Canadian Forestry Law Commentary

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FORESTRY LAW COMMENTARY

DLA PIPER (CANADA) LLP FORESTRY LAW COMMENTARY | 3

Administrative Remedies in the BC Forest Industry: Where Are We 20 Years After the Forest Practices Code?By Jeff Waatainen and Garry Mancell, R .P.F.

The Ministry of Forests, Range and Natural Resource Operations (the “Ministry”) enforces numerous environmental and financial obligations imposed upon the holders of Crown forestry tenures in BC. With the enactment of the former

Forest Practices Code of British Columbia Act (the “Code”) some 20 years ago, the Ministry began to acquire what has become a surprising array of administrative remedies to enforce compliance with these obligations. These remedies enable the Ministry to pursue compliance and enforcement action against those in the BC forest industry without the need to first resort to the courts – what was then a novel concept.

While the possibility of a traditional prosecution or civil law suit before a judge still remains, it has become more theoretical than real. The Ministry no longer needs to persuade the Ministry of Attorney General that evidence exists to establish beyond a reasonable doubt that someone committed an environmental offence, or that an alleged contravention is otherwise of sufficient importance to warrant a prosecution. The Ministry can simply act on its own and exercise any of a number of administrative remedies. And once the Ministry does act, the onus is placed on the person subject to the Ministry’s authority to take positive steps to ensure the Ministry has exercised its authority appropriately.

Since the Code was largely repealed in 2004, forest practices in BC are now primarily regulated under the Forest and Range Practices Act (“FRPA”) and, to a lesser extent, under the Wildfire Act. A relatively unique feature of this legislation (as well as the Code before it) compared with more traditional environmental legislation (such as the federal Fisheries Act), is the authority of the Ministry to act administratively, on its own, in response to perceived contraventions of environmental standards. On the 20th anniversary of the Code’s enactment, in this bulletin we review notable administrative remedies – both statutory and financial – available to the Ministry to enforce the laws in BC forests.

STATUTORY REMEDIES FOR THE ENFORCEMENT OF FOREST PRACTICES

Administrative Penalties

The “Crown” jewel in the Ministry’s collection of administrative remedies is the power to make findings of legislative “contraventions,” and impose “administrative penalties” on account of a contravention.

The defining characteristic of this remedy is the Ministry’s ability to impose a financial penalty “administratively” under its own authority without the burden of first justifying a case in terms of evidence and law before an independent tribunal, such as a court. The Ministry merely needs to satisfy itself that someone contravened the legislation, and that a penalty is warranted on account of the contravention. If the person subject to the administrative penalty objects, then it is up to that person to pursue an appeal to the Forest Appeals Commission (the “Commission”) or, in limited circumstances, to the courts.

Administrative penalties are efficient from the Ministry’s perspective:

■ The Ministry is able to impose potentially significant monetary penalties for perceived noncompliance without the involvement of Crown counsel or the courts.

RECOGNITION

Our practice is recognized by the Canadian Legal Lexpert Directory since 2007 as “Consistently Recommended” in Forestry Law in Vancouver.

4 | DLA PIPER (CANADA) LLP FORESTRY LAW COMMENTARY

■ If an administrative penalty is appealed to the Commission, the Ministry only has to prove its case on the civil standard of a “balance of probabilities” (more likely than not), rather than on the much more onerous standard of “proof beyond a reasonable doubt” that would generally apply to the prosecution of an offence in the courts.

■ Appeals are costly, and the Commission’s policy is not to award costs to a successful appellant other than in the most rare of circumstances. The effect of this policy is to discourage appeals and, thereby, limit independent scrutiny of the Ministry’s administrative penalty determinations.

Indeed, the use of administrative penalties is so efficient that traditional prosecutions of offences for contraventions of BC’s forest practices legislation are now extremely rare.

STOP WORK AND REMEDIATION ORDERS

If the Ministry determines that a person has contravened either FRPA or the Wildfire Act, it can order that person to undertake any work reasonably necessary to remediate the contravention, and to do so by a specific date. This is the equivalent of a mandatory injunction in the civil law – an order of a court that requires someone to take positive action to do something (rather than simply refrain from doing something, as is the case with a standard injunction). The difference is that the Ministry cannot on its own, without the assistance of the courts, directly compel a person subject to a remediation order to comply with it in the same way a court can compel compliance with an injunction through its ability to punish for contempt of court. That said, if a person subject to a remediation order does not perform the work as contemplated in the order, the Ministry can perform the work itself, and then bill the person for the Ministry’s costs and realise on any security the Ministry holds in connection with the forest tenure at issue (or otherwise use financial remedies discussed fur ther below to recover its costs).

The difficulty with a remediation order from the Ministry’s perspective is that, like most other orders the Ministry may issue under FRPA, it is stayed until the person subject to the order has exhausted all rights of appeal unless the Minister specifically determines that a stay is not in the public interest.

Under FRPA, the Ministry may order a person to stop any activity if the Ministry has “reasonable grounds” to believe the activity is in contravention of BC’s forestry legislation. In other words, the Ministry does not have to make a determination of contravention as is the case with a remediation order; it merely has to have reasonable grounds to believe that there is a contravention. Unlike most other orders, a stop work order is not stayed pending appeal, and remains in effect until the Ministry, itself, determines there were insufficient grounds to issue the order or that the order is no longer required or appropriate, or the order is successfully reviewed or appealed. As with remediation orders, the Ministry can only compel compliance with a stop work order through the courts.

FOREST ACT REMEDIES

The Forest Act also makes certain tools available to the Ministry to enforce standards of forest practices. Specifically, if a person fails to comply with FRPA or the Wildfire Act then,

■ under section 81 of the Forest Act, the Ministry may refuse to issue a cutting permit to that person, or reject an application from that person for another forest tenure or other permit, and

■ under section 76 of the Forest Act, the Ministry may suspend a person’s rights under its forest tenure and, ultimately, cancel that person’s forest tenure under section 7.

Finally, under section 70 of the Forest Act, the Ministry’s Chief Forester is authorised to reduce the allowable annual cut of a forest tenure if:

■ its holder failed to establish a free growing stand as required under FRPA, or

■ caused or allowed soil disturbance to occur in excess of that allowed in an operational plan.

In either case, the amount of the reduction may equal the volume of timber the Chief Forester determines was on the affected area.

VIOLATION TICKETS

Though not a statutory remedy under BC’s forestry legislation, forest officers with the Ministry are authorised to issue “violation tickets” under the Offence Act for noncompliance with BC’s forestry legislation. A familiar example of a violation ticket is a “speeding ticket”. A speeding ticket is simply a violation ticket issued for noncompliance with the Motor Vehicle Act. Like a speeding ticket, once a violation ticket is issued the onus is on the person who receives the ticket to dispute it in provincial court. If the person does not file a notice of dispute within the requisite time period (30 days), then the person is presumed to have plead guilty to the offence.

