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Agriculture - Farm Income Protection Act (FIPA). Flying E Ranche Ltd. v. Canada (Agriculture)
In Flying E Ranche Ltd. v. Canada (Agriculture) (Ont CA, 2023) the Court of Appeal illustrates Canada's legal experience with Bovine Spongiform Encephalopathy ('BSE'), which involved the Farm Income Protection Act:Background
[3] This was a lengthy trial with a number of witnesses and a large number of documents. The background to the claim can be conveniently summarized from the extensive reasons of the trial judge.
[4] In 1986, animal health experts in the United Kingdom ("U.K.") identified BSE as a novel neurological disease that was afflicting cattle in that country. The disease was invariably fatal within weeks or a few months of symptoms emerging in animals.
[5] The incidence of BSE grew quickly in the U.K. By 1988, when it was formally brought to the attention of L'Office International des Epizooties, now known as the World Animal Health Organization, over 2,000 cattle in the U.K. had been diagnosed with BSE. Although investigation of the cause of BSE was at an early stage, it was suspected that it may have originated from the scrapie agent in sheep which had been transmitted to cattle through feedstuffs containing ruminant-derived protein that were fed to calves beginning in about 1981 or 1982. As a result, in 1988, the U.K. prohibited the inclusion of ruminant-derived protein in feed for ruminant animals such as cattle.
[6] BSE affects the central nervous system of cattle. It has a lengthy incubation period. Cattle afflicted with BSE become symptomatic, on average, at about five years of age. The number of cattle diagnosed with BSE continued to grow in the U.K., peaking in 1992 when over 37,000 cases were confirmed. Animal health experts in the U.K. and elsewhere conducted extensive research into the causes of BSE and its transmissibility. By 1990 it was suspected that the rapid increase in cases was due to the slaughtering and rendering of infected but non-symptomatic, or subclinical cattle whose protein was also included in feed supplements provided to calves prior to the implementation of the U.K. ruminant-to-ruminant feed ban in 1988.
[7] Like other countries, Canada took steps to prevent BSE from entering its cattle population. In 1989, the federal Department of Agriculture imposed restrictions on cattle being imported from the U.K., and, in 1990, Canada banned all further imports of cattle and other ruminants from the U.K. and the Republic of Ireland. BSE was made a reportable disease. Canada identified that approximately 182 cattle had been imported from the U.K. and Ireland during the 1980s, and placed them in a Monitoring Program. Later, in 1994, following confirmation of BSE in one of the imported cattle, Canada ordered that the imported animals still alive and present in Canada – approximately 67 – should be returned to the U.K. or be destroyed.
[8] Unlike Britain, but like the United States, Canada did not prohibit the inclusion of ruminant protein in feedstuffs for cattle until 1997, following a recommendation from the World Health Organization made in 1996. Of the approximately 182 cattle imported into Canada between 1982 and 1990, it was determined in 1994 that approximately 68 had been slaughtered for consumption and rendering. Aside from the 67 still alive in Canada which were ordered destroyed, the balance had been exported to the United States or had died and been destroyed.
[9] When cattle and other ruminants such as sheep are slaughtered, portions of the animal not fit for human consumption, such as the brain, spinal cord, certain organs and other elements of the central nervous system, are sent to rendering plants where they are heated and ground into meat and bone meal, which is then used in a number of products, including fertilizer and animal feedstuffs. Consequently, prior to 1994, protein from the approximately 68 U.K. cattle imported between 1982 and 1990 that had been slaughtered in Canada entered the animal feed chain, creating a risk of transmission of BSE to Canadian cattle born prior to the ruminant-to-ruminant feed ban implemented in Canada in 1997 (the "Feed Ban").
[10] No Canadian animal was diagnosed with BSE in the 1990s. Indeed, it seemed that Canada had been successful in its efforts to keep BSE from entering the Canadian cattle herd following the import ban in 1990. But in May 2003, almost a decade after the last of the U.K. imports was destroyed, a cow which had died earlier that year on a farm in Saskatchewan was found to have had BSE. It was later determined that this cow was fed a "calf-starter" feed containing ruminant protein when it was a calf in 1997, just prior to the enactment of the Feed Ban, and that this was the likely source of BSE in the cow.
[11] After the May 2003 diagnosis, a small number of other Canadian cattle were diagnosed with BSE. But it is the consequences of the confirmation of BSE in a Canadian cow in May 2003 that are relevant to this action. The United States, which provided over 50 percent of the market for Canadian cattle and cattle products, immediately closed the border to Canadian cattle and beef products. Many other countries followed. Although over time the borders gradually reopened and trade resumed, the economic impact on Canadian cattle producers and related industries was enormous. The total cost of the trade embargo between 2003 and 2008 has been estimated to exceed $8 billion.
