Decision Date: February 10, 2017
Panel: Alan Andison, Howard Saunders, Reid White
Keywords: Forest and Range Practices Act – ss. 52(1), 52(3), 71; Administrative Orders and Remedies Regulation – s. 13(2); unauthorized timber harvesting; reserved timber; administrative penalty; past contraventions; corporate director; biodiversity value
The Forest Practices Board (the “FPB”) appealed a determination issued by the Acting District Manager (the “Manager”), Prince George Operations, Ministry of Forests, Lands and Natural Resource Operations (the “Ministry”). The Manager determined that M.G. Logging & Sons Ltd. (the “Company”) contravened sections 52(1) and 52(3) of the Forest and Range Practices Act (the “FRPA”) by cutting and removing Douglas-fir trees that were to be retained according to a timber sale licence (“TSL”) held by the Company. The Manager levied an administrative penalty of $3,500 against the Company for the contraventions.
The TSL authorized the Company to harvest Crown timber in an area within the Prince George Forest District. The TSL specified that all Douglas-fir trees must be retained except were retention would impede road building, felling, decking or safety. In early 2013, the Company cut and removed, without authority, most of the Douglas-fir on the site while harvesting under the TSL.
Following an investigation by Ministry staff, and after giving the Company an opportunity to be heard, the Manager concluded that the Company’s sole director, Mr. Goncalves, was instructed by Ministry staff during a pre-work meeting, and was reminded during harvesting, that the Douglas-fir were not to be harvested. Mr. Goncalves admitted that he instructed the Company’s logger to harvest Douglas-fir. 522 Douglas-fir stumps were found on the site, including 135 stumps harvested after Mr. Goncalves was warned. 281 cubic metres of Douglas-fir were unlawfully harvested. Allowing a 10% reduction for incidental damage that may normally occur during harvesting, the Manager concluded that the volume of unauthorized harvest was 253 cubic metres.
In calculating the penalty, the Manager considered the factors listed in section 71(5) of the FRPA. The Manager found that there were no previous contraventions of a similar nature by the Company, the magnitude of the contravention was significant because the Douglas-fir trees were reserved for biodiversity reasons, the contraventions were repeated and deliberate, and Mr. Goncalves cooperated with the investigation but made no effort to correct the contraventions. The Manager also found that the Company received an economic gain of $509.60 from the contravention. The Manager calculated the maximum penalty to be $50,600 (253 cubic metres multiplied by $200), based on section 13(2) of the Administrative Orders and Remedies Regulation (the “Regulation”). Taking into account the circumstances and the objective of deterrence, the Manager decided to impose a penalty of $3,500.
The FPB appealed the Manager’s determination on the basis that the penalty was far too low. The FPB submitted that the penalty should be increased substantially to reflect the seriousness of the contravention, particularly based on new evidence regarding the environmental values that were affected by the unauthorized harvest. The FPB also argued that the Manager should have considered evidence of previous contraventions of a similar nature by Mr. Goncalves personally and other companies he controlled. In addition, the FPB submitted that the Manager failed to properly calculate the maximum penalty under section 13(2) of the Regulation, and the $3,500 penalty was too low to compensate the Crown for its ecological losses.
The Commission found that administrative penalties are intended to encourage compliance with the legislation, by providing specific deterrence in respect of the contravener as well as general deterrence in respect of the industry. In addition, administrative penalties for unauthorized timber harvesting have the purpose of compensating the Crown for loss or damage to its resources. These overall purposes, in addition to the specific factors under section 71(5) of the FRPA, should be considered when assessing administrative penalties.
Regarding the relevance of the maximum penalty in assessing the appropriate penalty, section 71(2) of the FRPA states that a penalty may be levied that “does not exceed a prescribed amount”, and in this case, the prescribed amount is calculated under section 13(2) of the Regulation. However, the Commission noted that there are three different ways to calculate the maximum under section 13(2), and the resulting maximums vary depending on which formula is used and the circumstances of the case. Also, there is no legal requirement to calculate the maximum penalty before assessing an administrative penalty, and the maximum penalty is of questionable relevance in determining the seriousness of the contravention. The Commission concluded that the factors listed in section 71(5), and the objectives of deterrence and compensation, provide a more suitable framework for assessing administrative penalties.
Next, the Commission considered whether previous contraventions by Mr. Goncalves in his personal capacity, and by closely related companies of which he was the controlling mind, should be considered “previous contraventions of a similar nature by the person” for the purposes of section 71(5)(a) of the FRPA. A violation ticket was issued to Mr. Goncalves in 2013 for unauthorized harvesting of Crown timber, and a compliance notice was issued to M.G. Logging Ltd. in 2010 for mismarking timber. Mr. Goncalves is the sole director of M.G. Logging Ltd.
The Commission found that a previous “contravention” includes any compliance or enforcement action recorded by the Ministry. A violation ticket is clearly a “contravention”. The Commission also found that official warnings and compliance notices are contraventions, although the weight given to them in a penalty determination will vary with the circumstances. Regarding the meaning of “by the person” in section 71(5)(a) of the FRPA, the Commission found that this phrase is limited to the person who is the subject of the determination, and not directors or officers of a corporate person, or other corporations. However, the Commission held that it is consistent with the objectives of encouraging compliance, and deterring non-compliance, to consider previous non-compliance by a director, an officer, or a closely related company. However, to ensure procedural fairness, the person who is going to be the subject of the determination should be notified, before the penalty is determined, that such past contraventions are being considered, so that the person may make submissions at the opportunity to be heard.
In the present case, the Commission found that the violation ticket issued to Mr. Goncalves in 2013 involved circumstances in which he did not direct the unauthorized harvesting, but it showed that he had previous experience with unauthorized harvesting and he had not been deterred from future noncompliance. The Commission found that the compliance notice issued to M.G. Logging Ltd. in 2010 was not sufficiently relevant to warrant consideration in the present penalty assessment.
Turning to the factors under section 71(5) of the FRPA, the Commission agreed with the Manager’s findings that there were no previous contraventions of a similar nature by the Company, that the magnitude of the contravention was significant, and that Mr. Goncalves cooperated with the investigation but made no effort to correct the contravention. Based on new expert evidence regarding the environmental impact of the contravention, the Commission found that the Douglas-fir trees were ecologically important to the local area, which is near the northern limit for Douglas-fir, and it would take 50 to 100 years for the environment to recover. The Commission also found that the contraventions were continuous and repeated, and there was a high to very high degree of deliberateness, especially regarding the 135 trees harvested after Mr. Goncalves was reminded to retain Douglas-fir. Regarding the economic benefit from the contravention, the Commission estimated that the Company actually lost $2,144.38 based on the stumpage paid on the merchantable volume of Douglas-fir harvested.
Considering all of those factors, and the objectives of deterrence and compensating the Crown for the loss of resources and environmental values, the Commission decided that the penalty should be increased as follows: $6,000 for deterrence; plus $21,128.76 for compensation for lost biodiversity values. Loss of timber values was not included in this penalty, because that loss was addressed through the stumpage was paid by the Company.
Accordingly, the Commission varied the Manager’s determination by increasing the penalty to $27,128.76. The appeal was allowed.