Violation tickets are not uncommon in the forest industry, and they are sometimes not treated as seriously as other statutory remedies available to the Ministry. They typically involve a relatively trivial fine and, unlike the process associated with other statutory remedies, there is little, if any, follow-up from the Ministry once the forest officer issues the ticket. The notice of dispute period may simply lapse without a second thought. The problem with ignoring a violation ticket is that it will form part of recipient’s compliance and enforcement record with the Ministry. If the Ministry subsequently makes a finding of contravention against a person in order to assess an administrative penalty (as discussed earlier), one significant factor the Ministry will look at to determine the amount of the penalty is whether there are “previous contraventions of a similar nature”. For the purposes of administrative penalties, a violation ticket for a similar contravention is a “contravention of a similar nature”. So while the initial violation ticket fine is relatively trivial, it


may result in a larger administrative penalty assessment down the road for a subsequent contravention of a similar nature.

FINANCIAL REMEDIES

While the use of administrative remedies in the BC forest industry was pioneered in the context of forest practices enforcement, their use over the past decade has become a central component of the Ministry’s authority to asser t the Crown’s financial interest in the public’s forest resources.

THIRD PARTY REMEDIES

Before we consider the “new”, we should review the “old”. The Ministry has long had the lawful right to pursue third parties for monies another person owes to the Crown. These rights can work together with some of the more recently developed remedies discussed below to produce potentially unanticipated problems for third parties.

Section 131 of the Forest Act provides that any party who “acquires or deals in timber on which” stumpage is outstanding, must pay the outstanding stumpage to government. The courts have interpreted the words “deals in” to apply anyone who exercises a “measure of control” over the progress of the felled log from the stump to the point of manufacture. Clearly this would capture a purchaser of timber, though the courts have also applied section 131 broadly enough to capture log brokers. This is not to say that all log brokerage arrangements are subject to section 131, but the courts will look at the details of the specific arrangement to determine if the broker (or other third party) exercised the requisite “measure of control”.

LIEN RIGHTS

Section 130 of the Forest Act creates a lien in favour of government on the forest products and other personal property of any person who, essentially, owes money to government, whether on account of stumpage, or other financial liabilities that may arise under the Forest Act, FRPA, or the Wildfire Act. A section 130 lien would also apply to any third party who became liable for stumpage under section 131 of the Forest Act. Section 130 also allows government to file a “certificate” with a court registry in relation to any such lien. The certificate, effectively, becomes a judgement of the court, and government is then entitled to use the court’s processes to collect the amount claimed in the lien as though the certificate were a court order, and without the need to go to trial.

SUSPENSION OF RIGHTS/WITHHOLDING OF APPROVALS

As it can with the enforcement of forest practices, the Ministry can withhold various approvals, permits and authorisations if an applicant has outstanding financial liabilities owed to the Crown. If government claims that stumpage remains outstanding from a licensee, or from any person “not at arm’s length” from that licensee then, under section 81 of the Forest Act, government may

refuse to issue a forest tenure, road permit, cutting permit or a scale site authorization to the licensee. Effectively, this allows government to shut-down a licensee’s business so long as the government claims the licensee owes stumpage. Similarly, under section 54 of the Forest Act, the holder of a Crown forest tenure cannot dispose of the forest tenure so long as the tenure holder owes any money to the government.

Ultimately, a failure to pay stumpage for timber harvested under a Crown forest tenure constitutes a failure to perform an obligation under the tenure. This would authorise the Ministry to proceed with suspension and potentially cancellation of the forest tenure pursuant to sections 76 and 77 of the Forest Act.

RE-OPENING STUMPAGE RATES

Over the past decade government has gone to some lengths to allow itself to reopen stumpage rates long after timber is harvested, sold and manufactured. Section 105.2 of the Forest Act allows a government official to re-determine a stumpage rate if, in the official’s opinion, the original stumpage rate was based upon inaccurate information. The re-determined rate takes effect as of the effective date of the original stumpage rate, and the collection remedies discussed above will apply to any new stumpage charges. Third parties who may have acquired or dealt in the timber at issue as contemplated in section 131 of the Forest Act are not immune.

Similarly, the policies and procedures used to determine stumpage rates under section 105(1) of the Forest Act, and found in appraisal manuals published for each of the coast and interior of BC, require a “changed circumstances” reappraisal of a stumpage rate if the circumstances encountered at the time of harvesting or the methods used to harvest timber are sufficiently different from that contemplated in the original appraisal. The reappraised stumpage rate becomes effective the day after the most recent appraisal before the changed circumstances reappraisal, and the government can use any remedies otherwise available to it to collect any additional stumpage owed on account of a changed circumstances reappraisal. Again, third parties who may have acquired or dealt in the timber as contemplated in section 131 of the Forest Act are not immune to any additional stumpage liability that may arise on account of a changed circumstances reappraisal.

ADMINISTRATIVE PENALTIES

The government can also impose administrative penalties to asser t the public’s financial interest in its forest resources. For example, section 105.1 of the Forest Act requires a licensee to submit “accurate” information for use in stumpage appraisals. Section 105(5.2) requires a licensee to submit a “changed circumstances” reappraisal if required under the appraisal manuals. A failure to comply with either provision may result in the imposition of an administrative penalty of up to $500,000.00.


VICARIOUS LIABILITY

The vicarious liability provisions of FRPA are of concern to a corporate licensee’s officers and directors, including potential vicarious liability for administrative penalties related to the determination of stumpage as discussed above. Section 72(4) of FRPA provides that if a corporate licensee contravenes a provision of “the Acts”, then so does any officer or director of that corporate licensee who “authorized, permitted or acquiesced” in the contravention. In addition to FRPA, the Wildfire Act, and the Code, “the Acts” also include the Forest Act and, more particularly, sections 105.1 and 105(5.2) of the Forest Act. What is meant by “authorized, permitted or acquiesced” is not entirely clear but, to date, the Commission has suggested that it means a failure to prevent an occurrence that the officer or director ought to have foreseen. So, in the case of stumpage, a director or officer of a corporate tenure holder is exposed to liability for an administrative penalty if that officer or director “authorized, permitted or acquiesced” in the use of inaccurate information in a stumpage appraisal, or in a failure to submit a changed circumstances reappraisal.

THE FOREST REVENUE AUDIT PROGRAM (“FRAP”)

Finally, a recent and controversial addition to the government’s arsenal of administrative remedies under the Forest Act is Par t 11.1, the statutory authority for FRAP. The Minister of Finance is authorised under Part 11.1 to appoint an official called “the commissioner”. In turn, the commissioner may appoint forest revenue officials who are given broad powers under Part 11.1 to enter a premises to inspect records, or demand production of records. If, based upon these records, the commissioner determines that stumpage was underpaid, the commissioner may estimate the outstanding stumpage and make an assessment against a person for that amount. Experience to date suggests that the standards employed to “estimate” underpaid stumpage are not overly rigorous. The difficulty is that once an assessment is made on the basis of this estimate, the amount owing is immediately payable and, in the meanwhile, the burden is on the person subject to the assessment to prove that the estimate is wrong.

If the commissioner determines that an underpayment of stumpage was willful, the commissioner may also impose a penalty against the person of up to 100% of the assessment. Even if the underpayment was not wilful, the commission can still impose a penalty of up to 25% of the assessment. Once the assessment is made, the remedies otherwise discussed above become available to the government to collect the assessment and any penalty, including the ability to register a certificate as a judgement pursuant to section 130 of the Forest Act and pursue any creditors’ remedies otherwise available at law to collect on the assessment.

Experience to date has also shown that government can be very aggressive in its application of Par t 11.1, and that defending against an assessment under the Part 11.1 is time consuming and expensive.

