Supreme Court of Canada
Kootenay & Elk Railway Co. v. Canadian Pacific Railway Co., [1974] S.C.R. 955
Date: 1972-05-01
Kootenay and Elk Railway Company and Burlington Northern, Inc. Appellants;
and
Canadian Pacific Railway Company Respondent;
and
Attorney-General of British Columbia, Minister of Highways and Transport for Alberta and Canadian National Railways Intervenants.
1971: October 13, 14, 15; 1972: May 1.
Present: Fauteux C.J. and Abbott, Martland, Judson, Ritchie, Hall, Spence, Pigeon and Laskin JJ.
ON APPEAL FROM THE CANADIAN TRANSPORT COMMISSION
Railways—Line of provincially incorporated railway company and line of American company each to stop ¼ inch from international border—Traffic Interchange Agreement—Applications made to Canadian Transport Commission dismissed—Appeal—Railway Act, R.S.C. 1952, c. 234, ss. 156(1), 315 and 319—Crow’s Nest Pass Act, 1897 (Can.), c. 5, s. 1(f).
Appeal—No opinion on question of law expressed by Canadian Transport Commission—Whether appeal lies to Supreme Court of Canada—Railway Act, R.S.C. 1952, c. 234, s. 53.
The appellant Burlington Northern, Inc., a company incorporated under the laws of the State of Delaware, proposed to construct a line of railway, in Montana, north from its main line, in the United States, for a distance of a little over nine miles to the United States-Canada border near Roosville West, in British Columbia. The appellant Kootenay and Elk Railway Co. proposed to construct a line of railway, in British Columbia, running generally south from Line Creek, in the Kootenay mining district, to the border to a point of junction with the proposed Burlington line. Kootenay, incorporated under the Railway Act of British Columbia, and intended to operate in connection with the mines of the Crow’s Nest Pass Coal Co. Ltd. and of Kaiser Resources
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Ltd., and not as a common carrier, was a wholly-owned subsidiary of Crow’s Nest.
It was proposed that the line to be constructed by Kootenay would cross the line of the Canadian Pacific Railway Co. at Hosmer, or that Kootenay should obtain running rights over the C.P.R. line between Elko and Natal. The construction plan called for the Burlington and Kootenay lines each to stop ¼ of an inch from the border. It was proposed that trains of Burlington would be brought by its crews to a point north of the border, where they would be taken over by Kootenay’s crews to be operated over its line to the coal loading points. They would operate the trains carrying the coal back to the point where Burlington’s crews would take over. None of Kootenay’s personnel would operate the trains over the border or in the United States.
The purpose of the construction of these two lines of railway was to enable coal mined from the properties of Crow’s Nest and Kaiser to be shipped by way of Burlington’s main line, west to the Pacific coast, and thence to Roberts Bank, in British Columbia, for shipment to Japan.
Applications were made by the appellants to the Canadian Transport Commission for: (1)(a) an order granting leave to join the proposed lines and (b) an order granting leave to Burlington to operate its trains on the Kootenay line for the purpose of providing a free interchange of trains; (2) an order granting leave for the crossing, by way of overpass, of the line of C.P.R. between Michel and Elko at a point north of Hosmer; and (3) the granting of running rights over the C.P.R. line between Natal and Elko. The second application was an alternative to the third application, which the appellants stated would be withdrawn if the third application was granted.
All three applications were dismissed and the appellants, with leave, then appealed to this Court. Leave was also granted to the respondent, the Canadian Pacific Railway Co., to cross-appeal.
Held (Fauteux C.J. and Judson, Hall and Pigeon JJ. dissenting): The appeal should be allowed in part.
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(Hall and Spence JJ. dissenting in part): The cross-appeal should be dismissed.
The opinion of the Court on the questions raised by leave in the appeal was as follows:
Q. (1). Was the Canadian Transport Commission in error in not holding that the agreement or arrangement between Burlington and Kootenay for interchange of traffic is authorized or permitted inter alia under ss. 315 and 319 of the Railway Act, R.S.C. 1952, c. 234?
A. No.
Q. (2). Was the Canadian Transport Commission in error in holding that the agreement or arrangement between Burlington and Kootenay for interchange of traffic was prohibited by s. 156(1) of the Railway Act, supra?
A. Yes. Fauteux C.J. and Judson, Hall and Pigeon JJ. dissenting.
The opinion of the Court on the questions raised by leave in the cross-appeal was as follows:
Q. (1). Did the Canadian Transport Commission err in law when it found that s. 1(f) of the Crow’s Nest Pass Act, 1897 (Can.), c. 5, vests in the Canadian Transport Commission the necessary jurisdiction for granting running rights over Canadian Pacific’s Crow’s Nest Line to a provincial railway company?
A. No.
Q. (2). Did the Canadian Transport Commission err in law when it found that, in considering and determining applications for the junction or crossing of railways made under s. 255 of the Railway Act, supra, the Commission is concerned with matters of safety only, and cannot properly take into account other considerations of public interest?
A. No.
Q. (3). Did the Canadian Transport Commission err in law when it failed to find that Kootenay was part of an extraprovincial undertaking?
A. No. Hall and Spence JJ. dissenting.
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As to the questions raised in a factum filed by the Commission, Hall J. would refer those questions back to the Commission for decision by the Commission before it acts on the answer given in respect of s. 156(1) of the Railway Act, supra.
APPEAL and CROSS-APPEAL from an order of the Canadian Transport Commission dismissing certain applications made by the appellants. Appeal allowed in part, Fauteux C.J. and Judson, Hall and Pigeon JJ. dissenting. Cross-appeal dismissed, Hall and Spence JJ. dissenting in part.
J.J. Robinette, Q.C., J.G. Alley and W.G. Burke-Robertson, Q.C., for the appellants.
A. Findlay, Q.C., E.E. Saunders, Q.C., and G.P. Millar, Q.C., for the respondent.
A.W. Macdonald, Q.C., and P.B. Tetro, for the Attorney-General of British Columbia.
J.J. Frawley, Q.C., for the Minister of Highways and Transport of Alberta.
The judgment of Fauteux C.J. and Judson and Pigeon JJ. was delivered by
THE CHIEF JUSTICE (dissenting)—In my opinion, the Canadian Transport Commission did not err in law in holding that the agreement or arrangement between Burlington Northern, Inc. and Kootenay and Elk Railway Company for the interchange of traffic was prohibited by s. 156(1) of the Railway Act, R.S.C. 1952, c. 234; and I find nothing that could usefully be added to the reasons given on this point by the Vice-President of the Canadian Transport Commission and by Hall J. in this Court.
Concerning the other questions of law raised in the appeal and in the cross-appeal, I agree with the reasons and conclusion of the Commission.
I would dismiss the appeal and the cross-appeal with costs.
The judgment of Abbott, Martland and Ritchie JJ. was delivered by
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MARTLAND J.—This appeal is brought, with leave, from an order of the Canadian Transport Commission, which dismissed three applications made by the appellants. The leave to appeal was granted on the following questions of law:
1) Was the Canadian Transport Commission in error in not holding that the agreement or arrangement between Burlington Northern, Inc. and Kootenay and Elk Railway Company for interchange of traffic is authorized or permitted inter alia under section 315 and 319 of the Railway Act?
(At the time of the application that Act was c. 234, R.S.C. 1952. It is now c. R-2, R.S.C. 1970. References in these reasons are made to section numbers as they existed under the earlier Act, which was in effect at the time leave to appeal was granted.)
2) Was the Canadian Transport Commission in error in holding that the agreement or arrangement between Burlington Northern, Inc. and the Kootenay and Elk Railway Company for interchange of traffic was prohibited by section 156(1) of the Railway Act?
Leave was also granted to the respondent to cross-appeal. The questions of law stated in the respondent’s notice of cross-appeal are as follows:
1) Did the Canadian Transport Commission err in law when it found that Section 1(f) of the Crow’s Nest Pass Act (60/61 Victoria, Chapter 5) vests in the Canadian Transport Commission the necessary jurisdiction for granting running rights over Canadian Pacific’s Crow’s Nest Line to a provincial railway company?
2) Did the Canadian Transport Commission err in law when it found that, in considering and determining applications for the junction or crossing of railways made under Section 255 of the Railway Act, the Commission is concerned with matters of safety only, and cannot properly take into account other considerations of public interest?
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3) Did the Canadian Transport Commission err in law when it failed to find that the Kootenay and Elk Railway Company was part of an extraprovincial undertaking?
The circumstances which gave rise to the three applications made by the appellants are that the appellant Burlington Northern, Inc., hereinafter referred to as “Burlington”, proposes to construct a line of railway, in Montana, north from its main line, in the United States, for a distance of a little over nine miles to the United States-Canada border near Roosville West, in British Columbia. The appellant Kootenay and Elk Railway Company, hereinafter referred to as “Kootenay”, proposes to construct a line of railway, in British Columbia, running generally south from Line Creek, in the Kootenay mining district, to the border to a point of junction with the proposed Burlington line.
It is proposed that this line cross the line of Canadian Pacific Railway Company, hereinafter referred to as “C.P.R.”, at Hosmer, or that Kootenay should obtain running rights over the C.P.R. line between Elko and Natal. The construction plan calls for the Burlington and Kootenay lines each to stop ¼ of an inch from the border. It is proposed that trains of Burlington would be brought by its crews to a point north of the border, where they would be taken over by Kootenay’s crews to be operated over its line to the coal loading points. They would operate the trains carrying the coal back to the point where Burlington’s crews take over. None of Kootenay’s personnel would operate the trains over the border or in the United States.
The purpose of the construction of these two lines of railway is to enable coal mined from the properties of Crow’s Nest Pass Coal Company Limited, hereinafter referred to as “Crow’s Nest”, and of Kaiser Resources Limited, hereinafter referred to as “Kaiser”, to be shipped by way of Burlington’s main line, west to the Pacif-
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ic coast, and thence to Roberts Bank, in British Columbia, for shipment to Japan.
Burlington is a company incorporated under the laws of the State of Delaware and is the successor, by merger and amalgamation, of several American railway companies, some of which had interests in the operation of railways in Canada. The merger and amalgamation were authorized, in respect of Canadian operations, by c. 23 of the Statutes of Canada, 1965. Kootenay was incorporated on May 4, 1966, under the provisions of the Railway Act of British Columbia, c. 329, R.S.B.C., 1960. It is intended to operate in connection with the mines of Crow’s Nest and Kaiser, and not as a common carrier. It is a wholly-owned subsidiary of Crow’s Nest. It has received the necessary certificates required under the provisions of the British Columbia Railway Act.
The project which gave rise to the appellants’ applications originated in 1965 after Crow’s Nest had failed to negotiate with C.P.R. a satisfactory rate for the transportation of its coal to the west coast. Subsequently Kaiser purchased from Crow’s Nest the coal producing properties then concerned, and was able to negotiate an agreement with C.P.R. The situation changed when Crow’s Nest found coal in other areas which it controlled and Kaiser found new reserves on its properties. The project was then revived.
The three applications made by the appellants to the Canadian Transport Commission are as follows:
Application No. 1 is for (a) an order under s. 255, now s. 193(1), of the Railway Act of Canada granting leave to join the proposed lines and (b) an order granting leave to Burlington to operate its trains on the Kootenay line for the purpose of providing a free interchange of trains. Application No. 2 is for an order, also under s. 255, granting leave for the crossing, by way of an overpass, of the line of
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C.P.R. between Michel and Elko at a point north of Hosmer. Application No. 3 is for the granting of running rights over the C.P.R. line between Natal and Elko, and is made pursuant to s. 1(f) of Chapter 5 of the Statutes of Canada, 1897 (the Crow’s Nest Pass Act). Application No. 2 was an alternative to application No. 3, which the appellants stated would be withdrawn if application No. 3 was granted.
The applications were opposed by C.P.R.
Section 255 of the Railway Act, under which the first two applications were made, provides as follows:
255. (1) The railway lines or tracks of any railway company shall not cross or join or be crossed or joined by or with any railway lines or tracks other than those of such company, whether otherwise within the legislative authority of the Parliament of Canada or not, until leave therefor has been obtained from the Commission as hereinafter provided.
(2) Upon any application for such leave the applicant shall submit to the Commission a plan and profile of such crossing or junction, and such other plans, drawings and specifications as the Commission may, in any case, or by regulation, require.
