Decision No. 73-W-2000

February 4, 2000

File No. 9255/H1-1

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APPLICATION

On December 8, 1999, Halterm Limited (hereinafter Halterm) filed with the Agency an application as set out in the title. In its application, Halterm requested that the Canadian Transportation Agency (hereinafter the Agency):

1. make a finding that the Halifax Port Authority (hereinafter the HPA) discriminated against Halterm, has given undue or unreasonable preference to other users of the Port of Halifax and has subjected Halterm to an undue or unreasonable disadvantage through the terms set by the HPA for the renewal of the use of facilities at the Port of Halifax which are currently under lease to Halterm;
2. issue an order directing the HPA to cease its discriminatory conduct and to set fees which are not discriminatory but are fair and reasonable in accordance with such action as the Agency may give;
3. inquire into the HPA's action in setting such fees, terms and conditions and into the Authority's manner of dealing with Halterm;
4. hold a public hearing in respect of the matter in Halifax; and
5. order costs against the HPA as deemed appropriate by the Agency.

In its letter dated December 22, 1999, the Agency advised Halterm and the HPA that the application filed by Halterm alleging that the HPA has acted contrary to section 50 of the Canada Marine Act (hereinafter the CMA) will be considered under section 52 of the CMA which says that a person may file a complaint with the Agency that there is unjust discrimination in a fee fixed by a port authority. In accordance with the National Transportation Agency General Rules, SOR/88-23 (hereinafter the General Rules), the HPA was required to provide its answer to Halterm's application to the Agency on or before January 7, 2000.

PRELIMINARY MOTION

On January 7, 2000, the HPA filed with the Agency a motion with respect to the Agency's jurisdiction to consider Halterm's application under subsection 52(1) of the CMA. The HPA requested that the Agency, pursuant to section 22 of the General Rules, stay the main proceeding until a final determination has been made by the Agency on the issues raised in the motion.

In its letter dated January 12, 2000, the Agency advised Halterm and the HPA that the HPA's motion would be considered by means of an oral hearing with the parties of record, to be held at the Agency's offices on January 25, 2000. The Agency requested Halterm to file its response with regard to the HPA's motion by January 19, 2000 and informed the parties of record that the main proceeding related to Halterm's application of December 8, 1999 would be stayed until the Agency renders its decision with respect to its jurisdiction in the matter.

ISSUE

The issue is whether the Agency has the jurisdiction, under subsection 52(1) of the CMA, to consider Halterm's application alleging that the HPA has acted contrary to section 50 of the CMA.

LEGISLATIVE REFERENCE

Pursuant to subsection 2(1) and section 5 of the CMA, the following definitions apply:

"fees": includes harbour dues, berthage and wharfage, as well as duties, tolls, rates and other charges.

"person": includes a partnership, an association and a body corporate.

"port": means the navigable waters under the jurisdiction of a port authority and the real property that the port authority manages, holds or occupies as set in the letters patent.

"user": in respect of a port, means a person that makes commercial use of, or provides services at, the port.

The CMA further states, in part:

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.

50.(1) A port authority shall not unjustly discriminate among users or classes of users of the port, give 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.

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 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.

POSITION OF THE HPA

The motion brought by the HPA alleges that:

1. Halterm's complaint does not meet the requirement of subsection 52(1) of the CMA; and
2. the Agency does not have jurisdiction under section 52 of the CMA to consider the complaint in the manner requested by Halterm, or at all.

The HPA states that, pursuant to the CMA, it has the right and the obligation to manage federal property such as the facilities presently leased to Halterm. Under the CMA, the HPA has the power to enter into leases of the federal real property which it manages, for the purpose of operating the Port of Halifax. The HPA advises that Halterm asked the HPA for an opportunity to renew its use of the leased port facilities and to negotiate a new lease agreement. The HPA further advises that, while it agreed to negotiate new terms and conditions, the current lease agreements it has with Halterm for the tenancy of various port facilities do not provide for a right of renewal. As there is no agreement between the parties as to the rental charges, the HPA submits that there is no fixing of fees and that section 52 of the CMA does not apply.

