Docket: T-1323-13
Citation:
2014 FC 869
Ottawa, Ontario, September
12, 2014
PRESENT: The
Honourable Madam Justice Strickland
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BETWEEN:
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NATIONAL GYPSUM (CANADA) LTD
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Applicant
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and
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CANADIAN NATIONAL RAILWAY COMPANY
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Respondent
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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 S.C.R. 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 S.C.R. 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 latest version of
PC*Miler. However, the specified Tariff also appears to contemplate CN
calculating mileage outside the PC*Miler software when the software is unable
to do so. Therefore, it would have been reasonable for the Arbitrator to
decide that the manual calculation of the variable fuel surcharge rate would be
permitted under the Tariff language.
[72]
But what is most significant is that the Rate
proposed in CN’s final offer was stated to be subject to the Fuel Surcharge.
The surcharge was estimated only in CN’s Information and was based on the
calculation for June 2013. This was a variable representing an estimated
amount for the purposes of the arbitration. The impact on that figure as a
result of the mileage discrepancy was only addressed in the letter of June 20,
2013. The Arbitrator did not accept the June 20, 2013 letter with the revised Information calculations into evidence and there is no evidence that the Arbitrator accepted
that testimony as amending CN’s final offer.
[73]
Having reviewed both Informations, I agree with
CN that there were a number of reasons why the Arbitrator could have selected
the CN final offer over the NGL final offer. It is entirely possible that the
Arbitrator could have selected the CN final offer as being the most
commercially reasonable knowing that the fuel surcharge component was calculated
with an erroneous mileage which would resulting a short term overcharge until
PC*Miler was updated.
[74]
As it is not apparent on the face of the record
that CN amended its final offer and that the Arbitrator accepted a revised
final offer, no issue of the Arbitrator having exceeded his jurisdiction or
erred by contravening ss. 161.1(1) and 165(1) of the CTA arises.
[75]
As stated in Western Canada, above, the
arbitrator’s role in a FOA is to select the more reasonable of the two offers
submitted. There is nothing to suggest that the Arbitrator erred by selecting
the CN final offer in making that determination.
ISSUE 3: Was CN’s final
offer compliant with section 161.1(1) of the CTA?
NGL’s Position
[76]
NGL submits that the CTA requires final offers
to include dollar amounts. Where a party fails to submit a final offer in
accordance with the CTA, the Arbitrator must select the compliant offer. CN’s
final offer did not comply with s. 161.1(1) because it did not contain a dollar
amount representing the total rate. The Arbitrator therefore acted without
jurisdiction in selecting CN’s final offer. Alternatively, he erred in law in
doing so.
[77]
NGL submits that because s. 161(2)(a) of the CTA
requires the shipper to initially submit its final offer “excluding
any dollar amounts”, s. 161.1(1) must therefore be understood as
requiring the parties to submit their final offers including all dollar
amounts. The final offers must include dollar amounts representing all
charges, or the total rate, the shipper would be required to pay under the
offer. Otherwise, it is impossible for an arbitrator to select the most
commercially reasonable of the offers as he does not know the total rate
payable under one of them (Western Canadian, above, at paras 31, 35 and
45).
[78]
CN’s rate was only a base rate because it was
subject to the specified CN Tariff, a variable fuel surcharge that fluctuated
monthly. A variable fuel surcharge is not a dollar amount. CN acknowledged in
its Information that the structure of its final offer made it impossible to
determine the total rate payable for any month other than June 2013.
CN’s Position
[79]
CN submits that the stated rate per car was
clearly inserted in its final offer. Therefore, NGL cannot in good faith argue
that CN did not include “dollar amounts” as required by s. 161.1(1) simply
because it includes the application of a standard fuel charge. NGL appears to
be reading in the words “total price” or “total rate payable” into s 161.1(1)
when those words are simply not there. This was not Parliament’s intent.
[80]
Further, NGL itself incorporated by reference
other CN Tariffs which could possibly increase the rates paid and gave an
example of this.
[81]
Section 161.1(1) requires each party to submit
to the Agency their final offers “including dollar
amounts”, it does not require that the parties’ final offers include
“all” potential dollar amounts that could be payable over the course of the
award term. To make such a finding requires the reading in of the word “all”.
Statutory interpretation presumes against adding words unless the addition
gives voice to Parliament’s implicit intention (Murphy v Walsh, [1993] 2
SCR 1069 at 1078-1079, 106 DLR (4th) 404 [Murphy]; Cuthbertson v
Rasouli, 2013 SCC 53 at para 32, [2013] 3 S.C.R. 341 [Cuthbertson]).
