Date: 19981123
Docket: A-863-97
BETWEEN:
HER MAJESTY IN RIGHT OF ALBERTA
Appellant
- and -
CANADIAN WHEAT BOARD
Respondent
Heard at Edmonton, Alberta, on Wednesday, October 21, 1998.
Judgment delivered at Ottawa, Ontario, on Monday, November 23, 1998.
REASONS FOR JUDGMENT BY: DESJARDINS J.A.
CONCURRED IN BY: ROBERTSON J.A.
McDONALD J.A.
Date: 19981123
Docket: A-863-97
BETWEEN:
HER MAJESTY IN RIGHT OF ALBERTA
Appellant
- and -
CANADIAN WHEAT BOARD
Respondent
REASONS FOR JUDGMENT
DESJARDINS J.A.
This is an appeal from a judgment of the Trial Division which dismissed an application for judicial review brought by the appellant who sought an order declaring the Canadian Wheat Board"s ("the Board") grain delivery program for the crop year 1995-1996 ending July 1, 1996, to be wholly or partly invalid under the Canadian Wheat Board Act1 ("the Act"). The appellant also sought an order prohibiting the Board from operating the program in violation of the Act.
A. Background
The Board is incorporated, pursuant to section 5 of the Act, "with the object of marketing in an orderly manner, in interprovincial and export trade, grain grown in Canada". The grain to which the Act applies is that which, pursuant to section 23, is produced in the "designated area". According to subsection 2(1), that area comprises Manitoba, Saskatchewan, Alberta, parts of British Columbia, and other areas the Board may designate. During the relevant crop year, the Board was running a delivery program composed of two major components, an acreage-based component and a delivery-contracts component.
Under the acreage-based delivery component, the respondent announced calls for the delivery of specific grades of wheat, durum and barley at the beginning of the crop year. Delivery calls were based on the acreage which the producer chose to assign to the delivery program. This amount was recorded in the producer"s permit book. Each producer was entitled to deliver the greater of a minimum of thirty tonnes of a grade of grain called for delivery or the total assigned acreage multiplied by the acreage-based delivery call. The grades to be called and the size of each delivery call was determined by the Board based on early crop year sales.
Under the contract-based delivery component, producers could offer to sell to the Board wheat, durum and barley under any one of four contracts. Each contract involved an application deadline at different times. Each offer was for a specified grain and for a specified quantity, class and grade of grain. The terms of the offer would be recorded by the producer in his or her permit book.
Producers were free under the contract-based delivery system to change the amount of grain offered prior to each sign-up deadline. Once the deadline arrived, the Board was required, within the following eighteen-day acceptance period, to announce how much of the offered grain it would accept. After the level of acceptance was announced, the Board was contractually obligated to call for delivery of the accepted tonnage within the crop year. If the Board accepted less than one hundred per cent of the grain offered, a producer had fourteen days during which he or she had the option of cancelling the contract.
If a producer failed to deliver a minimum of eighty-five per cent of the grain called under a delivery contract, the producer was in default and liable to pay liquidated damages to the Board. The Board could also cancel the breached contract and any other delivery contract with that producer.
Evidence brought by the Board indicates that the contract delivery system is the primary means by which the Board currently administers the quota system under the Act. The contract delivery system was instituted after a considerable period of consultation with producer groups, the grain industry and the governments of the provinces within the "designated area" as defined by subsection 2(1) of the Act.
The Board says that the contract delivery system was implemented in response to the changing realities faced in the marketing of grains. Three key factors were at play.
First, sales to traditional customers such as those in the former Soviet Union and Europe have decreased. Millers and bakers around the world became more sophisticated and more demanding. The Board felt it was required to move proactively to take advantage of the new opportunities resulting from these changes. Through market development initiative and targeted marketings, the Board diversified the customer base and positioned the organization as a predictable, efficient supplier of consistent quality wheat, durum and barley. The Board now markets a significantly greater number of classes and grades of wheat to customers in over seventy countries around the world.
[1] Second, the movement of grain through the Great Lakes has lessened over the last period of years. Many of the emerging markets for Board grain were in the Pacific Rim and Latin America. The Board"s response to these new markets resulted in a greater concentration of grain moving through the west coast ports of Vancouver and Prince Rupert. These ports are limited in their storage capacity. The Board needed to develop an ability to deliver to the ports the exact quantity and quality of grain required by firm sales contracts.
[2] Third, the storage capacity of the grain elevator systems in the designated area has been reduced from 11 million tonnes to 7 million tonnes and there has been dramatic rationalization of the rail system. Production of grain in the designated area is approximately six times the elevator capacity. The Board felt that in order to regulate the exact amount of grain available for delivery into the system, it had to call upon producers to deliver the grain as sales were made in the marketplaces.
