minicounsel

COURT FILE NO.: 11-52407

DATE: 2013/08/16

BETWEEN:

Laplante Poultry Farms Limited

Applicant

– and –

Riverview Poultry Limited and

The Chicken Farmers of Ontario

Respondents

Benoit M. Duchesne, for the Applicant

Arlen K. Sternberg, for the Respondents

HEARD: November 22 and December 18, 2012 and March 8, 2013

1The applicant, Laplante Poultry Farms Limited (“Laplante”) commenced this application in September, 2011 seeking:

(a) a declaration that Laplante conditionally purchased all of the interest of Remy Poultry Ltd. (“Remy”) in any right to the interprovincial purchase of live chicken on the Ontario-Quebec interprovincial market for live chickens which may be allocated to Remy (“Remy Interprovincial Quota”) by the Chicken Farmers of Ontario (“CFO”) pursuant to a January 26, 2011 agreement (“IPM Agreement”) between the CFO, the Eleveurs de Volailles du Quebec (“EVQ”) the Association of Ontario Chicken Processors (“Ontario Processors Ass.”) and the Association des Abattoirs Avicoles du Québec (“Quebec Abatt. Ass.”);

(b) a declaration that Riverview Poultry Limited (“Riverview”) has not purchased any right or interest to the Remy Interprovincial Quota; and

(c) an interlocutory injunction retraining the CFO from dealing with, allocating or deciding to allocate or distribute the kilograms to which Remy may be entitled to pursuant to Article II of the IPM Agreement.

2Laplante discontinued this application against the CFO in May, 2012.

3At Riverview’s request Master MacLeod on August 20, 2012, bifurcated this application requiring this court to first determine whether this action is premature and in the wrong forum prior to hearing and determining the merits of the application. This preliminary issue was argued on the above dates.

SUMMARY OF PARTIES’ POSITION AS TO PRELIMINARY ISSUE

4This preliminary objection is presented by Riverview which has the onus to establish the validity thereof.

5Riverview submits that:

(a) the dispute in this application is in respect to the calculated base and supply allocation granted Laplante by the CFO. It is not, as submitted by Laplante, a dispute about contract law or contractual interpretation of contracts between Remy and Laplante and Remy and Riverview;

(b) the calculated base allocation to Laplante and to Riverview is determined within a legislative scheme and is within the exclusive jurisdiction of the CFO;

(c) in the alternative, if the CFO and this court have concurrent jurisdiction, it is appropriate to first defer the matter to the jurisdiction of the CFO;

(d) this application is a collateral attack to the quota allocated by the CFO to Laplante. It is an attempt to obtain a favourable declaration by the courts as to what processors contractually sold and brought to leverage an increase by the CFO in Laplante’s quota potentially through the reduction of quota allocated to Riverview;

(e) Laplante has not exhausted its available administrative remedies within the legislative framework. This application is premature and amounts to a collateral attack on the administrative process and the supply allocation decisions of the CFO; and

(f) this application amounts to an abuse of process and should be dismissed.

6Laplante submits that:

(a) the issues in this application involve the interpretation of contractual rights provided for in contracts between chicken processors, to which the CFO is not a party;

(b) the CFO has no legislated jurisdiction to control or regulate contracts between processors with respect to an intangible right to a chicken supply entitlement. The jurisdiction of the CFO is limited to the determination of regulated rights provided for in the legislation;

(c) the legislated jurisdiction of the CFO does not include determination of what rights are contracted for in agreements between processors, namely what was contractually sold by a processor and to whom;

(d) determination of contractual rights in agreements between processors is a question of contractual interpretation which falls squarely within the jurisdiction of the courts; and

(e) Riverview has failed to meet its heavy onus to justify this court declining jurisdiction on the issues in the application. Riverview’s preliminary objection to jurisdiction should therefore be dismissed.

BACKGROUND

7The chicken industry generally, consists of producers and processors. Producers grow chickens, processors slaughter them. Processors must have a CFO Class A licence as described in s. 17 of Ontario REGULATION 402. These parties are processors.

CHICKEN FARMERS OF CANADA

8The Canadian chicken industry is heavily regulated. The regulatory scheme includes legislations, regulatory bodies and agreements at the Federal and Provincial levels.

9A 2001 Federal-Provincial agreement created a regulatory scheme between those two levels of government. The national body regulating chicken supply management is the Chicken Farmers of Canada (CFC). The CFC sets a chicken production quota per Province.

10Provincial regulation includes legislation, regulations and legislatively created bodies to carry out the directives and governance as legislated.

CANADIAN FARMERS OF ONTARIO

11Each Province through its agencies, allocates the provincial chicken quota assigned by the CFC among chicken producers within that jurisdiction. The calendar year is divided into eight week blocks or quota periods.

12The CFO is the chicken marketing board in Ontario. It represents approximately 1100 chicken farmers and is Ontario’s quota allocation agency for producers and processors of chickens.

