Decision No. 656-W-2005

October 31, 2005

IN THE MATTER OF a complaint by Adventure Tours Inc. against the St. John's Port Authority pursuant to subsection 52(1) of the Canada Marine Act, S.C., 1998, c. 10.

File No. W9150-5

---

COMPLAINT

[1] On June 3, 2005, Adventure Tours Inc. (hereinafter ATI) filed a complaint with the Canadian Transportation Agency (hereinafter the Agency) alleging that the per passenger fee charged by the St. John's Port Authority (hereinafter the SJPA) to tour boat operators is unjustly discriminatory, unfair and poses undue hardship.

ISSUE

[2] The issue to be addressed is whether the Agency has jurisdiction to hear the complaint and if so, whether the per passenger fee charged by the SJPA to tour boat operators is unjustly discriminatory within the meaning of the Canada Marine Act (hereinafter the CMA).

LEGISLATIVE REFERENCE

[3] Under the CMA, port authorities are empowered to set fees for their services in accordance with the following provisions:

49.(1) A port authority may fix fees to be paid in respect of

(a) ships, vehicles, aircraft and persons coming into or using the port;

(b) goods loaded on ships, unloaded from ships or transhipped by water within the limits of the port or moved across the port; and

(c) any service provided by the port authority, or any right or privilege conferred by it, in respect of the port.

(2) A port authority may fix the interest rate that it charges on overdue fees.

(3) The fees fixed by a port authority shall be at a level that permits it to operate on a self-sustaining financial basis and shall be fair and reasonable.

50.(1) A port authority shall not unjustly discriminate among users or classes of users of the port, give an undue or unreasonable preference to any user or class of user or subject any user or class of user to an undue or unreasonable disadvantage.

(2) It is not unjust discrimination and it is not an undue nor an unreasonable preference or disadvantage for a port authority to differentiate among users or classes of users on the basis of the volume or value of goods shipped or on any other basis that is generally commercially accepted.

[4] Under the CMA, the Agency has a mandate to investigate complaints concerning fees set by port authorities as follows:

52.(1) Any interested person may at any time file a complaint with the Agency that there is unjust discrimination in a fee fixed under section 49(1), and the Agency shall consider the complaint without delay and report its findings to the port authority, and the port authority shall govern itself accordingly.

POSITIONS OF THE PARTIES

Adventure Tours Inc.

[5] ATI is a company that offers sightseeing and boat tours from St. John's harbour. ATI highlights that the tour vessel SCADEMIA has been a major tourist attraction in the city of St. John's since 1986 and that the company has been a major proponent of the redevelopment of Pier 7 for the tourism initiatives of the SJPA.

[6] According to ATI, in the fall of 2003, previous to the publication of a new rate schedule, the SJPA began construction of a development at Pier 7 of the waterfront apron which SJPA has presented as being its new tourism initiative. Part of the Pier 7 development included seasonal kiosks from which tour operators could sell their tickets and retailers could sell their wares.

[7] ATI indicates that, in March 2004, the SJPA implemented a new rate schedule which, for the first time, included a per passenger fee for tour boat operators who did not rent a kiosk on Pier 7. ATI states that the lease contract for a kiosk for tour boat operators included an exemption from the per passenger fee. ATI submits that this new per passenger fee was implemented to force tour boat operators to rent kiosk space.

[8] ATI indicates that the rental rates for the smaller kiosks are $6,000 plus HST annually and $12,000 plus HST for the largest one known as the "pavilion". ATI notes that the SJPA requires that the rent be paid over a five-month period, which means a payment of $1,200 plus HST for the smaller kiosks and $2,400 plus HST for the pavilion.

[9] ATI states that initially the operating season was from May 1 to October 31 each year for all tenants but for the 2005 season, the rent has been adjusted downward for the retail operators to $4,100 for a shortened operating period from June 15 to September 15. ATI indicates that no reduction was offered to the tour boat operators.