The HPA claims that the intentions of Parliament to treat the leasing of real property and the fixing of fees as fundamentally different activities can be construed from the fact that the letters patent contain provisions relating to the leasing of federal real property and the negotiation of lease terms including rates while subsection 49(1) of the CMA contains the provisions regarding the fixing of fees. The HPA is of the opinion that, under the definition of "fees" in section 2 of the CMA, the term "other charges" does not include rent charges for real property managed by a port authority. It submits that the Agency would act beyond its statutory mandate, should the Agency assume jurisdiction and consider Halterm's complaint regarding the fixing of fees.

With respect to the application filed by Halterm concerning the terms and conditions proposed by the HPA for the renewal of the lease, the HPA is of the view that the ongoing discussions in respect of leases between Halterm and the Authority are bilateral negotiations and cannot be considered as the fixing of a fee and, therefore, do not meet the requirement of subsection 52(1) of the CMA.

The HPA outlines the contrast between the authority of a port authority to fix fees under subsection 49(1) of the CMA on one hand and the authority provided by the CMA to a person operating the St. Lawrence Seaway to fix fees with respect to the use of property on the other hand. The HPA believes that while the wording of the CMA clearly indicates that Parliament intended to give the Seaway the authority to fix fees in respect of real property, the provisions of the CMA respecting port authorities do not reflect the same intent.

The HPA states that, according to the wording of the CMA, Parliament did not intend to include rental fees for the use of real property in the statutory authority given to the port authorities to fix fees. Further, the HPA submits that lease negotiations are of a commercial nature and that it was not Parliament's intention to involve the government in the regulation of commercially-related matters such as negotiations between landlords and tenants. The HPA is of the view that these negotiations are within the spirit of a competitive, efficient and commercially oriented port system promoted by the National Marine Policy.

POSITION OF HALTERM

In its response of January 19, 2000 to the HPA's motion, Halterm states that the CMA provides the Agency with the mandate to consider unjust discrimination with respect to fees imposed by the HPA.

Halterm states that, while the principal purpose of the CMA is to make Canadian ports competitive, effective and commercially oriented, Parliament's intent is to also ensure a competitive environment for users of these ports. Halterm is of the view that Parliament has therefore empowered the Agency, under section 52 of the CMA, to deal with the potential negative competitive impact certain charges imposed by the port authorities could have on the users of port facilities. Halterm believes that subsection 52(1) of the CMA empowers the Agency to consider complaints to determine whether certain charges levied by a port authority are unjustly discriminatory. Halterm is of the opinion that, with subsection 52(1) of the CMA, Parliament's intent is to prohibit a port authority from unjustly discriminating among users of the port or subjecting a user to an undue or unreasonable disadvantage, as stated in subsection 50(1) of the CMA. Halterm claims that it has no alternative facilities available to it in the port of Halifax and that it is subject to the monopoly of the HPA with regard to land for lease. Halterm states that, to remain in business, it has no option but to accede to the HPA's demands and is subject to the fees imposed by the HPA.

Halterm is of the opinion that the CMA leaves no doubt as to the jurisdiction of the Agency regarding its application. Halterm submits that, under section 5 of the CMA which defines the terms "user" and "port" for the purpose of the CMA, Halterm is a commercial "user" and that the "port" of Halifax includes real property managed by the HPA. As to the meaning of "fees", Halterm believes that section 2 of the CMA, which includes "other charges" in the definition of fees, demonstrates that the lease payments paid by Halterm constitute a charge or a "fee" for the real property managed by the HPA.

