Canadian National Railway Company v. Viterra Inc.

Canadian National Railway Company v. Viterra Inc.
Court (s) Database
Federal Court of Appeal Decisions
Date
2017-01-12
Neutral citation
2017 FCA 6
File numbers
A-396-15, A-398-15
Notes
A correction was made on November 15, 2018.
Decision Content
Date: 20170112
Dockets: A-396-15
A-398-15
Citation: 2017 FCA 6
CORAM:
NADON J.A.
RENNIE J.A.
GLEASON J.A.
Docket: A-396-15
BETWEEN:
CANADIAN NATIONAL RAILWAY COMPANY
Appellant
and
VITERRA INC. and CANADIAN TRANSPORTATION AGENCY
Respondents
Docket: A-398-15
AND BETWEEN:
CANADIAN NATIONAL RAILWAY COMPANY
Appellant
and
RICHARDSON INTERNATIONAL LIMITED and
CANADIAN TRANSPORTATION AGENCY
Respondents
Heard at Vancouver, British Columbia, on April 21, 2016.
Judgment delivered at Ottawa, Ontario, on January 12, 2017.
REASONS FOR JUDGMENT BY:
NADON J.A.
CONCURRED IN BY:
RENNIE J.A.
GLEASON J.A.
Date: 20170112
Docket: A-396-15
A-398-15
Citation: 2017 FCA 6
CORAM:
NADON J.A.
RENNIE J.A.
GLEASON J.A.
Docket: A-396-15
BETWEEN:
CANADIAN NATIONAL RAILWAY COMPANY
Appellant
and
VITERRA INC. and CANADIAN TRANSPORTATION AGENCY
Respondents
Docket: A-398-15
AND BETWEEN:
CANADIAN NATIONAL RAILWAY COMPANY
Appellant
and
RICHARDSON INTERNATIONAL LIMITED and
CANADIAN TRANSPORTATION AGENCY
Respondents
REASONS FOR JUDGMENT
NADON J.A.
I. Introduction
[1] The Canadian National Railway Company (CN or the appellant) appeals from preliminary and final decisions made by the Canadian Transportation Agency (the Agency) on December 18, 2014 and May 20, 2015 wherein the Agency held, pursuant to sections 113 to 115 of the Canada Transportation Act, S.C. 1996, c. 10 (CTA), that the appellant had failed to meet its level of service obligation to the respondents Viterra Inc. (Viterra) and Richardson International Limited (Richardson) (collectively the respondents) and accordingly ordered remedial measures.
[2] For the reasons that follow, I would allow the appeals.
II. Facts
[3] The 2013 grain crop was the largest crop in Canadian history with 75.8 million metric tonnes of grain being harvested. Unable to fully respond to the resulting surge in demand for freight service by Canadian grain shippers, CN implemented a car rationing methodology based on each shipper’s use of CN’s grain transportation services during the post-harvest peak period of the 2012-2013 crop year and assigned to each shipper a percentage of its available rail car supply.
[4] In early October, 2013, CN communicated to Canadian grain shippers, and in particular to the respondents, the share of rail car supply that would be assigned to each of them (Percentage Shares). During the period covered by the respondents’ complaints (i.e. a 39 week period beginning in October, 2013 for Viterra and a 25 week period beginning in January, 2014 for Richardson), the number of rail cars CN provided to the respondents fell short of their Percentage Shares calculated under its rationing methodology.
[5] In addition to the record grain crop, the prairies experienced extreme winter conditions during the 2013-2014 winter. As a result, CN had to adapt its modus operandi to ensure the safe handling and operation of trains (e.g. operate shorter trains at lower speeds) thus reducing its grain moving capacity.
[6] In early May, 2014, following the issuance on May 2, 2014 by the Agency of an interim order in an unrelated proceeding involving Louis Dreyfus Commodities Canada Ltd. (Letter Decision No. 2014-05-02) (Dreyfus interim order), CN notified the respondents that it would further reduce their allocation of rail cars by a certain number of cars every third week for the duration of the Dreyfus interim order.
[7] In its proceedings before the Agency, commenced on April 14, 2014, Dreyfus alleged that CN had breached its level of service obligation at four of its elevator facilities in Saskatchewan and Alberta during the 2013-2014 crop year. Dreyfus argued that CN had failed to provide it with the number of cars to which it was entitled pursuant to a confidential contract entered into between the parties.
