Caneast Final Decision

In The Matter Of the Farm Products Marketing Act, R.S.O. 1990, c. F-9 and the Ministry of Agriculture, Food and Rural Affairs Act, R.S.O. 1990, c. M-16;

And In The Matter Of a request made by the Ontario Processing Vegetable Growers to the Ontario Farm Products Marketing Commission to review the licence of Caneast Foods Ltd. pursuant to sections 4, 5, 6, 7 and 8 under Regulation 440, titled "Vegetables for Processing, - Marketing" made by the Commission under the Farm Products Marketing Act;

And In The Matter Of a hearing held before the Ontario Farm Products Marketing Commission on November 25th, 2008 in respect of the vegetable processor's licence held by CANEAST FOODS LTD.

Before:

Deborah Whale, Chair of the Hearing Panel; Anna Andres, Member; and Carolyn Fuerth, Member

Appearances:

Robert A. Wilson, Wilson Spurr, Solicitors for the Applicant, the Ontario Processing Vegetable Growers
Graham McConnell and Robert Sugrim for the Respondent, Caneast Foods Ltd.

Also present were:

Katherine Catton - Counsel to the Ontario Farm Products Marketing Commission
Sophia Dinnissen - Regulated Marketing Unit, Strategic Policy Branch, OMAFRA, Policy Analyst for processing vegetable sector
Marianne Philippi - Executive Assistant to the Commission Secretary, OFPMC

DECISION

This matter was heard by the Ontario Farm Products Marketing Commission (the "Commission") in Guelph, Ontario on November 25, 2008.

The Hearing was held under the authority of the Ministry of Agriculture, Food and Rural Affairs Act, R.S.O. 1990, c. M-16, the Farm Products Marketing Act, R.S.O. 1990, c. F-9 (the "Act") and the O. Reg. 440 made under the Act.

Background

The Act and Regulations

The Ontario Processing Vegetable Growers is a local board (the "Local Board") established by Ontario Regulation 441 made by the Lieutenant Governor in Council under the Farm Products Marketing Act, R.S.O. 1990, c. F-9. The purpose of the Local Board is to control and regulate the marketing of vegetables within Ontario.

Ontario Regulation 440, made by the Ontario Farm Products Marketing Commission, further provides for the control and regulation of the producing and marketing of vegetables within Ontario. Under that Regulation, the Commission is vested with the responsibility for regulating the licensing of vegetable processors - see sections 3 to 8 of that regulation.

Further under Regulation 440, the Local Board is given a variety of powers and responsibilities in respect of the regulation of the marketing of vegetables in Ontario by both producers and processors. Among the various responsibilities delegated by the Commission to the Local Board is the power to make regulations with respect to vegetable marketing. Pursuant to this delegated authority, the Ontario Processing Vegetable Growers has made a variety of regulations.

Pursuant to its authority under Regulation 440, the Local Board may establish a negotiating agency for any vegetable, and appoint processors and Local Board representatives to the agency. The negotiating agency, in turn, is empowered to settle by agreement:

1. minimum prices for a vegetable or class, variety, grade or size thereof,
2. terms, conditions and forms of agreement relating to the producing or marketing of the vegetable, and
3. any charges, costs or expenses relating to the production and marketing of the vegetables the vegetable

If a vegetable processor does not have a negotiated agreement, the Local Board may impose one.

Caneast Foods Ltd.

Caneast Foods Ltd. engages in the processing of vegetables in Ontario. Caneast is licensed by the Commission to engage in the business of processing vegetables, and has engaged in this business since approximately 2002. Caneast buys the vegetables it processes pursuant to agreements authorized under Regulation 440.

Witnesses

The Ontario Farm Products Marketing Commission (the "Commission") heard evidence from two witnesses on behalf of the Ontario Processing Vegetable Growers Board (the Board). The first witness was Alan Krueger, Executive Assistant to the General Manager of the Ontario Processing Vegetable Growers. Mr. Krueger is responsible for regulatory compliance. The second witness was John Lugtigheid, a Board Member and also Chair of the Cucumber Committee of the Local Board.

