Innerkip Specialty Meats Ltd. vs. Director

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In the matter of Section 16 of the Food Safety and Quality Act, 2001.

And in the matter of: An Appeal to the Agriculture, Food and Rural Affairs Appeal Tribunal by Innerkip Specialty Meats Ltd., of Innerkip, Ontario, under Subsection 10(1) of the Food Safety and Quality Act, 2001 (FSQA) from a decision of a Director appointed under the FSQA, dated August 12, 2010, (reasons dated November 17, 2010) in which the Director refused to renew the licence to operate a meat plant to Innerkip Specialty Meats Ltd.

Before:
John O'Kane, Vice Chair; Corry Martens, Member; Sharon Weitzel, Member

Appearances:

Don Murray - appellant/witness
Egon Spreitzer - witness
Nickalos Nicolaides - witness
Claude Scott - witness
John Benedetti - representing the Ministry
Lee-Ann Walker - witness
Ed Bailey - witness
Dr. James Christian - witness
Lisa Drabble - witness
Mike Tilford - witness

Decision of the Tribunal

Innerkip Specialty Meats Ltd. (Innerkip) appealed to the Tribunal over a decision of a director, appointed under the Food Safety and Quality Act, 2001 (FSQA), refusing to renew Innerkip's licence to operate a meat plant.

Under section 10(5) of the FSQA, this appeal before the Tribunal is a new hearing and in that context, the Tribunal has wide discretionary decision making powers.

The Tribunal heard the appeal in Guelph on February 8th and 9th, 2011, and April 27th, 2011.

Background

In 2006, Don Murray and Egon Spreitzer, both having backgrounds in farming and livestock operations, purchased a facility in Innerkip that had previously housed a meat processing operation. Together, they are the shareholders in Innerkip.

After buying the processing plant they applied to the Ministry of Agriculture, Food and Rural Affairs (the Ministry) for a licence under the FSQA. The Ministry licensed Innerkip to operate as an abattoir beginning January 9th, 2009.

The purpose of the FSQA is clearly spelled out in the first section of the Act, and that is to provide for:

1. The quality and safety of food, agricultural or aquatic commodities and agricultural inputs;
2. The management of food safety risks; and
3. The control of regulation of regulatable activities.

Meat processing plants, including abattoirs, are regulated operations under the FSQA.

Between becoming licensed in January 2009 and being provisionally suspended on March 18th, 2010, Innerkip faced many challenges that had a direct impact on its ability to operate the abattoir in compliance with the legislation. Since that time, Innerkip's licence expired on March 31st, 2010. A licence renewal hearing took place on June 14th and 24th, 2010 before a director appointed under the FSQA. On August 12th, 2010 the director issued a decision stating, "After considering the evidence, I find that it is in the public interest to refuse to renew the licence issued to Innerkip". On November 17th, 2010, the director released written reasons for that decision refusing to renew Innerkip's licence.

The issue in this appeal is whether Innerkip, who has the burden of proof, has satisfied the Tribunal that it is entitled to a licence renewal.

The Appellant's Evidence

Egon Spreitzer, while the majority shareholder of Innerkip, was not involved in the daily operations of the abattoir. Don Murray was the designated operator on the licence and responsible for daily operations. These gentlemen invested significant money into buying the plant and then upgrading it to obtain a licence. Their intentions in buying the plant were to provide an alternative custom slaughter facility for the farming community.

Egon Spreitzer acknowledged that Innerkip experienced difficulty getting the plant operational. They did not anticipate that it would take almost a year to get the facility ready. The work needed to get the building up to the legislated standards also cost them much more than expected.

Egon Spreitzer testified that once the facility became licensed, the Ministry often stopped them from processing animals for what he considered trivial matters, and he felt they were being picked on by Ministry staff.

