Woodbury Leaf Inc. vs. Ontario Flue-Cured Tobacco Growers' Marketing Board

In the matter 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 (Tribunal) by Woodbury Leaf Inc. and Joseph Allan Slusarczyk Jr. and Joshua Slusarczyk, respectively of Burford and Harley, Ontario, from decisions of The Ontario Flue-Cured Tobacco Growers' Marketing Board regarding requests to rescind quota transactions and amend applications under the Tobacco Transition Program.

And in the matter of: a Pre-Hearing Conference pursuant to Rule 24 of the Tribunal's Rules of Procedure;

And in the matter of: the hearing of a motion by The Ontario Flue-Cured Tobacco Growers' Marketing Board (Tobacco Board) pursuant to Rule 25 of the Tribunal's Rules of Procedure to quash the hearing of the appeal;

And in the matter of: a written hearing pursuant to Rule 13 of the Tribunal's Rules of Procedure, and on the consent of the parties.

Motion Hearing Decision of Tribunal

Overview and Background

On September 2, 2010 the Tribunal issued its Notice of Written Pre-Hearing Conference - Motion to Quash Hearing of Appeal as it relates to an appeal by Woodbury Leaf Inc. ("Woodbury"), Joseph Allan Slusarczyk Jr.("Joseph Jr."), and Joshua Slusarcyzk ("Joshua") (Woodbury, Joseph and Joshua are collectively referred to as the "Appellants"), from a decision of The Ontario Flue-Cured Tobacco Growers' Marketing Board ("Tobacco Board") from a hearing held on May 20, 2009. The parties to this appeal agreed to have this motion brought by the Tobacco Board under Rule 25 of Tribunal's Rules of Procedure ("Rules") proceed by way of written submissions.

Tobacco Transition Program (TTP)

On February 13, 2009 the Tobacco Board and the federal government, represented by the Minister of Agriculture and Agri-Food, entered into the Canada-Ontario Tobacco Board Funding Agreement for the Tobacco Transition Program ("TTP"). Under the TTP, the federal government allocated money to buy tobacco growers' quota at $1.05 per pound on the condition that participating growers never plant the crop again.

The Tobacco Board's responsibilities under the TTP included, among others:

• removal of the current quota system for the production and marketing of Tobacco; and the implementation of a permanent licensing system through the enactment of regulations;
• communicating to all Eligible Recipients the timing and details of the TTP process and the requirements to participate in the TTP;
• drafting and distributing the Application Form to all potential Eligible Recipients;
• ensuring Eligible Recipients complete and submit an Application Form; and
• calculating and making payments to Eligible recipients.

The Appellants indicated that several meetings were held with the growers by representatives of the program and the Tobacco Board to explain the TTP. The Appellants' understanding was that the growers were able to transfer their quota in certain specified ways and still be permitted to apply for a licence under the new licensing system that was going to be implemented by the Tobacco Board and that would replace the quota based system.

Divestiture of Appellants Holdings under the TTP

According to the materials submitted by the Appellants, on or before March 20, 2009 and after the announcement of the TTP, Joseph Jr. and Joshua divested themselves of their shares in Woodbury, leaving Joseph and Nancy as the only shareholders in Woodbury.

It was the Appellants understanding that growers could transfer their quota and at the same time still be permitted to apply for a licence to grow tobacco. Based on this understanding, Joseph Jr. and Joshua completed their quota transfers to Woodbury in accordance with what they thought were the rules of the TTP.

The Appellants claim that the constant changes in the Tobacco Board's policy coupled with the manner in which information was distributed to the growers resulted in confusion amongst the growers about the implementation of the TTP.

The Appellants further allege that the Tobacco Board recommended that all transfers, with some limited exceptions such as wills, be rescinded to preserve the eligibility for TTP funds. It was based on this alleged recommendation that Joseph Jr. and Joshua claim to have rescinded their transfers of quota to Woodbury. The Appellants allege that after they rescinded their transfers, the federal government clarified its position on the TTP guidelines so that transfers would be acceptable in circumstances where a transferor of quota subsequently applied for a licence to produce tobacco on land owned by a TTP recipient. It was at that time the Appellants claim to have attempted to revoke their recission of the transfers, or in other words, request that the transfers be granted to Woodbury. This request to grant the transfers was denied by the Tobacco Board and became part of the appeal brought by the Appellants to the Tobacco Board and resulted in the appeal before the Tribunal.

