No Damages for First Nations Blockade

The Supreme Court of Canada recently denied leave to appeal in Moulton Contracting Ltd. v British Columbia, confirming the BC Court of Appeal's decision (2015 BCCA 89) overturning an award of $1.75 million in damages against the Province of BC for failing to inform Moulton Contracting Ltd. of the complaints of certain members of the Fort Nelson First Nation (FNFN) regarding two Timber Sales Licenses granted by BC to Moulton.

Moulton sued the Province for losses suffered as a result of a blockade on Moulton's logging access road. The BC Supreme Court found the Province liable for failing to inform Moulton of the threat against its logging operations by an individual member of the FNFN based upon breach of an alleged implied term in the Licenses and negligent misrepresentation.

On appeal, the Court held that the wrong legal test for implying a term into the Licenses was applied. The test is not what reasonable parties would have intended, but what the actual parties to the agreement actually intended. The Court held that Moulton and the Crown did not intend the Licenses to contain a term that the Crown was to keep Moulton informed of any dissatisfaction by the FNFN of the consultation undertaken by it. The Court also rejected Moulton's argument that the recently recognized duty of good faith and honesty in contractual performance (see Bhasin v Hrynew, 2014 SCC 71) supported the implied term.

The Court further overturned the trial judge's finding on liability for negligent misrepresentation. There was no express representation made by the Province to Moulton, nor was there any evidence that Moulton relied upon and was induced to purchase the Licenses by a continuing representation regarding First Nations consultation.

The Supreme Court's denial of leave indicates that courts will continue to be reluctant to impose liability against the Crown where damages have been incurred due to allegations of a failure to consult. The denial of leave also confirms that the duty of good faith and honesty in contractual performance will not apply broadly to import issues of good faith and honest contractual performance to every situation. However, the decision is based on the particular facts of the case and does not foreclose future awards of damages should the Crown's failure to keep companies informed of any potential threat to their operations due to complaints about consultation result in a disruption of operations. It likely remains good practice for companies to review the Crown consultation undertaken and periodically contact the government to keep informed of First Nations relations in order to avoid the potential for business disruption or prolonged litigation.

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