Don Murray testified that he had been in the barbeque pig business for eighteen years which led to he and Egon Spreitzer developing the idea to open their own abattoir, despite the fact that they had never previously operated an abattoir. After purchasing the facility, Don Murray and Egon Spreitzer met with Dr. Ed Hayes, who had previously been in a position of responsibility for inspections within the Ministry. Dr. Hayes reviewed with them what Don Murray described as a "book of issues" to be addressed if they wished to become licensed. Don Murray testified that Innerkip borrowed money and began to address the list of issues identified by Dr. Hayes. Don Murray conceded that before buying the facility they had failed to investigate the electrical and cooling systems in the building. Innerkip then invested money to upgrade the electrical and cooling system as well as the water heating system and the well. Don Murray testified that almost from the beginning of licensed operations, Innerkip faced a series of challenges that included:

• The new propane water heating system could not maintain sufficient temperature necessary for slaughtering operations because the minerals in the water interfered with the system efficiency.
• A continuing struggle to find the right employees. He suggested some employees actively sabotaged the business by stealing plant records, stealing knives, stealing a scale, dumping mud into the cooling system trays and puncturing holes in the coolant lines.
• The swine flu scare and the general economic downturn.
• A money broker who was supposed to raise $1.9 million for Innerkip ran off with $380,000 that Don Murray and Egon Spreitzer entrusted to him.

Don Murray explained that he and Egon Spreitzer brought in an experienced manager, Claude Scott, to manage the abattoir so that Don Murray might step back from the operations, if Innerkip became relicensed. He acknowledged that he had made mistakes operating the abattoir. He acknowledged that he had failed to do the required paperwork. However, he felt that the Ministry personnel should have given him more help. He described feeling ridiculed by the Ministry meat inspectors. Don Murray acknowledged that he had found some of the Ministry meat inspectors at the facility frustrating, and that when he was under pressure, he had a "short-fused" temper. He acknowledged that he had said a "few things" to Ministry inspector Lisa Drabble, but that she had misunderstood him.

Claude Scott testified that he had worked in abattoirs for about twenty-five years and that he joined Innerkip about five months before Innerkip's licence was provisionally suspended on March 18th, 2010. He stated that when he arrived at Innerkip the operations were "going downhill". He testified that he felt Innerkip had addressed about 80% of the issues identified in a September 2009 Ministry audit, when the licence was provisionally suspended. Mr. Scott testified that after Innerkip's licence was suspended, he became a stakeholder in Innerkip. He borrowed money to invest in the business on the condition that Don Murray would not return to managing the abattoir. He testified that "Donny can't talk without snapping." Claude Scott testified that, in his view, it would take as little as $40,000 and as much as $110,000 to bring the plant up to Ministry standards.

Nicolas Nicolaides, a self-described community activist, who had known Don Murray since January 2010, testified on behalf of Innerkip. Mr. Nicolaides' evidence focused on his background as a butcher in Europe and his experience with the European system of livestock inspection. He inspected the Innerkip plant after the licence had been suspended. He was critical of the education and training system for meat inspectors in Ontario. He recommended a tax of $5 to $10 on each slaughtered pig that would be used to fund a new education and training system for inspectors. He volunteered to be appointed to a committee to design the new education and training system.

Despite pre-hearing disclosure of the materials that the Ministry intended to call in evidence, including copies of Compliance Orders, warning letters and witness will-say statements, all focusing on Innerkip's non-compliance with the FSQA and regulations, Innerkip did not lead any evidence in chief, challenging the Ministry materials.

The Ministry's Evidence

Lee-Ann Walker, a General Manager of the Ministry's meat inspection program testified that under the legislation, the onus is on the operator of an abattoir to ensure compliance with the legislation and the safety of on-site Ministry staff. She explained the licensing process for all 150 licensed abattoirs in the province. Ms. Walker explained that Ministry inspectors are required to be present in abattoirs every time animal slaughtering happens to ensure legislative compliance by the operator. The on-site inspector's oversight responsibilities include sanitation, documentation, animal health and welfare, pest control and meat temperature and handling. She explained the training that meat inspectors receive, as well as the field support they can access from Ministry staff and veterinarians. She explained the Ministry's annual audit program for all abattoirs and the three outcomes: pass, conditional pass and fail.

Ms. Walker also explained the Ministry's "progressive compliance approach" used to ensure all operators are treated consistently.

• The first stage is to educate operators to achieve voluntary compliance with the legislation.
• The second stage is a verbal warning with a time period to achieve compliance.
• The third stage is a written warning with a deadline for compliance and consequences for non-compliance.
• The fourth stage is a compliance order with a deadline for compliance and a right to have a hearing of the issues before a director.
• The fifth stage is a provisional suspension of the operator's licence with a right to a hearing of the issues before a director.