The Commission heard evidence from two witnesses on behalf of Caneast Foods Ltd. The first witness was Robert Sugrim, the manager of Caneast's vegetable processing plant. The second witness was Graham McConnell who is the owner of Caneast Foods Ltd.

Issues

The issues in the hearing are set out in the Notice of Hearing dated September 30, 2008, as amended on October 24, 2008th. The issues are as follows:

1. Whether the licence as a processor of vegetables issued to Caneast Foods Ltd. should be suspended or revoked under Section 4 of Regulation 440.
2. Whether to impose terms and conditions upon the licence under Section 5 of Regulation 440.
3. Whether Caneast Foods Ltd. should be required to furnish security or a performance bond under Section 7 of Regulation 440.
4. Whether the Commission should impose a penalty under Section 6 of Regulation 440.

Evidence:

The Commission heard evidence from the Local Board detailing a pattern of non-compliance by Caneast Foods Ltd. with the provisions of the Act, Ontario Regulation 440, the Local Board's General Regulation and various marketing agreements between Caneast and the Local Board over the years 2002 through 2007. At the hearing, Mr. Sugrim, speaking on behalf of Caneast, acknowledged that most of the Board's evidence of non-compliance by Caneast was correct.

The panel heard evidence of noncompliance in the following areas. This includes, but is not limited to the examples given below (see Exhibit 1).

1. Late filing by Caneast of required contract reports, grower contracts and harvest reports contrary to clauses (a) and (c) of section 8 of the cucumber marketing agreement, clauses (a) and (b) of section 7 of the pepper marketing agreement, clause (c) of section 10 of the beet marketing agreement and section 18 of the Board's General Regulation, as detailed below:

• Late filing in 2003 of cucumber contract report, pepper contract report, samples of 2003 grower contracts and cucumber harvest reports.
• In 2004 failure to meet deadline for filing requirements for the pepper contract report and the sample of the 2004 grower contract.
• In 2005 failure to file contract report in a timely manner detailing their intended purchases of cucumbers from growers.
• In 2006 late filing of cucumber harvest information.
• In 2007 failure to complete and file with the Local Board a cucumber harvest schedule 11 by November 1.
• In 2007 failure to complete and file with the Local Board a red beet harvest schedule 2 by December 1.

2. Late remittance by Caneast of its licence fees to the Board, contrary to the requirements of section 20 of the Board's General Regulation, as detailed below:

• In 2003 overdue harvest cucumber data and licence fees payable.
• In 2004 overdue licence fees for peppers and cucumbers.
• In 2006 overdue cucumber licence fees.
• In 2007 failure to deduct and remit licence fees respecting the purchases of cucumbers, peppers and red beets.

3. Breach by Caneast of the payment provisions found in the marketing agreements between Caneast and the Local Board, and the payment requirements set out in section 20 of the Local Board's General Regulation, as follows:

• In 2002 and 2007, Caneast failed to pay according to the pay dates specified in the marketing agreement between Caneast and the board. Caneast's 2007 failure to pay on time resulted in late payments to producers.

4. Unauthorized deductions by Caneast from growers, contrary to section 10 of the cucumber marketing agreements between Caneast and the Local Board and clause (a) of section 23 of the Local Board's General Regulation, as follows:

• In 2002 unsupported and unauthorized deduction by Caneast of 1% of gross value for loads of nubs and crooks.

5. Irregularities in prices paid and payments to growers by Caneast contrary to section 14 and clause (a) of section 23 of the Local Board's General Regulation, as follows:

• Charge by Caneast to Underhill Bros. of $1000/week for administration fees to sell cucumbers to third party processors.
• In 2007 payment made by Caneast for cucumbers at rates differing from grade size delivered, resulting in underpayment to growers.
• In 2007 failure by Caneast to break out submitted beet information by grade size as required.
• In 2008 failure by Caneast to comply with the Local Board's payment order dated April 30th, 2008 in respect of Caneast's purchase of cucumbers for processing in2007.