13Allocation levels to producers are determined every 8 weeks. Producer’s quotas limit the number of chickens the licensee may produce within each 8 week period.

14CFO administers a quota system to ensure that Ontario’s chicken farmers produce the volume allocated to that province. CFO’s licensing of producers and allocation of quota thereby limits the quantity of chickens licensees may produce.

15The EVQ is Quebec’s equivalent of the CFO.

ONTARIO PROCESSORS

16CFO also licences Ontario processors and limits by assigned quota the quantity of chicken processors may slaughter.

17CFO’s negotiates with licensed Ontario chicken processors the price to be paid by processors to Ontario chicken producers.

18Ontario processors historically purchased grown chickens from Ontario or from Ontario and Quebec chicken producers under supply contracts. Contracts are entered into pursuant to which producers sell and processors buy specific quantities of chicken. Such contracts do not alter the quota allocation set by the CFO for that producer or processor.

19Quota allocated by provincial agencies to producers and processors are a valuable asset to producers or processors but limit one’s market share during the period of the quota.

20Ontario chicken producers are required to obtain approval of the CFO to sell Ontario produced chickens out of Province. EVQ has similar requirements before Quebec produced chickens may be sold to Ontario purchasers.

LEGISLATIVE FRAMEWORK IN ONTARIO

21The umbrella legislation regarding Ontario chickens is the Ministry of Agricultural, Food and Rural Affairs Act, R.S.O. 1990 CHAPTER M. 16 (“Agricultural Food Act”).

22One purpose of the Agricultural Food Act is to control and regulate the processing of the chicken in Ontario.

23The control and regulation of the processing of chicken in Ontario under the Agricultural Food Act is done pursuant to a plan recommended to and approved by the Minister. A plan for chickens is created under R.R.O. 1990, REGULATION 403 of the Marketing Act. That plan includes the establishment of a local board. The Lieutenant Governor and Counsel may make regulations establishing a chicken plan.

24The Agricultural Food Act creates the agricultural Food and Rural Affairs Appeal Tribunal (“Tribunal”) and the Ontario Farm Marketing Commission (“Commission”).

25The Commission under the Agricultural Food Act may:

(a) settle any dispute relating to the processing of chicken;

(b) investigate any matter relating to chicken processing, conduct hearings in relation thereto and investigate matters relating to chicken processing;

(d) delegate such of its powers considered necessary to a local board;

(e) make regulations with respect to chicken, the terms and conditions of any licence processor and may prohibit a person from processing chicken except under the authority of a licence;

(f) prescribe the form of licences, the processing of chicken on a quota basis and the prohibition of processing in excessive quota; and

(g) make regulations for the control and regulation of agreements entered into between chicken producers and processors.

26The CFO is the local board pursuant to R.R.O. 1990, REGULATION 402 under the Marketing Act. The CFO is a body corporate.

27The Commission under REGULATION 402 delegates to the CFO its powers to:

(a) make regulations with respect to the licensing of chicken processing;

(b) make the class and form of such licenses;

(d) grant, suspend or revoke a license;

(e) provide for the control and regulation of the processing of chicken;

(f) provide for the control or regulation of agreements entered into between chicken producers and chicken processors;

(g) prohibit any person from processing chicken not sold by or through the CFO;

(h) provide for the making of agreements relating to the processing of chicken through the CFO, and

(i) prescribe the terms and conditions of such agreements as well as making orders or directions to enforce observance and carrying out of the Marketing Act.

28The Commission under REGULATION 402 vests in the CFO the power to:

(a) require the chickens be processed on a quota basis and on such basis as the CFO considers proper;

(b) fix and allocate quota of chicken to a processor;

(d) cancel, reduce or refuse to increase a chicken quota allocated to a processor for any reason the CFO considers proper;

(e) investigate, adjust or settle any dispute regarding the processing of chicken between processors; and

(f) investigate the management policies and other matters related to the processing of chicken.

29Orders, decisions, policies made by regulation under the Farm Product Marketing Act, R.S.O. 1990, CHAPTER F. 9 (“Marketing Act”), may be appealed to the Tribunal. The Tribunal may order a commission or local board to take action within its jurisdiction. The Tribunal alternatively may reopen a hearing commenced before that local board, conduct a hearing and make any order that the local board or commission could have made relating to management policies or the marketing of chicken product.

CFO 2005 POLICY

30The CFO from time to time issued Quota Policies which define, determine, and provide for the distribution of supply and the setting of quota limits for Ontario processor. An example is CFO’s December 2005 Supplemental Quota Policy No. 171-2005 (“2005 Policy”) effective May 28, 2006.

31Remy and Laplante are each listed as Ontario processors in the 2005 Policy. Laplante, incorporated in 2005, is not listed among the Ontario processor in the 2005 Policy.

