National Gypsum (Canada) Ltd. v. Canadian National Railway Company

National Gypsum (Canada) Ltd. v. Canadian National Railway Company
Court (s) Database
Federal Court Decisions
Date
2014-09-12
Neutral citation
2014 FC 869
File numbers
T-1323-13
Decision Content
Date: 20140912
Docket: T-1323-13
Citation: 2014 FC 869
Ottawa, Ontario, September 12, 2014
PRESENT: The Honourable Madam Justice Strickland
BETWEEN:
NATIONAL GYPSUM (CANADA) LTD
Applicant
and
CANADIAN NATIONAL RAILWAY COMPANY
Respondent
PUBLIC JUDGMENT AND REASONS
[Confidential Judgment and Reasons issued on September 12, 2014]
[1] This is an application for judicial review brought by National Gypsum (Canada) Ltd. (NGL) concerning the decision of an arbitrator, Murray A. Clemens, Q.C. (Arbitrator), dated July 5, 2013, made in a final offer arbitration (FOA) held pursuant to Part IV of the Canada Transportation Act, SC 1996, c 10 (CTA), in which the Arbitrator selected the final offer of Canadian National Railway Company (CN). These public reasons are an edited form of the confidential reasons and reflect the parties’ expectation of confidentially arising from s. 167 of the CTA.
Factual Background [2] NGL operates a quarry in East Milford, Nova Scotia. For sixty years it has shipped gypsum rock from there to its port facility in Wrights Cove, Dartmouth, by CN rail.
[3] As defined by s. 6 of the CTA, NGL is a shipper of goods and CN is a carrier of goods. The CTA permits a shipper who is dissatisfied with the rates charged or proposed to be charged by a carrier for the movement of goods, or with any associated conditions, to submit the matter in writing to the Canadian Transportation Agency (Agency) to be determined by a FOA. In essence, this process requires the shipper to serve its final offer, excluding any dollar amounts, on the carrier. Within ten days after service, the shipper and the carrier must submit their respective final offers to the Agency, including dollar amounts. The Agency then provides each party with a copy of the other’s submission and refers the matter to an arbitrator who must select one of the two offers.
[4] On April 29, 2013, NGL filed with the Agency and served on CN a FOA submission, comprised of its final offer without dollar amounts. This final offer was comprised of two sections, rate and conditions. The rate (Rate) was left blank.
[5] The listed “Conditions Associated with the Movement of the Goods” (Conditions) included an “Incorporation by Reference” clause which excluded any fuel surcharge.
[6] On May 9, 2013, NGL submitted its final offer, which differed from its initial submission only by the addition of a specified dollar figure in the Rate space.
[7] On May 9, 2013, CN also submitted its final offer. This followed the format of NGL’s final offer and also included a specified Rate. The conditions were substantively the same as those proposed by NGL except for the wording of the Incorporation by Reference clause. There was also a further condition being a Fuel Surcharge.
[8] The Agency exchanged the parties’ final offers and on May 14, 2013 it referred the matter to the Arbitrator. Pre-hearing teleconferences were held and, by letter dated May 24, 2013, the Arbitrator wrote to the parties to record the procedural matters agreed to and directed during the teleconferences. This included that no court reporter was required for the hearing.
[9] On May 29, 2013, the parties exchanged the information that they intended to submit to the Arbitrator in support of their final offers (Information). In its Information NGL submitted, amongst other things, that CN’s inclusion of a variable fuel surcharge rendered CN’s offer uncertain and unascertainable because it was based on a formula which was dependant upon unpredictable future events and was unilaterally changeable by CN; that CN’s final offer contravened s. 161.1(1) of the CTA because it did not include a “dollar amount”; and, that CN’s final offer was unreasonable because it proposed an uncompetitive rate contrary to the National Transportation Policy. CN’s Information, amongst other things, addressed the negotiation and FOA history between the parties; why its proposed Rate was reasonable; and, the fuel surcharge as a component of its rate. Each party made substantive submissions in support of its position by way of its Information.
