Canadian Pacific Railway Company v. Canexus Chemicals Canada, LP

Canadian Pacific Railway Company v. Canexus Chemicals Canada, LP
Court (s) Database
Federal Court of Appeal Decisions
Date
2015-12-07
Neutral citation
2015 FCA 283
File numbers
A-81-14
Notes
A correction was made on September 27, 2016.
Reported Decision
Decision Content
Date: 20151207
Docket: A-81-14
Citation: 2015 FCA 283
CORAM:
PELLETIER J.A.
GAUTHIER J.A.
SCOTT J.A.
BETWEEN:
CANADIAN PACIFIC RAILWAY COMPANY
Appellant
(Respondent on Cross-Appeal)
and
CANEXUS CHEMICALS CANADA, LP, OLIN CANADA, ULC DOING BUSINESS AS OLIN CHLOR ALKALI PRODUCTS, ERCO WORLDWIDE, A DIVISION OF SUPERIOR PLUS LP, CHEMTRADE LOGISTICS INC. and CHEMTRADE WEST LIMITED PARTNERSHIP
Respondents
(Appellants on Cross-Appeal)
and
CANADIAN TRANSPORTATION AGENCY
Respondent
(Respondent on Cross-Appeal)
and
AGRIUM and
THE CANADIAN FERTILIZER INSTITUTE
Interveners
Heard at Montréal, Quebec, on May 27, 2015.
Judgment delivered at Ottawa, Ontario, on December 7, 2015.
REASONS FOR JUDGMENT BY:
PELLETIER J.A.
CONCURRED IN BY:
GAUTHIER J.A.
SCOTT J.A.
Date: 20151207
Docket: A-81-14
Citation: 2015 FCA 283
CORAM:
PELLETIER J.A.
GAUTHIER J.A.
SCOTT J.A.
BETWEEN:
CANADIAN PACIFIC RAILWAY COMPANY
Appellant
(Respondent on Cross-Appeal)
and
CANEXUS CHEMICALS CANADA, LP, OLIN CANADA, ULC DOING BUSINESS AS OLIN CHLOR ALKALI PRODUCTS, ERCO WORLDWIDE, A DIVISION OF SUPERIOR PLUS LP, CHEMTRADE LOGISTICS INC. AND CHEMTRADE WEST LIMITED PARTNERSHIP
Respondents
(Appellants on Cross-Appeal)
and
CANADIAN TRANSPORTATION AGENCY
Respondent
(Respondent on Cross-Appeal)
and
AGRIUM and
THE CANADIAN FERTILIZER INSTITUTE
Interveners
REASONS FOR JUDGMENT
PELLETIER J.A.
I. INTRODUCTION [1] The Canadian Transportation Agency (the Agency) was asked by a group of shippers of hazardous products to rule on the legality and reasonableness of Item 54, a group of clauses dealing with liability and indemnity issues, in Tariff 8 published by the Canadian Pacific Railway Company (CP). The shippers, Canexus Chemicals Canada, LP, Olin Canada ULC doing business as Olin Chlor Alkali Products, ERCO Worldwide, a division of Superior Plus LP, and Chemtrade Logistics Inc. and Chemtrade West Limited Partnership, (collectively, the Shippers), argued that Item 54 is prohibited by subsection 137(1) of the Canada Transportation Act, S.C. 1996 c. 10 (the Act) or, alternatively, should be struck down as unreasonable pursuant to section 120.1 of the Act.
[2] The Agency examined the question and, in the course of two decisions, held that portions of Item 54 were indeed prohibited by subsection 137(1) and, pursuant to section 26 of the Act, ordered that CP refrain from applying Item 54 until such time as the tariff was amended to remove the prohibited limitations of liability. At the same time, the Agency ruled that it could not disallow Item 54 as unreasonable pursuant to section 120.1 of the Act because it found that section 120.1 applied only to charges and associated terms and conditions for incidental or additional services whose cost had been unbundled from the rate for transporting the goods. On the facts of this case, Item 54 was not such an item.
[3] CP appeals from the order prohibiting it from applying Item 54. The Shippers cross-appeal from the dismissal of their application under section 120.1.
[4] For the reasons which follow, I would allow the appeal and dismiss the cross-appeal. I would return the matter to the Agency with instructions that the Shippers’ application should be dismissed.