6. Lack of cooperation with the Local Board's auditors contrary to subsection 6 (1) of the Farm Products Marketing Act, as follows:

• In 2003 Caneast failed to provide the Local Board's auditor with requested of bank statements and cancelled cheques.
• In 2007 by Caneast refused to allow the Local Board's auditor to inspect Caneast's books and records.
• In 2008 the Local Board's auditors have made repeated attempts, without success, to arrange an audit of Caneast's grower purchases for 2007.

With respect to purchases made by Caneast from producers in Ontario for vegetables processed by Caneast in the 12 month period immediately preceding the hearing, Mr. Krueger of the Local Board testified that the amount paid by Caneast was approximately $25,000.00. Caneast agreed with this statement.

Findings

Based on the evidence set out above, the Hearing Panel has concluded that the applicant has established the respondent's failure to comply with the applicable legislation.

Decision

Given the Hearing Panel's factual findings and analysis of the issues, the following is the Hearing Panel's decision:

1. the Caneast Foods Ltd. vegetable processing licence will not be suspended or revoked at this time.
   
   
2. the following terms and conditions are imposed on the vegetable processing licence of Caneast Foods Ltd. These terms and conditions are already requirements set out in the Act, and Commission and Local Board regulations. The purpose of imposing these legal obligations as conditions to Caneast's licence as a vegetable processor is to underscore to Caneast that it must comply with its existing legal obligations as a licensed processor of vegetables. The terms and conditions are as follows:

Caneast Foods Ltd. shall fulfill all the normal requirements of the Act, the Regulation 440, the Local Board's regulations and any existing marketing agreements, including:

• completing and filing of all reports within the deadlines prescribed
• deducting and remitting of all license fees within the deadlines prescribed
• purchasing of vegetables from a producer with whom it has a contract as reported to the Local Board under section 18 of the Local Board's General Regulation
• making payments to the growers in accordance with the payment requirements outlined in the marketing agreements.

If Caneast Foods Ltd. fails to comply with these conditions, the Commission will, at the request of the Board, convene a hearing under section 4 of O. Reg. 440 to determine if Caneast Foods Ltd. vegetable processing licence should be suspended or revoked.

3. Pursuant to the Commission's authority under Section 7 of Regulation 440, the Commission orders that Caneast Foods Ltd., within 45 days of the date of this decision, provide the Commission with an originally signed irrevocable letter of credit in the amount of TEN THOUSAND CANADIAN DOLLARS ($10,000.00) drawn upon a registered Canadian bank in which the bank agrees, on receipt by the bank of a written demand from the Ontario Farm Products Marketing Commission, to pay to the Commission (as the beneficiary) the fixed amount specified on the face of the letter of credit, that is, $10,000.00 in Canadian funds. The term of the letter of credit is to be two years from the date the letter of credit is posted with the Commission. The letter of credit must be in a form satisfactory to the Commission.

In the event that Caneast Foods Ltd. fails to provide the Commission with the required letter of credit within the time period specified above, the vegetable processor licence of Caneast Foods Ltd. is suspended until such time as the required letter of credit is posted with the Commission.

The required letter of credit will be held by the Commission for two years, and will be drawn on by the Commission if the Commission determines that Caneast Foods Ltd. has failed to comply with or contravenes any term or condition of its licence or the Act, the regulations, the plan set out in O. Reg 441 or any order or direction of the Commission.

Finally, the Commission wishes to note that, in the future, it expects that the Ontario Vegetable Processing Growers will work more closely with Caneast Foods Ltd. to:

1. assist Caneast in understanding its legal obligations as a licensed vegetable processor in Ontario. These legal obligations arise under the Act, the applicable Commission regulations, the Local Board regulations and the applicable marketing agreements, and
   
   
2. facilitate a more positive working relationship between the Local Board and Caneast.

Dated: December 11, 2008

I hereby certify that these written reasons are
the reasons for the unanimous Commission decision.

Signed:

_______________________
Arva Machan
Secretary to the Commission
Ontario Farm Products Marketing Commission Secretariat
Ontario Ministry of Agriculture, Food and Rural Affairs

December 12, 2008