[10] ATI underlines that it experienced a significant reduction in revenue with its tour boat operation during the 2004 season and lost money. Therefore, ATI says that it has been forced to reduce costs. ATI notes that it would have fared better by paying the per passenger fee for 2004 than to rent the pavilion. ATI decided not to rent the pavilion for 2005 and has tried to negotiate a more favourable rent for a smaller kiosk for 2005 - albeit unsuccessfully.

[11] ATI argues that due to this inability to negotiate a rate for a kiosk with the SJPA, ATI has refused to enter into a lease for a kiosk for the summer of 2005. However, by not renting a kiosk, ATI will not be exempt from the passenger fee of $1.27 per passenger. ATI affirms that given that the SJPA was insisting on collecting the per passenger fee and not awaiting the results of this complaint, and given that ATI is hoping for a profitable year, it was forced to rent a kiosk for 2005 to avoid paying the per passenger fee for the balance of the summer.

[12] ATI states that the SJPA has indicated that the per passenger fee calculation is based upon 70 percent of total capacity for tour boat operators. ATI is of the view that this is not fair and reasonable when the business operates at a much lower capacity.

[13] ATI argues that the SJPA has a monopoly on the St. John's waterfront and that it is the only location in St. John's from which ATI can operate its tour boat. Accordingly, ATI argues that if the SJPA refuses to negotiate a rental rate for a kiosk Pier 7 development, ATI is subject to the per passenger fee as set by the tariff, which could be twice or three times the rental charged at the development depending upon the results of the season.

[14] ATI suggests that depending upon the success of the season, the per passenger fee could be an additional charge in excess of $19,000 in fees to be paid to the SJPA. This would be in addition to annual berthage costs. ATI states that it simply cannot afford this extra cost. It further states that there is no financial justification for this per passenger fee and, as such, it is unfair and poses an undue hardship on ATI's seasonal operation.

[15] ATI disagrees with the SJPA's argument that tour boat operators have never been assessed any charge or fee for the use of Port property and facilities. ATI mentions that it pays annual wharfage fees and that the berthage paid is calculated on the same basis as all other ships. ATI adds that it has paid for the installation of shore power for its vessels three times in the years it has operated from the waterfront and that garbage collection has always been its responsibility. ATI states that tour boat operators do not avail themselves of any other services or facilities.

[16] ATI submits that the SJPA is self sustaining and has shown surpluses year after year. ATI notes that the SJPA is not operating in the red and it does not require this additional tax that the SJPA wants to impose on seasonal operators whose livelihood is so dependent upon the inconsistencies of the weather and tourists.

[17] ATI states that it is not opposed to paying a fair and reasonable rent to the SJPA for space to sell its product; however, it wants fair treatment without the threat of the harsh penalty of the imposition of the per passenger fee if a negotiated lease cannot be achieved.

[18] Therefore, ATI respectfully submits that the per passenger fee to be imposed by the SJPA for tour boat operators be ruled unjustly discriminatory pursuant to subsection 52(1) of the CMA.

St. John's Port Authority

[19] In its answer to ATI's complaint, the SJPA states that at the time of the complaint, ATI had executed neither a lease nor a licence with the SJPA, one of which is a prerequisite to operating in the Port as per section 23 of the Port Authorities Operations Regulations, made pursuant to the CMA. As no commercial agreement has been executed, the SJPA submits that ATI cannot be said to be a "user" within the meaning of section 5 of the CMA, which defines "user" as "a person that makes commercial use of, or provides services at, the port".

[20] Accordingly, the SJPA argues that the Agency has no jurisdiction to hear this matter, given that the remedy provided in sections 50 and 52 of the CMA is directed to commercial users of a port.

[21] The SJPA adds that on June 15, 2005, it had to issue a Detention Order on the complainant's vessels because the complainant had failed to execute either a lease or a licence with the SJPA, either of which is required in order to operate, and that as such it operated contrary to section 23 of the Port Authorities Operations Regulations and paragraphs 115(1)(a) and (b) of the CMA.

[22] The SJPA is also of the opinion that it would be contrary to the spirit and intent of the CMA, as well as the general laws of equity, if a party in clear violation of the CMA were to be afforded a remedy or even a hearing. The SJPA claims that "one must come to Court with clean hands". Therefore, the SJPA requests that the complaint be dismissed.

