Saskatchewan Wheat Pool v. Canadian Grain Commission, 2004 FC 1307

Date: 20040923

Docket: T-2483-03

Citation: 2004 FC 1307

BETWEEN:

                                                SASKATCHEWAN WHEAT POOL

                                                                                                                                            Applicant

                                                                           and

                                              CANADIAN GRAIN COMMISSION

                                                                                                                                        Respondent

                                                        REASONS FOR ORDER

KELEN J.:

[1]                This is an application for judicial review to set aside a decision of the Canadian Grain Commission (the "Commission") to cancel a certificate of inspection issued to the applicant on June 13, 2003. The case raises the legislative authority of the Commission to cancel a "final" inspection certificate, and downgrade a shipment of wheat, after it has been shipped and sold on the basis of that inspection certificate.

BACKGROUND AND RELEVANT FACTS

[2]                The applicant, Saskatchewan Wheat Pool ("SWP") is a licensed grain dealer pursuant to the Canada Grain Act, R.S.C. 1985, c. G-10 (the "Act"). Its principal business is handling and marketing grain, including the shipment of wheat and barley to export markets on behalf of the Canadian Wheat Board ("CWB"). The Commission is the federal agency responsible for establishing and maintaining Canada's grain quality standards, pursuant to sections 3 and 13 of the Act; one of its chief purposes is to provide the grain industry with fair and impartial inspection and grading of grain.

Grain Quality Control

[3]                Since each class of wheat has its own unique kernel appearance, it is possible for grain handlers to segregate one class from another using a process known as 'kernel visual distinguishability' ("KVD"). The Commission also controls grain quality by registering known grain varieties according to standards of agronomic performance (i.e. yield, days to maturity), disease resistance, and end-use quality (i.e. gluten strength and dough strength).

[4]                The KVD process has been a reliable means of determining grain quality. However, both parties agree that the emergence of visually indistinguishable non-registered grain varieties is now threatening the Commission's ability to certify grades, and is undermining the quality profile of Canadian grain. This is because KVD, on its own, is not effective in detecting the presence of visually indistinguishable non-registered varieties. These unregistered varieties often originate in the United States and typically possess higher yielding potential, but inferior milling qualities than Canadian registered varieties.

[5]                The Commission advised the grain industry in 1999 and 2000 that it would increase monitoring of railcar and vessel shipments in order to address the problem, and that shipments found to contain non-registered varieties exceeding grade tolerance levels would be downgraded.

SWP's Grain Shipment

[6]                On or about May 27, 2003, SWP loaded 25 railcars with wheat at its facility located at Brandon, Manitoba. At the time of loading, the wheat was visually inspected by a Commission grain inspector ("inspector") and certified as grade No. 2 Canadian Western Red Spring Wheat ("CWRS"). On June 13, 2003, the grain was visually inspected again when it was loaded onto the Gordon C. Leitch vessel at SWP's Thunder Bay port terminal. At this time, SWP's grain was again graded as No. 2 CWRS and a final certificate of inspection was issued. A sample of the grain was retained by the inspector and sent to the Commission's Grain Research Laboratory for testing. Within a week, the grain was unloaded at Quebec City and sold to an end-user

The Commission's Decision

[7]                On July 16, 2004, thirty-three days after the second inspection, the Commission advised SWP that its lab tests detected a 20.0% content of unregistered varieties of wheat in SWP's shipment and that the grade would therefore be lowered from No. 2 CWRS to Canadian Western Feed Wheat. A new and corrected certificate was issued in July 2003, although the certificate is dated June 13, 2003. The original final certificate dated June 13, 2003 was cancelled.

[8]                By letter dated September 10, 2003, SWP submitted to the Commission that its decision was ultra vires the Act. And by letter dated October 2, 2003, the Commission refused to restore the original certificates because of the need to maintain the integrity of the grading system and Canada's reputation as a supplier of high quality wheat. That letter states at pages 1 - 2:

[...]

...The grading system remains, however, based on exclusion of non-registered varieties or at least limiting their concentration to established tolerances for wheats of other classes. Canada's reputation as a supplier of high quality wheat is based on this cornerstone of the grading system.

