Ferme Martel Inc. c. le Dairy Farmers of Ontario

In the matter of the Milk Act and Section 16 of the Ministry of Agriculture, Food and Rural Affairs Act.

And in the matter of:

An Appeal to the Agriculture, Food and Rural Affairs Appeal Tribunal by Ferme Martel Inc. (Lucien Martel) of St. Albert, Ontario, from a decision of the Dairy Farmers of Ontario to deny its request for an exemption from the 15% Transfer Assessment on the sale of its quota.

Before: John O'Kane, Vice Chair; Ron Gelderland, Member; Tim Mousseau, Member

Appearances:

Lucien Martel, appellant
Murielle Martel, appellant
Donald Good, counsel for the appellant
George MacNaughton, representative for the respondent
Geoffrey Spurr, counsel for the respondent
David Murray, witness for the respondent

Background

Lucien and Murielle Martel are the sole shareholders of Ferme Martel Inc., a farming corporation they operate in St. Albert, Ontario. They crop 200 acres on the home farm and rent another 100 acres. They grow an equal mix of corn and soybeans.

Until late April 2008 they also operated a dairy herd of about 60 cows. Ferme Martel Inc. sold their entire milk production quota (66.17 kgs.) on the April 2008 quota exchange for $31,505.00 per kg.

Under a November 2006 regulatory policy, the Dairy Farmers of Ontario (DFO) imposed a 19.06 percent transfer assessment on that quota transaction, which translated to $337,292.53 of the quota sale price that Ferme Martel Inc. did not receive.

In August 2008, Ferme Martel Inc. asked DFO to exempt them from the transfer assessment asserting they had been forced to sell their milk quota due to Lucien Martel's back related condition. The DFO denied the requested exemption in October 2008. In September 2009, Ferme Martel Inc. asked DFO to reconsider its denial. On December 21st, 2009, DFO denied Ferme Martel Inc.'s request for reconsideration.

The DFO has developed policies to guide and inform its decision making as the regulator of the dairy production industry. One such policy is the Quota Policy (the "Policy"). Section F, 1. (j) of the Policy, enacted in November 2006, imposed a minimum transfer assessment of 15 percent on all quota sold on the quota exchange. The Policy also provides in Section H, 2 that producers can seek "special consideration" for reasons that prevent compliance with DFO policies.

Ferme Martel Inc. appealed from the DFO decision to this Tribunal under section 16 of the Ministry of Agriculture, Food and Rural Affairs Act. The Tribunal conducts a hearing de novo and "stands in the shoes" of the DFO and can make any decision the DFO could have made.

The Issues

The issue for determination is whether Ferme Martel Inc. should receive an exemption from the DFO's assessment on quota transfer.

The Evidence

Lucien Martel is fifty-nine years old and operated the dairy operation from 1977, when he purchased the farm and milk quota from his father, until April 2008.
Before 2008 Lucien Martel had occasional back problems. Murielle Martel testified he dealt with such problems with visits to the chiropractor. However, in January 2008 he experienced serious back pains.

Murielle Martel tried to continue the dairy operation with some hired help but by March 2008 they made the decision to sell the quota and withdraw from the dairy industry. Lucien Martel confirmed he had no private disability insurance.

Lucien and Murielle Martel testified that he could no longer do the job of a dairy farmer which requires a lot of bending and lifting. They testified he was told his back would not get any better and it could get worse. Although they had no prior plans to exit the dairy industry, they felt it medically better for him to give up the dairy operation.

Medical investigations done early in 2008 revealed Lucien Martel had a condition called osteopenia, nearing a diagnosis of osteoporosis. Neither the July 31st, 2008 medical letter nor the February 23rd, 2010 medical letter filed by the Appellant provides any objective medical findings of inability to do the job of a dairy farmer. Both documents confirmed that Mr. Martel concluded he could no longer work as a dairy farmer.