[10] By letter dated May 31, 2013, CN advised the Arbitrator that it sought to lead rebuttal evidence to respond to NGL’s allegation that CN’s final offer was non-compliant with the CTA as a result of its incorporation of a specified CN Fuel Surcharge Tariff. CN submitted that this issue was not foreseeable as it was the first time NGL had raised such an argument even though the surcharge had been incorporated in prior contracts between the parties. On June 17, 2013, CN wrote to the Arbitrator formally requesting permission to file the rebuttal evidence, to which NGL objected the next day. Ultimately, by letter of June 19, 2013, the Arbitrator advised the parties that he would determine the issue at the hearing unless they required a decision in advance.
[11] The parties exchanged interrogatories on June 20, 2013. On the same day, CN advised the Arbitrator that in preparing its answers to the NGL interrogatories, CN had noticed a discrepancy in the actual distance of the movement of NGL’s traffic, 31 miles, and the distance that had been used to calculate the mileage-based fuel surcharge under a specified CN Tariff, which was 36 miles. The discrepancy resulted from an erroneous calculation of the mileage by the third party software, PC*Miler (ALK Technologies), used to calculate NGL’s fuel surcharge. CN advised that it had received confirmation from ALK Technologies that the error would be corrected and that the next version of PC*Miler would calculate the correct mileage. Also, CN said that it would reimburse NGL for the overpayments made as a result of the error, inclusive of HST and interest at 5%. Further, that the impact of this recalculation of the proper amount of fuel surcharge payable by NGC in previous years and on a go-forward basis impacted certain of the figures referenced in CN’s Information, although only negligibly.
[12] The Arbitrator ultimately determined that CN’s June 20, 2013 letter did not form a part of the record.
[13] This issue was also addressed by CN in response to NGL Interrogatory #8.
[14] The hearing was held in Halifax, Nova Scotia on June 24, 25 and 26, 2013 during which time witnesses were heard. On July 5, 2013 the Arbitrator selected CN’s final offer.
Decision Under Review [15] Pursuant to s. 165(1) of the CTA, the arbitrator is required to select the final offer of either the shipper or the carrier. The decision must be in writing (s. 165(4)) but the arbitrator is not to give reasons unless every party requests them within 30 days of the decision (s. 165(5)).
[16] Accordingly, the Arbitrator’s decision in this instance is brief, containing only background information, then concluding:
Award Final Offer Selection
9. The final offer of the carrier, Canadian National Railway Company, is selected. Pursuant to ss.165(1)(c) of the Canadian Transportation Act, this final offer selection is binding on the parties for a period of one year from […]
[17] Neither party requested written reasons and none were given.
[18] By letter of August 7, 2013, the Arbitrator confirmed that. given the expiration of the deadlines for written reasons set out in s. 165(5) of the CTA, and, pursuant to Rule 27 of the Procedures for the Conduct of Final Offer Arbitration, he had destroyed all information, notes or documents including agendas or minutes of pre-hearing conferences filed, deposited prepared or taken during the arbitration.
Legislative Background [19] FOAs are addressed in Part IV of the CTA.
[20] A shipper who is dissatisfied with the rate or rates charged or proposed to be charged by a carrier for the movement of goods, or with any of the conditions associated with the movement of goods, may submit the matter in writing to the Agency for final offer arbitration to be conducted by one arbitrator, or if the shipper and carrier agree, by a panel of three arbitrators (s. 161(1)).
[21] A copy of that submission must be served on the carrier by the shipper and must contain, amongst other things, the final offer of the shipper to the carrier, excluding any dollar amounts (s. 161(2)(a)). Within ten days after service of a shipper’s submission, the shipper and the carrier must submit to the Agency their final offers, including dollar amounts (s. 161.1(1)). The Agency then provides each party with a copy of the other’s final offer (s. 161.1(2)). If one party does not submit a final offer in accordance with s. 161.1(1), the final offer submitted by the other party is deemed to be the one selected by the arbitrator (s. 161.1(3)).
[22] Within five days of the final offers being received, the Agency must refer the matter to arbitration (s. 162(1)). On request by the arbitrator, the Agency may provide administrative, technical and legal assistance to the arbitrator (s. 162(2)).
[23] In the absence of an agreement between the arbitrator and the parties as to the procedure to be followed, a FAO shall be governed by the rules of procedure made by the Agency (s. 163(1)). Subject to that procedure, the arbitrator shall conduct the arbitration proceedings as expeditiously as possible and in a manner the arbitrator considers appropriate in the circumstances (s. 163(2)).