[23] With respect to the per passenger fee, the SJPA states that the passenger fee at issue was implemented on March 1, 2004, after the requisite public notice. The fee assessed tour boat operators for 2005 is $1.27 per passenger. The SJPA states that by comparison, the complainant's tour fee structure is $50 per tour per adult; $45 per tour per senior citizen; $35 per tour per student; and $25 per tour per child.

[24] The SJPA points out that the rationale for implementing a per passenger fee is to recover from tour boat operators a fair and reasonable contribution to the cost of operating the port. The SJPA states that while tour boat operators have always paid a modest berthage fee for their vessels, they have never been assessed any charge or fee for the use of port property and facilities to conduct business. The SJPA is of the view that this practice is contrary to that applied to all other port users and results in tour boat operators not bearing their fair share of port operating expenses.

[25] The SJPA claims that the passenger fee is not discriminatory as it is applied equally and without discrimination to all those engaged in the activities as described in the rate schedule, with the exception of tour boat operators renting a kiosk at Pier 7.

[26] The SJPA states that since the fee was implemented, it has seen application with only one user. The SJPA indicates that this user, which was not the complainant, was charged the fee pursuant to its licence agreement and the fee was paid without issue.

[27] According to the SJPA, by resolution dated September, 2003, the SJPA Board of Directors provided for an alternative to the $1.27 passenger fee insofar as tour boat operators electing to lease a kiosk at Pier 7 would not be required to remit the $1.27 passenger fee. The SJPA points out that the terms and conditions of the said lease provided for a waiver of the passenger fee in consideration of rent payable.

[28] The SJPA states that this option was available equally to all tour boat operators, including ATI and that ATI took advantage of this option and leased a kiosk from the SJPA in 2004 and has done so again as of June 24, 2005.

[29] The SJPA submits that neither the fee schedule nor the lease option can be said to be discriminatory in any manner. Should the Agency determine otherwise and hold that the fee schedule of the lease option is discriminatory, then the SJPA further submits that such discrimination is not "unjust" within the meaning of the CMA, but rather fair, reasonable and commercially sound.

[30] The SJPA is of the view that in providing for a lease option, it has not given an "undue or unreasonable preference to any user...or subject any user...to an undue or unreasonable disadvantage," as per subsection 50(1) of the CMA. The SJPA claims that given the complainant's assertion that the passenger fee for 2005 would amount to some $19,000, the rental rate of the kiosks, at $6,000 per season, is markedly less expensive.

[31] The SJPA also submits that the passenger fee is fair and reasonable because those who are required to pay the fee are those who benefit from the purposes for which the fee is imposed, that being the recovery of the investment and cost associated with the provision of facilities and infrastructure. The SJPA claims that it cannot be said to be unreasonable for tour boat operators to be assessed the fee because the proceeds from the passenger fee, while intended to cover the operational expenses of the piers involved, do not do so to the extent required.

[32] Based on the above, the SJPA respectfully submits that the complaint be dismissed.

PRELIMINARY MATTERS

Jurisdiction to hear the complaint

[33] The first question raised in the SJPA's pleadings is whether the Agency has jurisdiction to hear ATI's complaint as, according to the SJPA, ATI is not a "user" of the Port, within the meaning of the CMA.

[34] Subsection 52(1) of the Canada Marine Act is relevant to the present question:

Any interested person may at any time file a complaint with the Agency that there is unjust discrimination in a fee fixed under subsection 49(1), and the Agency shall consider the complaint without delay and report its findings to the port authority, and the port authority shall govern itself accordingly.

[35] Subsection 52(1) clearly states that any interested person may file a complaint with the Agency. It is not mandatory to be a port user to be heard before the Agency. Relative to the argument that "one must come to Court with clean hands", the Agency is not a Court of equity. In any event, the CMA requires only that a complainant be an interested person, which ATI is.