Since May 2008, Ferme Martel Inc. continues as a corn and soybean cropping operation on a total of 300 acres. Lucien Martel still describes himself as a farmer and carries on the cropping operation without help except at harvest when he hires a custom combiner. He explained that during cultivation in the spring and fall he spends as much as ten hours on the tractor and when he does heavy work, he can feel it in his back. Lucien and Murielle Martel both testified the crop operation is not as hard on his back as was the dairy operation.

David Murray has farmed for about twenty-five years. He is a Vice Chair of the DFO. Mr. Murray testified that he is one of twelve producer directors of DFO. He represents the Huron-Perth area (Region 10) which comprises 570 of the 4,300 milk producers in Ontario.

David Murray testified the DFO introduced the transfer assessment policy in November 2006 to address concerns over risks to the dairy industry from the increasing price of quota. The DFO had previously used a policy of transfer assessments during the 1990s. He also explained that, as part of a new policy introduced in August 2009, the quota transfer assessment policy has been replaced and the exchange price for quota has now been capped at $25,000 per kg., as of January 2010.

We note that under the capped quota structure, had Ferme Martel Inc. held on to their quota and exited the industry today, they would have received $1,654,250 for their quota, rather than the $1,747,393.32 they did receive, after application of the transfer assessment.

David Murray confirmed that DFO has received about eighty exemption requests since the quota transfer assessment policy was introduced in November 2006. Of those requests the DFO has granted four and one other resulted in a negotiated resolution during an appeal. He testified that in three of those cases the dairy farmer proved they had an exit plan underway at the time DFO implemented the November 2006 Policy.

David Murray testified that in May 2008, in response to a number of exemption requests based on medical conditions, the DFO amended its "special consideration" policy to specifically except medical conditions as a basis for exemption from DFO policies. He explained that this had been a long-standing unwritten DFO policy committed to writing at that time partly in response to the comments from a panel of this Tribunal in a case known as Cayer #1, which was subsequently overturned on internal review.

Findings and Analysis

In argument, counsel for the Appellant and Respondent each referred to several transfer policy exemption cases from this Tribunal: Cayer #1, Cayer #2, VanderGeest, Shaw and Haleyview. Those cases resulted in two full exemptions, one partial exemption and one exemption denial.

Both parties agreed those decisions are not binding as the principle of stare decisis does not apply between panels of coordinate jurisdiction.

However, we are mindful that where we depart from an existing body of Tribunal jurisprudence, we should explain why in order to contribute to developing a body of consistent jurisprudence. However, the four decisions cited do not, in our view, comprise a body of cases from which we can distil a set of established legal principles.

Knowing that when they sold their quota they would be assessed a minimum 15 percent transfer assessment, Ferme Martel Inc. made the business decision to leave the industry. The evidence is clear that what drove that decision was Lucien Martel's back condition and his own subjective view that he could no longer do the work of a dairy farmer.

However, he has continued to work as a farmer. If the considerations of those previous four Tribunal cases were controlling or even persuasive on us, that fact alone is a significant distinguishing feature in this case and sufficient for us to refuse the exemption.

In addition, other facts from those previous cases that are conspicuously absent in this case include:

• no death of the primary dairy operator
• no catastrophic accident ending the farming career of the primary dairy operator
• no fatal disease of the primary dairy operator
• no ongoing plan to exit the industry interrupted by the November 2006 policy
• no undue hardship
• no other compassionate grounds

We are loathe to attempt to articulate an exhaustive list of what circumstances will engage a "special consideration" exemption. To do so would usurp the role of DFO and might act to fetter the discretion afforded DFO by the legislation. However, as a general proposition, our view is there must be something unique or extraordinary to engage an exemption from the Policy.

Standing in DFO's shoes we are asked by Ferme Martel Inc. to exempt it from the quota transfer assessment under the "special consideration" provisions of the Policy. Based on all the evidence we find that Ferme Martel Inc. has not satisfied us that there is anything sufficiently "special" about Lucien Martel's back condition to warrant an exemption from the Policy.

Order of the Tribunal

The Tribunal hereby Orders the appeal by Ferme Martel Inc. is dismissed.

Dated at Ottawa, Ontario this 2nd day of March, 2010.