[24] Within fifteen days after the Agency refers the matter for FOA, the parties are required to exchange the information that they intend to submit to the arbitrator in support of their final offers (s. 163(4)). Seven days after that information has been received, each party may direct interrogatories to the other which must be answered within fifteen days of receipt (s. 163(4)). If a party unreasonably withholds information that the arbitrator subsequently deems to be relevant, that withholding shall be taken into account by the arbitrator in making a decision (s. 163(5)).
[25] The arbitrator is required to have regard to the information so provided and, unless the parties agree to limit the amount of information to be provided, to any additional information that is provided by the parties at the arbitrator’s request (s. 164(1)). Further, unless the parties agree otherwise, in rendering a decision the arbitrator shall have regard to whether there is available to the shipper an alternative, effective, adequate and competitive means of transporting the goods to which the matter relates and to all considerations that appear to the arbitrator to be relevant to the matter (s. 164(2)).
[26] The decision of the arbitrator in conducting a FOA shall be the selection by the arbitrator of the final offer of either the shipper or the carrier (s. 165(1)) in writing (s. 165(2)(a)) and applicable for a period of one year or less if appropriate, unless otherwise agreed by the parties (s. 165(2)(c)). As stated above, no reasons shall be included in the decision (s. 165(4)), however, if requested by all of the parties to the arbitration within thirty days of the decision, the arbitrator shall give written reason for the decision (s. 165(5)). Unless the parties both otherwise agree, the decision shall be final and binding (s. 165(6)(a)).
[27] A complete copy of Part IV of the CTA is attached as a schedule to this decision.
Issues [28] I would frame the issues in this matter as follows:
What is the standard of review? Did CN amend its final offer? Was CN’s final offer compliant with s. 161.1(1) of the CTA? Was CN’s final offer uncertain or void for uncertainty? Is this an appropriate case for a directed verdict or mandamus?
[29] NGL had also originally objected to the admissibility of paragraphs 25(b), 25(c) and 29 of the Affidavit of Lon Labrash, Director in Financial Planning for CN, dated October 2, 2013, which was filed in response to NGL’s application for judicial review (Labrash Affidavit). However, that objection was withdrawn at the hearing, it being left to the Court to determine what weight to afford that evidence.
[30] In support of its judicial review application, NGL submitted the affidavit of Sharon Schmitz, legal administrative assistant with Davis LLP, dated September 3, 2013 (Schmitz Affidavit), which attached as exhibits many of the documents relevant to this application. The Labrash Affidavit similarly attached such documentation as exhibits.
ISSUE 1: What is the standard of review? NGL’s Position [31] NGL submits that the issues raise questions of law and jurisdiction and relate to the interpretation of the CTA. An arbitrator in a FOA does not have specialized expertise nor can the CTA be considered the Arbitrator’s home statute. The decision is therefore reviewable on the standard of correctness (Dunsmuir v New Brunswick, 2008 SCC 9 at paras 59-60 [Dunsmuir]).
[32] NGL submits that the Arbitrator acted without jurisdiction by allowing CN to amend its final offer, which is not permitted by the CTA. Alternatively, that the Arbitrator erred in law as he acted contrary to ss. 161.1(1) and 165(1) of the CTA. At the hearing before me, NGL elaborated on its position as to the standard of review and submitted that on a contextual analysis the correctness standard would apply: as to the expertise of the Arbitrator, regardless of s. 169(1) of the CTA, it is the Agency and not the Arbitrator who has expertise; as the issues are statutory interpretation and jurisdiction they are more suited to be heard by the Court; while issues on the merits reside with the Arbitrator, the question of the validity of the final offer is better addressed by the Court; the scheme of the CTA does not contemplate arbitrators addressing questions of law or home statutes as demonstrated by s. 162(2) which permits the arbitrators to request the Agency to provide legal assistance; s. 165(6)(a) is not a true privative clause; and, the issue is of central importance to the FOA scheme.
CN’s Position [33] CN submits that the standard of review is reasonableness. It characterizes the nature of the questions that were before the Arbitrator as questions of fact or mixed fact and law, being whether CN’s final offer was uncertain, failed to include dollar amounts, and, was amended. Questions where the legal and factual issues are inextricably intertwined also attract a standard of reasonableness (Dunsmuir, above, at para 59).
