Decision Date: December 10, 2012

Court: BCSC, Justice Armstrong

Cite: 2012 BCSC 1856

The Province of British Columbia (the “Province”) appealed a decision of the Forest Appeals Commission (the “Commission”) to the BC Supreme Court. The decision relates to a cost recovery order issued under the Wildfire Act, and more specifically, the amount that CNR was obligated to pay as a result of causing a fire that damaged or destroyed Crown timber.

On July 29, 2005, a CNR train caused a fire that damaged or destroyed 25,010.8 cubic metres of Crown timber. At the time of the fire, there were no approved plans to harvest the timber. In the Fall of 2006, the salvageable timber was harvested. A total of $4,874.80 in stumpage was paid for 19,809.79 cubic metres of timber, at a stumpage rate of $0.25 per cubic metre of timber.

In 2008, the Fire Centre Manager (the “Manager”), Ministry of Forests and Range (the “Ministry”), determined that CNR had contravened the Wildfire Act and the Wildfire Regulation in causing the fire. The Manager levied penalties of $1,000 for the contravention of the Wildfire Act, and $10,000 for the contravention of the Wildfire Regulation. The Manager also ordered CNR to pay $254,680.38 for the damaged or destroyed Crown timber, which was 75 percent of the timber’s stumpage value at the time of the fire, as calculated by the Manager. CNR appealed to the Commission.

The parties settled several issues before the appeal was heard. The remaining issue for the Commission to decide was the value of the Crown timber that was damaged or destroyed in the fire. The parties agreed on the volume of damaged or destroyed timber, but disagreed on the applicable valuation date for the timber. CNR argued that the timber value should be based on the stumpage rate that applied when the salvaged timber was scaled, which resulted in a value of $6,252.50. In addition, CNR submitted that the Manager had jurisdiction to reduce the amount to 75 percent of the timber value, and that CNR should pay nothing for the timber because stumpage was paid when the timber was salvaged. The Government argued that the timber value should be based on the stumpage rate that applied on the date that the fire ignited, that the Manager had no jurisdiction to reduce the amount to 75 percent of the timber value, and that the claim for cost recovery under the Wildfire Act was unrelated to the stumpage collected when the timber was salvaged.

In Canadian National Railway v. Government of British Columbia (Decision Nos. 2008-WFA-001(a) & 2008-WFA-002(a), issued June 27, 2011), the Commission found that section 27(1)(c) of the Wildfire Act together with section 30(a) of the Wildfire Regulation require that the value of damaged or destroyed timber must be calculated by ascertaining the amount of stumpage applicable under the Forest Act. The Commission found that, under section 103(1) of the Forest Act, if a harvesting agreement had been in place, the damaged timber would have been valued based on the stumpage rate when the timber was scaled, which would have been $0.25 per cubic metre. The Commission also considered section 103(3) of the Forest Act, which describes the procedure for calculating the stumpage owing when a person “cuts, damages, destroys or removes Crown timber without authorization”. Section 103(3) contemplates using the stumpage rate that “would likely have applied to the timber” under section 105(1) of the Forest Act “if rights to the timber had been granted under an agreement entered into under” the Forest Act. The Commission interpreted this to mean that the applicable stumpage rate is the one that would have applied when the timber might have been harvested. The Commission concluded, in this case, the appropriate stumpage rate is not the one that applied when the fire occurred, given that no cutting permit was in place at that time. Rather, it is the rate that would likely have applied in the future, and the most likely future rate is the one that applied when the timber was cruised or scaled; namely, $0.25 per cubic metre.

In addition, the Commission found that the Manager had no statutory authority to reduce the cost recovery order to 75 percent of the timber’s value, and nothing in the legislation indicated that the stumpage paid on the salvaged timber should be applied as a “credit” towards the amount owed by CNR. Accordingly, the Commission concluded that the cost recovery order should be for $6,252.50.

The Province appealed the Commission’s decision to the BC Supreme Court. The Province argued that the Commission erred in law when it held that section 30(a) of the Wildfire Regulation requires the amount of stumpage applicable to damaged or destroyed timber to be ascertained on the date when the timber was scaled or might have been harvested, rather than on the date of destruction. The Province submitted that the Crown’s statutory right to recover the value of damaged or destroyed timber is in the nature of common law “damages,” which crystallize at the time the damage occurs.

The Court applied the standard of “reasonableness” in reviewing the Commission’s decision. This meant that, for the Province to succeed, the Court had to be satisfied that the Commission’s reasoning on the timber valuation question was outside of the range of possible or acceptable outcomes, and indefensible in respect of the law and facts.

The Court held that it was open to the Commission’s conclusion on the valuation date was a reasonable exercise of its specialized expertise in relation to forestry statutes, and was also correct. The Commission acted reasonably in concluding that common law principles on damages did not apply, because the legislation creates a complete scheme for valuing lost Crown timber, and there is clear legislative intent not to follow the common law principles on damages.

In addition, the Court found that the Commission’s decision was based on factual considerations that were reasonable and adequately justified. The Commission clearly and rationally explained its decision regarding the appropriate valuation date. The Commission’s specialized skill and experience qualified it to interpret the legislation and reach a different conclusion than the Manager. It was reasonable for the Commission to decide that the factors affecting the likely valuation date would have included the fact that harvesting rights would be unexercised until a cutting permit was issued.

Accordingly, the appeal was dismissed and the Commission’s decision was upheld.