II. FACTS AND LEGISLATION [5] Unless it has entered into a specific contract with a shipper, a railway can only charge a rate and stipulate terms and conditions which have been published in a tariff. A railway’s obligation to publish its rates and conditions in a tariff flows from section 117 of the Act:
117. (1) Subject to section 126, a railway company shall not charge a rate in respect of the movement of traffic or passengers unless the rate is set out in a tariff that has been issued and published in accordance with this Division and is in effect.
117. (1) Sous réserve de l’article 126, une compagnie de chemin de fer ne peut exiger un prix pour le transport de marchandises ou de passagers que s’il est indiqué dans un tarif en vigueur qui a été établi et publié conformément à la présente section.
(2) The tariff must include any information that the Agency may prescribe by regulation.
(2) Le tarif comporte les renseignements que l’Office peut exiger par règlement.
(3) The railway company shall publish and either publicly display the tariff or make it available for public inspection at its offices.
(3) La compagnie de chemin de fer fait publier et soit affiche le tarif, soit permet au public de le consulter à ses bureaux.
[6] Pursuant to the authority conferred in subsection 117(2), the Railway Traffic and Passenger Tariffs Regulations SOR/96-338 (the Regulations) were promulgated. They make it clear that a tariff is not limited to the stipulation of the rate but must include the terms and condition of carriage as well:
2. The following information shall be included in every traffic or passenger tariff that is issued and published by a railway company under Part III of the Act:
…
2. Tout tarif de transport des marchandises ou des passagers que la compagnie de chemin de fer établit et publie aux termes de la partie III de la Loi doit comporter les renseignements suivants :
….
(f) any terms and conditions of the tariff, including terms and conditions of the carriage of persons with disabilities, or an explanation, with references, of where the terms and conditions can be found;
f) les modalités du tarif, y compris les conditions de transport applicables aux personnes ayant des déficiences, ou une indication, avec les renvois pertinents, de l’endroit où se trouvent ces modalités
[7] Section 126, which is referred to in the opening words of section 117, is the provision which allows the parties to proceed by way of a confidential contract which may contain rates and terms and conditions other than those in the railway’s published tariff :
126. (1) A railway company may enter into a contract with a shipper that the parties agree to keep confidential respecting:
126. (1) Les compagnies de chemin de fer peuvent conclure avec les expéditeurs un contrat, que les parties conviennent de garder confidentiel, en ce qui concerne :
(a) the rates to be charged by the company to the shipper;
a) les prix exigés de l’expéditeur par la compagnie;
(b) reductions or allowances pertaining to the tariffs that have been issued and published in accordance with this Division;
b) les baisses de prix, ou allocations afférentes à ceux-ci, indiquées dans les tarifs établis et publiés conformément à la présente section;
(c) rebates or allowances pertaining to rates in tariffs or confidential contracts that have previously been lawfully charged;
c) les rabais sur les prix, ou allocations afférentes à ceux-ci, établis dans les tarifs ou dans les contrats confidentiels, qui ont antérieurement été exigés licitement;
(d) any conditions relating to the traffic to be moved by the company; and
d) les conditions relatives au transport à effectuer par la compagnie;
(e) the manner in which the company shall fulfill its service obligations under section 113.
e) les moyens pris par la compagnie pour s’acquitter de ses obligations en application de l’article 113.
[8] In this case, CP published Tariff 8 including Item 54 which, due to its length, is reproduced as Appendix “A” to these reasons. In brief, Item 54 provides as follows:
a) CP shall not be liable to the shipper for claims, loss or damage caused by or arising from the transportation of the commodities [the Shippers’ traffic].
b) The shipper shall defend, indemnify and hold harmless CP for claims, loss or damage arising from or caused by the transportation of the commodities.
c) This indemnity shall include any liabilities arising from;
i. Any failure of, release from or defect in the equipment tendered by the shipper for the transportation of the commodity.
ii. Loading, sealing and/or securing the commodity in the shipper’s equipment.
iii. Release, unloading, transfer, delivery, treatment, dumping, storage, or disposal of the commodity.
iv. Any fines or penalties resulting from the actual or alleged violation of any environmental or other law, code, or regulation.
v. Any loss caused by the sole negligence of the shipper.
d) The shipper shall have no obligation to indemnify CP for liabilities arising from the sole negligence or willful misconduct of CP, its agents or employees.
