Decision No. 102-R-2003

February 28, 2003

File No. T7475/01-3

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APPLICATION

On November 1, 2002, the Canadian National Railway Company (hereinafter CN) filed an application with the Canadian Transportation Agency (hereinafter the Agency) pursuant to section 25.1 of the Canada Transportation Act (hereinafter the CTA) for an award of costs arising from the application filed by the Ferroequus Railway Company Limited (hereinafter FE) on October 25, 2001, as amended.

BACKGROUND

CN's application for an award of costs follows the issuance of Agency Decision No. 505-R-2002 on September 10, 2002 in respect of the application filed by FE on October 25, 2001. In its application, FE requested running rights over CN's lines from interchanges with the Canadian Pacific Railway Company (hereinafter CP) at Lloydminster, Saskatchewan and Camrose, Alberta to Prince Rupert, British Columbia.

This application was FE's second submission requesting the right to operate over the lines of CN. FE had applied earlier in 2001 to the Agency seeking running rights on approximately 2,000 kilometres of CN lines from North Battleford, Saskatchewan to Prince Rupert, British Columbia. The Agency found, in Decision No. 213-R-2001 dated May 3, 2001 that section 138 of the CTA did not permit it to grant a running right to a railway company that was seeking solicitation rights along the lines of the host railway company and as such dismissed the application.

A number of procedural issues were raised by CN and CP over the course of the proceedings of FE's second application. One of these issues related to the use of CP's assets as well as the solicitation of CP's traffic at both the interchanges in Lloydminster, Saskatchewan and Camrose, Alberta. In Decision No. LET-R-86-2002, the Agency found that it could not consider FE's application in its present form as CP's assets were an integral part of FE's proposed operation at both the interchange in Lloydminster, Saskatchewan and Camrose, Alberta.

Given the Agency's findings with respect to CP's property rights at the two interchanges, FE subsequently filed an amended application eliminating reference to Lloydminster and reference to CP assets at Camrose. In Decision No. LET-R-101-2002 dated April 15, 2002, the Agency accepted FE's amended application as part of the ongoing proceeding related to FE's October 25, 2001 application, and issued a notice of public hearing on the merits of the application. CN and CP sought leave to appeal these two Agency decisions to the Federal Court of Appeal. Leave to appeal was, however, dismissed in both cases.

The Agency held a public hearing in Winnipeg, Manitoba from April 29, 2002 to May 8, 2002. In the resulting Decision No 505-R-2002 dated September 10, 2002, the Agency found that there was no convincing evidence of any prevailing public interest need in terms of existing railway rates or service for the imposition of running rights. The Agency concluded that FE had not established the existence of a rate or service problem in the relevant markets, nor had it established that the granting of running rights would eliminate or alleviate any lack of adequate and effective competition. The Agency also found that the granting of FE's application would have a negative impact on many of the participants in the grain handling and transportation system and that FE's pro forma Business Plan was overly optimistic. For these reasons, the Agency dismissed FE's application for running rights.

FE sought leave to appeal this Decision to the Federal Court of Appeal on October 8, 2002 and leave to appeal was granted by the Court on December 6, 2002.

ISSUES

The issue to be addressed is whether the Agency should award costs to CN arising from the proceedings related to FE's application filed with the Agency on October 25, 2001.

POSITION OF THE PARTIES

CN states that it is seeking a general award of costs arising from FE's second application, as amended, in its entirety and notes that costs are not being sought with respect to the first running rights application filed by FE earlier in 2001. CN is of the opinion that the proceeding leading to Decision No. 505-R-2002 constitutes special and exceptional circumstances which justify an award of costs.

In support, CN relies on the guiding factors for awarding costs set out in Rule 400(3) of the Federal Court Rules, 1998 and concludes that similar conditions exist in that: the results of the proceeding were in CN's favour; the amounts claimed were considerable; the issues were simultaneously important and complex; the amount of work was considerable and; the conduct of FE tended to unnecessarily lengthen the duration of the proceeding.

In response, FE submits that CN's application omits certain factors which can be taken into account in determining whether to award costs. In citing Rule 400(6) of the Federal Court Rules, 1998, FE points out that the court may award costs against a successful party. FE also notes that CN did not claim costs at any stage of the proceedings and that its claim now is an afterthought, advanced six months after the conclusion of the public hearing in Winnipeg and after FE filed its application for leave to appeal to the Federal Court of Appeal.

FE further submits that the criteria for awarding costs has been established in previous Agency decisions where costs have been awarded, notably, the Eagle Forest Products Limited (hereinafter EFPL), the Canadian Wheat Board (hereinafter CWB) and the Gordon Moffat decisions. FE maintains that the present situation does not meet the criteria established by the Agency in these cases.

In comparing the current situation with that of the EFPL, CWB and Gordon Moffat decisions, CN argues that costs were awarded to EFPL on the success of its application and on the Agency's determination that CN's application was without merit. According to CN, a similar situation now exists in that the decision was in CN's favour and that the lengthy review of the issues resulted from FE's wrongful and flawed application. CN further submits that contrary to the current situation, where CN was successful, the CWB failed to prove many of its allegations and that costs were only allowed for the portion of the application proved. With respect to the issue that the Agency's decision is currently before the Federal Court of Appeal, CN notes that an appeal was before the Court at the time the Agency awarded costs in the Gordon Moffat case.