Appeal to the Tobacco Board

In its appeal Woodbury and the Appellants requested that the Tobacco Board allow the following:

1. The TTP application by Joshua Slusarczyk be revoked;
2. The TTP application of Joseph Slusarcyzk Jr. be revoked;
3. The recission of the transfer of quota by Joshua Slusarczyk to Woodbury be rescinded and that the original quota transfer be permitted in favour of Woodbury;
4. The recission of the transfer of quota by Joseph Slusarcyzk Jr. to Woodbury be rescinded and that the original quota transfer be permitted in favour of Woodbury; and
5. The combined total of Joshua Slusarczyk's and Joseph Slusarczyk Jr.'s quota be allowed to form part of Woodbury's original TTP application.
   

Decision of the Tobacco Board

On May 4, 2009 the Appellants filed its appeal with the Tobacco Board requesting that the Tobacco Board provide an opportunity for oral submissions relating to its decision not to permit the revocation of the Joseph Jr.'s and Joshua's recission of the original quota transfers (i.e. to allow the quota transfers to Woodbury) and to revoke their TTP applications and allow the quotas to be transferred to Woodbury and form part of Woodbury's TTP application.

The Tobacco Board held an oral hearing on May 20, 2009 to consider the appeals of Woodbury, Joshua, and Joseph Jr. On May 25, 2009 the Tobacco Board sent each of the Appellants a letter advising that the appeals were denied. The Tobacco Board provided detailed written reasons for its decision on June 4, 2009.

In its decision of June 4, 2009 the Tobacco Board advised Woodbury that:

Unfortunately, the relief requested by the application would require the Board to do something which is no longer within its power. The Board has abolished the quota system. It no longer has the power to reallocate quota to Joseph Jr. and Joshua and to then approve a transfer of that quota to Woodbury. As there is no longer a quota system and as the Board no longer has any power over quota, the Board has no choice but to deny the appeal.

Further the appeal seeks to have the Board treat the TTP applications of Joshua and Joseph Jr. as if they did not exist and to retroactively amend the application of Woodbury to reflect the transfer of BFQ from Joseph Jr. and Joshua. The Board has no authority to do that as the administrator of the TTP.

On July 13, 2009 Woodbury and the Appellants requested that the Tobacco Board reconsider its appeal. On July 29, 2009 the Tobacco Board advised that it saw "no basis for convening a further hearing in this matter." Woodbury and the Appellants appealed the decision of the Tobacco Board to the Tribunal on March 5, 2010.

Motion to Quash the Appeal brought by Woodbury

The Tobacco Board brought this motion requesting an Order quashing, dismissing, or refusing to hear the appeals of the Appellants pursuant to Rule 25 of the Tribunal's Rules on the basis that the Tribunal lacks the jurisdiction to hear appeals or to grant the relief requested by the Appellants.

The grounds of the Tobacco Board's motion are as follows:

1. The decisions of the Tobacco Board relating to the TTP are not decisions made under the Farm Products Marketing Act, as required by subsection 16(2) of the Ministry of Agriculture Food and Rural Affairs Act, and further that the Tribunal lacks jurisdiction over remedies that would affect the Federal government as the decision of the Tobacco Board was made pursuant to an agreement with the federal government; and
2. The Tribunal does not have the jurisdiction under the Farm Products Marketing Act and the Ministry of Agriculture, Food and Rural Affairs Act to grant the relief being requested by the Appellants.

Analysis and Conclusions

The Tribunal is constituted pursuant to section 14 of the Ministry of Agriculture, Food and Rural Affairs Act and provides an independent, avenue of appeal in a variety of matters under numerous provincial statutes including the Farm Products Marketing Act.

1. The decisions of the Tobacco Board relating to the TTP are not decisions made under the Farm Products Marketing Act, as required by subsection 16(2) of the Ministry of Agriculture Food and Rural Affairs Act, and further that the Tribunal lacks jurisdiction over remedies that would affect the Federal government as the decision of the Tobacco Board was made pursuant to an agreement with the federal government.

The Appellants filed their appeal with the Tribunal on March 5, 2010. This appeal was initiated by the Appellants when they filed their appeal with the Tobacco Board on May 4, 2009. The Tribunal's jurisdiction to hear the appeal arises at the time the appeal was first filed with the Tobacco Board. In May 2009 the Tribunal's jurisdiction to hear appeals relating to an order, direction, policy or regulation of the Tobacco Board was set out in section 16(2) of the Ministry of Agriculture, Food and Rural Affairs Act. In October 2010 the Ministry of Agriculture, Food and Rural Affairs Act was amended and the Tribunal's jurisdiction previously found under section 16(2) is contained in section 16(1) which corresponds to the former section 16(2) .

