Ottawa, Ontario, February 26, 2007
PRESENT: The Honourable Mr. Justice Phelan
BETWEEN:
and
and CHICKEN FARMERS OF CANADA
REASONS FOR JUDGMENT AND JUDGMENT
[1] The Applicant, a chicken processor subject to a complex regulatory/quota scheme, was found to have breached the applicable regulations.
II. BACKGROUND
[2] The sale of chicken in interprovincial and export trade is subject to a supply-management system established pursuant to the Farm Products Agencies Act in accordance with a federal-provincial agreement in respect of chicken. The Respondent Chicken Farmers of Canada (CFC), established by Order-in-Council, administers much of this system including making provincial quota allocations, issuing licences and imposing levies to those engaged in marketing chickens interprovincially and for export. These activities are governed respectively by the Canadian Chicken Marketing Quota Regulations (Quota Regulations), Canadian Chicken Licensing Regulations (Licensing Regulations) and the Canadian Chicken Marketing Levies Order (Levies Order).
[3] As part of this supply-management system, CFC establishes quotas. There are “regular” quotas for which there are no limits on end use or time limits; almost all regular quota is sold domestically. There are also “market development” quotas which are for export. These quotas contain safeguards to protect the domestic market to ensure that export chicken is not dumped back into domestic sales. One of the safeguards is that the “marketing” of market development quota chicken must be completed within certain periods.
[4] The Applicant, a chicken processor, has held a market development licence and has marketed products under that license continuously since 1998. The marketing development period relevant to this matter expired March 5, 2005. By that date all marketing by the Applicant in respect of that quota had to be completed.
[5] The product in question was shipped and had left the Applicant’s processing plant in Winnipeg between February 18, 2005 and February 25, 2005. As of March 2, 2005, the product was delivered to International Cold Storage Inc. (International) in Montreal.
[6] According to correspondence from International, upon arrival of the product at International’s facilities, the seal on the trailer is removed and the load is verified. The product is then unloaded, inspected and counted. When it is time for exportation, the product and containers are inspected by the Canadian Food Inspection Agency (CFIA). It is at that point that a form CFIA 1454 (Form 1454) is issued.
[7] In the present case, the Form 1454 was not issued until four days after the expiry of the marketing period. CFC concluded that the Applicant had not completed its marketing by March 5, 2005 relying on the filing date of the Form 1454 as evidence that the product was not ready for export until March 9, 2005.
[8] The Applicant’s position was that once the product was transferred to International, it was out of Dunn-Rite’s control and all marketing of the product by Dunn-Rite was completed.
[9] There was considerable debate about which document properly exhibited the end of the marketing activity. The Applicant said that the proper document is one known as Annex H (Export Application Verification Form). CFC says that the appropriate document is CFIA 1454 (Certificate of Inspection Covering Meat Products).
[10] The evidence is clear that CFC has always used the Form 1454 as the evidence of export and the end of marketing. This is because once that document is issued, it is extremely difficult to bring the product back into the Canadian market. The effect of the document is consistent with the goal of ensuring that export chicken does not enter the Canadian market.
[11] In this case, the CFIA form listed the exporter as Export Packers Company Limited (Export Packers) – its exact role and relationship to Dunn-Rite was never formally established. There was some suggestion that supplemental material establishing ownership of the product would be filed but this never occurred. There was no objective documentary evidence presented that ownership of the chicken in this case transferred to Export Packers or anyone else. The evidence of the Applicant, however, was not cross-examined upon and remains unchallenged.
[12] In addition to Export Packers being the exporter of record, the Form 1454 recorded the consignee as a company in Skopje, Macedonia, thus indicating that the product would enter the market in that country in some fashion.
[13] The Applicant admitted that the Form 1454 was completed after the March 5, 2005 deadline. It explained there was a potential risk of this occurring when product moves by rail to a storage company late in “the allowed period”.