(3) The Commission may, by order,
(a) grant such application on such terms as to protection and safety as it deems expedient;
(b) change the plan and profile, drawings and specifications so submitted, and fix the place and mode of crossing or junction;
(c) direct that one line or track or one set of lines or tracks be carried over or under another line or track or set of lines or tracks;
(d) direct that such works, structures, equipment, appliances and materials be constructed, provided, installed, maintained, used or operated, watchmen or other persons employed, and measures taken, as
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under the circumstances appear to the Commission best adapted to remove and prevent all danger of accident, injury or damage;
(e) determine the amount of damage and compensation, if any, to be paid for any property or land taken or injuriously affected by reason of the construction of such works;
(f) give directions as to supervision of the construction of the works; and
(g) require that the detail plans, drawings and specifications of any works, structures, equipment or appliances required, shall, before construction or installation, be submitted to and approved by the Commission.
(4) No trains shall be operated on the lines or tracks of the applicant over, upon or through such crossing or junction until the Commission grants an order authorizing such operation.
(5) The Commission shall not grant such last mentioned order until satisfied that its orders and directions have been carried out, and that the provisions of this section have been complied with.
It is not in issue, on this appeal, that Burlington is a railway company, within the meaning of s. 255(1), and that the joining of the lines of Burlington and Kootenay requires the leave of the Commission under that subsection.
The conclusions of the Canadian Transport Commission may be briefly summarized as follows: It would have granted the applications if it had not decided that the proposed interchange of traffic was prohibited by s. 156(1) (now s. 94(1)) of the Railway Act. It decided the questions of law raised by the cross-appeal in favour of the appellants.
The first issue to be determined is whether the Commission’s conclusion as to the meaning and effect of s. 156(1) is correct. Section 156 of the Act provides as follows:
156. (1) The directors of the company may, at any time, make and enter into any agreement or arrangement, not inconsistent with the provisions of this or
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the Special Act, with any other transportation company operating as a common carrier either in Canada or elsewhere, for the interchange of traffic and for the division and apportionment of tolls in respect of such traffic.
(2) The directors may also make and enter into any agreement or arrangements, nor inconsistent with the provisions of this or the Special Act, for any term not exceeding twenty-one years
(a) for the running of the trains of one company over the tracks of another company;
(b) for the division and apportionment of tolls in respect of such traffic;
(c) generally in relation to the management and working of the railways, or any of them, or any part thereof, and of any railway or railways in connection therewith; and
(d) to provide, either by proxy or otherwise, for the appointment of a joint committee for the better carrying into effect of any such agreement or arrangement, with such powers and functions as are considered necessary or expedient;
subject to the like consent of the shareholders, the sanction of the Governor in Council upon the recommendation of the Commission, application, notices and filing, as hereinbefore provided with respect to amalgamation agreements; publication of notices in the Canada Gazette is sufficient notice, and the duplicate original of such agreement or arrangement shall, upon being sanctioned, be filed with the Commission.
(3) The Commission may, notwithstanding anything in this section, by order or regulation, exempt the company from complying with any of the foregoing conditions, with respect to any such agreement or arrangement made or entered into by the company for the transaction of the usual and ordinary business of the company, and where such consent of the shareholders is deemed by the Commission to be unnecessary.
(4) Neither the making of any such arrangement or agreement, nor anything therein contained, nor any approval thereof, restricts, limits, or affects any power by this Act vested in the Commission, or relieves the companies from complying with the provisions of this Act.
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It was the opinion of the Commission that, as s. 156(1) only permitted agreements for the interchange of traffic to be made “with any other transportation company operating as a common carrier”, it prohibited such an agreement with a transportation company, not a common carrier, and, as Kootenay was not a common carrier, the agreement by Burlington with it was prohibited.
Reference was made to three cases, which had been cited by counsel for the C.P.R., Shrewsbury & Birmingham Railway Company v. North Western Railway Company; Great Western Railway Company v. Grand Trunk Railway Company; and Ashbury Railway Carriage and Iron Company v. Riche, as illustrative of the theory that where a corporation is given by statute specific authority and the power to enter into certain types of contracts it is implicitly prohibited from making other types of contracts.
Those cases are concerned with the doctrine of ultra vires, and illustrate the principle that a company which owes its incorporation to statutory authority cannot effectively do anything beyond the powers expressly or impliedly conferred upon it by its statute or memorandum of association. Burlington, which was incorporated in the State of Delaware, was given power, among other things:
1. To engage in any and all branches of the business of transportation, whether by railroad, motor vehicle, pipe line, water, air, or any other means of conveyance whatsoever now in existence or hereafter invented or developed.
12. To enter into, make and perform contracts of every kind and description, with any person, firm, association, corporation, joint-stock company, syndicate, trust, body politic or any other entity.
16. To have one or more offices, and to carry on all or any of its operations and business in any of the states, districts, territories or possessions of the
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United States, and in any and all foreign countries, subject to applicable law.
There is, therefore, no doubt as to its corporate authority to enter into the traffic interchange agreement with Kootenay. The question is whether, having that power, s. 156(1) prohibits it from making such agreement. This is not the case of a railway company which, in the absence of the powers conferred by s. 156(1), would have no power to make a traffic interchange agreement. It is the case of a company which has such power, and which does not need to resort to that subsection.
Section 156 is, by its terms, not a prohibitory provision, but an enabling provision. Its original predecessor was s. 48(1) of c. 68, Statutes of Canada, 31 Victoria, 1867/8, which provided as follows:
48. The Directors of any Railway Company may, at any time, make agreements or arrangements with any other Company either in Canada or elsewhere, for the regulation and interchange of Traffic passing to and from their Railways, and for the working of the traffic over the said Railways respectively, or for either of those objects separately, and for the division and apportionment of tolls, rates and charges in respect of such traffic, and generally in relation to the management and working of the Railways, or any of them, or any part thereof, and of any Railway or Railways in connection therewith, for any term not exceeding twenty-one years, and to provide, either by proxy or otherwise, for the appointment of a Joint Committee or Committees for the better carrying into effect any such agreement or arrangement, with such powers and functions as may be considered necessary or expedient, subject to the consent of two thirds of the Stockholders voting in person or by proxy.
This subsection conferred upon the directors of a railway company the power to enter into certain kinds of agreement, as defined, but subject to their obtaining the consent of two thirds of the stockholders of the company.
This provision appeared again as s. 60(1) of c. 9, Statutes of Canada, 42 Victoria, 1879. Section 60(1) was amended in 1883, by s. 11, c. 24, Statutes of Canada, 46 Victoria, 1883/4, by
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requiring, in addition to the consent of two thirds of the stockholders, the approval of the Governor in Council. The section, as amended, appeared as s. 56(2) of c. 109 of the Revised Statutes of Canada, 1886.
A significant change occurred when the Railway Act was revised in 1903, c. 58, s. 284. Whereas up to that time the powers of the directors to make the kinds of agreement defined in the section had required the approval of two thirds of the stockholders and, later, as noted, the consent of the Governor in Council, the powers of the directors were now defined in two subsections, and the powers granted under the first subsection were not made subject to such approval and consent. This change was carried forward into c. 37 of the Revised Statutes of Canada, 1906, in s. 364, which reads:
364. The directors may, at any time, make and enter into any agreement or arrangement, not inconsistent with the provisions of this or the Special Act, with any other company, either in Canada or elsewhere, for the interchange of traffic between their railways or vessels, and for the division and apportionment of tolls in respect of such traffic.
2. The directors may also make and enter into any agreement or arrangements, not inconsistent with the provisions of this or the Special Act, for any term not exceeding twenty-one years,—
(a) for the running of the trains of one company over the tracks of another company;
(b) for the division and apportionment of tolls in respect of such traffic;
(c) generally in relation to the management and working of the railways, or any of them, or any part thereof, and of any railway or railways in connection therewith; and,
(d) to provide, either by proxy or otherwise, for the appointment of a joint committee for the better carrying into effect of any such agreement or arrangement, with such powers and functions as are considered necessary or expedient;
subject to the like consent of the shareholders, the sanction of the Governor in Council upon the recommendation of the Board, application, notices and
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filing, as hereinbefore provided with respect to amalgamation agreements: Provided that publication of notices in the Canada Gazette shall be sufficient notice, and that the duplicate original of such agreement or arrangement shall, upon being sanctioned, be filed with the Board.
It will be noted that the exercise of the power of the directors to enter an agreement for the interchange of traffic was no longer to be subject to their obtaining the consent of a required majority of the shareholders. It was only those kinds of agreements which are described in subs. (2) which would require the same kind of shareholders’ consent as was necessary with respect to amalgamation agreements; i.e., two thirds of the votes of the shareholders at a meeting at which shareholders representing at least two thirds in value of the capital stock of the company were present or represented by proxy.
This section continued in substantially the same form in the Revised Statutes of Canada in 1927 and in 1952. In 1967 the National Transportation Act was enacted (c. 69, Statutes of Canada, 14-15-16 Elizabeth II, 1966-67). Section 1 declared, in part, that “an economic, efficient and adequate transportation system making the best use of all available modes of transportation at the lowest total cost is essential to protect the interests of the users of transportation and to maintain the economic well-being and growth of Canada.” It applies to transportation by railways subject to the Railway Act, by air, water, and by commodity pipe line or by a motor vehicle undertaking connecting a province with any other or others of the provinces or extending beyond the limits of a province.
It was in this context that s. 39 was enacted to repeal s. 156(1) of the Railway Act and to substitute the subsection as it now stands. Prior to this amendment the subsection had referred to an agreement with “any other company, either in Canada or elsewhere, for the interchange of traffic between their railways or ves-
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sels.” The subsection now refers to an agreement “with any other transportation company operating as a common carrier either in Canada or elsewhere, for the interchange of traffic.” The effect of this change was to expand the unrestricted power of the directors of a railway company to make traffic interchange agreements by permitting their making such agreements with any transportation company, and not only with another railway company, but to provide that such transportation company must be a common carrier.
The amendment did not alter the fact that the powers conferred by s. 156(1) continued to be powers conferred upon the directors of a railway company which they could exercise without the necessity of obtaining the approval of the shareholders or the sanction of the Governor in Council. I do not accept the contention that such a provision, which, in terms, confers specific powers on the directors of a railway company, must be construed as a prohibition against the company itself, as distinct from its directors, entering into a traffic interchange agreement with another railway company, which is not a common carrier, provided that it has the necessary corporate powers to enable it to do so.
I do not think that the amendment made by s. 39 of the National Transportation Act was intended to effect such a prohibition. If it were so construed it would prevent C.P.R. or Canadian National Railways from making an agreement for the interchange of traffic with a logging or mining railway operating under the provisions of s. 202 of the British Columbia Railway Act.
It was the contention of the respondent that when s. 156(1) spoke of the directors it should be construed as meaning the company itself. I find this submission difficult to accept when considered in relation to the past history of s.
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156 and its predecessors. Throughout that history it is clear that reference to the directors meant precisely what it said, and was not intended to refer to the company itself.
The Railway Act, when conferring powers on a railway company, or prohibiting the doing of certain things, has clearly made specific reference to the company itself; e.g., s. 137, dealing with the power to mortgage its property, s. 147, dealing with the power to borrow, s. 150, dealing with the power to dispose of lands acquired from the Crown, s. 164, dealing with the general powers of the company, s. 149, prohibiting the purchase of railway stock, and ss. 192 and 195, prohibiting the taking of possession of Crown or Indian lands without the consent of the Governor in Council.
In my opinion, therefore, the second of the two questions on which leave to appeal was granted should be answered in the affirmative.
I turn now to the first question of law raised in this appeal, as to whether the agreement between Burlington and Kootenay is authorized or permitted under ss. 315 and 319 (now ss. 262 and 265) of the Railway Act. The contention that it was so authorized or permitted was made by the appellants in answer to the respondent’s contention that such agreement was forbidden by s. 156(1). If it was not forbidden by that forbidden subsection, as in my opinion it was not, the answer to this question is not of any real significance. If s. 156(1) were effective to prohibit the agreement, it is my view that the appellants would not be taken out of the operation of that section by the provisions of ss. 315 and 319.
The relevant portions of those sections read as follows:
315. (1) The company shall, according to its powers,
(a) furnish, at the place of starting, and at the junction of the railway with other railways, and at all stopping places established for such purpose,
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adequate and suitable accommodation for the receiving and loading of all traffic offered for carriage upon the railway;
…
(2) Such adequate and suitable accommodation shall include reasonable facilities for the junction of private sidings or private branch railways with any railway belonging to or worked by the company, and reasonable facilities for receiving, forwarding and delivering traffic upon and from those sidings or private branch railways, together with the placing of cars and moving them upon and from such private sidings and private branch railways.
