On February 26, 2015, the Court of Appeal for British Columbia (the Court) in Moulton Contracting Ltd v. British Columbia overturned a trial judge’s order that the Province of British Columbia (the Province) pay logging contractor Moulton Contracting Ltd. (Moulton) a sum of $1.75 million in damages for the Province’s failure to warn Moulton of a threatened blockade by members of the Fort Nelson First Nation (FNFN). The blockade was carried out and, as a result, Moulton was unable to complete the logging under its Timber Sales Licences (TSLs).
The Court’s decision is the latest in a legal battle that commenced in 2006, and included a decision of the Supreme Court of Canada (SCC) in Behn v. Moulton Contracting Ltd. (See our Osler Update for more on the Behn v. Moulton decision).
The facts and trial decision are summarized in an earlier Osler Update. In brief, after the Province granted TSLs to Moulton, a member of the FNFN informed an employee of the Province that he intended to “stop the logging” because, among other things, timber harvesting in the areas would constitute an infringement of Aboriginal and treaty rights. The Province did not inform Moulton of this threat until two months later, after Moulton had commenced logging. A few days later, members of the FNFN erected a blockade, preventing Moulton from completing the logging under the TSLs.
The trial judge held that the Province breached an implied term of the TSLs by failing to inform Moulton of the threat at the time it was made, and awarded Moulton damages for lost opportunities to enter into alternative logging contracts. Additionally, the trial judge found the Province concurrently liable for a negligent misrepresentation based on an implied continuing representation that it was not aware of any First Nations expressing dissatisfaction with the Province’s consultation, aside from those disclosed to Moulton.
On appeal, the Court held that
- There was no implied term (Dissatisfaction Term) under the TSLs that the Province was not aware of any First Nations expressing dissatisfaction with the Province’s consultation, aside from those disclosed to Moulton; and
- The Province did not negligently misrepresent an implied continuing representation in the same terms, and in any event an exemption clause in the TSLs exempted the Province from liability in the circumstances.
No Implied Term
The Court found that the trial judge erred by implying the Dissatisfaction Term based on the “commercial reality” from the point of view of the parties, rather than the correct test of what the “actual parties in the actual circumstances of the contract intended.”
Moreover, the Court held that the trial judge erred by failing to consider two clauses of the TSLs which were inconsistent with implying the Dissatisfaction Term. Those clauses provided, respectively, (i) the Province reserved the right to suspend a TSL in the event of, among other things, an injunction being granted on account of an infringement of Aboriginal rights; and (ii) that the Province was exempt from liability for losses incurred by the licensee as a result of an act or omission of a person who is not a party to the TSL, including road blocks. Accordingly, the TSLs “contemplate third parties interfering with Moulton’s access to the timber harvest areas, and relieve the Province from liability for those interferences.”
No Negligent Misrepresentation
Additionally, the Court found that the trial judge erred by finding the Province liable for negligent misrepresentation. The Court reasoned that there was no express representation, and no evidence that Mouton was induced or relied on the Dissatisfaction Term in entering into the TSLs. Further, the Court held that there was no basis on which to impose on the Province a duty to disclose to Moulton details of the consultation process at any point. In any event, and specific to this case, the threat to “stop the logging” occurred after Moulton and the Province entered into the TSLs. Finally, for the reasons discussed above, the Dissatisfaction Term was inconsistent with the parties’ contractual relationship under the TSLs.
The Court also reasoned that the exemption clause (discussed above) shielded the Province from liability resulting from the acts of third parties which disrupted, stopped or interfered with timber harvesting under the TSLs. In doing so, the Court rejected Moulton’s argument that the exemption clause was unconscionable.
In this case, the Crown was found not to be civilly liable for a failure to disclose to a counterparty an Aboriginal consultation issue of which it had knowledge. The actual intentions of the parties, as evidenced by the terms of a licence or other agreement, will assist in determining whether such liability may arise.