Agency's jurisdiction on port authorities' leases

[36] The Agency notes that throughout the pleadings, both parties made several references to the fairness of the lease rate imposed by the SJPA to rent a kiosk at its Pier 7 development. As set out in Order in Council No. P.C. 2000-889 dated June 9, 2000, the Agency has no jurisdiction over the terms or conditions set out in property leases negotiated between a port authority and its users.

AGENCY DETERMINATION ON SUBSTANTIVE ISSUE OF DISCRIMINATION

Decision of Member Beaton Tulk, panel chair

[37] The CMA represents a marked departure in Canada's historical approach to port management. This law envisages federal ports operating autonomously, with a minimum of government intervention, with matters such as commercial viability, attention to costs and competition being fundamental - having due regard to a safe and secure port system for Canada. This approach is to be contrasted with that in existence prior to the passage of this law wherein the federal government actively managed the day to day commercial affairs of ports.

[38] Yet, while the law advocates port autonomy and the application of commercial principles to port operation, there is a limit to a port's operating freedom. In Harlequin Cruises Inc. et al against the Toronto Port Authority (Decision No. 437-W-2003) dated July 31, 2003 (hereinafter the Harlequin Cruises case), the Agency found that this new freedom " ... is not boundless". Rather, the Agency found that it is curtailed by section 50 in the Canada Marine Act, which prescribes that a port authority shall not:

... unjustly discriminate among users or classes of users of the port, give an undue or unreasonable preference to any user or class of user or subject any user or class of user to an undue or unreasonable disadvantage.

[39] Persons who feel that this provision has not been respected may file a complaint with the Agency whereupon the Agency shall consider the complaint and report its findings to the port authority. Upon receipt of this report the port authority "shall govern itself accordingly". As a regulatory rate review mechanism, it falls short of requiring the Agency to review and to set an appropriate rate, nevertheless, it represents Parliament's intention to place a limit on a port's rate setting freedom.

[40] The policies behind such an approach are fully set out in the Harlequin Cruises case. Suffice it to say, the policy acknowledges that ports are basically monopolists within their geographic spheres in the provision of port services. The potential for abuse of the market power held by a monopolist is at the root of the present review provision.

[41] In the instant case, the SJPA has created a tariff that prescribes a rate of $1.27 per passenger which, according to ATI, will result in it having to pay approximately $19,000 per year in port charges. This will be in addition to the berthage charges that are levied on vessels using the port.

[42] This passenger fee contrasts to the fixed charge that tour boat operators may pay the port, in lieu of paying the per passenger levy. This latter charge represents a rental fee for the use of kiosks located on Pier 7. It totals $6,000 or $12,000 per year (depending on the size of the kiosk rented) and is payable over 5 months of operation (May 1 to October 1 in each year). This rental fee is apparently an adjunct to the passenger tariff and was introduced in a resolution adopted by the Port's Board of Directors in September 2003.

[43] I find that the Directors' resolution and the tariff work in conjunction with each other in a manner that gives tour operators such as ATI the opportunity to choose between paying either the passenger levy or the rental fee - but never both. What this means in terms of the prohibitions set out in section 50 of the CMA is that within one class of port users (in this case, tour boat operators) there are two sub-classes or two different treatments being (i) those who pay the per passenger levy, and (ii) those who pay the rental fee for a kiosk.

[44] By definition, this constitutes discrimination because in its application it creates a distinction between individuals within the same group. Notably, it has the effect of imposing a financial burden on one that is not borne by the other (see Andrews v. Law Society (British Columbia), [1981] 1 S.C.R.143). Put another way, operators who pay the per passenger fee, according to the tariff, do not get to use a kiosk on the pier while those who pay the kiosk rental, which is not a tariff matter, do not have to pay a per passenger levy.

[45] Subsection 50(2) of the CMA establishes that it is not unjust discrimination to differentiate among users or classes of users on the basis of the volume or value of goods shipped or on any other basis that is generally commercially accepted. While I do not find that the discrimination here is based upon volume or value of goods shipped, I do find that there is a discrimination that is based upon generally accepted commercial principles.

