A sawmill in Watson Lake, Yukon, sits idle in October, 2006.Mike Thomas
The federal government has been ordered to pay more than $67-million to the owners of a defunct Yukon sawmill after a judge found that a former Liberal minister encouraged construction of the mill, only to have his departmental staff starve it of wood.
The Federal Court judgment, which the mill owners say is among the most substantial award ever issued against the federal government in a non-class-action suit, is a 397-page indictment of both the elected officials who failed to deliver on promises and bureaucratic foot dragging. Legal experts say the case is a rarity, a situation where the government's conduct was so reprehensible that the court waded into an area - discretionary government decisions - where it is often reluctant to pass judgment.
"There is no question that the conduct of these public servants was not up to the standard that would be expected by the reasonable Canadian public," Madam Justice Elizabeth Heneghan wrote in her recent decision, which was based on a trial that spanned nearly 40 days in 2008.
The former politician at the centre of the case is Ron Irwin, a former Sault Ste. Marie, Ont., Liberal MP who was the minister of Indian affairs and northern development in the mid-1990s. In May, 1996, Mr. Irwin and his assistant met with three logging entrepreneurs at Dawson City's Gold Show, an annual trade show on the shores of the Klondike River, kick-starting what would morph into a 14-year legal saga.
The entrepreneurs led by Leonard Bourgh, a woodsman who had been felling trees since the Second World War, had their sights set on the untouched timber of southeastern Yukon near the border with British Columbia. The three testified they were assured by Mr. Irwin and his assistant that if they built a mill - which would put a significant dent in the area's endemic unemployment - Mr. Irwin's department would give them access to 200,000 cubic metres of wood annually.
Judge Heneghan said she found all three entrepreneurs to be credible, but Mr. Irwin and his assistant, who were both called to testify and played down their commitment to the project, were "not credible," she said. Judge Heneghan highlighted the former minister's "selective memory" and his "propensity to respond to questions with self-serving answers."
With what they thought was a firm commitment in place, the entrepreneurs hired a B.C. construction firm, attracted new investors, created the South Yukon Forest Corporation and erected a mill in the community of Watson Lake. But behind the scenes, the civil servants at Mr. Irwin's regional office were not as eager, the judgment states. Judge Heneghan found a revolving door of bureaucrats failed to read significant reports about the amount of timber available, and manufactured data to make it look like there was less timber available than the entrepreneurs had been promised.
Staff members at the Department of Indian Affairs and Northern Development routinely plugged arbitrary numbers into the computer models they used to calculate available timber "until they achieved a result that they 'liked,' " the judge found. "This resulted in a number based on the personal preferences of the DIAND employees and not on science."
As a result of this conduct, and other efforts by DIAND officials, a long-term timber harvesting agreement was never issued and the mill closed in 2000, the judge found.
The judge also ruled that one of the most senior officials in the Yukon regional office, Jennifer Guscott, sent misleading information about the mill owners to her superiors in Ottawa to "contaminate" their opinions of the company.
In one internal e-mail sent in 2001, Ms. Guscott made light of the company's grievances about their lack of wood, writing: "If everyone is so unhappy maybe the moratorium should last until April 2003. ha ha."
The judge also noted the government failed to hand over some of Ms. Guscott's more damaging e-mails in the discovery process, and instead, the mill owners had to rely on the Access to Information Act to obtain documents.
The Justice Department did not respond to requests for comment, and has not said whether it plans to appeal the decision. Ms. Guscott did not reply to an e-mail request for comment. Mr. Irwin was reached at his home in Sault Ste. Marie, but declined to comment.
Neil Finkelstein, a litigation partner at law firm McCarthy Tétrault, said it's rare for judges to punish the government for discretionary decisions such as whether to issue a permit.
"It's got to be a pretty egregious case before the court will say the minister made a misrepresentation," Mr. Finkelstein said.
Len Sali, the lawyer for the mill owners, said his clients were pleased with the decision.
"In our review of the jurisprudence … there was no indication of a judgment against any government in Canada in an order of magnitude such as this," said Mr. Sali, a partner at Bennett Jones LLP in Calgary. In an interview, Mr. Bourgh cited some shareholders with deep pockets as the reason they were able to see the lawsuit to the end. Other litigators contacted for this story said it was difficult to say whether the award, which also includes $50,000 in punitive damages, was one of the largest of its kind because of the vast history of judgments, as well as non-monetary awards.
"It's certainly an incredible win," said Harvey Strosberg, a class-action lawyer in Windsor, Ont.