Canada: British Columbia To Pay $1.7 Million In Compensation To A Forestry Company

Facts

The forestry company Moulton Contracting (Moulton) had obtained licences from British Columbia to harvest timber on tracts of land in the territory of the Fort Nelson First Nation (FNFN), which is a signatory to Treaty 8, entered into in 1899. Members of FNFN, the Behn family, had erected a camp blocking Moulton's access to the logging sites. The Behns argued that, under the FNFN system of territorial management, hunting and trapping rights are exercised on tracts of land associated with different extended families, each of which is headed by a headman. The forestry company filed a tort claim against the Behns. On May 9, 2013, the Supreme Court of Canada rejected the Behns' defence that the licences were invalid because they were awarded in breach of the duty to consult and infringed Treaty 8 rights. The Supreme Court of Canada found this defence to be an abuse of process.¹

On December 23, 2013, the British Columbia Supreme Court finally ruled on the forestry company's claim.

The issues

The issues before the British Columbia Supreme Court were:

• whether the Behn Family, Chief Liz Logan and FNFN should be held liable for the torts of intentional interference with Moulton's economic relations and conspiracy against Moulton;
• whether the Government of British Columbia should be held liable for a contractual breach or negligent misrepresentations.

The decision

Liability of the Behn Family, Chief Liz Logan and FNFN

The British Columbia Supreme Court² began by dismissing the claim against the Behns, Chief Logan and FNFN, stating that the blockade participants had not committed the torts of intentional interference with Moulton's economic relations or conspiracy.

The court rejected Moulton's contention that erecting a camp blocking access to the logging sites was an act of criminal mischief within the meaning of the Section 430 of the Criminal Code. The court held that, although the blockade affected the rights granted to Moulton under its logging licences, its property rights were incorporeal in nature and therefore did not give rise to the offence of mischief.

As for Moulton's further contention that blocking a road used by a permit holder is unlawful because such conduct is not authorized by law, the court held that the road that was blockaded (the Canfor Road) was a forest road that was not considered a public highway and consequently existed in a legislative vacuum. As "that which is not expressly forbidden is permitted," the Court also rejected this argument.

Liability of the Government of British Columbia

With respect to the second issue, the Court dismissed Moulton's claim that the effect of its contract with the province was to promise it access to the logging sites area and that, consequently, the Government of British Columbia should have tried to obtain an injunction to end the blockade.

The Court stated that the duty to consult FNFN was nonetheless an implied term of the contract entered into with Moulton. It felt that the Government of British Columbia had breached this duty because its actions in this regard had proven insufficient to facilitate a true dialogue with FNFN. However, the Court did not find the province liable for breach of this implied term as the evidence did not show a sufficient causal connection between the province's failure to discharge its duty to consult with FNFN and Georges Behn's decision to proceed with the blockade. Even if the province had fulfilled its duty to consult with FNFN, Mr. Behn would likely have still erected the camp in order to block the Canfor Road. While the blockade was set up in part to protest the lack of consultation, it could also be explained by Mr. Behn's intention to oppose any industrial activity on the lands in question.

In addition, the timber-harvesting licences awarded to Moulton included a clause exempting the Government of British Columbia from liability for losses suffered by the licensee as a result of an act or omission by a third party. The loss of revenue suffered by Moulton was clearly of the type encompassed by this exemption as it was a direct result of the blockade organized by the Behns.

Finally, the court found liability on the part of the province for breach of an implied contractual term obliging it to warn Moulton about Defendant Georges Behn's intent to deprive the forestry company of access to the logging sites identified in the timber-harvesting licenses. The province knew or ought to have known of Mr. Behn's intentions as of July 31, 2006, but it failed to convey this "information of fundamental relevance" to Moulton. According to the court, the finding of liability could also be made on the basis of the province's failure to pass on this information to Moulton, to whom it owed a duty of care. The court found the province liable for Moulton's loss of opportunity to secure other logging contracts for the 2006-2007 season.

The Court assessed the losses suffered by Moulton as a result of the province's failure to warn it about Mr. Behn's intention to block the Canfor Road at $1,750,000.

Comments

This decision highlighted British Columbia's continuing disclosure obligation in its contractual relationship with Moulton. Although the court found that the province had failed to fulfill an implicit contractual term obliging it to advise Moulton of Mr. Behn's threat to block physical access to the Canfor Road, the finding of liability could also be made on the mere basis of its failure to pass on this very important information. Therefore, even if there is no implicit contractual term, the province could still be found liable. Given the sizeable damages awarded to Moulton by the court, forestry companies operating in the natural resources sector should bear this in mind.

This decision comes at a time when governments are being sued by forest exploration companies on the grounds that the governments in question had failed in their duty to consult Aboriginal People, thereby depriving the companies of the ability to carry on their exploration activities. For example, Northern Superior Resources is currently suing the Ontario government for $110 million.

The author wishes to thank law student Andréane Giguère for her help in preparing this Legal update.

Footnotes

1 See our Legal update of May 2013 on the topic.

2 Moulton Contracting Ltd. v British Colombia, 2013 BCSC 2348

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