Canada: Agricultural Law NetLetter: Friday, March 21, 2014 - Issue 296

** HIGHLIGHTS **

  • A Federal Court Justice has held that an Indian Band Council which chose not to renew an agricultural permit for a farmer had to give the farmer reasonable notice and an opportunity to be heard with respect to its decision. The Court quashed the decision of the Band Council for the Blood Indians First Nation and directed it to afford a hearing, on notice, to the farmer, as well as affected Band members. Band Council had entered into agreements with a number of Band members to request permits to be issued by the Minister of Indian Affairs for the farmer in question. Over 56,000 acres of land and over 500 Band members were involved. (Hengerer v. Blood Indians First Nation, CALN/2014-011, [2014] F.C.J. No. 259, Federal Court)
  • The Ontario Court of Appeal has firmly rejected the proposition that the provisions of the Ontario Health Protection and Promotion Act and the Ontario Milk Act, which prohibit the consumption of unpasteurized milk and the operation of an unlicensed milk plant contravene s. 7 of the Charter of Rights and Freedoms. The Court distinguished case law involving the right to consume medical marijuana on the grounds that there was no scientific or medical evidence to support the alleged health benefits from consumption of unpasteurized milk. Lifestyle choices with respect to food are not protected by the Charter. The Court also dismissed the appeal and upheld the convictions against unpasteurized milk advocate Michael Schmidt. The Court also held that Schmidt's "cow share" arrangement, which did not transfer an ownership interest in particular cows to the participants of the arrangement, did not take his activities outside of public health legislation, and that the Courts have resisted schemes that purport to create "private enclaves" immune to the reach of public health legislation. (R. v. Schmidt, CALN/2014-012, [2014] O.J. No. 1074, Ontario Court of Appeal)
  • The Federal Court of Canada has rejected a challenge by the Western Grain Elevator Association, and a number of its members, to an Order made by the Canada Grain Commission with respect to the maximum allowable moisture shrinkage allowance elevator operators can calculate when drying grain. The Court concluded that the Order which reduced the allowable shrinkage was within the statutory authority of the Commission, notwithstanding that similar authority was also given to the Federal Cabinet. The Court also concluded that it had no authority to question the science or policy behind the Order. (Cargill Ltd. v. Canada (Attorney General), CALN/2014-013, [2014] F.C.J. No. 275, Federal Court)

** NEW CASE LAW **

Hengerer v. Blood Indians First Nation; CALN/2014-011, Full text: [2014] F.C.J. No. 259; 2014 FC 222, Federal Court, Russell J., March 6, 2014.

Agricultural Permits to Farm Indian Reserve Lands -- Termination and Non-Renewal -- Right to Judicial Review.

A farmer, Joachim Hengerer and Hengerer Farms Ltd. (collectively "Hengerer") and two members of the Blood Tribe, Charlene Fox and Lois Frank ("Fox" and "Frank") applied to the Federal Court of Canada for an Order quashing the decision of the Chief and Council of the Band of Blood Indians ("Band Council") not to request the renewal of agricultural permits which allowed Hengerer to farm lands on the Blood Indian Reserve in southern Alberta (the "Reserve"). Hengerer, Fox and Frank also sought an Order directing Band Council to cause agricultural permits to be issued to Hengerer pursuant to agreements entered into between Band members and Band Council.

Hengerer is a 63 year old farmer who had farmed land on the Reserve since 1981.

In 2013, Hengerer farmed approximately 56,000 acres of land on the Reserve on lands occupied by in excess of 500 Band members.

The Blood Reserve is the largest reserve in Canada at 518.5 square miles and a population of 11,500 members. The primary industry on the Reserve is agriculture.

Hengerer, Fox and Frank alleged that Band Council had entered into binding agreements with Band members pursuant to which Band Council had agreed with Band members to cause agricultural permits to be issued or renewed to Hengerer until 2015 and that Band Council's decision constituted a breach of legally binding contracts between Band Council and Band members.