e) The shipper shall defend, indemnify and hold CP harmless for any liabilities due to the presence of contaminants in the commodity which are not properly described in the commodity shipping document.
f) The shipper’s obligation to indemnify CP does not include claims for loss, damage or delay to the commodities.
g) Subject to the shipper’s obligation to defend and indemnify CP, where Customer alleges that claims, loss or damages arising from or caused by the transportation of the commodities are caused by the joint, contributory or concurrent negligence of CP, responsibility for the claims, loss or damage shall be adjudicated under principles of comparative fault in which the trier of fact shall determine the percentage of responsibility of CP, the shipper or any other party. CP shall be liable only for its percentage of responsibility and the shipper shall be responsible for the balance.
[9] As can be seen, Item 54 deals with issues of liability between CP and the shipper, as well as liabilities owed to third parties The question which the Shippers put before the Agency was whether Item 54 ran afoul of subsection 137(1) of the Act which deals with limitations of liability:
137. (1) A railway company shall not limit or restrict its liability to a shipper for the movement of traffic except by means of a written agreement signed by the shipper or by an association or other body representing shippers.
137. (1) La compagnie de chemin de fer ne peut limiter sa responsabilité envers un expéditeur pour le transport des marchandises de celui-ci, sauf par accord écrit signé soit par l’expéditeur, soit par une association ou un groupe représentant les expéditeurs.
(2) If there is no agreement, the railway company’s liability is limited or restricted to the extent provided in any terms and conditions that the Agency may
(a) on the application of the company, specify for the traffic; or
(b) prescribe by regulation, if none are specified for the traffic.
(2) En l’absence d’un tel accord, la mesure dans laquelle la responsabilité de la compagnie de chemin de fer peut être limitée en ce qui concerne un transport de marchandises est prévue par les conditions de cette limitation soit fixées par l’Office pour le transport, sur demande de la compagnie, soit, si aucune condition n’est fixée, établies par règlement de l’Office.
[10] Pursuant to the authority granted by paragraph 137(2)(b), the Railway Traffic Liability Regulations (SOR/91-488) were promulgated. They contain a number of terms but, for present purposes, the most noteworthy are the following:
4. Subject to sections 8 and 15, for the purposes of subsection 137(2) of the Act, a carrier is liable, in respect of goods in its possession, for any loss of or damage to the goods or for any delay in their transportation unless that liability is limited by these Regulations.
….
4. Sous réserve des articles 8 et 15, pour l’application du paragraphe 137(2) de la Loi, le transporteur est responsable, quant aux marchandises qui sont en sa possession, des pertes, des dommages et des retards de transport subis par celles-ci, sauf dans les cas où cette responsabilité est limitée par le présent règlement.
5. (1) A carrier shall not be liable for any loss or damage in respect of any goods or for any delay in the transportation of the goods if the loss, damage or delay, as the case may be, results from
(a) an act of God;
(b) war or an insurrection;
(c) a riot, strike or lock-out;
(d) any defect in the goods;
(e) any act, negligence or omission of the shipper or owner of the goods;
(f) an authority of law; or
(g) a quarantine.
5. (1) Le transporteur n’est pas responsable des pertes, des dommages et des retards de transport subis par les marchandises qui sont attribuables à l’une des causes suivantes :
a) cas de force majeure;
b) guerre ou insurrection;
c) émeute, grève ou lock-out;
d) défectuosité des marchandises;
e) acte, omission ou négligence de l’expéditeur ou du propriétaire des marchandises;
f) application d’une loi;
g) mise en quarantaine.
[11] These provisions largely reproduce a common carrier’s obligations (and the exceptions to those obligations) at common law where a common carrier is treated as the insurer of the shipper’s goods: See Canadian Forest Products Ltd v. B.C. Rail Ltd., 2005 BCCA 369, [2005] B.C.J. No. 1486 at paragraphs 35-36, Boutique Jacob Inc. v. Pantainer Ltd., 2006 FC 217, [2006] F.C.J. No. 292 (reversed on other grounds, 2008 FCA 85), citing Canadian National Railway co. v. Harris, [1946] S.C.R. 352.
[12] In their application, the Shippers asked the Agency to make orders determining that Item 54 contravened subsection 137(1), that it was unreasonable, and that it be eliminated from Tariff 8. They said that the Agency had, by virtue of sections 26 and 120.1 of the Act, the authority to make the orders which they sought.