With regard to subsection 49(1) of the CMA and in response to the HPA's argument regarding the Seaway Authority, Halterm states that a reference to "the use of any property" in the fee setting power of a port authority is not needed because this section refers to "any right or privilege conferred...in respect of the port", and section 5 of the CMA defines "port" as including the real property that the port manages, including land leased by the port. Halterm is of the view that the lease rates proposed by the HPA fall under subsection 49(1) of the CMA which relates to "fees" fixed by a port authority and to be paid in respect of any right, i.e. lease renewal, or privilege conferred by the port authority in respect of the "port", and are reviewable by the Agency under subsection 52(1) of the CMA.

Concerning the powers of the HPA established under its letters patent, Halterm states that the activities resulting from the power to create, impose or fix fees or charges on the one hand, and the power to lease property on the other hand are interelated and derive their authorization from the same legislative provision.

On the issue of whether rental charges are a fee or not, Halterm refers to subsection 49(3) of the CMA which requires a port authority to fix fees at a level that permits it to operate the port "on a self-sustaining financial basis". Further, Halterm submits that the HPA would have difficulty in achieving self-sufficiency if the lease payments it collects for the real property it manages were not part of the fixed fees. Halterm is of the opinion that a narrow interpretation of the meaning of fees, as submitted by the HPA, would result in fees paid for the operation of ships and cargo, such as berthage and wharfage, being subject to the unjust discrimination test, while other port charges, such as fees paid by tenants in respect of land lease being exempt from the test. Halterm states that transient ships would be better protected from the monopoly power of a port authority than permanent tenants, such as terminal operators conducting business on land leased from a port authority.

Halterm is of the view that Parliament could not have intended to deprive terminal operators from the protection of the CMA in the event of unjust discrimination on the part of a port authority with respect to lease payments related to lease agreements.

ANALYSIS AND FINDINGS

Inclusion of rental charges in fees to be fixed by port authorities

In accordance with subsection 52(1) of the CMA, the Agency has the mandate to examine fees fixed by a port authority pursuant to subsection 49(1) of the CMA. The question of whether rental charges proposed to be paid to a port authority for the use of property in the port are fees for purposes of subsection 49(1) of the CMA is a contentious matter between the HPA and Halterm; the former contends rental charges are not included as part of fees while Halterm argues the opposite. This then is the question upon which the Agency's jurisdiction to examine rental charges rests.

The Agency has closely examined the written and oral submissions of the parties; the provisions of the CMA in respect of the powers of port authorities, in particular to fix fees, and the definitions contained within the CMA itself; and, the existing lease agreements between Halterm and the HPA.

Under the existing lease agreements between the HPA and Halterm, the HPA has leased certain premises to Halterm in return for rental payments and other terms and conditions. The premises are described in the lease agreements as certain parcels of land and buildings which are the property of the HPA. Halterm therefore has the right to use and occupy certain HPA property in accordance with the lease agreements. The existing lease agreements expire in December 2000 and the parties have been unable to successfully negotiate a renewal of the agreements.

The CMA sets out the newly revised legislative scheme for, amongst other things, the administration and management of Canada's ports. Part 1 of the CMA, entitled Canada Port Authorities, details the structure for the administration and management of specific Canadian ports by "port authorities", corporate bodies specified to be agents of Her Majesty for limited purposes.

The definition of "port" contained in section 5 of the CMA includes the real property managed by a port authority and the letters patent of each port authority define the real property that is managed by that port authority. Section 5 also defines "user" as "a person that makes commercial use of, or provides services at, the port". The definition of "person" in section 2 of the CMA includes "a body corporate" which includes terminal operators such as Halterm. On this basis, the Agency finds that Halterm is a person using real property managed by the HPA in return for rental payments as a user of the Port of Halifax and, as such, is entitled to make a complaint under subsection 52(1) of the CMA.