With the number of remedies available to the Ministry to enforce forestry practices in BC, it will be interesting to see how they will evolve over the next 20 years.

This bulletin was originally published as a DLA Piper (Canada) LLP Forestry Bulletin on March 31, 2014.


Forestry Service Providers Protection ActBy Jeff Waatainen, Garry Mancell, R .P.F., and Mary Buttery

Following up on our bulletin of May 2010, the government brought into force the remaining provisions of the Forestry Service Providers Protection Act (“FSPPA” or “Act”) on April 1,

2013. These, together with amendments to the Personal Property Security Act (“PPSA”) that came into force March 25, 2013 make the FSPPA functional as of April 1, 2013. Section references herein are to the FSPPA.

The Act is of interest to contractors, subcontractors, timber owners and lenders in the forest industry.

The Act does three things for those who provide services to the forest industry in BC:

■ it creates lien rights over forest products in favour of contractors in the forest industry;

■ it establishes charges in favour of both contractors and subcontractors over accounts receivable of the person they contracted with for unpaid amounts under the contracts or subcontracts;

■ it enables the creation of a trust fund to assist contractors (“Forestry Service Providers”) who are victims in the insolvency of persons to whom they have provided services.

Any agreement to waive, surrender or modify the rights of a contractor or subcontractor under the Act is void (s .22).

The Act does not alter or repeal the Woodworker Lien Act.

CONTRACTOR’S LIEN

Creation of the Lien

The Act creates a lien over “forest products” in favour of a “contractor” who has a contract for “services” with a “forest products owner” (s. 2). The Act does not create a similar lien in favour of a “subcontractor.” The details are in the definitions (s. 1(1)):

■ “forest products” means:

(a) timber, whether limbed, bucked or peeled, and

(b) prescribed products manufactured from timber

■ owned by a forest products owner, or in which a forest products owner has given a security or has transferred ownership for security purposes;

■ “services,” in respect of forest products, means felling, bucking, yarding, skidding, processing, chipping, grinding, decking, loading, hauling, unloading, dryland sorting, logging road construction and maintenance, and any other prescribed activity;

■ “forest products owner” means a person who has entered into a contract with a contractor under which services are provided by the contractor or subcontractor. Conspicuously absent are forestry consulting services and silviculture;


■ “contractor” means a person who has entered into a contract with a forest products owner under which services are provided to the forest products owner. Interestingly, under Section 1(2) of the Act, where a forest products owner contracts with an affiliate for services, which affiliate then contracts with a subcontractor for those services, the subcontractor is deemed to be a contractor for the purposes of the Act;

■ “subcontractor” means a person who has entered into a contract with a contractor under which services are provided to or on behalf of the contractor;

■ “registrar” and “registry” have the same meaning as under the PPSA.

The lien is automatically created when the services begin regardless of whether the contractor registers the lien, but the security provided under the lien is limited to the fair market value of those services, as opposed to “an amount due” (s. 2(2)).

Registration and Priority

The lien is registerable under the PPSA, but not until the forest products owner is delinquent in payments under the contract. Any registration before that time is not valid and may be challenged by the forest products owner (s. 4(2)). Until the lien is registered, it ranks behind any registered charge holder in the Personal Property Registry who has a charge over the forest products of the forest products owner. Once registered (after the forest products owner has defaulted in payment under the contract), the lien will rank in priority to charges that are registered after it (s. 5).

Persons who have prior registered security interests over the inventory and other assets of the forest products owner will rank ahead of the lien holder, even for advances made after the lien is registered (s. 5(3)). There is no priority as between two or more registered lien holders under the FSPPA (s.5(5)).

A purchaser of forest products, who purchases in the ordinary course of business, will take title free of any lien. (s.5(4)).

To register a lien, a financing statement is filed in the Personal Property Registry. This is a relatively straight-forward process and requires no input from the forest products owner or the courts.

The contractor must give prompt notice of the lien registration to the forest products owner (s.23(1)). At any time the court may be called upon to determine the validity of the lien claim and other issues relating to the lien claim (s.21).

Where a lien is invalid or has been discharged, the forest products owner, or any person with an interest in the forest products, may demand that lien holder discharge the registration (s.16(2)). Where, within 20 days of the demand, the lien holder fails to discharge the lien or obtain a court order that the lien be maintained, the person making the demand may cause the lien to be discharged by filing a form for that purpose with the registrar under the PPSA (s. 16(3)).

Seizure Under a Lien

Where a forest products owner is in default, a lien holder may apply to court to have forest products seized (ss. 2(5), 17(1)). The court may deal with any issues about the validity of the lien or its priority, order that persons be notified of the application, order a trial of any issue, make an order with respect to costs and may order the Sheriff to seize and sell the forest products (s. 17).

Once forest products have been seized and sold, the lien holder must apply to court for payment out from the lien fund (s. 18(3)). The court may determine who is entitled to the lien funds, determine who is to receive notice of the application for payment out, deal with any issues of validity or priority, or order a trial of any issue (s. 18(3), (4)). After 30 days following a court order determining entitlement to lien funds, the Sheriff must pay out the lien funds, net of the Sheriff ’s costs (s. 18(2)), to the claimants, unless the Sheriff receives notice that additional lien holders have made application to court in respect of the funds (s. 18(5), (6)). If there are insufficient funds to discharge the amounts owing to lien holders, the funds will be distributed to the lien holders in proportion to their claims, after allowing for third party claims that rank in priority to the liens (s. 18(7)).

CHARGES

The Act creates a charge in favour of a contractor or subcontractor for any monies due to them under a contract or subcontract for the provision of services (ss. 6, 11). The security provided under a charge is not limited to the fair market value of the services (as is the case with a lien under the Act), but secures “the amount due”. A charge in favour of a contractor attaches the accounts receivable of a forest products owner (s. 6). A charge in favour of a subcontractor attaches the accounts receivable of a contractor and would include any amounts payable by the forest products owner to the contractor (s. 11).

Contractor’s Charge: Creation and Registration

The charge in favour of a contractor on accounts receivable of a forest products owner attaches immediately upon an amount being due under the contract for services, and not when the forest products owner is in default (s. 6). However, like the lien over forest products, the charge on accounts receivable ranks behind security interests already registered in the Personal Property Registry, even for advances made after registration of the charge (s. 9).

The charge may be registered in the Personal Property Registry only after the forest products owner is in default in payment under the contract (s. 8). Once registered, the charge will rank ahead of subsequent registrations purporting to create a security interest in the accounts receivable. There is no priority as between two or more registered charge holders (s. 9).

As with lien registrations, a charge holder must give notice of the registration to the forest products owner (s. 23) and the forest products owner, or any person with an interest in the


forest products, can demand that an invalid or discharged registration be removed (s.16(2)). The charge holder then has 20 days to remove the charge registration or obtain a court order maintaining it, failing which the person making the demand can file a notice with the registrar under the PPSA causing the registration to be discharged (s. 16(3)).