26. The Agency may require a person to do or refrain from doing any thing that the person is or may be required to do or is prohibited from doing under any Act of Parliament that is administered in whole or in part by the Agency.
26. L’Office peut ordonner à quiconque d’accomplir un acte ou de s’en abstenir lorsque l’accomplissement ou l’abstention sont prévus par une loi fédérale qu’il est chargé d’appliquer en tout ou en partie.
120.1 (1) If, on complaint in writing to the Agency by a shipper who is subject to any charges and associated terms and conditions for the movement of traffic or for the provision of incidental services that are found in a tariff that applies to more than one shipper other than a tariff referred to in subsection 165(3), the Agency finds that the charges or associated terms and conditions are unreasonable, the Agency may, by order, establish new charges or associated terms and conditions.
120.1 (1) Sur dépôt d’une plainte de tout expéditeur assujetti à un tarif applicable à plus d’un expéditeur — autre qu’un tarif visé au paragraphe 165(3) — prévoyant des frais relatifs au transport ou aux services connexes ou des conditions afférentes, l’Office peut, s’il les estime déraisonnables, fixer de nouveaux frais ou de nouvelles conditions par ordonnance.
…
(7) For greater certainty, this section does not apply to rates for the movement of traffic.
….
(7) Il est entendu que le présent article ne s’applique pas aux prix relatifs au transport.
[13] With that background in mind, I now turn to the decisions under appeal.
III. THE DECISIONS UNDER APPEAL [14] As noted earlier, there are two decisions in issue in this appeal. The first, Decision 202-R-2013 (Decision 202), was issued on May 24, 2013. In that decision, the Agency dealt with the interpretations of subsection 137(1) and Item 54. However, because certain questions namely, the effect of the indemnity and hold harmless provisions of Item 54 and whether section 120.1 applied to Item 54, had not been canvassed, the Agency asked for further submissions on those questions.
[15] Following receipt of those submissions, the Agency released Decision No. 388-R-2013 (Decision 388) on October 7, 2013. Decision 388 did not limit itself to the two questions on which further submissions were requested. It returned to the ground already covered by Decision 202 and, in my view, came to different conclusions than it had in Decision 202. It then addressed the issues on which further submissions were requested and decided those questions.
[16] In order to facilitate comparison of the two decisions, I will set out the reasoning and conclusions on the questions which are common to both decisions. I will then deal with the questions which were specifically referred for further submissions.
[17] The first issue dealt with in Decision 202 is the interpretation of subsection 137(1).
[18] The Agency had little difficulty rejecting CP’s submission that the phrase “limit or restrict its liability to a shipper for the movement of traffic” should be read as “limit or restrict its liability to a shipper for loss or damage to the shipper’s goods”. The Agency found this interpretation was inconsistent with the plain meaning of the words used in the legislation.
[19] According to the Agency, subsection 137(1), on its face, prohibits a railway company from “limiting or restricting its liability to a shipper for the movement of traffic [of goods including equipment required for their movement] except by written agreement signed by the shipper or by an association or other body representing shippers”: see Decision 202 at paragraph 58. The words in brackets are the statutory definition of traffic found at section 87 of the Act.
[20] The Agency then focussed on the meaning of the expression “movement of traffic” which it found was broader than simply a reference to goods. After referring to this Court`s decision in Canadian Pacific Ltd v. Canada (National Transportation Agency) (1992) F.C.J. No. 116, the Agency held that “movement of traffic” “should be read to mean the whole process by which goods, including equipment required for their movement, are transported from origin to destination”: see Decision 202 at paragraph 63. The Agency then restated its position on subsection 137(1) by substituting this expanded expression for “movement of traffic”, with the following result:
… subsection 137(1) of the CTA must be read as prohibiting a railway company from limiting or restricting its liability for the [whole of the process or series of actions by which traffic [of goods including equipment required for their movement] is moved from origin to destination] except by means of a written agreement signed by the shipper or by an association or other body representing shippers.”
Decision 202 at paragraph 66.
