Part 11.1 of the Forest Act authorizes the "Forest Revenue Audit Program," or FRAP, as it is sometimes called without much affection. Unless you have encountered the business end of FRAP up-close, you may not even have heard of it. Yet to date, FRAP has waged a number of existential battles with those it has suspected of underreporting stumpage, and FRAP can pursue its suspicions with surprising zealotry.
Part 11.1 of the Act authorizes "forest revenue officials" to conduct audits in relation to stumpage revenue. Forest revenue officials possess broad powers to enter a premises to inspect records or demand production of records. If, based upon an audit, an official known as the 'commissioner' determines that stumpage was underreported, the commissioner may estimate the outstanding stumpage and make an assessment against the licensee for that amount. If the commissioner determines that underpayment was willful, he or she may also impose a penalty of up to 100% of the assessment and may impose a penalty of up to 25% of the assessment regardless of willfulness.
The problem is with how an "assessment" is sometimes made and what happens afterwards. For example, FRAP may make an assessment based upon cruise information for a stand of timber, notwithstanding that anyone with any experience in the forest sector will tell you that the difference between what is reported in a cruise and what is actually in a stand of timber may vary dramatically. FRAP may also rely upon check-scales of timber from a given cutting authority, even though a check scale of a particular load of timber is unlikely to represent the timber from the stand at issue as a whole. An assessment based upon these types of evidence is inherently unreliable.
An appeal of a commissioner's assessment is available to the Minister of Finance. Yet, once the commissioner makes an assessment, "the onus of proving otherwise is on the person liable to pay the amount assessed." In other words, the licensee must prove that FRAP is wrong, not the other way around. Even more problematic, an appeal does not delay government's entitlement to commence collection proceedings that could substantially interfere with a licensee's wherewithal to defend itself. There is no time limit for the Minister to complete an appeal and experience indicates that an appeal can take over 18 months.
Even if a licensee does have the wherewithal to fend off government collection agents and mount an appeal, a recent decision of the BC Supreme Court in Timberwolf Log Trading Ltd. v. British Columbia illustrates that an appellant should not expect even-handed treatment during an appeal to the Minister. In that decision, the Court found that the Minister "relied upon submissions from other parties and documents that were not disclosed to the petitioners [the appellants] or referred to in the commissioner's decision" and that the appellants "have been denied access to all of the evidence relied upon by the commissioner and the revenue minister ... and were clearly hampered in their challenge of the reassessment."
The right to know the case against you is a core principle of administrative fairness and justice. In this case, an agency of the Crown appears to have ignored this principle to the detriment of the appellant's ability to meaningfully appeal an assessment to the Minister. So, FRAP can make an assessment based upon unreliable evidence and then require the licensee prove FRAP wrong on appeal to the Minister, even though such an appeal is, apparently, little more than a kangaroo court. Meanwhile, FRAP is free to commence collection proceedings that could disrupt an appellant's finances while the appeal is pending.
The good news is that the Forest Act provides a further appeal to the Courts. In such an appeal, the entire assessment is reopened, and the Court has confirmed its willingness to thoroughly scrutinize all of the evidence, including full-discovery and cross-examination of government officials. Unfortunately, a prospective appellant may not survive long enough to get to the courts, or may have to cut a bad deal in order to survive.
Originally published in BC Forest Professional magazine.
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