South Yukon Forest Corp. et al. v. Canada, (2012) 431 N.R. 286 (FCA)

• Judge: Evans, Sharlow and Stratas, JJ.A.
• Court: Federal Court of Appeal (Canada)
• Case Date: October 31, 2011
• Jurisdiction: Canada (Federal)
• Citations: (2012), 431 N.R. 286 (FCA);2012 FCA 165

South Yukon Forest Corp. v. Can. (2012), 431 N.R. 286 (FCA)

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[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

Temp. Cite: [2012] N.R. TBEd. JN.017

Her Majesty the Queen (appellant) v. South Yukon Forest Corporation and Liard Plywood and Lumber Manufacturing Inc. (respondents)

(A-307-10; 2012 FCA 165; 2012 CAF 165)

Indexed As: South Yukon Forest Corp. et al. v. Canada

Federal Court of Appeal

Evans, Sharlow and Stratas, JJ.A.

May 31, 2012.

Summary:

South Yukon Forest Corp. (SYFC) and Liard Plywood and Lumber Manufacturing Inc. (LPL), collectively the plaintiffs, sued the Crown to recover damages for pure economic loss and punitive damages relating to the construction, operation and ultimate closure of a sawmill near the town of Watson Lake in the Yukon Territory. The plaintiffs claimed that the mill closed because it did not have an adequate supply of lumber which had been promised by officials of the Department of Indian Affairs and Northern Development (DIAND) before the mill was built. The plaintiffs alleged negligence, negligent misrepresentation (LPL), breach of contract, breach of fiduciary duty and misfeasance in public office.

The Federal Court, in a decision reported 365 F.T.R. 13, allowed the action. The court found that the plaintiffs built the mill because the Crown made a commitment to provide an adequate supply of timber over the long-term, if a mill was built. The court stated that the making of the commitment, by itself, did not carry consequences in law; however, once it was acted upon by the plaintiffs, a unilateral contract came into existence, between the plaintiffs and the Crown. The existence of a contract gave rise to legal obligations. The Crown breached the contract by failing to provide an adequate timber supply over a 20 year term, which caused the mill to close down. The Crown's breach of contract was a direct result of the negligence and bad faith of her servants and agents in the Yukon Regional Office. The breach of contract caused direct financial loss to the plaintiffs. The Crown's promise to provide an adequate supply of timber for the mill was not only the foundation of a contract between LPL, SYFC and the Crown, it was also a negligent misrepresentation vis-à-vis LPL. The court stated that the commitment ("promise") was made to LPL during a scheduled "due diligence" meeting on July 15, 1997. The Crown's promise was intended to induce the construction of the mill. That promise, or commitment, was negligently made by the Crown's servants who knew, at the time, that the representation was untrue and would be relied upon. The other causes of action were not established. The court assessed damages, including an award of punitive damages. The Crown appealed.

The Federal Court of Appeal allowed the appeal, set aside the judgment of the Federal Court, and dismissed the actions by SYFC and LPL. The court held that there was no legal basis for liability on the part of the Crown in these circumstances. Negligent misrepresentation was not established because any reliance by SYFC and LPL on the representations by the Crown's servants was not reasonable. As to the contract claim, a unilateral contract could not come into being in these circumstances. Negligence based on delay by the Crown was not established.

Contracts - Topic 8

General principles - General - Unilateral v. bilateral contracts (incl. what constitutes a unilateral contract) - Following a sawmill closure in the Yukon Territory due to inadequate lumber supply, the mill owners (plaintiffs) sued the Crown for damages for breach of contract - The plaintiffs claimed that a unilateral contract came into existence when the Crown orally promised the plaintiffs a long-term supply of wood for the mill, if the plaintiffs built the mill - The Federal Court agreed that a binding unilateral contract came into existence which the Crown breached by failing to supply an adequate supply of timber for the mill - The Crown appealed - The Federal Court of Appeal allowed the appeal - As a matter of law, a unilateral contract could not come into being in these circumstances because the Crown officials had no authority to bind the Governor-in-Council to grant a timber harvesting agreement (Territorial Lands Act, s. 8) - Where a statute regulated the power to make contracts, such as s. 8, a contract binding on the Crown did not come into existence until the requirements of the statute were fulfilled - See paragraphs 66 to 72.