[8] After issuance of the Agency’s Dreyfus interim order, both Viterra and Richardson unsuccessfully sought intervener status in those proceedings. In dismissing Viterra and Richardson’s motion to intervene, the Agency indicated that if the respondents were not satisfied with the level of service received from CN, they should file separate level of service complaints under the CTA.
[9] On October 3, 2014, the Agency issued its final decision concerning Dreyfus’ complaint, concluding that that CN had not met its level of service obligation under sections 113 to 115 of the CTA (Letter Decision No. 2014-10-03) (Dreyfus final order). More particularly, because the parties had entered into a confidential contract pursuant to subsection 113(4) of the CTA, the Agency found that it was not open to it by reason of subsection 116(2) to conduct an investigation into the reasonableness of the services offered by CN. Rather, the Agency indicated that it was bound to give effect to the terms agreed to by the parties. Thus, failure by CN to deliver to Dreyfus the number of cars which it had agreed to deliver was fatal to its case.
[10] CN was granted leave to appeal the Dreyfus final order to this Court. On September 16, 2016 in Canadian National Railway Company v. Louis Dreyfus Commodities Canada Ltd. and Canadian Transportation Agency, 2016 FCA 232, [2016] F.C.J. No. 1018 (Louis Dreyfus Commodities), our Court dismissed CN’s appeal. I will return to this decision later in these reasons.
[11] On June 12 and 20, 2014, Richardson and Viterra filed their respective complaints with the Agency, alleging that CN had not complied with its level of service obligation under sections 113 to 115 of the CTA. More particularly, the respondents made the following allegations:
That CN had failed to provide them with their Percentage Shares over an extended period of time; and
That CN had, in an arbitrary and discriminatory manner, further reduced the rail cars to which they were entitled in order to satisfy its obligation arising from the Dreyfus interim order.
III. The Agency’s Decisions
A. Agency’s Preliminary Decisions
[12] On December 18, 2014, the Agency rendered preliminary decisions with respect to the level of service complaints made by Viterra and Richardson. The Agency was of the view that although rationing could not be relied on routinely to smooth out the seasonality of the demand for Canadian grain shipping, the record 2013 crop was an extraordinary circumstance justifying the need for rationing.
[13] The Agency scrutinized CN’s service provision using the three-step “Evaluation Approach” that it had earlier enunciated in its Dreyfus final order (paragraphs 36 to 75) as its approach to all level of service applications filed pursuant to sections 113 to 115. The Evaluation Approach requires the Agency to consider three questions: (1) Is the shipper’s request for service reasonable? (2) Did the railway company fulfill the request? (3) If not, are there reasons to justify the failure to meet the request? If there are reasons to justify the service failure, then the railway company has not breached its obligations. If no reasonable justification is found, the railway company will be in breach and the evaluation will proceed to remedy.
[14] In applying this Evaluation Approach to Viterra and Richardson’s complaints, the Agency found that the respondents’ rail car entitlements under CN’s rationing methodology constituted reasonable requests. The Agency underlined the fact that although the rationing methodology was not a guarantee of a specific number of cars, each shipper was entitled to receive, in a non-arbitrary and non-discriminatory manner, the number of cars that their market share represented. Because of the degree of specificity of the Percentage Shares allocated to each shipper, and because of CN’s failure to advise shippers of the rationing methodology’s intended flexibility, the Agency rejected CN’s arguments that the Percentage Shares were only meant to be guidelines.
[15] As the respondents’ request for service had not been met, the Agency proceeded to evaluate possible justifications for the service failure and found none. Despite the fact that there was no contractual commitment on CN’s part to abide by the Percentage Shares, the Agency found that the respondents were entitled to their Percentage Shares as these constituted benchmarks of a reasonable level of service under sections 113 to 115 of the CTA.
[16] With respect to the impact of the Dreyfus interim order, the Agency held that it “cannot determine the magnitude of the impact of [this Order] without any substantiating evidence or detailed analysis as to whether CN had allocated these cars ‘off the top’ of the total car supply and not from individual shippers’ allocations on a rotating and disproportionate basis…” (paragraph 112 of the preliminary decision in Viterra and paragraph 107 of the preliminary decision in Richardson). In the Agency’s view, railway companies were to be given some flexibility to deal with unexpected situations provided that such flexibility did not result in a given shipper receiving fewer cars than its market share over a specified period. The number of cars could be reduced, but the shortfall had to be fairly redistributed amongst shippers in the rationing pool.
