Forest Appeals Commission

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1 Forest Appeals Commission Fourth Floor 747 Fort Street Victoria British Columbia Telephone: (250) Facsimile: (250) Mailing Address: PO Box 9425 Stn Prov Govt Victoria BC V8W 9V1 APPEAL NO FOR-35 In the matter of an appeal under section 131 of the Forest Practices Code of British Columbia Act, R.S.B.C. 1996, c BETWEEN: Dean Foisy APPELLANT AND: Government of British Columbia RESPONDENT BEFORE: A Panel of the Forest Appeals Commission Toby Vigod Panel Chair Gerry Burch Member Geza Toth Member HEARING DATE: May 5, 1998 PLACE: Kelowna, B.C. APPEARING: For the Appellant: Thomas Christensen, Counsel For the Respondent: Jan Hill, Counsel APPEAL This is an appeal brought by Dean Foisy against the September 23, 1997 decision of a Review Panel. The Review Panel varied the decision of the District Manager dated December 5, The District Manager had found that Mr. Foisy contravened section 96(1) of the Forest Practices Code of British Columbia Act (the Code ) by the unauthorized harvest of 98 m³ of timber. Mr. Foisy was assessed a penalty of $1, pursuant to section 119 of the Code. The Review Panel confirmed the contravention of section 96(1) of the Code but varied the penalty from $1, to $6, Mr. Foisy seeks an order that the decision of the Review Panel be rescinded and that no penalty be levied, or in the alternative, that the penalty be reduced. The appeal was brought before the Forest Appeals Commission (the Commission ) pursuant to section 131 of the Code.

2 APPEAL NO FOR-35 Page 2 BACKGROUND Lodgepole Pine timber that had been infested and killed by Mountain Pine Bark Beetle was discovered by Mr. Foisy. He then applied for a Salvage Timber Sale over the area. In accordance with the usual practice of the Ministry of Forests ( MOF ), the timber in question was inspected by a Forest Officer. On July 11, 1995, the District Manager of the Vernon Forest District awarded a direct Timber Sale License (T.S.L.) A52266 to Mr. Foisy under section 18 of the Forest Act. The T.S.L. authorized him to harvest 250 m³ of the affected timber. The terms and conditions of the T.S.L. required that the Licencee (Mr. Foisy) notify the Forest Officer of the start-up and completion dates of the harvesting operation. Mr. Foisy testified that he has been in the forestry industry for approximately 15 years, and has had his own contracts for the past 10 years. His practice is to look for diseased timber and then make an application to the MOF for a T.S.L. to salvage the timber. Mr. Foisy estimated that he had received 3-4 licences a year for the past 10 years. On August 17, 1995, at Mr. Foisy s request, John Fleming, Forest Officer with the Vernon Forest District, visited the T.S.L. area. Mr. Foisy asked for the Forest Officer because he had harvested the authorized volume of 250 m³ and because more beetle infested and dead and down timber remained in the area. According to the Load Detail Report from Riverside Forest Products Ltd. of Lumby Division, where the timber was delivered and scaled, seven loads of the timber had been delivered by Mr. Foisy s company, Tundra Logging Ltd., under Timber Mark 52266, before August 17, 1995, with an estimated volume of 284 m³. During the harvesting inspection on August 17, 1995, Mr. Fleming concurred with Mr. Foisy that there was additional volume in the sale area, and that it should be salvaged. Mr. Fleming completed his Harvest Inspection Report wherein he directed Mr. Foisy to concentrate harvesting by cleaning up the dead and down timber only. The report states: Issued volume of 250 m 3 has now been reached. A lot of cleanup wood left to come out, consisting of dead and down and dead stands. Estimate 150 m 3 to clean it up. Any volume extension to be issued would be strictly for dead or down wood as negligible green attack is left. The Harvesting Inspection Report was signed by both Mr. Foisy and the inspecting officer. Following the inspection, Mr. Fleming sent a memorandum, dated August 21, 1995, to the District Manager, recommending that the maximum volume for T.S.L. A52266 be increased to 400 m³ to allow for the clean up of dead and down wood.

