Illegal milk sales may end up costing B.C. farmer $200K after court decision

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A B.C. dairy farmer who illegally sold unpasteurized milk may see his fines for doing so increase to more than $200,000 after a recent court decision.

The B.C. Supreme Court – acting in its capacity as the appeal court for decisions by tribunals and industry regulatory bodies – partially upheld an appeal by the British Columbia Milk Marketing Board in the case of Adrie Stuyt and his Agassiz-based business Hol-Amer Farms. 

In the decision issued last week, Justice Anita Chan concluded that the British Columbia Farm Industry Review Board erred in its interpretation of the law and the facts when it struck down a $195,184.77 charge the milk board imposed on Stuyt for his illegal sales. 

Chan upheld another part of the BCFIRB's decision, in which that panel declined to cancel Stuyt's licence to sell milk.

ILLEGAL MILK SALES INVESTIGATION

The complicated web of decisions and appeals began with a milk board investigation of Stuyt and Hol-Amer Farms.

According to Chan's decision, the board started investigating the business in February 2021 to determine if milk was being sold illegally.

"In British Columbia, the production, marketing and sale of milk and milk products is regulated," the decision reads. "Milk can only be sold through the milk board and must be pasteurized."

The milk board conducted surveillance at Stuyt's farm and saw a driver doing pickups, then driving to a warehouse in Surrey, according to the decision.

"A search warrant was executed at the warehouse and the pickup vehicle where containers of milk were found," Chan wrote. "The milk board demanded that Mr. Stuyt provide a sworn statement as to whether he had sold milk other than through the milk board. Mr. Stuyt admitted he had been selling and shipping from his farm unpasteurized milk directly to a person named 'Inder (Andy) Grewal' for a period of approximately seven years."

The decision indicates that Stuyt told investigators he sold the milk – all of which was unpasteurized – to earn extra cash.

THE MILK BOARD AND BCFIRB DECISIONS

Selling unpasteurized milk is illegal in B.C., as is selling milk outside the provincial supply management system, which the milk board administers.

At a hearing in August 2021, the milk board ordered Stuyt to pay $195,184.77 for "the loss to the milk producer pool" caused by his years of illegal sales, Chan's decision notes.

He was also ordered to pay $33,266.25 for the cost of the milk board investigation, and had some conditions – which are not enumerated in the court decision – imposed on his licence.

Stuyt appealed the milk board's decision to the BCFIRB, where he was successful in getting the $195,184.77 charge eliminated, though the $33,266.25 for the investigation costs was upheld, as were the conditions on his licence.

In place of the hefty charge for loss to the milk producer pool, the BCFIRB imposed a $3,000 charge on Stuyt, representing the milk board's "lost levies for milk marketed outside of the regulated system."

Chan's decision in B.C. Supreme Court dealt with the milk board's appeal of the BCFIRB ruling. The board asked the court to find the BCFIRB's decision patently unreasonable and order a new hearing.

BCFIRB 'FUNDAMENTALLY MISUNDERSTOOD' CASE

Chan declined to toss out the BCFIRB's decision entirely, but she did find multiple issues with it.

First, the judge found that the BCFIRB had incorrectly interpreted the law that enables the milk board to seek compensation in cases such as this.

In imposing a $3,000 fine in place of the $195,184.77, the panel concluded that the milk board's authority to recover losses applied only to its own losses, and not losses to other parties, such as other producers.

Thus, the BCFIRB ruled that $3,000 – representing the amount the milk board would have collected from Stuyt in fees if the milk had been sold through the proper system – was appropriate.

Chan disagreed, writing that the panel had failed to discuss two pieces of regulation in its reasoning, both of which suggest that the milk board has broader powers for recovering losses than the BCFIRB ruling considered.

"The BCFIRB decision does not explain how it arrived at the conclusion that only losses incurred by the milk board can be the subject of a levy or a charge," Chan wrote. "There is no tenable line of reasoning evident in the BCFIRB decision to support this interpretation of the milk board’s powers."

Further, the judge concluded that the BCFIRB panel had erred in its interpretation of the facts leading to the large fine.

While the panel determined that the milk board had "overstated its loss by including the value of the milk which, if shipped, would have been payable to the producer," Chan notes in her decision that payments for milk in B.C. are more complicated than that.

If the milk had been shipped, rather than sold illegally, the proceeds from its sale would not have gone back to Stuyt directly, according to Chan. Rather, they would have gone to the "milk producer pool" and been paid out according to the milk board's equalization system.

The judge wrote that the BCFIRB "fundamentally misunderstood" the nature of revenue sharing in the provincial dairy industry.

"When Mr. Stuyt sold milk directly to his customer, and not through the milk board as required by the legislative scheme, the revenue from those direct milk sales was not placed in the producer pool," the decision reads.

"Thus, the dairy producers in the producer pool did not get to share in those revenues – Mr. Stuyt got to keep all the revenue for himself. The producers in the producer pool suffered losses, as they did not receive their proportionate share in accordance with the equalization principles."

For these reasons, Chan quashed the section of the BCFIRB's ruling that eliminated the $195,184.77 charge, remitting the matter back to the panel for reconsideration.

Chan declined to quash other aspects of the BCFIRB ruling, including its decision not to cancel Stuyt's dairy licence.