Decision No. 48-R-1999

February 5, 1999

File No. T 7375-3/97-2

---

APPLICATION

On June 9 and 16, 1998, Eagle Forest Products Limited Partnership (hereinafter EFPL) submitted to the Canadian Transportation Agency (hereinafter the Agency) its Bills of Costs that included, inter alia, costs arising from its application for review dated December 22, 1997.  On September 11, 1998, the Agency initiated pleadings on the issue of whether the Bills of Costs submitted by EFPL in June 1998 should be deemed to be a request for costs in respect of the application for review dated December 22, 1997. The Agency noted that the parties declined to file comments on this issue and, by way of letter dated September 25, 1998, the Agency determined that it would accept the said Bills of Costs as an application, pursuant to section 25.1 of the Canada Transportation Act (hereinafter the CTA), for an award of costs associated with the application for review filed on December 22, 1997 and initiated pleadings on the merits of such a request.

BACKGROUND

The origin of the current dispute arises from a final offer arbitration proceeding which commenced on January 23, 1997 in respect of the rates to be charged by the Canadian National Railway Company  (hereinafter CN) for traffic of oriented strand board originating from Miramichi.  In a decision dated May 30, 1997, the arbitrator decided in favour of the shipper by choosing the final offer of EFPL.  In accordance with this decision, CN was required to publish a tariff setting out the offer selected by the arbitrator.

On June 20, 1997, EFPL filed a complaint with the Agency in respect of CN’s implementation of the arbitrator’s decision.  In addition to an interim order, EFPL requested that the Agency order CN to properly set out, in its tariffs, the rates and conditions that were selected by the arbitrator.

By Decision No. 457-R-1997 dated July 17, 1997, the Agency determined that Tariff CNR 3030 was inconsistent with the selected offer as it imposed a restriction on the use of rates for movements to Canadian points which was not included in the offer selected by the arbitrator. More specifically, the Agency determined that the use of rates for movements to the five specified Canadian points in conjunction with transborder movements of traffic was not inconsistent with the selected offer. Accordingly, by Order No. 1997-R-453 dated July 17, 1997, the Agency ordered CN to issue, without delay, new tariffs in conformity with the selected offer, in order to remove from Tariff CNR 3030 the restriction imposed with respect to the availability of the rates to Canadian points in conjunction with transborder movements of traffic and to publish the rates and conditions associated with the offer selected by the arbitrator in respect of all the U.S.A. points specified in the offer.

On August 1, 1997, CN filed an application for review of Order No. 1997-R-453 and Decision No. 457-R-1997 alleging new facts and circumstances since the issuance of the decision and, alternatively, requesting that the Agency enforce the decision of the arbitrator. In support of its alternative request, CN raised two questions: whether, under the terms of the offer selected by the arbitrator, EFPL can legitimately use the rates specified for movements to Canadian points in respect of transborder traffic; and whether EFPL can legitimately request CN to transfer its traffic to a connecting carrier at other points than those specified in the selected offer.

On September 4, 1997, EFPL filed an application with the Agency, pursuant to section 25.1 of the CTA, requesting an award of costs incurred as a result of the application for review filed by the CN on August 1, 1997.

By Decision No. 649-R-1997 dated November 14, 1997, the Agency denied CN's application for review as it found no new facts or circumstances since the issuance of Decision No. 457-R-1997. With respect to CN's first question, the Agency determined that it had specifically addressed the question in its July 17, 1997 decision. In respect of the second question, the Agency determined, inter alia, that movements to Huntingdon, Quebec were not contemplated by the final offer selected by the arbitrator and, consequently, the terms and conditions for such movements should be governed by CN's regular tariffs. In respect of the application of EFPL for an award of costs, the Agency stated that it was not prepared to rule on that matter at that time and requested the parties to submit further arguments before making a final determination in that respect.