3 APPEAL NO FOR-35 Page 3 On the same day, Mr. K.W. Belik, District Manager, signed the letter authorizing an increase in the salvage volume under T.S.L. A52266 to 400 m³. That is, he authorized an additional 150 m³ for a maximum of 400 m³. The letter states that no further increases in the volume of this Timber sale will be awarded. After the harvesting inspection of August 17, Mr. Foisy resumed his salvage harvesting operation. Five loads of dead and down timber with an estimated volume of 202 m³ were delivered to the Riverside Forest Products Ltd. s log yard. The last load was delivered on August 29, Four out of the five loads were designated into the Dry Stratum for weigh scaling. Upon receipt of Mr. Belik s letter dated August 21, 1995, with the volume extension up to and not exceeding 400 m³, Mr. Foisy immediately stopped his logging operation. A total of 12 loads of timber had been harvested with a compiled volume of 498 m³ on the basis of all Scale and Royalty Invoices computed for the months of July and August under Timber Mark The authorized volume for harvest under T.S.L. A52266, as amended by the District Manager, was limited to 400 m³. Thus, the compiled volume of 498 m³ indicated a 98 m³ unauthorized overcut. Mr. Foisy had initially challenged the accuracy of the volume determination by the weigh scale records in his grounds for appeal. At the hearing before the Commission, Mr. Foisy abandoned this ground of appeal. Therefore, the volume of the unauthorized overcut is no longer an issue in this appeal. The District Manager issued a notice of contravention of overcut on T.S.L. A52266 on October 21, After the notice was issued, the District Manager held an opportunity to be heard meeting with Dean Foisy's father, Eugene Foisy. Mr. Belik testified that he also called Dean Foisy by telephone about the contravention before he made his determination. No records were provided on the content of this conversation. On December 5, 1996, the District Manager issued a Notice of Determination to Dean Foisy for the contravention of section 96(1) of the Code. The determination levied a penalty of $1, for the unauthorized harvest of 98 m³ of timber. The penalty was based on one times stumpage rate of $31.15/m³ for sawlogs ( m³) and $0.25/m³ for log grades 3, 4, 5 and 6 ( m³), plus $ for volume compilation cost. Eugene Foisy, on behalf of Dean Foisy, submitted a request for review on January 21, The reasons for review focused on his contention that the overcut calculated in the determination was unfair. The District Manager s determination was reviewed by a two member Review Panel on September 23, 1997 in Kamloops, B.C., by an oral hearing pursuant to section 129 of the Code.

4 APPEAL NO FOR-35 Page 4 Following the hearing of the matter, the Review Panel contacted local log buyers to ascertain the market prices paid for wood during July and August The Panel then contacted Mr. Foisy by telephone and asked him if he had any comments on these estimates of the price of wood. The Review Panel upheld the contravention of section 96(1) of the Code but found that the District Manager had not properly considered Mr. Foisy s economic benefit as provided for in section 117(4)(b)(v) of the Code. The Review Panel, therefore, varied the penalty from $1, to $6, by charging one times the stumpage plus the bonus bid to take into account what it found to be the economic benefit derived by the licencee from the overcutting. Mr. Foisy appealed this decision to the Commission on the following grounds: He had verbal approval to harvest an additional 250 m³, for a total of 500 m³, therefore there was no contravention. The Review Panel exceeded its jurisdiction by varying the penalty and making a determination upon issues that had not been placed before them for review (i.e., the quantum of penalty). The Review Panel denied him a proper and fair hearing in accordance with the rules of natural justice, by considering and making a determination upon issues that had not been placed before it for review. The penalty imposed by the Review Panel upon Mr. Foisy was excessive. Counsel for Mr. Foisy pointed out that his arguments were sequential in that, for example, if he succeeded in showing that the entitlement was for 500 m 3, he need not go on to his second ground of appeal. ISSUES The issues before the Commission are as follows: 1. Whether Mr. Foisy s entitlement to harvest timber under T.S.L. A52266 was 400 m³ or 500 m³. 2. Whether the Review Panel exceeded its jurisdiction by varying the penalty when the penalty was not an issue placed before it for review. 3. Whether the Review Panel denied Mr. Foisy a proper and fair hearing in accordance with the rules of natural justice by varying the penalty when the penalty was not an issue that had been placed before it for review. 4. Whether the penalty imposed by the Review Panel on Mr. Foisy was excessive. RELEVANT LEGISLATION The relevant sections of the Code considered in this decision are as follows:

5 APPEAL NO FOR-35 Page 5 Unauthorized timber harvest operations 96. (1) A person must not cut, remove, damage or destroy Crown timber unless authorized to do so (a) under an agreement under the Forest Act or under a provision of the Forest Act, Penalties for unauthorized timber harvesting 119. (1) If a senior official determines that a person has cut, damaged, removed or destroyed Crown timber in contravention of section 96, he or she may levy a penalty against the person up to an amount equal to (a) the senior official's determination of the stumpage and bonus bid that would have been payable had the volume of timber been sold under section 20 of the Forest Act, and (b) 2 times the senior official's determination of the market value of logs and special forest products that were, or could have been, produced from the timber (4) Before the senior official levies a penalty under subsection (1) or section 119, he or she (a) must consider any policy established by the minister under section 122, and (b) subject to any policy established by the minister under section 122, may consider the following: (i) previous contraventions of a similar nature by the person; (ii) the gravity and magnitude of the contravention; (iii) whether the violation was repeated or continuous; (iv) whether the contravention was deliberate; (v) any economic benefit derived by the person from the contravention; (vi) the person's cooperativeness and efforts to correct the contravention; (vii) any other considerations that the Lieutenant Governor in Council may prescribe.

6 APPEAL NO FOR-35 Page 6 DISCUSSION AND ANALYSIS 1. Whether the entitlement to harvest timber under T.S.L. A52266 was 400 m³ or 500 m³. Mr. Foisy argues that the Review Panel erred in that it failed to acknowledge the evidence submitted that he had been verbally advised by the Forest Officer that he could increase the harvestable volume from 250 m 3 to 500 m³. Mr. Foisy testified that, after he and Mr. Fleming walked the site on August 17, Mr. Fleming prepared the Harvest Inspection Report which Mr. Foisy signed. Mr. Foisy says that they then had a discussion about an additional volume of 250 m 3 needed to clean-up the area, which Mr. Fleming agreed to. At the time of the inspection, Mr. Foisy s employee, Mr. Tony Bennett, was also present. At the hearing before the Commission, Mr. Bennett testified that he heard Mr. Foisy talk about wanting to make 500 and that his recollection was that Mr. Fleming did not say no, and agreed that the wood would be there. Mr. Foisy also submits that while the Harvest Inspection Report talks about an estimate of 150 m 3, it does not specify the exact extension that was to be considered. The Respondent argues that the amount of timber that could be harvested under T.S.L. A52266 is clear. It submits that the Harvesting Inspection Report clearly shows that only 150 m³, mostly dead and down timber, was authorized by Mr. Fleming and this report was signed by Mr. Foisy. The District Manager s letter of authority, dated August 21, 1995, clearly limited the authorized volume to a total of 400 m³. The Respondent also states that the allegation that there had been a verbal authorization of 500 m³ was not raised in Eugene Foisy s request for review and Mr. Bennett was not called to testify at the review hearing. The Respondent argues that the evidence of a verbal authorization is not credible. It further suggests that it is unlikely that the inspecting Forest Officer would write one thing and say something different. At the hearing before the Commission, the Forest Officer, Mr. Fleming, testified that he does not recall the conversation referred to by Mr. Foisy and Mr. Bennett, and stated that he had no recollection of giving verbal approval to harvest 500 m³. He testified that his usual practice is to walk the site with the client, determine the volume, and that the last thing he would do before leaving the area would be to write up the Harvest Inspection Report. His recollection of the August 17, 1995 inspection visit was that he walked the site with Mr. Foisy, and there was some disagreement about the trees that had been cut or were going to be cut, as he remembers tearing some ribbons off some green trees. He had not been happy with the job Mr. Foisy was doing, and his Harvest Inspection Report reflected that only dead and down trees were to be taken. Mr. Fleming recalls that there was some controversy over the additional volume to be taken, but cannot recall the details of that discussion. He stated that it made sense to do his report as a last step before leaving the site. Mr. Fleming said that he thought he was being clear when he referred to the estimate of 150 m 3 to clean up the site in the Harvest Inspection Report. Further, he testified that his