[21] The Agency then turned to the scope and purpose of subsection 137(1) of the Act, and the statutory regime. The Agency noted the decision of the British Columbia Supreme Court in Mitsubishi Heavy Industries Ltd. v. Canadian National Railway Company, 2012 BCSC 1415, in which it was held that the purpose of subsection 137(1) was to protect shippers from being subject to a limitation of liability without having full knowledge of the terms of that limitation.
[22] As for the statutory regime, the Agency referred to one of its prior decisions, Decision No. 212-R-2001, in which it made the point that while deregulation left shippers and carriers largely free to make their own arrangements, nonetheless the Act continued the economic regulation of the railway industry by providing specific remedies to shippers and imposing obligations on railway companies. The Agency found that subsection 137(1) was an obligation imposed on the railways whose object was to protect shippers from unauthorized transfers of liability: see Decision 202 at paragraph 70.
[23] The Agency summarized its reasoning dismissing CP’s argument as to the scope of subsection 137(1) as follows:
The narrow interpretation argued by CP that the limitation of liability to a shipper is limited to the liability for loss or damage to the shipper’s goods is inconsistent with the plain meaning rule and not supported by the legislative purpose behind this provision.
Decision 202 at paragraph 73
[24] Having rejected CP’s argument, the Agency restated its position on the interpretation of that provision as follows:
The Agency finds that subsection 137(1) of the CTA prohibits a railway company from limiting or restricting its liability to a shipper in respect of any liability that is caused by, arising from, or associated in any way with the movement of traffic, unless there is a written agreement or as provided for in regulations promulgated pursuant to subsection 137(2) of the CTA.
Decision 202 at paragraph 76
[25] The gloss which the Agency has added to the words of subsection 137(1) is found in the words “in respect of any liability that is caused by, arising from, or associated in any way with the movement of traffic”.
[26] I now turn to Decision 388 where the same ground was covered.
[27] Focussing on the words “liability to a shipper” in subsection 137(1), the Agency noted that the underlying assumption is the existence of actual or potential liability of a railway company to a shipper. It concluded from this that a claim against the railway company by anyone other than a shipper was outside the scope of subsection 137(1): Decision 388 at paragraph 37.
[28] Precisely because subsection 137(1) was specific to a railway’s liability to a shipper, it did not apply to all liability related to or arising from the movement of traffic. In particular, the imposition of obligations on a shipper in relation to third party claims was not caught by subsection 137(1):
“Subsection 137(1) of the CTA does not deal with all aspects of liability that may be related to the movement of traffic. It is specific to the railway company’s limitation of liability to a shipper. In other words, subsection 137(1) only prevents the railway company from limiting the amount it may owe to a shipper as a result of an event that occurred in relation to the movement of the shipper’s traffic which caused damages to that shipper. If the railway company imposes obligations on the shipper in relation to a claim against the railway company from a third party, it is not captured under section 137, and nothing in subsection 137(1) would prevent the railway company from imposing terms and conditions on a shipper to limit or attenuate the financial impact those third party liabilities will have on the railway company.”
Decision 388 at paragraph 39
[29] The Agency summarized its position as follows:
... terms and conditions found in Item 54 will only be contrary to subsection 137(1) if they have the effect of limiting, restricting, or in any way reducing the amount of a claim a shipper has or may have against CP in connection with the movement of the shipper’s traffic.
Decision 388 at paragraph 44
[30] To summarize, in Decision 202, the Agency attributes to subsection 137(1) a very wide scope so that it catches “any liability that is caused by, arising from, or associated in any way with the movement of traffic”, while in Decision 388, the Agency excludes from the scope of subsection 137(1) any liability which the railway company may have to third parties or any reallocation of that liability by the railway company to a shipper.
[31] I now return to Decision 202 to examine the Agency’s interpretation of Item 54 and its application of subsection 137(1) to that interpretation. The Agency began its analysis with an assessment of the effect of the phrase “shall not be liable to a customer” (the Broad Limitation). I reproduce below, in redacted form (to assist in readability) the opening paragraph of Item 54:
CP shall not be liable to Customer and Customer shall fully indemnify, defend, and hold harmless CP, from and against any and all claims, … damages … and for any and all liability, claims, actions, fines, penalties, and associated costs and expenses (collectively "Liabilities") which are caused, arise from, or are associated in any way with transportation of the commodities or anything done or failed to be done and Customer shall fully indemnify, defend, and hold harmless CP, under this tariff.