[17] This led the Agency to find that “CN arbitrarily decided that [the respondents] would be subject to a fixed car reduction irrespective of what [their] fair share of the reduction actually ought to have been under a market share-based rationing methodology” (paragraph 134 of the preliminary decision in Viterra and paragraph 129 of the preliminary decision in Richardson) and that this was sufficient to constitute a breach of CN’s level of service obligation.
[18] Accordingly, the Agency concluded, pursuant to its three step Evaluation Approach, that:
The respondents’ demand that their Percentage Shares be respected was a reasonable service request;
CN had not fulfilled this request; and
3. CN had not provided reasons justifying the identified service failure.
Thus the Agency ordered CN to deliver to the respondents the number of cars representing their market share and to implement a detailed communication protocol.
B. Agency’s Final Decisions
[19] On May 20, 2015, the Agency rendered its final decisions with respect to the level of service complaints made by Viterra and Richardson. The Agency reviewed the “show cause” submissions and fixed the actual cumulative shortfall at a certain number of rail cars. It ordered CN to repay the shortfall in a specific and detailed manner.
[20] On August 10, 2015, upon CN’s motion, leave to appeal the Agency’s preliminary and final decisions was granted by this Court in accordance with subsection 41(1) of the CTA.
IV. Issues
[21] The appeal raises the following four questions:
What is the applicable standard of review?
Did the Agency lack jurisdiction to determine the respondents’ complaints?
Did the Agency exceed its jurisdiction in deciding the respondents’ complaints?
Did the Agency err in concluding that CN breached its statutory level of service obligation?
V. Parties’ Submissions
[22] Although, as will appear shortly from these reasons, I conclude that I need only address the first and fourth issues to determine these appeals, it will be useful to set out the parties’ respective submissions on the four issues as they are helpful in understanding the Agency’s decisions. They also provide a fuller context to the fourth issue in regard to which I conclude that the Agency erred in determining that CN breached its level of service obligation under sections 113 to 115 of the CTA.
A. CN’s Submissions
[23] CN submits that the Agency lacked jurisdiction to determine the respondents’ complaints which were not, in its view, level of service complaints. As an administrative body, the Agency only has the powers statutorily delegated to it. The Agency has the power to adjudicate level of service complaints pursuant to section 116 of the CTA, but it does not have the power to enforce a rationing methodology developed by a railway company.
[24] In addition, CN contends that the Agency exceeded its jurisdiction by prescribing how all railway companies must design and implement car rationing. In this respect, CN argues that the Agency breached its duty of procedural fairness in deciding an issue that was outside the scope of the pleadings. More particularly, CN takes issue with the Agency describing how rationing should be conducted (paragraphs 189 to 192 of the Agency’s preliminary decision in Viterra and paragraphs 184 to 188 of the Agency’s preliminary decision in Richardson), noting that the respondents had not challenged its rationing methodology.
[25] Further, CN asserts that the Agency, whose powers are complaint specific and not systemic, converted the adjudication of the complaints into an improper systemic review. In CN’s view, the Agency was not mandated to “broadly legislate how all railway companies must move their traffic or conduct their operations”.
[26] CN also argues that the Agency erred in finding that CN breached its level of service obligation under the CTA in that it confused CN’s rationing methodology with its statutory obligation. CN reiterates its need for flexibility in order to react to unexpected contingencies and that it should not be bound by strict adherence to a mathematical formula. According to CN, it was wrong for the Agency to determine that it had to justify any departure from the rationing methodology which, in its view, was a mere guideline. In CN’s opinion, the incorrect conclusion that it breached its statutory obligation was influenced by the Agency’s Evaluation Approach which it applied in rendering its preliminary decisions. In CN’s view, this approach places too high of a burden on railway companies.
[27] Finally, CN submits that the Agency did not have the power to order specific performance of the rationing methodology or to order “off the top” car allocations. While it considers that the former does not fall within the Agency’s statutory powers, CN affirms that the latter would inevitably result in breaches of CN’s level of service obligation to other grain shippers.
