Decision Date:February 23, 2016

Court: B.C.C.A., Justices Saunders, Chiasson, and Harris

Citation: 2016 BCCA 80

Western Forest Products Inc. (“Western”) appealed a decision of the BC Supreme Court which overturned a decision of the Forest Appeals Commission (the “Commission”). The Commission’s decision concerned Western’s appeals against two stumpage determinations issued by the Timber Pricing Coordinator (the “Coordinator”), Coast Forest Region, Ministry of Forests, Lands and Natural Resource Operations (the “Ministry”). The determinations set the stumpage rate that Western would pay on Crown timber harvested under cutting permit 300 (“CP 300”), which covered an area within a tree farm licence held by Western.

Stumpage rates in the Coast region of the Province are determined in accordance with the policies and procedures in the Coast Appraisal Manual (“CAM”), which has the force of law. Under the CAM, stumpage rates are affected by certain variables. The variable at issue in this case was the amount that Western could claim for estimated road development costs.

Western had entered into an extended road amortization agreement (the “Agreement”) with the Province, for the apportionment of road costs between two CPs: one that Western applied for around the time when the Agreement was signed, and a CP that Western would apply for in the future, which became CP 300. Western intended to build the road to access both CP areas for harvesting. When the Agreement was made, the road had not been built. The Agreement indicated the apportionment between the two CPs as both percentages and dollar amounts.

The road was built when Western applied for CP 300, and the costs were higher than estimated. Western sought to use the higher costs, which would have had the effect of reducing the stumpage payable for timber harvested under CP 300. Western requested that the Ministry agree to amend the Agreement to reflect the updated costs. The Ministry refused. The Ministry’s position was that the Agreement provided that the original estimated costs would apply to the second CP. The Coordinator refused to amend the Agreement, and the Coordinator calculated the stumpage rates for CP 300 using the dollar amounts set out in the Agreement. Western appealed to the Commission.

In its appeal to the Commission, Western’s main arguments were: (1) the Coordinator determined the stumpage rates based on information that was no longer accurate, contrary to section 105.1 of the Forest Act (the “Act”) and the CAM; (2) the Ministry exercised its discretion unreasonably when it declined to amend the Agreement to account for the more accurate information that was available; and, (3) the Agreement required the Coordinator to determine the cost allowances applicable to CP 300 based on the information available when Western applied for CP 300.

In Western Forest Products Inc. v. Government of British Columbia (Decision Nos. 2013-FA-001(a) and 002(a), issued December 2, 2013), the Commission held that, as a specialized tribunal with expertise in forestry legislation, and de novo powers in hearing appeals, it was not obligated to give deference to the Coordinator’s decisions. Next, the Commission found that section 105.1 of the Act requires licensees to submit accurate data to the Ministry for stumpage appraisal purposes, and that section 3.2 of the CAM, which authorizes the Ministry to review appraisal data for errors or emissions, is consistent with those accuracy requirements.

Turning to the nature of the Agreement, the Commission found that extended road amortization agreements are an integral part of the stumpage appraisal process. Therefore, the Commission’s jurisdiction in deciding stumpage appeals includes interpreting the Agreement, and considering whether the Ministry exercised its discretion reasonably in refusing to agree to an amendment of the Agreement.

Further, the Commission found that the Coordinator should have applied the percentages in the Agreement to the updated costs Western had provided for CP 300. The Commission found that the Agreement was unclear regarding whether the parties’ intention was to apply the percentages or the dollar amounts it specified. Given the lack of clarity, the Commission found that the Agreement must be read in the context of the CAM and the Act, which imply that the dollar values in the Agreement should be updated when the subsequent CP (i.e., CP 300) was appraised, to be current with the cost base of the CAM in effect at that time.

Finally, the Commission found that the Coordinator exercised his discretion in an unreasonable manner in refusing to amend the Agreement and apply the updated costs, which were the most accurate information available when Western applied for CP 300. His exercise of discretion was unreasonable because it was inconsistent with section 105.1 of the Act, the overall scheme of the CAM, and the objectives and intent of the governing legislation. Accordingly, the matter was remitted back to the Coordinator with directions to re-determine the stumpage rates for CP 300 using the updated costs, and to amend the Agreement accordingly.