[14] Following an audit by CFC, the Applicant received an assessment of levy notice requiring the payment of $59,548.28 for breach of the applicable regulations in marketing after the deadline.
[15] Following a hearing before the CFC Board of Directors, the levy was confirmed. In reaching its conclusion, the Board took account of the following factors:
· Dunn-Rite has significant experience with the CFC Marketing Development Policy, having held a market development licence since A-20, and the specific challenges with exporting product from its facilities in Winnipeg.
· Dunn-Rite is well aware of the additional time required to containerize product in Montreal for export.
· The broker used by Dunn-Rite, Export Packers, has significant experience with the CFC Market Development Policy and the strict timeframe within which product must be marketed.
· Dunn-Rite did not present any evidence to prove that there was any undue delay by CFIA in Montreal to containerize the product, place it under CFIA seal and issue the Form 1454 “Certificate of Inspection Covering Meat Products”.
· In A-25, CFC amended the Market Development Policy to provide additional flexibility to market development licence holders to meet their market development commitments by adding a third period to market the product. As such, the CFC Board of Directors has consistently and strictly upheld the specific timeframes in the policy to market the product. Dunn-Rite is well aware of this fact through previous issues with meeting the marketing timeframe.
· As CFIA Form 1454 “Certificate of Inspection Covering Meat Products” is only issued once the product has been containerized and put under CFIA seal for export, CFC has consistently used this document as the date of export, with the transporter’s bill of lading used as the proof of actual export. The CFC Board of Directors does not accept CFIA’s “Export Application Verification Form – Annex H” as the date of export. The purpose of this document is only to confirm that the product meets the requirements of the importing country. The product in question was transported from Winnipeg to Montreal under a Dunn-Rite seal and not one of CFIA.
· The documents provided by Dunn-Rite confirm that the product in question was slaughtered by Dunn-Rite in December 2004, January 2005 and February 2005.
· It is the view of the CFC Board of Directors that the failure of Dunn-Rite to market the product within the timeframes of the CFC market Development Policy was completely within its own control. Dunn-Rite left itself no flexibility to deal with the type of normal delays associated with exporting product from Winnipeg through Montreal by waiting until the last 10 days of the 168-day period it had to market the product to initiate the export process.
III. ANALYSIS
[16] The Applicant had originally raised the issue of whether the applicable regulations were vague for uncertainty. This attracted the Attorney-General’s involvement. That issue was not advanced significantly and need not be dealt with here.
A. Regulations
[17] The power to impose the levy on the Applicant – which in reality is the equivalent of a fine or penalty – is found in s. 5(1)(a)(i) of the Levies Order:
While the CFC decision refers to marketing other than in accordance with the “CFC’s Marketing Development Policy”, rather than “the market development commitment period”, or otherwise alleging a breach of regulations, the Applicant has not raised this issue of proper notice.
[18] The particularly pertinent regulatory Licensing Regulation provisions are:
(a) Section 3(c) which prohibits any person from marketing chicken in interprovincial or export trade unless they comply with the conditions of a license.
(b) Section 5(3)(d) which provides that every licensee must market the chicken during the market development period.
(c) Section 5(3)(f) which requires the licensee to provide sufficient information to CFC to ensure compliance with certain license conditions.
(d) Section 5(3)(i)(iii) which requires the filing within 15 days of the market development period what is now known as the Form 1454.
(e) Section 5(3)(k) which provides that any transfer of ownership or other disposition of the chicken does not exempt the licensee from compliance with s. 5(3).