B. Respondents’ Submissions
[28] The respondents first emphasize that CN failed to raise the question of the Agency's jurisdiction before the Agency itself. Consequently, they ask this Court to decline to consider the jurisdictional arguments made by CN. In any event, the respondents contend that their complaints fell squarely within the Agency's mandate as they constituted true level of service complaints even if they were based on a request that CN's rationing methodology be respected. In their view, the Agency did not enforce something other than the obligation imposed upon CN by the CTA.
[29] In answer to CN’s argument that the Agency had exceeded its jurisdiction by converting the complaints into a systemic review, the respondents say that the Agency merely enunciated general principles relating to rationing methodologies. In their view, the Agency provided guidance rather than mandatory requirements. Further, the respondents say that notwithstanding CN's suggestion that the rationing methodology was not at issue before the Agency, there could be no doubt that the rationing methodology was the central focus of their complaints.
[30] With respect to the Agency’s Evaluation Approach, the respondents say, contrary to CN’s submission, that it does not impose an absolute obligation on railway companies. In their view, the Evaluation Approach was consistent with previous case law, i.e. that the service request must be reasonable. Moreover, the respondents emphasize that CN had received specific notice that the Agency would follow this approach well before the hearing.
[31] Finally, turning to the Agency's remedial jurisdiction, the respondents argue that the Agency's remedial powers under subsection 116(4) of the CTA are broad and include ordering “off the top” car allocations.
C. Agency’s Submissions
[32] The Agency submits that it has standing to be heard on an appeal of its own decisions pursuant to subsection 41(4) of the CTA and says that it has broad and discretionary powers under the CTA to make orders where it finds that a railway company does not fulfil its level of service obligation. It asserts that it developed the Evaluation Approach according to its mandate so as to refine its approach to matters that come within its jurisdiction.
VI. Analysis
A. What is the applicable standard of review?
[33] CN’s appeals from the Agency’s preliminary and final decisions are before this Court pursuant to subsection 41(1) of the CTA which provides as follows:
Appeal from Agency
Appel
41 (1) An appeal lies from the Agency to the Federal Court of Appeal on a question of law or a question of jurisdiction on leave to appeal being obtained from that Court on application made within one month after the date of the decision, order, rule or regulation being appealed from, or within any further time that a judge of that Court under special circumstances allows, and on notice to the parties and the Agency, and on hearing those of them that appear and desire to be heard.
41 (1) Tout acte — décision, arrêté, règle ou règlement — de l’Office est susceptible d’appel devant la Cour d’appel fédérale sur une question de droit ou de compétence, avec l’autorisation de la cour sur demande présentée dans le mois suivant la date de l’acte ou dans le délai supérieur accordé par un juge de la cour en des circonstances spéciales, après notification aux parties et à l’Office et audition de ceux d’entre eux qui comparaissent et désirent être entendus.
[34] Although these are statutory appeals, the applicable standard of review is the one enunciated by the Supreme Court in Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190. In effect, in Mouvement laïque québécois v. Saguenay (City), 2015 SCC 16, [2015] 2 S.C.R. 3, the Supreme Court held that statutory appeals of decisions of specialized administrative tribunals were to be reviewed on the basis of administrative law principles. More particularly, at paragraph 38 of its reasons, the Supreme Court held as follows:
Where a court reviews a decision of a specialized administrative tribunal, the standard of review must be determined on the basis of administrative law principles. This is true regardless of whether the review is conducted in the context of an application for judicial review or of a statutory appeal.
[emphasis added]
[35] While CN did not address the standard of review, the respondents and the Agency argued that except for the procedural fairness issue raised by CN, the Agency’s decisions were to be reviewed upon the reasonableness standard. Indeed, to the extent that a statutory appeal turns on the interpretation of a tribunal’s home statute, as is the case here, a standard of reasonableness presumption applies (see Ontario (Energy Board) v. Ontario Power Generation Inc., 2015 SCC 44, [2015] 3 S.C.R. 147 at paragraph 73 and Alberta (Information and Privacy Commissioner) v. Alberta Teachers’ Association, 2011 SCC 61, [2011] 3 S.C.R. 654 at paragraph 30).
