Decision No. 103-R-2020

SUMMARY

[1] On October 16, 2019, HBR filed an application requesting that, pursuant to section 32 of the CTA, the Canadian Transportation Agency (Agency) rescind or vary Decision No. CONF-11-2018 (Initial Decision) pertaining to the Agency’s finding regarding the reasonable pause period of HBR’s rail service between Gillam, Manitoba, and Churchill, Manitoba, after an event of force majeure in May 2017.

[2] HBR submits that, under its new ownership, it acquired new information, including video footage, which revealed that it could not have repaired the railway line by November 2017. In its view, this constitutes a significant change in the facts or circumstances pertaining to the Initial Decision, as per section 32 of the CTA, and the Initial Decision should, therefore, be rescinded or varied.

[3] The Agency will address the following issue:

Has there been a change in facts or circumstances since the issuance of the Initial Decision that warrants a review, rescission or variance of the Initial Decision?

[4] For the reasons set out below, the Agency finds that HBR has not established that there has been a change in the facts or circumstances pertaining to the Initial Decision as provided for in section 32 of the CTA. Consequently, the Agency dismisses HBR’s application.

BACKGROUND

[5] In May 2017, the railway line operated by HBR between Gillam and Churchill was damaged by flooding. On May 23, 2017, the railway line was determined to be unsafe, and rail service ceased. In June 2017, HBR declared a force majeure event.

[6] HBR retained AECOM Canada Ltd. (AECOM), an engineering company, to assess the damage to the railway line and estimate the costs to repair the damage. According to HBR, from June 23, 2017, to June 29, 2017, and from July 6, 2017, to July 12, 2017, AECOM conducted an assessment of the railway line between Gillam and Churchill. On August 18, 2017, AECOM produced a report (AECOM Report) that set out a 60-day plan to restore service on the railway line based on performing essential and immediate repairs to allow for the passage of light loaded trains in early November 2017.

[7] On September 8, 2017, Mark Rosner filed an application with the Agency against HBR alleging that the railway company was in violation of its level-of-service obligations.

[8] In the original proceeding, HBR argued that the high cost of repairs to the damaged railway line, considered in combination with its financial circumstances, should exempt it from its service obligations pursuant to the CTA. Although HBR filed the AECOM Report in which it presented a 60-day plan to restore service for the light loaded trains on the railway line as early as November 2017, HBR argued that its financial incapacity to repair the railway line justified exempting it from its statutory obligation to provide service. HBR submitted financial statements and argued that “it simply did not … have the funds.” HBR also argued that even if it had the financial capacity to repair the railway line, it should be excused from any level-of-service obligations until at least November 2018.

[9] In the Initial Decision, issued on June 13, 2018, the Agency found that, based on the evidence, including the AECOM Report, the reasonable pause period of service on the railway line due to the force majeure event in May 2017 should extend until November 2017. As a result, the Agency found that HBR had been in breach of its level-of-service obligations since November 2017. The Agency ordered HBR to initiate the repair of the railway line by July 3, 2018, and to complete the repair and resume the operation of the railway line as expeditiously as possible.

[10] On August 31, 2018, Arctic Gateway Group LP (AGG), a partnership comprising First Nations, northern communities, Fairfax Financial Holdings Limited and AGT Food and Ingredients Inc. (AGT Food), purchased HBR.

[11] On October 31, 2018, HBR resumed freight service on the railway line.

[12] On October 16, 2019, HBR filed an application pursuant to section 32 of the CTA seeking to have the reasonable pause period extended until November 2018 based on new information that it acquired. HBR alleges that this new information revealed that it would not have been possible to repair the railway line by November 2017.

[13] On March 19, 2020, the Agency issued Decision No. LET-R-18-2020 in which it provided HBR with the opportunity to file submissions, if any, on whether the August 31, 2018, change in ownership of HBR constitutes a change in the facts or circumstances pertaining to the Initial Decision. Mr. Rosner was provided with the opportunity to submit his response to HBR’s application under section 32 of the CTA, including the issue of the change in ownership.