[12] In 1991, Parliament passed the Farm Income Protection Act, S.C. 1991, c. 22. The legislation allowed for the implementation of a new series of generally available safety-net programs in collaboration with the provinces. These included revenue and crop insurance, as well as net income stabilization programs. Section 12 of FIPA provided specific legislative authority for special measures by which the Minister of Agriculture may offer special assistance when producers face unforeseen circumstances.
[13] FIPA also authorized the establishment of the Net Income Stabilization Accounts Program ("NISA") which was set up in the early 1990s. Two funds were created. Fund 1 consisted of the producer's deposits. Fund 2 contained matching funds from the federal and provincial governments up to three percent of eligible net sales of the producer. Farmers could withdraw funds, if they wished, when their annual net income was below the preceding five-year average, or if household income was below $35,000, subject to prescribed limits. Funds withdrawn from Fund 1 were not subject to tax, as the deposits were made in after-tax dollars. However, withdrawals from Fund 2 were taxable, although they were treated as investment income, not farm income. The NISA program was discontinued at the end of 2002.
[14] In 2003, the Canadian Agricultural Industry Support Program ("CAIS") was established. Funded by the federal government and the provinces, its objective was to help protect producers against income losses, regardless of the cause. Although initially it required a deposit by farmers, that was replaced by a small fee to enroll in the program. In this sense it differed from NISA which had required deposits by farmers in order to qualify for matching funds. Under CAIS, if a producer had a loss, or margin decline, of 15 percent or less, the government would pay for half the loss. For any loss between 15 percent and 30 percent, the government would pay 70 percent of the loss, and for losses above 30 percent, the government would cover 80 percent of the loss. As a whole-farm program, payments were based solely on income and did not relate to a particular commodity or volume of production. The AgriStability program replaced CAIS in 2007.
[15] In addition to these programs, Canada implemented a number of direct programs to address the impacts of BSE on cattle producers and cattle production (“the BSE-specific programs”). These included the BSE Recovery Program Phases 1, 2, 3 and 4; Transitional Industry Support Programs ("TISP"); Farm Income Payment Programs (“FIP”); and the Milk Price Increase.
[16] The BSE Recovery Program was intended to encourage the Canadian slaughter of existing cattle for consumption in Canada by providing cattle producers with a price deficiency payment for cattle owned prior to May 20, 2003 and sold for slaughter in Canada between June 1, 2003 and August 31, 2003.[1] Under Phase 1 of this program, the federal government paid out more than $266 million to cattle producers from the Consolidated Revenue Fund. The provinces contributed more than $177 million.
[17] Phase 2 of the BSE Recovery Program was designed to delay the marketing of older animals that would ordinarily have been exported and/or sent for slaughter in the fall of 2003 until there was sufficient slaughter capacity to process these animals in Canada. The federal government paid out more than $104 million to cattle producers from the Consolidated Revenue Fund under this Phase.
[18] Phase 3 also addressed the need to delay the slaughter of animals until sufficient slaughter capacity was created. The federal government paid out more than $25 million from the Consolidated Revenue Fund under one program under this Phase, and more than $112 million under another program under this Phase.
[19] Only the province of Quebec participated in Phase 4. The objective of this program was to ensure that older animals could be marketed and disposed of properly and herds could be rejuvenated. Payments were only made to producers in Quebec. The federal government paid $9 million under this Phase.
[20] TISP was created in 2003 when the federal government identified a need for interim support programs to get cash to cattle farmers. It was also intended to help producers keep their herds together and to prevent cows from being culled and put into waste dumps. The TISP-Direct Program was funded solely by the federal government and involved a direct payment to cattle producers based on the number of cattle owned by them as of December 23, 2003. The federal government made payments under this program to cattle producers for cattle across Canada in excess of $579 million.
[21] FIP was essentially a continuation of the TISP programs for the year 2005, to assist producers during this period of historically low incomes. The federal government made payments under this program to cattle producers for cattle across Canada in excess of $333 million.
[22] The Milk Price Increase was administered in 2005 and 2006. To offset a price decrease resulting from the fall in price of culled cattle that was affecting dairy farmers, the Canadian Dairy Commission raised the price of industrial milk by $1.66 per hectolitre for 12 months. Dairy producers were paid more than $96 million under this program.
[23] Canada also established other BSE-specific programs that provided benefits to cattle producers. They are not set out here as the respondent was not relying on these programs in support of its s. 9 argument.
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