319. (1) All railway companies shall, according to their respective powers, afford to all persons and companies all reasonable and proper facilities for the receiving, forwarding and delivering of traffic upon and from their several railways, for the interchange of traffic between their respective railways, and for the return of rolling stock.
…
(5) The reasonable facilities that every railway company is required to afford under this section, shall include reasonable facilities for the junction of private sidings or private branch railways with any railway belonging to or worked by any such company, and reasonable facilities for receiving, forwarding and delivering traffic upon and from those sidings or private branch railways.
The provisions upon which the appellants rely are those contained in s. 315(2) and s. 319(5). I do not regard the Kootenay line as being a private branch railway within the meaning of those two subsections. I agree with the view expressed in Coyne’s Railway Law in Canada, 1947, p. 400, where the author, after pointing out that there is no definition in the Act of “private sidings” or “private branch railways”, goes on to say that they no doubt mean railways constructed without legislative authority. No such authority is required to enable a person to construct a railway on his own land.
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This issue is dealt with in the decision of the Commission as follows:
In argument, Counsel for the applicants did not deny the fact—which is obvious enough—that an interchange of traffic would take place at the border, but argued that the applicable provisions in this case are found in ss. 315 and 319 of the Railway Act, and not s. 156. Both ss. 315 and 319 relate to the obligations of companies to accommodate traffic, and subs. (5) of s. 319 imposes upon railway companies the specific obligation to afford “reasonable facilities for the junction of private sidings or private branch railways with their own railways and for receiving, forwarding and delivering traffic upon and from those sidings or private branch railways.” The fact is that, notwithstanding Mr. Prentice’s affirmation that the K. & E. is an extension of “his” (Crow’s Nest’s) plant, K & E. is neither a private siding nor a private branch railway in any legal sense. At all events, any statutory obligation B.N. might have under s. 319 to serve a private siding or a private branch railway cannot obscure the realities of a situation whereby B.N. has been and continues to be a voluntary and active participant in the total project, and, as admitted by Mr. Downing, has an “arrangement” with K. & E. That arrangement, in my view, is clearly one for the interchange of traffic with K. & E.
I agree with this view, and would answer the first question of law in this appeal in the negative.
The three legal issues raised on the cross-appeal now have to be considered. The first of these involves the consideration of the meaning and effect of the Crow’s Nest Pass Act, 1897 (Can.), c. 5. It was enacted on June 29, 1897, and was styled as “An Act to authorize a subsidy for a Railway through the Crow’s Nest Pass.” It authorized the Governor in Council to grant a subsidy to C.P.R., towards the construction of a railway from Lethbridge, in the district
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of Alberta, to Nelson, in the province of British Columbia, through the Crow’s Nest Pass, provided that an agreement was entered into between the Government and C.P.R. containing covenants, as specified in the Act. The covenant, relevant to the issue in this appeal, is that which is contained in s. 1(f) of the Act, which provides:
(f) That the Railway Committee of the Privy Council may grant running powers over the said line of railway and all its branches and connections, or any portions thereof, and all lines of railway now or hereafter owned or leased by or operated on account of the Company in British Columbia south of the Company’s main line of railway, and the necessary use of its tracks, stations and station grounds, to any other railway company applying for such grant upon such terms as such Committee may fix and determine, and according to the provisions of The Railway Act and of such other general Acts relating to railways as are from time to time passed by Parliament; but nothing herein shall be held to imply that such running powers might not be so granted without the special provision herein contained;
It is the contention of C.P.R. that the words “any other railway company” in this provision must be restricted to mean a railway company within the legislative authority of the Parliament of Canada, and that Kootenay, being a provincially incorporated railway company, is not within this provision.
Section 2(28) of the Railway Act defines a “Special Act”, when used with reference to a railway, as meaning any Act under which the company has authority to construct or operate a railway, or that is enacted with special reference to such railway. The Act in question was enacted with special reference to a railway to be constructed by C.P.R. from Lethbridge to Nelson.
Section 3(b) of the Railway Act provides that:
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(b) where the provisions of this Act and of any Special Act passed by the Parliament of Canada relate to the same subject-matter the provisions of the Special Act shall, in so far as is necessary to give effect to such Special Act, be taken to override the provisions of this Act.
The clear purpose of the Crow’s Nest Pass Act was to subsidize C.P.R. with public funds with a view to assisting in the development of the areas which the railway line to be constructed by C.P.R. would serve. There is no definition of “railway company” in this Act, but in the light of that purpose, and of the use of the words “any other” in relation to “railway company”, I cannot construe those words as excluding from s. 1(f) a railway company incorporated in British Columbia to operate in the area defined in that paragraph.
I would, therefore, answer this question in the negative.
The next question is as to whether, in determining an application under s. 255 for the junction or crossing of a railway, the Commission must take into account considerations of public policy. In essence, the respondent contends that an application under this section should be considered as though the issue is as to whether it is a matter of public convenience and necessity that such application be granted.
The answer to this question is to be found in the wording of s. 255, which has already been cited in full. Subsection (1) of that section forbids the railway lines or tracks of any railway company from crossing or joining those of any other railway company unless leave of the Commission is obtained “as hereinafter provided.” Subsection (2) stipulates the material to be submitted to the Commission by the applicant for consideration by the Commission in deciding upon such application; i.e., a plan and profile of the crossing or junction and such other plans, drawings and specifications as the Commission may, in any case, or by regulation, require.
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None of this material relates to the economic feasibility or desirability of the railway line of the applicant.
The powers of the Commission on such an application are set out in subs. (3). It may grant the application “on such terms as to protection and safety as it deems expedient.” It may change the plans and may fix the place of the crossing or junction. It may direct that the line or track be carried over or under the other line or track. It may direct various measures to be taken to prevent danger of accident, injury or damage. It may determine the amount of damage and compensation for land taken or injuriously affected by the construction. It can give directions as to supervision of the construction and it can require submission of detailed plans, drawings and specifications of the works, structures, equipment or appliances required, before construction or installation, to be approved by the Commission.
None of these matters relates to the question of public convenience or necessity. When an issue of that kind is intended to be considered by the Commission, Parliament has specifically so stated. An example of this is found in s. 185 under the heading of “Branch Lines”:
185. (1) The Commission, if satisfied that the branch line is necessary in the public interest or for the purpose of giving increased facilities to business, and if satisfied with the location of such branch line, and the grades and curves as shown on such plan, profile and book of reference, may, in writing, authorize the construction of the branch line in accordance with such plan, profile and book of reference, or subject to such changes in location, grades and curves as the Commission may direct.
A similar example is to be found in s. 188 (1).
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In these circumstances, I agree with the majority view expressed in the reasons of the Commission in the following passages:
S. 255 forms part of a group of sections within a division of the Railway Act entitled “Matters incidental to construction”. These matters relate to wages (247), navigable waters (248-251), bridges, tunnels and other structures (252-254), crossings and junctions with other railways (255-257), highway crossings (258-270), drainage and powers, mining and irrigation works (271-274), farm crossings (275-276), fences, gates and cattle-guards (277) and gates to be closed (278). In respect of many of these matters, the Commission is given broad discretionary powers to grant leave and to impose terms and conditions. Nowhere, however, except in s. 253 (4) is there any reference to the “public interest” as such. In most sections, as in s. 255, discretion appears to be related exclusively to safety.
…
It is clear that in the large sense in which it was said the Commission has the duty of using its powers “for the benefit of the public”. This does not and cannot mean, however, that considerations of public interest at large enter into every aspect of any matter within the jurisdiction of the Commission. Where the Commission has been given a function to ensure safety of railway construction or operation, it uses its powers “for the benefit of the public” and discharges fully its duty by issuing orders and directions that effectively ensure safety. The Commission would, however, be abusing its powers if in such matters which are related exclusively to safety principles and techniques, it were to set and take into account other criteria or canons of public interest and exercise its regulatory powers in a manner which would result in a denial or prohibition of rights.
…
Consequently, as a general proposition and subject to what I will have to say on the question of the applicability of s. 156, I am of the opinion that in considering applications under s. 255 for the junction or crossing of railways it would be improper for us to require proof that it is necessary in the public interest that there be such junction or crossing, and the
[Page 977]
position of the applicants on this point is the correct one.
I would answer this question in the negative.
The third question raised on the cross-appeal is stated, in the notice, as being:
Did the Canadian Transport Commission err in law when it failed to find that the Kootenay and Elk Railway Company was part of an extraprovincial undertaking?
The submission made by C.P.R. to the Commission is stated in the reasons of the Commission as follows:
In his submission on this issue, C.P.R. Counsel, relying on s. 92(10)(a) of the British North America Act and on the principles that “you cannot do that indirectly which you are prohibited from doing directly” (Madden v. Nelson and Fort Sheppard Railway Company, 1899 A.C. 626 at pp. 627-8) and that “a colourable device will not avail” (Ladore v. Bennett, 1939 A.C. 468 at p. 482), contends that the British Columbia Government acted beyond its power in constituting the K. & E., the proposed undertaking of that company being in pith and substance part of an undertaking extending beyond the limits of the Province.
Counsel for the respondent states the issue in the following manner:
It was submitted by Respondent to the Commission that the undertaking of the K. & E. was not a local work or undertaking, and in virtue of Section 92(10)(a) of the B.N.A. Act, the Parliament of Canada would have exclusive jurisdiction to prescribe regulations for the construction of the K. & E.’s railway and its management, and to dictate the constitution and powers of the company. This being so, it was argued that the legislature of British Columbia did not have such power. Subsidiarily, it was submitted by Respondent that, even if it could be said that the original incorporation of the company by British Columbia was not ultra vires the Province in view of the stated object of the company in the Memorandum of Association, nevertheless the nature of the undertaking as it has emerged rendered it clear that the undertaking was not local, and accordingly, it was ultra vires the province either to accord to the K. & E. the authority to construct its railway, or to operate it as planned.
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Section 92(10) of the British North America Act provides as follows:
92. In each Province the Legislature may exclusively make Laws in relation to Matters coming within the Classes of Subjects next hereinafter enumerated; that is to say,—
…
10. Local Works and Undertakings other than such as are of the following Classes:—
(a) Lines of Steam or other Ships, Railways, Canals, Telegraphs, and other Works and Undertakings connecting the Province with any other or others of the Provinces, or extending beyond the Limits of the Province:
(b) Lines of Steam Ships between the Province and any British or Foreign Country:
(c) Such Works as, although wholly situate within the Province, are before or after their Execution declared by the Parliament of Canada to be for the general Advantage of Canada or for the Advantage of Two or more of the Provinces.
The matters excepted by this section are the subject of federal jurisdiction by virtue of s. 91(29).
The respondent’s submission is that Kootenay was a part of an undertaking extending beyond British Columbia, and that, in consequence, its incorporation was ultra vires of the British Columbia Legislature. It made an alternative submission, which was summarized, and, I think, properly dealt with by the Commission, as follows:
It was submitted that we would not have to find expressly that the incorporation of K. & E. is ultra vires the Provincial authorities and it would suffice for us, if we are of the opinion that the undertaking is in fact of an extra-provincial character, to dismiss the application on the ground that K. & E. has no legal right or authority to construct the proposed railway. This proposition, it seems to me, begs the question; it suggests in effect that we make an implicit finding of invalidity rather than an explicit one.
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Kootenay was incorporated by the filing and registration of a memorandum of association with the object “to establish a railway undertaking, and to construct or acquire a railway from Natal to a point three miles west of Roosville immediately north of the Canada-United States border, in the Province of British Columbia.”
It is not a subsidiary of Burlington or subject to Burlington’s control. Its railway would not be operated by Burlington. Its proposed function is to deliver carloads of coal over its line to Burlington, north of the border, to be taken over and carried by Burlington over its lines, for ultimate delivery on the west coast of British Columbia. It is quite true, as is stressed by the respondent, that it would not have been incorporated save with the view of achieving this purpose.
The first point, which is clear, is that the Kootenay railway would not connect the Province of British Columbia with any other province, nor would it extend beyond the limits of the province. In Montreal Street Railway Company v. The City of Montreal, in the reasons for judgment delivered by Duff J., as he then was, in this Court, it was said, after referring to s. 92(10) and s. 91(29) of the B.N.A. Act:
The exclusive authority to legislate in respect of a railway wholly within a province is by virtue of these enactments vested in the provincial legislature, unless that work be declared to be for the general advantage of Canada; in that case, exclusive legislative authority over it is vested in the Dominion.