[34] The existence of a privative or preclusive clause, such as s. 165(6)(a) of the CTA, is a statutory direction from Parliament giving rise to a strong indication of a deferential standard of review (Dunsmuir, above, at paras 52 and 55). Nor are any of the issues raised matters of central importance to the legal system as a whole thereby attracting a correctness standard.
[35] This is not a jurisdictional issue and the Courts should not brand as jurisdictional issues that are doubtfully so. Here the Arbitrator was not required to determine whether his grant of authority gave him the ability to decide a particular matter, and there is no question that the CTA gave him the authority to decide the FOA. NGL takes issue with the manner in which the Arbitrator exercised his authority which is not a question of jurisdiction.
Analysis [36] The first step in determining the appropriate standard of review is to ascertain whether existing jurisprudence has already resolved, in a satisfactory manner, the degree of deference to be afforded a particular category of question. If it has not, then the Court must engage the second step, which is to determine the appropriate standard having regard to the nature of the question, the expertise of the tribunal, the presence or absence of a privative clause, and the purpose of the tribunal (Dunsmuir, above, at paras 51-64; Agraira v Canada (Public Safety and Emergency Preparedness), 2013 SCC 36 at para 48 [Agraira]).
[37] In this matter the parties have not referred the Court to any cases where the standard of review has been determined in the context of FOA arbitration decisions conducted pursuant to the CTA. Thus, the second step must be engaged.
[38] In Dunsmuir, above, the Supreme Court identified factors that will assist in determining whether the decision-maker should be given deference and a reasonableness test applied (para 55):
• A privative clause: this is a statutory direction from Parliament or a legislature indicating the need for deference.
• A discrete and special administrative regime in which the decision maker has special expertise (labour relations for instance).
• The nature of the question of law. A question of law that is of “central importance to the legal system . . . and outside the . . . specialized area of expertise” of the administrative decision maker will always attract a correctness standard (Toronto (City) v. C.U.P.E., at para. 62). On the other hand, a question of law that does not rise to this level may be compatible with a reasonableness standard where the two above factors so indicate.
[39] The Court also found that there is nothing unprincipled in the fact that some questions of law will be decided on the basis of reasonableness. It simply means giving the adjudicator’s decision appropriate deference in deciding whether a decision should be upheld, bearing in mind the factors indicated.
[40] The Supreme Court of Canada restated this finding in Smith v Alliance Pipeline Ltd, 2011 SCC 7, [2011] 1 SCR 160, as follows:
[26] Under Dunsmuir, the identified categories are subject to review for either correctness or reasonableness. The standard of correctness governs: (1) a constitutional issue; (2) a question of “general law ‘that is both of central importance to the legal system as a whole and outside the adjudicator’s specialized area of expertise’” (Dunsmuir, at para. 60 citing Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77, at para. 62); (3) the drawing of jurisdictional lines between two or more competing specialized tribunals; and (4) a “true question of jurisdiction or vires” (paras. 58-61). On the other hand, reasonableness is normally the governing standard where the question: (1) relates to the interpretation of the tribunal’s enabling (or “home”) statute or “statutes closely connected to its function, with which it will have particular familiarity” (para. 54); (2) raises issues of fact, discretion or policy; or (3) involves inextricably intertwined legal and factual issues (paras. 51 and 53-54).
(See also: Canada (Canadian Human Rights Commission) v Canada (Attorney General), 2011 SCC 53, [2011] 3 SCR 471 at para 18; Dunsmuir, above, at paras 58, 60-61).
[41] And, in Alberta (Information and Privacy Commissioner) v Alberta Teachers' Association, 2011 SCC 61, [2011] 3 SCR 654, the Supreme Court indicated that true questions of jurisdiction are exceptional. There Justice Rothstein stated:
[39] What I propose is, I believe, a natural extension of the approach to simplification set out in Dunsmuir and follows directly from Alliance (para. 26). True questions of jurisdiction are narrow and will be exceptional. When considering a decision of an administrative tribunal interpreting or applying its home statute, it should be presumed that the appropriate standard of review is reasonableness. As long as the true question of jurisdiction category remains, the party seeking to invoke it must be required to demonstrate why the court should not review a tribunal’s interpretation of its home statute on the deferential standard of reasonableness.