Notice to Account Debtor (Customer)

Once a forest products owner defaults in payment to a contractor, the contractor may notify persons who owe money to the defaulting forest products owner of the default and of the amount of the default (s. 10(1)). Where a customer of the forest products owner receives such notice, the customer may pay the amount payable to the sheriff in discharge of the payment obligation to the forest products owner (s.10(2)). Where the customer pays the forest products owner instead, the payment does not discharge the debt to the forest products owner to the extent of the charge (s. 10(3)). In other words, the customer is still deemed to owe the amount to the forest products owner, despite the payment, and may be required to pay the amount to the Sheriff. The Act is unclear as to what rights or remedies a charge holder may have if a customer simply fails or refuses to pay either the forest products owner or the Sheriff.

Distribution of Charge Fund

Where monies have been paid to a Sheriff in respect of a charge by a contractor over accounts receivable, the Sheriff will deposit the monies (again, net of the Sherriff ’s costs as with the distribution of a lien fund) into a separate account (s. 19(1), (2)). The charge holder may apply to court for entitlement to the funds. The court may then determine who is entitled to payment from the fund, determine what persons should receive notice of the application, deal with questions of validity and priority, make an order with respect to costs and order a trial of any issue (s. 19(3), (4)). After 30 days after a court has determined entitlement, the Sheriff must pay to the charge holders the amounts secured by the charge, unless the Sheriff receives notice that additional charge holders have applied to the court in respect of the fund (s. 19(5), (6)). If there is insufficient money in the fund to discharge the amounts owing to all charge holders, after allowing for third party claims that rank in priority to the charges, the funds will be distributed to the charge holders in proportion to their claims (s. 19(7)).

Subcontractors Charge

A subcontractor who provides services to a contractor who in turn provides services to a forest products owner has a charge over the accounts receivable of the contractor for amounts owing to the subcontractor under the subcontract (s. 11). The rules with respect to creation, registration, priority, discharge and payment out are identical to those for the contractor’s charge.

Forestry Service Providers Compensation Fund

Part 2 of the FSPPA deals with the establishment of a fund to be called the Forestry Service Providers Compensation Fund (the

“Fund”). This Par t, and the Fund, are not related to the lien and charge provisions of the Act.

Purpose of the Fund

The purpose of the Fund is to provide compensation to “forestry service providers” who have suffered financial losses as a result of the insolvency of persons to whom they have provided services (BC Reg. 3/2013, s. 3). “Services” has the same meaning as in the context of liens and charges. “Forestry service provider” for the purposes of Par t 2 of the FSPPA is limited by BC Reg. 3/2013 to persons who provided services to tenure holders under the Forest Act.

Creation of the Fund and the Authority

Part 2 of the Act does not create the fund, it enables the creation of the fund and of the institutions that will administer it. The fund was created on March 30, 2012 by the Forestry Services Providers Compensation Fund Regulation (BC Reg. 64/2012) and was seeded with a contribution of $5,000,000 provided by the government. The fund is to be administered by an “Authority” appointed by the Minister of Forests, Lands and Natural Resource Operations (s. 31) pursuant to an “Administrative Agreement” between the Authority and government. Eric van Soeren was initially appointed as the Authority on March 30, 2012 and an Administrative Agreement was entered into on February 1, 2013. The Authority is not an agent of the government for the purposes of the Act or the regulations under it (s. 33).

Sources of Funds for the Fund

In addition to the $5,000,000 seed money provided by the government, the Act contemplates other sources of funding. Par t 2 of the Act refers to “contributors” who will be identified by regulation and who will make contributions to the fund in accordance with the regulations (s.27(1)). Additionally, Cabinet may, by regulation, impose a levy on stumpage bearing timber that must be paid into the Fund (s. 27(2)). Finally, any amounts received by a person in respect of a financial loss for which that person has applied for and received monies from the Fund, must be paid to the Fund (s. 29(4)). This is to prevent double dipping. To date no additional contributors have been identified or stumpage levy created.

Administration of the Fund

Details with respect to the administration of the Fund are to be found in the Act, Regulations and the Administrative Agreement. Other than BC Reg. 64/2012, which creates the fund and defines who is eligible for compensation from the fund, there are no fur ther regulations at the date of this bulletin. In summary the fund will work as follows:

■ the Authority holds the fund in trust;

■ monies in the fund may not be garnished, attached or seized;

■ the Authority will invest monies in the fund in accordance with the Trustee Act ;


■ an “Advisory Board” will be established under the Administration Agreement which Advisory Board will assist the Authority with the development of policies and any suggestions for changes to the Act;

■ the Authority will receive and adjudicate compensation claims from contractors and subcontractors;

■ a compensation claim must show:

– the amount of the claim;

– evidence of financial loss;

– a list of any affected subcontractors and amounts owing to each; and

– other information required under policies of the Authority.

■ the Authority has very broad discretion to evaluate the merits of a compensation claim;

■ limitations on compensation include:

– only for losses incurred after February 1, 2013;

– only for a financial loss resulting from a failure of a licensee of a forest tenure to pay for services, not for other claims;

– the licence holder must be insolvent;

– only for services provided in the pay period immediately preceding default and 30 days thereafter;

– maximum 60 days services; and

– will be prorated if there are insufficient monies in the Fund.

■ the recipient of compensation from the fund will be required to enter a “Compensation Agreement” with the Authority whereby the recipient will assign to the Authority any accounts due to the recipient which gave rise to the compensation claim;

■ the Administration Agreement includes reporting requirements to government.

Woodworker Lien Act

Despite the earlier intention that it do so, the Act does not repeal the Woodworker Lien Act.

This bulletin was originally published as a DLA Piper (Canada) LLP Forestry

Bulletin on May 1, 2013.

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■ Aboriginal and First Nations

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■ Renewable Energy

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“Business” is sometimes described as the ar t of turning

uncertainty into opportunity. But two recent decisions of the

BC Court of Appeal suggest that the risks of doing business in

the BC Timber Sales (BCTS) program amid the uncertainty of unresolved

Aboriginal title claims has star ted to become too much. In Moulton

Contracting Ltd. v. British Columbia, a BCTS logger was unable to access

the harvest site on account of a blockade that members of the Fort

Nelson First Nation (FNFN) erected to reflect their dissatisfaction with

consultation they received from BCTS. Moulton was therefore unable to

complete the Timber Sale Licence (TSL) and initiated legal action against

the Province and the FNFN.

The BC Supreme Court found that BCTS personnel knew that the

FNFN members intended to “stop the logging” and failed to pass that

information along to Moulton before it entered the TSL. The court held

the Province liable to Moulton for breach of an implied term of the TSL

whereby the Province represented to Moulton that it was unaware of any

First Nations’ dissatisfaction with the Province’s consultation. The court

also found the Province concurrently liable in negligence, and awarded

approximately $1.75M in damages to Moulton against the Province on

account of foregone business opportunities.

The Court of Appeal overturned the lower court’s decision, ruling that

BCTS had no legal obligation to inform Moulton of any First Nations

dissatisfaction with the consultation process. The court fur ther held

that the exclusion of liability clauses in the TSL documentation (clauses

included in vir tually all TSLs) insulated the Province from any such

claim. The court’s unambiguous message to BCTS loggers in relation to

Aboriginal title claims was “buyer beware.”

