Stetler v. The Ontario Flue-Cured Tobacco Growers' Marketing Board

Stetler v. The Ontario Flue-Cured Tobacco Growers' Marketing Board Collection Decisions of the Court of Appeal Date 2009-03-16 Neutral citation 2009 ONCA 234 Docket numbers C49101 Judges Moldaver, Michael James; Gillese, Eileen E.; Armstrong, Robert Patrick Subject Civil Decision Content CITATION: Stetler v. The Ontario Flue-Cured Tobacco Growers' Marketing Board , 2009 ONCA 234 DATE: 20090316 DOCKET: C49101 COURT OF APPEAL FOR ONTARIO Moldaver, Gillese and Armstrong JJ.A. BETWEEN Wyatt Stetler and 934671 Ontario Limited Applicants (Respondents) and The Ontario Flue-Cured Tobacco Growers’ Marketing Board Respondent (Appellant) and The Agriculture, Food and Rural Affairs Appeal Tribunal Respondent (Respondent) Barry H. Bresner and Melanie E. De Wit, for the appellant Peter Brauti and Matthew R. Barteaux, for the respondents Heard: March 12, 2009 On appeal from the judgment of the Divisional Court (Justice Arthur M. Gans, Justice Keith A. Hoilett and Justice Katherine E. Swinton (dissenting)) dated January 8, 2008, and reported at 234 O.A.C. 366. Gillese J.A.: [1] Courts owe deference to administrative tribunals. In all but exceptional circumstances, if a regulatory body is found to have erred in the imposition of a penalty, deference dictates that the matter should be remitted for reconsideration. This is just such an exceptional case and the court must act, not by remitting the matter, but by deciding the penalty itself. There comes a time when “enough is enough”. BACKGROUND [2] Wyatt Stetler is a 70 year old tobacco farmer in Ontario. He has been a tobacco farmer for his whole life. The farm on which he lives has been home to the Stetler family since 1841. [3] Tobacco farming has been a way of life for the Stetler family since 1929. Mr. Stetler has three daughters and a son, all of whom have played an active role in running the farm. The production and sale of tobacco grown on the family farm is the only meaningful source of income for Mr. Stetler and his son, and has been a partial source of income for his other children and their families. Mr. Stetler expected that after he retired, his son would run the farm and support him with proceeds from the farm, a common practice among farming families. [4] The farm is approximately 100 acres in size and previously provided jobs for many workers, including local people who counted on the farm for income. On the farm there are two large barns that can store approximately 4,000 bales or 180,000 pounds of tobacco. [5] In Ontario, to participate in the tobacco growing industry, a person must obtain a basic production quota from the Ontario Flue-Cured Tobacco Growers’ Marketing Board (the “Board”). All tobacco must be sold through Board auction sales to buyers licensed by the Board. Pursuant to the Board Regulations, recipients of a basic production quota are allotted a marketing quota, which is calculated as a percentage of the basic production quota and reflects the amount of tobacco a producer is entitled to sell at the Board auctions. At the relevant time, Mr. Stetler and his corporate personality 934671 Ontario Limited [1] together owned 232,604 pounds of basic production quota. [6] On March 12, 1999, Mr. Stetler was charged with unlawfully selling three shipments of tobacco outside of the quota system: September 13, 1998 – 70 bales; September 20, 1998 – 66 bales; and February 4, 1999 – 90 bales. [7] On October 23, 2001, the Board found that Mr. Stetler had unlawfully sold tobacco on the three occasions in question, in breach of the Farm Products Marketing Act, R.S.O. 1990, c. F.9. [8] The Board cancelled Mr. Stetler’s entire basic production quota, although it allowed him to sell the tobacco he had already grown. The amount of tobacco that Mr. Stetler improperly sold represented a small fraction of his total basic production quota. He had no criminal record and had never been charged with a regulatory offence. In short, apart from these infractions, he had (and has) an unblemished record as a tobacco farmer and as a citizen of this country. [9] Mr. Stetler appealed to the Agriculture, Food and Rural Affairs Appeal Tribunal (the “Tribunal”). The Tribunal found him guilty of two, rather than three, infractions. He was found not guilty of the September 13, 1998, sale of 70 bales of tobacco. Thus, he had been found to have unlawfully sold 6040 pounds of tobacco or 2.6% of his total basic production quota. [10] Despite having found that