On December 22, 1997, EFPL filed an application for review of Decision No. 649-R-1997 alleging that new facts and circumstances had occurred since the issuance of the decision which warranted its reconsideration. EFPL requested that the Agency vary Decision No. 649-R-1997 by determining that the traffic of EFPL routed through Huntingdon and other interchanges that connect CN with Conrail in the Montréal/Valleyfield area are in compliance with the decision of the arbitrator. The Agency conducted a hearing on March 19 and 20, 1998 on this matter.

By Decision No. 177-R-1998 dated April 21, 1998, the Agency determined that there had been a change in the circumstances pertaining to the decision which warranted a review and variance of the decision. Therefore, the Agency varied Decision No. 649-R-1997 by determining that the traffic of EFPL, routed through Huntingdon at CN's request, was to be considered within the scope of the decision of the arbitrator and should be governed by the terms and conditions specified in the selected offer for the traffic destined to Montréal/Valleyfield.

By Decision No. 227-R-1998 dated May 19, 1998, the Agency determined that, in light of the success of EFPL in these matters and the determination that CN's application for review of August 1, 1997 was without merit, the request made by EFPL for an award of costs was appropriate and justified. In that same decision, the Agency also appointed Mr. Keith Penner, Member of the Agency, to assess the appropriate quantum of costs to be paid by CN, pursuant to subsection 25.1(2) of the CTA. Accordingly, on May 21, 1998, Mr. Penner initiated pleadings to gather information on the issue of quantum of costs to be awarded and requested that EFPL file a Bill of Costs setting out the fees and expenses that had been incurred directly and necessarily for the purposes of sustaining its position against the application for review filed by CN on August 1, 1997. EFPL filed Bills of Costs representing the fees and expenses incurred by EFPL from August 1997 to June 1998, for counsel, consultants and witnesses in respect of CN's application for review dated August 1, 1997, EFPL's application for review dated December 22, 1997 and EFPL's application for an award of costs. Given the apparent uncertainty created by Decision No. 227-R-1998 as to whether the award of costs included the costs associated with the application for review of EFPL dated December 22, 1997 or was limited to the costs resulting from the review application of August 1, 1997 and the divergent positions expressed by the parties to that effect, Mr. Penner submitted the matter to the Agency for consideration.

ISSUE

The issue to be addressed is whether the Agency should award costs to EFPL arising from its application for review of December 22, 1997 and its application for an award of costs.

POSITIONS OF THE PARTIES

EFPL requests that the Agency exercise its discretion to award costs to EFPL arising from the application for review of CN dated August 1, 1997. EFPL contends that those costs necessarily include the costs which EFPL was required to incur in pursuing its application dated December 22, 1997, as this review application was required to demonstrate that Decision No. 649-R-1997 ought to be amended to take into account the false representations that CN made in the original review proceedings.

In response to EFPL's allegation concerning the meaning of Decision No. 227-R-1998, CN contends that the Agency did not rule that CN had made false representations but rather accepted the evidence presented by EFPL instead of CN's. Moreover, CN stresses that costs should not be awarded as requested by EFPL on a solicitor-client basis but on a more objective basis such as the Tariff of the Federal Court.

CN also asserts that the present case does not involve the general public but represents a private matter between two parties in which EFPL has already gained financially from the corrective measures ordered by the Agency. Therefore, CN is of the opinion that an award of cost is not appropriate in this case.

ANALYSIS AND FINDINGS

Section 25.1 of the CTA states that:

1. Subject to subsections (2) to (4), the Agency has all the powers that the Federal Court has to award costs in any proceeding before it.
2. Costs may be fixed in any case at a sum certain or may be taxed.
3. The Agency may direct by whom and to whom costs are to be paid and by whom they are to be taxed and allowed.
4. The Agency may make rules specifying a scale under which costs are to be taxed.

As the Agency noted in Decision No. 227-R-1998 of May 19, 1998 in respect of EFPL's application for an award of costs arising from the application for review of CN dated August 1, 1997, the Agency has discretion regarding the award or denial of costs and each application is decided on its own merits. Although each application by EFPL for an award of costs constitutes a separate proceeding, the Agency notes that there is a very close link between the two proceedings since they relate to two review applications where the second application for review was necessitated by the first one.