Saik’uz First Nation and Stellat’en First Nation v. Rio Tinto Alcan Inc

concerned a lawsuit that the Saik ’uz and Stellat’en First Nations (SSFN)

commenced against the operator of a dam (Alcan). The SSFN claimed

that the dam created a nuisance and interfered with rights associated

with lands subject to their Aboriginal title claims. Since the claims

were based upon unproven Aboriginal title, Alcan applied to court for

summary dismissal of the claims. While the BC Supreme Court sided

with Alcan, the Court of Appeal held that the SSFN could commence

a civil action based upon Aboriginal title rights before it had a lawfully

established its Aboriginal title. SSFN could then prove its Aboriginal title

as par t of their case.

So, with this decision in hand, First Nations who claim Aboriginal title may

commence civil law suits based upon unproven Aboriginal title rights. In

the case of a TSL, they could potentially use interim legal procedures such

as injunctions to prevent logging from taking place. In effect, this decision

may allow First Nations to use the courts to stop logging if they have the

resources to do so: no blockade required.

As the Supreme Court of Canada reminded us in last summer’s decision

in Tsilhqot’ in v. British Columbia, the Crown may only infringe upon

Aboriginal title lands if the infringement is “ justified” in accordance with

a complicated legal test or, potentially, with the title holder’s consent.

Getting to either of these two outcomes before a claim of Aboriginal

title is lawfully resolved requires the resources necessary to undertake a

strength-of-claim analysis to assess the risk associated with a given claim

to Aboriginal title, and to accommodate First Nations whose title claim

is strong. BCTS has the resources necessary to assess strength-of-claim

and to provide accommodation where the logging opportunities it sells

potentially interfere with Aboriginal title claims. Nevertheless, BCTS

passes the risk associated with Aboriginal title claims onto the logger on

an “as is, where is” basis.

This philosophy is fine for those with the resources to play that game.

But most BCTS loggers do not—at least, not in terms of Aboriginal title

claims. One potential strategy for BCTS loggers is to enter joint venture

or par tnership arrangements with First Nations to pursue BCTS logging

opportunities. But, again, to effectively implement this strategy requires

pre-existing relationships and resources. Instead, BCTS loggers are likely

to become more and more dependent upon par tnerships with major

licensees who have a long-term presence in BCTS operating areas, the

relationships, and the resources to better manage the uncertainty of

Aboriginal title claims. Likely, the only way to avoid this dependence is

either a speedy resolution of Aboriginal title claims, or for BCTS to issue

harvesting rights with some form of warranty to protect BCTS loggers

from the uncertainty of Aboriginal title claims. Neither seems likely.

Until this situation changes, and in light of recent court decisions, the

bonus bids BCTS receives should begin to decrease (if they haven’t

already) as a result of increased risk and a smaller pool of bidders. This

will result in lower BCTS revenues. More importantly, this may also begin

to effect the stumpage received from major licensees due to the role

that the BCTS bids play in the market pricing system used to determine

stumpage rates. Perhaps once this uncertainty begins to affect Crown

revenues, government will take steps to maintain the value of its BCTS

harvesting opportunities. In the meanwhile, one would expect that if a

BCTS logger is unable to perform its obligations due to Aboriginal title

claims, BCTS would grant relief from deposit forfeiture.

This article originally appeared on Truck LoggerBC, Summer 2015 Issue and

has been reproduced here with permission from the publisher.

Unresolved Aboriginal Title Claims: Risk Allocation and BCTSBy Jeff Waatainen and Jason Fisher


Clients who participate in the BC Timber Sales program (BCTS) are sometimes surprised to learn that the moment they submit an application for a BCTS timber sale licence

(TSL) in response to an invitation for applications, they have entered into a contract with BCTS. This contract is not the TSL itself but, like any other contract, it does include legally enforceable rights and obligations as between the contracting parties.

The well-known 1981 decision of the Supreme Court of Canada in Ron Engineering & Construction (Eastern) Ltd. v. Ontario (Ron Engineering) and subsequent Canadian judicial rulings establish that any tender process involves the formation of two contracts. A recent decision of BC’s Supreme Court in M.G. Logging & Sons Ltd. v. British Columbia has confirmed that the analysis from Ron Engineering applies to BCTS timber auctions.

The first of the two contracts contemplated in the Ron Engineering analysis (referred to as “Contract A”) is formed between the party who calls for tenders (the “Owner,” for sake of terminological convenience), and each party who submits a bid that conforms with the conditions of the tender. A foundational principle of contract law is that “consideration” (that is, some form of benefit) must flow to each party for a lawfully enforceable contract to come into existence among those parties. In the case of a Contract A, the consideration that flows from the Owner to each party who submits a conforming bid to the Owner is to evaluate all conforming bids strictly in accordance with the conditions of tender, and to treat conforming bids even-handedly. The consideration that flows from conforming bidders to the Owner is a commitment to enter into the contract for the goods or services that are the object of the tender process if a bidder is the successful bidder. This second contract formed between the Owner and the successful bidder is referred to as “Contract B” in this analysis.

In the case of a BCTS auction, a “Contract A” is formed between BCTS and any eligible BCTS participant who submits an application for the TSL in conformance with the invitation to do so. “Contract B” is the TSL itself. While the Contract A does not assure the bidders of any harvesting rights, it nevertheless does impose legally enforceable obligations upon each of the conforming bidders and BCTS.

To illustrate, if BCTS were to award a TSL in a BCTS timber auction contrary to the terms and conditions of the invitation for applications or not otherwise in an even-handed manner (for example, if the successful bidder was ineligible, did not submit the

highest bonus bid or bonus offer, or did not submit its application before the submission deadline), then BCTS would breach the Contract As formed with all other conforming bidders and may become liable to an award of damages in favour of the conforming bidder whose application included the highest bid or offer. As a star ting point, the quantum of damages could approximate the profits that the aggrieved bidder would have earned on the Contract B (that is, the TSL) but for BCTS’ breach of Contract A.

In the normal course on the other side of the equation, if a par ticipant submits the successful conforming bid in a tender process, but does not enter a Contract B with the Owner, that person could become liable to the Owner for damages that the Owner would suffer due to the fact that the Owner would not enjoy the benefit of the successful bid (and, presumably, would have to go with a more expensive option). In the context of a BCTS auction, however, the remedies available to BCTS upon the failure of a successful applicant to enter a TSL with BCTS are outlined in the Forest Act and regulations prescribed thereunder. These remedies would include forfeiture of the applicant’s bid deposit to the Crown, suspension from the BCTS program and increased deposit requirements imposed on the applicant upon re-entry into the program. Nevertheless, these are remedies available to BCTS for a breach of “Contract A,” a separate Contract from the TSL (or the “Contract B”).

This article originally appeared on BC Forest Professional, September -

October 2015 Issue and has been reproduced here with permission from the

publisher.

The Story of Contract A and Contract B and the BCTS Tender ProcessBy Jeff Waatainen


The Supreme Court of Canada’s recent decision in Bhasin v. Hrynew underscores the vir tue of not leaving uncertain outcomes in contracts. Bhasin concerned a contract that

allowed the plaintiff (Bhasin) to operate a business that sold education savings plans (ESPs) offered by one defendant (Can-Am) in Alberta. The contract had a three-year term and provided for automatic renewal unless either party delivered a written notice to the contrary at least six months in advance. The contract did not expressly require a party to act ‘reasonably’ or in ‘good faith’ if it exercised its right not to renew.