The respondent contends, however, that, while Kootenay’s works do not extend beyond the province, its undertaking was not local in character. But in determining the legislative power of the British Columbia Legislature to incorporate Kootenay we are concerned with the nature of the undertaking which it authorized. That undertaking is one which is to be carried on entirely within the province. I do not
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overlook the fact that its undertaking when coupled with that of Burlington would provide a means of transport of goods from British Columbia into the United States. It may be, as is pointed out in the reasons of the Commission, that when the two lines are joined an overall undertaking of international character will emerge. But in my opinion that possibility did not preclude the British Columbia Legislature from authorizing the incorporation of a company to construct a railway line wholly situate within the borders of the province.
In Luscar Collieries, Limited v. McDonald, the question was as to the power of the federal Railway Board to make an order for running rights over the appellant’s line, which was a short line constructed for the carriage of coal in Alberta from the appellant’s mine to another line which branched from the Canadian Northern Railway. It was held that it did have such jurisdiction because the line was part of a system of railways operated together connecting one province with another. The ground of decision in that case was, however, the fact that the Luscar line was operated by C.N.R. At p. 932 the following passage appears:
In the present case, having regard to the way in which the railway is operated, their Lordships are of opinion that it is in fact a railway connecting the Province of Alberta with others of the Provinces, and therefore falls within s. 92, head 10(a), of the Act of 1867. There is a continuous connection by railway between the point of the Luscar Branch farthest from its junction with the Mountain Park Branch and parts of Canada outside the Province of Alberta. If under the agreements hereinbefore mentioned the Canadian National Railway Company should cease to operate the Luscar Branch, the question whether under such altered circumstances the railway ceases to be within s. 92, head 10(a), may have to be determined, but that question does not now arise.
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It is of interest to note, in that case, that the statute which authorized the construction of the Luscar line was enacted by the Alberta Legislature, and that it also provided for the Luscar company entering into an agreement with C.N.R. for the operation of its railway. It is clear that the purpose of the Luscar line was to assist in marketing its coal beyond the province. There was no suggestion in that case that the Alberta Legislature could not enact such a provision. The point of the case was that once the line, by reason of its operation, had become a part of an inter-provincial railway system it became subject to federal regulation.
The Luscar case was referred to in a judgment of this Court in British Columbia Electric Ry. Co. et al. v. Canadian National Ry. Co. et al., which involved the power of the Board of Transport Commissioners in relation to a short line of railway, operated by a non-federal railway company, which connected with two lines of railway under federal jurisdiction. At p. 169 Smith J., who delivered the majority reasons, said this:
The case of Luscar Collieries v. McDonald, [1927] A.C. 925, is cited in support of the jurisdiction of the Board in the present case. There the appellant company owned a short railway line in the province of Alberta branching from a line which branched from the Canadian Northern Railway at a point within the province. Both branches were operated by the Canadian Northern Railway Company under agreements, and traffic could pass from the appellant’s line without interruption into such other provinces as were served by that company’s railway.
It was held that the Board had jurisdiction over the appellant’s lines constructed under provincial authority, because the line was part of a continuous system of railways operated together by the Canadian National Railway Company and connecting one province with another.
[Page 982]
The decision is expressly put upon the way in which the railway is operated by the Canadian National Railway Company under the agreements, and it is intimated that if that company should cease to operate the appellant’s branch, the question whether, under such altered circumstances, that branch ceases to be within s. 92, head 10(a), might have to be determined. The question thus left undetermined is the very question that arises in the present case, because the Park line is not operated by the Canadian National Railway Company, nor by the appellant, the British Columbia Electric Railway Company, as the operator of the Vancouver & Lulu Island Railway, on behalf of the Canadian Pacific Railway.
The mere fact that the Central Park line makes physical connection with two lines of railway under Dominion jurisdiction would not seem to be of itself sufficient to bring the Central Park line, or the portion of it connecting the two federal lines, within Dominion jurisdiction.
In summary, my opinion is that a provincial legislature can authorize the construction of a railway line wholly situate within its provincial boundaries. The fact that such a railway may subsequently, by reason of its interconnection with another railway and its operation, become subject to federal regulation does not affect the power of the provincial legislature to create it.
In my opinion the third question on the cross-appeal should be answered in the negative.
This completes the consideration of the questions of law raised on the appeal and on the cross-appeal. Following the arguments submitted on these matters on behalf of the appellants, the respondent and the intervenant, the Attorney-General of British Columbia, counsel appearing for the Canadian Transport Commission raised a question which had not been determined by the Commission, and on which no leave to appeal had been sought by any of the parties to the appeal. In his factum, which was subsequently filed, at the request of the Court, he points out that the appellants had sought leave from the Commission for Burlington to
[Page 983]
operate its trains on Kootenay’s lines for the purpose of providing for a free interchange of the trains of the two companies. He further notes that, in the course of argument before it, the Commission had raised the question of Burlington’s authority to cross the border and to operate in Canada without reference to any special Act or statutory provision of general application.
Counsel, in the factum, then goes on to say:
Now that the Appellant Burlington Northern appeals to the Court on the question of involving the proper interpretation of section 156(1), the Commission is of the view that this Court may wish to decide whether Burlingtion Northern has the statutory power to operate trains in Canada at the border point.
In my opinion it would not be proper for the Court to deal with a question of law raised in this manner. The jurisdiction of this Court under the provisions of s. 53 of the Railway Act arises on an appeal from the Commission if leave to appeal is obtained. Such an appeal must be on a question of law or of jurisdiction. In my opinion this means a question of law on which the appellant contends that the Commission has erred. I do not construe the section as empowering this Court, of its own motion, to elect to determine a question of law on which the Commission has not expressed any opinion.
In the result, I would allow the appeal in respect of the second question of law in respect of which leave to appeal was granted, and would dismiss the cross-appeal. The appellants should be entitled to costs of the appeal and of the cross-appeal. I would certify to the Commission the opinion that the agreement or arrangement between the appellants for interchange of traffic was not prohibited by s. 156(1) of the Railway Act, and that the Commission correctly decided the other questions of law raised on the appeal and on the cross-appeal.
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HALL J. (dissenting)—The question of law upon which leave was given are set out in the reasons of my brother Martland. Taking, as I do, a different view on some of the basic issues involved in this complex controversy, I find it necessary to deal throughout these reasons with certain events and developments, some historical, which have an important bearing on the answers to be given to the questions asked in the appeal and in the cross-appeal.
In the early 1960’s industrial interests in Japan proposed buying great quantities of coal from mines in the Sparwood area of British Columbia. Sparwood is on the Crow’s Nest branch of the respondent, Canadian Pacific Railway Company (hereinafter referred to as “C.P.R.”). When discussions about the sale and transportation of coal from Sparwood to Japan were being initiated, the only direct rail line over which the coal could reach the Pacific Ocean was the Crow’s Nest branch of C.P.R.
Kaiser Resources Limited (hereinafter called “Kaiser”) was the first exporter to obtain firm contracts with Japanese industrialists for the sale and delivery of some 2,000,000 tons of coal per year. Kaiser and C.P.R. negotiated as to the rate structure for transporting the coal from Sparwood to the deep seaport at Roberts Bank in British Columbia then being developed at great expense by the Government of Canada. Facilities at Roberts Bank were being built to handle bulk cargo such as the coal in question from unit trains. These unit trains were being engineered and built for C.P.R. to achieve, while in motion, a continuous loading operation at the source and similarly a continuous unloading technique into the cargo vessels that would carry the coal to Japan. It was a new concept and the port facilities at Roberts Bank were adapted and structured accordingly. No other port on the Pacific Coast had similar facilities.
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Following lengthy discussions between Kaiser and C.P.R., a rate was agreed upon in an agreement dated October 14, 1968.
Meanwhile, Crow’s Nest Industries Limited, a shareholder in Kaiser Steel Corporation, the parent of Kaiser, was engaging in further exploration work which led to the discovery of substantial deposits of coal at Line Creek north of Sparwood. Following this, Crow’s Nest Industries Limited and Kaiser both sought further coal contracts with Japanese industrialists, the source of supply to be from the Sparwood and Line Creek areas.
In 1965, while negotiations with C.P.R. were in progress, Crow’s Nest Industries Limited approached Great Northern Railway Company (hereinafter called “Great Northern”), a transcontinental line in the United States, which, in a general way, paralleled the International Boundary, with a scheme to establish a competitor to C.P.R. for the transportation of the coal by the construction of rail trackage from Line Creek to the Great Northern main line at or near Eureka in northern Montana. This scheme remained in the planning stage until Crow’s Nest Industries Limited achieved an assured market in Japan for an additional 3,000,000 tons of coal per year.
In May 1966 Kootenay and Elk Railway Company (hereinafter called “Kootenay”) had been incorporated under the provisions of the Railway Act of British Columbia, R.S.B.C. 1960, c. 329, as a railway within the meaning of that Act. This was the first step taken in the development of the scheme whereby an alternative route for the transportation of coal to Roberts Bank was being planned. With the more substantial annual export contracts aggregating some 5,000,000 tons assured, Kootenay continued discussions with Burlington Northern
[Page 986]
Inc. (hereinafter called “Burlington”) to further the plan of the alternate route. Kootenay had been incorporated and was being utilized as the corporate vehicle in the execution of the Canadian segment of the international scheme. The international character of the whole exercise was fixed before the application to incorporate Kootenay was made. One of the incorporators was Thomas F. Gleed, Chairman of the Board of Crow’s Nest Industries Limited and a director on the board of several Kaiser Steel Corporation subsidiaries or affiliates. The discussions just mentioned involved a plan whereby coal from the Sparwood and Line Creek mines would be transported southward across the International Boundary, thence over the lines of Burlington through the United States to a point close to Roberts Bank which is immediately north of the International Boundary. At Roberts Bank the trains were to be handled by what was described as a transfer or switching operation. The plan contemplated the creation and construction of a railway facility in British Columbia northward from the border to the mines. Kootenay was conceived to provide this facility. It was incorporated as and remains a wholly-owned subsidiary of Crow’s Nest Industries Limited. It was not to be a common carrier.
Burlington is a railway company incorporated under the laws of the State of Delaware and is the successor by a series of mergers and amalgamations of several United States railway companies including Great Northern. The mergers and amalgamations were authorized, in so far as operations in Canada were concerned, by c. 23 of the Statutes of Canada 1965. The preamble to c. 23, referring to Great Northern which was being merged with Burlington, reads in part, “and is as to its operations in Canada subject to all the obligations of a railway company which is subject to the legislative authority of Parliament;”.
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This was not the first time that coal had been mined and shipped into the United States from the Sparwood-Fernie area. In 1901 Great Northern, the predecessor of Burlington, had a railway line from Rexford in Montana to Newgate in British Columbia (Newgate being in the same area as Roosville West) which connected with a railway known as Crow’s Nest Southern Railway Company which ran from Newgate to Fernie. Fernie is a point on C.P.R. Crow’s Nest line between Elko and Sparwood. However, according to the evidence of R.W. Downing, as the demand for coal decreased, that company’s operations into the Sparwood-Fernie area were changed to trackage rights over C.P.R. and subsequently to a trackage right operation east of Elko and finally, in 1936, the line from Rexford to Elko was abandoned. The application to abandon had to be approved by the then Board of Railway Commissioners for Canada and the abandonment was effected by Order No. 53515 of the Board of Railway Commissioners dated October 2, 1936, reported in Judgments of Railway Commissioners Canada, vol. 26, p. 274, and reads:
Upon hearing the matter at the sittings of the Board held at Fernie, British Columbia, September 19, 1936, in the presence of counsel for the Crow’s Nest Southern Railway Company, the province of British Columbia, the city of Fernie, and the Western Pine Lumber Company, Limited, the evidence offered, and what was alleged,
IT IS ORDERED: That the Crow’s Nest Southern Railway Company (Great Northern Railway Company) be, and it is hereby, granted leave to discontinue the operation of the said line of railway between Fernie and Newgate, in the province of British Columbia, subject to and upon the conditions following, namely:
(a) That the rails, ties, buildings, bridges, and fences on the said line of railway be not removed for a period of one year from the date of this order; and
(b) That this order is based on the understanding between the parties that the Great Northern Railway Company’s line from Newgate, in the province of
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British Columbia, to Rexford, in the state of Montana, shall not be dismantled until after the expiration of the said one year from the date of this order.