Mr. Stetler had committed two, rather than three, unlawful acts, the Tribunal affirmed the penalty that the Board had imposed and cancelled Mr. Stetler’s basic production quota in full. The Tribunal’s reasons for upholding the penalty are contained in a single paragraph. It said that Mr. Stetler was an experienced grower in a highly regulated industry who knew his obligations and knew that the penalty for breaking the rules would be severe. [11] Mr. Stetler challenged the Tribunal’s decision by means of an application for judicial review. The Divisional Court quashed the Tribunal’s decision on the basis that liability had not been established to the requisite standard and because of a reasonable apprehension of bias. [12] As the Tribunal decision had been quashed, nothing prevented Mr. Stetler from growing tobacco so he planted and harvested an entire season of tobacco worth approximately $170,000. The Board wrote to him to say that while his basic production quota had been reinstated, it was appealing the Divisional Court order and Mr. Stetler would not be permitted to market the tobacco if the Divisional Court decision was overturned. [13] On appeal, this court restored the Tribunal’s decision on liability but directed the Tribunal to reconsider the penalty and provide further reasons for whatever penalty was imposed: Stetler v. Agriculture, Food and Rural Affairs Appeal Tribunal (2005), 76 O.R. (3d) 321 ( C.A. ) (“ Stetler No. 1”). Mr. Stetler’s application for leave to appeal to the Supreme Court of Canada was refused: Stetler v. Agriculture, Food and Rural Affairs Tribunal ( 2006), 219 O.A.C. 400n. [14] In the meantime, all Mr. Stetler’s attempts to purchase basic production quota had been rejected. However, he had been allotted marketing quota for the 2005 growing season. On October 5, 2005, following this court’s decision in Stetler No. 1, the Board rescinded Mr. Stetler’s tobacco marketing instructions, refused to provide its customary pre-payment and locked the tobacco in the barn. The parties later agreed that the proceeds of sale of the 2005 crop would be held by the Board pending the outcome of the reconsideration hearing. The Board continues to hold those funds, apart from a portion of the funds that has been paid to a sharegrower, Dennis Hare. [15] The Tribunal conducted the reconsideration hearing in May and July 2006. In a note to the Tribunal in which he explained that he was unable to attend the hearing due to ill health, Mr. Stetler stated that his health problems were attributable to these protracted legal proceedings. There was no evidence to contradict that assertion or cast doubt on it. A letter from Mr. Stetler’s treating physician confirmed that he has serious health problems including coronary artery disease, hypertension, anxiety and an abdominal aortic aneurysm. The letter goes on to state that Mr. Stetler would require surgery in the near future and that for him to testify “would be a significant stress to him and would adversely affect his health.” [16] At the hearing, Mr. Stetler’s son gave evidence as to Mr. Stetler’s grim financial situation, his ill health and the financial consequences flowing from cancellation of his quota. He has depleted his life savings, lost most if not all of his retirement funds, and now lives on a government old age pension. [17] The Tribunal rendered its reconsideration decision on August 2, 2006 (the “reconsideration decision”). It gave Mr. Stetler the same penalty as had been previously imposed – in other words, it cancelled 100% of his basic production quota. In its reasons, the Tribunal repeatedly stated that in determining penalty, it could not consider matters arising after the first Tribunal’s decision in 2002. It expressly declined to consider Mr. Stetler’s financial circumstances and health because its reconsideration of penalty was to be based solely on “actions of the appellant [Mr. Stetler] prior to the date of the decision of the first Tribunal”. [18] In determining that a complete cancellation of Mr. Stetler’s basic production quota was the appropriate penalty, the Tribunal emphasized the need for general deterrence. It stated that the sale of tobacco outside the regulated system “is the worst offence that a tobacco grower... can undertake.” Such a “deliberate illegal act, by any grower, strikes at the heart of the whole regulated system.” The Tribunal stressed the importance of the Board retaining absolute control over production and marketing. On a number of occasions