Sections 44 to 48, inclusive, contain the port authorities' powers and obligations with respect to the real property that they manage, including the power to lease or license the real property. Sections 49 to 53, inclusive, set out the authorities' power to fix fees for, amongst other things, "any right or privilege conferred by it, in respect of the port" (paragraph 49(1)(c) of the CMA); the obligation of the authorities in fixing fees to not, inter alia, unjustly discriminate among users of the port; publication requirements for changes or establishment of specific fees; and, a review mechanism to be provided by the Agency where there is a complaint from "any interested person...that there is unjust discrimination in a fee fixed under subsection 49(1)".

While the HPA has argued that the physical separation in the CMA between the power to lease property and the power to fix fees is indicative of Parliament's intention to exclude rental charges arising from the lease of real property from the definition of fees for purposes of subsection 49(1) of the CMA, the Agency rejects this argument. Part 1 of the CMA must be read as a whole for an understanding of how port authorities are organized, including both their powers and their responsibilities to the public and the government. To suggest that there is a separation between port activities and the ability to fix fees associated with such port activities simply because they are contained in separate sections of the CMA ignores the overall framework for port authorities that has been established in Part 1 of the CMA. Port authorities have the power to lease the property that they manage. To do so, port authorities must determine rental charges associated with all lease agreements. Therefore, a logical conclusion to make is that the fixing of rental charges is part of the fee fixing powers of a port authority. Obligations are imposed on the HPA by both the letters patent and the CMA to fix the rental charges at a level to ensure that:

1. they permit the authority to operate on a self-sustaining financial basis;
2. they are fair and reasonable;
3. they are not unjustly discriminatory; and,
4. they are for not less than fair market value (subject to certain specific exceptions which are irrelevant for purposes of this discussion).

The HPA also argued that while both the Seaway operator and a port authority have jurisdiction over property under the CMA, only the Seaway operator was specifically given the authority to fix fees in respect of the use of property (paragraph 92(1)(a) of the CMA). The HPA asserts that if Parliament had intended to give port authorities the power to fix fees in respect of the use of property, this would have been stated explicitly in section 49. However, the Agency is of the view that this interpretation of the provisions of the CMA is untenable. Port authorities have the power to fix fees for the use of the port. The definition of port incudes property managed by the port authority. Therefore, port authorities do have the power to fix fees in respect of property. The inclusion of a specific provision under section 49 for property would have been redundant. In the case of the Seaway operator, the definition of Seaway in the CMA does not include the property adjacent to the water and, thus, specific inclusion of the power to fix fees for the use of that property is required in that scheme.

Section 2 of the CMA defines "fees" as "includes harbour dues, berthage and wharfage, as well as duties, tolls, rates and other charges". Both parties argued the issue of whether rental charges are included in the definition of fees from a statutory interpretation perspective : Halterm argued that, from a plain ordinary sense of the language, the use of the terms "includes" and "other charges" combined to make this definition very broad and inclusive, while the HPA argued that the Limited Class Rule had to be applied to limit the meaning of "other charges" in the definition of fees to the context of the meaning of the immediately preceding terms, "duties, tolls, rates" - the principle of this rule is that a general term at the end of a definition is to be viewed as being of the nature of the other terms contained in the definition.

The Agency has carefully considered these arguments and the wording of the legislation. It accepts the argument of Halterm that the use of "includes" and "other charges" is, from the plain and ordinary meaning of the words, indicative of a broad definition, used specifically to avoid having to list separately all of the different types of fees and charges that a port authority normally fixes in the conduct of its business. The CMA empowers port authorities to lease property and to be able to do so, port authorities must fix rental charges. Given that port authorities fix rental charges associated with lease agreements on a regular basis, it is logical to conclude that such rental charges are included in the phrase "other charges". A reading of section 49 of the CMA in its entirety indicates that port authorities were given power to fix fees for all the activities related to port operations. Therefore, the nature of harbour dues, berthage, wharfage, duties, tolls and rates is that they are all charges for normal port activities and the inclusion of rental charges as part of "other charges" does not extend the definition of fees beyond its true nature since leasing property is a normal port activity.

