2004 BCSC 1243 Haida Nation v. Minister of Forests et al

Before: The Honourable Mr. Justice Kelleher

Reasons for Judgment

Counsel for the Petitioners:	Louise Mandell, Q.C. and Cheryl Sharvit
Counsel for the The Minister of Forests and The Attorney General of British Columbia:	Paul J. Pearlman, Q.C.
Counsel for Weyerhaeuser Company Limited:	John J.L. Hunter, Q.C.
Date and Place of Hearing:	September 1, 2004
	Vancouver, B.C.

[1] Council of the Haida Nation (the “CHN”) has applied for an order that:

1. The respondent, Weyerhaeuser Company Limited (“Weyerhaeuser”), produce to the petitioner, Council of the Haida Nation (“CHN”), all Cruise Reports relating to Block 6 of TFL 39, and, in particular, such information within the Cruise Reports database relating to the location of red and yellow cedar, logged or unlogged, that may be suitable for cultural use by the CHN; and

2. Prior to entering into an agreement to transfer any of its rights or interests under TFL 39 to a third party, Weyerhaeuser shall disclose to the CHN the identity of the transferee and the terms of the proposed transfer, so that the CHN can take such steps as necessary to ensure that Weyerhaeuser’s obligations to the CHN, and such agreements as have been reached between Weyerhaeuser and the CHN, extend to the transferee.

[2] These proceedings began as an application by the CHN under s. 2 of the Judicial Review Procedure Act, R.S.B.C. 1996, c. 241 for judicial review of several decisions of the Minister of Forests. The petitioners represent the Haida people. The petition concerns logging operations on the Queen Charlotte Islands, also known as Haida Gwaii. The petitioners took issue with the decisions of the Minister of Forests in 1981, 1995 and 2000 to replace Tree Farm License 39 (“TFL 39”) and to approve a transfer of it from McMillan Bloedel Ltd. to Weyerhaeuser. The chambers judge dismissed the application for judicial review on November 21, 2000: [2001] 2 C.N.L.R. 83, 2000 BCSC 1280. The Court of Appeal allowed the appeal, deciding that the Crown and Weyerhaeuser both owed a duty to the Haida people to consult with them and to seek to work out accommodations with respect to the tree farm license: Haida Nation v. British Columbia (Minister of Forests) (2002), 99 B.C.L.R. (3d) 209, 2002 BCCA 147 (C.A.) ("Haida 1"); supplementary reasons (2002), 5 B.C.L.R. (4th) 33, 2002 BCCA 462 ("Haida 2").

[3] The decision of the Court of Appeal included an order that the parties may apply to a judge of this Court for necessary orders pending the conclusion of the proceedings. This application is made pursuant to that order.

[4] The decision of the Court of Appeal was the subject of a further appeal by the Crown and Weyerhaeuser to the Supreme Court of Canada. That court has heard argument and reserved its decision.

[5] I turn to the first part of the order sought, directing Weyerhaeuser to produce “Cruise Reports” related to Block 6 of TFL 39. Peter Kofoed, a forester employed by Weyerhaeuser, deposed that there are two types of timber cruises. The first is a full inventory of timber which Weyerhaeuser’s predecessor, MacMillan Bloedel Limited, completed in the 1960’s. It was based on aerial photographs and random sampling of parts of Block 6. These formed the basis of estimates of timber volumes, species and grades. This was a comprehensive inventory of the block, with the exception of some areas which at the time appeared to be too difficult to access. As a result of technological advances these areas may now be accessible. This inventory was prepared for “strategic planning” purposes.

[6] The second kind of cruising is what Mr. Kofoed calls “operational cruising”, and began in the 1970s. It is required for making submissions to the Minister of Forests regarding cutting permits. It is based on more intensive sampling but is less comprehensive than the original Cruise Report. The CHN submits that it needs this data to determine the location of monumental cedar. In this way, the CHN may be an informed participant in the process of consultation and accommodation.

[7] The supply of monumental cedar for Haida cultural uses is directly relevant to these proceedings. Findings of fact by Mr. Justice Halfyard, the chambers judge in these proceedings, were reproduced by Mr. Justice Lambert at para. 22 of his reasons in Haida 1:

...

