In its recent decision in Moulton Contracting Ltd. v. British Columbia, the British Columbia Court of Appeal (Court) held that the Province of British Columbia (Province) can contractually exclude liability for losses incurred by forestry companies and other licensees due to third parties’ interference with the licensees’ operations. The Court also dismissed the claim by Moulton Contracting Ltd. (Moulton) that the Province had impliedly represented that it had discharged its duty to consult First Nations before issuing timber sale licences (Licences) to Moulton. This case serves as a reminder to would-be resource developers that a licence to harvest provincial resources is necessary but not always sufficient to carry out the intended operations.

The Court’s decision follows a 2013 decision by the Supreme Court of Canada, summarized in our May 2013Blakes Bulletin: Unauthorized Individuals Cannot Claim Aboriginal Consultation Rights, regarding the communal nature of aboriginal and treaty rights.

BACKGROUND

Moulton obtained the Licences from the B.C. Ministry of Forests (Ministry) to harvest timber in the territory of the Fort Nelson First Nation (First Nation) within the Treaty 8 area of northeastern B.C. The First Nation did not contest the validity of the Licences. However, months before Moulton started its operations, members of the First Nation—the Behn family, who claim aboriginal and treaty rights within the proposed logging area—told the Ministry that they would “stop the logging.” The Ministry did not inform Moulton of this threat until two months later, after Moulton had started its harvesting operations. Subsequently, the Behns carried out their threat, erecting a camp that effectively blocked Moulton’s access to its operations. Within weeks of the blockade, Moulton released all of its workers and its equipment was repossessed the following year.

The British Columbia Supreme Court held that the Province was liable to Moulton for C$1.75-million in damages for failing to warn Moulton of the threatened blockade. The Court of Appeal overturned that decision.

COURT OF APPEAL ANALYSIS

Moulton characterized its claim two ways:

  1. Breach of contract: Moulton alleged that the Province breached implied terms of the Licences that the Province would provide Moulton access to the lands under licence, and that the Province had discharged its duty to consult all relevant aboriginal groups before issuing the Licences.
  2. Negligent misrepresentation: Moulton argued that the Province breached its duty to inform Moulton of circumstances known to the Province that could well interfere with Moulton’s ability to exercise its Licence rights.

In support of its contract claim, Moulton relied on the recent Supreme Court of Canada decision in Bhasin v. Hrynew (summarized in our November 2014 Blakes Bulletin: Let's Be Honest: SCC Finds All Contracting Parties Owe Each Other a Duty of Honesty), which addresses good faith in contractual performance. The Court of Appeal held that Bhasin did not support Moulton’s claim because the Province did not act dishonestly, unreasonably, capriciously or arbitrarily in failing to disclose to Moulton that Mr. Behn had threatened to disrupt the logging.

Fundamentally, the Court upheld the validity of the limitation clause in the Licences, which provided that: “The government is not liable to the Licensee for injuries, losses, expenses, or costs incurred or suffered by the Licensee as a result, directly or indirectly, of an act or omission of a person who is not a party to this Licence, including but not restricted to an act or omission of a person disrupting, stopping or otherwise interfering with the Licensee’s operations under this Licence by road blocks or other means.”

The Court concluded that this clause excluded any governmental liability for the blockade, in particular any liability for failing to warn Moulton of the Behns’ intentions.

IMPLICATIONS

A licence to harvest provincial resources grants the holder authority to harvest the specified resources, but is not a guarantee that the holder will be able to do so. Practically speaking, resource developers seeking licences from provincial governments have very limited scope to negotiate the legal terms of the licence. The terms offered by the Province may exclude governmental liability, as in this case. As a result, companies may seek to protect themselves through other means, such as (a) maintaining close contact with staff at the relevant provincial ministry, requesting frequent updates; and (b) engaging with local First Nations to develop a respectful and open relationship, in order to learn about their interests and concerns. A licensee cannot count on government to volunteer information, even when it is directly relevant to the licensee’s ability to exercise the rights granted under the licence.