It is significant that although Crow’s Nest Southern Railway Company had been incorporated by special act of the Province of British Columbia (1901 (B.C.), c. 73), it had to have the approval of the Board of Railway Commissioners for Canada to abandon operation.
Accordingly in substance the proposal to connect the Burlington transcontinental line with the coal fields in the Sparwood area meant resurrecting the line which had been in operation some 30 to 60 years ago but abandoned and the rails lifted when that line ceased to be a paying proposition. Now, with the advent of the Japanese coal contracts, the climate was propitious for Burlington to involve itself into what appeared to be a prosperous contract for the carriage of great quantities of coal to the West Coast. Burlington proposed to use unit train coal-carrying equipment identical to that which had been developed by C.P.R. because the unloading facilities at Roberts Bank required the coal to be unloaded in this manner.
Three applications were made to the Canadian Transport Commission (hereinafter called the “Commission”) as follows:
1. The Great Northern Railway Company (predecessor of Burlington) and the Kootenay and Elk Railway Company hereby apply to the Railway Transport Committee of the Canadian Transportation Commission for an order under Section 255 of the Railway Act and such other sections of the said Railway Act as may be relevant granting the applicants leave to join their respective railways at or near the Border between the Province of British Columbia and the State of Montana, one of the States of the United States of America, at Roosville West; and for an order that the Great Northern Railway Company be granted leave to operate its trains on the lines or tracks of the applicant Kootenay and Elk Railway Company for the purpose of providing for a free interchange of the trains of the Kootenay and Elk
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Railway Company with the trains of the Great Northern Railway Company. A.C. p. 1.
2. The Kootenay and Elk Railway Company hereby applies to the Railway Transport Committee of the Canadian Transportation Commission for an order under Section 255 of the Railway Act granting the applicant leave to cross the line of the Canadian Pacific Railway Company running between Michel and Elko in the Province of British Columbia at a point north of Hosmer on the line of railway of the Canadian Pacific Railway Company as shown on the plan attached hereto and marked Exhibit “A”. A.C. p. 32.
3. The Kootenay and Elk Railway Company hereby applies to the Railway Transport Committee of the Canadian Transportation Commission for an order under Section 1(f) of the Crows Nest Act, being Statutes of Canada 60/61 Victoria Chapter 5 that it may be granted running rights over the line of railway of the Canadian Pacific Railway Company between Natal in the Province of British Columbia to Elko in the Province of British Columbia, upon such terms and conditions as to this Honourable Committee may seem just and desirable having due regard to the public and all other proper interests. A.C. p. 36.
As will be seen, Application No. 2 is an alternative to Application No. 3 and if No. 3 was to be granted then No. 2 would not be required and would be abandoned. All three applications were opposed by C.P.R.
Kootenay does not exist as a railway line at the present time nor does the proposed extension of Burlington from its main line to the international boundary exist. These are projects which may or may not come into being, depending on whether approval is obtained from the Commission granting leave to join the proposed Kootenay line with that of the Burlington extension at the border. The applications to cross over and for running rights over the C.P.R. are necessarily subsidiary to the main objective, that of getting approval to joining the two lines for the interchange of traffic at the border.
[Page 990]
The key to the whole Burlington and Kootenay scheme depended on leave being granted to join Burlington and Kootenay at the border and for the interchange of the trains of the two lines north of the border. Unless leave to join the two railways and approval of the interchange agreement was to be forthcoming, it is clear that no construction would be done either north or south of the border. The plans to date are paper plans. Burlington has not as yet made a formal application to the Interstate Commerce Commission of the United States for permission to build the extension to the international boundary. Mr. Downing seemed to imply in his evidence that such approval would be forthcoming as a matter of course if the Canadian Commission approved of the interchange agreement. He said in that regard:
Q. You also said, Mr. Downing, that the Burlington Northern Board authorized the company to go to the Inter-State Commerce Commission to seek permission to build part of the route to Eureka, is that correct?
A. That is correct.
Q. At what stage are those proceedings?
A. They have not yet been started. The construction involved is approximately 9½ miles, so it is a relatively small problem from a construction standpoint, and we have been assured by Counsel that the granting of that permission would be relatively easy to accomplish, or let’s say that it can be accomplished in a relatively short time, so therefore, we have not filed the Application until the proceedings in Canada have progressed further.
All of this emphasizes the international character of the scheme to join Burlington and Kootenay and negatives any suggestion that Kootenay was ever intended even from the very beginning to be a wholly intraprovincial railway. The evidence of Leighton, a consulting engineer employed by Crow’s Nest Industries to do the engineering for Kootenay, is significant as to
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the purpose of the Kootenay project. Leighton, testifying on behalf of the appellants, was questioned and answered as follows:
Q. From your knowledge of the project, Mr. Leighton: if by chance the Burlington Northern did not get permission from the Interstate Commerce Commission to build up to the border, would the Kootenay & Elk Railway be built anyway?
A. It could be built, but it would serve no purpose.
It is clear, therefore, that the international character of the scheme was fixed before the application to incorporate Kootenay as a provincial railway was made. The essence of what was being proposed was that the Kootenay line would be built to within one-quarter of an inch north of the border and the Burlington spur would be built to within one-quarter of an inch south of the border in such a way that trains could pass from Burlington to Kootenay and vice versa as though the lines were actually and physically connected. Kootenay was not to have any rolling stock or equipment. All that would belong to Burlington. Crews of Burlington were to bring the unit trains northward across the border and crews of Kootenay would then take the trains to the mine locations in the Sparwood area. The exchange of crews was to be made in Canada and the intent was that these Burlington unit trains which were to be almost a mile in length would be brought wholly into Canada empty, then taken to Sparwood by Kootenay crews, there loaded and returned to the exchange area north of the border. It was conceded by Mr. Robinette that the Burlington crews would be operating the Burlington trains for a distance of close to two miles in Canada over Kootenay rails. There is nothing in the record to indicate that Burlington has approval or authority so to operate in Canada. Approval or authority to operate over Kootenay rails in Canada can only come from the Commission.
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The Commission was disposed to grant the leave sought, but concluded:
(a) That it could not do so under ss. 315 and 319 of the Railway Act, the judgment of the Commission of this issue being as follows:
In argument, Counsel for the applicants did not deny the fact—which is obvious enough—that an interchange of traffic would take place at the border, but argued that the applicable provisions in this case are found in ss. 315 and 319 of the Railway Act, and not s. 156. Both ss. 315 and 319 relate to the obligations of companies to accommodate traffic, and subs. (5) of s. 319 imposes upon railway companies the specific obligation to afford ‘reasonable facilities for the junction of private sidings or private branch railways with their own railways and for receiving, forwarding and delivering traffic upon and from those sidings or private branch railways’. The fact is that, notwithstanding Mr. Prentice’s affirmation that the K. & E. is an extension of “his” (Crows Nest’s) plant, K. & E. is neither a private siding nor a private branch railway in any legal sense. At all events, any statutory obligation B.N. might have under s. 319 to serve a private siding or a private branch railway cannot obscure the realities of a situation whereby B.N. has been and continues to be a voluntary and active participant in the total project, and, as admitted by Mr. Downing, has an “arrangement” with K. & E. That arrangement, in my view is clearly one for the interchange of traffic with K. & E.
(b) That it did not have jurisdiction to grant the application giving leave to join Burlington and Kootenay for the interchange of traffic and for the division and apportionment of tolls in respect of such traffic, saying:
Prior to the passage of the National Transportation Act in 1967, s. 156(1) authorized the entering into of traffic interchange agreements or arrangements between railway companies only. The amendment to s. 156 brought about by the Act stems from renewed concern on the part of Parliament, apparent throughout the statute, over the multi-modal aspects of trans-
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portation, and it is obviously as a result of such concern that the expression “transportation company” was substituted for “railway company”. At the same time, however, as the authority was widened a restriction was inserted by the addition of the words “operating as a common carrier”. In doing so Parliament expressed its clear will to exclude non-common carriers from the operation of s. 156(1).
The applicants deny that s. 156 contains a prohibition and say that, in any event, the constitution of B.N. empowers it to enter into contracts of every kind with any person or corporation—a power which it brings with it when it comes into Canada. He relies in particular on Campbell v. Northern Railway Company (26 Grant’s Chancery Reports 522). It seems to me to be unnecessary to consider whether an agreement or arrangement between B.N. and K. & E. for the interchange of traffic would be intra vires B.N. under its constitution if in fact a Canadian statute forbids it to act. In my opinion the correct interpretation of s. 156(1) is that it prohibits any railway company which is subject to the Railway Act from entering into an agreement or arrangement with a non-common carrier for the purposes set forth in that section, and consequently B.N., being subject to the Railway Act, may not enter into any such agreement or arrangement with K. & E.
Section 156(1) referred to reads as follows:
156. (1) The directors of the company may, at any time, make and enter into any agreement or arrangement, not inconsistent with the provisions of this or the Special Act, with any other transportation company operating as a common carrier either in Canada or elsewhere, for the interchange of traffic and for the division and apportionment of tolls in respect of such traffic.
The Canadian Transport Commission is a body established under the National Transportation Act, 1966-67, c. 69 [R.S.C. 1970, c. N-17], and by s. 6(2) the Commission is a court of record and its powers and duties are set out in s. 21 which reads as follows:
21. It is the duty of the Commission to perform the functions vested in the Commission by this Act, the
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Railway Act, the Aeronautics Act and the Transport Act with the object of coordinating and harmonizing the operations of all carriers engaged in transport by railways, water, aircraft, extraprovincial motor vehicle transport and commodity pipelines; and the Commission shall give to this Act, the Railway Act, the Aeronautics Act and the Transport Act such fair interpretation as will best attain that object.
The Act establishing the National Transportation Commission declares the national transportation policy to be as set out in s. 3 as follows:
3. It is hereby declared that an economic, efficient and adequate transportation system making the best use of all available modes of transportation at the lowest total cost is essential to protect the interests of the users of transportation and to maintain the economic well-being and growth of Canada, and that these objectives are most likely to be achieved when all modes of transport are able to compete under conditions ensuring that having due regard to national policy and to legal and constitutional requirements
(a) regulation of all modes of transport will not be of such a nature as to restrict the ability of any mode of transport to compete freely with any other modes of transport;
(b) each mode of transport, so far as practicable, bears a fair proportion of the real costs of the resources, facilities and services provided that mode of transport at public expense;
(c) each mode of transport, so far as practicable, receives compensation for the resources, facilities and services that it is required to provide as an imposed public duty; and
(d) each mode of transport, so far as practicable, carries traffic to or from any point in Canada under tolls and conditions that do not constitute
(i) an unfair disadvantage in respect of any such traffic beyond that disadvantage inherent in the location or volume of the traffic, the scale of operation connected therewith or the type of traffic or service involved, or
(ii) an undue obstacle to the interchange of commodities between points in Canada or unreasonable discouragement to the development of primary or secondary industries or to export trade
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in or from any region of Canada or to the movement of commodities through Canadian ports;
and this Act is enacted in accordance with and for the attainment of so much of these objectives as fall within the purview of subject-matters under the jurisdiction of Parliament relating to transportation.
By s. 4 of the Act it is stated to apply to transport by railways to which the Railway Act applies. By s. 53 of the Railway Act an appeal lies from the Commission to the Supreme Court of Canada upon a question of law or on a question of jurisdiction upon leave therefor being obtained from a judge of the Supreme Court.
Being a statutory court of record and being required by the National Transportation Act to give to the Railway Act such fair interpretation as will best attain the national transportation policy set out in s. 3 (supra), the Commission possesses only the powers which the Act gives it and it cannot exercise a jurisdiction in excess of those powers. Accordingly, it seems to me that this appeal falls to be determined not on an analysis and determination of the corporate powers of either Burlington or Kootenay but on the jurisdiction of the Commission to grant approval of the proposed interchange.
On the assumption that both Burlington and Kootenay possess all the corporate powers to enter into an agreement for the interchange of traffic and for the division and apportionment of tolls in respect of such traffic, the decisive issue in respect of application no. 1 is whether the Commission possessed or possesses the authority to approve of any such agreement.
It is common ground that any such agreement must have the approval of the Commission and it follows, I think, that any approval sought or obtained must be an approval of an agreement that the Commission has the jurisdiction and authority to give. The approval cannot be given as a matter of course. Approval by the Commis-
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sion in respect of a matter that it has not been given the authority to approve would be a nullity.
