Sure Fresh Foods Inc. v. Chicken Farmers of Ontario

In the matter of the Farm Products Marketing Act, and 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 (Tribunal) by Sure Fresh Foods Inc. (Cericola Farms), Bradford, Ontario, from a decision of Chicken Farmers of Ontario (CFO), dated July 30, 2007, to not review and adjust a levy imposed on Cericola Farms during quota periods A-66, A-67 and A-68, in 2005.

Before:
Kirk Walstedt, Chair; Jack Young, Vice Chair; Rob Scouller, Member

Appearances:
Andrew Heal, counsel to Sure Fresh Foods Inc.
Hank Van Voorst, representative of Sure Fresh Foods Inc.
Geoffrey Spurr, counsel to CFO
Janet Cioruch, representative for CFO

Decision of the Tribunal on Preliminary Objection

Sure Fresh Foods Inc. (Cericola Farms) launched an appeal with the Tribunal, dated June 24, 2008, of a decision of the Board of the Chicken Farmers of Ontario (CFO), dated July 30, 2007, to not review and adjust a levy applied against Sure Fresh Foods Inc. by the Chicken Farmers of Canada (CFC). Sure Fresh Foods Inc. requested that the CFO reconsider the application of the CFO market development policy to chicken marketed by Sure Fresh Foods Inc. during periods A66, A67, and A68. Sure Fresh Foods Inc. objected to the policy of the first kilograms out of the barn and received by a processor such as Sure Fresh Foods Inc. being applied to meeting the processor's market development commitment. The hearing of the appeal to the Tribunal began on February 17, 2009, in Guelph, Ontario.

Background

In accordance with the Market Development Policies of both the CFO and CFC, once a processor has enrolled in the program for the export of chicken, they must make a commitment as to the number of kilograms of chicken to be exported. This commitment is termed the market development commitment or MDC. According to the CFO, a processor must fulfill this commitment prior to fulfilling any domestic commitments. Failure by a processor to meet their market development commitment may result in a levy being imposed by the CFC. With respect to the levy imposed on Sure Fresh Foods Inc. by the CFC, the events which have taken place are as follows:

Application for Market Development

1. December 22, 2004, CFC licenses Sure Fresh Foods Inc. as a primary processor of chicken, "pursuant to the provisions of the Canadian Chicken Licensing Regulations in the Market Development Trade", to expire on December 31, 2005.
2. Hank Van Voorst, on behalf of Sure Fresh Foods Inc. (market development License No. E037), submits Market Development Commitment Forms to the CFC, requesting the production of 200,000 kilograms of chicken, as follows:
   1. On February 23, 2005, for period A-66;
   2. On April 21, 2005, for period A-67; and
   3. On June 16, 2005, for period A-68.

Underproduction of Market Development Commitment

3. November 8, 2005, Sure Fresh Foods Inc. informs CFC of its receipt of 43,873 kilograms of live production for period A-66.
4. November 25, 2005, Sure Fresh Foods Inc. informs CFC of its receipt of 129,448 kilograms of live production for period A-67.
5. December 2, 2005, CFC informs Sure Fresh Foods Inc. of:
   1. A potential market development levy of $200,000 for a failure to meet the market development commitment;
   2. An upcoming "audit of Sure Fresh's market development activities"; and
   3. A forthcoming market development levy assessment.
6. January 9, 2006, Sure Fresh Foods Inc. provides a summary of MDC quota requested from CFC, and received from producers, as it relates to the management of their inventory.
7. March 22, 2006, Sure Fresh Foods Inc. requests a review by CFC of the "current fee levied for non-compliance".
8. April 5, 2006, CFC informs Sure Fresh Foods Inc. of the completion of the audit of Sure Fresh Foods Inc.'s market development activities and of levies totaling $228,450.00, calculated as below, and requests that Sure Fresh Foods Inc. provide CFC with written submissions containing any argument or information they wish to make to CFC regarding the assessed levies.
   1. For period A-66, $200,000.00;
   2. For period A-67, $14,225.00; and
   3. For period A-68, $14,225.00.
9. May 4, 2006, CFC issues reminder letter to Sure Fresh Foods Inc. regarding the payment of the assessed levy, and of the opportunity to make written submissions to CFC by May 5, 2006.