[42] Recently, in McLean v British Columbia (Securities Commission), 2013 SCC 67, the Supreme Court of Canada addressed the standard of review on judicial review (at paras 21-27) and stated:
[21] Since Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, this Court has repeatedly underscored that “[d]eference will usually result where a tribunal is interpreting its own statute or statutes closely connected to its function, with which it will have particular familiarity” (para. 54).[2] Recently, in an attempt to further simplify matters, this Court held that an administrative decision maker’s interpretation of its home or closely-connected statutes “should be presumed to be a question of statutory interpretation subject to deference on judicial review” (Alberta (Information and Privacy Commissioner) v. Alberta Teachers’ Association, 2011 SCC 61, [2011] 3 S.C.R. 654, at para. 34).
[22] The presumption endorsed in Alberta Teachers, however, is not carved in stone. First, this Court has long recognized that certain categories of questions - even when they involve the interpretation of a home statute - warrant review on a correctness standard (Dunsmuir, at paras. 58-61). Second, we have also said that a contextual analysis may “rebut the presumption of reasonableness review for questions involving the interpretation of the home statute” (Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 35, [2012] 2 S.C.R. 283, at para. 16). The appellant follows both these routes in urging us to accept a correctness standard. I propose to deal with her second argument first as it can be dispensed with quickly.
[…]
[25] Post-Dunsmuir, it has become fashionable for counsel to argue that the question before an administrative decision maker falls into one of the few recognized exceptional categories. One wave of cases focuses on whether the question raised is a “true” question of vires or jurisdiction; see Alberta Teachers, at paras. 37-38 (citing various cases). In that case, the Court expressed serious reservations about whether such questions can be distinguished as a separate category of questions of law, but ultimately left the door open to the possibility (para. 34).[3]
[26] A second wave - the one which the appellant now rides - focuses on “general questions of law that are both of central importance to the legal system as a whole and outside the adjudicator’s specialized area of expertise” (Canada (Canadian Human Rights Commission) v. Canada (Attorney General), 2011 SCC 53, [2011] 3 S.C.R. 471 (“Mowat”), at para. 22, referring to Dunsmuir, at para. 60); see also Nor-Man Regional Health Authority Inc. v. Manitoba Association of Health Care Professionals, 2011 SCC 59, [2011] 3 S.C.R. 616; Communications, Energy and Paperworkers Union of Canada, Local 30 v. Irving Pulp & Paper, Ltd., 2013 SCC 34, [2013] 2 S.C.R. 458. In each of these cases, this Court unanimously found that the question presented did not fall into this exceptional category - and I would do so again here.
[27] The logic underlying the “general question” exception is simple. As Bastarache and LeBel JJ. explained in Dunsmuir, “[b]ecause of their impact on the administration of justice as a whole, such questions require uniform and consistent answers” (para. 60). Or, as LeBel and Cromwell JJ. put it in Mowat, correctness review for such questions “safeguard[s] a basic consistency in the fundamental legal order of our country” (para. 22).
[43] In my view this matter does not fall within either of the categories identified and described by Dunsmuir and the subsequent jurisprudence as attracting the correctness standard. It is not a constitutional issue nor a question of general law that is both of central importance to the legal system as a whole and outside the Adjudicator’s specialized area of expertise. It does not involve the drawing of jurisdictional lines between two or more competing specialized tribunals nor is it a true question of jurisdiction or vires.
[44] While NGL argued that the decision is of central importance to the FOA scheme, that is not the test to be met. None of the issues pertaining to the Arbitrator’s decision concerning the FOA as between NGL and CN amount to a question of general law that is of central importance to the legal system as a whole and outside the Arbitrator’s specialized area of knowledge. As Justice Kelen said in Canadian National Railway Company v Western Canadian Coal Corporation, 2007 FC 371 [Western Canadian], the issues to be decided do not transcend the interests of the parties involved:
[49] In this case, at issue is a form of interest arbitration operating under a statutory framework that expressly states that no reasons are to be provided except where both parties consent. At stake are purely commercial interests, rather than fundamental personal liberties. There is no right of appeal from the arbitrator’s decision. It is final and binding. Moreover, time is of the essence. The arbitrator is not bound by precedent, and accordingly the issues to be decided by the arbitrator do not transcend the interests of the parties involved…
Although that decision pre-dated Dunsmuir and dealt with a different issue, the reasoning on this point is relevant.