In the late summer and fall of 2013, Hengerer had seeded approximately 4,000 acres of Reserve land to winter wheat and had sprayed and worked a portion of the land in the expectation that he would be farming it in 2014. He also expended approximately $16.2 million on the purchase of new farm equipment and had entered into contracts to sell canola in the fall of 2014 at fixed prices, in the expectation that the permits would be issued.

On or about December 20 or 21, 2013, Hengerer received a letter from Band Council which advised him that all permits allowing him to farm on the Reserve would expire on March 31, 2014 and that no future permits would be issued.

Band Council's decision was based on a Committee report which alleged that he:

  1. disregarded directions from the Band's Land Management Department regarding the planting of winter wheat;
  2. disregarded survey markers;
  3. failed to report "Buck Shea" arrangements to Land Management;
  4. failed to submit a crop report to Land Management for 2013;
  5. failed to maintain fences in 2013;
  6. not remitted payment of crop rental fees for the invoice amounts in 2013;
  7. made racist remarks against Band members.

Hengerer had not been given notice of Band Council's December 17, 2013 meeting and was not given an opportunity to respond to these allegations.

Band Council did not provide Hengerer with the reasons for its decision until February 17, 2014, after judicial review proceedings were commenced.

Hengerer's Affidavit evidence denied all of these allegations.

The issues on the application were:

  1. Whether the Decision is subject to judicial review;
  2. If the Decision is reviewable, what is the standard of review;
  3. Was procedural fairness denied;
  4. If a reviewable error occurred, what relief should be granted?

Section 18(3)(b) of the Federal Court Act provides:

(3) On an application for judicial review, the Federal Court may...

(b) declare invalid or unlawful or quash, set aside or set aside and refer back for determination in accordance with such directions as it considers to be appropriate, prohibit or restrain, a decision, order, act or proceeding of a federal board, commission or other tribunal.

Section 2 of the Federal Court Act defines "federal board, commission or other tribunal", in part, as follows:

"federal board, commission or other tribunal" means anybody, person or persons having, exercising or purporting to exercise jurisdiction or powers conferred by or under an Act of Parliament or by or under an order made pursuant to a prerogative of the Crown..."

Section 28 of the Indian Act provides that leases by which Bands and Band members permit non-Indians to occupy or use Reserve lands are void, but that the Minister may authorize permits:

"28(1) Subject to any subsection (2), any deed, lease, contract, instrument, document or agreement of any kind, whether written or oral, by which a band or a member of a band purports to permit a person other than a member of that band to occupy or use a reserve or to reside or otherwise exercise any rights on a reserve is void.

(2) The Minister may by permit in writing authorize any person for a period not exceeding one year, or with the consent of the council of the band for any longer period, to occupy or use a reserve or to reside or otherwise exercise rights on a reserve."

Decision: Russell, J. [at p. 16 and 17] quashed the decision of Band Council and directed that if Band Council still intended to sever its relationship with Hengerer, Band Council must notify Hengerer in writing of its intention to do so, provide adequate reasons, convene a meeting of all Band members affected who will have an opportunity to address Band Council, provide evidence to Hengerer who will have an opportunity to address the evidence and elicit his own evidence, give Hengerer an opportunity to have legal counsel present and allow him to make submissions, and render a timely decision with adequate reasons.

Russell, J. considered the following issues:

1. Is the decision of Band Council subject to judicial review by the Federal Court?

Russell, J. observed [at para. 39] that Band Council took the position that it had severed a private business relationship with Hengerer with its inherent powers to contract and manage the use of lands on the Reserve, and that the Court had no jurisdiction to hear the matter.

Russell, J. concluded that Band Councils can act as a federal board and that, in this case, Band Council's actions had a source in federal law, were of a public nature, and were consequently reviewable by the Court, stating [at para. 40 to 50]:

"[40] Section 18.1 of the Federal Courts Act allows for judicial review of a decision or order of a federal board or commission or other tribunal, and section 2 of that Act tells us that a federal board, commission or other tribunal "means anybody, person or persons having, exercising or purporting to exercise jurisdiction or powers conferred by or under an Act of Parliament..."

