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RAILWAYS - Regulation - Level of service

Wednesday, August 25, 2021 @ 5:21 AM  


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Appeal by Hudson Bay Railway Company (HBR) from a decision of the Canadian Transportation Agency holding that HBR breached its level of services obligations in failing to repair a railway line that sustained extensive damage from a flood. The damage to the railway line was caused by a once-in-200-year flood. It was estimated that the cost of essential repairs would be $43.5 million. HBR argued that the Agency misconstrued the provisions in the Canada Transportation Act as requiring it to either repair the line or discontinue it, ignored HBR’s financial incapacity in assessing the length of the reasonable pause in HBR’s level of services obligations, and that the order was incapable of being complied with and unclear.

HELD: Appeal allowed. The Agency erred in holding that a railway company could not be indefinitely exempted from its service obligations under the Act without following the transfer and discontinuance process. The Agency’s determination of the scope of a railway’s statutory duty to provide service and allegations of breach must be guided by reasonableness, independent of whether transfer or discontinuance was at play. As a force majeure event, the flood and resulting damage was an improbable event for which no railway company could be reasonably expected to prepare. HBR was in a precarious financial situation with no sign of help on the horizon at the time of the complaint. Given these circumstances, it was hardly able to provide a timeline for repairs. It would be unreasonable to compel a railway company to initiate the transfer and discontinuance process where the company had every intention to continue operating the line but, for practical reasons, could not provide an accurate timeline for the resumption of services. The Agency also erred in law by failing to consider HBR’s financial circumstances in determining the length of the reasonable pause period. While it was open for the Agency to question HBR’s claims of financial incapacity or the accuracy of the supporting documents, there was no reference to HBR’s financial situation in the Agency’s determination of the reasonable pause period. There was no indication in the decision that the Agency considered the financial information it had in its possession in assessing the scope of HBR’s level of services obligations and the allegation of breach. Had the Agency done so, it might well have come to a different conclusion on what repairs were feasible for HBR to undertake at the time of the complaint.

Hudson Bay Railway Co. v. Rosner, [2021] F.C.J. No. 765, Federal Court of Appeal, M. Nadon, D.J. Rennie and M. Rivoalen JJ.A., July 20, 2021. Digest No. TLD-August232021005