Canada: Logging Company Awarded $1.75 Million For B.C. Government's Failure To Consult

A recent decision of the B.C. Supreme Court suggests that recovering economic losses caused by blockades or activities that interfere with commercial activities will not be straightforward.

After the decision of the Supreme Court of Canada in Behn v Moulton Contracting Ltd., 2013 SCC 26 (summarized in an earlier update here), the B.C. Supreme Court heard the trial of the action commenced by Moulton Contracting Ltd. against the Province of B.C., the Fort Nelson First Nation (FNFN), the Chief of the FNFN, and several members of the FNFN (the Behn Defendants) for economic losses alleged to have been caused by a blockade erected by the Behn Defendants. Although Moulton had commenced the lawsuit in 2006, the trial was adjourned in 2010 pending the Behn decision, which related to an appeal of a ruling to strike portions of the Statement of Defence of the Behn Defendants that related to the Crown's alleged failure to consult and violation of their treaty rights.

The facts leading to the dispute began in June 2006 when Moulton successfully applied for two Timber Sales Licenses (TSLs) for sale by the Province. Under the TSLs, Moulton was given the right to harvest timber in two harvest blocks. The blocks had been included in a recent amendment to the Province's Forest Development Plan (FDP) for the Fort Nelson Forest District following consultation with the FNFN. On July 31, 2006, one of the Behn Defendants advised the Province that he opposed the impending logging under the TSLs and that "he would be going out to stop it". Shortly thereafter, several members of the FNFN erected a blockade that effectively stalled Moulton's harvesting operations. As a result, Moulton could not harvest the timber subject to the TSLs.

In reasons released on December 23, 2013 in Moulton Contracting Ltd v British Columbia, 2013 BCSC 2348 (Moulton), Saunders J. held that the facts did not support a finding of liability as against the FNFN, the Chief of the FNFN, and the Behn Defendants. In considering Moulton's claim under the tort of intentional interference with contractual relations, the court found that Moulton had not established that the defendants had committed an "unlawful act" through erecting the blockade, either through criminal mischief or through an unauthorized act contrary to provincial legislation. The court also rejected Moulton's argument that the participants in the roadblock were engaged in the tort of civil conspiracy.

The court did find, however, that the Province was liable for breach of the TSLs. Specifically, in order to give business efficacy to the TSLs, the court implied the following terms:

  1. that the Province had engaged in all necessary consultation with the FNFN and had discharged its duty to consult; and
  2. that the Province was not aware of any First Nations expressing dissatisfaction with the consultation undertaken by the Province, except as the Province had disclosed to Moulton.

Saunders J. found that the Province did not consult with the FNFN in a manner sufficient to maintain the honour of the Crown, and that the regulatory approval process for the amendment to the FDP was "fundamentally flawed" and did not embody a "transparent consideration" of the FNFN's concerns. While the court did not hold the Province liable for its breach of the first implied term on the basis of a lack of evidence and an exemption clause in the TSLs, the court did find that the Province was liable for breach of the second implied term. In addition, the court also held the Province concurrently liable in tort for breach of a continuing representation, by failing to warn Moulton following the July 31, 2006, warning of an imminent roadblock that could impact the TSLs. In the result, the Province was ordered to pay Moulton $1.75 million, representing Moulton's loss of opportunity to secure other contracts for the 2006-2007 winter logging season arising from the Province's failure to warn Moulton of a potential roadblock.

The Moulton case indicates that the court will impose a high standard in assessing claims of interference with contractual relations with respect to damages arising from First Nations roadblock activity, and strictly require that a plaintiff demonstrate "unlawful activity". Although it was not considered in Moulton, it could be argued that "unlawful activity" could be established if it can be shown that the participants in a roadblock on public land contravened the Land Act, RSBC 1996, c 245 in B.C. A similar argument may be available based on the Public Lands Act, RSA 2000, c P-40 in Alberta, which, inter alia, prohibits obstruction of access to public roads.

Moulton also demonstrates that the court may imply terms to contracts or licenses for resource development that require the Crown to warn operators of an imminent blockade. Nonetheless, it is advisable for companies operating in areas which may be susceptible to a First Nations blockade to review the history of consultation with First Nations in the area prior to the licensing process or contracting with the government, and to have periodic contact with the government to monitor First Nations relations in order to avoid a prolonged litigation experience as was the case for Moulton. However, given that many resource proponents are directly involved in the consultation process, it may be arguable whether a similar implied term would apply in all circumstances.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Laura M. Gill
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