[...]

We recognize your concerns with changing grades so long after the original      inspection has taken place. The Commission has no alternative but to correct the documents we have issued once we become aware of more information. Our inspectors on the front line are no better equipped to identify indistinguishable varieties than are your front line employees. ...

[...]

Indistinguishable US varieties have been around the system for at least the last 30 years, but never before in the concentration we see today. To effectively manage their presence today a number of mindsets need to change in our opinion. To begin, producers need to be ready to identify what they are delivering into the system. Slipping something past the elevator manager today is not an acceptable practice. The system simply does not have room for as many mistakes as it did in the past, given the proliferation of indistinguishable varieties.

...From a Commission perspective, we do not know or could we know whether the presence of indistinguishable varieties is an intentional blend or a mistake. We can only deal with the facts as they are determined and we must react as consistently as possible regardless of the time frame involved in completing our tests.

[...]

Limitation Period

[9]                Since the applicant did not make its application for judicial review until December 31, it is barred by the limitation period in subsection 18.1(2) of the Federal Courts Act, R.S.C. 1985, c. F-7, and cannot bring this application without an extension of time.

THE ISSUES

[10]            The applicant raises the following issues:

1)                                           should this Court grant the applicant an extension of time to apply for judicial review pursuant to subsection 18.1(2) of the Federal Courts Act?

2)                                           was the Commission functus officio once it had issued the certificate of inspection on June 13, 2003?     

3)                                           did the Commission exceed its statutory authority by revoking the certificate of inspection issued on June 13, 2003, and substituting it with a second corrected certificate?

THE RELEVANT LEGISLATION

[11]            The objectives of the Act and the relevant powers and duties of the Commission are outlined in sections 13, 14(1), and 16(1), as follows:

[12]            The provisions relating to revocation of certificates, and the power to correct certificates on appeal are sections 34, 39(1) and 41, as follows:

POSITION OF THE PARTIES

A)        Applicant

[13]            The applicant submits the circumstances of this case warrant an extension of time for judicial review. The applicant submits that, without an extension, it will be unable to challenge the decision of the Commission. The applicant submits that this application raises questions of general importance to the Canadian grain industry, including the validity of the Commission's policy to randomly test grain samples and lower assigned grades if necessary. The applicant submits that it formed the intention to challenge the Commission decision within the allowed time and maintained this intention thereafter. The applicant submits that the delay in bringing this matter was due to efforts to achieve an out of court resolution. The applicant submits that it has an arguable case and that the respondent will not be prejudiced by the granting of an extension.

[14]            The applicant submits that the Commission's grant of authority does not include the power to revoke a certificate of inspection already issued. The applicant submits that once a final certificate of inspection has been issued, the Commission becomes functus officio and lacks the authority to reverse its original grading of grain. The applicant submits that while there may be room for      discretion during the grading process, that discretion is narrow and does not translate to discretion to reverse the issuance of a certificate.

[15]            The applicant submits that the only authorized exceptions to the alteration of an already issued certificate is where there is deterioration of grain, or where a reinspection is conducted on appeal. The applicant submits that the impugned Commission decision does not fall under either of these two exceptions. The applicant submits that while the KVD system may not be perfect at detecting non-registered varieties of wheat, that is not the issue at hand.

B)        Respondent

[16]            The respondent acknowledges that this application raises issues of importance to the Canadian grain industry and is not opposed to the Court granting an extension of time to the      applicant.

[17]          The respondent submits that the Commission was acting within its mandate when it revoked the applicant's certificate and issued corrected certificates. The respondent submits that the Commission is not functus officio in respect of its administrative power to correct an erroneous certificate. The respondent urges the Court to confirm that it is within the Commission's discretion and expertise to determine how best to handle grading and certification issues, and that this Court ought not interfere. The respondent submits that an implied power to correct erroneous certificates exists in the CGA, and that the Commission has an implied power to conduct laboratory analyses on random samples of wheat to determine if a particular shipment contains non-registered varieties of wheat which cannot be detected by visual inspection.

