Decision Date: May 1, 2014

Court: B.C.C.A.; Justices Saunders, Groberman, and Willcock

Citation: 2014 BCCA 171

Her Majesty the Queen in Right of the Province of British Columbia (the “Province”) appealed a decision of the BC Supreme Court, which had dismissed the Province’s appeal of a decision issued by the Forest Appeals Commission (the “Commission”). The decision related to the amount of money that the Canadian National Railway Company (“CNR”) was obliged to pay to the Province as a result of causing a fire that damaged or destroyed Crown timber.

On July 29, 2005, hot metal fragments from the brakes of a train operated by Canadian National Railway Company (“CNR”) caused a wildfire. The fire destroyed 25,010.8 cubic metres of Crown timber. At the time of the wildfire, the Province had no plans to harvest the timber. In the Fall of 2006, the salvageable timber was harvested. A total of $4,874.80 in stumpage was paid for 19,809.79 cubic metres of timber.

In 2008, the Fire Centre Manager (the “Manager”), Ministry of Forests and Range (the “Ministry”), determined that CNR had contravened the Wildfire Act and the Wildfire Regulation in causing the fire. Section 27(1)(c) of the Wildfire Act and section 30(a) of the Wildfire Regulation provide that a cost recovery order may be issued when a wildfire is caused by a contravention, and if a cost recovery order is issued, the value of damaged or destroyed Crown timber must be calculated by ascertaining the amount of stumpage applicable under the Forest Act. The Manager ordered CNR to pay $254,680.38 for the damaged or destroyed Crown timber, which was 75 percent of the timber’s stumpage value at the time of the fire, as calculated by the Manager. CNR appealed to the Commission.

The issue before the Commission was the date on which to value the timber, which would determine the stumpage rate used to calculate the value of the timber. The Province argued that the value should be calculated using the stumpage rate that applied when the timber was damaged or destroyed by the fire, resulting in a value of $280,299.19. CNR argued that the value should be calculated using the stumpage rate that applied from April 2006 to 2009, based on a future date (sometime after the fire) when the timber would have been scaled or harvested, resulting in a value of $6,252.50.

In Canadian National Railway v. Government of British Columbia (Decision Nos. 2008-WFA-001(a) & 2008-WFA-002(a), issued June 27, 2011), the Commission determined that the amount of stumpage payable by CNR was $6,250.50. The Commission found that, under section 103(1) of the Forest Act, if a harvesting agreement had been in place, the damaged timber would have been valued based on the stumpage rate when the timber was scaled. The Commission also considered section 103(3) of the Forest Act, which describes the procedure for calculating the stumpage owing when a person “cuts, damages, destroys or removes Crown timber without authorization”. Section 103(3) contemplates using the stumpage rate that “would likely have applied to the timber” under section 105(1) of the Forest Act “if rights to the timber had been granted under an agreement entered into under” the Forest Act. The Commission interpreted this to mean that the applicable stumpage rate is the one that would have applied when the timber might have been harvested. The Commission concluded that, in this case, the appropriate stumpage rate is not the one that applied when the fire occurred, given that there were no plans to harvest the timber at that time. Rather, the appropriate stumpage rate is the one that would likely have applied when the timber was cruised or scaled, sometime after the fire. In addition, the Commission found that the Manager had no statutory authority to reduce the cost recovery order to 75% of the timber’s value. Accordingly, the Commission concluded that the cost recovery order should be for $6,252.50.

The Province appealed the Commission’s decision to the BC Supreme Court. In British Columbia v. Canadian National Railway, 2012 BCSC 1856, the Court held that the Commission’s conclusion on the valuation date was a reasonable exercise of its specialized expertise in relation to forestry statutes, and was also correct. The Commission reasonably concluded that the common law principles on damages did not apply, because the legislation creates a complete scheme for valuing lost Crown timber, and there is clear legislative intent not to follow the common law principles on damages. The Commission clearly and rationally explained its decision. Accordingly, the Court upheld the Commission’s decision.

The Province sought leave to appeal the Supreme Court’s decision, and the BC Court of Appeal granted leave (2013 BCCA 185).

On appeal to the BC Court of Appeal, the Province argued that the BC Supreme Court erred in declining to interfere with the Commission’s interpretation of section 103(3) of the Forest Act, and that the Commission’s interpretation was unreasonable and contrary to the plain meaning of the legislation. However, the Court of Appeal concluded that the Commission’s interpretation was reasonable. Given the regulatory processes surrounding the determination of stumpage rates, it was reasonable for the Commission to assess compensation from a future date when the timber could have been harvested, rather than at the time of the fire. The appeal was dismissed.