Crown - Topic 1001

Contracts with Crown - General principles - General (incl. what constitutes) - Unilateral contract - [See Contracts - Topic 8 ].

Crown - Topic 1565

Torts by and against Crown - Negligence by Crown - Issuance of permits - Following a sawmill closure in the Yukon Territory, the mill owners (plaintiffs) sued the Crown for damages, alleging negligence because of the failure by Crown officials to issue commercial timber permits in a timely manner, resulting in an inadequate lumber supply for the mill - The Federal Court held that the Crown was negligent in failing to issue - The Crown appealed - The Federal Court of Appeal allowed the appeal - The plaintiffs' losses could not be attributed to the delay by the Crown - See paragraphs 80 to 85.

Crown - Topic 1576

Torts by and against Crown - Negligence by Crown - Negligent advice or misrepresentation - Following a sawmill closure in the Yukon Territory due to inadequate lumber supply, the plaintiff mill owners sued the Crown for damages for economic loss, alleging negligent misrepresentation - The plaintiffs alleged that Crown officials had represented to them that if they built the mill, the Crown would ensure an adequate supply of timber by granting permits to harvest lumber in a timely fashion - The plaintiffs claimed that their reliance on those representations was reasonable - The Federal Court agreed - The Crown appealed - The Federal Court of Appeal allowed the appeal - The plaintiffs' reliance was unreasonable - The plaintiffs had to be taken as knowing that pursuant to s. 8 of the Territorial Lands Act, only the Governor-in-Council, not Crown officials, had authority to grant a timber harvesting agreement - Alternatively, as a matter of law, the Federal Court could not have found reasonable reliance on the part of the plaintiffs given the totality of the representations made to them in this case - See paragraphs 56 to 65.

Crown - Topic 4001

Actions by and against the Crown in right of Canada - General - The Federal Court of Appeal stated that it was well-established that an action does not lie to enforce substantive expectations encouraged by government officials - See paragraph 79.

Crown - Topic 4005

Actions by and against Crown in right of Canada - General - For failure to issue licences or permits - [See Crown - Topic 1565 ].

Crown - Topic 6881

Crown lands - Licences or permits to use - General - Section 8 of the Territorial Lands Act provided that "Subject to this Act, the Governor in Council may authorize the sale, lease or other disposition of territorial lands and may make regulations authorizing the Minister to sell, lease or otherwise dispose of territorial lands subject to such limitations and conditions as the Governor in Council may authorize" - The Federal Court of Appeal held that s. 8 was a mandatory provision - See paragraphs 61 to 63.

Crown - Topic 6881

Crown lands - Licences or permits to use - General - [See Crown - Topic 1576 ].

Fraud and Misrepresentation - Topic 2508

Misrepresentation - General principles - Negligent misrepresentation - [See Crown - Topic 1576 ].

Fraud and Misrepresentation - Topic 2512

Misrepresentation - General principles - Action for economic loss arising from misstatement - [See Crown - Topic 1576 ].

Fraud and Misrepresentation - Topic 2535

Misrepresentation - Elements - Reliance - [See Crown - Topic 1576 ].

Mistake - Topic 202

Mistake of law - Ignorance of the law - [See Crown - Topic 1576 ].

Practice - Topic 8800

Appeals - General principles - Duty of appellate court regarding findings of fact - The Federal Court of Appeal stated that in deciding whether a trial judgment should be set aside because it rested upon faulty findings of fact, the standard of review was "palpable and overriding error" - The court stated that "palpable and overriding error" was a highly deferential standard of review - "Palpable" meant an error that was obvious - "Overriding" meant an error that went to the very core of the outcome of the case - The court stated that "When arguing palpable and overriding error, it was not enough to pull at leaves and branches and leave the tree standing. The entire tree must fall" - See paragraphs 42 to 46.

Statutes - Topic 5126

Operation and effect - Enabling acts - Obligatory, mandatory, imperative and absolute Acts - What constitutes a mandatory power - [See Crown - Topic 6881 ].

Cases Noticed:

Waxman et al. v. Waxman et al. (2004), 186 O.A.C. 201 (C.A.), refd to. [para. 44].

H.L. v. Canada (Attorney General) et al., [2005] 1 S.C.R. 401; 333 N.R. 1; 262 Sask.R. 1; 347 W.A.C. 1; 2005 SCC 25, refd to. [para. 46].

