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
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
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
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