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RAILWAYS - Regulation - Level of service

Wednesday, March 06, 2019 @ 7:54 AM  

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Appeal by CP from a decision of the Canadian Transportation Agency finding that the appellant had failed to meet its level of service obligations to provide direct rail service to the respondent and ordering remedial measures. The respondent was a distributor of chemicals and related products and services. The appellant had been its servicing railway since the facility opened in 1968. In 2014, a bridge was severely damaged by a fire. The appellant notified the respondent that the fire was a force majeure event under its Tariff and that it would no longer provide the respondent with direct rail service due to the damage caused by the fire. From the day of the fire until the decision of the Agency, the appellant did not transport any loaded railway cars over the bridge and did not take any action to repair it or to initiate a discontinuance process.  The Tariff under which the appellant provided service to the respondent purported to excuse the appellant from performance of its service obligations in the event of force majeure.  The Agency found that the appellant was in breach of its level of service obligations except for one year after the bridge fire, and for a further 13 weeks after a 2016 barge collision. These periods accounted for time that it would have taken the appellant to repair the bridge and restore direct rail service following the two force majeure events. The Agency held that, by refusing to repair the bridge and resume direct rail service, the appellant acted unreasonably and breached its level of service obligations to the respondent. The appellant argued that the Agency erred in law by failing to apply the appropriate legal test to determine whether the appellant had breached its level of service obligations in failing to rebuild the damaged line and in not considering and applying the terms of the appellant’s Tariff.

HELD: Appeal dismissed. The Agency stated the law accurately and applied it reasonably. When read as a whole, it was clear that the Agency was aware of its obligation to strike a reasonable balance between the interests of both parties in the factual context before it. The Agency did not impose an absolute obligation on the appellant or found that the costs associated with the reconstruction of a railway line could never, as a matter of principle, justify an indefinite cessation of service. While the Agency’s decision could have been made clearer by the Agency, the lack of more fulsome reasons was insufficient to render the Agency’s decision unreasonable. The conclusion reached by the Agency that the appellant’s alleged repair costs did not rise to the level sufficient to relieve it permanently from its statutory obligations was a highly factual one, and not one based on a misapprehension of the applicable legal principles. The Agency’s conclusion was also consistent with the purpose behind the level of service provisions. The level of service obligations was statutory in nature and were governed by the reasonableness test. Only when the parties had entered into a confidential contract the Agency applied the terms of the contract rather than the reasonableness test. The Agency found that the parties had not entered into a confidential contract which finding was not challenged on appeal. A Tariff could not alter the level of service obligations mandated by the Act.

Canadian Pacific Railway Co. v. Univar Canada Ltd., [2019] F.C.J. No. 119, Federal Court of Appeal, J.D.D. Pelletier, Y. de Montigny and M.J.L. Gleason JJ.A., February 1, 2019. Digest No. TLD-March42019009