[My emphasis]
[32] The Agency’s conclusion as to the scope of this clause is reproduced below:
The Agency is of the opinion that, by using the expression "shall not be liable to a Customer" in Item 54, CP integrated in its tariff a complete exclusion of liability to shippers of hazardous materials for any liability that may arise with respect to transportation of hazardous materials by CP.
Clearly, this broad exclusion of liability constitutes a limitation and restriction of liability to a shipper for the movement of traffic within the meaning of subsection 137(1) of the CTA.
Decision 202 at paragraphs 81-82
[33] Since this limitation and restriction of liability appears in a tariff, which is not a written agreement signed by the shipper, the Agency found that it was contrary to subsection 137(1) of the Act.
[34] The Agency then turned to Item 54’s requirement that the customer (the shipper) “fully indemnify and hold harmless CP”. The Agency found that Item 54 imposed on shippers the obligation to reimburse CP for any liabilities incurred in the transportation of hazardous materials. It found that this obligation to indemnify must necessarily arise in relation to third party liabilities since “CP has already excluded all liability to the shipper under Item 54”: see Decision 202 at paragraph 86.
[35] Item 54 also includes a clause dealing with joint liability (the Joint Liability clause), reproduced below:
Subject to Customer’s obligations to defend and indemnify CP as set forth above, should Customer believe that Liabilities are caused in whole, or in part, by the joint, contributory, or concurrent negligence or fault of CP, responsibility for Liabilities shall be adjudicated under principles of comparative fault in which the trier of fact shall determine the percentage of responsibility for CP, Customer, and any other party. CP shall be liable only for the amount of such Liabilities allocated to CP in proportion to CP’s percentage of responsibility. Customer shall be liable for all other Liabilities.
[36] The Agency was of the view that this clause could result in the shipper being responsible for more than it would otherwise be responsible under the law applicable to the situation. Since a shipper must first indemnify and defend CP before claiming the benefit of the joint liability clause, the Agency found that in doing so, the shipper would incur costs which were not recoverable under the joint liability clause. This led the Agency to find that “in certain circumstances, [Item 54 could] result in the shipper being ultimately responsible for more than the shipper would otherwise be responsible under the law applicable to the situation”: see Decision 202 at paragraph 91.
[37] In the end, the Agency found that Item 54 not only excluded CP’s liability to the shipper but also imposed additional obligations on the latter with respect to liabilities that might arise related to the transportation of a shipper’s traffic. For example, the Agency was of the view that should an event occur which triggered Item 54, the shipper would not only be unable to recover its own losses from CP, but it would have to assume CP’s liability to third parties and assume the cost of defending CP. Furthermore, the shipper would have to absorb miscellaneous costs such as “CP’s emergency response and evacuation costs, remediation costs and government oversight costs (whatever those might be), and the cost of adverse effects on wildlife or the environment”: see Decision 202 at paragraph 94.
[38] This reasoning led the Agency to conclude as follows:
Because Item 54 sets aside the principle of allocation of liability under the law governing joint liability between CP and the shipper, by reducing or nullifying CP’s share of liability, the Agency finds that this constitutes a limitation of liability to a shipper. Considering that these terms are neither included in a written agreement between CP and the applicants nor established by regulation, the Agency finds that this limitation of liability is prohibited under subsection 137(1) of the CTA.
Decision 202 at paragraph 95.
[39] It appears that this conclusion flows from the Agency’s interpretation of the Joint Liability clause.
[40] Having found that the joint liability clause limited or restricted CP’s liability to shippers, the Agency questioned whether the obligation to indemnify, defend and hold harmless was itself a limitation or restriction on liability:
By imposing on the shipper an obligation to indemnify, defend, and hold harmless, CP has integrated in the Tariff a mechanism by which CP ensures it will be made whole by the shipper for third party liabilities. This obligation goes beyond a limitation of liability and therefore may not be a limitation of liability to the shipper.
Decision 202 at paragraph 96
[41] However, since there were no pleading on the issue of the “indemnify, defend and hold harmless” clause, the Agency asked for further submissions.
[42] Decision 388 resulted from those further submissions. On the issue of the obligation to indemnify, the Agency found that it simply required the shipper to pay CP an amount equal to the amount which CP owed to third parties, subject to the shipper’s right to claim those amounts back from CP pursuant to the Joint Liability clause. This did not relieve CP of its obligations to those third parties. However, since CP did not owe anything to the shipper with respect to third party liability, the indemnification clause could not limit or restrict CP’s liability to a shipper. For that reason, the Agency found that the obligation to indemnify was not a limitation of liability to a shipper within the meaning of subsection 137(1) of Act.