ANALYSIS

Issue No. 1

Extension of Time

[18]            I am satisfied that an extension of time ought to be granted to the applicant for this judicial review since all of the criteria outlined by the Federal Court of Appeal in Grewal v. Canada (MEI)(1985), 63 N.R. 106 (F.C.A.) have been met. Those criteria are:

1)                   whether granting an extension is necessary to do justice between the parties;

2)                   whether an applicant has an arguable case for setting aside the impugned decision;

3)                   whether there is a proper justification for the delay, taking into account factors such as the intention to file an application within the allowed time and that the intention was maintained continuously thereafter; and

4)                   whether an opposing party will suffer prejudice from the grant of an extension.

Standard of Review

[19]            The parties agree that the appropriate standard of review is correctness with respect to the issues.

[20]            In applying the functional and pragmatic approach, I agree that the standard of review is correctness because the issue is whether the Commission has the jurisdiction to cancel a certificate after a laboratory analysis determines that the original final certificate is incorrect. This is a question of law about the powers of the Commission under the Act. Furthermore, this question of law and determination is one of general importance and precedential value to the grain industry. Under these circumstances, no deference should be accorded to the Commission on this question. See Barrie Public Utilities v. Canadian Cable Television, [2003] 1 S.C.R. 476 at paragraph 18.

Issue No. 2

Was the Commission functus officio once it had issued the final certificate of inspection on June 13, 2003?

[21]            The applicant submits that a strict application of the functus officio rule is warranted in this case. The respondent replies that the Commission was not engaged in a "re-hearing" of a contested matter before it, but rather was conducting an administrative exercise in correcting an error on documents. The respondent submits that the rule only applies to administrative hearings or similar proceedings.

[22]            The Supreme Court of Canada's decision in Chandler v. Alberta Association of Architects, [1989] 2 S.C.R. 848 is authoritative on the issue of reopening hearings. In that case Sopinka J. comments on the functus officio rule at paragraphs 20, 21 and 22, as follows:

[20]       I do not understand Martland J. to go so far as to hold that functus officio has no application to administrative tribunals. Apart from the English practice which is based on a reluctance to amend or reopen formal judgments, there is a sound policy reason for recognizing the finality of proceedings before administrative tribunals. As a general rule, once such a tribunal has reached a final decision in respect to the matter that is before it in accordance with its enabling statute, that decision cannot be revisited because the tribunal has changed its mind, made an error within jurisdiction or because there has been a change of circumstances. It can only do so if authorized by statute or if there has been a slip or error within the exceptions enunciated in Paper Machinery Ltd. v. J. O. Ross Engineering Corp., supra.

[21]        To this extent, the principle of functus officio applies. It is based, however, on the policy ground which favours finality of proceedings rather than the rule which was developed with respect to formal judgments of a court whose decision was subject to a full appeal. ...

[22]       Accordingly, the principle should not be strictly applied where there are indications in the enabling statute that a decision can be reopened in order to enable the tribunal to discharge the function committed to it by enabling legislation. This was the situation in Grillas, supra. [emphasis added]

[23]            The errors which the Supreme Court refers to in [1934] S.C.R. 186">Paper Machinery Ltd. v. J.O. Ross Engineering Corp., [1934] S.C.R. 186 are the following: (1) where there has been a slip in drawing it up, or (2) where there has been error in expressing the manifest intention of the Court.

[24]            In my view, Chandler, supra applies to final decisions of tribunals or to matters that have been finally resolved through adjudication. The Commission's issuance of a certificate of inspection is not the type of decision contemplated in Chandler. It does not involve a "proceeding before the tribunal" and is purely an administrative exercise. Furthermore, the issuance of a certificate of inspection does not have the same finality as a proceeding before a tribunal since all parties acknowledge that the KVD method, in today's reality, is insufficient by itself to determine grain quality.

Issue No. 3

Did the Commission exceed its statutory authority by cancelling the certificate of inspection issued on June 13, 2003, and substituting it with a second corrected certificate?