The Province appealed the Commission’s decision to the BC Supreme Court. The Province raised four main issues in the appeal: (1) whether there was a reasonable apprehension of bias because the Commission member who decided the appeal is employed in the forest industry and his work includes lobbying the government on forestry matters such as stumpage rates; (2) whether the Commission exceeded its jurisdiction by reviewing the Ministry’s exercise of a contractual authority in relation to the Agreement; (3) if the Commission had jurisdiction to review the stumpage determinations, did it exceed its jurisdiction by failing to give deference to the Coordinator; and (4) whether the Commission erred in its interpretation of the CAM, the Agreement, and the Act.

First, the BC Supreme Court addressed the standard of review that applied to the Commission’s decision. The Court held that a standard of fairness, with no deference to the Commission, applied when considering the question of reasonable apprehension of bias. However, regarding the merits of the Commission’s decision, including the Commission’s interpretation of the Agreement, the CAM, and the Act, a standard of reasonableness applied. A decision is unreasonable if it is outside the range of acceptable or possible outcomes and is indefensible in respect of the law and facts in the case.

Turning to the substantive issues, the Court found that there was no reasonable apprehension of bias. The Court considered that almost all members of the Commission are part-time members who are not expected to give up their employment. The pool of potential members with the expertise to decide stumpage appeals is small, and consists of people who have worked in the forest industry or have close ties to the industry. The member in this case was employed in the forest industry for decades. His employment in the industry was known to the Government when it recommended him for appointment to the Commission, and his work had long involved some form of lobbying for changes to forest practices. He had not lobbied for amendments to the CAM or the appraisal manual that applies to the Interior region, and there was no evidence that he had a closed mind regarding the relevant provisions of the CAM or the Act.

In addition, the Court agreed with the Commission that the Agreement was an integral part of the stumpage appraisal process, and its terms were dictated by the CAM. Also, the Commission properly characterized the Coordinator’s refusal to amend the Agreement as an exercise of statutory discretion. However, the Court held that the Commission’s finding that the Agreement was unclear was unreasonable. The Court held that the Agreement indicated that the dollar amounts specified in it were to be included in the appraisals of both CPs, including CP 300, and this interpretation is consistent with the CAM. The Court also found that the underlying premise of the CAM and section 105.1 of the Act is that the licensee must submit accurate information when input from the licensee is required, and the information must only be accurate based on the standards set by the CAM. In addition, the Court held that the Commission should not have interpreted the accuracy requirement in section 105.1 of the Act to be a paramount and over-riding principle, because the CAM only permits reappraisals of stumpage rates in certain circumstances, and those circumstances did not apply in this case. Consequently, the Court concluded that the Commission’s interpretation of section 105.1 of the Act was unreasonable, and the Commission erred when it concluded that the refusal to amend the Agreement was inconsistent with section 105.1 and was an unreasonable exercise of discretion. The Court concluded that the Commission’s decision was not within the range of acceptable outcomes, and the matter was remitted back to the Commission for re-hearing.

Western appealed the BC Supreme Court’s decision to the BC Court of Appeal.

The Court of Appeal agreed with the BC Supreme Court that the standard of review was reasonableness in this case, because the Commission is a specialized tribunal and its task was to interpret its home statute and an agreement mandated by the CAM, which is subordinate legislation under that statute. However, the Court found that the standard of review was not significant in this case, because the Court agreed with the BC Supreme Court that the Commission’s interpretation was wrong.

Specifically, the Court found that section 105.1 of the Act requires licensees to use currently accurate appraisal data in submissions for the purpose of stumpage determinations. The requirement in section 105.1(2) that the licensee must supply accurate information when the information is submitted to the Ministry applies generally, and includes information required for stumpage determinations. This general provision does not override the provisions of the CAM that authorize an extended road amortization agreement to apportion costs between CPs. The provision of the CAM permitting the apportionment of estimated road development costs, section 5.3.2.1, does not create an exception to this requirement, but it is satisfied if the information submitted when an extended road amortization agreement is formed is accurate. Subject to the provisions of the extended road amortization agreement, the information submitted at that time is applicable to stumpage determinations for tributary CPs (in this case, CP 300). In the present case, the specific wording of the Agreement was not unclear, and did not override the regulatory scheme; it was consonant with it.

Accordingly, the Court of Appeal dismissed Western’s appeal.