Considering s. 161.1(1) in its grammatical and ordinary sense (Re Sound and
Motion Picture Theatre Associations of Canada, 2012 SCC 38 at para 33,
[2012] 2 S.C.R. 376), it is not necessary or reasonable to read in the word “all”,
particularly as Parliament inserted the word “including” before the phrase
“dollar amounts”. This suggests that it was not Parliament’s intention to
impose a requirement that “all” dollar amounts be stipulated in the parties’
final offers. Rather, the definition suggests that Parliament intended to simply
differentiate the final offers contemplated by s. 161.1(1), for which the
parties may include dollar amounts, from the shipper’s preliminary offer which
must exclude dollar amounts.
Analysis
[82]
Section 161(2), which concerns a shipper’s
preliminary final offer submission, states:
161. […] (2) A copy of a submission under
subsection (1) shall be served on the carrier by the shipper and the submission
shall contain
(a) the final offer of the shipper to
the carrier in the matter, excluding any dollar amounts;
[emphasis added]
[83]
Section 161.1(1), which concerns submission of
the final offers by both parties, states:
161.1(1) Within 10 days after a submission is
served under subsection 161(2), the shipper and the carrier shall submit to the
Agency their final offers, including dollar amounts.
[emphasis added]
[84]
I do not agree with NGL’s submission that
because a shipper’s s.161(2)(a) preliminary offer excludes “any” dollar
amounts, then s. 161.1(1) must be understood as requiring the parties to submit
their final offers including “all” dollar amounts. NGL’s reasoning is that the
word “any” is synonymous with “all” (Aerlinte Eireann Teoranta v Canada
(Minister of Transport) (1990), 68 DLR (4th) 220 at 225, 107 NR 129
(FCA)). Because s. 161(2)(a) refers to “any” dollar amounts, this can be read
as “all” dollar amounts and it therefore follows that s 161.1(1) must be read
to include “all’ dollar amounts.
[85]
This is, at best, a tortured interpretation and
does not arise from a plain reading of either provision. The Supreme Court has
said that it is problematic to rely on “an unnatural and
strained interpretation” of a phrase (British Columbia
(Forests) v Teal Cedar Products Ltd, 2013 SCC 51 at para 26, [2013] 3 SCR
301). It also confirmed in Cuthbertson, above, at para 32 that:
The basic rule of statutory interpretation is
that “the words of an Act are to be read in their entire context, in their
grammatical and ordinary sense harmoniously with the scheme of the Act, the
object of the Act, and the intention of Parliament”: R. Sullivan, Sullivan on
the Construction of Statutes (5th ed. 2008), at p. 1.
[86]
NGL’s interpretation also requires reading in
the word “all” when interpreting s. 161.1(1), however, “[c]ourts
should normally avoid an interpretation of legislation that requires words to
be read into it” (Febles v Canada (Citizenship and Immigration),
2012 FCA 324 at para 51, 357 DLR (4th) 343; R v McIntosh, [1995] 1 SCR
686 at para 26, 178 NR 161 [McIntosh]). I am not convinced that to do so
here would express what Parliament clearly implied (Murphy, above, at
1078-1079; R v McIntosh).
[87]
Further, while NGL submits that it is impossible
for an arbitrator to select the most reasonable offer when he does not know
what the total rate payable is under one of the offers, this would appear to
overstate the situation. As is set out in more detail below, it appears that
final offers including fuel surcharges and other terms that may contain
variable rates are not exceptional. Further, each party may submit an Information which can explain such figures, including their variables, and provide an estimate
of what that additional cost will be. The arbitrator can take this into
consideration when comparing and selecting the final offer.
[88]
In this case a related CN Tariff explains how
the fuel surcharge is calculated:
CN will apply a
fuel surcharge to the linehaul freight charge(s) based on the monthly average
price of U.S. No. 2 Diesel Retail Sales by All Sellers (Cents per Gallon)
On-Highway Diesel Fuel (HDF).
The source for the price of HDF is the U.S.
Department of Energy’s EIA Retail On-Highway Diesel Prices Report, whose
monthly average price is available under “2-M Diesel Prices – All Types” at http://tonto.eia.doe.gov/oog/ftparea/wogirs/xls/psw18vwall.xls.