The Tribunal has the jurisdiction to hear appeals arising from any order, direction, decision, policy or regulation made by the Tobacco Board under the Farm Products Marketing Act.

The Tobacco Board is established by regulations made pursuant to the Farm Products Marketing Act and has the authority to exercise powers and perform duties that are delegated by the Farm Products Marketing Commission and given or assigned to it by regulations made pursuant to the Farm Products Marketing Act. The Tobacco Board has no inherent jurisdiction and only has the authority set out in the statutory regime.

The Tobacco Board has no inherent jurisdiction, all of their powers to engage in regulated marketing, including but not limited to entering into agreements respecting a regulated commodity, such as tobacco, arise from the Farm Products Marketing Act. All decisions made by the Tobacco Board relating to regulated marketing are considered decisions made under the Farm Products Marketing Act.

The purpose of the TTP was to move the tobacco growers from a quota based system to a licensing program. The TTP is a federal program and the implementation of that program was delegated to the Tobacco Board. The Tobacco Board acted pursuant to its statutory authority given to it by the Farm Products Marketing Act to implement that program. Since decisions of the Tobacco Board regarding the TTP are decisions under the Farm Products Marketing Act, the decision of the Tobacco Board refusing to allow the original quota transfers and permitting these transfers to form part of Woodbury's TTP application represents a decision under the Farm Products Marketing Act and as a result, the Tribunal has the jurisdiction to hear this appeal

The Tobacco Board and the federal government agreed that the Tobacco Board shall be responsible for the administration and delivery of the TTP . It is clear that the federal government delegated the authority for the implementation of the TTP to the Tobacco Board. As discussed above, decisions made by the Tobacco Board are decisions pursuant to the Farm Products Marketing Act and any remedy that the Tribunal has available to it on this appeal would only affect the federal government to the extent that it had already delegated the authority to the Tobacco Board. The Tribunal has the jurisdiction to grant any remedy as it relates to the implementation of the TTP that was available to the Tobacco Board in accordance with the authority delegated to it by the federal government.

2. The Tribunal does not have the jurisdiction under the Farm Products Marketing Act to grant the relief being requested by the Appellants.
   

The TTP represented a program initiated by the federal government to facilitate the transition of quota holders out of the tobacco industry.

The Tobacco Board obtained its authority to make decisions relating to the quota based system from regulations made under the Farm Products Marketing Act. Specifically, Ontario Regulation 435 under the Farm Products Marketing Act delegated the authority to the Tobacco Board to require that tobacco be produced and marketed on a quota basis in section 6.1. The Tobacco Board was responsible for the administration and delivery of the TTP which included the removal of the quota based system and implementation of a licensing system through the enactment of regulations no later than March 31, 2009.

At the time the Tobacco Board received the appeal on May 4, 2009, it had already enacted Tobacco Board Regulation No. 122-2009 to comply with the requirements of the TTP. Tobacco Board Regulation No. 122-2009 removed the quota based system for the control of production and marketing of tobacco effective March 31, 2009. However, Regulation No. 122-2009 did not revoke Ontario Regulation 435 which remained in force until June 1, 2009.

The jurisdiction for the quota system and decisions made relating to the transfers of quotas continued to be delegated to the Tobacco Board under the Farm Products Marketing Act pursuant to Ontario Regulation 435 and this jurisdiction remained with the Tobacco Board until Ontario Regulation 435 was revoked on June 1, 2009. At the time the Appellants filed their appeal with the Tobacco Board, it is clear that the Tobacco Board continued to have discretion delegated to it by the Farm Products Marketing Commission to implement a quota based system.

The remedy requested by the Appellants is to allow the Appellants to rescind the rescission of the original quota transfers, or in other words to allow the original transfers, and permit the original transfers to form part of Woodbury's TTP application. The Tribunal has the jurisdiction to make an order directing the Tobacco Board to take any action that is within the Tobacco Board's authority as it existed at the time the appeal was first made to the Tobacco Board in May 2009 and to substitute its opinion for that of the Tobacco Board. The Tobacco Board had the authority for the quota based system at the time the appeal was filed in May 2009 and as a result the Tribunal has the authority to consider the relief being requested by the Applicants.

Order of the Tribunal

Therefore the Tribunal denies the Tobacco Board's motion.

Dated at Lasalle, Ontario this 10th day of February, 2011.