time.

33After the applicant launched its appeal, the Administration sent a letter dated July 19, 2006 outlining the process before the Committee. The letter described the Committee’s mandate and method of operation, noting that the Committee would review statements and documents, as assembled in the enclosed brief, to determine if the program guidelines had been applied in a fair and consistent manner.

34Appended was a summary of the Administration Actions, which included an explanation of the structural change adjustment and the BPU used. Reference is made to the BPU for slaughter cattle, which is “based on the normal industry income and expenses related to a beef animal that has gained 600 pounds of gain prior to sale.”

35The Administration set out its position, stating that prorating production units to equate to 600 pounds for structural change is common. The submission indicated, as well, that there was no BPU based on 200 pounds of gain available in the calculation software.

36The Committee had this material before it. In addition, it heard oral representations from the applicant through Mr. Clare and Mr. Lindsay. From the minutes of the hearing, it is evident that the proceeding was quite informal.

37In my view, the Committee was not required to hear oral evidence under oath or affirmation before making its decision. While it exercised an appellate function, it did so as part of an administrative process to determine whether the applicant qualified for a benefit under the CAIS program. The Committee had before it the written position of the Administration on the one issue in dispute – the structural change adjustment and the appropriate BPU, and it heard representations from the applicant. In making its findings and reaching its decision based on the written material and the representations, it did not make a jurisdictional error or an error of law on the face of the record.

Conclusion

38The application for judicial review is granted on the grounds of reasonable apprehension of bias. The Recommendation of the Committee is set aside, and the appeal of the applicant with respect to the 2003 program year is remitted to be heard by the Committee. Costs to the applicant are fixed at $15,000.00 all inclusive, as agreed by the parties.

Swinton J.

Cumming J.

Echlin J.