[46] The information filed shows that the SJPA began construction of Pier 7 in the fall of 2003, which represented, in the words of ATI, "their new tourism initiative". Kiosks were constructed on the pier apron as part of the project and efforts were made to attract a restaurant. ATI indeed attributes part of the effort to renovate the Pier as being due to ATI who had been conducting business in the area since 1986 - suggesting at one point in its pleadings that as it had been in business for this long, other tour operators should be given second priority in terms of kiosk rental - with the priority given to ATI.

[47] ATI also indicated that the pier development was carried out, at least in part, with public funds. I find that the investment in the Pier 7 construction is significant and, in the words of ATI, represents a serious tourism initiative by the Port. The information shows that during the first two years of operation the kiosks were not fully rented. In light of the investment undertaken in this project, I find it reasonable to conclude that the SJPA has a legitimate business interest in ensuring that the kiosks are occupied to the extent possible and that it is reasonable that this can be accomplished by offering tour operators, like ATI, a financial incentive to occupy the kiosks during the operating season.

[48] It is conceivable that the SJPA sees the kiosks as important in the development of the site to the extent that operators here, whether tour operators or retailers, will attract tourists to the area. This, in turn, has economic spin-offs that reasonably go toward the viability of the Pier 7 project.

[49] In this light, I find that the two-tiered approach available to tour operators (that is, payment of the passenger fee or the reduced kiosk rental) is commercially defensible, indeed, in these circumstances it is a reasonable solution to the commercial viability of the Pier 7 and potentially of the port itself.

[50] For the above reasons, I find that the passenger fee tariff is discriminatory but it is a discrimination that is not unjust as provided for in subsection 50(2) of the CMA. Specifically, I find that in this case the discrimination is based upon a commercially accepted economic strategy that is fundamental to the development of the Pier 7 tourist initiative. The complaint filed by ATI against the St. John Port Authority claiming that the per passenger fees levied against tour boats operating in that port is, therefore, dismissed.

Decision of Member George Proud

[51] I have read the reasons of Member Tulk and I too dismiss this complaint, but for different reasons.

[52] Based upon my review of the pleadings in this matter, it is not necessary for me to enter into an assessment under subsection 50(2) of the CMA of whether or not any discrimination, if so found, is based upon generally accepted commercial principles or is otherwise supportable due to the volume or value of goods shipped.

[53] This case is not one of berthage fees where, for example, all port users are obligated to pay a fee based upon a system such that some users in a given class end up paying more than others further to some arbitrary distinction. To the contrary, in this case all tour operators have a choice as all operators including ATI can determine a method of payment.

[54] On the one hand, as part of being granted access to Pier 7, operators can pay the per passenger levy. This levy would be payable based obviously on the number of passengers that are carried during the operating season.

[55] Conversely, operators can pay a lump sum in lieu of the passenger levy. This sum according to the submissions filed with the Agency is payable monthly - during the 5-month operating season. Ostensibly, the SJPA has tailored its system of commerce relative to Pier 7 based upon considerations of risk (of revenue shortfalls during bad seasons), certainty of income and as Member Tulk has alluded to, for the business interest of attracting tourists to the pier apron. Yet, it is not necessary for me in this Decision that I examine the intent of the SJPA in structuring its affairs in this manner.

[56] Rather, fundamentally, I find that the element of choice that tour operators possess here is the antithesis of discrimination. That is, they all have a choice of paying either a per passenger levy, with its inherent uncertainty, or paying a kiosk fee, which by definition is predictable. All tour operators are treated the same here in the availability of this choice. While the information suggests that some retailers (as opposed to tour operators) may have paid less for kiosk rental than others, this does not take away from the principle that as among tour operators there is no discrimination whatsoever. They have the choice, regardless of the SJPA's perceived market power as a monopolist, of choosing the kiosk rental as an alternative to the per passenger levy.

[57] This kiosk rental, at least based upon the information filed in these proceedings, will generally be less than the cumulative passenger levy in any particular year. Indeed, because of this I would say that the choice here is an easy one. ATI can either pay $6,000 for access rights to Pier 7 (if it pays the kiosk rental), or it can pay in the neighbourhood of $19,000, which on its own admission is a good estimate of the seasonal passenger levy. This choice precludes me from finding any kind of discrimination to tour operators with respect to the payment of passenger levies.