[36] Considering that the Agency is a specialized administrative body with technical expertise, the Supreme Court and this Court have held that the Agency was entitled to a deferential standard of review for matters falling within the scope of its expertise and mandate (Council of Canadians with Disabilities v. VIA Rail Canada Inc., 2007 SCC 15, [2007] 1 S.C.R. 650 at paragraph 100; Canadian National Railway Company v. Richardson International Limited, 2015 FCA 180, 476 N.R. 83 at paragraphs 25-31; Canadian National Railway Company v. Canadian Transportation Agency, 2010 FCA 65, [2011] 3 F.C.R 264 at paragraphs 28-30).
[37] More particularly, regarding the issue of the Agency’s characterization of a level of service complaint, this Court held in Canadian National Railway Company v. Canadian Transportation Agency, 2013 FCA 270, 454 N.R. 125 (at paragraphs 3-5) that the applicable standard of review was that of reasonableness.
[38] Given that the questions raised by these appeals relate to the Agency’s interpretation of its home statute and clearly fall within the scope of its expertise and given that the parties do not challenge the existing jurisprudence, it is my view that the applicable standard of review must be that of reasonableness. Although I agree with the respondents and the Agency that the correctness standard applies to questions of procedural fairness (Mission Institution v. Khela, 2014 SCC 24, [2014] 1 S.C.R. 502 at paragraph 79), I need not say anything further on this as it is not necessary for me to address the procedural fairness argument raised by CN in order to dispose of the appeal.
[39] I now turn to the merits of the appeals. Because of my view that the Agency made a reviewable error in concluding that CN breached its statutory level of service obligation, I need not address issues 2 and 3 which pertain to the Agency’s jurisdiction.
B. Did the Agency err in concluding that CN had breached its statutory level of service obligation?
[40] I begin by setting out the relevant provisions of law:
Accommodation for traffic
Acheminement du trafic
113 (1) A railway company shall, according to its powers, in respect of a railway owned or operated by it,
113 (1) Chaque compagnie de chemin de fer, dans le cadre de ses attributions, relativement au chemin de fer qui lui appartient ou qu’elle exploite :
(a) furnish, at the point of origin, at the point of junction of the railway with another railway, and at all points of stopping established for that purpose, adequate and suitable accommodation for the receiving and loading of all traffic offered for carriage on the railway;
a) fournit, au point d’origine de son chemin de fer et au point de raccordement avec d’autres, et à tous les points d’arrêt établis à cette fin, des installations convenables pour la réception et le chargement des marchandises à transporter par chemin de fer;
(b) furnish adequate and suitable accommodation for the carriage, unloading and delivering of the traffic;
b) fournit les installations convenables pour le transport, le déchargement et la livraison des marchandises;
(c) without delay, and with due care and diligence, receive, carry and deliver the traffic;
c) reçoit, transporte et livre ces marchandises sans délai et avec le soin et la diligence voulus;
(d) furnish and use all proper appliances, accommodation and means necessary for receiving, loading, carrying, unloading and delivering the traffic; and
d) fournit et utilise tous les appareils, toutes les installations et tous les moyens nécessaires à la réception, au chargement, au transport, au déchargement et à la livraison de ces marchandises;
(e) furnish any other service incidental to transportation that is customary or usual in connection with the business of a railway company.
e) fournit les autres services normalement liés à l’exploitation d’un service de transport par une compagnie de chemin de fer.
…
[…]
Confidential contract between company and shipper
Contrat confidentiel
(4) A shipper and a railway company may, by means of a confidential contract or other written agreement, agree on the manner in which the obligations under this section are to be fulfilled by the company.
(4) Un expéditeur et une compagnie peuvent s’entendre, par contrat confidentiel ou autre accord écrit, sur les moyens à prendre par la compagnie pour s’acquitter de ses obligations.
Facilities for traffic
Installations de transport
114 (1) A railway company shall, according to its powers, afford to all persons and other companies all adequate and suitable accommodation for receiving, carrying and delivering traffic on and from its railway, for the transfer of traffic between its railway and other railways and for the return of rolling stock.
114 (1) Chaque compagnie de chemin de fer doit, dans le cadre de ses attributions, fournir aux personnes et compagnies les aménagements convenables pour la réception, le transport et la livraison de marchandises sur son chemin de fer et en provenance de celui-ci, pour le transfert des marchandises entre son chemin de fer et d’autres chemins de fer ainsi que pour le renvoi du matériel roulant.