B. The decision under appeal
[3] The motions judge dismissed the application for judicial review on four grounds. He felt the matter raised by the appellant involved a question of broad public policy which was not amenable before a court of law. He further stated that the appellant had no standing since the appellant was not a person "directly affected" by the grain delivery program as required under subsection 18.l(1) of the Federal Court Act . He denied the appellant public interest standing on the basis that there was a more effective way the matter could come before this Court. He felt that any one of the 111,581 holders of the Board"s permit books in the designated area, or of the 33,012 permit holders in Alberta, could have initiated an application. He noted that none had done so. He was satisfied, finally, that had the matter been properly before him the appellant had no case on the merits.
C. The appellant"s submission
[4] In the originating notice of motion, the appellant described in general terms grievances against the validity of the program. Before us, however, the appellant reduced this to three illegal acts committed by the Board.
[5] The appellant says that in operating its grain delivery program, the Board exceeds its statutory jurisdiction in three ways: by making contracts which are not purchase agreements or necessary or incidental to the carrying on of its operations, contrary to paragraphs 6(b) and (k) of the Act; by issuing permit books not authorizing the delivery of grain, contrary to subsection 26(1) of the Act; and by imposing penalties that are unconscionable, thus making contracts not primarily benefiting the producers.
[6] The appellant argues that these three propositions are judicable, that it has standing to raise them and that the claims it has formulated reflects an excess of statutory jurisdiction on the part of the Board.
[7] I shall examine each of these three arguments in turn.
D. Analysis
1. The judicability of the appellant"s submission
[8] I share the view of the appellant with regard to the judicability of the first two of the three propositions concerning the Board"s excess of statutory jurisdiction. It is understandable, however, that the motions judge who dealt with the originating notice of motion, found that the appellant"s lengthy propositions lacked specificity and could not be the object of judicial scrutiny.
[9] I shall deal further with the three issues in my analysis on the merits of the case.
2. Standing
[10] The appellant pleads that it is a party "directly affected" within the meaning of subsection 18.1(1) of the Federal Court Act , even though producers are also, but differently, directly affected. The matter, the appellant says, deals with the implementation of a tool of public policy pertaining to agriculture in Alberta. The appellant's interest is direct because it has a genuine interest in maintaining the employment and economic benefits provided by farm operations. On March 18, 1996, the Board announced the cancellation of fifty per cent of the barley offered by producers under one of the four contracts for the 1995-1996 crop year.2 This may have depressed domestic prices of feed barley and wiped out over 70 million from expected returns. Such action triggers genuine, important public interests which only the province can represent. The appellant urges that its position is analogous to the one of Her Majesty in Right of Nova Scotia who was granted public interest standing in the Ultramar case.3 The appellant further says that the Attorney General of a province has a special standing when a federal public body exceeds its jurisdiction in a province. The appellant recognizes that this proposition is somewhat novel and has been alluded to in a negative way by Laskin J. (as he then was) in Thorson v. Attorney General of Canada.4 But, the appellant argues, where questions of general importance are raised, standing should be recognized. The appellant finally indicates that standing has been granted to the Attorney General of a province with regard to the actions taken by local boards.5
[11] The appellant"s arguments are interesting. I need not, however, decide on them since I am of the view, for the reasons I will now give, that the appellant has no case on the merits.
3. The merits of this appeal
a) The contracts not being purchase agreements or incidental thereto
[12] The appellant argues6 that the delivery contracts exceed the Board"s jurisdiction. They are not "contracts or agreements for the purchase... of grain" pursuant to paragraph 6(b) of the Act, nor are they "acts and things as may be necessary or incidental" to the carrying on of the Board"s operations as provided in paragraph 6(k) of the Act. They are not purchase contracts because the Board can unilaterally reduce the quantity of grain to be sold. Instead, they are options to buy grain and are unauthorized under the Act.
[13] The relevant terms and conditions of the Board"s delivery contracts are the following:7
1. THE CWB"S COVENANTS
a. The CWB agrees to accept delivery of the Grain from the Producer, in accordance with the Canadian Wheat Board Act (CWBA) and the terms and conditions of the contract for the Grain.
b. The CWB shall, in accordance with the CWB Act, pay the Producer the initial payment in effect for the crop year in which settlement is made, less all authorized deductions including those under the Prairie Grain Advance Payments Act (PGAP Act).
...
2. THE PRODUCER"S COVENANTS
a. The Producer agrees:
i. to sell the Grain to the CWB; and
ii. to deliver the Grain, and any portion called for by the CWB, to the CWB by the termination date specified in any delivery call.
...