[43] Because the obligation to defend found in Item 54 imposes additional obligations on the shipper and does not reduce any liability which CP may have to the latter, the Agency found that it was not a limitation of liability which was caught by subsection 137(1).
[44] As for the obligation to hold harmless, the Agency relied on the following definition from Black’s Law Dictionary:
[Hold harmless agreement] Agreement or contract in which one party agrees to hold the other without responsibility for damage or other liability arising out of the transaction involved.
Decision 388 at paragraph 54
[45] Relying on this definition, the Agency concluded that:
This definition suggests that the shippers’ obligation to hold harmless CP could extend beyond CP’s liability to third parties. It could also be construed as a waiver by the shipper in respect of any claim that the shipper has or may have against CP in relation to third party liabilities. To this extent, the shipper’s obligation to hold harmless CP would limit or restrict the amount of a shipper’s claim against CP in relation to the movement of the shipper’s traffic.
Decision 388 at paragraphs 55-56
[46] The Agency did not explain how a document issued unilaterally by the railway company could amount to a waiver of its rights by the shipper.
[47] The last issue to be dealt with is whether the Agency had jurisdiction pursuant to section 120.1 to deal with in the reasonableness of Item 54. In Decision 202, the Agency formed the preliminary view that the terms and conditions in Item 54 were not associated with a charge. However, it gave the parties the opportunity to make further submissions. The Agency then addressed the issue of the scope of section 120.1 of the Act in Decision 388.
[48] For ease of reference I reproduce section 120.1 below:
120.1 (1) If, on complaint in writing to the Agency by a shipper who is subject to any charges and associated terms and conditions for the movement of traffic or for the provision of incidental services that are found in a tariff that applies to more than one shipper other than a tariff referred to in subsection 165(3), the Agency finds that the charges or associated terms and conditions are unreasonable, the Agency may, by order, establish new charges or associated terms and conditions.
…
120.1 (1) Sur dépôt d’une plainte de tout expéditeur assujetti à un tarif applicable à plus d’un expéditeur — autre qu’un tarif visé au paragraphe 165(3) — prévoyant des frais relatifs au transport ou aux services connexes ou des conditions afférentes, l’Office peut, s’il les estime déraisonnables, fixer de nouveaux frais ou de nouvelles conditions par ordonnance.
…
(7) For greater certainty, this section does not apply to rates for the movement of traffic.
(7) Il est entendu que le présent article ne s’applique pas aux prix relatifs au transport.
[49] The Agency noted that its jurisdiction under section 120.1 was limited to “charges” and “associated terms and conditions” for the movement of traffic or for the provision of incidental services. While rates are specifically excluded from the matters which may be reviewed under section 120.1, the Agency reasoned that this did not mean that anything other than a rate was therefore reviewable.
[50] After reviewing several dictionary definitions of the word “charge”, the Agency concluded that “charge” in its ordinary sense “could literally include any obligation, whether the payment of a sum of money or the execution of an obligation to do something”: Decision 388 at paragraph 84.
[51] After referring to the modern approach to statutory interpretation, the Agency considered the context in which the expression “charges” appears in the Act. This led it to conclude that the issue was the meaning to be given to “charges” in the context of a railway company’s tariff.
[52] The Agency then compared (a) the remedy available under section 120.1 in relation to "charges and associated terms and condition for the movement of traffic or for the provision of incidental services” to (b) the remedy available under section 161 in relation to “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”. It found that the difference in remedies depending upon whether a rate or a charge was being challenged meant that the terms “rates”, “charges”, “terms and conditions” as used in the definition of tariff had distinct meanings and were not interchangeable.
[53] The Agency went on to reason that if section 120.1 was intended to permit the Agency to review everything in a tariff that was not a rate, Parliament would have used language more suited to that purpose, as it did in paragraph 114(4)(b) of the Act which allows the Agency to disallow any rate or tariff in certain circumstances.
[54] In the result, the Agency concluded that the term “charges” referred to something other than “rates” or “terms and conditions” for the movement of a shipper’s traffic or for the provision of incidental services: Decision 388 at paragraph 90.