7 APPEAL NO FOR-35 Page 7 inspection visit took place on a Thursday, that he did his recommendation to the District Manager right away, and that the authorization letter sent by the District Manager was mailed to Mr. Foisy the following Monday, August 21, The Commission notes that, in his December 5, 1996 determination, the District Manager rejected the contention that a verbal extension was given to harvest 500 m³ of timber. Further, the Commission finds that the combination of the Harvesting Inspection Report dated August 17, 1995, and the authorization letter dated August 21, 1995, indicate that the extension was only for an additional 150 m³ over the initial 250 m³ for a total of 400 m³. While there is no doubt that there was some discussion and difference of opinion about the total volume to be harvested, the Commission finds that, on a balance of probabilities, the only direction given to Mr. Foisy was to harvest no more than 400 m³. 2. Whether the Review Panel exceeded its jurisdiction by varying the penalty when the penalty was not an issue placed before it for review. Mr. Foisy argues that he did not ask the Review Panel to review the quantum of penalty - only the assessment of overcut volume. He contends that the Review Panel took it upon itself to review the quantum of the penalty without prior notice to him and made a decision in excess of its authority. Mr. Foisy refers to section 129(5) of the Code which provides that a review panel may make a decision (a) confirming, varying or rescinding the determination or making a new determination. [emphasis added] Mr. Foisy also refers to section 127(1), which provides that a person who is the subject of a determination under section 117 to 120 may deliver, to the review official named in the notice of determination, a written request for a review of the determination. Mr. Foisy argues that there are two separate determinations made by the senior official in this case - the first, whether to levy a penalty at all and second, what the penalty should be. He says that the letter from Eugene Foisy which initiated the review process, stated that the overcut calculation was unfair, and that that the determination should be cancelled in its entirety. Mr. Foisy argues that nowhere in the letter for review does he raise the issue of the quantum of the penalty. He therefore submits that according to section 129, the Review Panel can only deal with the determination of the contravention and not the quantum of penalty. The Respondent argues that the Review Panel did not exceed its jurisdiction by varying the penalty. It submits that sections 129(5)(a) and (c) of the Code give authority to the Review Panel to remedy the Senior Official s determination if something wrong is found. It further submits that the legislation should be interpreted in a generous and liberal manner and that the distinction between a and the is a very fine point. The Respondent argues that a review panel can give a fresh re-examination of the entire issue, and that the entire package of liability, legal issues and quantum is the determination. It submits that in this case the