3. GENERAL COVENANTS
a. The Producer can only increase or decrease the quantity of the Grain to be delivered under the contract for the Grain before the deadline for the Contract Program.
b. At any time within 18 days following the deadline for the Contract Program the CWB may reduce the quantity of the Grain to be delivered under the contract for the Grain if the delivery contract quantities requested by all Producers combined exceeds the total quantities of grain established by the CWB for the Contract Program. The quantity to be delivered by each producer who has a delivery contract with CWB for the class, variety and quality of grain covered by the contract for the Grain shall then be reduced proportionately. If the quantity of the Grain to be delivered by the Producer under the contract for the Grain is so reduced, the Producer shall have fourteen (14) days within which to notify the CWB that the contract for the Grain is terminated. If the Producer does not so notify the CWB then the Producer will continue to be bound by the contract for the Grain and shall deliver to the CWB the quantity of the Grain, as proportionately reduced.
c. The CWB may issue delivery calls at any time during the crop year. The CWB reserves the right to issue delivery calls for only a portion of, or a particular grade or quality of, the Grain to be delivered pursuant to the contract for the Grain. The total of all such delivery calls, subject to 3.a., 3.b., 3.d. and 3.e, shall equal the quantity of and quality of grain for which delivery is agreed to under the contract for the Grain.
[14] As these words indicate, producers apply to deliver a certain quantity of grain to the Board under a contract series. Until the expiry of the deadline, producers can increase or decrease the amount of grain offered. As the deadline expires, the offer becomes fixed. Within eighteen days after the deadline period, the Board is required to announce how much of the total grain offered it will accept. If this amount is less than the total quantity submitted, a producer has fourteen days within which he can notify the Board that the contract for the grain is terminated.
[15] Producers must apply for a delivery permit. The terms and conditions of the delivery contracts, which are set by the Board, are found in the permit books.8 One of the primary terms is that producers cannot withdraw the amount of grain made available for delivery before the expiry of a period of eighteen days after the deadline. As a consequence, producers accept these terms and conditions when they specify on their application for a delivery permit the amount of grain allocated to a particular contract series.9 Thus, the locked-in situation at the start of the eighteen-day period for each contract series is but a phase leading up to the delivery contract under that series. When the Board determines how much grain it wishes to accept, a contract for the delivery of grain is born which binds the Board to accept delivery and pay for the selected grain.10 The producer has fourteen days to cancel that contract if the acceptance does not cover one hundred per cent of the offer.
[16] I fail to see any merit in the appellant"s submission. The appellant has not demonstrated that the wide powers given to the Board in paragraph 6(b), and particularly in paragraph 6(k) of the Act, which empowers the Board to "generally do all such things and acts as may be necessary or incidental to carrying on its operations under this Act," are not adequate to cover the phases described in the delivery contracts.
b) The permit book
[17] The Board, the appellant says, derives its authority in respect of permit books from the Canadian Wheat Board Act. Subsection 26(1) of the Act requires the Board to issue permit books authorizing the delivery of grain. The appellant submits that when read in their entire context, in particular with regard to the word "quota" in subsections 2(1), 26(1), 75(1) and with regard to paragraphs 24(1)(e), 28(a), (b), (c), (f), the Act requires the Board to specify in the permit book the quantity of grain authorized for delivery. The Board must observe this requirement even if it is not expedient to do so according to modern commercial practice.11
[18] For acreage-based deliveries, the appellant says, each producer can assign in the producer"s permit book a number of acres for the delivery of wheat, durum and barley. The assignment can be amended by the producer signing a declaration and by a copy of the declaration being attached to the permit book. The Board then calls for the delivery of a specific grade and quantity per acre of grain. The appellant submits that for acreage-based deliveries, the Board issues books which do not record a quantity of grain, but instead record a quantity in acres of land. The permit book authorizes no acreage-based grain to be delivered. The kind and quantity, if any, of grain the producer is authorized to deliver is separately determined by a call made by the Board.12
[19] For contract-based deliveries, the initial offer by the producer as well as reductions by the Board are all recorded in the permit book.13 Therefore, the appellant says, the Board issues permit books that record a quantity of wheat, durum or barley that is not authorized for delivery when the books are issued and that will become authorized for delivery only if the respondent does not subsequently unilaterally reduce the quantity at the time of the acceptance call.14
[20] By issuing permit books that do not authorize the delivery of grain, the Board, concludes the appellant, acts without or beyond its jurisdiction. Instead, the Board should issue permit books that, when issued, set out the quantity and kind of grain authorized for delivery and that are not subject to subsequent unilateral reduction by the Board.15
[21] I see no merit in this argument.