When the monthly average price of HDF equals or
exceeds $1.25 in the second calendar month prior to the month in which the fuel
surcharge is applied, the fuel surcharge rate per mile as shown in the HDF Fuel
Surcharge Table will be applied to the linehaul freight charge. For example,
the surcharge amount in December will be calculated from the monthly average
HDF price during October. Rail mileage is calculated using the latest version
of the third party software PC*Miler (ALK Technologies) on each linehaul
movement. When the rail miles are not available through PC*Miler, CN will
calculate and publish the mileage independently.
For example:
When HDF rate is $2.60, the fuel surcharge for
a carload linehaul movement of 1,500 miles would be $0.2760 x1500 = $414.00
[89]
That Tariff then goes on to describe and give
examples of how the U.S. On-Highway Diesel surcharge will be converted to
Canadian currency for customers who are invoiced in Canadian dollars, to
provide a table showing how the date of surcharge will be applied and a HDF
fuel surcharge table from which the HDF value can be extracted and applied.
[90]
Thus, while the Fuel Surcharge calculation is
dependant on mileage, this is not a variable for a known route, the only
variable is the HDF which is figure determined by an independent source and
over which CN has no control. While the Arbitrator could not know exactly what
the fuel surcharge will be from month to month, CN estimated this at a
specified dollar rate per car and provided the surcharge from prior years. In
my view, the Arbitrator in determining which of the final offers was most
commercially reasonable, could consider the CN Information when making an
informed determination of the total amount payable under CN’s final offer.
[91]
NGL cites and relies on a portion of Western
Canadian, above, at para 31. When viewed in whole this reads:
[31] The applicant argues that various aspects
of the FOA regime have the effect of denying it the opportunity to prepare
adequately its case and to know the case it has to meet. In particular, the
applicant challenges the following features of the arbitration regime, which it
argues are unfairly prejudicial and constitute a violation of paragraph 2(e) of
the Canadian Bill of Rights:
1. Paragraph 161(2)(a) excludes for 10
days from the shipper’s final offer the dollar price it is willing to pay for
the rail service contained in the offer. Accordingly, the carrier must respond
to the shipper’s final offer without knowing the dollar price the shipper is
willing to pay;
[92]
NGL submits that in Western Canadian, CN
equated “dollar amounts”, which is what s. 161(2)(a) excludes, with “total
price” which is what CN wanted to know before crafting its offer. I fail to
see how this paragraph stands for the proposition for which it is being
advanced by NGL. It is a recitation of the arguments of CN in that case, and
merely states the fact that when drafting a final offer, the carrier must do so
without knowing how much the shipper is willing to pay. It makes no reference
to a total price nor does it exclude the ability of a carrier to incorporate
terms by reference or to use a variable rate that is able to be calculated
based on objective information.
[93]
In conclusion, I do not agree that s. 161.1(1),
and in particular the phrase “dollar amounts” must be interpreted and
understood as requiring the parties to submit final offers that contain amounts
in dollars which represent the total rate payable by the shipper. I see no
reason why, as in this case, a stated dollar rate cannot be stated to be made
subject to another provision of the final offer, such as a fuel surplus clause
or an incorporated by reference clause. Should a party choose to proceed in
this manner, then it is incumbent upon them to explain in their Information the basis for the additional charge and to convince the arbitrator that enough
information concerning that charge has been provided so that he or she can
undertake a comparison of the two final offers and make a determination as to
which of them is commercially the most reasonable. This can include, as it did
in this case, the history of the development and application of the charge,
historic rates for the charge as well as the method by which it is calculated.
If the party fails to satisfy the arbitrator of the necessity and relative
predictability of the additional charge, then this will be to the party’s
detriment.
[94]
As I do not agree that CN’s final offer failed
to specify a “dollar amount” nor that its stated rate was required to include
the Fuel Surcharge or other tariffs incorporated by reference, I cannot
conclude that CN’s final offer did not comply with s. 161.1(1) nor, therefore,
that the Arbitrator was obliged by s. 161.3 to select NGL’s final offer. And,
for the reasons set out above, it was reasonable for the Arbitrator to find
that CN’s final offer contained dollar amounts.
ISSUE 4: Was CN’s final
offer uncertain or void for uncertainty?
NGL’s Position
[95]
NGL submits that CN’s offer was uncertain and
unascertainable, or void for uncertainty, and therefore that the Arbitrator
erred in jurisdiction and law by selecting CN’s final offer. This is because a
reasonable comparison of the two offers is not possible when one of them
incorporates a fuel surcharge dependant on uncertain future events. Further,
because CN can unilaterally alter the tariff at any time. Because the Fuel
Surcharge can be revised by CN during the term of the award, the Arbitrator’s
selection of CN’s final offer amounts to an impermissible sub-delegation to CN
of his adjudicative powers, being the authority to determine the rate payable (Therrien
(Re), 2001 SCC 35 at para 93, [2001] 2 S.C.R. 3; Murphy v Canada (National
Revenue), 2009 FC 1226 at paras 40-47, 314 DLR (4th) 540).
