Canada: Agricultural Law Netletter - Wednesday, February 21, 2018 Issue 390

HIGHLIGHTS

*

A Justice of the Ontario Superior Court of Justice has granted the Director appointed under the Ontario Milk Act, a health unit, and two Ontario municipalities several permanent injunctions which, among other things, restrain an unlicensed milk plant owned by a "worker" Cooperative and its directors from delivering and distributing unsterilized milk and milk products to members of another Cooperative (the "Second Cooperative") which owned the cows, leased the dairy operation and had entered into a management agreement with the "worker" Cooperative. The worker Cooperative acquired the dairy farm from Michael Schmidt, an outspoken advocate of the legalization of the sale of raw milk. Michael Schmidt's spouse was one of the directors of the worker Cooperative. Consumption of the raw milk products produced by the worker Cooperative was limited to the approximately 150 members of the Second Cooperative. The Defendants admitted that they were not licensed and that they were transporting and distributing unpasteurized and unsterilized raw milk products. The Court rejected their argument that the members of the Second Cooperative fell within the "family farm" exemption under the Milk Act and the Ontario Health Protection and Promotion Act, as the exemption was restricted to the members of traditional families who reside on a family farm. [Editor's note: This is the most recent of a long list of cases involving Michael Schmidt.The previous cases are reviewed in the Court's decision.]. (Downing v. Agri- Cultural Renewal Co-operative Inc. (c.o.b. Glencolton Farms), CALN/2018-006, [2018] O.J. No. 46, Ontario Superior Court of Justice)

NEW CASE LAW

Downing v. Agri-Cultural Renewal Co-operative Inc. (c.o.b. Glencolton Farms);

CALN/2018-006,

Full text: [2018] O.J. No. 46;

2018 ONSC 128,

Ontario Superior Court of Justice,

P. Sutherland J.,

January 5, 2018.

Milk Production -- Regulation of Milk Production -- Unlicensed Production of Raw Milk Products -- Injunctions.

Gavin Downing, the Director appointed under the Ontario Milk Act, R.S.O. 1990, c.M.12 (the "Director"), the Regional Municipality of York, the Simcoe Muskoka District Health Unit and the Regional Municipality of Peel (collectively the "Health Unit" and the "Municipalities") applied to the Ontario Superior Court of Justice for a permanent injunction against a "worker" Cooperative named the Agri-Cultural Renewal Co- operative Inc. (the "Agricultural Renewal Cooperative"), its directors Michael Schmidt, Elisa Vander Hout, Nikolaus Alexander Johannes Osthaus, and The Church of the Christian Community in Canada (collectively the "Respondents").

The Director sought an order pursuant to s. 22 of the Milk Act, R.S.O. 1990, c. M.12 (the "Milk Act") restraining the Agricultural Renewal Cooperative from operating a "plant" without a license. The Director also sought an order restraining the Respondents and the Agricultural Renewal Cooperative's employees from hindering or obstructing the inspection of the Agricultural Renewal Cooperative's books and documents by any field person or officer appointed by the Director.

The Health Unit sought a declaration that the Respondents have contravened s. 18 of the Health Protection and Promotion Act, R.S.O. 1990, c. H.7 (the "Health Protection Act") by offering for sale, selling, delivering or distributing unpasteurized or unsterilized milk in unpasteurized or unsterilized milk products or by counselling others to do so, or permitting the use of their land by others to do so.

The Municipalities sought a declaration that the Respondents had contravened s. 18 of the Health Protection Act by offering for sale, selling, delivering or distributing unpasteurized or unsterilized milk or counselling others to do so, or permitting the use of their lands to others to do so. The Municipalities also requested an order that the premises of the Church of the Christian Community in Canada (the "Church") be closed to any use in any way associated with or related to the offering for sale, selling, distribution or delivery of unpasteurized or unsterilized milk or milk products.

The Respondents, none of whom were represented by legal counsel, opposed these applications and presented 87 Affidavits from various individuals in support of their position.

The Respondent, Elisa Vander Hout was the spouse of Michael Schmidt ("Schmidt"), a dairy farmer with a long history of advocating the legalization of the sale of raw milk.

