B.C. Supreme Court in Vancouver. (Photo: Tom Zytaruk)

B.C. Supreme Court in Vancouver. (Photo: Tom Zytaruk)

Surrey sawmill’s obligations with Interfor didn’t burn with the fires, judge decides

Judge says MacKenzie Sawmill Ltd. not ‘permanently’ released from agreement to provide lumber giant with wood chips

A B.C. Supreme Court judge has decided that MacKenzie Sawmill Ltd., whose Surrey mill was destroyed in a series of fires, has not been “permanently discharged” from its obligations to provide lumber giant Interfor Corporation with wood chips.

The large mill, in the 11700-block of 130th Street in Surrey, went up in flames, taking 120 jobs with it. MacKenzie Sawmill Ltd.’s insurer paid out $20.2 million for the fire losses.

Burnaby resident Rick Anderson, who was a saw filer at the mill, looked on as huge billows of smoke rose from the burning wreck of the second fire.

“This thing ain’t going to stop until it’s to the ground,” he remarked at the time. Bystanders said sparks from a welder’s torch had started the first fire, a couple months earlier, in a chip truck full of sawdust.

In 2006 MacKenzie Sawmill Ltd. entered into a chip supply agreement (CSA) to supply wood chips to Interfor Corporation from its sawmill in Surrey.

“Wood chips are a natural by-product of sawmilling operations and an important input in pulp mill operations,” Justice Geoffrey Gomery explained in his reasons for judgment. “Interfor does not operate a pulp mill, but it is a former owner of the Mackenzie Mill and is contractually committed to supplying wood chips from the Mackenzie Mill to Catalyst Paper Corporation (“Catalyst”) for use in its pulp mill. Interfor entered into the CSA in fulfillment of its contractual commitment to Catalyst.

“The defendants submit that the CSA does not impose on MSL an obligation to rebuild the Mackenzie Mill and start producing chips again, following the fires. I agree,” the judge said. ” That is not the question at hand. The question is whether the contractual obligation persists if there is or could be a new “Mackenzie Mill” to which the CSA would apply.”

READ ALSO: Sikh millworker lodges human rights complaint against Interfor, again

The sawmill was built in 1938. Interfor bought it from Fletcher Challenge Canada Ltd. in 1991 under the agreement that it would sell all of the chips produced at the mill to Fletcher Challenge. As Catalyst is Fletcher Challenge’s successor, Gomery noted, the “obligations originally owed by Interfor to Fletcher Challenge under the CPSA are now owed to Catalyst.”

Three fires at the Mackenzie Mill – the first on Nov. 12, 2010, the second on Jan. 25, 2011, and a third on Oct. 31, 2014 – halted production and ruined the mill with the result being that MacKenzie stopped providing wood chips to Interfor, a development which was permitted under a “force majeure” clause.

“Its broader effect and implications, in the circumstances of this case, lie at the heart of the dispute in this case,” Gomery explained.

Gomery noted that while MacKenzie did not rebuild the sawmill, another company or companies associated with MSL’s owners built a new one on site and when that mill began operating its owners “began selling wood chips produced from the new mill’s operations to third parties, at higher prices than those provided under the CSA. When Interfor learned of this, it objected, and this action is the result.”

Interfor sued MSL, the owners and operators of the new sawmill, and other persons alleged to be related to them. The defendants are Mackenzie Sawmill Ltd., Pacific Lumber Remanufacturing Inc., Riverside Forest Products Inc., Riverside Forest Products (2018) Inc., West Rim Fibre Corp., 0761979 BC Ltd., 1162183 BC Ltd., Avtar Sidhu, Rajdeep Singh Sohi. The court noted Sohi incorporated Mackenzie Sawmill Ltd. in 2006, is its sole beneficial owner and he and members of his family own various companies that are named as defendants.

Interfor, the judge noted, maintains “that the CSA continued in force following the fires, and that the new mill’s owners are alter egos of MSL and bound by the CSA accordingly. Alternatively, it claims against the other defendants for conspiracy and inducing MSL to breach its contract with Interfor,” Gomery noted.

The defendants, for their part, sought a court order confirming that MacKenzie Sawmill Ltd. was discharged from all its obligations under the CSA on account of the fires, submitting that the fires that ruined the mill brought MSL’s business to an end.

