Canadian Forest Products Ltd v Alberta (Environment and Parks), 2016 ABQB 628

Court of Queen’s Bench of Alberta Citation: Canadian Forest Products Ltd v Alberta (Environment and Parks), 2016 ABQB 628 Date: 20161122 Docket: 1503 15374 Registry: Edmonton Between: Canadian Forest Products Ltd Applicant - and - Her Majesty the Queen In Right of Alberta As Represented by the Minister of Environment and Parks Respondent _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice R.

Paul Belzil _______________________________________________________ The Application [ 1 ] The Applicant, Canadian Forest Products Ltd (CANFOR), seeks Judicial Review from a decision to impose an administrative penalty on it in connection with the harvesting of merchantable timber under license. [ 2 ] CANFOR acknowledges that the Director who imposed the penalty had the jurisdiction to do so.

However, CANFOR alleges that the Director improperly fettered his discretion, prejudged the issue or acted out of bias. [ 3 ] In addition, CANFOR alleges that the Director breached requirements of procedural fairness and as well alleges that the Director utilized an incorrect regulatory provision. Factual Background and Regulatory Scheme

[ 4 ] CANFOR was granted a timber license pursuant to the provisions of the Forests Act , RSA 2000, c F-22 (Act) and the Timber Management Regulation , Alta Reg 60/1973 (TMR) relating to the harvesting of timber in northwestern Alberta. [ 5 ] Timber licenses are subject to terms and conditions and failure to comply with them is a contravention of the TMR , for which a penalty may be imposed. [ 6 ] One of the terms and conditions of the timber license granted to CANFOR is that it would harvest all merchantable timber in the area in which it was harvesting. [ 7 ] In August 2013, forestry program staff (staff) observed 288 piles of unutilized merchantable pieces of timber at a CANFOR storage yard. [ 8 ] The decision that is the subject of this application for Judicial Review, is a decision of Lori Paulovich, Regional Compliance Manager, (RCM) Peace Region, Alberta Environment and Parks (AEP) on August 10, 2015, to issue an administrative penalty in the amount of $121,500 under the Act . [ 9 ] Prior to June 2, 2015, AEP was known as Alberta Environment and Sustainable Resource Developments (ESRD).

Paulovich in his position as RCM for ESRD Peace Region was designated as a Director for the purpose of s 59 of the Act under Ministerial Order 52/2013 (M0 2013). [ 10 ] ESRD issued a coniferous timber quota to CANFOR for the period May 1, 2012, expiring April 30 2030. [ 11 ] In furtherance of the timber quota, CANFOR was issued a timber license to harvest coniferous timber for the period November 22, 2004 expiring April 30, 2019. [ 12 ] The timber license requires that CANFOR comply with all of the terms and conditions of the license. [ 13 ] In

summary, CANFOR is required to harvest all merchantable trees as outlined in the utilization standards which were set out. [ 14 ] On October 9, 2013 staff again attended at the CANFOR storage yard and observed unutilized merchantable timber. [ 15 ] On November 27, 2013 CANFOR was advised by ESRD staff that an investigation had been started into assessing the amount of waste timber observed. [ 16 ] On December 9, 2013, ESRD staff again visited the location to count the amount of merchantable timber in the 288 piles, but due to CANOR’s operational constraints, only two of the piles were made available for counting. [ 17 ] On April 9, 2014 ESRD staff again confirmed that it was conducting an investigation, the investigation was not complete and that there may be enforcement action arising from the investigation. [ 18 ] On May 13, 2014 in response to the April 9, 2014 letter, CANFOR requested a meeting with ESRD staff. [ 19 ] On May 26, 2014 CANFOR representatives met with ESRD staff and the Director. [ 20 ] During the meeting CANFOR was advised the Director had assigned two investigators to the file and that offences were being considered. [ 21 ] On July 10, 2015, the Director provided to CANFOR the preliminary assessment of the administrative penalty in the amount of $122,100 and CANFOR was encouraged to bring forward any additional information that it wished to present. [ 22 ] On July 14, 2015, the Director and CANFOR representatives met to review the facts on which the preliminary assessment was based.