Schmidt founded Glencolton Farms which had been carrying on the sale, distribution and delivery of unpasteurized/unsterilized milk and milk products and raw milk until approximately 2009 when these operations were transferred to the Agricultural Renewal Cooperative.

Schmidt had a long history of Court proceedings, including 19 charges laid in 2006 for contravening the Milk Act and the Health Protection Act. In 2007 a restraining order was issued restraining him from offering for sale or distributing raw milk. In 2008 he was found in contempt for breaching this order. He was acquitted in 2010 of the 2006 charges however these acquittals were overturned on appeal in 2011. Schmidt's appeal to the Ontario Court of Appeal was dismissed in 2014. In 2013 Schmidt was found guilty of contempt in British Columbia for distributing raw milk for human consumption contrary to the terms of a 2010 order. In 2013 Schmidt was again found in contempt for violating a B.C. injunction. His appeal to the B.C. Court of Appeal was dismissed in 2015. His legal history is reviewed in detail at para. 11 to 35 of the Court's decision.

The Respondents Vander Hout, Markus Schmidt, and Osthaus are directors of the Agricultural Renewal Cooperative. These Respondents alleged that while the Agricultural Renewal Cooperative owned the farm, another Cooperative - Our Farm Our Food Cooperative Inc. (the "Our Farm Cooperative") owned the cows and all dairy and other equipment involved in the production of unpasteurized milk and raw milk. The Agricultural Renewal Cooperative and the other Respondents acknowledged that they were distributing and delivering unpasteurized/unsterilized milk and raw milk to members of Our Farm Cooperative every Tuesday from a parking lot on property owned and operated by the Church and at other locations within the Municipalities.

Title for the farm was transferred to the Agricultural Renewal Cooperative in 2007. Most of the 150 members of Agricultural Renewal Cooperative had been "cow share" members in Schmidt's previous operations. Each member paid $2,000.00 for non-voting shares in the Agricultural Renewal Cooperative together with $3.00 to $5.50 per litre for any milk they consumed. Shareholders in the Agricultural Renewal Cooperative purchased shares in order to gain access to raw milk produced at the farm.

The Our Farm Cooperative was incorporated in January of 2016. Members of this Cooperative were required to pay $2,000.00 for one membership share and 9 preference shares and to pay a $1,000.00 non-interest bearing loan. There were about 150 members of the Our Farm Cooperative, most of whom were also shareholders of Agricultural Renewal Cooperative, which still owned the farm. The Our Farm Cooperative members purchased shares in order to gain access to raw milk and raw milk products.

On March 1, 2016 the Agricultural Renewal Cooperative sold all of the cows and diary equipment on the farm to Our Farm Cooperative. By a lease agreement dated March 1, 2016 the Our Farm Cooperative leased from the Agricultural Renewal Cooperative certain areas of the farm involved in the production of milk and milk products. Pursuant to a concurrent management agreement dated March 1, 2016, Our Farm Cooperative retained the Agricultural Renewal Cooperative to care for the cows and manage the dairy operations.

The Director obtained a search warrant on October 2, 2015 and attended to the farm to execute a search warrant. The Director's investigators were unable to execute the search warrant due to the conduct of Michael Schmidt. He was charged and convicted with obstructing a peace officer in October of 2017. This conviction has been appealed.

The questions before the Court were:

  1. Whether the actions of any of the Respondents violate the Milk Act.
  2. Whether the actions of any of the Respondents violate the Health Protection Act.
  3. Whether the "family farm" exemption applies.
  4. If the actions of any of the Respondents violate the Milk Act or the Health Protection Act, and if the family farm exemption does not apply, should a permanent injunction be granted?

Decision: Sutherland J. concluded [at para. 48] that the Respondents were all in violation of the Milk Act and the Health Protection Act; that the family farm exemption does not apply, and that an injunction should be granted. Sutherland J. [at para. 128] set out the terms of the injunction which, among other things, restrained the Respondents from operating a plant without a license in contravention of s. 15(1) of the Milk Act; restrained the Respondents from hindering or obstructing the inspection of books, records and documents by the Director's employees and directed them to furnish copies of the same; declared that the Respondents have contravened s. 18 of the Health Protection Act; restrained the Respondents from selling, offering for sale, delivering or distributing milk or cream products processed or derived from milk that has not been pasteurized or sterilized in a plant that has not been licensed under the Milk Act that is not exempt by the "family farm exemption" or by interfering with any performance by the Municipalities or employees of their mandated powers.