32The 2005 Policy states that the CFO will distribute per Ontario processor, the quantity of chicken each processor is authorized to purchase through the CFO and that each processor is to have a fixed calculated base or quota as of May 2006. This policy also provides for adjustments to processors calculated base over time by the CFO.

33The 2005 Policy contains procedure and requirements for parties wishing to become chicken processors in Ontario.

34This 2005 Policy provides that an Ontario processor may apply to the CFO for approval to transfer calculated base to another processor and if approved, the purchaser receives that calculated base pursuant to the 2005 Policy and the other regulations and policies of the CFO. If approved, the transferred calculated base will be added to the existing calculated base of the purchaser processor.

35The 2005 Policy further states the CFO may make orders and directions in relation to or adjunct to this 2005 Policy.

THE PARTIES, REMY AND THEIR CONTRACTS

36Remy was an Ontario processor of chicken.

37Remy historically held several chicken supply contracts with both Quebec and Ontario chicken producers.

38Within the context of this action, Remy entered into one contract with Riverview and two contracts with Laplante.

REMY – LAPLANTE CONTRACT #1

39On December 31, 2008, Laplante entered into the first of two contracts with Remy. Remy at the time held contractual supply rights to some 300,000 kgs of chicken with several Quebec producers. Remy in addition had contracted to purchase some 900,000 kgs of Quebec produced chickens in the future.

40Under this Contract #1:

(a) Remy acknowledged that Laplante would replace Remy in the future in the purchaser of Remy’s future Quebec produced chicken volume;

(b) Laplante assumed Remy’s obligation to purchase the future 900,000 kgs contracted for by Remy; and

(c) Remy’s Quebec purchasing agent, for consideration, agreed to and ceased acting for Remy and began acting as Laplante’s purchasing agent of Quebec chickens.

41Pursuant to Contract #1, Remy ceased its purchase of Quebec produced chickens in April, 2009.

42Remy continued after April, 2009 as an Ontario processor with a calculated base allocated by the CFO.

MORATORIUM

43Historically, there was a substantial quantity of chickens produced in Ontario and sold to processors in Quebec as well as chickens produced in Quebec that were sold to processors in Ontario.

44In January, 2010, the CFO created a moratorium or freeze, as to new supply agreements and chicken quantities which could be sold by Ontario producers to out-of-province processors. The EVQ enacted similar restrictions in Quebec regarding the sale by Quebec chicken producers to processors outside that province.

45This joint freeze was part of a regulatory review of the chicken industry in Quebec and Ontario which ultimately led to an agreement in those provinces between each provincial regulator.

46Laplante obtained a processor’s licence from the CFC in February, 2010. Prior to 2010, Laplante held a Dealer’s licence from the CFC which permitted it to market chicken.

47Laplante bought an Ontario processing plant in March, 2010 but did not then hold a CFO’s processor’s licence with an allocated supply quota.

REMY – RIVERVIEW CONTRACT #2

48In April, 2010, Remy sold its calculated base to Riverview for some $6,000,000. Mr. Chan in his affidavit as the principal officer of Remy, states that this sale and purchase agreement with Riverview was one page in length. This agreement is not however before the court.

49Mr. Chan states that this sale of calculated base to Riverview is only the sale of Remy’s Ontario produced chickens base but not its historical Quebec chicken volume.

50Remy as required under CFO Policy upon signing Contract #2, submitted an application to the CFO for approval to transfer its calculated base of 529,696 kilograms to Riverview. The CFO approved this sale by Remy and purchase by Riverview of this calculated base on May 11, 2010.

51According to Mr. Chan’s affidavit, Riverview, subsequent to Contract #2, told Remy it wished to process or have all of Remy’s Quebec chicken volume sent to Riverview. Remy replied it no longer had any direct Quebec purchase volume and referred Riverview to Laplante.

REMY – LAPLANTE CONTRACT #3

52Remy and Laplante entered into a second contract dated September 21, 2010.

53Contract #3 states that:

(a) interprovincial marketing of chickens between Quebec and Ontario were then undergoing a regulatory review by the CFO and the EVQ, the outcome of which remained uncertain;

(b) should such regulatory review determine that Remy has a right as to the purchase of chickens in Quebec, it was agreed that any such purchase rights of Remy to purchase chickens from Quebec producers were to be conveyed to Laplante;

(c) if Remy, as part of this ongoing regulatory review and based on its historical purchasing rights of Quebec produced chicken, is attributed the equivalent of an interprovincial calculated base, Remy will be entitled to exploit the same; and [Emphasis added]

(d) any such purchase right from Quebec producers, if not exercisable by Remy, will be conveyed to Laplante in consideration of $1.00.

IPM AGREEMENT – January 26, 2011

54As stated, the CFO and the EVQ created a moratorium on new supply contracts of chicken from within those provinces being processed out of province. That moratorium preceded the 2011 IPM Agreement between Ontario and Quebec regulators.