[45] As noted above, jurisdictional issues are exceptional and only arise “…where the tribunal must explicitly determine whether its statutory grant of power gives it the authority to decide a particular matter” (Dunsmuir, above, at para 59). That is not the case here. There is no doubt that the Arbitrator had the authority to select a final offer, the issues are concerned with the decision itself.
[46] NGL also submits that this matter raises questions of statutory interpretation which are best suited for determination by the Court. Further, that in this instance the Arbitrator is not a member of the Agency, lacks expertise and is not interpreting his home statute. As noted above, where the question relates to the interpretation of the tribunal’s enabling or home statute or statutes closely connected to its function, with which it will have particular familiarity, the reasonableness standard will normally apply.
[47] I do not think that the fact that an arbitrator is not an employee of the Agency precludes him from having the experience and expertise to effect his role under the CTA, including the interpretation of the CTA as a statute closely connected to his function and with which he will have particular familiarity. Nor do I agree that the fact that the Agency may, at the request of the arbitrator, provide administrative, technical and legal assistance to the arbitrator pursuant to s. 162(2) suggests that the FOA statutory scheme does not envision the arbitrator addressing questions of law or mixed fact and law in the execution of his role.
[48] While s.169 does not explicitly require that every arbitrator have expertise that may assist them in conducting FOAs, there is no evidence that the Arbitrator who presided in this matter lacked such expertise. In my view, if an arbitrator has been selected by the Agency and is fulfilling the role described within that scheme, then it must be assumed that he has acquired special expertise.
[49] Other factors leading towards the reasonableness standard are that Part IV of the CTA is a discrete and special administrative regime. Further, s. 165(6)(a) states that unless the parties agree otherwise, which they did not in this case, the decision of the arbitrator on FOA will be final and binding and enforceable as if it were an order of the Agency, which provision resembles a privative clause.
[50] In conclusion, the issues in this matter all raise issues of fact or mixed fact and law. Whether or not CN amended its final offer is a question of fact as is the question of whether the Arbitrator permitted CN to do so. Similarly, whether CN’s final offer was uncertain or void for uncertainty is a question of mixed fact and law. And, to the extent that the Arbitrator may have been required to interpret provisions of the CTA, he is interpreting his home statute. As the presumption of its application has not been rebutted, the standard of review is reasonableness.
ISSUE 2: Did CN amend its final offer? NGL’s Position [51] NGL submits that the CTA does not allow the parties to amend their final offers once submitted to the Agency nor does it allow an arbitrator to permit an amendment once a final offer is submitted. The Arbitrator, therefore, acted without jurisdiction in allowing CN to amend its final offer. Alternatively, the Arbitrator erred in law by acting contrary to ss. 161.1(1) and 165(1) of the CTA.
[52] Although CN may submit that it did not revise its final offer, but rather corrected the calculation of its fuel charge, this ignores the fact that CN can only correct the distance for NGL’s rail movement by calculating the fuel surcharge on something other than the specified CN Tariff, which requires calculation using PC*Miller. In the alternative, by revising its fuel surcharge, CN revised the rate payable under its final offer. This is because the application of the fuel surcharge is a component of the rate to be charged to NGL under CN’s final offer. This was an improvement of CN’s final offer after NGL had tendered its own offer which rendered it incapable of acceptance as it was an amendment.
[53] Even though the Arbitrator ruled that the June 20, 2013 letter from CN concerning the fuel surcharge error did not form a part of the record at the hearing, he accepted the evidence of CN’s witnesses regarding the error as evidenced by the fact that the decision specifically states that he “considered the evidence of the witnesses”. He thereby allowed CN to revise its final offer.
CN’s Position [54] CN submits that at no time during the FOA process did it attempt to revise, amend or to otherwise alter or modify its final offer. The final offer, including dollar amounts, that CN initially provided to the Agency pursuant to s. 161.1 of the CTA is the exact same final offer that was considered and ultimately accepted by the Arbitrator. Nor has CN ever requested that its final offer be amended or revised. While CN’s June 20, 2013 letter requested minor changes to CN’s Information, the wording of the final offer did not change.
