Decision No. 123-R-2005

March 4, 2005

March 4, 2005

APPLICATION by Gordon and April Machej pursuant to section 26 of the Railway Safety Act, R.S.C., 1985, c. 32 (4th Supp.) for a determination of the compensation to be paid by the Canadian National Railway Company for the proposed sale and transfer of a quarter section of land near the town of Middlebro, in the province of Manitoba, from Gordon and April Machej to the Canadian National Railway Company, and the removal of sand and gravel from the land by the railway company.

File No. R8020-11


APPLICATION

[1] On October 19, 2004, Gordon and April Machej filed with the Canadian Transportation Agency (hereinafter the Agency) the application set out in the title. On November 26, 2004, the Canadian National Railway Company (hereinafter CN) filed its answer to the application and on December 2, 2004, Mr. and Mrs. Machej filed their reply to CN's answer.

[2] On December 22, 2004, CN submitted comments on Mr. and Mrs. Machej's reply and stated that the reply raised new elements which should have been disclosed in the original application. On January 12, 2005, Mr. and Mrs. Machej responded to CN's December 22, 2004 submission.

[3] Pursuant to subsection 29(1) of the Canada Transportation Act, S.C., 1996, c. 10 (hereinafter the CTA), the Agency is required to make its decision no later than 120 days after the application is received unless the parties agree to an extension. In this case, the parties have agreed to an extension of the deadline until March 9, 2005.

BACKGROUND

[4] CN had plans to extend a siding on its Sprague Subdivision in Middlebro, Manitoba. In order for the project to be realized as planned, CN needed to conclude agreements with the landowners whose land abutted the railway company's right of way. Mr. and Mrs. Machej, the registered owners of a quarter section of land abutting the railway, which property is identified as SE1/4 - Sec 7 - Twp 1 - Rge 16 - EPM (hereinafter the subject property), were landowners of one of the properties. These agreements included provisions for the construction of a private road to provide access to a parcel of land abutting the subject property and the railway that was affected by the construction of the siding extension and the related closure of a public crossing at mileage 47.51 of the Sprague Subdivision. Following construction of the road, CN intended to turn it over to the Rural Municipality of Piney (hereinafter the RM).

[5] Following negotiations for the sale and transfer of the subject property, CN offered Mr. Machej a lump sum of $36,000 for his property on August 22, 2003. This offer, which included a proposed transfer of title date of January 1, 2004, was subject to CN reaching agreements with other affected property owners and obtaining the approval of the RM for the siding construction and closure of the public crossing. CN stated that upon Mr. Machej's acceptance, it would make arrangements for preparation of a formal letter confirming the terms and conditions and an Agreement. The offer was acknowledged and accepted by Mr. and Mrs. Machej on August 23, 2003.

[6] On September 11, 2003, CN informed Mr. Machej that it had obtained signed documents indicating acceptance in principle from other property owners and only required approval from the RM. CN also advised, as confirmation of the agreement between Mr. Machej and CN in an earlier telephone conversation of the same date, that construction was to start promptly and that Mr. Machej's co-operation was appreciated as it would be necessary to enter his property prior to the closing of the sale.

[7] On October 28, 2003, Mr. Machej requested that CN confirm the amount of material (gravel, sand and stone) removed from below ground level of the subject property advising that he considered the removal of the material without appropriate authority or approval a serious matter. CN responded on October 31, 2003 that materials used for the construction of the siding extension were not taken from the subject property and that any materials disturbed or relocated from the subject property had been used in the construction of the new access road.

[8] On November 3, 2003, Mr. Machej, on behalf of a numbered company 4270828 Manitoba Ltd., advised CN that the numbered company held a quarry lease at SE7-1-16E and expected compensation for material (gravel, sand and stone) used by CN in the project at Middlebro. CN was also requested to advise of the tonnage of material utilized.

[9] On November 13, 2003, CN and the RM completed the execution of an agreement, which came into effect on October 14, 2003, with respect to the road to be constructed by CN.