55On January 26, 2011, the CFO, the Association of Ontario Chicken Processors (“Ont. Processors Ass.”) and their two Quebec equivalents, including the EVQ, entered into an agreement effective October, 2011, to regulate the interprovincial chicken market between and in those two Provinces. (“IPM Agreement”).

56Laplante in January, 2011, held no processor licence from the CFO.

57The IPM Agreement implemented a number of changes to the Ontario and Quebec processor allocation and supply system administered by the CFO in Ontario and the EVQ in Quebec.

58One of the objectives of the IPM Agreement was to enable the CFO and EVQ to manage their provincial chicken allocation in a manner which gave priority to and better ensured that processors in each province are best able to obtain their share of chicken quota from producers in the same province as the processor.

59One objective of the IPM Agreement was to redirect the chickens produced in a province to processors in that province and thereby reduce the quantity of chickens produced in one province being processed in another province. As part thereof, the EVQ was implementing policy to ensure chickens produced in Quebec were primarily processed in Quebec.

60Under the IPM Agreement, Ontario processors were to contract their quota purchase of chicken supply from Ontario producers and only upon failing to source that quota supply within Ontario, were they permitted to contract from producers in Quebec, subject to the EVQ approval of such contracts.

61The IPM Agreement states that each Ontario processor will be allocated a calculated base amount of chicken which will constitute its guaranteed periodic supply per quota period.

62The IPM Agreement states that the past calculated base of each Ontario processor under the 2005 Policy, will be adjusted by the CFO by a factor relating to that processors’ chicken supply in the period 2006 to 2008 obtained of Quebec chicken supply or its pro-rata share of the average of all chickens produced in Quebec and processed in Ontario during the period 2006 to 2008. [Emphasis added]

63Laplante opposed a number of the provisions of the IPM Agreement.

64Laplante repeatedly advised the CFO and the Ontario Processors Association in September, 2011 that:

(a) it intends to apply to the CFO for a processors licence;

(b) the IPM Agreement is reducing Laplante’s average historical interprovincial volumes (out of Ontario purchases) of some 470,000 up to November, 2008 and 958,000 kgs average thereafter;

(c) if Laplante then held an Ontario processor licence from the CFO, the IPM Agreement would result in a reduction to it to 156,449 kgs as part of the re-distribution taking place under the IPM Agreement;

(d) during the IPM re-distribution reference period, Laplante’s average volume will increase again by some 284,000 kgs based on its Contract #3 with Remy;

(e) the re-distribution of volumes and the interprovincial regime contained in the IPM Agreement favours Ontario licenced processors at the expense of non-licenced Ontario purchasers of out of province chickens such as Laplante;

(f) the IPM Agreement is depriving Laplante of its historical out of province purchasing volumes and rights. Laplante requests that its past purchasing volumes not be re-distributed; and

(g) Laplante is awaiting notice from the Supreme Court of Canada whether, in its Quebec litigation, it will be entitled to appeal its constitutional challenge to the validity of the Quebec chicken agency’s right to regulate the requirements of out of province purchasers of chicken produced in Quebec.

65Laplante’s history of sourcing out of Ontario volume of chicken without an Ontario processor licence, placed it at a disadvantage in this shift occurring in these two provinces under the IPM Agreement.

IMPLEMENTATION OF IPM AGREEMENT

66A re-allocation of the historical chicken volumes occurred as part of and pursuant to s. 2.02 of the IPM Agreement. Discussions leading up to that commenced in 2010.

LAPLANTE’S CFO PROCESSOR LICENCE

67Laplante applied to the CFO to obtain an Ontario processor’s licence on July 19, 2011 which, if granted, would provide it with a calculated base. Laplante’s application for a processor’s licence was rejected by the CFO. Laplante appealed that decision but then withdrew that appeal.

68Laplante had outstanding court proceedings in Quebec challenging the validity of the IPM Agreement and regulations of the EVQ implementing the IPM Agreement in Quebec. Laplante was preparing a similar court challenge in Ontario against the CFO.

69Laplante’s concern was the requirement under the IPM Agreement that only Ontario processors licenced by the CFO with a calculated base could contract to purchase chickens from Quebec producers notwithstanding Laplante’s historical ability to purchase from those Quebec producers.

70Based on its purchase volume of Quebec chickens pre-IPM Agreement, Laplante felt it should be entitled to an Ontario processors licence under the new requirements with a calculated base or quota of 156,449 kgs.

71At the time of its court challenge of the IPM Agreement, Laplante was in negotiations with the Ontario Processors Association. Those discussions resulted in an agreement (“Ontario Processors Agreement”).