in the reasons, the Tribunal reiterated that in determining penalty, it did not matter whether one bale or 100 bales of tobacco were unlawfully sold, nor did it matter on how many occasions the wrongful act took place because each such act is serious. [19] The Tribunal also stated that it looked for mitigating factors in this case but “found none”. [20] Once again, Mr. Stetler returned to the Divisional Court. By judgment dated January 8, 2008 (the “Judgment”), a majority of the Divisional Court allowed his application for judicial review, set aside the reconsideration decision and ordered the Tribunal to reconsider penalty once again. [21] The Board appeals. It asks this court to set aside the Judgment and reinstate the reconsideration decision which cancels Mr. Stetler’s basic production quota in full. Mr. Stetler asks that the appeal be dismissed and that this court vary the Judgment by substituting its own decision as to penalty, rather than remitting it to the Tribunal for a further reconsideration. [22] Shortly before the oral hearing of this appeal, Mr. Stetler moved to adduce fresh evidence relating to events in the tobacco industry that have recently taken place. In summary, the fresh evidence is to this effect. The tobacco quota system is being abolished and a new licensing system for tobacco growers introduced. The federal government has created a buyout program for tobacco farmers who wish to sell their quota and exit the industry. Details of the program were given at an information session on February 18, 2009. The deadline for accepting the buyout is March 23, 2009. Mr. Stetler is clear: he will sell his quota through the federal buy-out program, if he can, and use the proceeds for support in his retirement. [23] Should the present appeal fail and, on further reconsideration, the Tribunal impose a penalty other than complete revocation, some of Mr. Stetler’s quota would be returned to him. However, unless the quota is returned before March 23, 2009, Mr. Stetler will be unable to avail himself of the federal buyout. It is obvious that reconsideration by the Tribunal cannot take place by March 23, 2009, as that is but a few days hence. Thus, the fresh evidence makes the questions surrounding penalty of critical importance. THE ISSUES [24] The parties agree that the Divisional Court properly reviewed the reconsideration decision on a standard of reasonableness. Thus, the first issue on this appeal is whether the majority of the Divisional Court erred in concluding that the reconsideration decision was unreasonable. If not, the question of the appropriate relief arises. Ought the matter of penalty to be remitted to the Tribunal for a further reconsideration or should this court decide the matter? If the latter, what is the appropriate penalty? WAS THE RECONSIDERATON DECISION REASONABLE? [25] I see no basis on which to interfere with the Judgment, as I share the view of the majority of the Divisional Court that the reconsideration decision is unreasonable. [26] I will outline four specific errors in principle which cause the reconsideration decision to be unreasonable. However, as those errors flow largely from the fact that the Tribunal fundamentally misconceived its role when engaged in a reconsideration of penalty, I begin with that. [27] From its reasons, it is apparent that the Tribunal understood that when reconsidering the penalty to be imposed, it was to stand in the shoes of the Tribunal in 2002 and review the record as it stood at that time – it was not to consider evidence of events that occurred following 2002. In my view, in the circumstances of this case, that approach is unreasonable. [28] There is nothing in the governing legislation that speaks directly to the matter of reconsideration of penalty following a decision by the courts to quash the original penalty and remit it. Thus, there were no legislative constraints preventing the Tribunal from considering evidence after 2002. [29] The word “reconsider” denotes a broader consideration than a mere review of the record as it stood when the penalty was initially imposed. There are many cases in which courts or tribunals have interpreted a legislative provision allowing the tribunal to “reconsider” a decision as enabling it to re-evaluate the original decision in light of new evidence or facts: see, for example, Re Commercial Union Assurance and Ontario Human Rights Commission (1987), 59 O.R. (2d) 481 (Div. Ct), at p. 487, aff’d (1988), 63 O.R. (2d) 112 (C.A.); Jamal