Sutherland J. considered the following issues:

1 Whether any of the Respondents were in violation of the Milk Act:

Sutherland J. observed [at para. 53] that s. 22 of the Milk Act gives a Superior Court Justice the discretion to enjoin any plant operator from the commission of any offence under the Milk Act or the Regulations thereunder; that the Director alleged that the Respondents were operating a plant in which milk and milk products are processed, and that they were transporting and selling raw milk and milk products without a license in violation of s. 15(1) of the Milk Act [at para. 50 to 57].

Sutherland J. also observed that the Respondents took the position that the shareholders of Our Farm Cooperative produced the milk; were the only ones who received the milk and milk products; were the only ones who consumed the milk, and that there was no provision in the Milk Act which prevents private owners of a dairy farm to collect raw milk for their own purposes and to consume it.

The Respondents relied on the decision of R. v. Schmidt, [2011] O.J. No. 4272, 2011 ONCJ 482 and the decision of the Ontario Court of Appeal in R. v. Schmidt, [2014] O.J. No. 1074, 2014 ONCA 188. Sutherland J. considered these two decisions in detail at para. 64 to 76 and concluded as follows [at para. 71 to 76]:

[71] Section 1 of the Milk Act defines the following: "milk" means milk from cows or goats.

"plant" means a cream transfer station, a milk transfer station or premises in which milk or cream or milk products are processed.

"processing" means heating, pasteurizing, evaporating, drying, churning, freezing, packaging, separating into component parts, combining with other substances by any process or otherwise treating milk or cream or milk products in the manufacture or preparation of milk products or fluid milk products.

[72] From the evidence filed on this application, it does appear to this court that the actions of the respondents and OFOF contravene sections 14(1) and 15(1) of the Milk Act. The respondents and OFOF have constructed a building intended for use as a plant without a permit and are operating that plant without a licence from the Director.

[73] The evidence, which is not contradicted by the respondents or OFOF, is that there is equipment in the building on Glencolton Farms used for the heating, churning, packing and separating into component parts cow's milk and products of cow's milk. There is also no dispute that raw milk products, cheese and other similar products, are manufactured at Glencolton Farms.

[74] The respondents and OFOF contend that the operation is not a commercial operation and thus, does not contravene the Milk Act. I do not accept this submission. Whether the operation is for commercial purposes that is the making of a profit, is not material. It is the processing of cows' or goats' milk where milk or milk products are manufactured that is material. The evidence provided does clearly show that milk and milk products are being processed to be delivered to the shareholders of OFOF and their respective families.

[75] It therefore seems apparent to this court that the respondents and OFOF are processing milk and milk products in a building without the necessary approvals and licence from the Director to do so. This, prima facie, are actions that are offences that are committed against the Milk Act.

[76] Accordingly, I find that the actions of the respondents and OFOF are in contravention of the Milk Act, namely sections 14(1) and 15(1), subject to the "family farm exemption" applying.

2. Whether any of the Respondents are in violation of the Health Protection Act:

Sutherland J. observed [at para. 77 to 81] that the Health Protection Act clearly prevents the selling, offering for sale, delivery or distribution of raw or unpasteurized milk or milk products, and that the Respondents did not dispute that they were in fact delivering and distributing these products to the shareholders of the Our Farm Cooperative, but that they did dispute that they were selling raw milk and their products [at para. 82].

Sutherland J. concluded that the Respondents and the Our Farm Cooperative was "at a minimum, distributing raw milk and their products to the shareholders of the Our FarmCooperative within the ordinary meaning of "distribute" and that while the Court sympathized with their logical and common sense submissions with respect to the perceived cultural, health and religious reasons with respect to why the Our Farm Cooperative shareholders wished to consume unpasteurized raw milk and milk products, the evidence nevertheless showed that the Respondents and the Our Farm Cooperative was delivering and distributing unpasteurized and unsterilized milk products, and that this constituted a violation of the Health Protection Act [at para. 91]. Sutherland J. noted that the question of whether the Milk Act and the Health Protection Act were violated a constitutionally protected right of freedom was not before the Court [at para. 90].