72The Ontario Processors Agreement reveals the then strategy of Laplante and rights that it received, released and intended to pursue, including the following:

(a) based on Laplante’s volume of Quebec chickens purchased during the reference period under the IPM Agreement, Laplante’s calculated base on that volume, had it held a CFO processor’s licence, would have been 156,449 kgs;

(b) the Ontario Processors Association agreed to recommend that the CFO grant Laplante a processor’s licence with a calculated base of 156,449 kgs;

(c) Laplante agreed to a dismissal of its litigation against any entity involved in the regulation, production or processing of chicken in Canada;

(d) Laplante waived its future right in court or administrative tribunal to challenge the validity of or to set aside the IPM Agreement, the regulations implementing it or the allocation of calculated base in Ontario or its equivalent in Quebec;

(e) Laplante waived its right to challenge or to set aside the IPM Agreement for administrative deficiencies, relevant constitutional principles and Competition Act arguments in relation thereto;

(f) Laplante reserved the right after receiving a CFO processor’s licence with a base quota of 156,449 , to apply to the CFO for an increased calculated base;

(g) Laplante reserved its rights to challenge the calculated base allotted by the CFO to Riverview, in court or before any administrative tribunal; and

(h) failing success with the CFO, Laplante reserved the right to appeal to the Tribunal and beyond that to the Minister of Agriculture under the Agricultural Food Act.

73It is apparent from article 3.5 of the Ontario Processors Agreement that the appeal rights includes not receiving a processor’s licence, receiving a licence with a calculated base less than 156,449 and not obtaining an increase from the CFO above 156,449 kgs.

74The Ontario Processor Association made the above recommendations to the CFO and Laplante thereupon re-submitted its application to the CFO for a processors licence.

75On April 16, 2012, and before Laplante obtained its CFO processor licence, the CFO adopted a number of regulations and policies to implement changes created by the IPM Agreement to its previous regulations and policies, including:

(a) supplemental quota policy 182-2012;

(b) quota policy 183-2012;

(d) general regulation 2384-2012;

(e) processor regulation 2385-2012; and

(f) regulation 2386-2012.

POLICY 182/12

76Supplementary quota policy 182-2012, effective April 16, 2012, (“Policy 182/12”) applied to the period September 9 to November 3, 2012.

77Policy 182/12 revoked the CFO’s previous 2005 Policy but did not revoke the rights acquired thereunder.

78Policy 182/12 identified the amount of re-distributed calculated base per licenced processor.

79Under Policy 182/12, each processor’s calculated base is to be adjusted on an ongoing basis for each crop quota period pursuant to a formula which includes contracted with Quebec producers. It provides that processor’s otherwise supply volumes under Policy 182/12 may be reduced by the CFO based on challenges of other processors. [Emphasis added]

80Policy 182/12 states that processors do not acquire rights or entitlement under or as a result of the association of the supply of chicken to them, nor by purchasing calculated base from another.

81Remy and Laplante were not allocated calculated base under Policy 182/12.

82Laplante received a conditional CFO processor’s licence on May 16, 2012 with a guaranteed calculated base of 156,449 . The conditions thereof required discontinuance of this action against the CFO, discontinuance of its action in Quebec and an undertaking to not challenge the legality of the PSA in Ontario, as implemented by the CFO.

83The CFO in awarding this conditional processors licence with the base of 156,449 to Laplante, drew Laplante’s attention to the CFO’s Supplementary Quota Policy 182/12. Section 1.03 thereof states that:

(a) the CFO may on occasion alter the manner of supply of chickens to processors and rules relating thereto; and

(b) there are limitations associated with a processor acquiring calculated base from another. Processors should not consider they have acquired any property rights, grants, licence or entitlement as a result of the association of chicken to them through their acquisition of calculated base.

LAPLANTE’S ALLEGATIONS IN APPLICATION

84Laplante in this notice of application alleges that:

(a) calculated base represents a volume in kilograms of Ontario produced chicken guaranteed to be supplied to an Ontario processor since April 16, 2012;

(b) calculated base has been redefined as “an amount of kilograms that the CFO has associated with a processor in schedule C of Supplementary Quota Policy No.182-2012” and includes volumes formerly found in the interprovincial market which were formerly treated as separate and distinct, thereby treating past volumes obtained on the interprovincial market with the same characteristics as domestic calculated base;

(c) prior to April 16, 2012, calculated base was limited solely to interprovincial or domestic chicken production and did not include volume purchased on interprovincial market;

(d) as a result of the IPM Agreement, Ontario processors will have their guaranteed supply of live chicken varied due to the redistribution of supply rights corresponding to historical purchasing volumes on the Ontario-Quebec interprovincial market;

(e) on December 31, 2008, Remy sold the entirety of its interprovincial purchasing rights and goodwill on the interprovincial market as between Ontario and Quebec to Laplante (Contract #1) and Laplante thereafter entered into interprovincial purchase agreement with those Quebec producers who had been dealing directly with Remy;

(f) in April, 2010, Remy sold the entirety of its 529,696 kilograms of CFO allotted domestic calculated base to Riverview (Contract #2). The CFO approved the sale and transfer of Remy’s calculated base to Riverview in May, 2010;

(g) eight (8) months prior to the IPM Agreement, on September 21, 2010, Remy sold its right, title and interest to its historical interprovincial purchasing volumes to Laplante. The conditions set out in this September 21, 2010 agreement (Contract #3) have been satisfied and Laplante therefore purchased every interest in Remy’s historical interprovincial purchasing volumes;

(h) after the signing of the IPM Agreement, Riverview asserted to the CFO that Remy sold not only its guaranteed domestic production right and calculated base to Riverview but also all of Remy’s to its historical purchasing volumes from the interprovincial market as between Ontario and Quebec; and

(i) Remy sold its interest in its historical, interprovincial purchasing volume to Laplante and not to Riverview.