The Agency therefore finds that rental charges associated with the use of property in the port fall within the definition of fees under the CMA. Accordingly, the Agency has jurisdiction under subsection 52(1) to examine complaints that rental charges fixed by the port authorities are unjustly discriminatory.

With respect to the HPA's comment that the inclusion of rental charges as fees would mean that all commercial negotiations between port authorities and terminal operators would be subject to intervention by the Agency and that this is not consistent with the overall intent of the CMA to create port authorities that are commercially oriented, the Agency has no intention to intervene in all lease negotiations between port authorities and their tenants. The jurisdiction of the Agency in this area is limited in that it is triggered by the filing of a complaint under subsection 52(1) of the CMA.

It must also be noted that commercial orientation is only one aspect of the National Marine Policy set out in section 4 of the CMA:

4. It is hereby declared that the objective of this Act is to

(a) implement a National Marine Policy that...will promote and safeguard Canada's competitiveness and trade objectives;...

(c) ensure that marine transportation services are organized to satisfy the needs of users and are available at a reasonable cost to the users;...

(e) provide a high degree of autonomy for local or regional management of components of the system of services and facilities and be responsive to local needs and priorities;

(f) manage the marine infrastructure and services in a commercial manner that encourages, and takes into account, input from users and the community in which a port or harbour is located;...

In view of the complexities of the policy and the potential conflicts between the various objectives, the mandate of the Agency in this area is entirely appropriate and consistent with the legislative scheme created by the CMA.

Furthermore, the finding that rental charges are fees for the purposes of subsection 49(1) of the CMA is consistent with the approach that has been taken by the federal government in other circumstances of government imposed monopolies over property and facilities along with the power to fix fees for required services. For example, the federal government has included legislative oversight of the fee fixing actions of organizations such as the Seaway Management Corporation, the Seaway International Bridge Corporation, Ltd., the Jacques Cartier and Champlain Bridges Incorporated, Nav Canada and pilotage authorities to ensure there is a recourse against potential abusive pricing actions or behaviour. Port authorities are government created monopolies in that each port authority has the exclusive right to manage port operations and activities. The inclusion of a complaint mechanism in the CMA in respect of fees that port authorities have been given the power to fix is to ensure that there is an avenue of appeal available to users to protect them against potential abuse in the fixing of fees by the port authority which has the sole right to operate the port.

The Fixing of a Fee by a Port Authority

Under subsection 52(1) of the CMA, the Agency has the mandate to examine fees that have been fixed by a port authority under subsection 49(1) of the CMA. The question of when a rental fee is considered to be fixed was disputed by Halterm and the HPA. Halterm argued that the HPA had fixed a rental fee when it set out the terms and conditions for a lease renewal in a letter to Halterm which also contained a deadline for the completion of negotiations and an indication of the HPA's intention to seek other tenants for the property should the negotiations not be successfully completed by that date. The HPA argued that the rental fees referred to in correspondence only reflected the HPA's position during negotiations and could not be viewed as being fees that had been fixed. The HPA argued that lease rental fees would only be fixed once the lease agreement had been signed by both parties.

The question of when a rental fee has been fixed is one of fundamental importance since the Agency's mandate in subsection 52(1) is clearly to examine a fee only once the fee has been "fixed" under subsection 49(1). The Agency is of the view that the information produced and the submissions made on this matter in the context of the HPA motion were insufficient to enable the Agency to make a determination on this fundamental aspect of the proceeding. The Agency will therefore examine this matter further at the public hearing in Halifax.

CONCLUSION

The Agency hereby finds that rental fees for the use of property in a port are included within the meaning of fees that may be fixed by a port authority pursuant to subsection 49(1) of the Canada Marine Act and that the Agency has jurisdiction under subsection 52(1) of the Canada Marine Act to consider the application filed by Halterm. At this time, the Agency does not make any finding on the question of whether a rental fee has been fixed by the HPA in this case.