CANFOR provided some documents at the meeting and on July 17, 2015 the Director received an email from CANFOR requesting an additional meeting, so that senior CANFOR representatives could attend. [ 23 ] On July 20, 2015, the Director invited senior CANFOR representatives to provide any new information and advise that he was able to meet again on July 22 and requested that CANFOR provide any new information by July 24. [ 24 ] On July 20, 2015, a senior CANFOR representative advised the Director that because the preliminary assessment was based on “different sections of legislation and on a different penalty mechanism that they had been understanding” CANFOR would provide additional information and requested an extension of the issuance of the final notice to August 30, 2015. [ 25 ] In response, on July 20, 2015, the Director advised that he was unable to provide an extension beyond July 28, 2015. [ 26 ] On July 31, 2015 a senior CANFOR representative called the Director requesting an extension to August 4, 2015 so that CANFOR could provide additional information, which extension was granted. [ 27 ] CANFOR sent an email to the Director on August 3, 2015 comprising its response to the preliminary assessment. [ 28 ] On August 10, 2015 the Director issued the Notice of Administrative Penalty (Notice) which required payment of $120,500 along with his reasons for the decision.

The Director noted that the penalty had been reduced by $1,600 to reflect CANFOR’s assistance in spreading the piles for timber counting. The reasons for decision are detailed, comprising nine pages. [ 29 ] On August 17, 2015 the Director personally served the Notice and his Reasons for Decision on CANFOR. [ 30 ] On September 16, 2015, CANFOR paid the Administrative Penalty in full.

Determining the Standard of Review [31] In Dunsmuir v New Brunswick, 2008 SCC 9 the Supreme Court of Canada mandated that two standards of review be utilizedin administrative law, reasonableness and correctness. [32] The differential standard of review of reasonableness was defined in para 47: 47 Reasonableness is a deferential standard animated by the principle that underlies the development of the two previous standards ofreasonableness: certain questions that come before administrative tribunals do not lend themselves to one specific, particular result.Instead, they may give rise to a number of possible, reasonable conclusions.

Tribunals have a margin of appreciation within the range ofacceptable and rational solutions. A court conducting a review for reasonableness inquires into the qualities that make a decisionreasonable, referring both to the process of articulating the reasons and to outcomes. In judicial review, reasonableness is concernedmostly with the existence of justification, transparency and intelligibility within the decision-making process.

But it is also concernedwith whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law. [33] At paras 53 and 54 the court commented on the use of the reasonableness standard: 53 Where the question is one of fact, discretion or policy, deference will usually apply automatically (Canada (Attorney General) v.Mossop, (SCC), [1993] 1 S.C.R. 554, at pp. 599-600; Dr. Q, at para. 29; Suresh, at paras. 29-30).

We believe that thesame standard must apply to the review of questions where the legal and factual issues are intertwined with and cannot be readilyseparated. 54 Guidance with regard to the questions that will be reviewed on a reasonableness standard can be found in the existing case law.Deference will usually result where a tribunal is interpreting its own statute or statutes closely connected to its function, with which itwill have particular familiarity: Canadian Broadcasting Corp. v. Canada (Labour Relations Board), (SCC), [1995] 1S.C.R. 157, at para. 48; Toronto (City) Board of Education v.

O.S.S.T.F., District 15, (SCC), [1997] 1 S.C.R. 487, atpara. 39. Deference may also be warranted where an administrative tribunal has developed particular expertise in the application of ageneral common law or civil law rule in relation to a specific statutory context: Toronto (City) v. C.U.P.E., at para. 72. Adjudication inlabour law remains a good example of the relevance of this approach. The case law has moved away considerably from the strictposition evidenced in McLeod v. Egan, (SCC), [1975] 1 S.C.R. 517, where it was held that an administrative decisionmaker will always risk having its

interpretation of an external statute set aside upon judicial review. [34] In Smith v Alliance Pipeline Ltd, 2011 SCC 7, the Court reiterated the Dunsmuir analysis at para 26: 26 Under Dunsmuir, the identified categories are subject to review for either correctness or reasonableness. The standard ofcorrectness governs: (1) a constitutional issue; (2) a question of "general law 'that is both of central importance to the legal system as awhole and outside the adjudicator's specialized area of expertise'" (Dunsmuir, at para. 60 citing Toronto (City) v.

