Letter Decision No. LET-R-101-2002

On December 21, 2001 and December 27, 2001 respectively, the Canadian Pacific Railway Company (CP) and the Canadian National Railway Company (CN) filed motions with the Canadian Transportation Agency (the Agency) requesting the dismissal of a running rights application filed with the Agency by the Ferroequus Railway Company Limited (FE) pursuant to the provisions of the Canada Transportation Act.

In its Decision No. LET-R-86-2002 dated March 21, 2002 the Agency rendered its decision on these motions dismissing that of CN and, upholding CP's motion to the extent of finding that CP property or property rights were involved in FE's proposed running rights. The Agency found that under section 138 of the Canada Transportation Act the Agency could not issue an order affecting CP properties or assets unless CP is named as a party in the proceeding. Because of this finding, the Agency concluded that the application as framed was incomplete and could not be considered further.

Motion by CP to dismiss

In response to this ruling CP submits that FE's application was improper and reiterates its request that it be dismissed. In support of this position CP, cites Decision No. LET-R-86-2002 and the Agency's finding that FE's application was incomplete. CP argues that a continuation of the proceeding at this stage rather than its dismissal as had been requested by CP is prejudicial to CP which had not been named as a full party and which would, in the event of a continued proceeding, be facing an incomplete application with insufficient notice.

CP also refers to the statutory time frame for Agency decisions and while it acknowledges the Agency's extension of this time, it states that it would nonetheless be prejudicial to CP to allow the matter to continue.

As a result of Agency Decision No. LET-R-86-2002, FE filed an amended application. This amendment, which was filed on March 26, 2002, eliminated reference to the CP facilities at the two interchanges identified in the original application. As a result, FE states that the continuation of the proceedings based upon the amended application will not prejudice CP. Regarding the statutory deadline for an Agency decision, FE states that the Agency's extension of the statutory time limit was consistent with precedent to the effect that the time limit is directory rather than mandatory.

In its reply dated March 27, 2002 CP argues that FE's amended application still appears to directly affect CPR interests although the involvement of CP in the application remains unclear. CP further states that the application remains premature, ill-defined and capable of further amendment that may ultimately involve CP assets.

Agency finding

Although CP alluded to the authority for the Agency to extend the statutory time for a decision on FE's application, CP does not raise this as grounds for dismissal of the application. Instead, CP is in agreement with the extension acknowledging that this is necessary in order to give a full hearing to the significant and complex issues raised by FE.

Rather, the basis for CP's request relates to the apprehension that it will be prejudiced by the continuation of these proceedings and this, notwithstanding FE's decision to amend its original application by eliminating reference to the CP assets otherwise involved at two interchanges.

The Agency finds that the amended application no longer references the identified CP assets and, as such, is complete in the sense that CP need not be named as a party. As a question of Agency jurisdiction, while the original application demanded CP's involvement as a party, the amended one does not.

While this amendment has an obvious bearing on FE's proposed operations, the Agency acknowledges FE's statement that it never intended its proposal to involve the use of CP facilities. Yet, whether intentional or not, the issue here is whether the amendment is attempting to rectify a fundamental flaw in the application - a defect that goes to its very root or foundation so that it creates a new and different operating proposal? If this is the case, then the potential for prejudice is high and a new application ought to be filed.

The Agency finds that FE's amendment has not changed the essence of the application. It has only deleted reference to CP assets at specific locations. The application, as amended, remains a request for running rights over CN railway lines to Prince Rupert from one rather than two prairie interchanges.

The amended application involves issues that if implemented will impact the Canadian railway industry - of which CP is a major participant. To date, CP has not filed any submission on the merits of FE's proposal. This right can be accommodated by ensuring at a minimum that CP is granted rights to comment on the proposal as well as making any other relevant written or oral submission to the Agency.

In addition to accepting written submissions from CP and other interested persons, the Agency shall also conduct an oral hearing into FE's proposal. The Terms of Reference and procedural directions to be issued for this hearing shall ensure that the interests of all affected persons be heard. The hearing will be held in Winnipeg commencing April 29, 2002.

CP has also argued that FE's amended application is premature because it is ill-defined. The Agency finds that the application, as amended, contains sufficient details for CP and others to comprehend the basic case before the Agency. It is to be anticipated that the details of the proposed operation will be significantly expanded upon prior to as well as at the hearing, that these will form part of the public record and that one of the reasons for the convening of a public hearing is to ensure that all affected persons understand the details of FE's proposal.