(f) From a time which is uncertain, but which pre-dates 1846, up to the present time, the Haida have used large red cedar trees from the old growth forests of the Queen Charlotte Islands for the construction of canoes, houses, and totem poles, and have also used red cedar for carving masks, boxes, and other objects of art, ceremony and utility.

(g) Since before 1846, the Haida have utilized red cedar trees obtained from old growth forests on both coastal and inland areas of what is now Block 6 of TFL 39.

(h) Red cedar has long been, and still is, an integral part of the Haida culture.

(i) Old growth cedar timber has been, and will in the future continue to be harvested from Block 6, pursuant to T.F.L. 39.

[8] Mr. Justice Halfyard pointed out that old growth forests are limited in quantity and that it was understandable that the CHN would wish to limit the rate of logging in old growth forests. He said (at para. 47):

[T]here is a substantial probability that the Haida will be able to establish the Aboriginal right to harvest red cedar trees from various old-growth forest areas of Haida Gwaii, including both coastal and inland areas of Block 6, regardless of whether Aboriginal title to those forest areas is proven.

[9] The position of the CHN is that the company is required by the remedy imposed by the Court of Appeal to engage with the Crown in the process of consultation.

[10] It is well established that the duty to consult includes the production of necessary information. In Halfway River First Nation v. British Columbia (Ministry of Forests) (1999), 64 B.C.L.R. (3d) 206, 1999 BCCA 470, Mr. Justice Finch, as he then was, stated at para 160:

The Crown's duty to consult imposes on it a positive obligation to reasonably ensure that aboriginal peoples are provided with all necessary information in a timely way so that they have an opportunity to express their interests and concerns, and to ensure that their representations are seriously considered and, wherever possible, demonstrably integrated into the proposed plan of action... .

[11] The parties have discussed the provision of information. Weyerhaeuser has been prepared to provide certain data if the CHN would sign an appropriate confidentiality agreement. The CHN and Weyerhaeuser have been unable to agree on the terms of such an agreement.

[12] Weyerhaeuser has also provided access to its cruise data to the Province. Weyerhaeuser has no objection to the Province sharing this information with the CHN.

[13] Weyerhaeuser opposes any order. The Crown agrees with Weyerhaeuser in the circumstances of this case that no order is necessary at this time.

[14] The position of Weyerhaeuser is that the effect of Haida 2 is that the company’s obligation is to ensure that the Crown fulfills its obligation to consult the CHN. But it submits that the Crown’s obligation only arises when the Crown is contemplating taking or authorizing action which would infringe the rights of the CHN under s. 35 of the Constitution Act.

[15] Weyerhaeuser asserts that before there is even a duty to consult, two things must be shown: first, identification of the precise aboriginal right or claim that it is alleged will be infringed; and second, identification of the scope of the aboriginal right claim: See Husby Forest Products Ltd. v. Minister of Forests, (2004), 25 B.C.L.R. (4th) 289, 2004 BCSC 142 ("Husby").

[16] Weyerhaeuser submits that the CHN has not identified what aboriginal rights would be infringed if it does not obtain production of the Cruise Reports. Counsel argues that there has been no action amounting to an infringement of a s. 35 right. There has been no Crown decision to “trigger” the consultation obligation. The CHN has not delineated the right which it says is interfered with by the failure to provide the Cruise Report data.

[17] The material before me satisfies the requirements set out in Husby. The Court of Appeal has ruled that there is a duty on Weyerhaeuser to engage in consultation along with the Province. That is because of the defect in the license which Weyerhaeuser currently holds. Based on the material before the Court already, there is a duty to consult and the information sought by the CHN is relevant and appropriate.

[18] But there is no necessity for an order at this time. Weyerhaeuser has provided to the Province access to the data contained in the Cruise Reports. Weyerhaeuser has not instructed the Province not to share the data with the CHN. The Province is prepared to provide the CHN with the information that it seeks.

