Date: 20070614
Docket: A-160-06
Citation:
2007 FCA 240
CORAM: DÉCARY
J. A.
SEXTON
J. A.
PELLETIER
J. A.
BETWEEN:
CANADIAN
PACIFIC RAILWAY COMPANY
Appellant
and
CANADIAN
TRANSPORTATION AGENCY
Respondent
REASONS FOR JUDGMENT
(Delivered
from the Bench at Calgary, Alberta, on June 14, 2007)
PELLETIER J. A. (Concurring)
[1] This is an appeal from a decision of the Canadian
Transportation Agency (CTA) in which it held that certain amounts recovered by
the appellant Canadian Pacific Railway Company (CPR) as performance penalties
pursuant to its agreement with certain grain shippers were not performance
penalties within the meaning of Canada Transportation Act and were in
fact a return of Industrial Development Fund contributions made by the
appellant.
[2] As a result of its findings,
the CTA held that the amounts were not to be included in the appellant’s
revenue for the purposes of calculating the revenue cap provided for at s. 151
of the Act but that they were to be “factored against the capital account of
each of the facilities subject to the contractual penalties”. This had the
effect of reducing the amounts which could be deducted from the appellant’s
revenue as the reasonable amortization of the IDF contributions.
[3] The appellant challenges this
decision on the basis that the amounts in question are, in fact, performance penalties
and that the CTA does not have the jurisdiction to add to its revenue by
revisiting amounts which have already been accepted as reasonable IDF
contributions.
[4] For the purposes of this
discussion we are prepared to agree that the standard of review of the CTA’s
decision is reasonableness simpliciter.
[5] The CTA held that the amounts
in question were not performance penalties because they were not related to the
movement of western grain. The CTA reasoned that since the statutory definition
of movement of grain refers to the actual carriage of grain by a prescribed
railway company, an amount paid by reason of the non-movement of grain cannot
be in relation to the movement of grain. With respect, a performance penalty
relates to a failure to complete an obligation. If that obligation is to ship
grain, and therefore involves the actual carriage of grain by a railway
company, a performance penalty in relation to that obligation will necessarily
involve the failure to actually move grain. The CTA acted unreasonably in
excluding the payments in question as performance penalties on the basis that
they did not actually involve the movement of grain.
[6] Had the CTA characterized the
amounts in question as performance penalties, they would have been excluded
from the calculation of the appellant’s revenue cap on the basis of paragraph
150(3)(b). Because the CTA decided that these amounts did not relate to
the movement of grain, they were excluded from the revenue calculation so that
the appellant is no worse off. The real issue is the “recapture” of these
amounts in calculation of the appellant’s IDF contributions.
[7] The amounts in question were
paid pursuant to two groups of contracts. In the first group, the shippers
agreed to a monetary penalty in a predetermined amount if they failed to ship
specified quantities of grain in a crop year. In the second group of contracts,
the shipper agreed to pay a penalty calculated as a percentage of the amount
contributed by the appellant to the construction of certain works in connection
with the shipper’s facilities. The percentage payable varied with the degree of
the shortfall. In either case, no amount was payable so long as the shipper met
the volume requirements.
[8] The CTA concluded that there
was a direct link between the amounts payable and the IDF contributions made by
the appellant and that the amounts received were therefore a clawback of the
IDF contribution. This conclusion is unreasonable for several reasons. First,
the connection between the payment and the contributions made appeared in only
one of the two groups of contracts. The payments made pursuant to that group of
contracts were a small proportion of the total amounts received by the
appellant under this heading. It was unreasonable for the CTA to characterize
the entire group of payment on the basis of the mode of calculation of a small
part of those payments. Secondly, the payments only became due upon the failure
of the shipper to meet its contractual obligations such that it would be
entirely possible for the shipper to escape payment of these amounts
altogether. In other words, there was no certainty that the payments would ever
be made which is inconsistent with the notion of cost recovery by way of
clawback. Finally, the only link between the payments and the IDF contributions
was in the calculation in the amount of penalty payable. There were other ways
of setting that amount, as is clear from the other group of contracts.
[9] The CTA’s characterization of
the amounts in question as clawback was therefore unreasonable and cannot
stand. There was therefore no basis for the CTA to modify the amortization
arrangement in place with respect to the appellant’s IDF contributions. As a
result, we do not have to decide if, and under what circumstances, the CTA is
entitled to intervene in the operation of the amortization scheme set out in
ss. 150(5).
J.D.
Denis Pelletier
SEXTON
J. A.
[10]
I agree
with the Reasons for Judgment read by Pelletier J.A. but I wish to go a step
further.
[11]
The
Canadian Transportation Agency (CTA) held that the monies paid by the grain
handlers are not performance penalties
because they do not relate to the movement of grain. The CTA said that the
grain in question here did not actually move.
[12]
I
disagree with the Agency’s reasons. While the grain here did not actually move,
the
penalties nevertheless related to the
obligation of the grain handlers to provide certain quantities of grain which
would be moved by Canadian Pacific Railway (CP). In my view the word, “movement”
includes the obligation to provide those quantities of grain for movement by
CP.
[13]
This
opinion is buttressed by this Court’s decision in Canadian Pacific v. National
Transportation Agency (1992), 151
N.R. 16. The issue in that case was whether storage charges were to be included
as rates for the movement of grain. The National
Transportation Agency there equated the word “movement” to the movement
between two points and said actual movement was required so that storage
charges could not be included as part of rates. Hugessen J. found this
interpretation to be too narrow. He was of the view that “movement” refers to
the whole process or series of actions by which grain is moved from origin to
destination. He said:
[30] In
my view, grain does not cease being in the process of movement within the
meaning of the WGTA simply because it is subject to temporary stoppages at any
point or points between its being loaded on to rail cars and its delivery at
destination. “Movement”, in the sense of carriage, refers to the whole process
or series of actions by which grain is moved from origin to destination and it
ends only with the placing or “spotting” of the rail cars so that they may be
unloaded. To suggest that “movement” might end, or even be suspended, at some
other point or points in the process would give rise to artificial and
unworkable distinctions; it would also defeat the clear purpose of the WGTA
which is to provide a single, subsidized statutory rate for grain moving east
or west from the prairies to port.
[14]
By
analogy I find that the CTA’s interpretation of “movement” to be inconsistent
with the
interpretation given by Hugessen J. in that
it interpreted “movement” to exclude “non-movement”. It is clear from the
reasons of Hugessen J. that movement includes the obligation to deliver and is
not merely limited in its simplest sense as to “put in motion”.
[15]
Subsection
150(3)(b) in my view is broad enough to include in the expression
“performance
penalty”, penalties generally relating to
the obligation to provide grain for movement by grain shippers.
[16]
I
therefore find that the conclusion of the CTA in this respect was unreasonable
in the case
at bar and that the payments made to CP
should be characterized as performance penalties related to movement of grain
within the meaning of subsection 150(3)(b) of the Canada
Transportation Act.
[17]
I
will allow the appeal without costs, set aside that portion of Decision No.
755-R-2005
which deals, from paragraphs 63 to 81, with
the “treatment of amounts paid by a grain company for failure to meet volume
commitments contained within Industrial Development Fund contracts” and remit
the matter back to the Canadian Transportation Agency for reconsideration on
the basis of these reasons.
J. Edgar Sexton
“I
agree.
R. Décary J.A.”
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