v. Ontario Public Service Employees Union (2005), 203 O.A.C. 119 (Div. Ct.), at para. 10; and Minalu v. Sims, [2006] O.J. No. 291 (S.C.) (Q.L.), at para. 15. [30] Further, the narrow approach taken by the Tribunal is not consistent with the order of this court in Stetler No. 1, which directed the Tribunal to undertake a full reconsideration of penalty. Nor is it consistent with the reasons of the court in Stetler No. 1. At para. 108 of those reasons, the court stated that where a person’s livelihood is at stake, the extremely serious consequences of the penalty require the Tribunal to properly consider all relevant factors when determining the appropriate penalty. [31] As a matter of logic and basic procedural fairness, it would seem that the circumstances of an offender are relevant until a penalty is confirmed and final. Surely our system of justice, whether in the courts or before administrative tribunals, is not so rigid as to bar a consideration of the effects that the process has had on the offender. I do not suggest that a tribunal is bound to give any particular weight to such evidence but, in the circumstances of this case, in my view the Tribunal was bound to receive the evidence and consider how it might impact on the appropriate penalty, if at all. It is hard to conceive how information of the effects of the legal proceedings and decisions of the Board and Tribunal could not be relevant to the just and appropriate penalty at the time that sentence was being imposed. It goes without saying that this approach to a reconsideration hearing allows for compassion in the sentencing process as it enables the decision-maker to take into consideration the personal circumstances of an offender after the initial penalty was imposed. [32] Counsel for the Board suggests that a consideration of post-penalty circumstances will create a slippery slope in which parties will wait out the effects of a penalty in order to build support for an eventual claim for relief. I do not accept this argument. As this case makes abundantly clear, the legal process, whether judicial or quasi-judicial, is far from a “walk in the park”, especially where an individual’s livelihood is at stake. It is unlikely that a person would choose to remain enmeshed in proceedings while enduring serious harm to their personal and professional lives for years on end, simply to marshall a possible case for a reduced penalty. [33] It is as a result of misconceiving its role that the Tribunal committed the first error in principle, namely, its refusal to consider evidence of matters occurring after 2002. In so doing, the Tribunal failed to consider all relevant factors when determining penalty. The significant adverse effects of these legal proceedings on Mr. Stetler’s health and financial affairs were relevant factors on reconsideration of penalty, as were the Board’s repeated refusals to permit him to buy fresh quota. [34] Second, it was unreasonable for the Tribunal to find that there were no mitigating factors in Mr. Stetler’s favour. His age and health are mitigating factors. So, too, is his unblemished record. Apart from the incidents in question, he has never been charged with any regulatory or criminal offence. For that matter, there is no evidence or suggestion that anyone in the Stetler family has ever been charged with any type of offence related to his farming business. [35] Mr. Stetler is 70 years old. At the time of the reconsideration hearing, he was an elderly first-offender. He had been a tobacco farmer for his entire life. A total cancellation of his tobacco quota stripped Mr. Stetler of his vocation and his livelihood, and deprived him and his family of the way of life they have shared for the past 70 years. While the prior Board and Tribunal decisions purported to permit Mr. Stetler to re-apply for new tobacco quota, each and every such application was denied. [36] Moreover, Mr. Stetler has complied with all regulatory and governmental dictates, before and after the incidents in question. It cannot seriously be contended that, in light of his age, health and unblemished record, he was at any risk of re-offending if his quota, or some portion thereof, was returned to him. Thus, specific deterrence was not an issue. The mitigating factors speak also to the Tribunal’s concern for general deterrence, as I cannot imagine that the huge price Mr. Stetler has paid, both financially and in terms of his health, has gone unnoticed in the tobacco farming community. [37] Third, it