[19] There is a question raised by the affidavit material as to whether Weyerhaeuser is providing sufficient information to meet the needs of the CHN. If, after receiving the data, the CHN concludes that it falls short of what is required, an application can be made. Counsel can address at that time what conditions of confidentiality should be included in such an order.

[20] This part of the application is therefore adjourned.

[21] I turn to the second part of the application. In the summer of 2004, rumours were circulating that Weyerhaeuser was contemplating a sale or transfer of its interests, namely Block 6 of TFL 39. The information which the CHN received was that the license might be sold or transferred to an operator who was already operating in Haida Gwaii.

[22] At the time of the Court of Appeal decision in this matter, a license to harvest timber could not be transferred without the consent of the Crown. The Court of Appeal held that the Crown, in deciding whether to consent to the transfer of TFL 39 from MacMillan Bloedel to Weyerhaeuser, was under a duty to consult the CHN.

[23] The Province of British Columbia subsequently amended the Forest Act, R.S.B.C. 1996, c. 157. One of the changes is an amendment to s. 54 of the Act such that there is no longer a requirement to obtain the consent of the Minister of Forests when transferring an interest in a tree farm license. See Forest (Revitalization) Amendment Act, S.B.C. 2003, c. 30, s. 9.

[24] The CHN argues that Weyerhaeuser, in the circumstances of this case, is under an obligation to advise the CHN of any proposed transfer or sale, just as it was obligated to notify the Province before the amendment.

[25] The argument of the CHN is as follows. Weyerhaeuser’s obligation to the CHN arose as a remedy of the Court of Appeal. The Court found that TFL 39 should not have been issued to MacMillan Bloedel, or transferred to Weyerhaeuser as successor, without consultation and accommodation of the aboriginal interest. The Court of Appeal decided not to declare the transfer invalid because of the hardship this would impose on Weyerhaeuser. Instead, the Court required Weyerhaeuser to participate with the Crown in the consultation and accommodation to which the CHN was entitled and of which it had been deprived.

[26] Chief Justice Finch put it this way in Haida 2, at para. 123:

In my view, Weyerhaeuser’s duty to consult arose from the particular circumstances of this case. Those circumstances in essence are the issuance by the Minister of Forests of a tree farm licence in breach of the Crown’s duty to consult, and receipt by Weyerhaeuser of a licence which therefore suffered a legal defect, which cannot be remedied without its participation. In other words, Weyerhaeuser’s duty to consult existed at least when it received replacement TFL 39 in 2000, and when this Court declared that the licence was issued by the Minister of Forests in breach of the Crown’s duty to consult. Upon that finding, Weyerhaeuser became possessed of a licence with a fundamental legal defect. It is a defect that absent a declaration of invalidity, can only be remedied by the participation of both Weyerhaeuser and the Crown in consultation with the Haida.

[27] The CHN argues that if Weyerhaeuser ceases to hold the tenure, the new holder will continue to be under a duty to consult. Counsel relied upon the judgment of Mr. Justice Lambert in Haida 2. He said at para. 72 that Weyerhaeuser's obligations continue "...throughout the period that Weyerhaeuser is licensee of TFL 39” and that they apply “to Weyerhaeuser’s management, administration and operation of TFL 39”.

[28] The CHN argues that a third party purchaser will be bound by what has occurred in this case and will have the same defect in title as Weyerhaeuser, and thus the same obligation to consult and accommodate.

[29] The CHN argues that with the change in legislation the Court of Appeal's decision that Weyerhaeuser has a duty to consult necessarily includes an obligation to consult the CHN before entering into a transaction that would perpetuate the infringement of Haida interests.

[30] Weyerhaeuser resists the order sought on two grounds. First, it argues that the effect of the amendment to the Forest Act is that a licensee can alienate its interest without government involvement. Therefore, the Crown cannot be required to consult with aboriginal groups. Since there is no duty on the Crown to consult, there is no duty imposed on Weyerhaeuser to co-operate with the Crown in avoiding or remedying a breach of the Crown's duty.