…
[…]
Adequate and suitable accommodation
Installations convenables
115 For the purposes of subsection 113(1) or 114(1), adequate and suitable accommodation includes reasonable facilities
115 Pour l’application des paragraphes 113(1) ou 114(1), des installations convenables comprennent des installations :
(a) for the junction of private sidings or private spurs with a railway owned or operated by a company referred to in that subsection; and
a) pour le raccordement de voies latérales ou d’épis privés avec un chemin de fer possédé ou exploité par une compagnie visée à ces paragraphes;
(b) for receiving, carrying and delivering traffic on and from private sidings or private spurs and placing cars and moving them on and from those private sidings or private spurs.
b) pour la réception, le transport et la livraison de marchandises sur des voies latérales ou épis privés, ou en provenance de ceux-ci, ainsi que le placement de wagons et leur traction dans un sens ou dans un autre sur ces voies ou épis.
Complaint and investigation concerning company’s obligations
Plaintes et enquêtes
116 (1) On receipt of a complaint made by any person that a railway company is not fulfilling any of its service obligations, the Agency shall
(a) conduct, as expeditiously as possible, an investigation of the complaint that, in its opinion, is warranted; and
(b) within one hundred and twenty days after receipt of the complaint, determine whether the company is fulfilling that obligation.
116 (1) Sur réception d’une plainte selon laquelle une compagnie de chemin de fer ne s’acquitte pas de ses obligations prévues par les articles 113 ou 114, l’Office mène, aussi rapidement que possible, l’enquête qu’il estime indiquée et décide, dans les cent vingt jours suivant la réception de la plainte, si la compagnie s’acquitte de ses obligations.
Confidential contract binding on Agency
Contrat confidentiel
(2) If a company and a shipper agree, by means of a confidential contract, on the manner in which service obligations under section 113 are to be fulfilled by the company, the terms of that agreement are binding on the Agency in making its determination.
(2) Dans les cas où une compagnie et un expéditeur conviennent, par contrat confidentiel, de la manière dont la compagnie s’acquittera de ses obligations prévues par l’article 113, les clauses du contrat lient l’Office dans sa décision.
[41] With respect to the approach to be taken in regard to sections 113 to 115 of the CTA, it is not disputed that the Supreme Court’s decision in A.L. Patchett & Sons Ltd. v. Pacific Great Eastern Railway, [1959] S.C.R. 271, 17 D.L.R. (2d) 449 (Patchett), remains the leading authority on the matter. The essence of the Supreme Court’s decision in Patchett can be found at paragraphs 5, 6, 105 and 111 of that decision where the three members of the majority wrote as follows:
5. Apart from statute, undertaking a public carrier service as an economic enterprise by a private agency is done on the assumption that, with no fault on the agency's part, normal means will be available to the performance of its duty. That duty is permeated with reasonableness in all aspects of what is undertaken except the special responsibility, of historical origin, as an insurer of goods; and it is that duty which furnishes the background for the general language of the statute. The qualification of reasonableness is exhibited in one aspect of the matter of the present complaint, the furnishing of facilities: a railway, for example, is not bound to furnish cars at all times sufficient to meet all demands; its financial necessities are of the first order of concern and play an essential part in its operation, bound up, as they are, with its obligation to give transportation for reasonable charges. Individuals have placed their capital at the risk of the operations; they cannot be compelled to bankrupt themselves by doing more than what they have embraced within their public profession, a reasonable service. Saving any express or special statutory obligation, that characteristic extends to the carrier's entire activity. Under that scope of duty a carrier subject to the Act is placed (Rand J.).
6. The examples of these extreme situations furnish guidance for the solution of partial cessations of work associated with labour controversy. The duty being one of reasonableness how each situation is to be met depends upon its total circumstances. The carrier must, in all respects, take reasonable steps to maintain its public function; and its liability to any person damaged by such a cessation or refusal of services must be determined by what the railway, in the light of its knowledge of the facts, as, in other words, they reasonably appear to it, has effectively done or can effectively do to meet and resolve the situation. In weighing the relevant considerations, time may be a controlling factor (Rand J.).
