British Columbia Court of Appeal rules that B.C. Vegetable Marketing Commission's extraordinary levy on greenhouse tomato growers to pay expenses of responding to U.S.'s dumping action against them did not exceed its powers
The Vegetable Marketing Commission (VMC) is a regulatory body set up under the British Columbia Vegetable Scheme to administer the plan under the supervision of the Vegetables Marketing Board.(VMB). In 1996, the VMC appointed B.C. Hothouse Foods, Inc. (Hot House) as the sole agent for marketing greenhouse vegetables grown in the Lower Mainland area of BC and on Vancouver Island. Hot House then entered into Grower Marketing Agreements (GMAs) with the growers it represented.
In 2000, the United States filed a trade action against Canadian greenhouse tomato growers. It alleged that the growers were dumping, that is, selling their goods in the U.S. at prices lower than they were asking in B.C. Hot House took it upon itself to orchestrate the B.C. Industry's response to the action. In 2001, an outfit calling itself "Global Growers" and others, asked the VMC to choose Global as their marketing agent to replace Hot House.
One month later, the VMC laid a special levy upon all greenhouse tomatoes produced in 2001 in order to pay the costs of the trade dispute. It also recommended to the VMB that it accord agency status to Global. At the outset, Global growers did not ask the Commission to cancel their GMA's with Hot House; it did so in 2002, however, after it became clear that the parties could not agree on how to go about the terminations. The VMC declined to comply. The Board then agreed to consider written submissions about the GMA terminations and other issues but turned down Global's request for a full hearing.
This led Global to withdraw from the review process, and to seek an injunction to prevent the VMB from proceeding. The B. C. court of first instance rejected that application. In July 2002, the VMC came out with its recommendations to the Board. The following month, the Governor General in Council adopted a regulation that empowered the VMC to impose levies on growers and to use the proceeds to pay litigation expenses and to make up for losses from the sale or disposal of vegetables during any period of time.
In September, the VMB issued its report. In dismissing Global's application for judicial review, the court found (1) that the Board's action lay within with its general supervisory authority and (2) that the evidence fully supported its findings of fact. The court held that the Commission had virtually unlimited powers to regulate the production and marketing of vegetables, including the authority to collect levies. The major problem lay in Global's unwillingness to deal with Hot House, or to answer its request for mediation, or to agree to the appointment of an arbitrator. This forced the court to appoint an arbitrator as requested by Hot House.
BC Vegetable Greenhouse, South Alder Greenhouses and Merom Farms appealed from two judicial rulings. The first was from the dismissal of their application for judicial review of VMB decisions on the marketing of greenhouse tomatoes; the second was the granting of Hot House's application for the appointment of an arbitrator relating to grower marketing agreements. The British Columbia Court of Appeal, however, unanimously dismisses.
The Court first found no merit in the claim that complex questions of law were at stake. Rather, in its view, the case turns on the applicability of clear rules to facts that are not in dispute.
"Whether or not the Commission had the authority to affect or cancel or vary the GMAs, and in particular the covenant of exclusive dealing, it did not purport or intend to do so. It left the question of the effect, if any, of the "Agency Decision' ... on the GMAs to be determined in accordance with their terms. This disposition was upheld, as it were, by the Board."
"In my view, the Agency Decision did not "render unenforceable' the covenants in those agreements requiring the appellants to market exclusively through Hot House. For one thing, ... none of the appellants were parties to Global's agency application. But more importantly, there is no doctrine of law - short of the law of frustration of contract or illegality - which have the effect of somehow rendering a term in a private law contract "inoperative'. This is not a situation where a statute requires the appellants to do one thing but a contract prohibits that thing. The Agency Decision gave the Global shareholders the right to market tomatoes outside the territory of Western Canada and the Interstate-5 corridor." [Slip op. 5-6]
"Indirectly, this gave the appellants a "right or option' to sell tomatoes to Global for that market. But the Commission did so subject to the express understanding, ... that "any existing GMA must be determined in accordance with its terms unless the parties to the GMA reach another agreement'."
"Equally important, the appellants were under no compulsion to market through Global. Thus they were not required by the new decision to breach their existing new contracts. If Hot House seeks damages under the GMAs, that will not defeat the Commission's marketing policy as alleged."
"It follows, in my view, that the dispute as to the effect of the appellants' alleged breach of the GMAs stands to be determined by the arbitrator under those agreements. I therefore see no error in the trial judge's conclusion on this point and would dismiss this aspect of the appeal."
"Turning next to the levy question, I am of the view that an order distributing the costs and expenses associated with the U. S. anti-dumping investigation does not invade the trade and commerce power of the federal government. The question, of course, is the object or purpose of the provincial scheme. Incidental effects on markets outside the province are not fatal if the pith and substance remain of provincial concern. ... Looking at it this way, I conclude that order 08/01 was constitutionally valid. Its object or purpose was to deal with the costs of a legal endeavour undertaken to benefit B.C. producers." [Slip op. 7-8]
"The appellants also question whether there was statutory authority to make the two levy orders, 08/01 dated August 15, 2001 and 09/02 dated September 18, 2002. (In between these dates, of course, the federal government amended the B.C. Vegetable Order to add a new section 4 referring to levies.) I believe there [already] was such authority in ... the Natural Products Marketing Act of 1996 (B.C.) ... This power was conferred on the Commission by ... the Vegetable Scheme, B.C. Reg. 96/80."
"If I am wrong on the vires issue, then the federal order SOR 81-49 entitled "B.C. Vegetable Order' effectively gives the Commission for federal purposes "all or any powers like the powers exercisable by it in relation to the marketing of vegetables locally within the province and the provincial plan.' In the result, this aspect of the second appeal must also fail."
The final issue was that of retrospectivity. The Court is not convinced that the second levy order is retrospective. "In my view, the levy order did not "look to the past and attach new consequences to a completed transaction' [Cite]. Producers of tomatoes in the 2002 year had the levy imposed on them in that year. No books had to be "reopened'. The allocation of the levies was based on production in the previous year, but this was merely a method of calculating the fair allocation."
"It did not mean that a person who had produced in 2001 but not in 2002 became liable for the levy. The charge was exacted from current production and became a debt due in 2002. It did not interfere with a vested right or change the consequences of a completed transaction. In the result I would also dismiss this final aspect of the appeal." [Slip op. 8-10]
Citation: B.C. Vegetable Greenhouse I, L.P. v. British Columbia Marketing Board Van. Reg. No. CA031329 [2005] B.C.J. No. 2222; 2005 B.C.C.A. 476; (Sept. 23, 2005).
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