[31] Second, Weyerhaeuser submits that securities law in both Canada and the United States prevents it from disclosing its business plans to the CHN. Because disclosure of the plans could have a material effect on the value of the company’s stock, Weyerhaeuser's position is that this would constitute selective disclosure. Selective disclosure is prohibited by the rules of the Securities and Exchange Commission in the United States, where the shares of Weyerhaeuser’s parent company are traded. Weyerhaeuser submits that similar regulations exist in Canada.

[32] The CHN does not concede but does not challenge the constitutionality of the amendment to the Forest Act in these proceedings. I am therefore disposing of this application on the basis that the enactment is constitutional. A holder of forest tenure such as Weyerhaeuser is now under no obligation to obtain the consent of the government before divesting itself of that tenure.

[33] The Province takes no position on this part of the application.

[34] Weyerhaeuser’s interest in this tenure has a certain flaw to it. As Chief Justice Finch described it, the license held by Weyerhaeuser has a “fundamental legal defect” (Haida 2, para. 123). This is because of the way in which it was obtained: because the Crown failed to consult the CHN before effecting the transfer of TFL 39 to Weyerhaeuser, the Crown and Weyerhaeuser are both under a duty to consult and accommodate. The Court of Appeal reached this conclusion in order to remedy the Crown's breach of duty. The Court chose this remedy rather than declaring that TFL 39 was invalid, which was what the CHN had sought.

[35] What will occur if Weyerhaeuser sells its interest to a third party? That party would stand in no better position than Weyerhaeuser. Its license would also have the same fundamental legal flaw. Weyerhaeuser cannot transfer any title less flawed than the title which it now has: Nemo dat quod non habet. Therefore, any transferee of TFL 39 would also be subject to a duty of consultation and accommodation pursuant to the Court of Appeal's decisions in Haida 1 and Haida 2.

[36] The Forest Act has been amended such that the Crown's approval is no longer necessary to effect the transfer of a tree farm license. But I conclude for the reasons that follow that Weyerhaeuser has a duty to consult with respect to any such transfer. It is not necessary for there to be a discrete Crown decision to "trigger" the obligation to consult - it has already been imposed on the company by the decision of the Court of Appeal in this matter. The obligation stems from the fact that the forest tenure itself is "clogged" by the Crown's original breach of the duty to consult, to use the terminology of Mr. Justice Lambert.

[37] The reasons of Mr. Justice Lambert and Chief Justice Finch in Haida 2 indicate that the duty of consultation was imposed on Weyerhaeuser precisely because the Crown had effectively divested itself of the ability to consult with the Haida and accommodate their interests in granting the tree farm license. As stated by Chief Justice Finch at para. 199:

There is a broad range of issues on which the Haida might reasonably seek consultation and accommodation. TFL 39 fully allocates all timber exclusively to Weyerhaeuser. The Crown has no capacity to allocate any part of that timber to the Haida without Weyerhaeuser's consent or co-operation. Within the tree farm license, the [Annual Allowable Cut] is dependent upon the management plan prepared by the licensee. The Crown's ability to reduce unilaterally the AAC is limited by statute, and the licensee has no power to do so without the Crown's consent. The ability to vary the AAC is therefore a power shared by the Crown and Weyerhaeuser. Other issues of concern to the Haida would include employment opportunities for their people, as well as opportunities for subcontracting.

Chief Justice Finch also makes it clear in his reasons that the obligation to consult falls on Weyerhaeuser because of the "fundamental legal defect" in its forest tenure. It is not linked to ongoing decisions or breaches of duty by Crown officials but rather stems from the original breach of the Crown's duty in issuing the license.

[38] In light of the Court of Appeal’s ruling, a proposed transfer of TFL 39 must fall under the scope of Weyerhaeuser’s duty to consult, particularly given the statement of Mr. Justice Lambert, already referred to above, that the obligation of consultation extends to “Weyerhaeuser's management, administration, and operation of TFL 39” (Haida 2, para. 72). It would be an unduly narrow reading of the Court of Appeal decision to hold otherwise.

