Decision Date: July 14, 2008

Panel: Alan Andison

Keywords:  Forest Act – ss. 103(1), 105(1); Interior Appraisal Manual – ss. 2.4, 5.6.6; stumpage rate; bonus bid; void decision; conflict between subordinate legislation and Act

Pristine Log and Timber Ltd. (the “Appellant”) appealed the total stumpage rate set out in five notices issued by the Timber Pricing Coordinator, Southern Interior Forest Region, Ministry of Forests and Range (the “Ministry”).  The stumpage rate pertained to timber harvested under a non-replaceable forest licence held by the Appellant.  The notices under appeal were issued after the Ministry discovered an omission in previously issued notices.  The original notices had set the total stumpage rate for sawlogs harvested under the licence at $0.25 per m³.  That total stumpage rate omitted the bonus bid of $5.43 per m³, which the Appellant had submitted in its application and tender for the licence, and which was a term of the licence agreement.  In September 2007, the Timber Pricing Coordinator issued the new notices which set the total stumpage rate at $5.68 per m³, retroactive to the periods covered by the original notices.

The Appellant argued that the revised total stumpage rate should apply as of September 1, 2007, rather than retroactively to the periods covered by the original notices.  The Appellant submitted that omitting the bonus bid was “an error… in performing the calculations specified in the manual” under section 2.4(1)(c) of the Interior Appraisal Manual (the “IAM”), and therefore, it was a correctable error.  Under section 2.4(5) of the IAM, if a correctable error is made, then the effective date of the reappraisal is the first day of the month following the date on which notice of the error is received by the regional manager, which would be September 1, 2007, in this case.

The Government submitted that the omission was not “an error… in performing the calculations specified in the manual” under section 2.4(1)(c) of the IAM.  The Government argued that section 5.6.6 of the IAM sets out, as a matter of law, the “total stumpage rate” under the IAM.  Section 5.6.6 states that “The total stumpage rate is the upset stumpage rate plus any bonus bid.”  The Government submitted that the Appellant had harvested and scaled all of the timber under the licence before September 1, 2007, and therefore, applying section 2.4 of the IAM would result in the Appellant paying no bonus bid at all.  The Government argued that failing to pay the bonus bid would conflict with the Appellant’s legal obligation under the licence agreement and section 103(1) of the Forest Act to pay the bonus bid.  The Government submitted that interpretations of the IAM that do not conflict with the Forest Act are preferred under the rules of statutory interpretation.

The Commission considered the meaning of sections 2.4 and 5.6.6 of the IAM, as well as the language in sections 103(1) and 105(1) of the Forest Act.  The Commission found that, although section 103(1) uses the word “stumpage” broadly, subsections (c) and (d) distinguish between the bonus bid and “the rate of stumpage applicable to the timber under section 105” as separate components of the amount payable under section 103.  This provides that the bonus bid is distinct from “the rate of stumpage applicable to the timber under section 105.”  The Commission held that this indicates that the addition of the bonus bid to the upset stumpage rate under section 5.6.6 of the IAM is not a calculation that is “specified in the manual”.  The Commission also found that section 5.6.6 reflects the provisions in section 103(1) of the Forest Act; namely, that the total amount payable to the government on a per cubic metre basis, otherwise known as the total stumpage rate, is the sum of the bonus bid and the rate of stumpage applicable to the timber under section 105, otherwise known as the upset stumpage rate.  Also, section 105(1)(c) of the Forest Act directs that the policies and procedures in the IAM are to be used for the determination of stumpage rates.  The Commission found that the bonus bid is not a stumpage rate; rather, it is a distinct financial obligation under the Forest Act that is added to the stumpage rate to create the “total stumpage rate”.  Therefore, the addition of the bonus bid to the previously calculated stumpage rate is not a calculation specified in the manual, and consequently, it is not a correctable error under section 2.4(1)(c) of the IAM.

Additionally, the Commission held that section 2.4 of the IAM does not contemplate correcting the omission that occurred in this case.  Here, the Timber Pricing Coordinator completely omitted the bonus bid from the total stumpage rate.  If section 2.4 applied, the Appellant would pay no bonus bid on any of the timber harvested.  This omission, and the result that would occur if section 2.4 applied, is contrary to the Appellant’s mandatory legal obligation to pay the bonus bid, as set out in section 103(1) of the Forest Act as well as the licence agreement.  Applying a procedure in the IAM, a form of legislation subordinate to the Forest Act that produces a result which goes against the clear and express language of the Forest Act cannot be what the Minister intended.  The rules of statutory interpretation require that, if there is a plausible interpretation of section 2.4 that avoids conflict with the Forest Act, that interpretation is to be preferred.  Consequently, the Commission found that the types of “errors” contemplated in section 2.4(1) of the IAM do not include a complete failure to include the bonus bid in the total stumpage rate such that the licensee avoids paying any bonus bid whatsoever.

The Commission concluded that the total stumpage rate set out in the original notices was void and the total stumpage rate had to be calculated anew, which is what the Timber Pricing Coordinator did.  The Timber Pricing Coordinator properly included the bonus bid in the new total stumpage rate, and properly set the effective dates of the new notices to be the same as the original notices.

Accordingly, the Commission confirmed the stumpage determinations under appeal.

The appeals were dismissed.