Duty to Consult Requirements on a Forest Licence Transfer in British Columbia

The Dispute

A forestry company agreed to buy a competitor’s sawmill and its provincial timber licence out of a court-supervised bankruptcy sale. The price was fixed regardless of what happened next, so the company owed the full amount whether or not the government approved moving the licence into its name. Before that approval came through, a neighbouring First Nation objected. It held an unresolved claim to Aboriginal title over part of the licence area, and years earlier it had struck a reconciliation agreement with the government promising it a growing share of the timber there over time. The First Nation argued the change in ownership would strip away protections the previous licence holder had given it directly, with nothing to replace them, and would make its promised timber share harder to reach.

The Parties’ Positions

The government approved the transfer without attaching conditions. It took the position that its duty to consult sat at a lower point on the spectrum because the decision changed nothing about the licence itself, only who controlled it: the timber volume stayed the same, the harvesting rights stayed the same, and no new right to log was created. On that view, the potential impact on the First Nation’s claim was minor, and letting the parties reach their own arrangement afterward was a reasonable way forward.

The First Nation took a different view. It argued the change in control was not neutral, because the new owner was not bound by the commitments its predecessor had made, including a promise to plan operations around the First Nation’s own land use plan and to share logging revenue in its territory. It argued the government had never engaged with those concerns beyond an exchange of letters, had not tested whether the transfer could preserve the earlier commitments, and had made no real effort to advance its own promise of a larger timber share.

The purchaser’s position was that its purchase agreement already accounted for the risk that approval might not be granted, and that the underlying sale of the assets did not depend on the outcome of this dispute.

The Court’s Decision

The court held the government to a high standard of consultation, because that was the level it had itself agreed to before the dispute arose, and a government cannot commit to deep consultation and then argue afterward that something less would have done. It rejected the idea that a change of operator was a neutral event. Losing the protections the previous licence holder had agreed to was a real and immediate impact on the First Nation’s ability to exercise its claimed rights, and the government’s own promise to grow the First Nation’s timber share made the potential effect on that promise a live issue too, not a speculative one.

The court found the government had simply hoped the new owner and the First Nation would sort matters out themselves, without ever proposing terms, exploring conditions on the approval, or bringing the two sides into direct dialogue. An exchange of letters between people who never spoke or met, the court said, is a poor way to achieve genuine consultation at the deeper end of the spectrum. At the same time, the court rejected the argument that the First Nation had tried to veto the transfer altogether; taking a firm position in consultation is not the same as obstructing it.

The court set aside the government’s approval and sent the matter back for a fresh decision following proper consultation, with no effect on the underlying sale of the business, which stood on its own terms regardless of the licence outcome. It made no order of costs against the purchaser.

Key Lessons for Purchasers of Regulated Tenures and Government Decision-Makers

• A purchase agreement that fixes the price regardless of regulatory approval protects the buyer from the deal unwinding, but it does not protect the approval itself from being set aside and sent back for a fresh decision.
• A change of ownership under a regulated licence is not a neutral event for a third party with rights in the same area. Commitments the previous holder made outside the licence, such as revenue sharing or operating protections, do not travel with the licence to a new owner, and a regulator that ignores that gap can find its approval unravelled later.
• A government’s own past commitments raise the bar it must meet. A regulator that has agreed to a higher level of consultation cannot fall back on a lower standard once a dispute reaches court.
• Letters and emails are not a substitute for direct engagement. A consultation record built entirely on correspondence, with no meetings between the parties, invites a finding that the process fell short, however extensive the paper trail.

The outcome of this application turned on the government’s own prior commitments and the record before the court on this application. A different consultation record may produce a different result.

ATAC LAW acts for purchasers and government decision-makers in administrative and regulatory disputes, including the judicial review applications that follow a contested consultation process.

This matter was conducted by Gurpal Sandhu, an associate lawyer at ATAC LAW, who acted for the purchaser.