B.C. Judge Rules Destruction of Surrey Mill Did Not Eliminated Obligation to a Chip Supply Agreement

British Columbia Supreme Court Justice, Geoffrey Gomery, has ruled that the MacKenzie Sawmill Ltd. (MSL), whose Surrey B.C. mill was destroyed by a series of fire, the first on Nov. 12, 2010, the second on Jan. 25, 2011, and a third on Oct. 31, 2014, which halted production and ruined the mill, has not been “permanently discharged” from its obligations to provide lumber giant Interfor Corporation with wood chips. A bit of history, in 2006 MSL entered into a chip supply agreement (CSA) to supply wood chips to Interfor Corporation from its sawmill in Surrey. In his reasons for judgement, Justice Gomery explained “Wood chips are a natural by-product of sawmilling operations and an important input in pulp mill operations. 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 mill has since been rebuilt by another company associated with MSL but entered into a different CSA with another user who is paying more for the chips than the original CSA user 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.” To that Justice Gomery says it does.