[19] Lastly, the word “marketing” is broadly defined as:
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"marketing" , in relation to chicken, whether live or in processed form, means selling or offering it for sale or buying, pricing, assembling, packing, processing, transporting or storing it or any other act necessary to prepare it in a form, or to make it available at a place and time, for purchase for consumption or use. |
«commercialisation» En ce qui concerne le poulet, la commercialisation inclut la vente et la mise en vente, l’achat, la fixation des prix, l’assemblage, l’emballage, la transformation, le transport, l’entreposage et toute autre opération nécessaire au conditionnement du poulet ou à son offre en un lieu et à un moment donnés pour achat en vue de consommation ou d’utilisation. |
B. Standard of Review
[20] I concur with the Respondent’s analysis (the Applicant having not addressed the issue), that the appropriate standard of review is reasonableness. Justice Shore’s decision in Saskatchewan (Minister of Agriculture, Food and Rural Revitalization) v. Canada (Attorney General), 2006 FC 345 where the standard was patent unreasonableness related to quota allocation which is much more of a policy-based decision than is the determination of whether a licensee has acted contrary to the licence and regulations. Reasonableness is more consistent with the Court of Appeal’s decision in Villetard’s Eggs Ltd. v. Canada (Egg Marketing Agency) (C.A.), [1995] 2 F.C. 581.
[21] While the standard of reasonableness is applicable to findings of fact and mixed law and fact, the Applicant quite properly focused on the definition of “marketing”. Dunn-Rite’s activities must still fall within the definition in order to attract the liability imposed. This does not mean giving the words narrow meaning, as cautioned against in Maple Lodge Farms Ltd. v. Canada, [1982] 2 S.C.R. 2, but it does require that the Applicant offend some aspect of the definition to attract liability.
[22] The term “marketing” includes very specific actions such as selling, processing, transporting and a more general phrase “or any other act necessary … to make it available at a place and time … for consumption or use”.
[23] The difficulty with the definition is the breadth which can be given to the words “consumption or use”. On one reading, any action directed at getting the product to the end user (potentially in this case some place in Macedonia) would constitute marketing. Thus, the shipment to the ultimate destination would be an aspect of marketing. This would be inconsistent with the purpose of the market development licence.
[24] The CFC, through the Licensing Regulations, has cut off the breadth of “marketing” for export at the point at which the Form 1454 is signed since that is the point at which export and thus removal from the Canadian market is virtually guaranteed.
[25] The determination of when marketing ends is a question of mixed law and fact. The CFC’s interpretation was known to producers, processors and licensees. It was known to Dunn-Rite. It is consistent with the purposes for which market development licenses are issued. Therefore, it is a proper interpretation of the provision consistent with s. 12 of the Interpretation Act.
[26] The Applicant’s argument that Annex H is a better indicator of the termination of marketing cannot be sustained. The form is nothing more than an application for a permit and does not address the substantive concern that product under this license in this case leaves the Canadian market.
[27] That Form 1454 is a critical document is evident in the Regulations. Annex H is not referred to in the Regulations. While it would be preferable to have its use and significance more clearly defined, on these facts it makes no difference.
[28] The Applicant’s position is that the product had been transferred to “International Inc.”; however, it has not demonstrated that ownership and all other actions under the definition of “marketing” had ceased.
[29] Even taking a narrow view of the definition of marketing, Dunn-Rite, by its own admission, was still involved in the movement of the product for export. This is evident in its letter of May 25, 2005 describing how it moves product. It is also evident in its submissions to CFC where it refers to its plant “flirting with deadlines when product is shipped towards the end of designated periods”. Dunn-Rite’s submissions are inconsistent with a defence that it had sold the product, transferred all rights and obligations to a buyer and had completely removed itself from the marketing activities.
[30] Whatever the state of ownership, which does not relieve it of obligations under the licence, it was reasonable to conclude that Dunn-Rite was at least still engaged in some fashion in the transportation of product after the expiry of the development period. This alone would be contrary to the Licensing Regulations.
IV. CONCLUSION
[31] Therefore, this application for judicial review will be dismissed with costs.
JUDGMENT
IT IS ORDERED THAT this application for judicial review is dismissed with costs.
