Date: 20070226
Docket: T-1425-05
Citation: 2007 FC 218
Ottawa, Ontario, February 26,
2007
PRESENT: The Honourable Mr. Justice Phelan
BETWEEN:
DUNN-RITE
FOOD PRODUCTS LTD.
Applicant
and
ATTORNEY GENERAL OF CANADA
and CHICKEN
FARMERS OF CANADA
Respondents
REASONS FOR JUDGMENT AND JUDGMENT
I. OVERVIEW
[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:
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5.
(1) Every primary processor who holds a
market development licence issued under the Canadian Chicken Licensing
Regulations and who markets chicken produced under a federal market
development quota must pay a levy of $1.00 per kilogram on the live weight
equivalent of any of that chicken
(a) that is
(i) marketed by the primary processor to a buyer, or for
an end-use, not specified by section 3 of Schedule 2 to the Canadian Chicken
Licensing Regulations,
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5. (1) Tout transformateur primaire détenteur d’un permis
d’expansion du marché, délivré aux termes du Règlement sur l’octroi de permis
visant les poulets du Canada, et qui commercialise des poulets produits au
titre d’un contingent fédéral d’expansion du marché doit payer une redevance
de 1,00 $ par kilogramme, équivalence en poids vif, de poulet :
a) qui,
selon le cas :
(i) est
commercialisé auprès d’acheteurs non visés à l’article 3 de l’annexe 2 du Règlement
sur l’octroi de permis visant les poulets du Canada ou pour une utilisation
finale autre que celles visées à cet article,
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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.
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«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.
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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.
“Michael
L. Phelan”
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.
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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).
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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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