Accordingly, when s. 156(1) says that any agreement for the interchange of traffic and for the division and apportionment of tolls is to be between two common carriers, the first question the Commission, on being asked to approve of such an agreement, must ask itself is, “Is this an agreement between two common carriers?” and if the answer to that question is “No” as it must be in this case, then how can the Commission signify its approval? It would be unlawful for it to do so and would be an error in law for which an appeal would lie to this Court.
It amounts, accordingly, to the Court deciding what can only, in effect, be an academic question for the Court to found its judgment on a review and determination of the corporate powers of the two companies or on a historical review of s. 156(1) when the section, as amended in 1967, plainly says that the agreement is to be one between two transportation companies operating as common carriers. The real question is, was it within the power of the Commission to give approval when it was conceded that Kootenay was not a common carrier nor intended to be one and that Burlington, in operating north of the border, came squarely within the provisions of the Railway Act and the control of the Commission?
I would accordingly answer both Questions No. 1 and No. 2 in the main appeal in the negative.
That would dispose of the appeal but as a contrary opinion is being asserted I must now turn to the questions raised in the cross-appeal as set out in the reasons of my brother Martland. I agree with him that Questions 1 and 2 should be answered in the negative. I hold that Question No. 3 should be answered in the affirmative for the following reasons:
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There is no question but that Burlington is proposing to operate into Canada for a distance of approximately two miles and this is made very clear in ex. 20 which shows a double track commencing at a switch 700 feet north of the international boundary and extending northward some 8,000 feet. The purpose of the double track arrangement is so that the empty unit train proceeding northward can meet a loaded train proceeding southward when it is said the crews from Kootenay hand over the loaded train to Burlington crews and take over from Burlington crews the empty train.
It is plain beyond argument that this was the concept of what was being proposed when the idea of incorporating a railway line under British Columbia legislation was conceived. There never was the slightest intention on the part of those furthering the project that Kootenay would be a wholly contained provincial undertaking with an operation beginning and ending within British Columbia. It was conceived and intended as part and parcel of an international undertaking whereby coal from the Sparwood area could proceed without interruption across the international boundary for it was never even imagined that the coal would be carried only as far as the boundary and dumped there.
No one disputes the jurisdiction of the Province of British Columbia to incorporate a railway to operate wholly within its boundaries but it is equally clear that the Province has no jursidiction to incorporate a railway that is, in its inception and concept, international in character.
So, when the application to incorporate Kootenay was made as a wholly-owned subsidiary of Crow’s Nest Industries, the incorporators knew that they were asking for incorporation of an international undertaking but that is not what was represented to the British Columbia Registrar of Companies. It is significant that in the
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memorandum of association of “The Kootenay and Elk Railway Company” dated April 26, 1966, the only stated object is contained in para. 3 which reads:
The object for which the Company is incorporated is to establish a railway undertaking, and to construct or acquire a railway from Natal to a point three miles west of Roosville immediately north of the Canada United States border, in the Province of British Columbia.
So stated, the real object of the company was concealed from and misrepresented to the Registrar when he issued his Certificate of Incorporation under the Railway Act of British Columbia dated May 4, 1966. This is not the case of a provincial railway having been incorporated bona fide for an intraprovincial purpose, but incorporation was attained solely to bring into being a railway intended from its inception to be an integral part of the international undertaking above mentioned. It differs in this respect from the cases which were in their origin genuine provincial undertakings such as Luscar Collieries, Limited v. McDonald.
Throughout the argument the unreality of the whole situation became crystal clear that the Court was being called upon to deal with a wholy fictitious situation dressed up in legalistic terminology and argument involving corporate powers to obscure the realities of what was being proposed. In these circumstances I cannot bring myself to a discussion of the legal propositions and distinctions which were advanced to support as a provincial undertaking something which was and is a subterfuge to enable Burlington to participate in what appears to be a lucrative endeavour while the coal export contract lasts with limited (in railway terms) capital outlay for if, as asked, Kootenay can obtain
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running rights over C.P.R.’s Crow’s Nest line it will save approximately $15,000,000 in capital expense. Nor would Kootenay be required to spend a dollar for rolling stock. Much of the roadbed abandoned in the 1930’s could be re-established to carry the rails over those parts that do not parallel the C.P. line.
The project contemplated, according to the evidence, that the coal delivered to Burlington north of the border would be carried through the United States until delivered to what is known as the transfer utility at the border at Robert Bank for unloading through the facilities of the newly created port there. I do not find any provision or undertaking that if the applications now being sought are granted that Burlington will necessarily continue to use the Roberts Bank facility. I see nothing in the record to prevent Burlington from using or creating another port in the State of Washington for the loading of this Canadian product destined for Japan. As a matter of fact, in the evidence of R.W. Downing, Executive Vice-President of Burlington, it is said that “the first discussions were directed towards moving the coal through a United States port”, but later it was decided to use Roberts Bank as the only port with facilities to handle unit trains.
I think the Commission had a duty apart from s. 156(1) to consider policy and the validity of Kootenay as a railway company in granting or rejecting the application under s. 255. The obligation of the Commission as contained in the National Transportation Act requires consideration by the Commission of all that was involved in the application. The bona fides of the whole proposition should have been of paramount importance to the Commission. It cannot be blind to the history of the prior line Burlington’s predecessor had into Elk Valley and its abandonment when the coal export to the United States in that area dried up. The Com-
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mission, being a court of record, was not established to rubber stamp agreements between companies one of which, like Kootenay, was illegally incorporated as a provincial railway company. The right to construct and operate an international railway undertaking can come only from the federal authorities.
The legislative authority to incorporate a railway which is international in character rests with Parliament. Head 10(a) of s. 92 of the British North America Act provides that local works and undertakings other than:
a. Lines of Steam or other Ships, Railways, Canals, Telegraphs, and other Works and Undertakings connecting the Province with any other or others of the Provinces, or extending beyond the Limits of the Province; (Emphasis added.)
shall be within provincial jurisdiction. The corollary to that is that lines of railways and undertakings extending beyond the limits of the Province must be within the legislative jurisdiction of Parliament; in other words, the matters listed in subhead (a) above are to be read as if they were enumerated heads under s. 91 and within the exclusive federal jurisdiction. In this regard Lord Porter in Attorney General of Ontario v. Winner, said at p. 568:
It is now authoritatively recognized that the result of these provisions is to leave local works and undertakings within the jurisdiction of the province but to give to the Dominion the same jurisdiction over the excepted matters specified in (a), (b), and (c) as they would have enjoyed if the exceptions were in terms inserted as one of the classes of subjects assigned to it under section 91.
and at p. 582 he said:
In coming to this conclusion their Lordships must not be supposed to lend any countenance to the suggestion that a carrier who is substantially an internal carrier can put himself outside provincial jurisdic-
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tion by starting his activities a few miles over the border. Such a subterfuge would not avail him. The question is whether in truth and in fact there is an internal activity prolonged over the border in order to enable the owner to evade provincial jurisdiction or whether in substance it is interprovincial. Just as the question of whether there is an interconnecting undertaking is one depending on all the circumstances of the case, so the question of whether it is a camouflaged local undertaking masquerading as an interconnecting one must also depend on the facts of each case, and on a determination of what is the pith and substance of an Act or regulation. (Emphasis added.)
Referring to attempts to designate a federal undertaking as a provincial one, Lord Atkin had reason to say at p. 482 in Ladore v. Bennett:
It is unnecessary to repeat what has been said many times by the Courts in Canada and by the Board, that the Courts will be careful to detect and invalidate any actual violation of constitutional restrictions under pretence of keeping within the statutory field.
Kootenay as a railway undertaking being part of an international project is an excepted “matter” and attracts full federal regulation and jurisdiction.
Dealing with the same subject, Lord Watson said in Canadian Pacific Railway v. Corporation of Parish of Notre Dame de Bonsecours, at p.372:
…the Parliament of Canada has, in the opinion of their Lordships, exclusive right to prescribe regulations for the construction, repair, and alteration of the railway, and for its management, and to dictate the constitution and powers of the company; (Emphasis added.)
Any doubt remaining on this subject was decisively resolved by Duff J. (as he then was) in
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Reference re Waters and Water-Powers, at p. 213:
In legislating for railways extending beyond provincial limits, it has been held, that it is of the essence of the Dominion authority to define the course of the railway, and to authorize the construction and working of the railway along that course…
It follows that no provincial authority can authorize the physical location of an interprovincial or international railway or the construction thereof. The result is that Kootenay is not a railway company (even on paper) within the meaning of s. 2(3)(a) of the Railway Act nor a company within the meaning of s. 156(1) of the Railway Act because it does not have the authority to construct or operate a railway from the only legislative source that could have given it such authority namely, the Parliament of Canada. Such authority could not emanate from the legislature of the Province of British Columbia.
It follows, accordingly, that the Orders of the Minister of Commercial Transport of British Columbia:
1. Approving the projected location of the proposed Kootenay and Elk Railway Company dated June 15, 1967;
2. Approving the extension of Kootenay from Sparwood to Line Creek dated November 6, 1969;
3. Approving of the Kootenay connection with Great Northern Railway at the International Boundary near West Roosville, British Columbia
are null and void.
The whole scheme would appear to me to be the classic case of a foreign conglomerate in concert with related Canadian companies so manipulating the enterprise that the export of Canadian jobs would be the result. That surely was a proper matter for the Commission to consider and weigh. There is nothing in the record to indicate that C.P.R. is unable for lack of equipment or personnel to carry all the coal going from the Sparwood area to Roberts Bank
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to fulfil present or future Japanese contracts and it is significant to observe that Burlington proposes to charge the same rate as C.P.R.
One more matter calls for consideration. Counsel for the Commission was present throughout the hearing of this appeal and at the conclusion of the arguments on behalf of the parties and of the intervenants addressed the Court on a matter which had not been dealt with in the argument. He had not filed a factum but was given leave to file one, outlining the points the Commission wished to draw to the attention of the Court. The other parties to the appeal and the intervenants were given leave to reply to any factum that would be filed on behalf of the Commission. The appellants and respondent have done so.
The factum so filed on behalf of the Commission states in part:
2. My submission, on behalf of the Commission, concerns Application No. 1, being the joint Application for
“(a) an order under Section 255 of the Railway Act (1952, RSC c 234) granting leave to Burlington Northern Inc. and Kootenay and Elk Railway to join their proposed lines of railway at a point on the Canada-United States border near Roosville West in the Province of British Columbia, and
(b) an order granting leave to Burlington Northern Inc. to operate its trains on the lines of Kootenay and Elk Company for a distance of 9,905 feet in the Province of British Columbia for the purpose of providing a free interchange of trains.”
The facts presented to the Court by the parties are not questioned by the Commission.
…
4. When the application just mentioned was heard, the Commission raised with Counsel for Appellant Burlington Northern Inc. a question relating to the authority of Burlington Northern to operate its trains into Canada at the border point in question (Vol. 5, p. 1169, line 37 to p. 1170, line 27). (Emphasis added.)
5. The decision of the Commission on this point speaks for itself. It denied the application on other
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grounds, namely that Burlington Northern could not enter into the agreement with Kootenay and Elk, which is not a common carrier, in accordance with section 156(1) of the Railway Act.
6. Now that the Appellant Burlington Northern appeals to the Court on the question of involving the proper interpretation of section 156(1), the Commission is of the view that this Court may wish to decide whether Burlington Northern has the statutory power to operate trains in Canada at the border point. (Emphasis added.)
7. In this regard, I have been instructed to draw the attention of the Court to the following provisions of the Railway Act, as well as to section 3 of the Special Act of Burlington Northern Inc., 1965 Statutes of Canada, c. 23:
(a) the definitions of “company”, section 2(4), especially paragraph (a); “railway”, section 2(21); “Special Act”, section 2(28); “the undertaking”, section 2(35). It is to be noted that each of these definitions refer to the words “authority to construct or operate” and that this authority in respect of a railway is required by the company;
(b) section 3, especially paragraph (b);
(c) sections 5 and 6, especially 6(1)(b);
(d) section 152 which relates to the purchase of a railway by a person without corporate authority to operate. By this section it may be inferred that no person may operate a railway without Special Act authority except in particular circumstances outlined in the section;
(e) section 170, especially subsection (2), which requires that an application to the Commission for approval of the plan of general location of a railway which is to be constructed must state the Special Act authorizing the construction of such railway;
(f) section 279, which provides that leave of the Commission must be obtained before a railway is opened for the carriage of traffic. It is under this section that federal railway companies obtain authority from the Commission to operate over a new line of railway and charge tolls therefor. Until such authority is granted, the railway company may not charge any tolls for the carriage of traffic as defined in section 2(32) of the Railway Act;
(g) section 280, which provides that the Commission has the power to order a railway company,
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subject to the legislative authority of the Parliament of Canada, to open its railway or any portion thereof, for traffic. If there is no railway, as defined in section 2(21) of the Railway Act at a given point, the question arises: how could the Commission make an order under section 280 of the Railway Act?;
(h) section 315, which provides that a company must receive, carry and deliver traffic “according to its powers” (see subsection (1), line 1); it would only be possible for the Commission to order a federal railway to carry out a duty imposed under this section if the Commission was satisfied that such company was refusing to carry out a duty which the company was authorized by Special Act to perform.
