Case Comment: Teal Cedar Products Ltd. v. British Columbia (Ministry Of Forests)

Expropriation cases are rarely argued at the Supreme Court of Canada.1 In July of 2012, the Supreme Court of Canada granted leave to appeal to Her Majesty the Queen in right of the Province of British Columbia's application in Teal Cedar Products Ltd. v. British Columbia (Ministry of Forests) ("Teal Cedar"). This case will likely be heard in 2013.

British Columbia raised two issues at the Court of Appeal, stating that the lower court judge erred:

In ordering that Teal is entitled to compensation for losses incurred during the period between the creation of the park in July 1995 and the reduction in its allowable annual cut in April 1999; and In failing to quash the award of compound interest.2 In addressing the first issue, the B.C. Court of Appeal's decision focused mainly on whether legislation which does not state the basis for determining compensation is sufficient to rebut the presumption of full compensation for a government taking. More specifically, this issue relates to the scope of damages claimable under the Protected Areas Forest Compensation Act,3(the "Compensation Act") and the Forest Act.4

In addressing the second issue, the B.C Court of Appeal considered whether it should quash the award of compound interest by the arbitrator.5 The Court of Appeal considered Her Majesty's argument that an award of compound interest as a component of compensation is not provided for in the Compensation Act or the Forest Act and offends the Court Order Interest Act.6

While Her Majesty obtained leave to appeal to the Supreme Court only on the second issue, the Court of Appeal's analysis of the scope of full compensation for a government taking in the first issue is helpful in setting the context for the upcoming argument at the Supreme Court on the compound interest issue.

There are numerous benefits to bringing claims for compensation under each province's Expropriation Act or equivalent legislation. Such legislation tends to provide additional protections and benefits for claimants including more expansive entitlements to full compensation and cost provisions that are interpreted broadly and liberally. This legislation embodying the indemnity principle represents the traditional approach to expropriation rights (the "traditional approach").

In addition to the traditional approach, legislation has been enacted in the past several decades relating to quasi or de facto expropriation rights beyond the traditional approach, such as is found in legislation related to natural resources or energy. In Teal Cedar, the Supreme Court of Canada may provide further insight into the scope of compensation owed for a government taking pursuant to these alternative types of statutes.

Background

In Teal Cedar, the claim for compensation is not governed by the compensation scheme set out in the Expropriation Act, R.S.B.C. 1996 c. 125. Rather, it is governed by the Compensation Act and the Forest Act.7

The applicant held a forest license entitling it to harvest annually a stipulated volume of timber from a specified area. In 1993, the Ministry of Forests imposed a moratorium on harvesting timber for the purpose of considering the creation of a new provincial park. In 1995, part of the area at issue was used to create a new provincial park and logging became prohibited within the park boundaries. The applicant's allowable annual cut under its harvesting license was ultimately reduced in 1999.

The applicant's claim for compensation for partial expropriation as a result of the allowable annual cut reduction was submitted to arbitration under the Forest Act, which resulted in an Arbitration Award dismissing the applicant's claim for losses suffered prior to 1999 when the allowable annual cut was reduced and awarding compensation after that period totalling $6.35 million plus compound interest and actual reasonable legal costs agreed upon by the parties on an indemnity basis totalling $1.02 million.

The Supreme Court of British Columbia partially allowed the applicant's application for leave to appeal...