But Gomery concluded that MSL’s obligations under its agreement with Interfor “were not permanently discharged” by the fires, and while it isn’t obliged to operate the mill and produce chips, if it does “it must sell the chips to Interfor” until the agreement is terminated.



tom.zytaruk@surreynowleader.com

Like us on Facebook and follow Tom on Twitter

BC Supreme CourtSurrey

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

A Surrey protest now in week 12 against a local resident has frayed the nerves of neighbours fed-up with the group’s presence. (Submitted photo)
Surrey neighbourhood fed-up with strange protest

Surrey Mounties say they’re monitoring the situation

Ed Holden owns and operates The Christmas Store at Potters, located on 48th Avenue in Surrey. (Photo: Tom Zillich)
‘B.C. Buy Local Week’ kicks off with urgent plea to holiday shoppers

‘Local businesses are just hanging on,’ says organizer of the week-long campaign

teaser
Contest-winning Christmas card revealed by Arts Council of Surrey

Watercolour painting by Andre Paulhus to grace cover, with verse written by Andre Paulhus

Surrey-White Rock MLA-elect Trevor Halford and Surrey South MLA-elect Stephanie Cadieux have each been given a portfolio as an Opposition critic. (Contributed photos)
BC Liberals give Halford, Cadieux critic responsibilities

Surrey South and Surrey-White Rock MLAs to help keep eye on majority NDP government

One man is dead after a shooting in Fleetwood Sunday evening. (Shane MacKichan photos)
UPDATE: Police ask for dash cam videos after 29-year-old man shot dead in Surrey

Incident took place near shopping complex at the corner of 152 Street and Fraser Highway

A B.C. Ambulance Service paramedic wearing a face mask to curb the spread of COVID-19 moves a stretcher outside an ambulance at Royal Columbia Hospital, in New Westminster, B.C., on Sunday, November 29, 2020. THE CANADIAN PRESS/Darryl Dyck
B.C. records deadliest weekend of COVID-19 pandemic with 46 deaths; more than 2,300 cases

Provincial health officer Dr. Bonnie Henry provides COVID-19 update

Black Press Media and BraveFace have come together to support children facing life-threatening conditions. Net proceeds from these washable, reusable, three-layer masks go to Make-A-Wish Foundation BC & Yukon.
Put on a BraveFace: Help make children’s wishes come true

Black Press Media, BraveFace host mask fundraiser for Make-A-Wish Foundation

Christy Jordan-Fenton is the co-author of the book Fatty Legs, which has been mentioned amid the controversy of an Abbotsford school assignment on residential schools.
Fatty Legs co-author responds to Abbotsford class assignment on residential schools

Children’s book mentioned amid controversy at W. A. Fraser Middle School

Kootenay East MLA Tom Shypitka takes over as energy and mines critic for the B.C. Liberal opposition. Kelowna-Lake Country MLA Norm Letnick (right) moves from health critic to assistant deputy speaker. (Hansard TV)
B.C. Liberals pick critics to take on Horgan’s NDP majority

Interim leader Shirley Bond takes seniors, long-term care

B.C. Supreme Court in Vancouver. (Black Press Media files)
Judge hears Langley development case that could end in mayor, councillors booted out of council

The conflict of interest case was launched by local voters a year ago

Deputy Prime Minister and Minister of Finance Chrystia Freeland listens to a question from a reporter on the phone during a news conference in Ottawa, Monday, Nov. 30, 2020. THE CANADIAN PRESS/Adrian Wyld
Spending too little worse than spending too much, Freeland says as Canada’s deficit tops $381B

‘The risk of providing too little support now outweighs that of providing too much’

Still from a video surveillance camera of a man alleged to have stolen from several people at knife-point in Chilliwack (Rosedale) early on Nov. 28, 2020. (Facebook)
B.C. man defends his family against intruder, saves neighbour while wielding hockey stick

RCMP looking for footage that captures violent crime spree in Chilliwack

Harbour seals rest on log booms at Flavelle Mill in Port Hardy. With recent announcements the mill will be getting rid of the log booms, Dr. David Rosen sees an opportunity to study how the disappearance of this highly-frequented refuge for the seals will alter their behaviour in Burrard Inlet. (Photo supplied by David Rosen)
What the heck is going on with marine mamals in Vancouver waterways?

UBC researcher asks why they’re returning, and what role we’re playing

Jim Neufeld, 55, was last seen leaving his home in Penticton Jan. 21, 2009. (RCMP photo)
Human remains found off U.S. coast in 2009 identified as Penticton man

Jim Neufeld, 55, was last seen leaving his home in Penticton Jan. 21, 2009

Most Read