Decision Date: August 13, 2009

Before: Newbury, J., Low, J., K. Smith, J.

Cite: 2009 BCCA 354

Western Forest Products Limited (“Western”) appealed a decision of the British Columbia Supreme Court allowing an appeal from decision of Forest Appeals Commission (the “Commission”) regarding the calculation of transportation costs for the purposes of assessing stumpage under the Forest Act.  The decision at stake was the Commission’s decision in Western Forest Products Ltd. v. Government of British Columbia, Decision No. 2004-FA-003(c), dated September 21, 2005.  The decision involved an appeal by Western of a determination by the District Manager, Ministry of Forests and Range, that a log dump used by Western near Jordan River was a suitable log dump for the purposes of determining the stumpage rate applicable to timber harvested by Western near Jordan River.  The issue before the Commission was whether, in determining the stumpage rate, the log dump at Jordan River was “unsuitable” for the purpose of calculating Western’s transportation cost estimates.

The Commission found that the stumpage rate should be determined based on the assumption that Western was using a log dump in Sooke rather than the one at Jordan River, despite the fact that the Jordan River log dump involved a shorter truck hauling distance and was the one that Western actually used for timber harvested in that area.  The Commission accepted evidence provided by Western’s witnesses that the concept of licensee neutrality is a fundamental principle in stumpage appraisals under the CAM.  The Commission held that, under the CAM, harvesting costs are to be estimated independent of the actual circumstances of a particular licensee, and are to be based upon what would be done by a notional average operator.  There was undisputed evidence that the Jordan River log dump’s capacity is limited and that Western fully utilized the log dump, such that there was no capacity in the log dump to service any other licensee.  On that basis, the Commission concluded that the Jordan River log dump was not suitable for use by a notional average operator because it has constraints that prevent a notional, average operator from having access to it.  Since an appraisal is based on estimated costs of a notional average operator, if Jordan River is unsuitable as an appraisal log dump for the notional average licensee, it must be unsuitable for all.  It would be unfair to appraise all other licensees in the area to another log dump but appraise Western to Jordan River.

The Province appealed the Commission’s decision to the BC Supreme Court.  In British Columbia (Minister of Forests and Range) v. Forest Appeals Commission, 2007 BCSC 696, the Court held that the issue before the Commission was a question of law, and that the appropriate standard of review lay between reasonableness simpliciter and correctness, but closer to reasonableness simpliciter.  Further, the Court determined that the evidence of the witnesses before the Commission appeared to be more argument and conclusion than statements of fact.  Regarding the Commission’s finding that the Jordan River log dump is unsuitable for the purposes of determining the applicable stumpage rate, the Court found that the concepts of licensee neutrality and “notional average operator” are not expressly used in the CAM.  Rather, those concepts were repeatedly referred to by Western’s witnesses.  The Court held that the Jordan River log dump only becomes unsuitable if the concepts of “licensee neutrality” and “notional average operator” are read into the CAM to defeat what would otherwise be the result of a plain and unambiguous reading of section 4.1 of the CAM.  The Court found that applying the concept of licensee neutrality to find that Western should pay stumpage as if it were trucking logs to a further log dump in Sooke simply because other licensees cannot use Jordan River produced an absurd result.  Therefore, the Court found the Commission’s decision unreasonable and ordered that the decision was stayed.

Western appealed to the BC Court of Appeal.  Writing for the Court, Newbury JA held that the judge below did not have the benefit of Dunsmuir v. New Brunswick, 2008 SCC 9, which now requires the application of a standard of reasonableness to the Commission’s decision.  In particular, the Court held that the case turned on the exercise of discretion under section 4.1 of the CAM regarding whether a log dump is “unsuitable”.  The Court held that this question engaged the Commission’s technical expertise in stumpage appraisal, even though the question could be characterized as one of law (i.e. the interpretation of the CAM, which is a form of subordinate legislation).  Applying the standard of reasonableness, the Court found that the Commission’s decision was reasonable.  Specifically, the Court held that there was evidence to support the principle of licensee neutrality which the Commission had applied, and it was not unreasonable for the Commission to have accepted that evidence, especially in light of section 148.6 of the Forest Act which permits the Commission to accept evidence even if that evidence may be inadmissible in a court.  After considering the meaning of section 4.1 of the CAM, the Court held that the Commission’s decision was consistent with the scheme and tenor of the CAM, as explained by the unchallenged evidence of Western’s witnesses, and lies within the range of acceptable outcomes that were available to the Commission.  Accordingly, the Court allowed Western’s appeal and ordered that the Commission’s decision was restored.