[22] The "permit book" is defined in subsection 2(1) of the Act as a delivery permit issued by the Board for a crop year. The Canadian Wheat Board Act controls and regulates not one trade of business but several, including the activities of the producers, the railroads, the elevators, the flour and feed mills.16 The permit book is a document used to record and track the delivery of grain authorized by the acreage-based and contract-based systems. The quota is the quantity of grain authorized to be delivered under paragraph 28(f) of the Act. It is thus defined in subsection 2(1) of the Act:
| "quota" means the quantity of grain authorized to be delivered from grain produced on land described in a permit book as fixed from time to time by the Board, whether expressed as a quantity that may be delivered from a specific number of acres or otherwise". |
|
[Emphasis added]
[23] Considering the definition of "quota" in subsection 2(1) and particularly the words "from a specific number of acres or otherwise," I see no illegality for the Board in acreage-based deliveries to issue books that record not a quantity of grain but a quantity in acres of land. The Board"s method of establishing the quota allocated to each producer, via permit books, is well within its broad authority to design and implement a quota system. Under paragraphs 28(a), (b) and (c), the Board may prescribe the manner in which these books are to be issued. It is irrelevant that the Board may inscribe offers in the permit book rather than fixed amounts to be delivered. The essential element behind which the Act is based is the quota system which is eventually reflected in the permit book once the acceptance call has been made.
c) The making of contracts not benefitting producers
[24] The program provides that producers who fail to deliver eighty-five per cent of the grain they have engaged themselves to deliver to the Board, are liable for liquidated damages and may have that contract and all other delivery contracts cancelled.17
[25] The appellant does not necessarily object to the liquidated damages clause. But, it says, because those damages are coupled with an extremely severe penalty, namely the cancellation of all delivery contracts, the Board is not running its operation in a way which benefits producers. It acts contrary to the scheme of the Act which, according to Rand J. in Murphy v. C.P.R.18, is primarily to benefit the producers.
[26] There was evidence before the motions judge that liquidated damages were instituted in response to requests by producers to ensure that the cost of non-delivery would be borne by producers who failed to live up to their contractual commitments to the Board. Liquidated damages reflect the cost of default including lost sales, demurrage, contract cancellation, less efficient use of the delivery system, loss of reputation as a reliable supplier and supplying customers with higher grade grain to meet the Board"s commitments. There is nothing on the record which indicates why the option of cancelling all other delivery contracts was added. Common sense would dictate, however, that in appropriate circumstances, it might be reasonable to exclude a producer who continuously failed to live up to his or her obligations under the program.
[27] The appellant brought no evidence to support its position nor do we know whether these penalties are implemented. Such a submission cannot be decided without a factual basis. The appellant, moreover, has been incapable of indicating by what standard a court of law is to assess the "benefit" to the producers. This matter cannot be decided in a vacuum.
Disposition
[28] I would dismiss this appeal with costs.
"Alice Desjardins"
J.A.
"I agree
| Joseph T. Robertson J.A." |
"I agree
__________________
1R.S.C. 1985, c. C-24.
2See letter of March 28, 1996, from the Minister of Agriculture, Food and Rural Development of Alberta to the Minister of Agriculture and Agri-Food Canada, A.B., vol. II at 200.
3Nova Scotia (Attorney General) v. Ultramar Canada Inc. (T.D.), [1995] 713 at 733, 734, 735, 737, 738, per MacKay J.
4[1975] 1 S.C.R. 138">[1975] 1 S.C.R. 138 at 152.
5Re The Queen and County of Beaver No. 9 (1984), 8 D.L.R. (4th) 473 at 475 (Alta. C.A.). See generally B.L. Strayer, The Constitution and the Courts: The Function and Scope of Judicial Review (1988) pp. 162-164; Report on Civil Litigation in the Public Interest, Law Reform Commission of British Columbia, 1980, at 21-30.
6See memorandum of fact and law of the appellant at paras. 70, 72, 73.
7A.B., vol. I at 70.
8A.B., vol. I at 20.
9A.B., vol. I at 17.
10See Canada Wheat Board Regulations, C.R.C. 397, s. 26.
11See memorandum of fact and law of the appellant at para. 59.
12Memorandum of fact and law of the appellant at para. 60.
13Memorandum of fact and law of the appellant at para. 62.
14Memorandum of fact and law of the appellant at para. 63.
15Memorandum of fact and law of the appellant at para. 64.
16[1958] S.C.R. 626">Murphy v. C.P.R., [1958] S.C.R. 626 at 633.
17See A.B., vol. I at 70. "CWB Delivery Contracts-Terms and Conditions", clauses 2(b) and (c).
18[1958] S.C.R. 626">[1958] S.C.R. 626 at 642.
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