was unreasonable for the Tribunal to give no consideration to the number of times in which a person has engaged in unlawful activity or to the quantities of tobacco which have been unlawfully sold. There can be no quarrel with the Tribunal’s view that every unlawful sale of tobacco is serious. However, just because each unlawful sale is serious, it does not mean that every such sale warrants the most serious of penalties, that is, cancellation of 100% of the tobacco grower’s basic production quota. There must be some degree of proportionality between the wrongdoing and the penalty imposed. The importance of proportionality is particularly significant where, as here, a person’s livelihood is at stake. As the Divisional Court stated in Carruthers v. College of Nurses of Ontario (1996), 31 O.R. (3d) 377 at p. 404:a [N]ot every case is the worst case, nor every person adjudged guilty worthy of the most severe sanction. There must be proportionality between the underlying findings and the penalty imposed. See also Pavelic v. Royal College of Dental Surgeons of Ontario, [1998] O.J. No. 2490 ( Div. Ct.) (Q.L.), at paras. 5-6. [38] The penalty imposed in this case was for two infractions, occurring within a four-month period, following a farming career that spanned several decades without incident. The amounts improperly sold amounted to approximately 2.6% of Mr. Stetler’s basic production quota. The effect of total cancellation of Mr. Stetler’s basic production quota was crushing as, given his age and background, he had no real opportunity to rebuild his life in a different place and with a different vocation. He was, in effect, given “capital punishment” for his transgressions. [39] This brings me to the fourth error in principle. It does not appear that the Tribunal considered the full range of penalties available to it and then fashioned a remedy that appropriately reflected the seriousness of the offence and the situation of the offender. In reconsidering the penalty, the Tribunal was exercising the powers of the Board. The Board’s powers are contained in s. 21 of the Ontario Flue-Cured Tobacco Growers’ Marketing Board’s General Regulations, 2001-2002. Section 21 reads as follows: The local board may cancel or reduce or refuse to increase a basic production quota or a marketing quota where the licensed producer to whom the said quota or quotas have been fixed and allotted has entered into a transaction or a series of transactions that has the effect of circumventing the provisions of these General Regulations or for any other reason that the local board deems proper. [Emphasis added.] [40] It can be seen that the Tribunal had a large range of possible penalties at its disposal. Again, in part because it appears that the Tribunal saw its role as reviewing the penalty previously imposed rather than reconsidering penalty afresh, the Tribunal meted out the most severe punishment available, without any apparent consideration of the range of possible penalties and whether something less than full cancellation of Mr. Stetler’s basic production quota could meet the appropriate sentencing objectives. WHAT RELIEF SHOULD BE IMPOSED? [41] The parties agree that, pursuant to s. 134(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, this court has the jurisdiction to impose the appropriate penalty in this matter. In light of the history of this matter and the fresh evidence, I would exercise that power and impose the penalty, rather than remit it for a further reconsideration. [42] While “[a] court may not substitute its decision for that of an administrative decision-maker lightly or arbitrarily”, exceptional circumstances may warrant the court rendering a final decision on the merits. Such circumstances include situations where remitting the case would be “pointless”, where the tribunal is no longer “fit to act”, and cases where, “in light of the circumstances and the evidence in the record, only one interpretation or solution is possible, that is, where any other interpretation or solution would be unreasonable”: Giguère v. Chambre des notaires du Québec, [2004] 1 S.C.R. 3, at para. 66. [43] In Denby v. Agriculture, Food and Rural Affairs Appeal Tribunal (2006), 216 O.A.C. 130, the Divisional Court varied the penalty imposed on a number of milk producers who had marketed milk outside the regulated quota system, contrary to the Milk Act, R.S.O. 1990, c. M.12. The Tribunal had reduced the producers’ milk quotas by a fraction of their total allotted