On December 23, 2013, the British Columbia Supreme Court (Court) ordered the Province of British Columbia (Province) to pay logging contractor Moulton Contracting Ltd. a sum of $1.75 million in damages for the Province’s failure to warn Moulton Contracting of an imminent blockade by members of the Fort Nelson First Nation (FNFN). The blockade occurred on a Moulton Contracting access road that prevented Moulton Contracting from carrying out logging activity.
This decision follows seven years of legal proceedings, including a Supreme Court of Canada decision on May 9, 2013. The SCC held that FNFN members could not raise an alleged breach of the duty to consult treaty rights as a defence against Moulton Contracting’s tort action arising from a blockade without challenging the licences in question.1
In June 2006, the Province granted Timber Sales Licences (TSLs) to Moulton Contracting to harvest timber in two areas located within the traditional territory of the FNFN. On October 2, 2006, members of the FNFN erected a blockade across a Moulton Contracting access road that, in effect, blocked Moulton Contracting’s access to the timber harvesting sites and prevented the company from carrying out logging activity. Prior to the blockade, members of the FNFN warned the Province that they would attempt to stop logging activity on their land.
Moulton Contracting brought a claim against the Province alleging that it had
breached the terms of the TSL contracts to grant access to the harvesting sites; and
negligently misrepresented that Moulton Contracting would have access to the lands designated in the TSLs and that adequate consultation with Aboriginal groups had taken place.
Moulton Contracting also made a number of claims against FNFN in tort, including interference with contractual relations and interference with the use of Moulton Contracting’s access road.
The Court found that two terms must be implied in the TSLs in order to “give business efficacy” to the licences:
That the Province had engaged in all necessary consultation with affected First Nations and had discharged its duty to consult; and
That the Province was not aware of any First Nation expressing dissatisfaction with the consultation undertaking by the Province, save as the Province had disclosed to Moulton Contracting.
First Implied Term - Consultation
The Court held that the Province breached the first implied term of the TSLs since it did not consult with the FNFN in a manner sufficient to maintain the honour of the Crown. The FNFN had limited capacity to engage with the Province. While the Province was not under an obligation to provide funding for improved capacity, the Court determined that the Province should have done more to improve consultation with the FNFN. Damages were not granted on this ground because there was no causal connection between the lack of consultation and the FNFN’s decision to proceed with a blockade.
Second Implied Term - Notice
The Court found that the Province had a contractual and common law duty to notify Moulton Contracting, as licensee, if it was aware of any First Nation dissatisfaction with the consultation process related to the TSLs. The duty of care arose out of the contractual relationship between the Province and Moulton Contracting, requiring the Province to pass on information of fundamental relevance to Moulton Contracting’s ability to use its rights under the licences.
The Court determined that the Province failed to advise Moulton Contracting of the FNFN’s threat to stop the logging activity. Had Moulton Contracting been advised of the blockade threat, the Court concluded that the company would not have pursued logging under the TSLs and would instead have undertaken its other usual sources of contract work. Consequently, the Court held that the Province breached the second implied term of the TSLs, and therefore it granted damages to Moulton Contracting. The Court used Moulton Contracting’s historical pattern of earnings and operating expenses to calculate damages at $1.75 million
The Court dismissed Moulton Contracting’s tortious claims against the FNFN on the basis that the requirements for common law unlawful conduct had not been met. The Court found that the Province had elected to leave conduct on private forestry roads on Crown land largely unregulated. The FNFM members also did not directly impede physical access to the equipment (e.g., by chaining themselves to it).
Significance for Resource Developers
The Court found that the Province owed both a contractual duty and a common law duty to the developer to disclose information of fundamental relevance when granting resource-development permits. If a government regulator has knowledge of a relevant Aboriginal consultation issue, such as a blockade threat, it must disclose this information when granting permits or risk potential liability for damages to the resource developer.
1Behn v. Moulton Contracting Ltd. 2013 SCC 26, para. 37.