FE maintains that the preliminary motions filed by CN, many of which were dismissed by the Agency, resulted in extending the process, and the application not being heard within the 120 day statutory time frame. FE also argues that its participation in the process provided considerable assistance in the resolution of important and complex issues, and that the amount of work was substantially more onerous on FE. It states that it was required to file numerous pleadings and submissions, retain and cross-examine expert witnesses, and fully participate in the public hearing.

In reviewing the criteria considered by the Agency for awarding costs in the past, FE points out that it had a substantial interest in the application, it participated in the proceeding in a responsible way, it made a significant contribution that was relevant to the proceedings, it contributed to a better understanding of the issues by all parties before the Agency, the issues were important and complex, the amount of work involved was substantial and CN's conduct during the proceedings resulted in considerable delay and substantial extra expense to the applicant and to the Agency. For these reasons, FE believes that CN's application does not merit an award of costs.

CN is of the view that there should be some repercussions for repeated unsuccessful recourse to regulatory intervention. CN acknowledges that an award of costs should not be used to intimidate future applicants from using the remedies available under section 138 of the CTA but stresses that applicants should be made accountable and responsible for the actions pursued for their own benefit. CN maintains that FE initiated three running rights applications on a whim and in the hope of profiting at the expense of CN. CN further submits that not only did it have nothing to gain through its participation in the proceedings, it should not be held responsible for advancing legal or regulatory knowledge. Given these factors, CN believes FE must be compelled to compensate CN for its expenses.

ANALYSIS AND FINDINGS

It has been well documented by the Agency and its predecessors that costs are not awarded as a matter of course even in situations where a party has been substantially successful in its recourse. Rather, the Agency's practice has been to review each application for costs on its own merit and to award costs only in special or exceptional circumstances. The Agency finds that the present case does not meet those special or exceptional circumstances.

There is no doubt, in this case, that the issues raised by FE's application were complex, required an inordinate amount of work from the parties involved and that the ultimate result of the proceeding was in favour of CN.

However, in reviewing the above elements, it is necessary to consider the significant amount of time and effort devoted to the preliminary motions filed by CN and CP. Indeed, eight motions were filed by the railway companies resulting in six interlocutory decisions issuing prior to the Agency's final decision in the matter. Of the six interlocutory decisions, only one, in part, was favourable to CN or CP. That is, the issue of CP's assets at Lloydminster and Camrose. The issues raised by CN and CP, in support of their various motions, greatly inflated the complexity of the proceeding and the time required by the parties to deal with the application. In addition, the filing of those interlocutory motions by CN and CP largely contributed to a lengthy duration of the proceeding before the Agency.

In addition to the preliminary motions filed by the railway companies, the length and complexity of the proceeding can also be explained by the nature of the application. Prior to FE's application of October 25, 2001, no Agency decision on the merits of a running rights application had ever been rendered. The issues raised by FE's application were not simple. Not only were the private interests of CN, CP and FE involved, but also the interests of the rail transportation network as a whole, as well as the interests of the various system participants. In this context, FE's application, although unsuccessful, was beneficial in that it allowed the Agency, CN, CP and the system participants to establish and/or to understand the meaning and the scope of section 138 of the CTA.

In considering whether to award costs in a given case, the Agency must be mindful not to establish a barrier to the regulatory remedy it provides. An award of costs against FE in this case could serve as a deterrent to any future public interest application. An applicant could potentially fear that it would have to bear the costs of the opposing party if unsuccessful.

The above elements combined with the fact that FE's application was not vexatious or frivolous demonstrates that FE, throughout the proceedings, acted efficiently and in good faith; FE made a significant contribution to the proceedings which was beneficial to the better understanding of the issues raised; and, FE incurred extraordinary costs to prepare and defend its application as well as the unsuccessful preliminary motions of CN and CP. As such, the Agency concludes that costs are not warranted in the circumstance.

Notwithstanding the above finding, the Agency has reviewed the evidence and arguments filed by CN over the course of the proceeding leading to Decision No. 505-R-2002 and notes that CN did not request costs at any time during the proceeding. As costs were never sought prior to the Agency's final decision in the FE proceeding and as the Agency, in rendering its final decision, elected not to use its discretion with respect to costs, the question arises as to whether the Agency should even consider the merits of CN's late application for costs.

Thus, it is well settled in law that as a principle, a final decision of a court cannot be reopened. The corollary of such principle is that once an adjudicative body has exercised its discretion and issued a final decision, it is functus from acting further in the same proceeding. There are two exceptions to this general rule. The first is where there has been a slip in the drafting of the decision and the second is where there has been an error in expressing the manifest intention of the court. CN's application for costs falls under neither of these two exceptions.

CN's application for costs, if successful, would establish an undesirable precedent. That is, it would allow a party to have an issue, a question or an argument, which was not otherwise raised or argued during the proceeding, examined by the Agency after the issuance of the final decision. The Agency finds that not only would such a precedent be unfair, it would also bring uncertainty to the finality of an Agency decision.

In the case at hand, the Agency finds that the FE proceeding was brought to an end by the issuance of Decision No. 505-R-2002 on September 10, 2002. As the Agency has already exercised its discretion with regard to this proceeding, including its refusal to award costs as part of its final decision, the Agency finds that its jurisdiction in this matter, including the award of costs, is now spent.

CONCLUSION

In light of the foregoing, the Agency hereby dismisses CN's application for an award of costs arising from FE's running rights application.