LAPLANTE’S STATEMENT OF THE ISSUE

85In the Notice of Application, Laplante states that the issue in this action is whether Laplante or Riverview purchased the rights to Remy’s historical interprovincial volume. Laplante states that this dispute between Laplante and Riverview with respect to the entitlement and ownership of Remy’s historical interprovincial purchasing volume turns on the interpretation of the Remy to Riverview – Contract #2 and the Remy to Laplante conditional Contract #3 as to Remy’s historical interprovincial purchasing volumes.

86The above issue is articulated in the application as follows:

Laplante and Riverview each claim entitlement and ownership to any historical interprovincial market volume which may be allotted notionally or practically by the CFO to Remy in performance of the IPM Agreement’s allotment and redistribution provisions in the event that the allotment and redistribution of Remy’s historical interprovincial purchasing volumes is made by the CFO.

87The Ontario Divisional Court in Chicken Farmers of Ontario v. Drost (2005), 258 D.L.R. (4th) 177; [2005] O.J. No. 3973 at paras. 8-12, described the chicken supply market legislative framework as a “comprehensive scheme regulating the production and marketing of chicken within Ontario”. That court outlined that framework as follows:

The Marketing Act provides for the establishment and empowerment of local boards created and charged with responsibility in respect of farm products.
‘Chicken’ is a regulated product and the CFO is a ‘local board’. Included in the authority delegated to CFO is the authority to make regulations in relation to chicken.
Pursuant to the Marketing Act, the Commission has delegated to CFO certain enumerated powers necessary for CFO to carry out its functions.
The Commission is established by the Agricultural Food Act.
Various provisions of the Regulations 402 and 403 made under the Marketing Act and the regulations made by CFO, when taken together, constitute a comprehensive scheme regulating the production and marketing of chicken within Ontario.
The CFO General Regulations enumerate the specific requirements that must I be met in order to produce and market chicken.
Through its quota authority, CFO operates a supply management system. CFO controls the amount of chicken produced and marketed so that these activities occur in an orderly manner.

DECISION AND APPEAL RIGHTS

88Quota or calculated base are matters decided by the CFO initially upon the issuance of a licence to a processor and thereafter upon regular review. Laplante had and will have input as to such decisions including a hearing before the CFO.

89A licensee may apply for a reconsideration of any order, direction, policy, decision or regulation of the CFO. Any person aggrieved by any such order, direction, policy, decision or regulation of the CFO may appeal to the Tribunal.

90The Tribunal conducts its appeals by way of a de novo hearing, involving the calling of witnesses, cross-examinations and submissions.

91The decision of the Tribunal is provided to the Minister under section 18 of the Agricultural Food Act for confirmation or variation thus permitting submissions and an appeal to the Minister (sections 16 and 17).

92After confirmation or variation by the Minister, one can then seek judicial review. (Assn. of Ontario Chicken Processors v. Ontario (Agriculture, Food and Rural Affairs Appeal Tribunal), 2003 CarswellOnt 323 (C.A.)).

ANALYSIS

93It appears Remy to date has not been assigned any quota for its historical volume of Quebec chickens. This is a specific term of Contract #3.

94This application presumes alternatively that:

(a) Remy’s historical Quebec purchase volume has value relevant to the CFO’s adjustment of processor’s calculated base pursuant to the IPM Agreement;

(b) the CFO may in the future attribute a quota or right to Remy for its past purchase volume of Quebec produced chickens;

(c) the CFO has not already or will not increase Laplante’s present calculated base: i) to account for Laplante’s historical average purchase volume of Quebec produced chickens; ii) to account for Laplante’s Contract #3 with Remy to acquire the latter’s’ historical rights, or iii) to account for any CFO quotas if allocated to Remy based on Remy’s past average purchase volumes of Quebec chickens, in favour of Laplante under Contract #3;

(d) if the CFO allocates value to Remy’s past interprovincial purchase volume, it did or will do so in favour of Riverview and not Laplante, contrary to the contractual rights granted to Laplante under Contract #3;

(e) the calculated base of Riverview now contains or will increase by a factor equal to a value attributed to Remy’s past volume of Quebec chicken purchases; and

(f) the court, rather than the CFO and the appellate regime of its decisions, is the appropriate forum to determine what Remy via contract conveyed to these parties.

95Sub-paragraphs (a) to (e) above, are questions within an elaborate legislative framework of responsibility which includes several levels of appeals.