ANNEX
Canadian Chicken Licensing Regulations, SOR/2002-22
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3. No person may engage in the marketing of chicken in interprovincial or export trade as a producer, producer-processor, primary processor, processor, dealer, retailer or transporter unless the person
(a) holds the appropriate licence referred to in section 6;
(b) pays to CFC the annual fee set out in section 6 for the licence; and
(c) complies with the conditions that the licence is subject to under section 5. |
3. Il est interdit de commercialiser du poulet sur le marché interprovincial ou d’exportation à titre de producteur, de producteur-transformateur, de transformateur primaire, de transformateur, de négociant, de détaillant ou de transporteur, à moins :
a) d’être titulaire du permis applicable visé à l’article 6;
b) de payer aux PPC les droits annuels fixés à cet article pour ce permis;
c) de respecter les conditions du permis prévues à l’article 5.
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5. (3) Every market development licence is issued subject to the following conditions:
(a) the licensee must be a primary processor using slaughtering facilities that are subject to inspection under a federal Act or regulations made under a federal Act;
(b) the licensee must submit a completed market development commitment form to CFC, or to any Provincial Commodity Board, or person, designated by CFC, at least five business days before the day on which CFC allocates the quota for the period indicated in section 1 of the form;
(c) the licensee must not knowingly engage in the marketing, in interprovincial or export trade, of chicken not raised by producers authorized to market chicken in interprovincial or export trade under federal market development quotas allotted in accordance with the Canadian Chicken Marketing Quota Regulations;
(d) during the market development commitment period, the licensee must market the total live weight equivalent of the number of kilograms of chicken indicated in section 1 of the market development commitment form — calculated by using the coefficients set out in column 2 of section 1 of Schedule 2 — to the buyers, and for the end-uses, referred to in section 3 of Schedule 2 and, during that period, the licensee must receive a copy of the Market Development Policy Volume Confirmation letter issued to buyers by the Department of Foreign Affairs and International Trade or the Certificate of Inspection Covering Meat Products issued by the Canadian Food Inspection Agency in respect of the chicken;
(e) the chicken marketed under the market development licence must be of one of the product categories set out in column 1 of section 1 of Schedule 2 and must not be derived from mature chicken or spent fowl;
(f) sufficient information to allow CFC to determine that the licensee has complied with the conditions set out in paragraphs (d) and (e) must be provided by the licensee to CFC, or to any Provincial Commodity Board, or person, that is authorized by CFC to receive the information, within 15 calendar days after each period that is described by paragraph (a), (b) or (c) of the definition "market development commitment period" in section 1 and included in the market development commitment period during which chicken produced under the federal market development quota was marketed;
(g) the licensee must comply with all orders, regulations and rules of CFC and the National Farm Products Council and with the provisions of the Farm Products Agencies Act;
(h) the licensee must remit any levies imposed on the licensee under subsection 5(1) of the Canadian Chicken Marketing Levies Order;
(i) within 15 calendar days after each period (in this paragraph referred to as the “reporting period”) that is described by paragraph (a), (b) or (c) of the definition "market development commitment period" in section 1 and included in the market development commitment period during which chicken produced under the federal market development quota was marketed, the licensee must provide to CFC, or to any Provincial Commodity Board, or person, designated by CFC, in respect of the chicken that was marketed under the licence during the reporting period,
(i) a complete product description, end-use product description, and the identity of the purchaser, of the chicken,
(ii) the Export Declaration in respect of any of the chicken that was marketed in export trade,
