Decision of the Agri-Food Appeal Committee

In the Matter of
Complaints
Against
The Chicken Farmers of Saskatchewan
By
Mr. Tim Keet
Mr. Dennis Keet
Mr. George Murray

March 27, 2000

1.0 INTRODUCTION

During the month of January 2000, three persons filed notices of appeal against actions of the Chicken Farmers of Saskatchewan (CFS). All three appeals were related to a January 3, 2000 CFS decision to rescind motions approved in 1999 regarding a proposed conversion of broiler hatching egg producers (breeder producers) to broiler chicken producers.

2.0 BACKGROUND

On January 3, 2000 the CFS made the following decision:

"That the CFS board rescind the motions of the August 10, 1999 and December 17, 1999 approving the Breeder to Broiler conversion and all prior motions and agreements between the CFS board and the Saskatchewan Broiler Hatching Egg Producers' Marketing Board that deal with the Breeder to Broiler conversions".

The decision effectively withdrew CFS's approval of an agreement made in 1999 to convert several breeder producers into broiler producers. A short time after the Saskatchewan Broiler Hatching Egg Producers' Marketing Board (Breeder Board) was advised of this decision, three persons filed appeal notices.

All three appellants objected to the January CFS decision as being arbitrary and unfair. The appellants had made significant changes and commitments with respect to their production facilities in the belief a conversion agreement was in place. All three appellants would suffer significant losses if the CFS decision were to stand.

The CFS was advised on February 2, 2000 that appeals had been filed and that they would be further advised as to the time and place of the appeal hearing. On February 25, 2000, both the appellants and the CFS were notified by facsimile and by mail that the appeal hearing was set for March 13, 2000. On March 9, 2000, the CFS requested a postponement to allow better participation of new CFS board members. A letter of March 10, 2000, from Mr. Wayne Bernakevitch, CFS legal counsel, also requested postponement of the hearing. As a result, the Agri-Food Act Appeal Committee set a new date of March 27, 2000 for the appeal hearing. Subsequent to the new date being set, the CFS made further requests on March 17, 20 and 21 essentially requesting another postponement. The Appeal Committee met on March 24, 2000 to consider the CFS request and concluded that sufficient time had been provided to prepare for the appeal hearing and that any further delay would be imprudent. The CFS was notified by facsimile and by telephone on March 25, 2000 of the decision to proceed with the March 27, 2000 appeal hearing as planned. Mr. Charles Stueck, Chair of the CFS, indicated over the telephone that no one would be attending the hearing on behalf of the CFS.

The hearing was conducted on March 27, 2000 in Saskatoon, Saskatchewan.

3.0 ATTENDANCE

The appeal meeting convened at 10:00 am with the following members of the Agri-Food Appeal Committee sitting on the appeal:

Mr. Jim Long, Chairperson
Mr. Ray Riviere, Member
Mr. Harold Greyeyes, Member

Mr. Roy White, Secretary
Mr. Brian Machin, Assistant Secretary

Representing the Appellants:

Mr. Tim Keet
Mr. Ken Stevenson, Q.C., and Ms. Christine Gould, legal counsel for Mr. Keet
Mr. George Murray
Mr. Dennis Keet

Witnesses on behalf of the Appellants:

Mr. David Keet
Mr. Bob Weins
Mr. Garry Vanderveen
Mr. Merv Slater

Observers:

Mr. Real Letourneau
Mr. Vic Loewen

No representatives attended on behalf of the Chicken Farmers of Saskatchewan. Although Mr. Letourneau was currently a member of the CFS board of directors, he indicated that he was attending strictly as an observer and not on behalf of the CFS.

4.0 SALIENT POINTS

• All three appellants were licensed producers under the Saskatchewan Broiler Hatching Egg Producers' Marketing Plan Regulations.
• On August 10, 1999, Mr. Merv Slater, Chair of the Breeder Board, made a presentation to the CFS outlining a plan to restructure the breeder sector of the chicken industry. Mr. Slater testified that the concept of converting a number of breeder producers to broiler producers was an integral part of the plan.
• Following Mr. Slater's presentation on August 10, the CFS passed the following motion:

"That the CFS board send a letter of agreement to the Hatching Egg Board advising that the CFS Board would endorse their plan for their industry to deliver the best quality of chicks to our industry".

The CFS followed up this motion by letter to the Breeder Board dated August 13, 2000 expressing support for the Breeder Board's plan.

• On August 23, 2000, the CFS made the following motion:

"That the CFS Board should make a presentation to the Breeder board, that if the auction process is adopted, as part of a package to assist the retirement of 30,000 breeders by making 85,000 broiler birds available to them at the average selling price established at the waiting list auction to be implemented between June 1, 2000 and December 31, 2000. The 85,000 birds would be made available in permit form until the quota is paid for, whenever that date, but within up (to) four years."