[39] Any transfer of TFL 39 to another operator has the potential to affect Haida interests significantly. As I have indicated above, the duty of consultation requires that parties be provided with the necessary information to allow effective participation in the consultation process. Here the Haida are seeking access to information with respect to any proposed transfer. As a transfer of TFL 39 would, in my view, engage the duty of consultation imposed on Weyerhaeuser by the Court of Appeal, I conclude that the identity of a proposed transferee and the terms of the proposed transfer is information that is necessary for effective consultation, and should therefore be disclosed.

[40] I turn to Weyerhaeuser’s submission that such disclosure would constitute the practice of selective disclosure as prohibited by Regulation FD of the Securities and Exchange Commission in the United States (“Regulation FD”); as well as by the Canadian Securities Administrators’ National Policy 51-201, titled “Disclosure Standards” (the “CSA Policy”). Weyerhaeuser advised that it is bound by Regulation FD and by the CSA Policy because its shares are publicly traded in the United States and Canada.

[41] For the reasons which follow, I am not persuaded by this submission.

[42] Rule 100(b)(1) of Regulation FD provides that the prohibition against selective disclosure only applies to four categories of persons: (1) broker-dealers, (2) investment advisors and institutional investment managers, (3) investment companies and hedge funds, and (4) any holder of the issuer’s securities who might reasonably be expected to trade based on the information received. In other words, the United States prohibition against selective disclosure is aimed at two broad categories: securities market professionals and holders of the issuer’s securities who are likely to trade based on the information. The CHN falls into neither of these broad categories, and therefore the proposed disclosure would not violate Regulation FD.

[43] While the Canadian rules are somewhat broader in their application, I conclude that they also do not prohibit the disclosure of the information sought in this application. The CSA Policy indicates that the prohibition against selective disclosure of material facts which would affect the company’s stock does not apply where such disclosure is “necessary in the course of business”. The CSA Policy attempts to provide some guidance with respect to what is covered by the "necessary course of business" exception. It states at s. 3.3(1) that whether a disclosure falls within this exception is a “mixed question of law and fact that must be determined in each case and in light of the policy reasons for the tipping provisions”. The CSA Policy states at s. 3.3(2) that the "necessary course of business" exception exists “so as not to unduly interfere with a company’s ordinary business activities”. It enumerates specific examples of communications which would be covered by the exception, and notes that the exception would not generally apply to information provided to “an analyst, institutional investor or other market professional” (s. 3.3(3) and (5)).

[44] Although the nature of the proposed disclosure in the present case is not specifically enumerated as an example of the "necessary course of business" exception to the selective disclosure prohibition, compliance with a court order must, in my view, fall under this exception. It is difficult to conceive of circumstances where complying with the order of a court of competent jurisdiction would not be a necessary part of a company's course of business. If the "necessary course of business" exception extends, as indicated in the CSA Policy, to communications with vendors, suppliers, strategic partners, parties to negotiations, and government agencies, then it must include the type of disclosure in this case made pursuant to a court order.

[45] Both the American and Canadian securities regulations are aimed at preventing the disclosure of material non-public information in order to limit the opportunities for insider trading and to preserve investor confidence that the markets operate in a fair and even-handed manner. These policy considerations are not engaged by the nature of the disclosure sought by the CHN in this matter. This is not a situation where there is a danger of an individual being placed at an unfair advantage with respect to securities trading because of the disclosure of "inside information".

[46] For these reasons I conclude that the disclosure sought by the CHN would not constitute a violation of American or Canadian regulations regarding selective disclosure. Weyerhaeuser may protect its interests by means of a confidentiality agreement, as recommended by the CSA Policy at s. 3.4. The CHN has indicated that it would be prepared to enter into such an agreement.

[47] The second part of the application, requiring Weyerhaeuser to disclose to the CHN the identity of a prospective transferee and the terms of a proposed transfer of TFL 39, is allowed.

[48] The CHN has succeeded with respect to part of its application. The other part has been adjourned. In all the circumstances the CHN is entitled to costs of the application.

“S. Kelleher, J.”
The Honourable Mr. Justice S. Kelleher

Citation:	*Haida Nation v. Minister of Forests et al.,*
	2004 BCSC 1243