She explained that the Ministry may not always follow that progression, particularly when there is any imminent food safety issue.

Ms. Walker explained that the Ministry did not renew Innerkip's licence when it expired March 31st, 2010 for the following reasons that were relevant to a licence renewal at that time:

1. Don Murray obstructed Ministry meat inspectors from doing their jobs;
2. Innerkip had received several written warnings about compliance issues;
3. The frictions between the Ministry meat inspectors and Don Murray became so great that the Ministry insisted Murray not be present at the facility during slaughter operations;
4. The annual Ministry audit from September 2009 disclosed that Innerkip was below the Ministry's rating requirements;
5. The Innerkip plant was not in compliance with the regulations;
6. Ministry staff had experienced personal safety concerns at Innerkip;
7. On several occasions, Ministry meat inspectors withdrew meat inspection services due to sanitation issues, totalling more than 70 hours of inspections withdrawn.

Ms. Walker testified that the Ministry remained concerned today about all those reasons if Innerkip's licence were renewed.

The Tribunal qualified Dr. Jim Christian as an expert in the discipline of food safety. The Tribunal limited the opinions Dr. Christian could express in evidence to those opinions that he had previously provided in the appeal materials disclosed by the Ministry to Innerkip. The Tribunal did not limit Dr. Christian's fact based evidence.

Dr. Christian stated that he had been involved in annual audits of about 500 meat processing plants, including the Innerkip annual audit on September 3rd, 2009. He testified that based on his audit results of Innerkip, he rated the plant a "C" which was a conditional pass rating and corresponded to "not meeting the requirements" of the legislation.

Dr. Christian explained that he had heightened concerns for food safety at Innerkip due to temperature control issues, sanitation, poor record keeping and, pests. He confirmed that he had not been to Innerkip since September 2009 and his concerns were informed by his September 2009 audit observations.

Ed Bailey testified that he is a Ministry Area Manager for the meat inspection program and is responsible for the area where Innerkip is located. Between September 2009 and March 2010 he was seconded elsewhere, and during those months, Lisa Drabble was the acting Area Manager.

He testified that he assisted Don Murray through the original licence application process, educating him about the application, the legislation, and the meat plant guidelines. He testified that during that process Innerkip was struggling with financial issues. He testified that after becoming licensed, Innerkip had continued problems with compliance. He explained the compliance issues related to slaughter scheduling, animal welfare issues and sanitation issues. He also testified about a September 11th, 2009 written warning letter that he issued to Innerkip after the September 2009 audit. That letter focused on Innerkip's "C" rating, and the potential consequences of Innerkip failing to remedy the audit deficiencies in accordance with a "corrective action plan" (CAP), which was a time-line to address all compliance issues. That letter carried the following warning to Innerkip:

Any recurrence of similar violations may result in further progressive compliance action, which could include, but is not limited to, the withdrawal of inspection services, detention of meat products, issuance of compliance orders and provisional suspension of your licence. Continued non-compliance with the act and regulation could result in a hearing before a Director to determine whether to suspend or revoke your licence to operate a meat plant.

Ed Bailey testified that his next dealings with Innerkip coincided with his return to his Area Manager position in March 2010. At that time, he was involved in a Ministry decision to provisionally suspend Innerkip's licence to operate for 72 hours to address a pest control issue. He confirmed that he personally delivered to Don Murray a March 18th, 2010 letter advising of the provisional suspension and a hearing on March 25th, 2010. The reasons for the provisional suspension focused mainly on personal safety issues of Ministry meat inspectors, but included obstructing meat inspectors, and health and safety concerns. Ed Bailey testified that he had spoken with Don Murray twice on the morning of March 18th, 2010 about the provisional suspension. In each call, Don Murray was increasingly upset. In the first call around 10:45 a.m., Don Murray made vague comments about meat inspector Mike Tilford and hung up abruptly. Ed Bailey then contacted the meat inspectors at Innerkip and instructed them to leave the plant. In the second call at 11:30 a.m., Don Murray was much more verbally abusive about the system and government employees; he lamented his need for money and his depression; he described his situation as a real mess; and said he would either sell it or "burn it down".