3. Does the "family farm exemption" apply:

Sutherland J. noted that this argument seemed reasonable at first blush, stating at para. 94:

[94] At first blush, this argument seems reasonable and seems to adhere to the statements of Tetley J. and the Ontario Court of Appeal. There is a transfer of ownership. The shareholders through the Board and shareholders meetings have an element of control over the cows and process. There is a Management Agreement between OFOF and ARC on the caring and maintenance of the herd. One has to apply to be a shareholder in OFOF. The applications are screened and approval is required by the Board. Membership is restricted and thus, is not open to the public as a whole, as with a membership in a "big-box" store. Membership entitles one to shares which translates into ownership of the assets of the company, OFOF. Actual money exchanged hands for the purchase of the cows and milk-related equipment from OFOF to ARC. One of the shareholders, Van Holt does reside on Glencolton Farms.

However Sutherland J. concluded that the Respondents' activities did not fall within this exemption stating, at para. 96 to 98:

[96] In taking a common sense approach to the meaning of "family farm", I do not accept the submission of the respondents and OFOF that the shareholders in this case fall within the "family farm exemption". Family is defined in the Oxford dictionary as: "a group of people related by blood, marriage or adoption". There is no application process to be a family member. One does not complete a form which is then approved by others. A family is a group of people related by blood, adoption or by marriage to someone who is related by blood or adoption. The owning of shareholdings in a company is not in itself a family.

[97] Having said this, I can envisage a family owned company, where family are the sole shareholders that own the farm operation, and family member(s) reside on the farm may fall within the "family farm exemption". But that is not the facts in this case. The shareholders of OFOF are not related by blood, marriage or adoption. The shareholders are strangers that have a common interest, being the consumption of raw milk and its products. That interest does not, on its own, I find, qualify as a family to fall within the gambit of the "family farm exemption".

[98] Historically, the family farm was that, a farm inhabited and operated, sometimes over generations, by farmers related to each other by either blood, marriage or adoption. The product and operation of the farm may have changed over the years by the farm stayed inhabited and operated by family members, either by blood, marriage or adoption. To me, the meaning and intention of the "family farm exemption" is that of farmers and their family members who consume unpasteurized or unsterilized milk, among themselves, which is produced from cows residing on the farm property that are owned or leased by the family farm, be it an incorporated entity or not.

Sutherland J. also observed that the Milk Act and the Health Protection Act both have components of controlling and regulating milk for the purposes of public health and that "...As a public welfare legislation, a broad and purposeful statutory interpretation is mandated that facilitates the intention and purpose of the legislation".

4. Should a permanent injunction be granted:

Sutherland J. reviewed the provisions of s. 22 of the Milk Act, and s. 102(2) of the Health Protection Act [at para. 104 and 105] and the legal principles involving statutory injunctions [at para. 108 to 109], and concluded that the Court's right to refuse to grant an injunction once a breach of a statute has been established can only be exercised in exceptional circumstances, stating, at para. 113:

[113] Once a breach of the statute has been established by the evidence provided, the court can only exercise its discretion to not grant the injunction in "exceptional circumstances" which could include: the offending party has ceased the activity; the injunction is moot and would serve no purpose; the offending party has provided clear and unequivocal evidence that the unlawful conduct will cease; whether there is a right that pre-existed the enactment that was breached; there is uncertainty that the offending party is flouting the law or where the conduct is not what the enactment was intended to prevent.

and at para. 118:

[118] Notwithstanding, the demand for raw milk and its products, the actions of the respondents and OFOF to distribute to non-family members raw milk and its products outside the confines of the family farm violates the Milk Act and the HPPA. Thus, the conclusion is evident. The actions of the respondents and OFOF are in contravention and are in repeated beach of the two statutes, the Milk Act and the HPPA. A permanent injunctive order, as requested by the Director and the Municipalities, is warranted.

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