96Factors listed in (b) to (e) above contain questions as to what the CFO did or may do in the future. These are presently unknowns and may not happen.

97Consideration by the CFO of the above questions may result in a favourable adjustment to Laplante. Alternatively, Laplante has appeal rights within the legislative framework if the outcome is negative, including the right of judicial review.

98The answer to the above questions may also raise the possibility that in setting Laplante’s calculated base, the CFO:

(a) lacked jurisdiction to ignore Remy’s historical volume of Quebec chickens and failed to allocate an interest to Remy in relations thereto; and

(b) improperly ignored Laplante’s contractual entitlement arguments to those rights.

99This court doubts that:

(a) Laplante is the only Ontario processor that held historical Quebec chicken volume rights at the time of the IPM Agreement transition; and

(b) the CFO did not consider what value, if any, was to result from historical Quebec chicken volumes held by Ontario processors in adjusting processor’s quotas under the IPM Agreement or subsequently.

100There is an air of artificiality to the request that this Court interpret Contract #3 and Contract #1, in isolation of:

(a) what the CFO and the EVQ intended to accomplish under the 2010 regulatory review and the implementation of the IPM Agreement;

(b) how was or will the historical out of province supply volumes impact the revised chicken supply processors’ quota in Ontario pursuant to the IPM Agreement; and

(c) Laplante’s entitlement to an increase in its calculated base, based upon contractual historical Quebec purchase volumes held by it or Remy.

101The above unknowns are a result of the CFO not being asked by Laplante to determine these issues. Laplante has shown no reason why it has not sought a ruling from the CFO and exercised the appeal avenues within the legislative framework on questions which relate directly to the subject of what was intended to occur and then done under the IPM Agreement’s adjustment to quotas.

102Riverview should not be required to litigate issues which are potentially academic. Nor should it be required to litigate issues in court which:

(a) may thereafter still have to be decided by an administrative body legislated to determine the very same issue; or

(b) which the CFO may determine that the court’s contractual interpretation has no impact upon the CFO’s authority to set and adjust quota.

103Laplante currently objects to the limited calculated base it applied for and received under a licence. As licensee, Laplante has the right to seek an increased supply quota from the CFO.

104In cross-examination on his affidavits in this action, Mr. Laplante stated that the ultimate objective in commencing this action is to obtain an increase of calculated base in excess of 156,449 kgs. This litigation at least indirectly, appears to be a collateral attack on the existing quota decision of the CFO and its jurisdiction to set and adjust quota.

105Courts clearly have the jurisdiction to interpret contracts. This however is not a case of simple contractual interpretation. The questions posed in this litigation may potentially impact processors beyond Riverview given the fixed provincial quota to Ontario.

106This case calls out for evidence and argument from the CFO. Laplante agreed to and has excluded the CFO as a party. It also agreed not to challenge the powers of the CFO in relation to the IPM Agreement.

107Courts should be hesitant to permit litigation of issues that the legislature has assigned for determination within an elaborate marketing framework by a designated administrative tribunal.

108Parliament has authorised the creation of federal marketing boards and the delegation to provincial marketing boards’ regulatory jurisdiction over interprovincial supply management of agricultural products. Each level of government has enacted laws and regulations to create a unified and coherent regulatory scheme in an attempt to maintain an equilibrium between supply and demand and attenuate the instability of the markets. (Fédération des producteurs de Volailles du Québec v. Pelland, 2005 SCC 20, [2005] 1 S.C.R. 292, para. 38.)

109Federal and provincial governments’ joint creation of an agricultural supply management program for products including chickens involving quotas, is a valid scheme limiting total production of chickens within Ontario in order to create an orderly market in relation to that product. (Chicken Farmers of Ontario v. Drost, supra, at para. 35.)

110The Tribunal is granted broad jurisdiction regarding appeals of decisions by the CFO and includes the power to direct the CFO to take action within the jurisdiction of the CFO. The Tribunal is a supervisor body which engages in balancing of competing interest which weighs in favour of a differential standard of review. (Assn. of Ontario Chicken Processors v. Ontario (Agriculture, Food and Rural Affairs Appeal Tribunal), [2003] 63 O.R. (3d) 284. (Div. Ct.) at paras. 36 and 37.) (Tribunal Decision)

111A decision of the Tribunal is final unless the Minister decides to intervene. (Agricultural Food Act, ss. 38 and 39.)

112Members of the Tribunal have specialised agricultural background. The Decisions of such tribunal often involve the application of highly specialized expertise which weighs in favour of a differential standard of review. (Tribunal Decision, supra, para. 40.)

113Chicken supply management in Ontario operates under a specialised statutory scheme within a specific industry sector. This weighs in favour a differential standard of review. Tribunal Decision, supra, at para. 47.