My brother Martland, in dealing with the submission of the Commission in the factum so filed, concludes that s. 53 of the Railway Act does not empower this Court of its own motion to elect to determine the question of law on which the Commission has not expressed any opinion. With deference, I am of opinion that Question No. 3 in the cross-appeal which reads:
(3) Did the Canadian Transport Commission err in law when it failed to find that the Kootenay and Elk Railway Company was part of an extraprovincial undertaking?
is sufficiently broad to encompass the submission that Burlington has not the authority to operate its trains into Canada at the border point in question and the further question as to whether Burlington has the statutory power to operate trains in Canada north of the border point.
It would seem futile for this Court to say that the Commission was in error or was not in error in its interpretation of s. 156(1) if, in any event, Kootenay was part of an extra-provincial undertaking and has not obtained authority to construct or operate a railway and was illegally incorporated as an intraprovincial company or if Burlington lacks the statutory power to operate trains in Canada over the Kootenay line (if
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constructed) north of the international boundary.
With deference, this is not a question of the Court electing of its own motion to determine a question of law on which the Commission has not expressed an opinion. The appeal to this Court is provided by s. 53 of the Railway Act, subs. (5) of which reads:
(5) On the hearing of any appeal, the Court may draw all such inferences as are not inconsistent with the facts expressly found by the Commission, and are necessary for determining the question of jurisdiction, or law, as the case may be, and shall certify its opinion to the Commission, and the Commission shall make an order in accordance with such opinion.
and in particular subs. (6) which reads:
(6) The Commission is entitled to be heard by counsel or otherwise, upon the argument of any such appeal.
The right of the Commission to be heard on any appeal being unfettered, it appears to me that the Court cannot ignore the serious questions raised in the Commission’s factum. I do not think that questions as important as these can be ignored. Section 53(5) above quoted says that the Court may draw all such inferences as are not inconsistent with the facts expressly found by the Commission and are necessary for determining the question of jurisdiction or law or as the case may be. If it should be the judgment of this Court that the questions raised by the Commission in its factum are not to be dealt with on this appeal, they should, I think, be referred back to the Commission to be decided by it before it acts upon any opinion that this Court may express on whether or not the agreement for the interchange of traffic was prohibited by s. 156(1) of the Railway Act and I would so order.
I would, accordingly, dismiss the appeal with costs and allow the cross-appeal in respect of
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Question No. 3 with costs. The respondent should have its costs of the appeal and of the cross-appeal. There will be no order as to costs respecting the intervenants or the Commission.
SPENCE J. (dissenting in part)—I have had the opportunity of reading and considering the reasons which are being delivered by Mr. Justice Martland and also those being delivered by Mr. Justice Hall. I have come to the conclusion that I agree, with respect, with the view expressed by Mr. Justice Martland as to the application of s. 156(1) of the Railway Act, now s. 94(1) 1970, c. R-2-2. Therefore, as would Martland J., I would answer the second of the two questions on which leave to appeal was granted in the affirmative.
For the reasons given by Martland J., I would answer the first question upon which leave to appeal was granted in the negative.
I am, however, of the opinion that Hall J. has come to the correct conclusion in reference to the third question submitted in the cross-appeal which question read as follows:
(3) Did the Canadian Transport Commission err in law when it failed to find that the Kootenay and Elk Railway Company was part of an extraprovincial undertaking?
I would answer such question in the affirmative. Questions (1) and (2) submitted upon the cross-appeal should be answered in the negative.
In view of the divided success which I envisage, I would make no order as to costs.
LASKIN J.—Having had the advantage of reading the reasons of my brother Martland, there are only two questions upon which I wish to express my own opinion, one arising in the appeal and one in the cross-appeal. I propose to deal with them in the reverse order.
So far as the cross-appeal of Canadian Pacific is concerned, I have nothing to add to what Martland J. has said on the first two questions,
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and I agree with his answers thereto. The third question, as phrased, conceals an issue which during the argument emerged as the dominant matter calling for decision in respect of that question, namely, whether Kootenay and Elk Railway Company was constitutionally brought into being if it was in fact to be “part of an extraprovincial railway undertaking”, to use the concluding words of question three.
The thrust of the submissions of Canadian Pacific on this aspect of the question was that if the sole purpose at the time of provincial incorporation was to have the railway company engage in an extra-provincial undertaking, within the first exception to s. 92(10)(a) of the British North America Act, the Province was constitutionally incapable of effecting the incorporation. It was conceded by Canadian Pacific—at least for the purposes of the argument in the present case—that a provincially incorporated railway company might be lawfully brought into existence and thereafter engage in an extra-provincial transportation activity, without fatally staining its charter of incorporation. The contention was, however, that this was not the situation here; rather, from the very inception of the provincial company, extra-provincial transportation relations were envisaged. Questions of fact as well as law must hence be assessed.
Kootenay and Elk Railway Company (hereinafter referred to as K. & E.) was incorporated under the Railway Act, R.S.B.C. 1960, c. 329 which, by s. 8(1), provides for the formation of an incorporated company “for the purpose of establishing an undertaking and constructing or acquiring a railway between any named termini situate wholly within the Province”. K. & E.’s memorandum of association, certified with incorporating effect on May 4, 1966, stated its object to be “to establish a railway undertaking and to construct or acquire a railway from Natal to a point three miles west of Roosville immediately north of the Canada-United States border, in the Province of British Columbia”. Required certificates were issued respecting the compa-
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ny’s borrowing powers, its share capital, the number of its directors and the location of its proposed railway. Approval of the location was first certified on June 15, 1967. By a certificate of November 6, 1969, an alteration in the railway plan, calling for a sixteen-mile extension northerly from Sparwood to Line Creek, was approved. On January 30, 1970, leave was given for an overpass at an intersection with trackage of the Canadian Pacific near Hosmer in the Province. On the same day approval was certified of a proposed connection with the Great Northern Railway (the predecessor of Burlington Northern, Inc.) at West Roosville in the Province, i.e. at the international boundary. These were all provincial approvals.
The jurisdiction of the Canadian Transport Commission was first invoked by K. & E. through an application of November 18, 1969, by it alone for leave to cross the Canadian Pacific trackage at Hosmer by means of an overpass. This was followed by two applications on November 21, 1969, one by K. & E. for running rights over the Crow’s Nest Line of Canadian Pacific, and the other a joint application by K. & E. and by Great Northern for junction at the international border. In this latter connection, Great Northern also applied for permission to operate its trains on the tracks of K. & E.’s proposed railway line. By the time the applications came on for hearing Great Northern had amalgamated with other railway companies in the United States to form Burlington Northern, Inc. (hereinafter referred to as B. & N.).
The proposed K. & E. line of railway was to be about 79 miles in length terminating within one-quarter inch of the Canada-United States border. Running rights over Canadian Pacific’s Crow’s Nest Line of some 39 miles, from Elko
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to Natal in British Columbia, were envisaged. B. & N. under its arrangement with K. & E. was to build a nine-mile stretch of railway line from Eureka in the State of Montana (through which its main line ran) to within one-quarter inch of the border at the point where K. & E.’s proposed line would terminate. K. & E. would not have any rolling stock; B. & N. was to supply the trains which its crews would take into Canada and turn over to K. & E. crews at a point said to be 700 feet north of the border but which must be beyond that if, as alleged, the crews of K. & E. would not set foot in the United States. They were to bring the B. & N. trains down from the coal fields and turn them over to B. & N. crews north of the border.
In my opinion, nothing of constitutional significance, either for the position of Canadian Pacific or of K. & E. and of the Attorney-General for British Columbia in respect of the corporate status of K. & E. turns on the fact that the two lines of railway would not physically connect. It was alleged and not disputed at the hearing before this Court that the one-half inch gap in the trackage at the border would not affect the running of trains over the respective tracks. I am in agreement with the submission of the Canadian Pacific that the one-half inch separation of the tracks of K. & E. and of B. & N. is not telling against the existence of an extra-provincial undertaking if it would otherwise be of that character. I am also in agreement with the submissions of K. & E. and of the Attorney-General of British Columbia that the corporate status or existence of K. & E. is not affected by reason of the arrangement between K. & E. and B. & N. in respect of tracks and the running of trains. This conclusion disposes of the third question on the cross-appeal adversely to Canadian Pacific’s contention thereon, and hence I wish to state fully my reasons for it.
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The K. & E. railway project was inspired by the development of a market in Japan for coal mined in the vicinity of Sparwood in British Columbia and by the creation of a bulk commodities port at Robert’s Bank on the coast, whence the coal would be transported to Japan. The plain fact is that whatever plan of transportation was worked out, the purpose of the project was to get the coal from the Kootenay mining area to Japan. Whether the coal moved to the port over the Crow’s Nest Line of Canadian Pacific within British Columbia or on trains travelling over the proposed K. & E. line and over that of B. & N. at the border and then over B. & N.’s main line westward to Roberts Bank, the transportation activity would in either case be within exclusive federal legislative competence. In the one case, it would be an activity engaging the transportation facilities of an admittedly interprovincial railway enterprise, and in the other, it would be an activity extending beyond the limits of the Province. It is enough to refer to the judgment of this Court in The Queen in right of Ontario v. Board of Transport Commissioners, and to Toronto v. Bell Telephone Co., in support of the foregoing propositions.
The present case does not call for a decision on whether K. & E. would be engaged in an extra-provincial undertaking if it built a railway line entirely within British Columbia to Roberts Bank, whence the coal would go by sea to Japan.
Taking the facts as they are, the constitutional issue as to the validity of K. & E.’s incorporation turns, in my view, primarily on the scope of s. 92(11) of the British North America Act, under which the Province may legislate in relation to “the incorporation of companies with provincial objects”. We do not reach the question of the validity of federal legislation requiring federal incorporation of any company which
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proposes to engage in an extra-provincial railway enterprise. There is no such federal legislation and hence, at most, the question of the scope of the provincial power under s. 92(11) must be read against the scope of unexercised federal authority under the exception in s. 92(10)(a) of the British North America Act.
C.P.R. v. Notre Dame de Bonsecours, does not touch the question in issue here. There is a passage therein, at p. 372, which could be taken as affirming federal authority to regulate the incorporation of companies proposing to operate extra-provincial railway systems, but it does not go so far as to assert that, in the absence of such federal legislation, provincial incorporating power is extinguished if a company proposes to enter into arrangements which will involve it in an extra-provincial transportation operation.
Constitutional decisions respecting incorporation powers under the British North America Act exhibit a distinction between the authority to incorporate and regulate a company qua company and the authority to regulate the business activity in which a company may be engaged. This distinction has been drawn particularly in respect of federally incorporated companies which engage in businesses that fall within provincial regulatory authority. The federal incorporation power, an illustration of the residuary character of s. 91 of the British North America Act, exists as a necessary complement to the provincial power under s. 92(11). The fact that federal and provincial powers of incorporation reside in the British North America Act, apart from specific authority in relation to various activities in which corporations could be expected to engage, is a material consideration in my conclusion that mere unexercised federal power in relation to extra-provincial transportation enterprises is not necessarily a bar to provincial
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incorporation of a railway company; and, moreover, that it is not a bar in the present case.
The memorandum of association through which K. & E. was incorporated reflects a recognition of two limitations on provincial incorporating powers under s. 92(11); K. & E. was endowed with powers exercisable only within the Province (the territorial limitation) and relating to matters within provincial legislative compentence (the limitation as to objects). This at least is consonant with what s. 92(11) imports, and it is unnecessary to consider whether it goes any farther.