[14] On April 27, 2020, HBR filed its response to Decision No. LET-R-18-2020. On May 21, 2020, Mr. Rosner filed his response to HBR’s application and the next day, he filed a request to withdraw his response from the record pursuant to section 35 of the Canadian Transportation Agency Rules (Dispute Proceedings and Certain Rules Applicable to All Proceedings), SOR/2014-104 (Rules). On May 23, 2020, HBR replied that it agreed to the withdrawal request.

PRELIMINARY MATTERS

Confidentiality

[15] Pursuant to section 31 of the Rules, a person may file a request for confidentiality in respect of a document submitted to the Agency.

[16] When filing its application under section 32 of the CTA, HBR filed public and confidential versions of its application and supporting documents without submitting a request pursuant to section 31 of the Rules. HBR claims that the redactions in its application and supporting documents are made pursuant to the confidentiality previously granted in the Initial Decision. The Agency finds that the information that HBR seeks to redact is not relevant to the Agency’s determination of the current application as it does not relate to the issue presently before the Agency. Accordingly, no confidentiality request is required, the confidential information will not be retained on the Agency’s record, and the Agency will place the redacted version of the application and supporting documents on the public record.

Request to withdraw a document

[17] Pursuant to section 35 of the Rules, a person may file a request to withdraw any document they filed in a dispute proceeding before the close of pleadings. If the Agency grants the request, it may impose any terms and conditions on the withdrawal that it considers just and reasonable.

[18] In his request to withdraw his response to HBR’s application from the record, Mr. Rosner stated that he “will accept the guidance of the Agency going forward.” In its reply, HBR agreed to the withdrawal request. In light of the positions of the parties on this issue, the Agency grants Mr. Rosner’s request to withdraw his response to HBR’s application from the record. Furthermore, no terms and conditions are necessary given that Mr. Rosner requested that his response be withdrawn a short time after filing it and HBR agreed to the withdrawal.

THE LAW

[19] Section 32 of the CTA states:

The Agency may review, rescind or vary any decision or order made by it or may re-hear any application before deciding it if, in the opinion of the Agency, since the decision or order or the hearing of the application, there has been a change in the facts or circumstances pertaining to the decision, order or hearing.

HBR’S POSITION

[20] HBR submits that there has been a change in the facts and circumstances pertaining to the Initial Decision that is sufficient to warrant its review, rescission or variance. HBR seeks to have the reasonable pause period extended until November 2018, as it argues that, under its new ownership, it obtained new information which revealed that the railway line could not have been repaired before November 2018.

[21] The information submitted by HBR as new information comprises video footage of the railway line that shows details of the damage to the railway line and statements from contractors retained to do the repair work, which documented previously unknown obstacles that were encountered when the work was undertaken in the fall of 2018.

Video footage

[22] HBR notes that, in or about February 2018, AGG entered into negotiations with OmniTRAX Entreprises Inc. (OmniTRAX) to purchase OmniTRAX’s shares in HBR. HBR states that, on or about June 4, 2018, Sheldon Affleck, President of Mobil Group, a short-line rail company owned by AGT Food, contacted Paradox Access Solutions Inc. (Paradox) on behalf of AGG, to discuss repair solutions for the railway line. Sheldon Affleck provided Paradox with the AECOM Report as background information on the damage to the railway line, but, according to Paradox, the information in the AECOM Report was insufficient to design a repair solution for the railway line.

[23] On or about June 11, 2018, Sheldon Affleck obtained video footage of the length of the railway line from Churchill to Gillam taken with a GoPro camera and gave it to Paradox to provide the information that it needed to design a repair solution. Sheldon Affleck states that a colleague told him about an adventurer who rode their mountain bike from Churchill to Gillam, starting in late May of 2018, and filmed the entire ride, including the railway line.