Interpreting the Act with respect to cancellation

[25]            The applicant submits that sections 34 and 41 of the Act support the finality of certificates issued by the Commission. The respondent replies that an administrative tribunal's powers should not be sterilized by overly technical interpretation of legislation, but should be interpreted to enable the tribunal to fulfill the purposes of its enabling legislation. The respondent further submits that the Act should be "deemed remedial", and its provisions should be given a "fair, large and liberal construction" in accordance with section 12 of the Interpretation Act, R.S.C., 1985, c. I-23.

[26]            Section 41 authorizes the Commission to correct erroneous certificates after an appeal. Section 41 gives the Commission power to (a) reinspect grain; (b) review previous certificates issued; (c) assign correct grades to grain; and (d) require all inspection certificates, and all other documents to be revised accordingly. In this particular case, any appeal to the Commission's decision to reissue a certificate on July 10, 2003 would require the Commission reexamine SWP's grain and to correct or affirm the certificate issued accordingly. However, the appeal provisions are not     applicable to the case at bar.

[27]            Section 34 also authorizes the Commission to "cancel" a certificate in specific circumstances. A canon of statutory construction, expressio unius est exclusio alterius, holds that to express or include one thing in a statute implies the exclusion of another. Accordingly, unless there is an express provision in the Act or Regulations for the cancellation of a certificate in the circumstances of the case at bar, it is implied that a final certificate cannot be cancelled under the Act or Regulations. None of this to say that there is not an implied power to correct an erroneous certificate based upon a clerical error, a slip or fraud.

Power to Regulate

[28]            Subsection 16(1) of the Act provides that the Commission may, by regulation, establish grades for any kind of western wheat, specifications for those grades, and methods, visual or       otherwise, for determining the quality of the grain. A non-visual method would include laboratory testing of random samples. Accordingly, I am of the view that the Commission has the power in subsection 16(1) to enact regulations which require shipments of wheat be subject to laboratory analysis, and that the certificate of grade provided at the time of shipment, based on a visual inspection, will be subject to revision and correction. That will necessarily require that the original certificate of grade be cancelled.

[29]            Subsection 16(2) provides that there be a notice given of any regulation before it comes into effect unless the regulation expressly provides otherwise. Notice of any change in regulations is part of the duty of fairness in administrative matters. Subsection 16(3) provides that any variation in a grade of grain to be made by regulation, be made so as to prevent or minimize any reduction in the value of existing grain of the grade to be so varied. Here Parliament expresses an intent to minimize the economic impact of any new regulation.

[30]            In the case at bar, the Commission failed to exercise its powers, by regulation, to set out the method, visual or otherwise, for determining the characteristics of the grain. The Commission has enacted the Canada Grain Regulations, SOR/2000-213, which cover some subjects regarding the grading of samples but do not provide for the cancellation of a certificate of grade.

No Guideline or agreement for method of inspection and cancellation

[31]            There is no guideline which sets out methods, visual or otherwise, for determining the characteristics of the grain. This is a matter of practice. The practice has been visual inspection or KVD. However, problems have arisen. The Saskatchewan Wheat Pool advised the Court that it "completely agrees that unregistered varieties have become a problem" and that the Commission has alerted the grain handling industry since 1999, that it intends to conduct laboratory analyses of

randomly selected samples of wheat, and if upon analysis, it is determined that the original certificate

is incorrect, that wheat may be downgraded. The Saskatchewan Wheat Pool does not, and has not agreed with this procedure. In the case at bar, this procedure has resulted in a loss of approximately $48,000 to the Saskatchewan Wheat Pool with respect to 938 tons of wheat. However, these 938 tons of wheat were intermingled with thousands of tons of similarly graded wheat in the hold of a ship so that that whole shipment may have been contaminated. This may result in a much higher potential liability.

Power to cancel certificate

[32]            Both parties presented the Court with a common question, does the Commission have the legal power to cancel an inspection certificate after conducting laboratory analysis on a particular shipment of wheat. The answer to that question is not at the moment, but the Commission can enact regulations under subsection 16(1) of the Act in order to do so.

