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On December 23, 2013, the British Columbia Supreme Court (“BCSC”) released its decision in the Moulton Contracting Ltd. (“Moulton”) case.  The case arose as a result of a blockade erected within Treaty 8 territory by members of the Behn family who are members of Fort Nelson First Nation (“FNFN”).  The blockade prevented Moulton from accessing lands and harvesting timber resources as authorized by two Timber Sale Licences (“TSLs”) that it purchased from the Province.  Moulton sued for damages for their business losses.

In cases where the court has found a breach of the duty to consult, the typical order is that the Crown and the First Nation should engage in further consultations.  However, here the Province had to pay the company $1.75 million because the Province failed to give the company information it had in hand from the consultation process (i.e., the possibility of a blockade).

A preliminary issue had already been decided by the Supreme Court of Canada (“SCC”).  In the Behn case, the SCC ruled, in May 2013, that individual members did not have standing to allege a breach of the Crown’s duty to consult without the authorization of FNFN.  Further, the SCC ruled that the defence of the Crown’s failure to consult was an abuse of process because the Behns did not bring a legal challenge to the TSLs before blockading.

After the SCC decided the pleadings issue, Moulton’s damages claim returned to trial. Moulton brought the following claims:

Against FNFN and individual members of the Behn family:

  1. Intentional interference with Moulton’s contractual rights under the TSLs and Road Permit;
  2. Intentional interference with Moulton’s economic interests;
  3. Mischief (under the Criminal Code) by obstruction, interruption or interference with Moulton’s use, enjoyment, or operation of its property, its TSLs and Road Permit; and
  4. Conspiracy with the intent to cause mischief or intentional interference.

Against the Province:

  1. Breach of contract in failing to provide Moulton with access to the TSL lands;
  2. Breach of a contractual term that the Crown had fulfilled its duty to consult; and
  3. Negligent continuing misrepresentations that access to TSL lands would be granted and that consultation had taken place.

The trial judge ultimately found the Province liable for breaching an implied term of the TSLs and awarded damages to Moulton in the amount of $1.75 million.

Liability of FNFN and Individual FNFN Members

The trial judge found that neither FNFN nor the Behn family were liable to Moulton for damages. 

With respect to FNFN, the trial judge found that there was no evidence that Chief and Council supported or participated in the blockade themselves.

Moulton’s claims against the Behn family failed primarily because of the limited type of property interests that Moulton held under the TSLs and Road Permit. The property interests granted to Moulton by the terms of the TSLs and Road Permit were non-exclusive and did not provide Moulton with rights to the land itself. Additionally, there was no regulation of the blockaded road that made the conduct of the Behn family unlawful and the predominant purpose of the blockade was not to injure Moulton but to protest the Province’s consultation efforts and infringement of aboriginal rights.

Liability of the Province

The trial judge found that the Province was not liable for breach of contract in failing to provide Moulton with access to lands because no terms within the TSLs or Road Permit guaranteed or promised unimpeded access to Moulton.

However, the trial judge did find that the TSLs contained two implied contractual terms in order to give them “business efficacy”. These two implied contractual terms were: (1) that the Province has engaged in all necessary consultation and has discharged its duty to consult; and (2) that the Province has informed Moulton of any First Nations expressing dissatisfaction with the consultation.  The trial judge found that the Province breached both of these; however, only the second resulted in liability.

Regarding the first implied term, the trial judge found that the Province’s consultation duty to FNFN with respect to the TSLs was on the low end of the Haida spectrum.  Despite this, the Province failed to discharge its duty. Central to this finding was the Province’s knowledge of FNFN’s limited capacity to evaluate forestry referrals.  The trial judge held at paras. 292, 296:

On the totality of the evidence, I cannot find that the Province consulted with FNFN in a manner sufficient to maintain the honour of the Crown. The FNFN Lands Department operated with substantially limited capacity. To the knowledge of BCTS and MOF, it had no real ability to undertake meaningful evaluation of forestry proposals. That is not to say, by any means, that the Province was under an obligation to provide funding for improved capacity. But, knowing of the limitations facing the Lands Department, BCTS could have done much more than it did.

… FNFN’s ability to engage was hampered due to capacity issues, the Province owed to the First Nation a duty to broaden the informational component, to facilitate a true dialogue. If the process of consultation could not be completed in a timely manner before the FDP Amendment was approved, the Province owed a duty to delay posting the TSLs for sale.

The trial judge also found that the Province’s failure to provide FNFN any information regarding wildlife habitat in response to their stated concerns about impacts on wildlife was a breach of its duty to consult. Additionally, the trial judge found the Province’s lack of transparent communication between its different ministerial bodies regarding FNFN’s concerns was a fundamental flaw.

The Province, however, was found not liable to Moulton for damages resulting from failing to discharge its duty to consult FNFN because the TSLs included a clause exempting the Province from liability in the event of a blockade.  The Court also noted that there was no causal connection between the failed consultation and the blockade by the Behn family members (i.e., the Behn family members were opposed to the project and would likely still have blockaded, even if the Province had consulted with FNFN).

Regarding the breach of the second implied term, a member of the Behn family had made their intentions to blockade known to the Province and the trial judge held that the Province owed a duty to pass on such knowledge to Moulton.  The trial judge found that had Moulton known of the Behns’ intentions it would have chosen to log elsewhere.  In this way, there was a causal connection between the Province’s failure to notify Moulton and Moulton’s losses.

Comments

The BCSC decision in the Moulton case has implications with respect to the potential for Crown liability to third parties where it fails to meet its duty to consult. The finding of implied contractual terms in TSLs may extend to other kinds of authorizations, licenses or dealings between companies and the Crown.  The potential for liability to companies for loss of economic interests ought to provide a further incentive for the Crown to make good faith efforts to fulfill its constitutional obligations to First Nations.  The Crown’s fulfilment of an obligation to notify licensees of First Nations’ dissatisfaction with consultation would allow companies to choose not to proceed (as would have Moulton) or work with First Nations to address their concerns where the Province has failed to do so.

The decision also makes it clear that companies may sue First Nations or their individual members for economic losses from blockades.  Like all cases, this all depends on the facts. Here, FNFN was found not liable because there was no evidence that they supported or participated in the blockade; the Behn family members were not liable because of the specific terms of the licenses and permits held by Moulton.

The decision is also significant because it found that a duty to consult on the low end of the spectrum was not fulfilled by the Province, in part due to the Crown’s knowledge that FNFN lacked the capacity to evaluate referrals.  Though there is no duty to provide funding for First Nations capacity, the Court made clear that the Crown is required to accommodate a First Nation’s limited capacity by some means in order to discharge its duty to consult.  For example,  that lack of capacity might require the Crown to adapt timelines, assist First Nations in locating Crown resources for capacity, assist the First Nation to understand the proposed activity including by way of intensive on the ground review, and provide more information.

It will be interesting to see whether the Province will appeal this decision and/or amend the language of their permits to further insulate themselves from liability to third party companies.

This case summary provides our general comments on the case discussed and should not be relied on as legal advice. If you have any questions about this case or any similar issue, please contact any of our lawyers practicing in Government-To-Government Relationships.

 


Posted in Case Summaries, Duty to Consult