Mr. Bailey testified that he had no issues with 37 other meat plants under his responsibility but with Innerkip, there were issues that arose "every other day". He testified that he had no confidence in Don Murray's ability to operate an abattoir in compliance with the FSQA and regulations.

Lisa Drabble testified that she is a Ministry Area Coordinator in the meat inspection program and between September 2009 and March 2010 was acting Area Manager during Ed Bailey's absence. She confirmed that she had been involved with Innerkip as a meat inspector, as an Area Coordinator and as acting Area Manager.

She testified that she was aware of Innerkip's September 2009 audit results, and that she attended the CAP meeting with Don Murray to review the CAP time-line for remedial actions.

Lisa Drabble identified three Compliance Orders that she issued to Innerkip under section 32 of the FSQA, all during September 2009. Two of the Orders related to animal welfare issues and one related to plant sanitation issues.

Lisa Drabble issued four written warning letters to Innerkip dated September 28th, 2009, October 2nd, 2009, November 3rd, 2009, and November 18th, 2009.

• The first of those warning letters related to an incident where Lisa Drabble felt verbally abused and physically threatened by Don Murray. According to Lisa Drabble, the incident arose when she delivered the September 28th, 2009 Compliance Order. She testified that Don Murray became upset and was crying and among his comments, said words to the effect that he was depressed and going to kill himself and before he does, he was going to execute someone. Lisa Drabble left, consulted with Joe Koza her Regional Manager, contacted the local OPP detachment and reported the incident.
• The second warning letter related to refrigeration issues and meat temperature issues at Innerkip, as well as transporting pig carcasses contrary to directions from Ministry meat inspectors.
• The third warning letter related to Innerkip's ongoing failures to address the September 2009 audit issues according to the CAP time-line.
• The fourth warning letter from Lisa Drabble related to physical threats that Don Murray had made in a telephone call with Lisa Drabble about meat inspector Mike Tilford. According to Lisa Drabble, in that call, Don Murray made comments about Mike Tilford stating that he could not guarantee his safety at Innerkip, that he was hated by the farmers and was not a desirable human, and if he returned to Innerkip "whatever happens, happens". Lisa Drabble then consulted with Joe Koza about the telephone call and issued the warning letter.

Lisa Drabble also identified three additional warning letters issued to Innerkip by Regional Manager Joe Koza on October 8th, 2009, November 25th, 2009, and December 22nd, 2009.

• The first of Joe Koza's warning letters to Innerkip related in part to Don Murray's comments to Lisa Drabble on September 28th about executing someone, and the second related to a October 5th text or voice message from Don Murray, "Please call Don Murray before he dies".
• The second of Joe Koza's warning letters related to ongoing compliance issues. The letter required that Innerkip provide the Ministry inspection staff 48 hours notice in advance of any scheduled animal delivery so that Ministry inspection staff could attend to assess six required conditions for approval to slaughter.
• The third of Joe Koza's warning letters related to several instances where Innerkip had operated contrary to the conditions of the November 25th, 2009 warning letter.

All of the eight written warning letters issued to Innerkip carried the same or similar warning reproduced above.

Lisa Drabble testified that beginning in late November 2009, she insisted that Don Murray not attend at Innerkip while Ministry inspection staff were on site. She explained the reason for that decision was concern over safety of the Ministry staff. She testified that she knows of no other situation where an operator has been banned from the premises during inspection services.

Lisa Drabble testified that she continues to have concerns about her safety and the safety of her inspectors around Don Murray.

During cross-examination, Lisa Drabble confirmed that Don Murray had never physically touched her, however, she still felt threatened by his words.

Mike Tilford testified that he is a meat inspector stationed at the Innerkip plant and has worked as an inspector in slaughter plants every day for 10 years. He described his observation that the Innerkip operation began to slide downhill after just a few weeks of opening. He listed the issues that he regularly saw including:

• Suspect or compromised animals
• Sanitation issues
• Equipment breaking
• Poor maintenance
• Poor record keeping
• Refrigeration issues
• Meat temperature issues
• Employee conduct

He acknowledged that his relationship with Don Murray was almost non-existent. He explained that almost daily he would take some portion of the regulations to Murray's attention to address a compliance issue and Murray's reaction was to dismissively call him a "bookworm" and throw up his arms saying that he had a business to run.