[41] We know that a band council can act as a federal board, commission or tribunal but that not all band council decisions are subject to judicial review. See Provost v. Canada (Minister of Indian Affairs and Northern Development), [2009] F.C.J. No. 1505 at para 34.

[42] We also know that reviewable actions must not only find their source in federal law but must also be of a public nature and that all of the circumstances of the case must be considered when determining if a federal board, commission or other tribunal is acting in a manner which brings it within the purview of public law (see Air Canada v. Toronto Port Authority, [2011], F.C.J. No. 1725 at para. 60. [Toronto Port Authority].

[43] In the present case, I am persuaded that, in making the Decision, Band Council exercised, or purported to exercise, jurisdiction and powers conferred by or under the Indian Act, and that it did so in such a way that brought Council within the purview of public law.

[44] The evidence before me shows that, in terminating the Band's relationship with Hengerer, Band Council regarded itself as acting under subsection 28(2) of the Indian Act and that, although the issuance of Permits is a power granted to the Minister and not Band Council, the de facto situation in this case is that Band Council controls who receives Permits by using its consent powers under subsection 28(2), and by refusing to request Permits or renewals if it decides to terminate a relationship with a farmer.

[45] In particular, the Band Council resolution of March 19, 2013 requesting Permits for named individuals, including Hengerer, refers to Council's powers under the Indian Act and specifically bases the request upon subsection 28(2) of the Indian Act. Likewise, the letter from Council to Hengerer of December 18, 2013 specifically says that the Permits were issued "pursuant to section 28(2) of the Indian Act.

[46] It is telling that the wording of the MOUs suggests that it is the Band who grants the Permits. In law, this is not the case, but the Band's own documentation assumes de facto control over the issuance of Permits under the Indian Act.

[47] As regards the public dimension of the Decision, and bearing in mind the factors and guidance referred to by the Federal Court of Appeal in para 60 of Toronto Port Authority above, I am convinced that Band Council, in making this Decision, has brought itself within the purview of public law. In particular, I note that Council expressly engages subsection 28(2) of the Indian Act and exercises de facto control over the allocation of Permits. There is a large number of MOUs and the whole Permit system and the customary and traditional rights of band members are here brought into play in a way that affects the whole Blood Reserve community and, as the actions of Council in calling meetings has shown, has already affected the whole community. This is a situation that cannot be confined to the private and internal severing of a business relationship but needs to be dealt with by way of public law remedies.

[48] It is clear that the Applicants have been directly affected by the Decision. The evidence indicates that Hengerer will suffer severe financial prejudicial effects and Occupants have at least some rights - as evidences by the current Dispute Resolution Policy - that are prejudicially affected. The MOUs and the evidence of Charlene Fox indicate that, although Council may have the ultimate say over which farmer receives a Permit, it has been customary to allow Occupants to designate the farmer they want. In fact, the MOUs designating Hengerer for a three-year term from April 1, 2013 to March 31, 2016 are clearly intended to be contractual documents and not mere memoranda of understanding intended for purely internal purposes as alleged by Band Council. Band Council does not sign the MOUs (they are witnessed by a Land Management employee) but their terms are clearly endorsed and accepted by Council by way of resolution, so that, in effect, Council has agreed with the Occupants who designated Hengerer to exercise its powers under the Indian Act to request and acquire Permits for a term that runs until March 31, 2016.

[49] If Council wishes to avoid the contractual consequences of its own documentation, then Council should change that documentation to reflect the relationship it wants. It is not sufficient to tell the Court that Council has decided to interpret clear contract documents as not giving rise to contractual consideration.