• In an open letter to broiler producers on October 24, 1999, the Breeder Board outlined the overall plan including the conversion agreement.
• 
  The Agri-Food Council was advised of the Breeder Board's plans throughout this process and again when Mr. Slater attended a Council meeting on November 19, 2000. Mr. Slater also followed up by letter to the Council on November 20, 2000 with a detailed account of the conversion plan. Tim and Cathy Keet (the Keets), Mr. Murray and Mr. Dennis Keet were identified in this letter as three of the six producers involved in the planned conversion.
• Although the Council was aware that some broiler producers were objecting to the conversion, neither the Breeder Board nor the Council received any correspondence from broiler producers or the CFS expressing concerns with the plan.
• The Keets wrote the CFS on December 9, 1999 requesting permission to comply with a request from Lilydale Co-op (the processor and major hatchery for the Saskatchewan chicken industry) to place 21,000 to 24,000 roasters. The Breeder Board also wrote the CFS on December 10, 1999, requesting similar consideration for placement for Goldenview Hutterian Brethren (another breeder producer involved in the conversion).
• On December 17, 2000 the CFS recorded a discussion again supporting the conversion agreement, making reference to two breeder producers who were in immediate need of placements. The following motion was passed:

  "That the two Broiler Hatching Egg producers applying for conversion to broiler production at this time be allowed to begin in the Saskatchewan cycle closest to the CFC period A32, if their production is needed".

• The discussion did not identify the two producers. However, a CFS letter to the Breeder Board early on December 22, 1999 not only continued endorsement of the conversion agreement but provided details as to when both the Keets and Goldenview Colony would receive permits to begin placements.
• Later on December 22, 1999 the CFS rescinded the letter faxed earlier with no explanation. There is also no record of a CFS board decision authorizing this action.
• The Breeder Board responded later on December 22, 1999 expressing concern over the CFS's second memo of December 22, 1999 and asking for an explanation. No action was taken until December 31, 1999 when the CFS once again passed the following motion confirming its decision of December 17, 1999:

  "That the CFS board do a follow-up letter to the hatching egg board confirming the actual motion passed December 17, 1999 and only that."

• On January 1, 2000, Mr. Garry Vanderveen's term expired on the CFS and he was replaced
  by Mr. Mike Dirven. On January 3, 2000 the CFS passed the motion rescinding its endorsement of the conversion agreement.
• The Keets and the other appellants filed appeals at the end of January 2000 seeking a decision from the Appeal Committee to disallow the CFS decision of January 3, 2000 with respect to the conversion agreement.
• Both Mr. Murray and Mr. Dennis Keet testified of situations very similar to that of the Keets. Both Mr. Murray and Mr. Dennis Keet believed they had been selected for conversion and had taken steps to convert their production facilities when they heard of the CFS's decision of Janaury 3, 2000.
• The Keets requested costs be awarded regarding this appeal, but no such authority is provided in the Act to make such awards.

5.0 GENERAL OBSERVATIONS

In the view of the Committee, the central issue was whether the CFS used its quota allocation authority in good faith and in regard to the interests of stakeholders.

In the view of the Committee, the CFS was authorized to enter into an agreement with the Breeder Board. While an argument can be made that specific orders and regulations were not in place at the time to make such allocations, it was clearly understood by all parties that any required changes to orders and regulations would be supported by the Agri- Food Council prior to implementation of plans and agreements.

In the Committee's view, CFS board minutes from August and December of 1999 indicated clear intention to allocate a block of 85,000 birds to the conversion when the time came to implement quota expansion plans for the industry. It is also clear that initial allocations would be made to the Keets and to Goldenview Hutterite Colony. It is therefore reasonable that the producers identified in the conversion agreement, including the appellants, would have some expectation that the CFS would be providing quota as promised. If there had been some indication that the CFS was unable to proceed with the conversion agreement, then this would cast some doubt as to the wisdom of breeder producers who were planning to depopulate production facilities and prepare for broiler placements. However, even when such doubts arose, the CFS was quick to re-iterate its support for the conversion by its motions of December 22 and 31, 2000, 1999.

When the CFS eventually rescinded its agreement on January 3rd, 2000, it did so with no provision for either the producers affected or the Breeder board to be heard; nor, did the CFS see fit to provide any explanation for its actions in its January 4, 2000 letter to the Breeder Board. There was likewise no explanation given in the CFS minutes of January 3rd as to why the CFS had rescinded its agreement. Witnesses for the appellants who were in attendance as members of the CFS on January 3, 2000 testified that the decision of January 3, 2000 was made with knowledge of possible liability for damages or costs incurred by persons affected by its decision to rescind. These witnesses further testified they tendered their resignations because of the substance and the manner in which the CFS made its decisions on January 3, 2000.

It is the conclusion of this Committee that CFS failed to use its quota allocation authority in good faith and in regard to the interests of stakeholders. It is the Committee's view that the CFS also failed to use its powers with regard to their regulated objective of co-operating with other agencies such as the Breeder board. The CFS in this matter did not exercise its authority in a fair and reasonable manner, having regard to the legitimate interests of all stakeholders.

6.0 DECISION

The Appeal Committee rules in favour of the appellants. The Committee hereby disallows the decision of the CFS of January 3, 2000 not to proceed with the conversion agreement. The Committee directs the CFS and the Saskatchewan Broiler Hatching Egg Producers Marketing Board to pursue a course of action that is consistent with commitments made in August 23 and December 17, 1999.