[55] Further, at no time did the Arbitrator permit CN to amend its final offer. Rather, the uncontradicted evidence is that the Arbitrator expressly ruled that the June 20, 2013 letter did not form a part of the record at the hearing. Nor is there any evidence to support NGL’s assertion that the Arbitrator accepted CN’s witnesses’ submissions as to the mileage error. The decision simply states that he considered the information, evidence and related materials provided by the parties and the evidence of the witnesses. In any event, the practical effect of the mileage error was negligible in comparison to the base rate differential between the two final offers. The Arbitrator could easily have rejected the evidence of CN’s witnesses as to the mileage error yet still have accepted CN’s final offer as being the most commercially reasonable.
Analysis [56] As a starting point it is useful to refer to Western Canadian, above. That case was a judicial review of an arbitrator’s decision which required the Court to determine if procedural fairness imposed by paragraph 29(e) of the Canadian Bill of Rights, S.C. 1960, c.44 applied to the FOA regime. There Justice Kelen summarized prior findings of the Federal Court of Appeal concerning FOAs, described the FOA process and noted that:
[8] Since FOA forecloses the option of the arbitrator choosing a compromise position between the two offers, the design of FOA encourages the parties to settle the dispute through their own negotiations.
[9] The FOA process disciplines the parties to advance tempered offers because the more far reaching a party’s position, the greater likelihood that the other party’s final offer will be selected by the arbitrator…
[…]
[35] Final offer arbitration has been described as “an intentionally high risk form of arbitration” that encourages settlement and tempers final positions. The arbitration resolves isolated disputes over rates to be charged by a carrier for a period of one year when the parties are unable to agree. The arbitrator’s task is to select the more reasonable of the two offers submitted. As is indicated in paragraph 165(6)(a) of the Act, the arbitrator’s decision is intended to bring finality to the dispute. The limited duration of the decision’s binding effect on the parties is closely linked to the limited timeframe within which the arbitration process occurs…
[…]
[57] While NGL devotes much of its effort in its submissions to establishing that final offers were intended and are to be exchanged simultaneously, in my view that is clear from the CTA provisions and is not at issue in this case.
[58] The only question is whether CN amended its final offer and, in my view, it did not.
[59] As indicated in the background facts, both parties were required to and did submit their final offers to the Agency on May 9, 2013. NGL’s final offer included an Incorporation by Reference clause which excluded any fuel surcharge and proposed a specified Rate. CN’s final offer included a different specified Rate, an Incorporation by Reference clause and a Fuel Surcharge clause that stated that the Rate was subject to a specified CN Fuel Surcharge Tariff supplements thereto and reissues thereof during the Term.
[60] In the June 20, 2013 letter from CN to the Arbitrator, CN advised that in preparing its answers to the NGL interrogatories it had noticed a discrepancy in the actual distance of the movement of NGL’s traffic and the distance that had been used to calculate the mileage based fuel surcharge under the specified CN Tariff. The discrepancy resulted from an erroneous calculation of the mileage by the third party software, PC*Miler, used to calculate NGL’s fuel surcharge. It went on to explain that the error had an impact on certain of the numbers “referenced in CN’s Information, although only negligibly” and provided an example of this.
[61] It is important to note that CN’s final offer contains only one figure, the stated Rate. Further, nowhere in the June 20, 2013 letter does CN request or suggest that the stated Rate contained in its final offer is to be revised. CN clearly stated that, although it viewed the adjustments to the comparative rates not to be material, that it sought to bring the discrepancy to the Arbitrator’s attention in advance of the hearing to avoid any confusion or inconsistency in the rate history or comparison. In that regard I would note s.163(5) of the CTA which states that if a party unreasonably withholds information that the arbitrator subsequently deems to be relevant, the withholding shall be taken into account by the arbitrator in making a decision. Thus, in my view, once it discovered the mileage error which had an impact on the fuel surcharge, CN was obliged to disclose this.
[62] It is also of note that it is only in CN’s Information, and not the final offer, that CN makes its analysis which concludes that its final offer is commercially more reasonable than that of NGL. Thus, when CN updated those figures, in its letter of June 20, 2013, it was referring to the submissions contained in its Information, not to the final offer.