Mike Tilford testified that Don Murray had threatened both he and an inspector from the Ministry of the Environment.

Mike Tilford testified that if Innerkip was re-licensed, he would go back despite the threats he had received, but only if he had another inspector to watch his back.

None of the evidence of the Ministry witnesses was seriously challenged during cross-examination.

Findings

The FSQA provides in subsection 5(3) that, subject to section (6), a director shall renew a licence. Section 6 gives a director discretion to refuse to renew a licence if the director is of the opinion that:

1. the licensee does not meet the requirements of this Act and the regulations;
2. the licensee or, if the licensee is a corporation, an officer, director or employee of the licensee, has contravened or has permitted any person under the licensee's control or direction in connection with the activity to contravene this Act, the regulations, any other Act, the regulations under it or any law applying to the carrying on of the activity or the conditions for licensing and the contravention is such that it would be in the public interest to refuse to renew the licence or to suspend or revoke the licence; or
3. there exists any other ground specified in the regulations for refusing to renew the licence or for suspending or revoking the licence.

The Legislature's use of the words "shall renew a licence" in that section before setting out the limited nature of a director's discretion to refuse a licence reflects the serious nature of not renewing an operator's licence.

In this appeal hearing, the Tribunal stands in the shoes of a director and can make any licence renewal decision that a director could make, including substituting our opinion for that of a director.

However, based on the evidence in this hearing, we have no doubt that in these circumstances, refusing Innerkip a licence was appropriate.

The following are the material findings of fact flowing from the evidence:

• The onus is on the operator of a meat plant to ensure compliance with the FSQA and regulations.
• Innerkip, and Don Murray as the operator, did not have a clear understanding of their responsibilities under the FSQA and regulations.
  • Don Murray admitted that he made mistakes operating the plant.
  • Don Murray admitted that he failed to do the paperwork required under the FSQA and regulations.
  • Claude Scott confirmed that when he started with Innerkip at the end of 2009 it was "going downhill".
• Innerkip routinely and repeatedly failed to comply with the FSQA and regulations:
  • Innerkip received at least three Compliance Orders
  • Innerkip received at least seven written warning letters
• Innerkip's failure to comply with the FSQA and regulations:
  • compromised the quality and safety of food
  • compromised proper management of food safety risks
• Don Murray, as the named operator at Innerkip:
  • obstructed Ministry personnel from carrying out their legislated mandate.
  • intimidated and threatened Ministry staff.
    o conceded that he said some things when angry that were misunderstood.
    " While the words he used may have been incautious, Mr. Murray's evidence clearly demonstrated that he does not appreciate that words can be as threatening and intimidating as physical violence.
    " Innerkip struggled financially from the start, suggesting to the Tribunal that it was probably undercapitalized.
    o That finding is supported by the evidence that in 2010 Innerkip was trying to raise $1.9 million in additional financing.
    o That attempt to raise money ended badly for Innerkip when its money broker absconded with $380,000.
    o That was undoubtedly devastating for Innerkip and its principals, Murray and Spreitzer.
    " Re-starting the Innerkip plant at this time would take significant money estimated from $40,000 to $110,000.

The legislative scheme of the FSQA and regulations, in the context of abattoirs, is designed to ensure, via the licensing system, as safe as possible a food chain. That system is built on operators who know their responsibilities within the licensing regime and respect Ministry oversight through the meat inspectors.

The Tribunal finds that Innerkip did not understand its responsibilities under the legislation, nor did it respect the meat inspectors' responsibilities. The Tribunal finds that Innerkip lacked the necessary skilled personnel and financial resources to operate a meat plant in accordance with the FSQA and regulations.

The Tribunal is satisfied that to ensure public safety and confidence in Ontario's regulatory system for meat plants, Innerkip's licence to operate a meat plant should not be renewed.

Order of the Tribunal

Therefore, the Tribunal Orders that the appeal of Innerkip Specialty Meats Ltd. under section 10(1) of the FSQA is dismissed.

Dated at Brampton, Ontario this 30th day of May, 2011.