quotas. Further, it cancelled their production licences, thus terminating their participation in the industry. While not interfering with the reduction in quota, the Divisional Court quashed that part of the order that cancelled the producers’ licences on the basis that cancellation was unjust, unnecessary and unreasonable: Denby at para. 54. It was disproportionate to the violations which, although serious, were brief in duration. The producers had no previous records. They had complied with the Milk Act and regulations during the time in which they had been permitted to keep their licences pending the application for judicial review. The Divisional Court noted that the significant financial penalties resulting from the loss of quota would serve as a sufficient deterrent to others in the industry. [44] Similar considerations exist in the present case. [45] In determining the appropriate penalty, I will not repeat the sad history of these proceedings and the toll it has exacted on Mr. Stetler, which is set out above. In my view, no matter what the appropriate penalty is, Mr. Stetler has more than served it. Apart from some partial relief in 2005, Mr. Stetler has been deprived of his livelihood and way of life for the better part of a decade. He has suffered enormously in these legal proceedings. That suffering includes financial ruin, or something very close to it. It extends to his health and the crushing impact on his family. I agree with counsel for Mr. Stetler when he says that the process itself has been the punishment. Mr. Stetler has suffered enough. [46] There is a strong argument to be made that even absent the fresh evidence, this case cries out for the court to render a final decision on penalty, rather than remit it for yet a further reconsideration. I am strongly attracted to that argument but decline to decide the matter solely on that basis for two reasons. The first is simply that, in light of the fresh evidence, there is no need to do so. The second is the importance of deference. As this court so clearly stated in Stetler No. 1, the courts must respect the experience and expertise of regulatory bodies in fashioning appropriate penalties for infractions within a profession or industry. [47] Thus, I end where I began. In all but exceptional circumstances, if a regulatory body errs when imposing penalty, the matter should be remitted for reconsideration. This is an exceptional case and the matter must end here. DISPOSITION [48] I would grant the motion to admit fresh evidence. In the circumstances of this case, the evidence sought to be admitted relating to the Tobacco Transition Program and deadlines for the program is necessary to deal fairly with the issues on appeal and declining to admit it could lead to a substantial injustice: see Illidge (Trustee of) v. St. James Securities Inc . (2002), 60 O.R. (3d) 155 (C.A.), at para. 6; and Sengmueller v. Sengmueller (1994), 17 O.R. (3d) 208 ( C.A. ), at para. 10. [49] I would dismiss the appeal and set aside para. 2 of the Judgment in which the matter of penalty is remitted to the Tribunal. As a consequence of dismissing the appeal, the reconsideration decision cancelling Mr. Stetler’s basic production quota no longer exists and his basic production quota is reinstated. For greater clarity, however, I would also declare that Mr. Stetler’s basic production quota is immediately reinstated and order the Board and Tribunal to forthwith take such steps as are necessary, if any, to achieve that reinstatement. [50] Further, I would declare that Mr. Stetler is entitled to the proceeds of sale of his 2005 tobacco crop, and any interest that has accrued thereon.[2] I understand that these funds are currently being held by the Board. Thus, I would direct the Board to forthwith take such steps as are necessary to ensure that those funds are released to Mr. Stetler. [51] Finally, I would award costs of this appeal to Mr. Stetler, fixed in the amount of $26,300, inclusive of disbursements and G.S.T. RELEASED: March 16, 2009 (“E.E.G.”) “E.E. Gillese J.A.” “I agree. M.J. Moldaver J.A.” “I agree. Robert P. Armstrong J.A.” [1] For convenience, I will refer to Mr. Stetler, his company or both, simply as “Mr. Stetler”. [2] Apparently a portion of the proceeds of sale of the 2005 tobacco crop has already been given to the sharegrower, Dennis Hare. I do not intend to suggest that Mr. Stetler is to be given anything more than the balance of those proceeds of sale, plus any interest that has accrued thereon.