Therefore, in considering whether costs should be awarded to EFPL, the Agency has examined the validity of the matters raised by EFPL in its application for review dated December 22, 1997 as well as any other relevant facts related to the earlier proceedings between the two parties.

In support of its application for review, EFPL argued that it was at the request of CN that it had issued shipping instructions requesting that its traffic be routed through Huntingdon and that this element constituted new facts and circumstances sufficient to warrant the revision of Decision No. 649-R-1997 by determining that the traffic of EFPL routed through Huntingdon and other interchanges that connect CN with Conrail in the Montréal/Valleyfield area was in compliance with the decision of the arbitrator.

The evidence collected during the public hearing revealed that EFPL was seeking to interchange its traffic with Conrail at Montréal and/or Valleyfield in accordance with the arbitrator's decision. The evidence confirmed that it was at the initial request of CN that EFPL issued instructions for the routing of its traffic through Huntingdon in order to accommodate CN's computer and billing requirements. The Agency found that this context was fundamentally different from the situation portrayed by CN during the review proceedings which led to the issuance of Decision No. 649-R-1997. The Agency concluded that CN had itself created this issue by requesting EFPL to route its traffic for interchange with Conrail at Huntingdon and then invoking the review provisions of the CTA to get confirmation of the inability of EFPL, under the terms and conditions of the selected offer, to route its traffic through Huntingdon without specifying the circumstances under which EFPL routed its traffic through that point.

By Decision No. 177-R-1998, the Agency determined, based on the difference between the facts presented by CN at the time of its application for review on August 1, 1997 and the evidence presented at the hearing on March 19 and 20, 1998 in respect of the circumstances surrounding the use of Huntingdon, that there had been a change in the circumstances pertaining to this particular aspect of the decision of such magnitude that it warranted a reconsideration of the decision.

The Agency concluded that in such context where both EFPL and CN have agreed to use an alternate routing and to interchange the traffic with Conrail at a point other than those specified in the selected offer in order to accommodate particular operational difficulties experienced by the carrier, such traffic should not be considered outside of the decision of the arbitrator.

The Agency has examined the argument of CN which asserts that costs should not be awarded because the present case represents a private matter between two parties in which EFPL has already gained financially from the corrective measures ordered by the Agency. The Agency acknowledges that this matter may be categorized as a private matter between two parties; however, the Agency is of the view that the critical point in the determination of entitlement to the present award relies on the fact that the second application for review was necessitated by CN's application for review dated August 1, 1997, which was revealed to be, at the conclusion of the second proceeding, wholly without merit. In fact, the Agency determined at the conclusion of the second proceeding, that CN had only been successful, in part, in the first proceeding due to submissions which had misled the Agency. As a result, these proceedings have forced EFPL to incur further expenses to sustain its position.

The Agency does not, as a matter of course, award costs in matters before it. However, in consideration of the fact that the question concerning the validity of Huntingdon as an interchange point for traffic moving under the terms of the selected offer was necessitated by CN's submissions in the course of the first application for review and the fact that the question was ultimately answered in favour of EFPL at the conclusion of the second application for review, the Agency has determined that the application filed by EFPL for an award of costs arising from its application for review dated December 22, 1997 is appropriate and justified and that costs should be awarded to EFPL. In light of this result and the fact that the Agency has granted, in Decision No. 227-R-1998, the application of EFPL for an award of costs arising from the application for review of CN, the Agency has determined that the costs arising from EFPL's application for an award of costs in June 1998 should also be awarded to EFPL.

A taxing officer will conduct pleadings to gather information on the issue of quantum of costs to be awarded. At the end of the pleadings and upon receipt of all necessary documentation, the taxing officer will make a determination as to the amount of costs to be awarded.

CONCLUSION

Accordingly, the Agency hereby awards to EFPL the costs arising from its application for review dated December 22, 1997 and its application for an award of costs in June 1998. In addition, pursuant to subsection 25.1(3) of the CTA, the Agency hereby appoints Mr. Keith Penner, Member of the Agency, as the taxing officer to determine the costs to be taxed and allowed, which costs shall be paid by CN.