114A case presented as one of contractual interpretation between producers or processors of chicken may, as in the present case, require detailed consideration and interpretation of the legislation regulations and policy of a provincial supply management agency such as the CFO, thereby requiring consideration of how the legislative regulations applicable to that provincial agency operate within the framework established by legislation and the regulations pursuant thereto.

115Laplante’s legal characterisation of the dispute between these parties ignores or sidesteps the jurisdiction and policies of the CFO as well as the IPM Agreement. It is the substance of and not the legal form of the claim presented to the court which should determine the issue of jurisdiction. If the substance of the relief sought in the action falls within the jurisdiction of the CFO, that agency has jurisdiction to determine the issue. (Snopko v. Union Gas Ltd., 2010 ONCA 248 at para. 24.)

116The essence within this action is Laplante’s allegation that it is entitled to receive an increase in its calculated base, based upon rights under Contract #3 and that the CFO must grant that increase.

117Where the dispute, regardless of its characterisation, in substance involves Laplante’s entitlement to be awarded a higher calculated base quota within the CFO’s jurisdiction to determine that entitlement and the rights thereto in contract, clearly that is a matter within the jurisdiction of the CFO. (Weber v. Ontario Hydro (1995), 24 O.R. (3rd) 358, para. 48.)

118Whether members of the CFO in deciding Laplante’s entitlement to calculated base quota lack expertise on legal questions as to such claim, that is a matter which can be decided within the internal appeal route and then ultimately by way of judicial review. (Weber, supra, para. 60.)

119The task of the court is to determine whether the legislature, through legislation, intended entitlement and the granting of chicken calculated base to processors to be decided by the court or through the application and review steps established under the relevant legislature. (Vaughan v. R., 2005 SCC 11, [2005] 1 S.C.R. 146 at para. 22.)

120Where the legislator has created a statutory regime which includes both rights and procedure for their resolution, there is a strong reluctance to permit jurisdiction to be divided between that agency and the courts. (Mahar v. Rogers Cablevision Ltd., 1995 CarswellOnt 1195 (Gen. Div.) p. 698 and Lomas v. Rio Algoma Ltd., 2010 CarswellOnt 1327 (ONCA) para. 80.)

121Laplante’s legal position should not be improved by his failure to apply for an increase in quota to the CFO relying upon Contract #1 and Contract #3. Where the legislature has clearly created a comprehensive scheme for dealing with entitlement and the award of calculated base quota, the court should not jeopardise that application and/or dispute process by permitting routine access to the court. (Vaughan v. R. supra, paras. 33, 37 and 39.)

CFO’s Capacity to Interpret Contracts

122Laplante argues the CFO has no jurisdiction to interpret contracts between processors.

123The thrust of Contract #3 is to conditionally convey rights which may impact Laplante’s calculated base.

124Once again, the CFO in relation to processors is granted the power under REGULATION 402 to:

(a) regulate licensing including the terms therein;

(b) control the marketing of chickens;

(d) make regulations with respect to chicken licensing of processors; and

(e) do such acts or make such orders or directions as are necessary to carry out the Act, regulations and the plan.

125CFO’s Regulation No. 2385-2012 regulates the contracting of processors to purchase chicken supply.

126The CFO prohibits without its approval contracts between processors to transfer calculated base.

127The decisions of the Tribunal reviewing decisions of the CFO filed by Riverview demonstrate instances of the CFO ruling upon issues of quota entitlement impacted by contract of producers or processors.

128The legislative framework of the CFO, including the power to make and carry out regulations is broad enough to include the power to consider what is the impact of Contract #3 on Laplante’s calculated base entitlement.

129Policy preamble in legislation, as dealt with in Reference re Broadcasting Regulatory Policy CRTC 2010 – 167 and Broadcasting Order CRTC 2010 – 168, 2012 SCC 68, is very different from this case of specific legislative empowerment with the above broad language.

130The CFO has the power to consider the terms of Contracts #1 and #3 and the impact thereof, if any, in their allocation of calculated base.

131The CFO and the Tribunal are the most knowledgeable forums to interpret the impact of Contracts #1, and #2, and the impact, if any, of Contract #3 on quota entitlement of Laplante within the legislative framework in place.

132Even if the governing legislation does not oust the jurisdiction of the court, this court should nevertheless defer to the internal application/grievance process within the legislation in which Laplante has the opportunity to seek an increase in its calculated base quota within the provisions of the legislation.

CONCLUSION

133Based upon the above analysis, the remedies being sought by Laplante should be presented for decision to the CFO and the appeal steps thereafter as legislated. This action is premature.

134In light of the above determinations this application is dismissed, without prejudice to Laplante’s right to pursue similar remedies in the future following presentation of these arguments of Laplante as to its entitlement under the Contracts in issue, a decision by the CFO and the exercise of any appeals within the legislation.

COSTS

135Costs would normally follow this disposition in favour of Riverview. If the parties cannot agree upon costs, written submissions in relation thereto should be provided within 30 days.

KANE, J.

Released: August 16, 2013