Can-Am wanted to merge the plaintiff ’s business with one of the plaintiff ’s competitors (Hrynew) who was also Can-Am’s biggest distributor of ESPs. The proposed merger would effectively have had the plaintiff work for Hrynew. The plaintiff opposed the merger so Can-Am elected not to renew the plaintiff ’s contract and issued the requisite six months’ notice. Hrynew managed to capture almost all of the plaintiff ’s business as a result.

The evidence before the Court was that Can-Am acted dishonestly with the plaintiff when it exercised its right not to renew the contract. Can-Am had actively concealed its intentions from the plaintiff with respect to the merger and provided misinformation to the plaintiff regarding the role of Hrynew in Can-Am’s business. The Court accepted that Can-Am’s dishonesty was ‘directly and intimately’ connected with its election not to renew.

In ruling that Can-Am was liable to the plaintiff in damages for breach of contract, the Court determined that a general ‘organising principle’ of contract law is good faith performance. A party to a contract cannot seek to undermine the interests of its counterpart in the contract through bad faith.

The Court explained that ‘good faith’ itself is not a stand-alone rule; instead, it is a standard that finds manifestation in other, more specific, legal doctrines. In this case, the Court held that one such manifestation is the ‘duty of honesty.’ Par ties to a contract must not lie or otherwise knowingly mislead each other about matters directly linked to the contract. The Court found that Can-Am had breached this duty in relation to its election not to renew the contract.

Few are likely to take issue with a ‘duty of honesty’ or expect a court to countenance dishonesty. The problem is that courts may resort to the ‘organizing principle’ of good faith to give meaning to a contract that the parties did not intend. The principle of good faith is most likely to arise when a contract provides for uncertain

outcomes when it provides a discretion to a party, or requires cooperation among parties. But the reality is that contracting parties will often leave outcomes uncertain either to punt a difficult issue down the road or to give some non-binding sense of comfort to a party. For example, contracts in the forest industry often contemplate that the parties ‘will agree’ upon rate adjustments for unforeseen circumstances, or that they ‘may agree’ to a renewal. In these circumstances, the parties often just want to avoid an issue.

Uncertainty leads to problems of enforceability — whether a court will attempt to enforce a contract in the face of uncertainty and, if so, how. If a contract explicitly leaves a particular outcome uncertain (for example: “will the parties renew or won’t they?”), the courts may turn to the organizing principle of good faith to supervise how the parties manage that uncertainty. In Bhashin, the Court appears to have invited additional, as of yet unknown, common law duties under the ‘organizing principle’ of good faith, with potentially unexpected results. The best way to avoid any unexpected results is to ensure that the door to uncertainty is not left open for the courts to step through. By way of example, if the contract in Bhasin simply had a fixed term without a discretionary renewal clause, then no issue of good faith could have arisen with respect to the question of renewal: the contract would simply have expired in accordance with its terms. The parties could then have agreed to renew had they wanted to do so.

This article originally appeared on BC Forest Professional, March - April

2015 Issue and has been reproduced here with permission from the publisher.

Issue Avoidance in Contracts and theOrganizing Principle of Good FaithBy Jeff Waatainen


Those who work ‘on the ground’ in the BC forest industry are required to manage occupational health and safety issues that are, for the most part, completely foreign to the

rest of us. And the unique dangers of working in the woods have, unfortunately, resulted in tragedy from time to time over the years and subjected the forest industry’s health and safety performance to intense media scrutiny. As someone who practises law in the forest industry (tucked safely behind a desk and computer monitor in my office), I would suggest that, in recent years, no single field of legal liability has come to concern those who work in the forest industry more than occupational health and safety.

Much of the focus in the BC forest industry with respect to occupational health and safety is placed upon ‘prime contractors.’ Under the Workers Compensation Act and Regulations (the ‘Act’), prime contractors must ensure that the health and safety activities of employers and workers at any ‘multiple-employer workplace’ are coordinated, and must do everything reasonably practicable to establish and maintain systems or processes to ensure compliance with the occupational health and safety requirements of the Act.

That noted, the Act actually places primary responsibility for the health and safety at a workplace upon others. ‘Employers’ (who probably have the biggest slice of the occupational health and safety pie) must ensure the health and safety of its own workers and all other workers at the workplace. ‘Owners’ must provide and maintain lands and premises that are used as a workplace in a manner that ensures the health and safety of “all persons at or near the workplace.” ‘Supervisors’ must ensure the health and safety of all workers under their direct supervision. Even ‘workers’ themselves must take reasonable care to ensure their own health and safety, as well as that of other workers who may be affected by their acts or omissions. Each of these actors are potentially subject to prosecution under the Act if they fail to discharge their respective responsibilities for health and safety at the workplace.

As well, every officer and director of a corporation “must” ensure that the corporation complies with its health and safety obligations under the Act. So, if a corporation is an ‘employer’ or an ‘owner’ and the corporation fails to comply with the obligations that are imposed upon employers or owners under the Act, every director and officer of the corporation is potentially subject to prosecution on account of that failure, subject to a defense of due diligence. Moreover, the Act provides that if a corporation contravenes

a provision of the Act related to health and safety, then any director or officer of the corporation who “authorizes, permits or acquiesces” in the commission of the offence also commits the offence. In other words, corporate directors and officers are exposed to personal liability for the corporation’s contraventions of the occupational health and safety requirements of the Act.

Occupational health and safety is also of par ticular concern to BC’s forest professionals. As an ethical matter under the ABCFP’s Code of Ethics, a member’s responsibility to the public is to “have regard for existing legislation.” Presumably, this would include the Act. More specifically, a member must “have proper regard in all work for the safety of others.” In terms of the ABCFP’s Standards of Professional Practice, “members maintain safe work practices and consider the safety of workers and others in the practice of professional forestry.” Not only is health and safety a moral and legal issue in the work lives of forest professionals; it’s also matter of ethics and practice enforceable through the imposition of discipline under the Foresters Act. Anyone who is a practising forest professional, sits on the board of directors of a forest company and is responsible for employees has plenty of motivation to exercise rigorous diligence when it comes to occupational health and safety. Little wonder why legal liability for health and safety has become of such superordinate importance in the forest industry.

This article originally appeared on BC Forest Professional, January -

February 2015 Issue and has been reproduced here with permission from the

publisher.

Occupational Health and Safety in the Forest Industry: A Matter of Superordinate ImportanceBy Jeff Waatainen


The Inherent Insecurity of Log Purchase TransactionsBy Jeff Waatainen

I have previously used this space to discuss the powerful remedies available to the provincial government’s Forest Revenue Audit Program (“FRAP”) under Part 11.1 of the Forest Act (the “Act”).

By way of recap, if a “commissioner” appointed pursuant to that program considers (for any number of reasons) that stumpage was underpaid on harvested Crown timber, the commissioner may make an assessment of the underpayment on any basis that the commissioner considers “adequate and expedient” and the amount of the assessment becomes due and owing on top of any stumpage already paid on the timber at issue.

The government has other rights available under the Act to adjust the stumpage owing on harvested timber after the fact. Sections 105(5.1) and (5.2), combined with provisions of BC’s stumpage appraisal manuals, require a “changed circumstances” reappraisal of the stumpage rate payable on harvested timber if the district manager concludes that the circumstances encountered in the field were sufficiently different from those contemplated in the original stumpage appraisal submission. As well, if government concludes (again, after the fact) that a stumpage rate applicable to harvested timber was appraised on the basis of “inaccurate information,” the government is authorized under section 105.2 of the Act to reappraise the stumpage rate on the basis of information that government considers accurate. In either case, the difference between the stumpage paid on the basis of the original stumpage rate and the amount owing under the reappraised stumpage rate, will become due and owing.