8 APPEAL NO FOR-35 Page 8 Review Panel was confronted with a determination that it considered deficient in that the District Manager did not consider the economic benefit derived by Mr. Foisy from the overcut, as referred to in section 117(4)(b)(v). Therefore, the Review Panel varied the quantum of the penalty by recognizing the economic benefit derived by Mr. Foisy. The Respondent refers to Tolko v. Government of British Columbia (Forest Appeals Commission, Appeal No. 96/09, April 9, 1997)(unreported), where the issue was whether the Review Panel had exceeded its jurisdiction by finding that Tolko had contravened sections of the Code in addition to the one that had formed the basis for the original determination made by the senior official. The Commission found that the Review Panel did not exceed its jurisdiction, and that section 129(5)(a) allows a review panel to confirm, vary or rescind the determination, meaning the determination made by the senior official, or make a determination, meaning make a new determination, where the original determination is found to be wrong or lacking. It should be noted that in Tolko, there was no dispute that the Review Panel had the power to confirm the determination and vary the penalty previously assessed. The Commission finds that the Review Panel has a broad remedial power under section 129(5)(a) and (c) to vary the penalty imposed by the senior official, regardless of whether it is specifically requested by Mr. Foisy. The Commission agrees with the Respondent and Tolko, that the review process was intended to provide review officials with significant flexibly in the manner in which they can perform the second instance re-examination or reconsideration, depending on the circumstances. The Commission notes that, if one takes Mr. Foisy s argument to its logical conclusion, then the Review Panel would not be able to vary the penalty, either up or down, unless the appellant requests it. On the facts of the case, the Commission would note that Eugene Foisy, in his request for the review, submitted that if a different conversion factor had been used, the overcut would have been reduced. Mr. Foisy also argued, at the review, that if Riverside Forest Products load detail had been used, the overcut again would have been less. Had the Review Panel acceded to either of these arguments, the result would have been a lowering of the penalty, but not necessarily a finding that section 96(1) had not been contravened. Therefore, the Commission finds that Mr. Foisy, at least indirectly, raised the issue of the quantum of penalty before the Commission. The Review Panel, therefore, had the jurisdiction to review and analyze the issue of economic benefit derived by the Licencee from the overcutting, and therefore to vary the penalty assessed by the District Manager. However, the Review Panel has an obligation to conduct its review in a manner which would satisfy the rules of natural justice. This will be discussed below. 3. Whether the Review Panel denied Mr. Foisy a proper and fair hearing in accordance with the rules of natural justice by varying the penalty when the penalty was not an issue placed before it for review.

9 APPEAL NO FOR-35 Page 9 Mr. Foisy argues that the Review Panel denied him a proper and fair hearing in accordance with the rules of natural justice, by considering and making a determination based upon material that had not been placed before it for review. The Review Panel varied the penalty assessed by the District Manager on data which was not submitted and examined during the review hearing as evidence. The Respondent argues that the rules of natural justice have been met in that an opportunity was afforded to Mr. Foisy to respond. It submits that, while not in a formal manner, and the usual panel practice, the telephone call after the hearing to Mr. Foisy, asking to confirm the market value of the timber sold to Riverside Forest Products Ltd. should not jeopardize the rules of natural justice. The Commission finds that, on the basis of the evidence provided at the appeal hearing, the introduction and use of the market value data obtained by the Review Panel after the review hearing, was in violation of the basic rules of natural justice. When Mr. Foisy was contacted by the Review Official by telephone after the hearing to get confirmation on the selling prices that Mr. Foisy may have benefited from, he testified that he was confused, that he was not told why these questions were being asked of him after the hearing, and that he had not been asked about the costs he had incurred. The Review Panel did not advise Mr. Foisy that this information may be used against him. In failing to so, it breached Mr. Foisy s right to know the case against him. In Tolko (Appeal No. 96/09), the Commission found that the maxim audi alteram partem -that is, the rule that a person must know the case being made against him or her and that the person be given an opportunity to answer the case, applied to the situation where a new allegation or new contravention is raised or considered by a Review Panel. A telephone call by a panel member to Mr. Foisy after the hearing, asking questions about selling prices without an indication that this information might be used to vary the penalty, does not adhere to the rule of natural justice or procedural fairness. However, as the Respondent points out, if there was procedural unfairness in the manner the Review Panel conducted its hearing, the hearing before the Forest Appeals Commission can remedy the situation. The Respondent referred to the decision in Tolko v. Government of British Columbia, (Forest Appeals Commission, Appeal No. 95/02, November 12, 1996)(unreported) at pages16-17, in which the Commission found that, as it has de novo powers, it can cure any procedural deficiencies that occurred at the determination or review panel level below. In this case, the parties had a full opportunity to present their cases before the Commission. The issue of the quantum of penalty was fully argued before the Commission and will be discussed below. 4. Whether the penalty imposed by the Review Panel on Mr. Foisy was excessive. Mr. Foisy argues that the Review Panel erred in the calculation of the economic benefit which may have been gained by him from the overcut. The calculation did not take into account the cost of harvesting which should offset the selling price of the timber that Mr. Foisy harvested and sold.