[50] All in all, then, I think the Applicants have established that they have suffered prejudice (Hengerer obviously in a way that is different from Occupant Applicants) as the result of a Decision made, or purportedly made, by Council in accordance with powers under the Indian Act, and which has the kind of public dimension that lends itself to public law remedies. In other words, it is my view that the Court does have the jurisdiction to deal with this application."

2. Have any of the Applicants suffered breach of procedural fairness?

Russell, J. observed [at para. 52] that there is no statutory authority under the Indian Act to suggest that procedural fairness should not apply to the decision of Band Council; that with respect to procedural fairness, a standard of correctness applies, and no deference is allowed to the decision-maker, relying on Baker v. Canada (Minister of Citizenship and Immigration), 1999 CanLII 699 (SCC), [1999] 2 S.C.R. 817 and Sketchley v. Canada (Attorney General), [2005] F.C.J. No. 2056, 2005 FCA 404.

With respect to Hengerer, Russell, J. concluded that Band Council had an obligation to provide him with adequate notice and an opportunity to be heard, stating [at para. 55 to 57]:

"[55] When I apply the Baker factors to the present situation, it is clear to me that, as far as Hengerer is concerned, this Decision was of immense importance to his farming business and that he had legitimate expectations that Council would secure the Permits he needed to farm the Lands until March 31, 2016. The whole history if his long association with the Blood Tribe and the particular arrangements entered into to take the relationship to 2016 required Council to provide him with adequate notice of the case he had to answer before a decision was made not to seek renewal Permits for him, and to give him the opportunity to be heard by Council on the serious allegations that were made against him and which were set out in the Land Management Committee recommendation and accepted by Council and used as the reasons for terminating the relationship.

[56] This does not mean that Council's ultimate powers to determine who farms on Reserve Lands are curtailed in any way. Council might well wish to terminate even long-standing relationships from time to time for any number of legitimate reasons. But when, as in this case, Council decided to terminate the relationship with Hengerer for very specific reasons and to such drastic effect for Hengerer, Council should have provided Hengerer the opportunity to know the case against him and be heard.

[57] This does not mean, as counsel for the Band argues, that the system will be thrown into chaos by disgruntled farmers. Procedural fairness is contextual and case specific. All I am saying is that, on the facts of this case, Hengerer was not deal with in a procedurally fair way."

With respect to Frank and Fox, Russell, J. stated that the procedural fairness owed to Band members could not be separated from the procedural fairness owed to Hengerer, stating at para. 58:

"[58] As for the Occupants Applicants, the Baker factors I think require a different result. The impact of the Decision falls mainly on Hengerer. The Occupants were deprived of the opportunity to have their designated farmer as permitee. But they are not likely to suffer economic consequences and I think the system and the community at the Reserve recognize that, although in the usual case Council will endorse their chosen permittee, Council must have ultimate say in this matter because Council is fixed with the ultimate power and responsibility of ensuring that Reserve lands are managed for the economic and other benefits of the community as a collective. It seems to me that whatever procedural fairness is owed to Occupants cannot be separated from the fairness that might be owed to the designated farmer in each case. In the present case, I don't think the Applicant Occupants, or indeed other Occupants who designated Hengerer to farm the Reserve lands they occupied, could expect more than that Hengerer be afforded procedural fairness before a decision was made to terminate the relationship with him."

With respect to the question of whether Hengerer had to name all 500 or so occupants who had designated him as their farmer in the agreements they had signed, Russell, J. observed that it was not necessary to strictly comply with Rule 303(1)(a) of the Federal Rules of Court which would have required naming all affected parties and that given the exigencies on both sides, Federal Court Rule 3 allowed the Court to remedy this non-compliance [at para. 59].

3. What remedy?

Russell, J. held that Band Council should have the ultimate power to decide who should farm Reserve lands, but that Hengerer ought to have an opportunity to make representations before the decision was made [at para. 60]. Given the permits entered into with Band members, however, Band Council must have sufficient justification not to follow through with their obligations and the expectations thereunder.

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