While reasonable people would not take issue with the right of government to insist upon payment of the stumpage properly due and owing on harvested Crown timber, the translation of this right into the Act creates security issues for those who enter into agreements for the purchase and sale of Crown timber. The commissioner under FRAP may make an assessment on Crown timber harvested anytime up to six years prior to the assessment. A district manager may require a changed circumstances reappraisal for timber harvesting under any cutting permit issued prior to July 31, 2005. The government may require a reappraisal of stumpage applicable to harvested timber on account of inaccurate information “at any time.” And the government can file a certificate in court

under the Act with respect to any stumpage owing that, effectively, becomes a judgment of the court, anytime within seven years after the amount became owing.

The real difficulty arises on account of the fact that persons other than the party responsible for the appraisal of stumpage may be potentially liable for payment of any retroactive stumpage bills. Under the Act, anyone who acquires or deals in Crown timber is potentially responsible for outstanding stumpage owing on that Crown timber. Consequently, even if timber is sold on the stump and the buyer assumes tenure management responsibilities — including appraisal of stumpage — the seller could still find itself on the hook for any stumpage shortfall years afterwards if stumpage was subsequently reappraised. Similarly, a purchaser of logs produced by a tenure holder could find itself liable for a retroactive stumpage reappraisal long after the conclusion of its purchase.

All of the foregoing raises the question of how a party to a log purchase agreement can protect itself from a retroactive stumpage appraisal potentially years in the future. Withholding the estimated stumpage from the purchase price pending satisfactory proof that stumpage was paid, or simply paying stumpage directly to the government, will not assist if stumpage is reappraised years afterwards.

Theoretically, if the party responsible for payment of stumpage holds substantial assets, then the exposed party could take some form of longterm charge against those assets. If not, the exposed party could insist upon a guarantor of substance. The problem is that the party responsible for stumpage payments will probably not agree to encumber its assets for a lengthy period of time, or manage to find a guarantor willing to do so. Ultimately, most timber purchases proceed without out any security against future retroactive stumpage appraisals and, presumably, this risk is accounted for in the purchase price.

This article originally appeared on BC Forest Professional, November -

December 2014 Issue and has been reproduced here with permission from

the publisher.


Standing in the Shadows of Delgamuukw: Uses of Aboriginal Title Land Under The Tsilhqot’in DecisionBy Jeff Waatainen

In last June’s controversial Supreme Court of Canada decision in Tsilhqot’ in Nation v. British Columbia, the court made a declaration of Aboriginal title, but did not provide much guidance with

respect to how the Tsilhqot’in could use its Aboriginal title lands. In this regard, the court did little more than state that a First Nation could not substantially deprive future generations of the benefit of those lands. The court’s concern with future generations relates to the collective nature of ‘Aboriginal title’ rights.

Similarly, the concern with future generations of Aboriginal title holders also manifests itself in the context of the Crown’s ability to “ justify” an infringement of Aboriginal title. Before the Crown can permit a project or pass laws in relation to Aboriginal title lands, the Crown is first obliged to satisfy a three-part justification test. The third branch of this test requires the Crown to ensure that any infringement of Aboriginal title is consistent with the Crown’s fiduciary obligations to the holder of the Aboriginal title. This requires the Crown to act in a manner that recognizes the collective nature of Aboriginal title. So, just as current generations of an Aboriginal title holder cannot use its Aboriginal title lands in a manner that would substantially deprive future generations of the benefits of the land, neither can the Crown.

In Tsilhqot’in, the court does not do much to clarify the uses of Aboriginal title lands that are reconcilable with the ability of succeeding generations to benefit from Aboriginal title lands and is largely content to say that this is an issue that the law would address on a case-by-case basis as needed.

Earlier comments of the court from its 1997 decision in Delgamuukw v. British Columbia shed a little more light on the matter. In that ruling, the court explained that while holders of Aboriginal title could use their lands for a variety of non-traditional, modern purposes, any use of the land that is irreconcilable with the nature of the First Nation’s original occupation of, and relationship to, the lands that gave rise to its Aboriginal title in the first place is not permissible. So, to use the court’s example, if a First Nation established a claim

to Aboriginal title through historical occupation of the lands for the purpose of hunting, then the First Nation may not use those lands for strip mining since this was probably irreconcilable with that First Nation’s historic relationship to the lands.

When read in the context of Delgamuukw, the court’s decision in Tsilhqot’ in tells us that the holder of Aboriginal title cannot use, and the Crown cannot justify an infringement, of Aboriginal title lands that is irreconcilable with the nature of the First Nation’s historic occupation of and relationship to those lands. Proposed uses of Aboriginal title lands that are irreconcilable with the nature of the First Nations’ historic occupation of and relationship to the Aboriginal title lands is simply not permitted and there’s nothing that the First Nation or the Crown can do about it.

Except for one thing. The court made clear in both Tsilhqot’ in and Delgamuukw that the holder of Aboriginal title lands may alienate those lands to the Crown for valuable consideration and, thereby, convert Aboriginal title lands to non-Aboriginal title lands. This would allow uses of (formerly) Aboriginal title lands that were irreconcilable with the nature of the First Nations’ historic occupation of and relationship to the lands. One might see this as an interesting exception given that the conversion of Aboriginal title lands to non-title lands would absolutely seem to come at the expense of future generations of the First Nation.

But this gets to what is probably the court’s primary objective when it comes to the reconciliation of Aboriginal rights with Crown sovereignty: to promote settlement treaties. Without the ability of First Nations to lawfully surrender Aboriginal title rights to the Crown, there is probably not much likelihood of reconciling Aboriginal rights with Crown sovereignty.


October 2014 Issue and has been reproduced here with permission from

the publisher.


Judicial Review and the Forest Practices Board: The New AlternativeBy Jeff Waatainen

A recent decision of the British Columbia Supreme Court has given an unexpected boost to the status of BC’s Forest Practices Board (Board). In Western Canada Wilderness

Committee v. British Columbia, two environmental advocacy groups (referred to as WC2), challenged the Minister of Environment’s decision not to issue ‘Section 7 Notices’ under the Forest Planning and Practices Regulation (Regulation) in relation to Coastal Douglas Fir (CDF).

Among other things, section 5(1) of the Forest and Range Practices Act (FRPA) requires that before the Ministry of Forest, Lands and Natural Resource Operations (FLNRO) may approve a forest stewardship plan (FSP) to authorize timber harvesting activities, the FSP must specify intended results and strategies in relation to “objectives set by government.” In turn, various objectives set by government are specified in the Regulation. The government’s objective for wildlife under section 7(1) of the Regulation is “to conserve sufficient wildlife habitat … for … the survival of species at risk.”