[96]
The selection is also contrary to s. 165(6)(a)
of the CTA as it is not final and binding and, contrary to the scheme of the
CTA, it does not provide certainty (Western Canadian, above, at para
9). The issuance of supplements and reissuances of the specified CN Tariff
could materially alter the terms of the final offer within as little time as
one month. Because the material terms of a contract must be certain, the offer
is void for uncertainty (Ko v Hillview Homes Ltd, 2012 ABCA 245 at para
81, 90-91 and 103, 536 AR 93 [Ko]).
CN’s Position
[97]
CN submits that both final offers are dependant
upon what NGL describes as unpredictable future events or the parties’ future
acts or omissions. For example, depending on how NGL handles rail cars during
the FOA term, the “total rate” may fluctuate greatly in accordance with a
referenced CN Tariff. Just because the total rate payable may fluctuate does
not render the final offers unascertainable or uncertain. An arbitrator can
still conduct a comprehensive comparison of the reasonableness of the parties’
final offers.
[98]
CN suggests that it may have been the lack of
variability in NGL’s offer caused it not to be selected by the Arbitrator. It
is a well-established practice within the transportation industry to adjust
price in line with fuel fluctuations. This is a fair practice as it removes
the uncertainty of volatile input costs while being neutral for both shippers
and carriers. Thus, NGL’s approach was out of step with industry practice
while CN’s approach, including a Fuel Surcharge clause, was inherently more
reasonable and open to acceptance by the Arbitrator on that basis. It did not
render CN’s final offer invalid for uncertainty.
[99]
Further, the practical consequence of NGL’s
argument is that any rail shipper could avoid a fuel surcharge tariff by merely
initiating a FOA. Railways would then be required to submit an all inclusive
rate in their final offer thereby removing what is accepted in industry as the
most efficient method of addressing fluctuations in fuel prices and leading to
higher rail rates. This would defeat the purpose of the FOA scheme. In
essence, CN submits that fuel surcharges are a commercial reality, being the
economic and commercial context prevailing in Canada, and are required to make
the transportation system more economical (Canadian National Railway Company
v Canada (National Transportation Agency) (1995), 129 DLR (4th) 163 at
170-171, [1996] 1 FCR 355 (FCA)). By filing an FOA, NGL should not be
permitted to extricate itself from the commercial market and a fuel surcharge
that virtually every other shipper is required to pay and that NGL has
previously paid.
[100] As for unilaterally changing the tariff, CN made clear at the
hearing that this is standard wording used of all of its tariffs. NGL cannot
point to a single instance of CN abusing this power to unilaterally change its
fuel tariff to the detriment of shippers. This concern is a theoretical
construct, as demonstrated by the testimony.
[101] CN submits that the Arbitrator did not delegate his authority.
Further, his decision was final and binding and that, in a FOA decision where
no reasons are given, the arbitrator’s decision must stand unless it can be
shown that it was patently perverse, patently unlawful or explicable only on
the assumption of bad faith (Western Canadian, above, at paras
52, 55; Quebec North Shore & Labrador Railway Co v New Millennium
Capital Corp, 2011 FC 765 at para 81, 392 FTR 167).
[102] Further, even if the final offers were required to meet a
contractual level of certainty, the terms of CN’s final offer were sufficiently
certain. The specified CN Tariff provided a specific means of ascertaining the
Fuel Surcharge to be paid by NGL. It is also clear from the authorities that
neither the fact that the fuel surcharge amounts may fluctuate over time, nor
the possibility that the fuel surcharge amounts might unilaterally be changed
by CN render it, and therefore CN’s final offer, uncertain (see Royal Bank
of Canada v Stonehocker, [1985] BCJ No 2340 (QL) at para 17 (CA), leave to
appeal refused [1985] SCCA No 65 (QL); Capital City Savings and Credit Union
Ltd v Elliot (1988), 91 AR 226 at 10 (QB, Master); Alberta Treasury
Branches v Smith, [1989] 5 WWR 633 at para 41, 67 Alta LR (2d) 357 (QB)).
Analysis
[103] In my view, CN’s final offer was not uncertain or unascertainable,
nor was it void for uncertainty.
[104] The Arbitrator had before him CN’s Information. This documented the
fuel surcharge previously paid by NGLand also describes the prior agreements
between the parties.