Appeal to the Chicken Farmers of Canada

10. May 5, 2006, Sure Fresh Foods Inc. initiates an appeal of the decision of the CFC on the basis of not having received the live weight of market development kilograms from producers. The hearing of this appeal took place on June 8, 2006.
11. May 19, 2006, CFO responds to Sure Fresh Foods Inc.'s inquiry regarding the first kilograms received being intended for export markets, advising that a statement to this effect is implied within the regulations and Form 401.
12. May 23, 2006, Sure Fresh Foods Inc. provides CFC with documents relevant to its appeal to the CFC.
13. June 19, 2006, CFC informs Sure Fresh Foods Inc. of its decision to uphold the levy imposed, in the amount of $228,450.00, on the basis that Sure Fresh Foods Inc. did receive "the full amount of market development production it requested in each of periods A-66, A-67 and A-68". CFC further informed of the levy being payable within 30 days of receipt of this letter.
14. June 30, 2006, Sure Fresh Foods Inc. requests clarification, in writing, of the CFC's decision regarding the application of the CFC Market Development Policy, section 8.7.
15. July 5, 2006, CFC provides written clarification of its market development assessment, in response to the June 30th letter from Sure Fresh Foods Inc.
16. July 31, 2006, CFC issues a letter to Sure Fresh Foods Inc. regarding non-receipt of the levy assessed against Sure Fresh Foods Inc. This final notice of the levy to be remitted to CFC indicates a payment date of no later than August 4, 2006. CFC indicates that a failure to pay the levy before this date "will result in a CFC staff recommendation to the Board of Directors to issue a notice of intention to suspend or revoke the market development license of Sure Fresh Foods Inc.

Appeal to the National Farm Products Council

17. August 1, 2006, counsel to Sure Fresh Foods Inc. issues a letter to the National Farm Products Council (NFPC), requesting an appeal of the CFC decision dated June 19, 2006, by way of a public hearing.
18. August 3, 2006, CFC requests NFPC deny Sure Fresh Foods Inc.'s request for appeal on bases including Sure Fresh Foods Inc.'s decision not to appeal the decision of the CFC Board to Federal Court [sic], and its omission from filing a complaint with the NFPC within 15 working days of the date of the decision of CFC, as required in the NFPC Guidelines.
19. August 18, 2006, NFPC informs CFC of its intent to conduct an investigation and invites CFC to submit additional information by September 5, 2006.


20. November 6, 2006, NFPC informs CFC of willingness to mediate a solution to the complaint by Sure Fresh Foods Inc., and requests CFC advise whether it is prepared to participate in such mediation.
21. November 8, 2006, CFC informs NFPC of its non-acceptance of the offer by NFPC to participate in mediation of the complaint.
22. November 24, 2006, NFPC informs Sure Fresh Foods Inc. of CFC's declining of NFPC's offer of the opportunity for mediation of the complaint, and of its limitation to mediate disputes on a voluntary basis. The NFPC advised Sure Fresh Foods Inc. that, "as the complaint did not meet the requirements for a public hearing", it could not take any further action.
23. November 27, 2006, CFC informs Sure Fresh Foods Inc. of payment of levies to be made within 30 days of the decision of the NFPC (i.e. by December 24, 2006).

Hearing before the Chicken Farmers of Ontario

24. January 17, 2007, Sure Fresh Foods Inc. requests a hearing before the CFO "to review [its] Market Development Policy … [with] the objective, to amend their submission relating to kilos received for export purposes." Sure Fresh Foods Inc. stated that "Cericola Farms has been imposed a financial penalty as direct result of producers under producing allocated kilos. The Chicken Farmers of Canada as a result of the submissions made to them by the CFO, imposed a severe financial penalty against Cericola Farms".
25. March 26, 2007, CFC informs Sure Fresh Foods Inc. of non-receipt of the levy payment. CFC further informs that, if CFC has not received payment by April 4, 2007, "CFC staff will recommend to the CFC Board of Directors that it issue a notice of intention to suspend or revoke the market development license issued to Sure Fresh Foods Inc."
26. July 19, 2007, CFO issues a Notice of Hearing, to take place on July 26, 2007, with respect to the CFO Market Development policy No. 157-2002, as requested by Sure Fresh Foods Inc.
27. July 30, 2007, CFO informs Sure Fresh Foods Inc. of its decision to deny their request to "review and adjust the information provided by it, to the Chicken farmers of Canada (CFC) in relation to Cericola's participation in the Market Development Program and the counting of kilograms received for such purpose".
28. September 25, 2007, as requested by Sure Fresh Foods Inc., CFO provides reasons for its decision of July 30, 2007.