C.U.P.E., Local 79,2003 SCC 63, [2003] 3 S.C.R. 77, at para. 62); (3) the drawing of jurisdictional lines between two or more competing specializedtribunals; and (4) a "true question of jurisdiction or vires" (paras. 58-61). On the other hand, reasonableness is normally the governingstandard where the question: (1) relates to the

interpretation of the tribunal's enabling (or "home") statute or "statutes closely connectedto its function, with which it will have particular familiarity" (para. 54); (2) raises issues of fact, discretion or policy; or (3) involvesinextricably intertwined legal and factual issues (paras. 51 and 53-54). [35] In Alberta (Information and Privacy Commissioner) v Alberta Teachers’ Association, 2011 SCC 61 at para 39 the Courtobserved that the default position in interpreting the home statute is the standard of review of reasonableness: 39 What I propose is, I believe, a natural extension of the approach to simplification set out in Dunsmuir and follows directly fromAlliance (para. 26).

True questions of jurisdiction are narrow and will be exceptional. When considering a decision of an administrativetribunal interpreting or applying its home statute, it should be presumed that the appropriate standard of review is reasonableness. Aslong as the true question of jurisdiction category remains, the party seeking to invoke it must be required to demonstrate why the courtshould not review a tribunal's

interpretation of its home statute on the deferential standard of reasonableness. [36] On November 4, 2016, being the day following argument in this application, the Supreme Court of Canada released itsdecision in Edmonton (City) v Edmonton East (Capilano) Shopping Centres Ltd, 2016 SCC 47, in which the Court again dealt with theissue of standard of review. [37] The Capilano decision deals with the issue of the owner of a shopping centre disputing a Municipal Property Tax Assessmentbefore the Assessment Review Board. [38] Following the release of the Capilano decision, I wrote to counsel requesting further written argument as to whether thedecision affected their positions in the application before me. [39] Counsel for CANFOR replied that this decision was not relevant to the application as it dealt with the administrative decisionmaker’s

interpretation of the enabling statute. [40] Counsel went on to point out, however, that Capilano does contain comments about procedural fairness in context of the timerequired to apply but as counsel noted, the factual circumstances are different than those arising in this application. [41] Counsel for the Respondent replied that the majority decision reaffirms the Court’s earlier decisions in Smith v AlliancePipeline Ltd, and Alberta (Information and Privacy Commissioner) v Alberta Teachers’ Association. [42] In my view, the majority’s decision in Capilano, albeit involving a significantly different set of facts, is instructive in that it

does reaffirm the presumption that the standard of review of reasonableness applies, if the administrative decision involves the homestatute (see para 22).

Which Standard of Review Should be Utilized? [43] The parties agree that the process to be used in determining the standard of review, but disagree in part, on which standard ofreview should be utilized on an issue by issue basis. [44] The issue of which standard of review should be utilized, engages the related issue of which issues attract a stand-alonestandard of review. [45] The parties agree that the standard of review of reasonableness applies to the issue of whether the administrative penaltyshould have been issued, whether it should have been issued under s 100(1)(