[33]            Much time at the hearing was spent as to whether the Commission has an implied power to conduct a subsequent laboratory analysis and if necessary, cancel or correct a grading certificate. The object of the Commission is to ensure that Canadian grain is a "dependable commodity" for domestic and export markets. To do this, the Commission must have the power to correct erroneous grading certificates. However, I do not think an implied power can permit cancellation of a certificate after the fact. This power can be enacted by regulation in clear specified circumstances and according to clear procedures.     

[34]            In the case at bar, the Commission failed to enact necessary regulations, as contemplated by Parliament in subsection 16(1). Part of the regulatory making process is giving notice to affected parties and providing them with an opportunity to make representations for or against a proposed regulation. The Court cannot give administrative guidelines the force of law by implying a power which the Commission has failed to exercise by regulation. Otherwise, there would be no reason to enact regulations.

How to cure the problem

[35]            In this case the Saskatchewan Wheat Pool does not accept the administrative practice of the Commission to conduct a laboratory analysis which may retrospectively downgrade wheat which has already been shipped and sold. It was reasonable of the applicant to assume that the inspection certificate is meant to be final. There has to be a certainty and reliability of the procedures so that the parties can govern themselves with respect to making a sale based on that certificate. However, the Saskatchewan Wheat Pool acknowledges that the intermingling of non-registered varieties of wheat with registered varieties of wheat has become a serious problem, and that laboratory analysis is necessary to issue "certain and accurate" certificates of grade. The disagreement lies in the timeliness of such laboratory analysis since a delayed analysis may impose an unforseen liability on the grain handler. The disagreement is whether the Commission has the implied power to cancel a certificate one month after the certificate is issued and relied upon by the parties. The Saskatchewan Wheat Pool submits that the Commission should not cancel a certificate thirty days after the certificate was issued, and thirty days after the certificate was relied upon by the parties. The applicant agrees that random grain testing after the fact is necessary and it does not oppose such lab testing, but not after the final certificate has been issued.

[36]            The Court cannot be expected to suggest a methodology for curing this problem. However, the Court can state that the Commission must enact regulations to prescribe the methods for determining the characteristics of the grain, including the laboratory testing and the cancellation of certificates based on KVD. The grain handling industry, the Commission and the Canadian Wheat Board must devise a system to ensure that either the lab testing is done on a timely basis, or a system of monetary holdbacks or insurance is implemented so that a grain handler is not exposed to an unreasonable potential liability due to no fault of their own.

DISPOSITION

[37]            An extension of time is granted to allow the applicant to bring this application. In this case the Commission has the regulatory power, which it has not exercised, to require laboratory testing and to cancel KVD certificates of grade. The Court cannot give administrative practice the force of law by implying a power which the Commission has failed to exercise by regulation. Accordingly, this application must be allowed, and the decision of the Commission to cancel the June 13, 2003 certificate must be set aside.

[38]            Both parties advised the Court that they wish to bear their own costs regardless of the outcome. Accordingly, there will be no order as to costs.

                                                             "Michael A. Kelen"                                                                                                       _______________________________

          JUDGE

Ottawa, Ontario

September 23, 2004

                                                             FEDERAL COURT

                            NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                                                       T-2483-03

STYLE OF CAUSE:                           Saskatchewan Wheat Pool

and

Canadian Grain Commission

PLACE OF HEARING                                  Regina, Saskatchewan

DATE OF HEARING:                                   September 16, 2004

REASONS FOR ORDER:                            THE HONOURABLE MR. JUSTICE KELEN

DATED:                                                          September 23, 2004

APPEARANCES:

Mr. Peter Bergbusch                                         For Applicant

Mr. Brian Hay                                       For Respondent

SOLICITORS OF RECORD:

Balfour Moss                                                     For Applicant

Regina, Saskatchewan

Department of Justice Canada                For Respondent

Winnipeg, Manitoba

Date: 20040923

Docket: T-2483-03

BETWEEN:

SASKATCHEWAN WHEAT POOL

                                                                    Applicant

and

CANADIAN GRAIN COMMISSION

                                                                Respondent

REASONS FOR ORDER