Huu-ay-aht First Nations wins compensation for illegal IR1 timber licence

Huu-ay-aht First Nations is celebrating a victory in a long-fought legal battle against the Canadian government and Canada’s decision not to appeal.

On July 15, 2014, Justice Whalen, of the Specific Claims Tribunal, found that the Canadian government owes HFN compensation for breaching its fiduciary duties to HFN in relation to a forest licence on Numukamis Indian Reserve No. 1 (IR1), that it illegally issued to Bloedel Stewart and Welsh (BSW) in 1942 and failed to cancel despite HFN’s request that it do so.

This decision is a resounding victory for the nation. The victory has even broader significance because it is the first compensation decision issued by the Specific Claims Tribunal. Canada has chosen not to appeal the decision.

“These are the types of issues we continue to face on an ongoing basis, and this is an important moral victory for us,” elected Chief Councillor Jeff Cook explains.

The key issues in the case were whether Canada breached its fiduciary duty to HFN in 1948 when it ignored concerns raised by the nation about the illegal timber licence and HFN’s requests to have it cancelled and, if so, what compensation is owed to HFN as a result.

“This achievement is a major milestone to celebrate. This area is part of the heart of Huu-ay-aht,” explains Stan Coleman, CEO of Huu-ay-aht Group of Businesses. “Now the work begins on compensation and implementation of restoration plans.”

In 1938, HFN surrendered timber on IR1 to Canada, on the condition that it would be sold on terms most conducive to HFN’s welfare. Canada then, in 1942, provided BSW with a 21-year renewable licence to harvest the timber, despite it being illegal under the Indian Act and Island Timber Regulations to issue that kind of long-term lease.

In 1948, HFN sent a formal petition to Canada asking for the licence to be cancelled on the basis that the licence was illegal, not in their best interests and that timber prices had risen significantly since 1942. No trees had been cut at that time, and HFN argued that a new deal could be drawn up with BSW or another company.

Canada ignored HFN’s request, failed to investigate the issue and continued to automatically re-issue the licence. For the next 20 years, BSW, later MacMillan Bloedel, harvested timber from IR1. Despite Canada having acknowledged in 1968 that it could terminate the licence, logging continued for two more years.

“In 2005, HFN recognized that we had a legitimate and strong claim and filed a claim against Canada,” Cook said.

In 2011, no negotiated resolution had been reached, and HFN filed its claim with the Specific Claims Tribunal. On November 12-14, 2013, the claim was heard in Anacla before Justice Whalen.

In his decision, Justice Whalen ruled that Canada ought to have paid more attention to HFN’s concerns, finding that “Canada committed numerous breaches of its fiduciary duty to the HFN.” These included agreeing to the long-term renewable licence, selling the timber on terms that were outside those on which HFN had surrendered it to Canada, repeatedly failing to consult with HFN and failing to protect the HFN’s interests by canceling the unlawful licence.

Justice Whalen held that, as a result, HFN suffered damages including the loss of timber revenues and reduction in the value of the timber on IR1 and that Canada must compensate the HFN for these damages.

Justice Whalen awarded close to $280,000 in 1948 dollars to the HFN for lost revenue, less the amount HFN actually received and concluded that Canada’s failure to cancel the licence in 1948 significantly reduced the value of the timber because regeneration of the timber was delayed and uneven. The tribunal ordered Canada to pay HFN just over $1.5 million in 2012 dollars for the reduction in the IR1’s timber value, but did not determine what the present-day value of the compensation award would be. This remains to be determined either through negotiations or, if necessary, at a second phase of the hearing.

“We are very pleased that the Specific Claims Tribunal has recognized Canada’s failure to act in HFN’s best interests and has found that we are entitled to damages for that failure,” Cook says. “It is our hope that we will be able to negotiate a reasonable settlement with Canada without the need for a further costly tribunal hearing.”