Peart et al. v. Peel Regional Police Services Board et al. (2006), 217 O.A.C. 269 (C.A.), refd to. [para. 46].

Queen (D.J.) v. Cognos Inc., [1993] 1 S.C.R. 87; 147 N.R. 169; 60 O.A.C. 1, refd to. [para. 57].

League for Human Rights of B'nai Brith Canada v. Canada (Attorney General) et al. (2010), 409 N.R. 298; 2010 FCA 307, refd to. [para. 61].

League for Human Rights of B'nai Brith Canada v. Odynski - see League for Human Rights of B'nai Brith Canada v. Canada (Attorney General) et al.

M & D Farm Ltd. et al. v. Manitoba Agricultural Credit Corp., [1999] 2 S.C.R. 961; 245 N.R. 165; 138 Man.R.(2d) 161; 202 W.A.C. 161, refd to. [para. 63].

British Columbia (Attorney General) v. Canada (Attorney General), [1994] 2 S.C.R. 41; 166 N.R. 81; 44 B.C.A.C. 1; 71 W.A.C. 1, refd to. [para. 63].

Wind Power Inc. et al. v. Saskatchewan Power Corp. (2002), 217 Sask.R. 193; 265 W.A.C. 193; 2002 SKCA 61, leave dismissed (2002), 307 N.R. 199; 238 Sask.R. 159; 305 W.A.C. 159 (S.C.C.), refd to. [para. 64].

Jacques-Cartier Bank v. The Queen (1895), 25 S.C.R. 84, refd to. [para. 69].

The King v. Vancouver Lumber Co. (1914), 41 D.L.R. 617 (Ex. Ct.) affd. (1919), 50 D.L.R. 6 (P.C.), refd to. [para. 69].

CAE Industries and CAE Aircraft Ltd. v. Canada, [1986] 1 F.C. 129; 61 N.R. 19 (F.C.A.), refd to. [para. 59].

The Queen v. Woodburn (1899), 29 S.C.R. 112, refd to. [para. 71].

Angevine v. Ontario, [2011] O.T.C. Uned. 4523; 2011 ONSC 4523, refd to. [para. 72].

Old St. Boniface Residents Association Inc. v. Winnipeg (City) et al., [1990] 3 S.C.R. 1170; 116 N.R. 46; 69 Man.R.(2d) 134, refd to. [para. 79].

Reference Re Constitutional Question Act (B.C.), [1991] 2 S.C.R. 525; 127 N.R. 161; 1 B.C.A.C. 241; 1 W.A.C. 241, refd to. [para. 79].

Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817; 243 N.R. 22, refd to. [para. 79].

Apotex Inc. v. Merck & Co. and Merck Frosst Canada Inc., [1994] 3 S.C.R. 1100; 176 N.R. 1, affd. [1994] 1 F.C. 742; 162 N.R. 177 (F.C.A.), refd to. [para. 84].

Just v. British Columbia, [1989] 2 S.C.R. 1228; 103 N.R. 1, refd to. [para. 85].

Brown v. British Columbia (Minister of Transportation and Highways), [1994] 1 S.C.R. 420; 164 N.R. 161; 42 B.C.A.C. 1; 67 W.A.C. 1, refd to. [para. 85].

Comeau's Sea Foods Ltd. v. Canada (Minister of Fisheries and Oceans), [1997] 1 S.C.R. 12; 206 N.R. 363, refd to. [para. 85].

Statutes Noticed:

Territorial Lands Act, R.S.C. 1985, c. T-7, sect. 8 [para. 50].

Authors and Works Noticed:

Hogg, Peter W., and Monahan, Patrick J., Liability of the Crown (3rd Ed. 2000), pp. 225 to 226 [para. 69].

Counsel:

Suzanne M. Duncan and Sean Gaudet, for the appellant;

Lenard M. Sali, Q.C., April Grosse and Andrew Wilson, for the respondents.

Solicitors of Record:

Myles J. Kirvan, Deputy Attorney General of Canada, Ottawa, Ontario, for the appellant;

Bennett Jones, LLP, Calgary, Alberta, for the respondent.

This appeal was heard at Halifax, Nova Scotia, on October 31, 2011, before Evans, Sharlow and Stratas, JJ.A., of the Federal Court of Appeal. The decision of the court was delivered by Stratas, J.A., at Ottawa, Ontario, on May 31, 2012.