Obstacles encountered during the repair work

[24] HBR states that it also obtained new information through its contractor, Paradox, about the condition of the railway line during the repairs that was not known at the time of the AECOM Report. According to HBR, Paradox encountered unanticipated obstacles, more particularly certain washouts had greater depths and additional areas of permafrost were uncovered. These new areas of permafrost required design adjustments to the repair solution by on-site engineers.

[25] HBR argues that these conditions were such that the repair work contemplated by AECOM in 2017 simply could not have been performed in the time estimated by AECOM and that, based on this new information, there was no way in which the railway line could have been repaired by November 2017.

Change in ownership

[26] In its response to the Decision No. LET-R-18-2020, HBR claims that whether or not a change in ownership constitutes a change in circumstances pertaining to an Agency decision will depend on the particular decision and circumstances. HBR states that the change in HBR’s ownership constitutes a change in circumstances given that it resulted in new information becoming available to HBR in September 2018 that was not available previously.

ANALYSIS AND DETERMINATION

[27] Pursuant to section 32 of the CTA, the Agency may review, rescind or vary any decision or order made by it or may re-hear any application before deciding it if, in its opinion, there has been a change in the facts or circumstances pertaining to the decision, order or hearing since the decision or order or the hearing of the application.

[28] The review provided for in section 32 of the CTA is not an open-ended authority for the Agency to review its decisions. The Agency’s jurisdiction under this section is limited and only arises if, in its opinion, there has been a change in the facts or circumstances pertaining to a particular decision since its issuance.

[29] In dealing with an application for review, the Agency must first determine whether there has been a change in facts or circumstances pertaining to the decision. If no such change exists, the decision stands. If, however, the Agency finds that there has been a change in facts or circumstances since the issuance of the decision, it must then determine whether such a change is sufficient to warrant a review, rescission or variance of the decision.

[30] The Agency has recognized that the wording of section 32 must generally be construed to include only facts or circumstances that did not exist at the time of the original hearing or were undiscoverable by the applicant for review at that time. If a fact was known to the applicant or discoverable through exercise of due diligence at the time of the initial complaint, it cannot constitute a change in facts or circumstances. The text of section 32 expressly refers to new facts and circumstances arising since the decision.

[31] The burden of proof rests with the applicant requesting the review to demonstrate to the Agency that the alleged change in facts or circumstances was not discoverable at the time of the decision and that it might have had an impact on the decision if it had been known at the time the decision was made.

[32] The Agency finds that HBR has not met this burden.

[33] HBR asserts that the video evidence that Sheldon Affleck obtained on June 11, 2018, constitutes new facts and circumstances since the Agency issued the Initial Decision. However, the video evidence does not constitute new facts and circumstances. The video evidence existed prior to the issuance of the Initial Decision and was in Sheldon Affleck’s possession immediately prior to the issuance of the Initial Decision, albeit he was not acting for HBR at that time.

[34] Furthermore, the extent of the damage to the railway line caused by the flooding in 2017 was discoverable prior to the Initial Decision. Knowledge of the extent of the damage to the railway line did not depend on the existence of the video evidence but was discoverable through the exercise of due diligence at the time of the initial complaint. In fact, HBR and its contractors conducted inspections of the railway line in the spring and summer of 2017 and knew or ought to have known the extent of the repairs that would be required. In the Initial Decision, the Agency stated at paragraph 40:

HBR states that it retained AECOM, an engineering company, to assess the damage to the railway line. According to HBR, from June 23, 2017 to June 29, 2017 and July 6, 2017 to July 12, 2017, AECOM conducted an assessment of the railway line between Gillam and Churchill. HBR states that in its report dated August 13, 2017 (AECOM Report), AECOM identified essential and immediate repairs, essential but non-immediate repairs, as well as areas which require further inspection to fully assess the damage. HBR indicates that AECOM estimated the cost of repairs at $43.5 million.

[35] HBR has not alleged that the railway line suffered additional damage after the Initial Decision was issued; rather, it asserts that its appreciation of the extent of the repairs required for the railway line changed because of the discovery of the video. However, that, in itself, does not constitute new facts and circumstances.