Moreover, the incorporation did not involve a limitation in connection therewith on the power of K. & E. to enter into arrangements for joint or cooperative ventures with other transportation companies, whether federal or foreign. Indeed, the approval given by the Government of the Province to the proposed connection with B. & N. at the border, as provided under s. 152 of the Railway Act, R.S.B.C. 1960, c. 329, establishes that fact beyond question. The Privy Council dealt with this very question in Bonanza Creek Gold Mining Co. Ltd. v. The King in rejecting the contention that s. 92(11) would not support the valid incorporation of a memorandum of association company with power to engage in extra-provincial operations. Viscount Haldane supported the rejection in these words (at pp. 584-585):
The words “legislation in relation to the incorporation of companies with provincial objects” do not preclude the province from keeping alive the power of the Executive to incorporate by charter in a fashion which confers a general capacity analogous to that of a natural person. Nor do they appear to preclude the
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province from legislating so as to create, by or by virtue of statute, a corporation with this general capacity. What the words really do is to preclude the grant to such a corporation, whether by legislation or by executive act according with the distribution of legislative authority, of powers and rights in respect of objects outside the province, while leaving untouched the ability of the corporation, if otherwise adequately called into existence, to accept such powers and rights if granted ab extra. It is, in their Lordships’ opinion, in this narrower sense alone that the restriction to provincial objects is to be interpreted.
I would hold, accordingly, that K. & E. was “adequately called into existence”, notwithstanding that its arrangements with B. & N. would involve it in an extra-provincial undertaking and subject it in that respect to the jurisdiction of the Canadian Transport Commission.
Turning to the appeal proper, I agree with what Martland J. has said on question 1. It is question 2, involving s. 156(1) of the Railway Act, R.S.C. 1952, c. 234, as re-enacted by 1966-67 (Can.), c. 69, s. 39, that moves me to the observations that follow.
Section 156(1) reads as follows:
The directors of the company may, at any time, make and enter into any agreement or arrangement, not inconsistent with the provisions of this or the Special Act, with any other transportation company operating as a common carrier either in Canada or elsewhere, for the interchange of traffic and for the division and apportionment of tolls in respect of such traffic.
Its history is detailed in the reasons of Martland J., and I note particularly that its re‑enactment as above-mentioned both expanded and restricted the language in which it was previously couched. The expansion was in authorizing specified agreements with any other transportation company, and thus included transportation enterprises other than railways. The restriction was in confining the authorization to agreements with transportation companies operating as common carriers. K. & E., as found by the
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Commission, is not a common carrier; B. & N. admittedly is.
The problem that s. 156(1) presents is one that appears to me to reside as well in other sections of the Railway Act. It is whether s. 156(1) is a “company” provision or a “regulatory” provision; that is, whether s. 156(1) is concerned with the powers of a railway company, with what such a company may do qua corporation, or whether its purpose is to regulate the activities of the railway company, in the same way, for example, as does s. 255 respecting crossings and junctions. Of course, in a broad sense, s. 156(1), if looked at in terms of implementation, can be regarded as regulatory as well as empowering in a corporation aspect; but this does not, in my opinion, destroy the distinction I would make.
There are three points that are relevant to this distinction. In expressing them I am prepared to treat the reference in s. 156(1) to “directors of the company” as a reference to the company itself. First, if s. 156(1) goes to the powers exercisable by a railway company, it may properly be construed as enabling in so far as the company does not already enjoy the power granted, provided also there is no inconsistency with the Railway Act or the company’s own constituent Act or other incorporating authority. Second, as simply an empowering or enabling provision going to corporate powers, there would not appear to be any need to seek the permission of the Canadian Transport Commission to enter into an agreement of the kind specified in s. 156(1). The implementation of the agreement is, of course, another matter, and here the regulatory authority of the Commission would be engaged.
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Third, the Railway Act, in its definition provisions and in its provisions as to its construction and application, exhibits an appreciation of the distinction between corporate powers and regulatory authority. Thus, “Special Act” is defined in s. 2(28) as meaning, when used with reference to a railway, “any Act under which the company has authority to construct or operate a railway” (and “company” is defined in s. 2(4) to mean, where not otherwise stated or implied, “railway company”). By s. 3(a), “except as in this Act otherwise provided, this Act shall be construed as incorporate with the Special Act…” Section 5 is as follows:
Subject as herein provided, this Act applies to all persons, railway companies and railways, within the legislative authority of the Parliament of Canada, whether heretofore or hereafter, and howsoever, incorporated or authorized, except Government railways…
Another indication of the distinction I would make may be found in a comparison of s. 164(1)(e) and s. 255 of the Railway Act. Section 164 is headed “General Powers”, and subs. 1(e) provides that “the company may, for the purposes of the undertaking, subject to the provisions in this and the Special Act contained… cross any railway, or join the railway with any other railway at any point on its route…” Section 255 prohibits any crossing or junction without leave of the Commission.
On the view I have taken, K. & E. is within the legislative authority of the Parliament of Canada in respect of the matters in issue in this appeal. B. & N. would likewise come under its authority in respect of any operations in Canada. Thus the Railway Act would apply to them, bringing in the authority of the Canadian Transport Commission. I see nothing in the Railway Act that requires either K. & E. or B. & N. to be reincorporated or otherwise certified
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as a railway company under Act of Parliament as a condition of their subjection to the supervisory and regulatory powers of the Canadian Transport Commission. Hence if s. 156(1) goes merely to the powers of a railway company qua company, the relevant inquiry is simply whether either or both of K. & E. and B. & N. have to rely on it to enter into the arrangement that they contemplated or whether they have powers to that end under their constituent authority; and in the latter case, whether there is any domestic federal law that limits the powers that a non-Canadian or non-federal company may exercise in seeking to carry on activities that are under federal regulatory authority.
I adopt, as applicable to the present case, what is said in Gower, Modern Company Law, 3rd ed., 1969, at pp. 670-1, as follows (adapting his references to English law as representing Canadian law):
…the question whether a company exists or not as a corporate body depends, according to English law, on the law of the place of its alleged incorporation… We have even given effect to foreign legislation substituting a new company as universal successor of another.
It is also generally stated that English law will treat the question whether a company’s transactions are ultra vires as governed by the law of the place of incorporation. This, no doubt, is generally true. But strictly it appears that its capacity is limited both by its constitution, construed in the light of the law of the country of its incorporation, and by the law governing the transaction in question.
This last statement is relevant here to the regulatory provisions of the Railway Act.
My brother Martland has referred in his reasons to the powers conferred upon B. & N. under the law of its place of incorporation, and they are ample enough to support the arrangement proposed with K. & E. As to K. & E., I
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have already referred to the fact that it had express provincial approval to connect with the line of B. & N. at the border, and that it was not limited in its powers to enter into arrangements for joint or cooperative operations with other transportation companies. Each was therefore a competent contracting party with the other, leaving only the question of their subjection to the Railway Act and to limitations thereunder affecting their arrangement.
I return now to the character of s. 156(1). It was urged by the appellants that even if s. 156(1) should be construed as implicitly prohibitory where a private carrier is concerned, it did not apply here because the traffic interchange agreement between B. & N. and K. & E. did not contemplate a division of B. & N. tolls. The submission was that the reference in s. 156(1) to interchange of traffic and division and apportionment of tolls must be read conjunctively. I do not find it necessary to decide this question here; but assuming that a conjunctive reading is commanded I think the arrangement proposed here is within the conjunctive provisions. The arrangement between the parties was for a limit of $3.81 per ton, and B. & N. agreed to accept $3.31, leaving 50 cents per ton for K. & E. What this “split” was actually called is not as material as what it actually represents. The Canadian Transport Commission viewed it as a division and apportionment of tolls, and I have the same view.
This, however, is not determinative against the appellants. I have concluded that s. 156(1) is an enabling company law provision, adding, if necessary, but not subtracting from existing corporate powers of railways whose actual or proposed operations bring them within federal regulatory competence and hence within the Railway Act. My reasons for this conclusion follow.
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Section 156(1) is among and in the midst of a series of sections, beginning with s. 73, which deal with the incorporation and the internal structure and management of railway companies, and with the powers conferred upon them. Most of these sections, certainly most of those that run from s. 73 to s. 147, are provisions that envisage federal incorporation, and can only be understood in that context. Examples are s. 78, dealing with the first meeting of shareholders; s. 79, respecting an increase in capital stock; s. 96, dealing with subscription by municipalities for capital stock of a railway company; s. 100, respecting notice of calls; s. 107, respecting notice of shareholders’ general meetings; s. 115, respecting qualifications of directors; and ss. 139 and 140 respecting deposit of mortgage deeds of trust.
There is nothing express to indicate that the provisions from s. 73 through to s. 147 and some beyond, are mandatory for foreign or provincial companies whose activities may bring them within federal regulatory authority. Indeed, Parliament has indicated (as in s. 136, respecting issue and disposal of securities by a provincial railway company) that where the company provisions of the Railway Act are intended to apply to other than federally incorporated railway companies, this is expressed. I have already mentioned s. 164(1)(e) and s. 255 to show also that the distinction between company powers and regulatory authority is recognized in the Railway Act. Other such contrasting provisions are s. 164(1)(k) and s. 266; s. 164(1)(m) and ss. 271 and 272.
I do not say that the distinction between corporate powers and regulatory authority in the Railway Act is always clear. The distinction is there, albeit there is also an interaction
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between the two. I take as an illustration the history of s. 164(1)(e) and s. 255, which also involves s. 156(1). Section 164(1)(e) has its origin in 1851 (Can.), c. 51 which set out in s. 9 thereof certain powers of railway companies in addition to an omnibus investment of powers set out in s. 8; this last-mentioned section now appears in the Railway Act as s. 73.
Fifteen powers are listed in s. 9 and the fifteenth confers power “to cross, intersect, join and unite the railway with any other railway at any point on its route…” By an amendment in 1858 it was provided by s. 2 of 1858 (Can.), c. 4 that the fifteenth power in s. 9 of the Act of 1851 was not exercisable by a railway company without application to the Board of Railway Commissioners, constituted under another Act, for approval of the mode of crossing, union or intersection proposed. This same s. 2 of the Act of 1858 brought in the ancestor of what became s. 156(1) in the following words: “It shall be lawful for the directors of any railway company… to make and enter into any agreement or arrangement with any other company… for the regulation and interchange of traffic… and for the division and apportionment of tolls, rates and charges in respect of such traffic…”
The power given to railway companies to “cross, intersect and join” with one another with the approval of a government board was carried through to the Railway Act, R.S.C. 1886, c. 109, where these matters are included in s. 6(13)(14) under the general heading “Powers”. In the Railway Act of 1888, enacted by 1888 (Can.), c. 29, the corporate power to cross, intersect and join became s. 90(f) and the regulatory provision for approval was separated as s. 173. This separation, marking the distinction which I have emphasized, has continued to this day.
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I do not doubt the power of Parliament to require either federal incorporation, or conformity to federal prescriptions for corporate organization, structure and powers, by companies that engage or seek to engage in railway operations that are within federal legislative power. This has not been manifestly done in the Railway Act; and, save as to situations in which the Commission or the Governor in Council is given a role by the Railway Act (as, for example, in s. 153 and in s. 156(2)(3)), I would not read permissive words of sections relating to the incorporation, corporate structure and powers of railway companies as excluding powers enjoyed by companies that are not federally created. Restrictions on powers exercisable by foreign and provincial railway companies under their respective incorporating Acts or charters ought to be plainly expressed in the Railway Act if they are to be effective. This, of course, is entirely apart from the regulatory authority exercisable under the Railway Act in respect of companies having powers that they seek to exercise.
The Commission’s regulatory authority in respect of the carrying out of the arrangements between K. & E. and B. & N. is not questioned here; and once the powers of the respective companies are found to be adequate to support the arrangements, the way is clear for the exercise of that authority. That is this case.
In the result, I would answer the questions in the appeal and in the cross-appeal in the same way as my brother Martland; and, in agreeing with his disposition of the appeal and cross‑appeal, I agree also with his conclusions on the issues sought to be raised by counsel for the Commission who intervened pursuant to s. 53(6) of the Railway Act.
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Appeal allowed in part, FAUTEUX C.J. and JUDSON, HALL and PIGEON JJ. dissenting, and cross-appeal dismissed, HALL and SPENCE JJ. dissenting in part, with costs.
Solicitor for the appellants: W.G. Burke-Robertson, Ottawa.
Solicitor for the respondent: G.P. Miller, Montreal.
Solicitor for the Attorney-General of British Columbia: Alistair Macdonald, Ottawa.
Solicitor for the Minister of Highways and Transport for Alberta: JJ. Frawley, Ottawa.
Solicitor for the Canadian National Railways: H.J.G. Pye, Montreal.
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