…
105. I am in agreement with the views expressed by Coady and Sheppard JJ.A. in the Court below and by my brother Rand that the statutory duty imposed upon the respondent is not an absolute duty but is only a relative one to provide service so far as it is reasonably possible to do so (Abbot J., citation omitted).
…
111. …It is also my opinion that the railway's statutory obligation under s. 203(1) (c) is not an absolute but a relative one, as defined in the reasons of my brother Rand (Judson J.).
[emphasis added]
[42] In Canadian National Railway v. Northgate Terminals Ltd., 2010 FCA 147, [2011] 4 F.C.R. 228, Sharlow J.A., writing for a majority of this Court, sets out her understanding of the Patchett principle in the following terms at paragraphs 34 and 35 of the reasons:
[34] Patchett is generally recognized as the leading case on the determination of the adequacy of the service provided by a railway company. CN argues that Patchett established three principles of law that were not applied properly, or at all, by the Agency. CN asserts that the three principles are: (1) a railway company is not bound to furnish cars at all times sufficient to meet all demands, (2) the obligation to give transportation is subject to reasonable charges, and (3) on the duty of a railway company to furnish services there is a correlative obligation on the customer to furnish reasonable means of access.
[35] Patchett stands for the general proposition that the duty of a railway company to fulfil its service obligations is “permeated with reasonableness in all aspects of what is undertaken” (except in relation to its special responsibility as an insurer of goods, which is not in issue in this case). As I read Patchett, the three propositions to which CN refers in its argument are not free-standing principles of law. They are guidelines that must inform any determination by the Agency of a service complaint, but they do not necessarily compel a particular outcome. That is because the determination of a service complaint requires the Agency to balance the interests of the railway company with those of the complainant in the context of the particular facts of the case.
[emphasis added]
[43] Thus, whether a railway company has provided or failed to provide adequate and suitable accommodation in respect of the traffic offered to it for carriage will depend on an assessment of all the relevant circumstances. The measure of that assessment is reasonableness. Consequently, in conducting the inquiry which paragraph 116(1)(a) of the CTA requires it to perform, the Agency must make its determination in light of all of the surrounding circumstances, keeping in mind that the railway company’s obligations are not absolute.
[44] I now return to the Agency’s preliminary decisions of December 18, 2014 as a more detailed review thereof is necessary to determine the appeals.
[45] On the basis of its Evaluation Approach, the Agency started by asking itself whether the respondents’ request for their Percentage Shares was a reasonable one. First, the Agency agreed “that the 2013-2014 crop year presented a set of extraordinary circumstances that would justify the temporary need for a rationing methodology” (paragraph 54 of the preliminary decision in Viterra and paragraph 55 of the preliminary decision in Richardson).
[46] Second, the Agency stated that since the complaints made by the respondents were based exclusively on their car entitlement under CN’s rationing methodology, it would consider whether the respondents’ request for their Percentage Shares constituted a reasonable car request.
[47] Third, after stating its view regarding the use of a rationing methodology by a railway company and what criteria such methodology should meet, the Agency made the point that since the respondents were not challenging “the validity of CN’s decision to use a market share-based rationing methodology,” (paragraph 58 of the preliminary decision in Viterra and paragraph 59 of the preliminary decision in Richardson), it would determine the merits of the respondents’ complaints by determining what level of service they were entitled to in light of their Percentage Shares under CN’s rationing methodology.
[48] Fourth, the Agency then dealt with CN’s argument that its rationing methodology was not a binding commitment, but rather a guideline, i.e. a target that it would attempt to meet. The Agency’s answer to CN’s argument was that if CN intended its rationing methodology to be merely a guideline, it ought to have been more specific in its dealings with the respondents, noting that the Percentage Shares had been expressed “not…in approximates, but with a degree of specificity to the first decimal place” (paragraph 60 of the preliminary decision in Viterra and paragraph 61 of the preliminary decision in Richardson).
[49] Then, after stating that the respondents were not entitled to a specific number of cars under CN’s rationing methodology, the Agency held that they were nonetheless entitled to receive their Percentage Shares as determined by the rationing methodology, adding that “Rationing cannot be applied in an arbitrary or discriminatory way, with no accountability, and a rationing methodology ceases to be consistent with statutory railway company level of service obligations if it is not applied fairly with rigour and consistency” (paragraph 61 of the preliminary decision in Viterra and paragraph 62 of the preliminary decision in Richardson).