[10] On November 12, 2003, CN again confirmed that the material used for the track grade was taken from the property to the east of the subject property. CN also stated that the material quantities used for the roadway were unknown and that should any royalties be pending, it would be the general contractor's obligation to cover such cost, and advised that Mr. Machej's concerns would be addressed prior to its final payments to its contractor.

[11] On December 17, 2003, in response to a request made by Mr. Machej on behalf of the numbered company, CN confirmed that approximately 3,500 cubic yards of sand and gravel from the subject property was used to construct the roadway. CN questioned why the matter of royalty payments had not been mentioned as early as the conversation on September 11, 2003, wherein it was agreed that access to the subject property would be required in order to permit construction of the roadway. CN also requested a copy of the quarry lease.

[12] On February 3, 2004, Mr. Machej, on behalf of 4270828 Manitoba Ltd., confirmed that the quarry lease is registered as Quarry Lease No. 1696, and advised that section 25 of the Quarry Minerals Regulation of the Province of Manitoba requires royalty payments and rehabilitation levies to the Province. Mr. Machej suggested that CN compensate 4270828 Manitoba Ltd. at a rate of $3 per metric tonne of material used of which 45 cents would be remitted by the numbered company to the Province of Manitoba.

[13] On February 19, 2004, CN forwarded the Agreement of Purchase and Sale, for the acquisition of the land only, to Mr. Machej. CN indicated that the issue of the quarry lease would be settled separately with Mr. Machej by CN's Engineering office in Winnipeg.

[14] On April 26, 2004, Mr. and Mrs. Machej's counsel requested that CN resolve both matters by submitting payment of the sum of $50,280 ($36,000 for the land, and $14,280 for the removal of sand and gravel) and the transfer of land document referred to in the February 19 letter, following which Mr. and Mrs. Machej would supply the signed agreement and the transfer of land document.

[15] On May 6, 2004, Mr. and Mrs. Machej signed the CN Agreement of Purchase and Sale.

[16] On August 4, 2004, Mr. and Mrs. Machej's counsel informed CN that it had seven days to provide payment in full, including interest and legal costs, for the acquisition of the land only, or no access would be allowed over the roadway across the subject property. It was also confirmed that the land deal did not include the quarry lease.

PRELIMINARY MATTER

[17] Both CN and Mr. Machej filed additional material following the close of pleadings. The Agency, pursuant to section 4 of the Canadian Transportation Agency General Rules, SOR/2005-35, accepts these submissions as being relevant and necessary to its consideration of the matter.

ISSUES

[18] The issues to be addressed are whether the Agency has the jurisdiction to determine compensation pursuant to section 26 of the Railway Safety Act (hereinafter the RSA) and if so, what compensation, if any, should be paid by CN to Mr. and Mrs. Machej.

POSITIONS OF THE PARTIES

[19] Mr. and Mrs. Machej have been unable to resolve the matter of the sale and transfer of the subject property. Mr. Machej has also been unable, on behalf of 4270828 Manitoba Ltd., to resolve the matter of any payments that may be required for the use of material from the subject property for the construction project at Middlebro with CN. He therefore requests that the Agency determine the appropriate compensation that he, his wife and 4270828 Manitoba Ltd. are entitled to pursuant to section 26 of the RSA.

[20] According to Mr. and Mrs. Machej, the matters raised in the application are fully within the jurisdiction of the Agency to consider pursuant to the RSA. Mr. and Mrs. Machej state that they have suffered substantial harm as the railway crossing has been closed, the siding extension is in full operation, trees, sand and gravel have been removed from the subject property, and a private road access has been constructed across the property which will cause a loss of access to the property. Mr. and Mrs. Machej request compensation in the amount of $36,000 plus interest and legal fees, for the purchase of the land, and Mr. Machej, on behalf of 4270828 Manitoba Ltd., requests compensation in the amount of $14,280 for the sand and gravel used from below ground level of the subject property without the necessary authority, for a total of $51,560.16. Mr. and Mrs. Machej claim that they have negotiated in good faith with respect to the agreement for the subject property.