e) of the TMR as opposed to s 100(1)(

b) and the amount ofthe penalty. [46] CANFOR argues that the actions of ESRD constitute a breach of procedural fairness and that it fettered its discretion orcontravene the rule against bias. [47] CANFOR argues that these stand-alone issues attract a standard of review of correctness. [48] The Respondent does not agree that the issues of procedural fairness, fettering of discretion or bias are stand-alone issuesattracting the standard of review of correctness. [49] Rather, the Respondent argues that they are subsumed within the standard of review of reasonableness pertaining to theexercise of discretion in issuing the penalty. [50] However, the Respondent does agree that the standard of review of correctness would apply in determining whether theDirector did satisfy the duty of procedural fairness. [51] Dealing initially with the issue of procedural fairness, I agree with the Respondent, that determining the extent of the duty ofprocedural fairness, attracts the standard of review of reasonableness whereas the standard of review of correctness applies to the issue ofwhether the duty of procedural fairness was in fact met. [52] Respecting the issues of fettering of discretion and bias, it was held in Alberta (Director of Assured Income for the SeverelyHandicapped) v Januario, 2013 ABQB 677 at paras 35 and 36 and in Kolody v Alberta (Environment and Sustainable ResourceDevelopment), 2016 ABQB 360 at paras 15 to 18 that they are no longer stand-alone grounds for judicial review but rather are subsumedinto the standard of review of reasonableness. [53] In the result, the issues of procedural fairness, fettering of discretion and bias are subsumed within the standard of review ofreasonableness of the decision to impose the penalty.

Was There a Breach of Procedural Fairness? [54] The Applicant argues that the actions of ESRD constitute a breach of procedural fairness. [55] It is well established in the jurisprudence, that administrative decision makers owe a duty of procedural fairness, Baker vCanada (Minister of Citizenship and Immigration), (SCC), [1999] 2 SCR 817 at para 20. [56] At paras 21 to 28 the Court outlined that the duty of procedural fairness is flexible and variable, in other words, it is not afixed concept. [57] The Court identified the following factors which are relevant to determining the level of procedural fairness required: 1.

Nature of the decision being made and the process followed in making it. 2. Nature of the statutory scheme. 3. Importance of the decision to the party. 4. The legitimate expectations of the party as to what procedures will be followed. 5.

What choice of procedure was adopted within the framework of the regulatory scheme. [58] Counsel for CANFOR concedes that the decision to issue an administrative penalty is not equivalent to proceedings in a courtof law but argues nonetheless that there were breaches of procedural fairness. [59] Specifically, it is argued that CANFOR was not given sufficient time to review its own files and explain its position. [60] CANFOR acknowledges that Paulovich met with CANFOR representatives on July l4, 2015 and that CANFOR was given anextension to provide a response, which was ultimately provided on August 3, 2015.

[ 61 ] CANFOR argues that its difficulties regarding the preliminary assessment were compounded by the fact that the preliminary assessment was based on different sections of the Act and utilized a different method of calculating the penalty. [ 62 ] In response the Respondent agrees that the Applicant was owed a duty of procedural fairness, which it argues was satisfied. [ 63 ] The Respondent notes that the only requirement in the Act is that the penalty be issued within two years after the alleged contravention comes to the attention of the Director, which would result in a deadline of August 19, 2015. [ 64 ] The Respondent also notes that the Act does not require that the Director forward the preliminary assessment or meet with the subject party to explain the Director’s position yet these steps were undertaken by the Director. [ 65 ] The Respondent observes that the decision in question involves a monetary penalty imposed on a corporation and that under these circumstances, CANFOR’s legitimate expectations were that it would be given a reasonable opportunity to provide information, explain its position and meet with the Director, all of which were done. [ 66 ] I do not accept that CANFOR has established any breach of procedural fairness. [ 67 ] It is noteworthy, that the first ESRD staff request for more information was made on September 15, 2014 and CANFOR in fact provided information up to July 10, 2015. [ 68 ] Following the release of the preliminary assessment on July 10, 2015, until the issuance of the administrative penalty on August 10, 2015, the Director met with CANFOR representatives, invited CANFOR to provide any new information and granted an extension to August 3, 2015.

Given that the penalty had to be issued by August 19, 2015 the Director was not acting unreasonably in refusing any further extensions. [ 69 ] Moreover, the record discloses that the Director, in his detailed written reasons for decision, responded to all of the concerns raised by CANFOR at the meeting on July 14, 2015. [ 70 ] The Respondent notes that up to the current date, CANFOR has not provided any additional information pertinent to the investigation, nor has CANFOR indicated that it has additional information to disclose. [ 71 ] As noted, the standard of review of reasonableness applies to the issue of the Director’s determination of what constituted procedural fairness.