Appeal to the Tribunal

29. June 24, 2008, Sure Fresh Foods Inc. appeals to the Tribunal the denial of CFO "to review and adjust an unjustified levy applied against Cericola by the CFC". In its appeal to this Tribunal, Sure Fresh Foods Inc. has requested that the Tribunal "set aside the decision of the CFO and find that Cericola Farms did not under-market production received and advise CFC that it ought not to impose any levy in excess of $47,369.00, which is the calculated adjustment amount, and may be subject to further adjustment."

Preliminary Objection by Respondent

At the commencement of the hearing, the CFO raised three objections to Sure Fresh Foods Inc. being permitted to proceed with the appeal. The Tribunal determined that these preliminary matters must be addressed prior to considering the appeal before us. At the hearing, both parties agreed that the Tribunal had the authority to rule on the preliminary objections by the Respondent.

The first submission of the CFO is that the appeal to the Tribunal was not advanced in a timely fashion because Sure Fresh Foods Inc. had knowledge of CFO's market development policy for well over three years.

The second matter raised by the CFO is that this matter relates to a levy imposed by the CFC. The CFO submits that this levy was imposed under Federal legislation and authority, and that it is beyond the jurisdiction of this Tribunal to make an order or determination in relation to a decision of the CFC. The CFO further submits that Sure Fresh Foods Inc. did not exercise the available federal mechanisms to challenge the decision of the CFC.

The third objection to this appeal proceeding made by the CFO is that this appeal amounts to a collateral attack on the decision of the CFC. The CFO further argues that Sure Fresh Foods Inc. chose not to directly attack the decision of the CFC.

Findings

Regarding the first objection of the CFO to this appeal proceeding, the Tribunal notes that the appeal to the Tribunal was submitted on June 24, 2008. Sure Fresh Foods Inc. purports to be appealing the July 30, 2007, decision of the CFO to not review and adjust a levy imposed on Sure Fresh Foods Inc. by the CFC. Sure Fresh Foods Inc. further submits that the levy was imposed with the advice and consent of the CFO.

Sure Fresh Foods Inc. argues that the CFO has no written policy to support the interpretation of counting the first production received from producers as counting towards the market development commitment, and that the appeal is an appeal of the decision of the July 30, 2007, decision of the CFO and was, therefore, brought within the one year timeframe provided for in subsection 16(4) of the Ministry of Agriculture, Food and Rural Affairs Act:

Tribunal may refuse to hear appeal

4. The Tribunal may refuse to hear the appeal or, after a hearing has commenced, refuse to continue the hearing or make a decision if it relates to any order, direction, policy, decision or regulation of which the appellant has had knowledge for more than one year before the notice is filed under subsection (1) or (2) or, if in its opinion,
   
   1. (a) the subject-matter of the appeal is trivial;
   2. the appeal is frivolous or vexatious or is not made in good faith; or
   3. the appellant has not a sufficient interest in the subject-matter of the appeal. R.S.O. 1990, c. M.16, s. 16 (4); 2006, c. 19, Sched. A, s. 16 (3).

The CFO argues that Sure Fresh Foods Inc. did have knowledge of the market development policy of the CFO that the first kilograms of chicken received from producers count towards a processor's market development commitment for well over three years, and that the Tribunal should exercise its discretion in refusing to hear the appeal.

Therefore, the issue is whether this appeal is an appeal of the July 30, 2007, decision of the CFO (and thus was launched within the one year time frame) or whether the appeal really amounts to an appeal of a policy of the CFO of which Sure Fresh Foods Inc. had knowledge of for more than one year (and thus was launched outside of the one year time frame).

