Decision Date: December 10, 2009

Court: BCCA; Madam Justice Rowles

Cite: Court of Appeal File No. CA037429

The Forest Appeals Commission and Her Majesty the Queen in Right of the Province of British Columbia (the “Province”) each sought leave from the BC Court of Appeal to appeal a decision of the BC Supreme Court, which had allowed an appeal by Canadian Forest Products Ltd. (“Canfor”) of a decision issued by the Commission.

In Canadian Forest Products Ltd. v. Government of British Columbia, Decision No. 2007-FA-023(a), dated November 13, 2007, the Commission had confirmed a reappraisal of a stumpage rate that applied to timber harvested under a cutting permit issued to Canfor.  The reappraised stumpage rate was set out in a stumpage advisory notice issued in March 2007 by a Timber Pricing Officer with the Ministry of Forests and Range (the “Ministry”).  The reappraisal was triggered when the Ministry determined that there had been a “changed circumstance” as defined in the Interior Appraisal Manual (“IAM”).  The reappraised stumpage rate was higher than the rate set in the stumpage notice sent to Canfor when the cutting permit was issued.  The reappraised rate was effective from January 16 to March 31, 2005, which meant that it was backdated to apply to timber that had already been harvested and scaled.

Canfor had appealed to the Commission on the basis that the reappraised rate could not apply to timber that had already been scaled.  Canfor argued that the section 103 of the Forest Act precludes the retroactive reappraisal of stumpage on timber that has already been scaled.  Canfor submitted that the IAM is a form of subordinate legislation created under the Forest Act, and as such cannot conflict with the Forest Act.   Canfor argued that section 2.4.1 of the IAM conflicts with section 103(1) of the Forest Act, and therefore, is ultra vires the Forest Act.  Canfor submitted that the Commission must refuse to apply section 2.4.1 of the IAM, and rescind the reappraised stumpage rate.

The Commission found that section 2.4.1 of the IAM does not conflict with section 103(1) of the Forest Act.  The Commission held that stumpage rates are determined under section 105 of the Act, and those rates are then applied pursuant to section 103(1) of the Act.  Section 103(1) focuses on the calculation of the amount of stumpage owing, rather than the rate of stumpage, and section 103(1) does not limit the timing of the determination or redetermination of stumpage rates.  Section 103(1) refers to the stumpage rate applicable under section 105, which says that “rates of stumpage must be determined, redetermined and varied …” in accordance with the IAM.  Section 2.4.1 of the IAM permits the reappraisal of stumpage applicable to timber that has already been scaled.  On that basis, the Commission confirmed the reappraised stumpage rate and dismissed the appeal.

Canfor appealed the Commission’s decision to the BC Supreme Court.  Before the Court, Canfor again argued that section 2.4.1 of the IAM is ultra vires the Forest Act because it conflicts with section 103(1) of the Act by permitting the retroactive application of a reappraised stumpage rate to timber that has already been harvested and scaled.

In Canadian Forest Products Ltd. v. British Columbia and the Forest Appeals Commission, 2009 BCSC 1040, the Court allowed Canfor’s appeal.  The Court first considered the standard of review that applied to the Commission’s decision.  The Court applied the test set out in Dunsmuir v. New Brunswick, 2008 SCC 9, and found that the standard of correctness applies when reviewing pure questions of law.  The Court found that the issue in this case was a question of law; namely, the appropriate interpretation of sections 103 and 105 of the Forest Act.  The Court held that this issue did not directly engage the Commission’s specialized expertise, and therefore, the appropriate standard of review in this case is correctness.

The Court then reviewed sections 103 and 105 of the Forest Act.  The Court found that section 103 (1)(c)(i) of the Forest Act contains a mandatory requirement that the amount of stumpage payable must be calculated based on the rate of stumpage applicable to the timber under section 105 at the time that the timber is scaled.  Section 103(1)(c) contemplates the application of stumpage rates only on a prospective basis, to timber that has not yet been scaled.  Section 103(1) is not subject to section 105, although it is expressly subject to other sections of the Forest Act.  Reading sections 103 and 105 together in the context of the Act, the Court found that the Minister’s power to redetermine stumpage rates under section 105(1) does not authorize the re-opening of completed stumpage assessments under section 103(1).  Moreover, the Court held that it is reasonable to assume that the legislature intended some measure of finality to the calculation of stumpage owing under section 103(1), subject to the limited exceptions stated in the Forest Act.

Next, the Court considered the relationship between the IAM and sections 103 and 105 of the Forest Act.  The Court held that the IAM is a form of subordinate legislation enabled by the Forest Act, and as such it is presumed to be inoperative to the extent that it conflicts with the Forest Act.  The Court held that section 2.4.1(1) of the IAM conflicts with sections 103 and 105 of the Forest Act, in that it purports to allow the Ministry to apply a stumpage reappraisal retroactively to timber that has already been scaled.  Consequently, the Court held that section 2.4.1(1) of the IAM is ultra vires the Forest Act, and the Commission erred in finding that there was no conflict between section 103 of the Forest Act and section 2.4.1 of the IAM.

In conclusion, the Court ordered that the Commission’s decision was stayed, and the stumpage advisory notice issued by the Timber Pricing Officer was rescinded.  The Court also declared that section 2.4.1 of the IAM is ultra vires the Forest Act to the extent that it purports to vary the stumpage payable on timber that has already been scaled.

The Province and the Commission each sought leave from the BC Court of Appeal to appeal the judgement of the BC Supreme Court.  Both applications for leave to appeal were granted on December 10, 2009.

Before the BC Court of Appeal heard the appeal, the parties reached an agreement to adjourn the appeals generally, by consent.