[50] As a result, the Agency concluded its analysis under the first step of its Evaluation Approach by saying that the respondents’ request that CN provide to them their Percentage Shares was a reasonable request (paragraph 65 of the preliminary decision in Viterra and paragraph 66 of the preliminary decision in Richardson).
[51] The Agency then proceeded to the second step of its Evaluation Approach to determine whether CN had provided to the respondents their Percentage Shares. It found that CN had failed to allocate to the respondents their Percentage Shares. More particularly, the Agency held that CN had not fulfilled Richardson’s service request for the period from grain weeks 23 to 47 of the 2013-2014 crop year and that it had not fulfilled Viterra’s service request for the period from grain weeks 9 to 47 of the 2013-2014 crop year.
[52] The Agency then proceeded to the third step of its Evaluation Approach so as to determine whether CN’s failure to provide the respondents with their Percentage Shares could be justified.
[53] In answer to CN’s argument that flexibility was required during the 2013-2014 crop year in order to deal with difficult circumstances, the Agency, although recognizing CN’s need for flexibility, held that CN’s rationing methodology “already integrates a sufficient degree of flexibility” (paragraph 154 of the preliminary decision in Viterra and paragraph 149 of the preliminary decision in Richardson).
[54] CN argued that it had taken all commercially reasonable steps to move as much grain as possible during the 2013-2014 crop year, for example that it had acquired additional hopper cars and high power locomotives to meet the accrued demand for services, and that it had increased its human resources. However, the Agency observed that CN’s efforts had been insufficient to meet the increased demand concluding that “any issues with capacity acquisition have no bearing on a rationing program based on percentage allocations and do not justify its faulty implementation” (paragraph 163 of the preliminary decision in Viterra and paragraph 158 of the preliminary decision in Richardson).
[55] CN further argued that during the 2013-2014 crop year that it had transported record levels of grain. The Agency’s response was that the fact that CN had surpassed its previous records was an irrelevant consideration which did not justify its service failure. At paragraph 173 of the preliminary decision in Viterra and paragraph 168 of the preliminary decision in Richardson, the Agency made the following remarks:
The Agency is of the opinion that, even assuming that CN faced the supply chain challenges that it claims, this does not constitute any justification as to why CN did not provide [the respondents’] share of CN’s Average Total Weekly Car Spots, however limited that weekly spotting may have been in weeks when CN faced supply chain challenges.
[56] Finally, CN argued that fulfilling the respondents’ requests for their Percentage Shares would have a detrimental effect on other grain shippers which it served. After making the point that the service which a rail company owed to shippers at large did not relieve a railway company from its level of service obligation to a specific individual shipper, the Agency concluded the third step of its Evaluation Approach by stating that it could not agree with CN’s argument that its obligations to other shippers constituted a justification for its failure to deliver the Percentage Shares to the respondents.
[57] Then, at paragraphs 185 and 186 of its preliminary decision in Viterra and paragraphs 180 and 181 of its preliminary decision in Richardson, the Agency summarized its determinations as follows:
In examining whether CN breached its level of service obligations to [the respondents] using its three-step Evaluation Approach, the Agency finds that:
Step 1: With its actual service requirements constrained by car rationing, [the respondents’] service request to receive service at a level that met the historical shipping percentage allocation imposed on it by CN in its car rationing methodology, that is, [redacted] percent of CN's total available car supply, constitutes a reasonable service request. This is reinforced by [the respondents’] need for predictable and reliable service to plan its operations and purchase and sales programs.
Step 2: CN has not fulfilled [the respondents’] service request for grain weeks [9 to 47 in the case of Viterra and 23 to 47 in the case of Richardson] of the 2013-2014 crop year. During grain weeks 40 to 47, CN further breached its level of service obligation to [the respondents] by subjecting [them] to inequitable treatment by reducing the cars available to [them] by an arbitrary number unrelated to its market share.
Step 3: CN did not establish reasons that would justify the service failures identified in Step 2.
The Agency therefore finds that CN has breached its statutory level of service obligations to [the respondents].
[58] In my respectful view, the Agency’s preliminary decisions are unreasonable for two reasons. First, the Agency erred in treating CN’s rationing methodology as if it constit