Since FRPA requires an FSP to include intended results and strategies to conserve sufficient wildlife habitat for the survival of a species at risk, and since there was no dispute that CDF was a species at risk, WC2 was presumably of the view that any FSP with areas of CDF must preserve that CDF. However, government hedged its bet with respect to wildlife habitat protection: section 7(2) of the Regulation provided that before the objective specified in section 7(1) applied to a FSP, the Minister first had to give a so-called ‘Section 7 Notice’ to the person required to prepare the FSP. The Minister had not issued any Section 7 Notices with respect to CDF, so the substantive issue in this case was whether the Minister was required to do so under the circumstances.

All statutory discretion, such as that at issue in this case, is subject to review by the courts one way or another. If, as in this case, there is no statutory right of review or appeal that is specific to the exercise of discretion at issue, then a procedure called ‘ judicial review’ is potentially available. Essentially, if a par ty has a sufficient legal interest in the exercise of a statutory discretion, and no specific right of review or appeal is otherwise available, then that

par ty may apply under the Judicial Review Procedure Act to have a court review the exercise of discretion for legal validity.

Importantly, here can be no “adequate alternative remedy” (that is, some other way to challenge the decision at issue). Traditionally, an ‘adequate’ alternative remedy has meant an ‘equally effective’ alternative remedy, and if an applicant for judicial review failed to pursue any available adequate alternative remedy, the court would decline its application.

Getting back to the Board, FRPA contemplates that the Board will (among other things) investigate public complaints and make recommendations to government based upon its investigations. The Board cannot bind the government to the Board’s recommendations, or otherwise lawfully compel the government to take any particular action. It can only recommend.

On the other hand, a court may make orders in a judicial review proceeding that does compel government to act in a par ticular way. While courts will rarely order government to take any particular positive action, courts will often strike down the government’s exercise of a statutory discretion, or make formal declarations as to the legality of the government’s conduct, and government is compelled adhere to these decisions.

Since government often does listen to recommendations of the Board, the court nevertheless held in this case that a complaint to the Board was an adequate alternative remedy to judicial review, and that WC2 was required to pursue a complaint to the Board before it was entitled to seek judicial review (ultimately, in the name of judicial efficiency, the court went on to determine the substantive issue against WC2 in any event). The court’s conclusion that the Board’s public complaint process is an adequate alternative remedy to judicial review would seem to suddenly make the Board into a much bigger watchdog.

This article originally appeared on BC Forest Professional, July - August

2014 Issue and has been reproduced here with permission from the publisher.


What in FRAP is Going on Under Part 11.1 of the Forest Act?!?!?!By Jeff Waatainen

Part 11.1 of the Forest Act authorizes the “Forest Revenue Audit Program,” or FRAP, as it is sometimes called without much affection. Unless you have encountered the business end of

FRAP up-close, you may not even have heard of it. Yet to date, FRAP has waged a number of existential battles with those it has suspected of underreporting stumpage, and FRAP can pursue its suspicions with surprising zealotry.

Par t 11.1 of the Act authorizes “forest revenue officials” to conduct audits in relation to stumpage revenue. Forest revenue officials possess broad powers to enter a premises to inspect records or demand production of records. If, based upon an audit, an official known as the ‘commissioner’ determines that stumpage was underreported, the commissioner may estimate the outstanding stumpage and make an assessment against the licensee for that amount. If the commissioner determines that underpayment was willful, he or she may also impose a penalty of up to 100% of the assessment and may impose a penalty of up to 25% of the assessment regardless of willfulness.

The problem is with how an “assessment” is sometimes made and what happens afterwards. For example, FRAP may make an assessment based upon cruise information for a stand of timber, notwithstanding that anyone with any experience in the forest sector will tell you that the difference between what is reported in a cruise and what is actually in a stand of timber may vary dramatically. FRAP may also rely upon check-scales of timber from a given cutting authority, even though a check scale of a par ticular load of timber is unlikely to represent the timber from the stand at issue as a whole. An assessment based upon these types of evidence is inherently unreliable.

An appeal of a commissioner’s assessment is available to the Minister of Finance. Yet, once the commissioner makes an assessment, “the onus of proving otherwise is on the person liable to pay the amount assessed.” In other words, the licensee must prove that FRAP is wrong, not the other way around. Even more problematic, an appeal does not delay government’s entitlement to commence collection proceedings that could substantially interfere with a licensee’s wherewithal to defend itself. There is no time limit for the Minister to complete an appeal and experience indicates that an appeal can take over 18 months.

Even if a licensee does have the wherewithal to fend off government collection agents and mount an appeal, a recent decision of the BC Supreme Court in Timberwolf Log Trading

Ltd. v. British Columbia illustrates that an appellant should not expect even-handed treatment during an appeal to the Minister. In that decision, the Court found that the Minister “relied upon submissions from other parties and documents that were not disclosed to the petitioners [the appellants] or referred to in the commissioner’s decision” and that the appellants “have been denied access to all of the evidence relied upon by the commissioner and the revenue minister ... and were clearly hampered in their challenge of the reassessment.”

The right to know the case against you is a core principle of administrative fairness and justice. In this case, an agency of the Crown appears to have ignored this principle to the detriment of the appellant’s ability to meaningfully appeal an assessment to the Minister. So, FRAP can make an assessment based upon unreliable evidence and then require the licensee prove FRAP wrong on appeal to the Minister, even though such an appeal is, apparently, little more than a kangaroo court. Meanwhile, FRAP is free to commence collection proceedings that could disrupt an appellant’s finances while the appeal is pending.

The good news is that the Forest Act provides a fur ther appeal to the Courts. In such an appeal, the entire assessment is reopened, and the Court has confirmed its willingness to thoroughly scrutinize all of the evidence, including full-discovery and cross-examination of government officials. Unfortunately, a prospective appellant may not survive long enough to get to the courts, or may have to cut a bad deal in order to survive.


October 2013 Issue and has been reproduced here with permission from the

publisher.


ABOUT US

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From the quality of our legal advice and business insight to the efficiency of our legal teams, we believe that when it comes to the way we serve and interact with our clients, everything matters.

FOR MORE INFORMATION

To learn more about DLA Piper, visit www.dlapiper.com.

For more information on our Canadian Forestry practice, please contact:

Brian HiebertPartnerT +1 604 643 [email protected]

Brian Hiebert practises corporate, commercial, energy, and environmental law. He has significant experience in mergers and acquisitions, joint ventures, corporate finance, as well as energy and forestry industry projects and transactions. Brian sat on the environmental management committee of a major forest products company for a number of years and has provided advice to a wide range of clients on environmental issues.

Garry Mancell, R.P.F.PartnerT +1 604 643 [email protected]

A professional forester with several years of operational experience in the forest industry in British Columbia, Garry Mancell’s practice is focused on the regulatory and commercial aspects of forestry. His clients include tenure holders, log brokers, timber developers, First Nations, communities, trade associations, contractors and consultants.

Jeff WaatainenAssociateT +1 604 643 [email protected]

Jeff Waatainen is a seasoned forestry lawyer with a wealth of experience regarding regulatory and commercial law in the B.C. forest industry. He has appeared before administrative tribunals that govern the industry, and worked on major commercial transactions within the industry.

This publication is intended to provide our general comments on developments in the law. It is not intended to be a comprehensive review nor is it intended to provide legal advice. Readers should not act on information in the publication without first seeking specific advice on the particular matter.

DLA Piper (Canada) LLP is part of DLA Piper, a global law firm operating through various separate and distinct legal entities. For further information please refer to the Legal Notices section at www.dlapiper.com.

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