[21] CN submits that the Agency should reject the application as it does not fall within the ambit of section 26 of the RSA, as the compensation requested by Mr. Machej is not in respect of actions taken pursuant to either subsection 24(2) or 25(3) of the RSA. CN states that the compensation requested by Mr. Machej is in respect of the acquisition of land and the valuation of those lands required for the construction of a road resulting from railway needs. CN argues that in the absence of an agreement with the landowner, the valuation of these lands and the compensation are to be done in accordance with the provisions of the applicable expropriation laws. With respect to the agreement for the subject property, CN claims that it has negotiated in good faith and that Mr. Machej has in effect repudiated the agreement by virtue of his actions.

ANALYSIS AND FINDINGS

[22] In making its findings, the Agency has considered all of the evidence submitted by the parties during the pleadings.

[23] Section 26 of the RSA provides, in part, as follows:

26. (1) Where the parties cannot agree on the compensation referred to in subsection 24(2) or 25(3), any of those parties may, if no right of recourse is available under Part III of the Canada Transportation Act, refer the matter to the Agency for a determination.

(2) A reference to the Agency under subsection (1) shall be made by notice in a form prescribed by the regulations made under subsection (5), and that notice shall be accompanied by such information as is prescribed by those regulations.

(3) The Agency may, in its discretion, by notice given to the person referring a matter, require that person to give the Agency, within such period as it specifies in the notice, such further information relating to the compensation claimed as the Agency specifies in the notice.

(4) Where a matter is referred to the Agency under subsection (1), the Agency shall determine the amount of compensation to be paid by the railway company to the owner, lessee or occupier in question.

[24] Sections 24 and 25 of the RSA state, in part, that:

24. (1) The Governor in Council may make regulations

(a) respecting

(i) the control or prohibition of the construction or alteration, or

(ii) the control of the maintenance of buildings and other structures, not being railway works, erected or proposed to be erected above or below a line of railway, or on land adjoining the land on which the line is situated, to the extent only that is necessary to prevent those buildings or structures from constituting a threat to safe railway operations;

(b) respecting the control or prohibition of the construction, alteration or operation of any mine or other works, not being railway works, constructed or proposed to be constructed below or on land adjoining the land on which a line of railway is situated, to the extent only that is necessary to prevent those mines or works from constituting a threat to safe railway operations;

(c) respecting

(i) the control or prohibition of the construction or alteration, and

(ii) the control of the maintenance, on land adjoining the land on which a line of railway is situated, of drainage systems that would constitute a threat to safe railway operations;

(d) respecting the control or prohibition of the presence or storage, on land adjoining the land on which a line of railway is situated, of specified materials;

(e) respecting

(i) the removal of anything, including trees or brush, that might, by obscuring clear vision either of a road or of a line of railway, constitute a threat to safe railway operations,

(ii) the removal of weeds that are on or along lines of railway, and

(iii) the use of alternatives to chemical pesticides under subparagraphs (i) and (ii);

(f) for restricting or preventing, by means of fences, signs or any other means, access to the land on which a line of railway is situated by persons, other than servants or agents of the railway company concerned, by vehicles, or by animals, where the presence of persons, vehicles or animals on that land would constitute a threat to safe railway operations;

(f.1) respecting the construction, alteration and maintenance of roads for the purpose of ensuring safe railway operations;

(f.2) respecting the control of vehicular and pedestrian traffic on road approaches to road crossings for the purpose of ensuring safe railway operations; and

(g) respecting the control or prohibition of any other activity, on land adjoining the land on which a line of railway is situated, that could constitute a threat to safe railway operations.

(. . .)

(2) Where the owner, lessee or occupier of land adjoining the land on which a line of railway is situated, the owner, lessee or occupier of any building or other structure erected on that adjoining land, or the owner of any mine or other works operated on that adjoining land, suffers a loss by reason of the operation of the regulations made under this section, the railway company operating that line of railway shall pay to that person such compensation in respect of that loss as is agreed to between the railway company and that person or, failing such agreement, as is determined pursuant to section 26.

