Executive Summary: Key Legal and Evidentiary Issues

• Chicken Farmers of Canada imposed a $241,485.00 levy assessment on Simple Path Farms and Poultry Ltd. for failing to meet market development commitments during two periods in 2022.

• SPF argued the levy under subsection 5(1) of the Canadian Chicken Marketing Levies Order was ultra vires the CFC's authority, operating as a punitive fine rather than a regulatory charge.

• Force majeure conditions were raised by the Applicant but rejected by the CFC Board, which characterized the shortfalls as ordinary market challenges or commercial risks.

• The Applicant withdrew its vires and Charter arguments from its complaint before the Farm Products Council of Canada, then attempted to raise the vires issue directly on judicial review.

• Application of the doctrine of exhaustion of adequate alternative remedies was the dispositive issue, as the Applicant bypassed the Council's complaint process on the legal questions it now sought to litigate.

• Federal Court dismissed the judicial review application with costs to the Respondent, finding no exceptional circumstances to justify circumventing the available administrative remedy.

Background and the parties involved

Simple Path Farms and Poultry Ltd. (SPF) is a subsidiary of ADP Direct Poultry Ltd., based in Welland, Ontario, where it operates a chicken slaughtering facility along with three processing facilities in the Greater Toronto area. SPF is a "primary processor" under the Canadian Chicken Marketing Levies Order and holds a market development licence issued by the Chicken Farmers of Canada (CFC), the marketing agency for chicken created under the Chicken Farmers of Canada Proclamation. SPF had voluntarily participated in the CFC's Market Development Program since approximately October 2020, which supplemented the regular chicken production quota system by allowing licensees to receive extra quota for interprovincial or export trade. The Applicant described itself as a small processor with a relatively small quota allocation that relied on the Program to ensure enough production for a five-day work week at its processing plant.

The assessment and initial challenge

On April 23, 2023, the CFC notified SPF that it had failed to meet its market development commitments for two market periods: A-174 (January 16 to March 12, 2022) and A-175 (March 13 to May 7, 2022). The CFC consequently proposed to impose levies totalling $241,485.00 under subsections 5(1) and 11.2(1) of the Levies Order. SPF did not deny the failure to meet its commitments but contested the assessment on legal grounds, advancing two main arguments: first, that its failure was attributable to force majeure events under subsection 11.1(2) of the Levies Order, and second, that subsection 5(1) was ultra vires the CFC's statutory authority because the levies were punitive in nature rather than regulatory. SPF also raised a Charter of Rights and Freedoms argument, contending the provision was inconsistent with constitutional protections.

The CFC's decision and the complaint before the Council

On November 2, 2023, the CFC's Board of Directors rejected SPF's force majeure argument, characterizing the conditions faced by the Applicant as "market challenges or commercial risks" associated with participation in the Market Development Program. The Board declined to address the legal challenges to the Levies Order, mainly on the ground that it was not trained to deal with legal questions, and considered it inappropriate to wade into a debate about the quantum of the levy when dealing with a force majeure application. SPF subsequently filed a complaint before the Farm Products Council of Canada on December 4, 2023, raising both the vires issue and, alternatively, seeking to have the Council conclude that the force majeure conditions were met and set aside the Final Assessment. During pre-hearing conferences, the Council's Advisory Personnel questioned whether the Council had jurisdiction to consider the Charter values argument. Notably, on February 6, 2024, counsel for both SPF and the CFC submitted a joint letter setting out their views that the Council indeed has the power to hear and decide questions of law, including Charter issues.

Withdrawal of the vires argument and the Council's decision

At a preparatory hearing on March 25, 2024, SPF's counsel indicated that arguments at the hearing may be limited only to the force majeure issue. On March 28, 2024, SPF formally amended its complaint, deleting any request that the Council exercise its power pursuant to paragraph 7(1)(f) of the Act to strike out subsection 5(1) of the Levies Order as either being ultra vires or unreasonable, and to set aside the Final Assessment. The hearing proceeded on April 17, 2024, only upon the challenge to the Final Assessment. The Complaint Committee recommended dismissal, and the Council agreed, issuing its decision on June 12, 2024.

The judicial review application and the parties' submissions

SPF had filed a judicial review application on April 16, 2024, focusing on the vires issue — the very argument it had withdrawn from the Council complaint process. SPF contended that subsection 5(1) of the Levies Order operated as a fine or penalty, not a regulatory measure, relying on the decision in Dunn-Rite Food Products Ltd. v. Canada (Attorney General) and the Supreme Court of Canada's identification of the characteristics of a regulatory charge in Westbank First Nation v. British Columbia Hydro and Power Authority. The Respondent, the Attorney General of Canada, countered that the application was premature because SPF had failed to exhaust the available complaint process under the Farm Products Agencies Act. The Respondent relied on Saskatchewan (Minister of Agriculture, Food and Rural Revitalization) v. Canada (Attorney General), where the Federal Court found that the complaint process pursuant to paragraph 7(1)(f) of the Act is a convenient, expeditious and cost-effective alternative to the courts, and on Leth Farms Ltd. v. Canada (Attorney General), to argue that the Council enjoys a broad range of remedial power. The Intervener, Chicken Farmers of Canada, supported the Respondent's arguments on the vires issue.

The regulatory framework and the levy provision at issue

Under the Market Development Program, paragraph 5(1)(b) of the Levies Order requires every primary processor holding a market development licence who markets chicken produced under a federal market development quota to pay an additional levy of $0.60 per kilogram on the live weight equivalent of chicken that is not marketed before the end of the period immediately following the market development commitment period. The CFC enacted the Levies Order pursuant to paragraph 22(1)(f) of the Farm Products Agencies Act, subject to review and approval by the Farm Products Council of Canada. The Proclamation's section 12 requires the CFC to conduct its operations on a self-sustaining financial basis and authorizes it to create reserves for expenses it deems essential to accomplish its goals.

The Court's ruling and outcome

Justice Heneghan of the Federal Court determined that the dispositive issue was not the merits of the vires challenge but rather the appropriateness of judicial review in the circumstances. The Court applied the doctrine of exhaustion of adequate alternative remedies, as articulated in C.B. Powell Limited v. Canada (Border Services Agency) and Strickland v. Canada (Attorney General), which hold that, absent exceptional circumstances, parties cannot proceed to the court system until the administrative process has run its course. The Court found SPF's argument — that the Council could not provide an adequate remedy because it had approved the Levies Order — not persuasive, noting that the Council has expertise in the discharge of its duties and exercise of its powers under sections 6 and 7 of the Act. SPF had elected to withdraw the vires issue from its complaint before the Council, then attempted to raise it afresh on judicial review without having pursued it through the available administrative avenue. The Court found no exceptional circumstances to allow the judicial review application to be determined on its merits. The application for judicial review was dismissed, with costs awarded to the Respondent (Attorney General of Canada). No costs were ordered in favour of or against the Intervener (Chicken Farmers of Canada). The exact amount of costs payable was not specified in the judgment.