10 APPEAL NO FOR-35 Page 10 Furthermore, Mr. Foisy argues that the Review Panel calculated the penalty as stumpage plus bonus bid ($31.15/m³ + $55.15/m³ = $86.30/m³). The primary objective of the type of salvage sale that Mr. Foisy conducted was to prevent further losses of the Crown s asset (timber) from beetle infestation, and to recover what is salvageable. Consequently, as Mr. Belik, the District Manager testified, this type of salvage timber sale under the Vernon Small Scale Salvage Program generally does not carry any bonus bid amount in addition to the stumpage rate to be paid. Therefore, Mr. Foisy argues that the inclusion of a bonus bid amount into the penalty is inconsistent with MOF s practice and is excessive. The Respondent argues that the penalty imposed by the Review Panel upon Mr. Foisy was not excessive. It argued that the Crown (Government of British Columbia) has the right under the mandate of the Ministry of Forest Act to regain the value of the timber harvested under T.S.L. A52266 as if that timber would have been sold in a competitive manner. While the Review Panel could exercise its authority under section 129(5)(a) of the Code to make a determination, and may consider any economic benefit derived by the person from the contravention (section 117(4)(b)(v)) in the assessment of a penalty, in the opinion of the Commission, the Review Panel erred in its calculation of economic benefit in this case. First, by not giving recognition to the full components of the operating expenses incurred by the Licencee, that is, the costs of harvesting, hauling and general overhead. Only stumpage costs were deducted from the market value of the timber before economic benefit values were derived. At the hearing, both Mr. Foisy and Mr. Belik indicated that operating costs were in the neighbourhood of $30.00 per cubic metre. If one adds the stumpage costs, the net economic benefit would be in the range of $20.00 per cubic metre. Second, the application of a bonus bid to timber of salvage quality was inconsistent with the practice of pricing timber under the Vernon Small Scale Salvage Program. The penalty set by the District Manager, in his determination for the contravention of section 96(1) of the Code, was $15.53/m³. The Commission finds that the penalty imposed by the Review Panel on Mr. Foisy for the overcut of 98 m³ of timber is $6, or $68.65/m³. Thus, the Review Panel increased the penalty for the overcutting by about four and a half times. During the testimony and crossexamination of the District Manager at the hearing, he stated that the contravention was not serious and his intention was to provide a deterrent, rather than economic compensation to the Crown for the overcut. The Commission finds that Mr. Foisy s argument was that the Crown received benefit from the harvest and clean up of the insect infested and killed timber, which otherwise might have been lost without any benefit to society, has substantial weight. In view of the foregoing, and because the economic benefit was calculated incorrectly, the Commission finds that the penalty imposed by the Review Panel is excessive.

11 APPEAL NO FOR-35 Page 11 DECISION Section 138 of the Code provides that the Commission may confirm, vary or rescind the decision appealed from and make any decision that the person whose decision is appealed could have made. Based on the evidence and arguments heard before it, the Commission finds that the penalty assessed by the District Manager for the contravention of section 96(1) of the Code is appropriate. Therefore, the decision of the Review Panel is hereby rescinded and the penalty assessed by the District Manager is reinstated. Geza Toth, Member Forest Appeals Commission June 30, 1998