Decision Date: November 21, 2014

Court: B.C.S.C., Justice Bruce

Citation: 2014 BCSC 2192

The Province of British Columbia (the “Province”) appealed a decision of the Forest Appeals Commission (the “Commission”) to the BC Supreme Court.

The Commission’s decision concerned the stumpage rate that Western Forest Products Inc. (“Western”) should pay for harvesting Crown timber. Western had appealed 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 stumpage determinations set out the stumpage rates that applied to Crown timber harvested under cutting permit 300 (“CP 300”), which covers 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 is approved by the Minister of Forests, Lands and Natural Resource Operations under section 105(1) of the Forest Act, and 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 incurred road development costs to access two CP areas, including CP 300, for harvesting.

The Coordinator had determined the stumpage rates for CP 300 using the dollar amount for estimated road development costs that was set out in an extended road amortization agreement (the “Agreement”) previously signed by Western and the Ministry. The Agreement had apportioned the estimated road development costs between CP 300 and another CP that was harvested before CP 300. The Agreement, which was signed before the earlier CP was harvested, indicated the apportionment between the two CPs as both percentages and dollar amounts. Months after the Agreement was signed, Western provided the Coordinator with updated road development cost estimates as part of the appraisal data it provided with its application for CP 300, and Western requested that the Ministry amend the Agreement to reflect the updated cost estimates. The Ministry refused to amend the Agreement, and the Coordinator calculated the stumpage rates for CP 300 using the dollar amounts set out in the Agreement.

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”), the CAM, the Foresters Act, and past Ministry interpretations of the CAM; (2) the Ministry exercised its discretion under the CAM unreasonably when it declined to amend the Agreement to account for the more accurate information that was available when Western submitted its appraisal data for CP 300; and alternatively, (3) the Agreement required the Coordinator to determine the extended road amortization cost allowances applicable to CP 300 based on the information available when Western submitted its appraisal data 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 deciding appeals under forestry legislation, and de novo powers in hearing those appeals, it was not obligated to give deference to the Coordinator’s decisions. Next, the Commission found that section 105.1 of the Act, read together with the Foresters Act and its bylaws, requires licensees and their forest professionals 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. Accordingly, the Commission found that the accuracy of the licensee’s data is a relevant consideration in a stumpage appraisal.

Turning to the nature of the Commission’s jurisdiction in regard to the Agreement, the Commission found that extended road amortization agreements operate as an integral part of the stumpage appraisal process. The Ministry’s exercise of discretion in making or amending an extended road amortization agreement is an “intermediate component” of that process. Therefore, the Commission’s jurisdiction in deciding stumpage appeals must necessarily include the interpretation and consideration of the Agreement itself, and the jurisdiction to consider whether the Ministry exercised its discretion reasonably in denying the request to amend the Agreement.

Further, the Commission found that the Coordinator should have applied the apportioned percentages in the Agreement to the updated cost estimates that Western provided with the appraisal data for CP 300. The Commission found that the Agreement was unclear as the whether the parties’ intention was to apply the percentage apportionments or the dollar amounts specified in the Agreement. 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 within the Agreement should be updated when the tributary or subsequent CP (i.e., CP 300) is 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 apply the updated cost estimates, which were the most accurate information available when Western submitted the data for CP 300, and in refusing to amend the Agreement. 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 Coordinator’s determinations were reversed, and the matter was remitted back to the Coordinator with directions to re-determine the stumpage rates for CP 300 using the updated cost estimates for CP 300, and to amend the dollar amount in 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 by a forest industry association and his work includes lobbying the government on forestry matters; (2) whether the Commission exceeded its jurisdiction in 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 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, the Court held that a standard of reasonableness applied. According to the reasonableness standard, 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 in the circumstances. The Court considered that most members of the Commission are part-time, and part-time members are not expected to give up their employment. The Court also considered that the pool of qualified 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 had been 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 in the Province. 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 prior to the appeal.

On the substantive issues, the Court held that the Commission had the jurisdiction to determine the issues raised by the appeal. In that regard, the Court agreed with the Commission that the Agreement is an integral part of the stumpage appraisal process in the CAM, and its terms are dictated by the CAM. The Court also found that the Commission properly characterized the decision not to amend the Agreement as an exercise of statutory discretion, which must be exercised in a reasonable manner. 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 the two 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 only when input form the licensee is required, and the information must only be accurate based on the standards set by the CAM. The Court found that there was no need to recalculate the road development costs stipulated in the Agreement when Western submitted the appraisal data for CP 300, because the dollar amounts in the Agreement were deemed by the Agreement to be consistent with the cost base in the CAM and were to be included in the future appraisal of CP 300, whenever it was appraised. 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 as a consequence, the Commission erred when it concluded that the refusal to amend the Agreement was inconsistent with the object and purpose of section 105.1 and was an unreasonable exercise of discretion. In conclusion, the Court found that the Commission’s decision was not within the range of acceptable outcomes.

Accordingly, the appeal was allowed, and the matter was remitted back to the Commission for re-hearing.