Dairy farmers lose bid for exemption from quota transfer rules

Thursday, February 20, 2014

by SUSAN MANN

An agriculture appeal tribunal has agreed with Dairy Farmers of Ontario in denying a request by a Woodstock-area dairy farming couple to be exempted from quota transfer rules.

When the couple, Rene and Bianca Strik originally of Holland, bought their farm in 2010, they were under the impression they would also be acquiring 105 kilograms of quota. But when the deal closed, only 80 kgs of quota were transferred as part of the farm sale, according to a Feb. 18 Agriculture, Food and Rural Affairs Appeal Tribunal written decision.

That amount represented the quota associated directly with the farm that the seller – identified in the tribunal decision only as Mr. Y – had bought in 2007. The Striks had also anticipated they would acquire 25 kgs of quota that Mr. Y held on a rented farm.

They thought they could obtain it because in April 2010, Dairy Farmers approved Mr. Y’s request to merge the two quota holdings. (The provincial dairy organization has since banned quota mergers).

But the organization had a policy that prohibited the resale of merged quota for two years from the effective date of the merger. For this reason, it did not permit the Striks to obtain Mr. Y’s other quota holdings.

Dairy Farmers didn’t know at the time Mr. Y intended to sell his farm, the decision states.

The couple approached the board unsuccessfully several times from 2010 to 2013 to obtain permission to transfer the remaining quota.

The Striks then requested the tribunal exempt them from Dairy Farmers’ policy of a two-year moratorium on the resale of merged quota.
 
Neither Mr. Y nor the agent/broker, identified as Mr. V in the decision, testified for either party. The tribunal did not receive an explanation as to why the two people weren’t called.

Graham Lloyd, Dairy Farmers, general counsel and communications director, says in a telephone interview Dairy Farmers didn’t call them because it “didn’t believe it was necessary in order to advance its case.”

The Striks couldn’t be reached for comment.

The Striks asserted their situation was unique and warranted an exemption to the Dairy Farmers policy, the decision says. They claimed that the amount of quota available for sale and transfer “was misrepresented by Mr. Y in the initial agreement of purchase and sale,” the decision says. The Striks also claimed the lesser amount of quota they bought with the farm left them cash strapped and obtaining the additional quota would have relieved this circumstance.

The tribunal’s decision says “it is not unique or exceptional that the Striks were unable to purchase the quantity of quota that they wanted.”

The Striks immigrated to Canada with a young family and needed to liquidate their farm holdings in Holland, find a new farm here, get it set up and get settled in Canada. While these circumstances are challenging, they are not unique, exceptional or “outside of their control,” the decision says.

In addition, the tribunal says the Striks knew there was a problem with the amount of quota available because they countersigned a revised Dairy Farmers quota transfer form dated Aug. 6, 2010 along with the seller. That form listed the quota being transferred at 79.85 kilograms. The Striks received an abatement of $800,000 on the purchase price of the farm for the 25 kilograms they weren’t getting, the decision says.

The Striks could have confirmed with Dairy Farmers the amount of quota available as part of the farm sale. Operations director George MacNaughton testified they would have told the Striks how much quota was available for transfer as part of an ongoing operation if they (the Striks) had “proper authorization from Mr. Y,” but the Striks didn’t request this information, the decision says.

The couple also didn’t provide any evidence, such as financial documents or bank statements, to back up their cash-strapped claim, the decision states. In addition, they invested more than $2 million in improving the farm structures, including the house, since buying the farm; bought eight kilograms of quota for $200,000 with a bank loan; and acquired in July 2013 a second Canadian farm using $3 million of borrowed money.

The Striks’ lawyer argued it has been more than two years since Dairy Farmers granted Mr. Y his quota merger, “and on that basis the Striks should be entitled to have the additional quota,” the decision says.

But Dairy Farmers says granting an exemption on this basis “would reward Mr. Y, after the fact, for proceeding as he did and that wouldn’t be appropriate,” the decision says. BF