The Tribunal finds that there are conflicting submissions of whether Sure Fresh Foods Inc. had knowledge of the policy of how the CFO calculates whether market development commitment was met. Because there is no written policy that describes the CFO's practice of counting the first kilograms out of the barn as being applied to the processors' market development commitment, the Tribunal finds that, on balance, the appeal was filed in a timely fashion based on the denial by CFO of the request by Sure Fresh Foods Inc., on July 30, 2007, and the subsequent appeal to the Tribunal on June 24, 2008.

Regarding the second preliminary objection, being that the Tribunal does not have the jurisdiction to make an order or determination in relation to a decision of the CFC, the Tribunal finds that it does not have the jurisdiction to order the CFC to alter the levies that it imposed under the federal regulated marketing scheme created pursuant to the Farm Products Agencies Act and the regulations, policies and guidelines made thereunder.

However, submissions by Sure Fresh Foods Inc. suggest that the CFO's calculation of whether market development commitment has been met is used by the CFC in calculating applicable levies. The Tribunal does have jurisdiction to review a decision of the CFO, including a decision regarding how a CFO policy applies to a processor of chicken such as Sure Fresh Foods Inc. Sure Fresh Foods Inc. has requested, in its letter of appeal to the Tribunal, that the Tribunal advise the CFC that it ought to not impose any levy in excess of an amount that is admitted to be due, of $47,369.00. This requested remedy would merely be a recommendation that would not be binding on the CFC. The making of a recommendation would not be outside the jurisdiction of the Tribunal.

Regarding the third argument of the Respondent, the Tribunal notes that the intention of the federal chicken marketing scheme as laid out in the Farm Products Agencies Act and the regulations, policies and guidelines made thereunder, is that decisions of the CFC regarding the assessment of levies be appealed to the NFPC. The opportunity for appeal is provided for in the CFC Market Development Policy s. 8.10. Parties before the CFC and the NFPC may also potentially make an application in Federal Court for a judicial review of the decisions of those entities. The Tribunal finds that it is not the intention of the Farm Products Agencies Act and the associated regulations, policies and guidelines regarding the federal chicken marketing scheme, that the assessment of levies by the CFC be challenged by citing how the application of a policy by the CFO could affect a decision of the CFC, and then challenging that CFO decision that applies the policy. While Sure Fresh Foods Inc. did argue that CFO does provide information to the CFC regarding whether a processor has met their market development commitment, the assessment of the levies is a decision of the CFC. The clear intent of the federal chicken marketing scheme is that decisions of the CFC be appealed to the NFPC.

Sure Fresh Foods Inc. unsuccessfully challenged the decision of the CFC at the NFPC and did not seek a judicial review of the decisions of the CFC or of the NFPC in Federal Court.

Additionally, the Tribunal notes that the CFC and the NFPC are federal entities with expertise in interpreting and applying the federal chicken regulated marketing scheme. The determination of applicable levies is wholly within their expertise and purpose.

Furthermore, the Tribunal considers that rendering a decision on this appeal could have the effect of creating two conflicting decisions on levies payable by Sure Fresh Foods Inc. Rendering a decision regarding the applicable federal levy may provide further opportunities for appeal to federal agencies.

The Tribunal also finds that the legal principle that one may not do indirectly what one is prohibited from doing directly has application here. Sure Fresh Foods Inc. was unsuccessful in its appeal of the CFC decision to the NFPC, and did not seek a judicial review in federal court. They are now prohibited from directly attacking the CFC decision. The appeal of the CFO decision to deny Sure Fresh Foods Inc.'s request to count first kilograms out of the barn as part of its domestic commitment is an attempt to indirectly attack the decision of the CFC to impose the levy.

For these reasons, the Tribunal finds that this appeal does amount to a collateral attack of the decision of the CFC and therefore lacks legal merit. Pursuant to clause 16(4)(b) of the Ministry of Agriculture, Food and Rural Affairs Act, the appeal is hereby dismissed.

Dated at Maidstone, Ontario, this 23rd day of April, 2009.