[58] Accordingly, I do not find that the passenger fees levied by the SJPA further to its tariff represents discrimination within the meaning of section 50 of the CMA.

Decision to dismiss

[59] As set out above in the reasons of Mr. Tulk and Mr. Proud, a quorum of the Panel has decided to dismiss this complaint.

Members

• Beaton Tulk
• George Proud

---

DISSENTING OPINION OF GUY DELISLE

[60] I have read the reasons of Members Tulk and Proud herein and disagree with their conclusion that this complaint be dismissed. Accordingly, I am dissenting in this matter.

[61] On the one hand, I agree with the preliminary findings on jurisdiction as well as the policy analysis of the legislation presented above by Member Tulk. It is clear that with the passage of the CMA, Parliament has changed Canada's port policies so that today our ports should strive to be autonomous and commercially driven. In terms of rate-setting authority, they have relative freedom. Yet, as Member Tulk has stated and, indeed, as the Agency has previously stated in the Harlequin Cruises case, there are limits to this rate freedom. In this particular case, the SJPA has exceeded the allowable limits and in doing so, has contravened section 50 of the CMA.

[62] I would grant ATI's application and find that the passenger fee levied against tour boat operators in the port of St. John's is discriminatory, it is unjustly so, and it is not mandated taking into consideration either the volume or value of goods shipped or upon any other basis that is generally commercially acceptable.

[63] I do not believe that if there is an element of "choice" here, it somehow diminishes the existence of this discrimination. If for whatever reason (e.g. when there is a place of business nearby for the tour operator that is not on port property) a tour boat operator cannot sign the kiosk rental lease, then it has no option but to pay the per passenger levy. It is this notion of "take it or leave it" and the inherent market power of a port to set port entry fees, which lies at the root of section 52 of the CMA.

[64] Having found that there is discrimination, subsection 50(2) next requires that the Agency assess whether the discrimination is "unjust". The law assists here by prescribing what is not an unjust discrimination. It is not "unjust" if the discrimination is based upon the "volume or value of goods shipped or on any other basis that is generally commercially accepted".

[65] I find that the discrimination here has nothing to do with whether one tour operator carries more passengers or carries goods that have a higher value when compared to another operator. Rather, the discrimination is based solely upon whether or not a tour operator rents a kiosk on the pier. If it does, a rental fee for the kiosk - a non-tariff matter - is paid, and there is no passenger fee. Conversely, if the passenger fee is paid, there is no rental fee.

[66] Basically, the SJPA has chosen to encourage tour operators to rent a kiosk by giving them a 100 percent rebate on the passenger fees. Although the incentive to sign the rental agreement is significant, representing a decrease relative to passenger fees of 300 percent in the case of ATI, the size of the incentive is not important. What is relevant to the Agency's assessment is that there is discrimination, arising from the application of considerations outside of the applicable tariff, that has no bearing on the extent of port services used by the operator. In this case, pursuant to a Board of Directors' decision, basically one operator will pay for a kiosk while the other will pay for the number of passengers transported during the season. I find that there is a disconnect between services used, the kiosk rental, and the fee charged in the tariff such that the discrimination that exists is not one that is "generally commercially accepted" within the meaning of subsection 50(2) of the CMA. This disconnect, which is exacerbated by the cavalier change to the effect of a tariff, is an eventuality that arises from the market power held by the SJPA in the provision of port services. Accordingly, the discrimination that exists in this case is unjust.

[67] In conclusion, I find that there is discrimination in the levying of a per passenger fee that tour boat operators must pay when they do not sign a kiosk rental agreement. This discrimination does not represent a differentiation among operators that is based upon either the volume or value of passengers they transport from the port and it has no commercial relation to the extent or value of port services being used by operators. As such, it is unjust differentiation that is not supportable under section 50 of the CMA.

Member

• Guy Delisle