[36] Further, it is clear from the Initial Decision that HBR’s request to extend the reasonable pause period until November 2018 was considered and rejected by the Agency in the Initial Decision. In particular, HBR submitted to the Agency, in the original proceeding, a letter prepared by AECOM dated November 20, 2017, advising HBR that, at that point in time, the earliest the railway line could be repaired was November 2018 and that the cost of the repairs would be higher than previously estimated. Despite this, in the Initial Decision, the Agency chose instead to accept the AECOM Report indicating that repairs could have been made by November 2017 and that those repairs would have permitted limited service to resume in 2017.

[37] Further, the proposition that the period required to repair the railway line might take longer than what was stated in the AECOM Report was alleged by HBR and rejected by the Agency in the Initial Decision. The Agency stated at paragraph 68 of the Initial Decision:

While AECOM qualified its estimate as “ambitious”, it is noted that the report itself was completed three months after the flood occurred and that to this day, HBR has done nothing to restore the damaged infrastructure.

[38] The Agency notes that HBR started preparing to perform the repairs “on or about” August 18, 2018, and the railway line was fully repaired for freight operations by October 31, 2018. This time period to successfully repair the railway line is consistent with the original 60-day estimate that was provided in the AECOM Report , and that was accepted by the Agency in its Initial Decision. Although the Agency appreciates that Paradox’s approach to repair the railway line differed from that recommended by AECOM, the extent of the damage to the railway line caused by the flooding in 2017 was discoverable prior to the Initial Decision, and the appropriate repair strategy could have been determined then as well. Had the repairs been initiated in August 2017, they could have been completed and rail service could have been restored before the end of the reasonable pause period, that is by November 2017.

[39] In its Initial Decision, the Agency recognized that the time required to complete the transfer and discontinuance process could impact the length of the reasonable pause period. The Agency stated the following at paragraph 62 of the Initial Decision:

Considerations of reasonableness may, however, mean that financial considerations play a role in the length of the reasonable pause after a force majeure event that damages infrastructure, during which a railway company is temporarily exempted from its statutory duty to provide service. For example, if repair costs are patently disproportionate, the railway company has initiated the transfer and discontinuance process, and if there is every reason to believe that process will be completed within a relatively short period of time, the reasonable pause could, in certain circumstances, extend to the end of that process.

[40] However, in the original proceeding, the evidence before the Agency was that HBR had not initiated the transfer and discontinuance process provided for under Division V of Part III of the CTA. Although HBR had claimed that its financial incapacity to repair the railway line justified it being provided a permanent exemption from its statutory obligation to provide rail service, the Agency found that HBR was not permanently relieved from its level-of-service obligations with respect to the damaged railway line. The Agency also found that the reasonable pause period extended to November 2017 in accordance with the AECOM Report and that HBR was in breach of its level-of-service obligations. The Agency ordered HBR to initiate the repairs and to resume operation of the railway line “as expeditiously as possible.”

[41] On March 19, 2020, the Agency provided HBR with the opportunity to file submissions on whether the August 31, 2018, change in ownership of HBR constitutes a change in the facts or circumstances pertaining to the Initial Decision. In its response, HBR indicates only that “the change in ownership resulted in new information becoming available to HBR in September 2018 which was not available to HBR in Winter 2017 or under its previous ownership.” However, the Agency has found above that the extent of the damage to the railway line caused by the flooding in 2017 was discoverable prior to the Initial Decision, such that HBR has not established that new facts and circumstances exist. Therefore, the Agency is satisfied that HBR’s change in ownership that occurred in August 2018 does not constitute a new fact and circumstance for purposes of section 32 of the CTA.

[42] In light of the above, the Agency finds that HBR has not established that there has been a change in the facts or circumstances pertaining to the Initial Decision as provided for in section 32 of the CTA.

CONCLUSION

[43] The Agency dismisses HBR’s application for a review of Decision No. CONF-11-2018.