High court fells hopes for Yukon sawmill owners

South Yukon Forest Corp. will not be getting another day in court. Yesterday the Supreme Court of Canada dismissed an appeal by the owners of a defunct Watson Lake sawmill, with costs.

South Yukon Forest Corp. will not be getting another day in court.

Yesterday the Supreme Court of Canada dismissed an appeal by the owners of a defunct Watson Lake sawmill, with costs. That means the owners of South Yukon Forest are on the hook to pay for the federal government’s legal expenses.

Just how much money they will have to pay isn’t clear, as the court, as usual, did not elaborate in its dismissal.

It marks the end of a protracted multimillion-dollar civil law suit that pitted the Yukon-based company against the federal government.

Two years ago, the shoe was on the other foot.

In the spring of 2012, after a 39-day trial, a federal court found the government at fault and ordered it to pay $67 million in damages to the sawmill operators.

The mill had closed down 10 years earlier because it was starved of wood, the judge concluded. That’s despite repeated assurances made to the company by senior staff and politicians that wood would be forthcoming.

The responsibility for managing forestry rested with the federal government at the time.

The mill had only been sporadically operating for two years. When it closed down, 150 jobs went with it. It was then the territory’s largest private employer.

Employees at the Department of Indian and Northern Affairs engaged in “harsh, vindictive, reprehensible and malicious” behaviour, said Justice Elizabeth Heneghan in her decision.

The mill needed 200,000 cubic metres of wood annually to operate. However, federal officials kept the wood supply capped at 128,000 cubic metres, despite reports indicating an annual cut could be sustained at 1.6 million cubic metres.

“The lack of wood for 1998 was and is no accident,” one federal employee wrote in an email. “It was well planned by inaction, complacency, disrespect of management and industry need and subtle disobedience.”

That incriminating correspondence was only uncovered after company lawyers filed access to information requests. “Numerous, highly relevant” documents were never produced by the government at trial, said Heneghan.

When all this was happening, in the mid-1990s, the southeast Yukon was going through a “green gold rush.” But not everyone was so happy about it. The logging boom triggered protests and native blockades.

Local officials seemed to side with the conservationists who argued there wasn’t enough wood to feed the mill. This pitted them against higher-ups in Ottawa, which may explain why the government poured millions of dollars into the mill while its own employees actively undermined the project.

Ottawa appealed the decision and last June the federal government won the case. The Federal Court of Appeal reversed the original $67-million judgment.

The three-judge appeal panel concluded that the owners of the Watson Lake sawmill should have known better than to believe promises by government officials and politicians who promised them a steady supply of wood.

The appeal panel didn’t dispute Justice Heneghan’s findings but concluded that because federal officials overstepped their authority in promising a supply of wood, it couldn’t be considered a legal contract.

“Any promises or representations by the officials of the department to the effect that a timber harvesting agreement would be granted were outside their authority to make because a timber harvesting agreement could only be granted by order-in-council,” the appeals panel concluded. “The officials had no authority to bind the Governor in Council.”

In August, South Yukon took the case all the way to the Supreme Court of Canada.

Because the high court dismissed the case, the decision of the Court of Appeal that sided with the government is final. South Yukon has no other legal recourse.

Contact Josh Kerr at


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