(iii) the Certificate of Inspection Covering Meat Products issued by the Canadian Food Inspection Agency in respect of the chicken,
(iv) the transporter’s bill of lading for shipment of the chicken,
(v) the sales invoices of the licensee for the chicken marketed to buyers,
(vi) the Market Development Policy Volume Confirmation letter, if any, issued by the Department of Foreign Affairs and International Trade to each buyer of the chicken,
(vii) each declaration, in the form set out in Schedule 3, that is received by the licensee in accordance with paragraph (4)(b),
(viii) an independently auditable declaration establishing the dry weight of the chicken and the product categories of the chicken as referred to in section 1 of Schedule 2, and
(ix) any other information relating to the marketing of the chicken by the licensee that CFC or any Provincial Commodity Board designated by CFC may direct;
(j) the licensee must keep complete and accurate books on all matters relevant to the marketing of chicken in interprovincial or export trade, and retain them for six years after the date of the last entry in them;
(k) any transfer of ownership or other disposition of the chicken marketed under the market development licence does not exempt the licensee from complying with this subsection;
(l) the licensee must prepare and forward to CFC, or to any Provincial Commodity Board, or person, designated by CFC, on a monthly basis a report of inventory of stock that is to be marketed under the market development licence and that is held in storage by the licensee, in a form that is approved by CFC and that sets out the total kilograms of chicken stored by the licensee in each province according to product categories;
(m) on written request by CFC or any Provincial Commodity Board designated by CFC, the licensee must provide originals of the documents listed in paragraph (i). |
5. (3) La délivrance des permis d’expansion du marché est assujettie aux conditions suivantes :
a) le titulaire est un transformateur primaire utilisant des installations d’abattage assujetties à l’inspection en vertu d’une loi fédérale ou d’un de ses règlements;
b) le titulaire doit remettre un formulaire d’engagement pour l’expansion du marché rempli aux PPC ou à un Office de commercialisation d’une province désigné par les PPC ou une personne désignés par les PPC, au moins cinq jours ouvrables avant la date à laquelle les PPC allouent les contingents pour la période visée à l’article 1 de ce formulaire;
c) il ne peut se livrer sciemment à la commercialisation de poulets sur le marché interprovincial ou d’exportation que s’il s’agit de poulets élevés par des producteurs autorisés à commercialiser des poulets sur le marché interprovincial ou d’exportation selon des contingents fédéraux d’expansion du marché alloués en vertu du Règlement canadien sur le contingentement de la commercialisation des poulets;
d) pendant la période d’engagement à l’expansion du marché, il doit commercialiser l’équivalence totale en poids vif du nombre de kilogrammes de poulet indiqué à l’article 1 du formulaire d’engagement pour l’expansion du marché — laquelle équivalence est calculée selon les coefficients figurant à l’article 1 de l’annexe 2, dans la colonne 2 — auprès des acheteurs visés à l’article 3 de l’annexe 2 et pour les utilisations finales visées à cet article et il doit avoir reçu, pendant cette période, une copie de la lettre de confirmation quant au volume visé par la politique d’expansion du marché délivrée aux acheteurs par le ministère des Affaires étrangères et du Commerce international ou le Certificat d’inspection pour les produits carnés délivré par l’Agence canadienne d’inspection des aliments relativement au poulet visé;
e) le poulet commercialisé en vertu du permis d’expansion du marché doit appartenir à une des catégories de produit visées à la colonne 1 de l’article 1 de l’annexe 2 et ne doit être un dérivé de poulet adulte ou de volaille de réforme;
f) dans les quinze jours civils suivant chaque période visée aux alinéas a) à c) de la définition de «période d’engagement pour l’expansion du marché» à l’article 1 qui est comprise dans la période d’engagement pour l’expansion du marché au cours de laquelle le poulet qui a été produit au titre d’un contingent fédéral d’expansion du marché est autorisé à être commercialisé, le titulaire fournit aux PPC ou à un Office de commercialisation ou une personne autorisés par les PPC à recevoir des renseignements, suffisamment de renseignements pour permettre aux PPC de déterminer s’il s’est conformé aux conditions prévues aux alinéas d) et e);