[63] More significantly, the parties agree in their submissions that the June 20, 2013 letter did not form part of the record at the hearing. Thus, even if CN’s letter was construed as an effort to improve its final offer, the letter was not evidence that was considered by the Arbitrator at the hearing and in forming his decision.
[64] NGL submits that its Information raised the issue of the fuel surcharge and alleged that CN’s final offer would overcharge NGL for fuel. It is correct that NGL’s Information raised the fuel surcharge noting that its final offer excluded it while CN’s final offer was subject to a specified CN Fuel Charge Tariff. The history of the fuel surcharge is also addressed and NGL took issue with CN’s proposal as being uncertain and unascertainable as well as contrary to s. 161.1(1) of the CTA. Further, because the base rate proposed by CN included a fuel cost component that covered CN’s full cost of diesel fuel for the movement of NGL’s traffic to Wrights Cove, that charging an additional fuel surcharge as set out in the specified Tariff would result in CN grossly over-recovering its actual fuel costs.
[65] NGL further submits that its Interrogatory #8 “clearly suggested” that CN had historically overcharged NGL for fuel based both on fuel costs and distance and, as a result of NGL’s position, CN revised its final offer to more accurately reflect the distance for Milford Quarry to Wrights Cove. However, Interrogatory #8 makes no such suggestion. Rather, it refers to CN’s Information and requests details of CN’s calculation of the specified fuel surcharge, including the distance and fuel cost associated with the calculation and the source of the numbers for both the distance and fuel cost. There is no evidence to suggest that it was anything other than as a result of CN’s efforts to respond to Interrogatory #8, and the resultant discovery of the mileage discrepancy, that prompted CN’s June 20, 2013 letter. This was confirmed by affidavit evidence as well as testimony to that effect at the hearing.
[66] Although the answer to Interrogation #8 does refer to “[t]he fuel surcharge of […] shown in CN’s Final Offer”, there was affidavit evidence stating that this was amended, with the consent of NGL’s counsel, at the hearing when the answers were being read in the record to “… CN’s Information …”.
[67] It is apparent from the affidavit evidence, reviewed in more detail in the confidential reasons, that not only did the Arbitrator refuse to accept the June 20, 2013 letter into evidence, but that he was aware of CN’s position that it was not seeking to amend its final offer. Ultimately, the Arbitrator accepted CN’s final offer, the text of which was not amended. There is no evidence that the Rate contained in the final offer was amended.
[68] NGL also submits that because the Fuel Surcharge clause in the CN final offer stated that CN’s rate was subject to the specified CN Tariff, which in turn states that the fuel surcharge is calculated on the basis of rail mileage provided by PC*Miler which had not been corrected from 36 to 31 miles at the time of the hearing, CN could only correct the mileage by revising its final offer which it did by way of the revised calculations. The specified Tariff does not contemplate PC*Miler being manually overridden, thus by applying 31 rather than 36 miles, CN revised its offer. However, for the reasons I have set out above, this submission cannot succeed.
[69] I would also note, however, that CN’s final offer stated that the Rate was subject to the specified Fuel Surcharge Tariff series, supplements thereto and reissues thereof during the Term. That CN Tariff is attached as Exhibit D of an affidavit file in support of CN’s submissions and was Appendix 3 to CN’s Information. It states, in part:
• To ensure consistency and fairness, rail mileage is calculated using the latest version of the third party software PC*Miler (ALK Technologies) on each linehaul movement. A mileage table of all Origin/Destination/Route combinations shipped in the last 12 months will be available when you login to Velocity eBusiness and select the Get Rail Miles tool. To get the mileage for any new Origin/Destination/Route combination, the customer will need to purchase the ALK Technologies software. The mileage table will be updated daily with any new moves.
NOTE: In rare cases where rail miles for an Origin/Destination/Route combination are not available through ALK Technologies’ PC*Miler software, CN will calculate and publish these miles in out Get Rail Miles mileage table.
[70] Another Tariff similarly states that “Rail mileage is calculated using the latest version of the third party software PC*Miler (ALK Technologies) on each linehaul movement. Where the rail miles are not available through PC*Miler, CN will calculate and publish the mileage independently”.
[71] There is no evidence to suggest that CN intended to calculate the Fuel Surcharge on anything other than the