[55] The Agency then considered a railway company’s obligations to a shipper upon payment of the tariff rate. Subsection 113(2) of the Act provides that upon payment of the rate, a railway company is bound to pick up the traffic at the point of origin, carry it and deliver it to the point of destination. The Agency found that the obligation to pay the rate was not tied to ancillary or incidental services but was payment for the start-to-finish movement of the traffic.
[56] The Agency also found that “terms and conditions” in section 120.1 referred to the obligations, other than the payment of the rate, which a shipper must satisfy “as a condition for the movement of traffic by a railway company”: Decision 388 at paragraph 94. An example of the latter would be the shipper’s obligation to properly label the traffic, as set out in Tariff 8. The Agency concluded from this that “charge” must relate to obligations other than the payment of the rate or the satisfaction of other conditions to be fulfilled by the shipper as a condition for the movement of the traffic.
[57] According to the Agency, a charge is an obligation of a shipper in respect of a specific service to be provided, or specific goods to be provided by the railway company other than the goods and services which are covered by the rate. A charge could include a payment for an optional service requested by the shipper or made necessary as a result of a shipper’s failure to fulfill its obligations under the tariff: Decision 388 at paragraph 95-96. An example of the latter might be demurrage.
[58] The Agency’s view was confirmed by an examination of the provisions of subsection 116(4) of the Act which deals with the Agency’s powers in the event that a railway company does not live up to its level of service obligations. After investigation of a complaint, the Agency may require a railway company to undertake various measures and specify “the maximum charges that may be made” with respect to those measures. The use of the term “charges” in connection with goods or services to be provided to meet the railway company’s level of service obligations is consistent with the use of that term to refer to obligations other than those covered by the rate.
[59] Another use of the term “charge” is found in subsection 169.31(1) which deals with final offer arbitration in the context of the negotiation of a confidential contract as to how a railway company will meet its level of service obligations. Subsection 169.31(1) defines the subjects which may be submitted to final offer arbitration, including “whether the railway company may apply a charge” with respect to “operational terms” or “incidental services”. The Agency was of the view that the “operational terms” and “incidental services” were services to be provided or performed by the railway but which were debundled from, and not included in, the rate.
[60] The Agency’s conclusion as a result of this review of the statutory regime was that its interpretation of the term “charge” in section 120.1, as set out in paragraph 57 above, was consistent with the use of that term in the balance of the statutory scheme: Decision 388 at paragraph 102.
[61] The Agency concluded its analysis with a reference to the legislative history of section 120.1. It found that the types of charges that were of primary concern to shippers at the time section 120.1 was introduced were demurrage, car cleaning and car storage. These services were incidental, optional or ancillary to the movement of traffic, and all of them related to specific activities or transactions that had been debundled from, and thereafter not included in, the rate for the movement of goods.
[62] This line of reasoning led the Agency to the following conclusion:
In this case, the shipper’s obligation to indemnify, defend and hold harmless found in Item 54 is not linked or related to a specific service to be performed or goods to be supplied by CP, that is, it is not debundled from the rate. Under Item 54, the shipper must undertake to indemnify, defend and hold harmless CP as a condition for the transportation of that shipper’s traffic. In return for undertaking that obligation, the shipper only obtains the execution of CP’s primary obligation, which is the movement of the traffic. That is to say, the railway company’s obligation is incorporated into the rate.
Decision 388 at paragraph 104
[63] Accordingly, the Agency found that it did not have jurisdiction under section 120.1 to grant the Shippers the remedy they sought, as the obligation to indemnify, defend and hold harmless was not a charge or a term or condition associated with a charge: Decision 388 at paragraph 105.
[64] This conclusion meant that the Agency did not have to undertake an analysis of the reasonableness of Item 54. However, in response to an argument by Agrium that it disallow Item 54 pursuant to section 26 (which deals with prohibited acts), the Agency restated its position that since Item 54 did not relate to “charges” or “associated terms and conditions”, it was not prohibited by section 120.1 and, as a result, could not be the subject of an order under section 26.
[65] The Agency concluded Decision 388 by stating that since Item 54 contains terms and conditions that limit a railway company’s liability to a shipper contrary to subsection 137(1) of the Act, CP was ordered, pursuant to section 26, to ref