[105] The CN Information also sets out the history of industry fuel
surcharges stating that traditionally fuel was included in the base
transportation rate charged for the movement of traffic as fuel prices were
relatively stable and predictable. Beginning around 2001, fuel surcharges in
all modes of the transportation industry were implemented in response to the
increasing volatility in fuel prices which were fluctuating significantly on a
week by week basis. As it was not commercially reasonable for carriers to
re-price their contract on such short term intervals, fuel surcharges were
implemented. These are an amount added to the freight invoice to reflect the
variability in fuel costs above the starting point of the freight base rate.
[106] CN’s Information further states that CN implemented its first fuel
surcharge tariff, CN 7400, in 2001. A new tariff, CN 7401, was introduced in
2005. In 2006, the shipper community expressed concerns to the U.S. regulator of the rail transportation industry, the Surface Transportation Board (STB),
about the application of fuel surcharges. At issue was the methodology of
applying the fuel surcharges. Ultimately, the STB determined that computing
rail fuel surcharges as a percentage of a shipper’s base rate was an
unreasonable practice. Consistent with this finding CN and all major railways
in North America implemented mileage based fuel surcharges. CN did so by way
of CN Tariff 7402 in April 2007. The use of the HDF index, also endorsed by
the STB decision, meant that the fuel surcharges more closely tracked
fluctuations in the actual prices being paid by railways for their locomotive
fuel. And, as a result of the STB decision, railways began to submit quarterly
reports to “better enable the STB to monitor
industry-wide fuel surcharge practices” and to provide a “useful and reliable regulatory tool for monitoring the
relationship between changes in revenue and costs”.
[107] More detailed information pertaining to the fuel surcharge is found
in the attachments to CN’s Information. This includes affidavit evidence which
provides a detailed history of rate based and mileage based fuel surcharges as
well as summary of the application of each to NGL.
[108] The affidavit evidence also states that following submissions from
counsel for CN and NGL, the Arbitrator ruled that he would admit of CN’s
rebuttal evidence in its entirety, subject to NGL’s ability to object to
specific elements of the rebuttal evidence as it was being introduced by CN’s
witnesses at the hearing. CN’s rebuttal evidence describes the past
application of the fuel surcharge between the parties and notes that there have
only been adjustments a total of three times, all to the benefit of shippers.
[109] What is clear from this evidence is that fuel surcharges have been a
part of the arrangements between CN and NGL for an extended period. This is
set out in detail in the NGL Information.
[110] NGL’s Information also confirmed that it has been charged a fuel
surcharge on its shipments, originally rate based but subsequently mileage
based, as a result of the STB decision. NGL estimated the prior rate based
surcharge, the prior mileage based surcharge and estimated that if CN’s final
offer was accepted what it would pay in fuel surcharges. However, it still
took the position that that CN’s rate was uncertain and unascertainable,
contrary to s. 161.1(1) and permitted a gross over recovery by CN.
[111] In my view, based on the record before him, the Arbitrator could
ascertain with reasonable certainty the amount of the Fuel Surcharge based on
the formula set out in the specified CN Tariff. Further, an estimated dollar
amount per rail car was provided by CN in its Information which was based on
distance of 36 miles and a monthly calculation for June. The Arbitrator also
had before him the past history of the fuel surcharge as between the parties
including actual cost per car. Accordingly, CN’s final offer was not uncertain
or unascertainable nor void for uncertainty, the Arbitrator did not err in law
or jurisdiction by selecting CN’s final offer.
[112] Further, the surcharge will rise or fall based on the cost of
diesel, making it fair to both parties. The HDF is an objective standard and
mileage, despite the discrepancy discovered in this instance, is not a true
variable when calculating the surcharge. I can see nothing unreasonable in accepting
the Fuel Surcharge clause as a term of the final offer to which CN’s stated
rate was subject. This was, in fact, consistent with past practice between the
parties.
[113] As to the contractual argument, even if valid, any uncertainty would
be cured as there is a specific means of ascertaining the value in the contract
(Ko, above, at para 120; Mitsui & Co (Point Aconi) Ltd v
Jones Power Co, 2000 NSCA 95 at para 52, 74).
ISSUE 5: Is this an
appropriate case for a directed verdict or mandamus?
[114]
For the reasons above I have determined that the
Arbitrator committed no error of law, did not act outside his jurisdiction, and
could reasonably have come to the decision that he did based on the record
before him. As the application will be dismissed, there is no need to decide
whether this would have been an appropriate case for a directed verdict or
mandamus.
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