I conclude that the Director acted reasonably in providing the level of procedural fairness he did to CANFOR. [ 72 ] I also conclude that the Director in fact satisfied the duty of procedural fairness which was established.

Did ESRD Fetter the Decision to Issue the Administrative Penalty or Contravene the Rule Against Bias? [ 73 ] In the alternative, CANFOR argues that jurisdiction was lost because the Respondent improperly fettered its discretion in issuing the penalty or in the further alternative argues that by improperly fettering its discretion, may have offended the rule against bias. [ 74 ] CANFOR argues that a staff member Glenn Dobransky, made field notes in the month of October 2013 and noted that “a penalty for waste is to be forthcoming” and that this amounts to a pre-judging or fettering of discretion and amounts to bias. [ 75 ] In response, the Respondent correctly notes that Dobransky was not the decision maker whose decision is being judicially reviewed and, in any event, the alleged “excessive waste” was not the basis for issuance of the administrative penalty under review. [ 76 ] I do not accept that the record establishes that the decision maker Paulovich fettered his discretion or was biased as a result of the comments made by Dobransky.

Indeed, there is no evidence that Paulovich relied in any way on the comments made by Dobransky in 2013. [ 77 ] In the result, CANFOR has failed to establish any improper fettering of discretion or bias. Should the Administrative Penalty Have Been Properly Issued Under Section 100(1)(

e) Rather Than Section 100(1)(

b) of the Timber Management Regulation ? [ 78 ] In the further alternative, CANFOR argues that the administrative penalty was excessive based on s 100(1)(

b) of the TMR which reads as follows: “Every person who harvests timber on public land shall comply with the terms and conditions of the timber disposition”. [ 79 ] CANFOR argues that the penalty should have been assessed under s 100 (1)(

e) which reads as follows: “Every person who harvests timber on public land shall avoid excessive waste when cutting timber and manufacturing timber products”. [ 80 ] The use of s 100(1)(

b) resulted in a higher monetary penalty being assessed than would have been the case had s 100(1)(

e) been utilized. [ 81 ] In Alberta Securities Commission v Brost , 2008 ABCA 326 the Alberta Court of Appeal identified four factors at paras 52-54 to be used in determining whether an administrative penalty is reasonable: a. The issuance of the administrative penalty serves a valid regulatory purpose.

b. The penalty amount is authorized by the regulatory scheme. c. The penalty reflects the seriousness of the conduct of the person to whom the penalty is issued and d.

The statutory regime indicates that deference to the decision maker is appropriate. [ 82 ] In Imperial Oil Ltd v Alberta (Minister of Environment) , 2003 ABQB 388 at para 50 it was held that a statutory decision maker has the discretion to chose the appropriate enforcement mechanism described in the statute. [ 83 ] As noted, it is agreed that the statutory standard of review of reasonableness applies to this issue. [ 84 ] In utilizing the analysis of the Alberta Court of Appeal in Alberta Securities Commission v Brost , it is clear that the administrative penalty does serve a valid regulatory purpose which is authorized by the regulatory scheme. [ 85 ] Moreover, the quantum of the penalty reflects the seriousness of the conduct of the party to whom the penalty is issued and it is noteworthy that the Act contains a privative clause indicating that deference is owed. [ 86 ] On this record the decision to issue the administrative penalty under s 100(1)(

b) was a reasonable discretionary choice. I do not accept that on this evidentiary record the Director was compelled to use s 100(1)(e). Moreover, in context, the monetary penalty was reasonable. Conclusion and Order [ 87 ] The Application is dismissed in its entirety. [ 88 ] As requested by counsel, costs may be spoken to. Heard on the 3 rd day of November, 2016. Dated at the City of Edmonton, Alberta this 21 st day of November, 2016. R. Paul Belzil J.C.Q.B.A. Appearances: Donald J. Wilson DLA Piper (Canada) LLP for the Applicant Vivienne M. Ball & Lisa K. Semenchuk Alberta Justice and Solicitor General for the Respondent