25. (1) For the purpose of preventing a threat to safe railway operations on a line of railway operated by a railway company, or for the purpose of restoring safe railway operations on a line of railway operated by a railway company,

(a) the company may

(i) at any time, enter onto any land adjoining the land on which the line of railway is situated for the purpose of maintaining or altering railway works or removing obstructions to them if no other access to the line of railway is reasonably available, and

(ii) remain on the land for as long as is necessary to accomplish that purpose;

(b) the company may, at any time, enter onto any land adjoining the land on which the line of railway is situated for the purpose of dealing with any fire occurring on either of those lands;

(c) the company may, at any reasonable time, on giving notice in writing of its intention to do so to the owner of any land adjoining the land on which the line of railway is situated, enter onto that adjoining land to cut down trees or brush that has been permitted to grow on that land in contravention of regulations made under paragraph 24(1)(e); or

(d) the company may, at any time between November 1 and March 31, enter onto any land adjoining the land on which the line of railway is situated to install or maintain a snow fence.

(1.1) For the purpose of preventing a threat to safe railway operations at a road crossing, a road authority may at any reasonable time enter onto any land in the vicinity of the road crossing to cut down trees or brush that has been permitted to grow on that land in contravention of regulations made under paragraph 24(1)(e), if the road authority gives notice in writing to the owner of the land of its intention to do so.

(2) A railway company that installs a snow fence on any land shall cause that snow fence to be removed on or before April 1 next following the date of its installation.

(3) If the owner, lessee or occupier of adjoining land suffers a loss because of the exercise by a railway company or a road authority of a power conferred by this section, the railway company or road authority shall pay to that person any compensation in respect of that loss that they may agree on or, failing an agreement, that is determined under section 26, but the payment of compensation is not a condition precedent to the exercise of the power.

[25] In order for the Agency to determine whether it has the jurisdiction to determine compensation pursuant to section 26 of the RSA, it must first consider whether either subsection 24(2) or 25(3) of the RSA applies to the circumstances in question. In this case, the pleadings clearly establish that CN and Mr. and Mrs. Machej freely entered into negotiations for the sale and transfer of the subject property. In particular, the Agency notes CN's submission dated September 11, 2003 which referred to Mr. and Mrs. Machej's acknowledgement and acceptance dated August 23, 2003 of CN's offer to purchase the subject property dated August 22, 2003. In that submission, CN confirmed a telephone conversation with Mr. Machej of the same date, wherein it had been agreed that construction was to start promptly and that Mr. Machej's co-operation was appreciated as it was necessary to enter his property prior to the closing of the sale. Based on the evidence, the Agency is of the opinion that CN's actions on the subject property were the product of the ongoing negotiations for the sale and transfer of the property. There is no evidence that CN's actions were the result of the operation of any regulation made pursuant to section 24 of the RSA or the exercise by CN of a power conferred to it by section 25 of the RSA.

[26] In light of the foregoing, the Agency finds that any loss that may have been suffered by Mr. and Mrs. Machej in connection with the sale and transfer of the subject property was not by reason of the operation of any regulation made pursuant to section 24 of the RSA or by the exercise by CN of a power conferred to it by section 25 of the RSA. Therefore, the Agency has no jurisdiction to determine compensation pursuant to section 26 of the RSA.

[27] In respect of the separate matters of a quarry lease and the associated claim for royalty payments, the Agency is of the opinion that there is no evidence that such matters were the result of the operation of any regulation made pursuant to section 24 of the RSA or the exercise by CN of a power conferred to it by section 25 of the RSA. Furthermore, the Agency is of the opinion that these matters fall within the jurisdiction of the Province of Manitoba. In light of the foregoing, the Agency finds that it has no jurisdiction to address these matters pursuant to section 26 of the RSA.

CONCLUSION

[28] In light of the above findings, the Agency hereby dismisses Mr. and Mrs. Machej's application.

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