g) il doit se conformer aux ordonnances, règlements et règles des PPC et du Conseil national des produits agricoles ainsi qu’à la Loi sur les offices des produits agricoles;
h) il doit verser les redevances prévues au paragraphe 5(1) de l'Ordonnance sur les redevances à payer pour la commercialisation des poulets au Canada;
i) dans les quinze jours civils suivant chaque période visée aux alinéas a) à c) (appelée « période visée par la déclaration » au présent alinéa) de la définition de «période d’engagement pour l’expansion du marché» à l’article 1 qui est comprise dans la période d’engagement pour l’expansion du marché au cours de laquelle le poulet produit au titre d’un contingent fédéral d’expansion du marché a été autorisé à être commercialisé, il fournit aux PPC ou à un Office de commercialisation ou une personne désignés par eux, quant au poulet commercialisé durant la période visée par la déclaration :
(i) une description complète du produit, une description de son utilisation finale et l’identité de l’acheteur,
(ii) la déclaration d’exportation visant tout poulet commercialisé sur le marché d’exportation en vertu du permis,
(iii) le Certificat d’inspection pour les produits carnés délivré par l’Agence canadienne d’inspection des aliments relativement au poulet,
(iv) le connaissement du transporteur pour l’expédition du poulet,
(v) les factures de vente du titulaire pour le poulet commercialisé auprès des acheteurs,
(vi) la lettre de confirmation quant au volume visé par la politique d’expansion du marché délivrée, le cas échéant, à l’acheteur par le ministère des Affaires étrangères et du Commerce international,
(vii) la déclaration en la forme prévue à l’annexe 3, obtenue par le titulaire du permis selon l’alinéa (4)b),
(viii) une déclaration vérifiable d’un tiers indépendant établissant le poids à sec et la catégorie de produit de tout poulet visé à l’article 1 de l’annexe 2 qui a été commercialisé en vertu du permis d’expansion du marché,
(ix) tout autre renseignement relatif à la commercialisation du poulet par le titulaire que les PPC ou un Office de commercialisation désigné par eux peuvent exiger;
j) il doit tenir des dossiers complets et exacts sur toutes les questions relatives à la commercialisation des poulets sur le marché interprovincial ou d’exportation et conserver ces dossiers pendant une période de six ans suivant la date de la dernière inscription;
k) le transfert de propriété ou toute autre forme d’aliénation de poulets commercialisés en vertu du permis d’expansion du marché n’exempte pas le titulaire de l’obligation de se conformer au présent paragraphe;
l) il doit établir et envoyer tous les mois, aux PPC ou à un Office de commercialisation ou à une personne désignés par les PPC, un rapport de ses stocks en entrepôt destinés à la commercialisation en vertu du permis d’expansion du marché, au moyen du formulaire approuvé par les PPC qui indique le nombre total de kilogrammes de poulet par catégories entreposées dans chaque province;
m) sur demande écrite des PPC ou d’un Office de commercialisation désigné par eux, il doit fournir les originaux des documents énumérés à l’alinéa i).
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FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1425-05
STYLE OF CAUSE: DUNN-RITE FOOD PRODUCTS LTD.
and
ATTORNEY GENERAL OF CANADA and CHICKEN FARMERS OF CANADA
PLACE OF HEARING: Winnipeg, Manitoba
DATE OF HEARING: January 23, 2007
APPEARANCES:
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Mr. William R. Murray Mr. David B. Kovnats
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Mr. Kevin Staska |
FOR THE RESPONDENT, ATTORNEY GENERAL OF CANADA
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Mr. David K. Wilson
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CHICKEN FARMERS OF CANADA |
SOLICITORS OF RECORD:
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MURRAY & KOVNATS Barristers & Solicitors Winnipeg, Manitoba
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MR. JOHN H. SIMS, Q.C. Deputy Attorney General of Canada Winnipeg, Manitoba
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FOR THE RESPONDENT, ATTORNEY GENERAL OF CANADA |
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JOHNSTON & BUCHAN LLP Barristers & Solicitors Ottawa, Ontario
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CHICKEN FARMERS OF CANADA |