Executive Summary: Key Legal and Evidentiary Issues

• Alberta Milk’s authority to impose a 2-day credit-day restriction (CDR) during COVID-19 was central to the dispute and upheld as reasonable under its statutory powers.

• Houweling Farms Ltd (HFL) alleged the CDR was discriminatory, disproportionately affecting producers reliant on leased quota credits, but this claim was rejected.

• The court found the COVID Decision was not retroactive since milk production is reconciled monthly and applied to future deliveries.

• Underproduction quota credits were held not to constitute “quota” and could be regulated separately, validating Alberta Milk’s restriction.

• The CDR was classified as an administrative order or directive, not merely policy, meaning Alberta Milk was not legally required to consult producers beforehand.

• The judicial review concluded the Appeal Tribunal addressed all key issues and reached reasonable findings, resulting in dismissal of HFL’s application.

Background and regulatory framework

Houweling Farms Ltd (HFL), a licensed dairy producer operating in Alberta, challenged Alberta Milk’s April 2020 response to the COVID-19 pandemic through a judicial review application. Alberta Milk, a statutory marketing board under Alberta’s dairy supply management system, issued the “COVID Decision” that imposed (i) a 3% quota reduction and (ii) a restriction allowing producers to use only two underproduction quota credit days per month (2-day CDR), effective retroactively to April 1, 2020.

The policy was implemented to address an urgent surplus of milk after pandemic-related closures caused a sharp decline in demand. Alberta Milk, as a member of the Western Milk Pool (WMP), was obligated to reduce its production share by approximately 3.2 million litres for April 2020. The Board determined that imposing the quota cut and restricting the use of credit days would achieve the necessary reduction efficiently. No prior notice was provided to producers beyond a general warning on April 3, 2020, that Alberta Milk was reviewing options to manage the oversupply.

Underproduction quota credits, which allow a producer to temporarily exceed their daily quota, had previously been unrestricted in monthly usage. HFL had heavily invested in such credits to expand production without purchasing permanent quota, relying on this flexibility. The COVID Decision thus significantly constrained its ability to ship milk, causing it to reduce production by 35% and reduce its herd by 44%.

Review and appeal process

HFL applied for a review of the COVID Decision, alleging it was discriminatory, retroactive, unauthorized, and made in bad faith. Alberta Milk’s Board held an oral hearing and issued its Review Decision in August 2020, finding that the Board had statutory authority to regulate quota credits, the decision was not retroactive, and the measures taken were necessary and reasonable under the circumstances.

HFL appealed to the Marketing of Agricultural Products Appeal Tribunal, asserting among other things that the CDR was discriminatory and unfair, particularly to producers dependent on quota credits. After a seven-day hearing, the Appeal Tribunal confirmed the Review Decision in February 2022. It ruled that:

• Alberta Milk had the power to issue the CDR as an administrative order or directive.

• The restriction was not retroactive as milk is reconciled monthly and the decision applied to future deliveries.

• Underproduction quota credits were not quota and could be separately regulated.

• The Alberta Milk Board acted in good faith, and no evidence showed any targeting of HFL or bad faith.

The Tribunal also found that although the decision may have affected producers differently, this was not discriminatory within the meaning of the applicable legal framework. It accepted that the measures were taken quickly under pandemic conditions in the industry’s broader interest.

Judicial review and court ruling

HFL filed for judicial review, arguing that the Appeal Tribunal failed to meaningfully address its core discrimination claim and improperly deferred to Alberta Milk’s decisions. The Court of King’s Bench of Alberta, however, found the Appeal Tribunal’s reasoning to be reasonable and consistent with the administrative law framework established in Canada (Minister of Citizenship and Immigration) v Vavilov.

The Court held that:

• The Appeal Tribunal appropriately applied a reasonableness standard in its internal review of Alberta Milk’s decision.

• Alberta Milk’s decision was not retroactive; it applied to deliveries going forward and fit within the usual monthly reconciliation process.

• Underproduction quota credits, while tradable, were a one-time right and not equivalent to quota, which justified different regulatory treatment.

• The CDR was an administrative order made in response to an emergency, and no consultation obligation existed in law.

• HFL’s discrimination claim was considered and reasonably dismissed based on evidence that the Board had no intent to target specific producers and that various Board members were also negatively impacted.

Ultimately, the Court concluded that the Tribunal's decision “bears the hallmarks of reasonableness—justification, transparency and intelligibility” and confirmed that HFL’s discrimination claim did not meet the threshold for judicial interference.

Outcome

The application for judicial review was dismissed. The Court found no error in the Appeal Tribunal’s treatment of HFL’s discrimination claim or in its upholding of Alberta Milk’s authority. Costs were awarded to Alberta Milk, and no costs were awarded for or against the Tribunal (no amount specified). The COVID Decision remained valid and enforceable.