In a further submission dated April 3, 2002 CP requests the Agency to reject FE's application to amend its original application. In support CP argues that any acceptance of this amendment will prejudice CP based on the substantial nature of the amendments and the advanced nature of the proceedings. CP alludes in this submission to the operational changes described in the amendment and the absence of information relating to how these changes will be accommodated in terms of the safety and efficiency which, CP states, indicates the overall lack of preparedness of FE. CP also argues that the changes filed by FE at this stage in the proceedings will deny CP an opportunity to respond to the merits of the proposal.

For the reasons set out above, the Agency finds that the essence of FE's application has not changed. Regarding CP's concerns that there are significant operational matters that have not yet been addressed by either FE or CP, the Agency expects that these will be fully addressed both prior to and at the hearing. In particular, CP's concerns relate directly to the viability of FE's proposal which is one of the public interest aspects of this proposal which will be examined by the Agency.

CP also argues that it will not have an opportunity to respond to and test FE's position. The Agency finds that the hearing and procedural directions set out in this decision shall grant CP a full and fair opportunity to ensure that its concerns are adequately met.

For the above reasons, CP's request for a dismissal of the application is rejected. The Agency accepts FE's amended application as part of these ongoing proceedings.

CN motion for dismissal

In a submission dated March 26, 2002 CN argues that the Agency's jurisdiction to hear and determine FE's application is spent. CN states that this loss of jurisdiction arose immediately upon the Agency concluding in Decision No. LET-R-86-2002 that it would not consider FE's application as it was then framed. According to CN the Agency is nowfunctus as this Decision was issued subsequent to the 120 days statutory time frame established pursuant to subsection 29(1) of the Canada Transportation Act.

In its reply dated April 2, 2002, CN elaborated upon these grounds stating that not only is the Agency functus, but section 29 of the CTA does not empower the Agency to accept FE's proposed amendment in any event.

Regarding section 29, CN asserts that it was first enacted in order to streamline regulatory interventions and provide prompt disposal of matters brought to the Agency. There are limited exceptions to the deadline and this approach is consistent with Parliament's decision to deregulate the industry. CN states that it is also consistent with the interest of justice and efficient disposition of disputes and eliminating the prospect for proceedings that continue endlessly.

FE submits in reply that there has been no final determination of FE's application and that the delays to date have been substantially due to preliminary objections raised by CN. FE also references jurisprudence in support of finding that when the Agency is performing a public duty, such as in this case, a statutory time deadline is directory only.

Agency finding

The Agency is not functus in these proceedings. This conclusion is consistent with regulatory precedent and the Agency's statutory duty to properly determine matters which Parliament has given it the duty to hear.

A proceeding under section 138 of the CTA, properly instituted, requires the Agency to determine, among any other relevant matters, whether the requested running right is in the public interest. FE's application is such an application. Although it involves a lis inter partes, it is nonetheless a statutory public interest proceeding and, as such, the decision of the Federal Court of Appeal in McCain Foods Limited v. National Transportation Agency and Canadian Pacific Limited is applicable here. Thus, in these proceedings, the deadline is directory rather than mandatory.

CN and all interested persons shall have an opportunity to participate in the Agency's proceedings relative to this application and, in particular, CN, as a party whose assets will be directly affected, will have full party status in the proceeding. In this respect CN shall be granted the right to make submissions and argument to the Agency as well as the right to examine any FE witnesses.

There is, therefore, no prejudice to CN in continuing this proceeding. CN's future involvement militates against any prejudice and, in terms of an opportunity to prepare for this participation, CN has known of FE's basic proposal since the application was filed with the Agency on October 25, 2001. In fact, CN has already made submissions to the Agency on the merits of the proposal.

The Agency finds that in passing subsection 29(1) of the CTA and notwithstanding the goal of deregulation, Parliament could not have intended that the merits of an application filed under the CTA, such as the one now filed by FE under section 138 of the CTA, are never to be heard and determined because of the time taken by the Agency to determine preliminary procedural motions raised by hearing participants. There are at least two reasons supporting this conclusion.

First, it would be contrary to the administration of justice and the fulfilment of the Agency's statutory duties to allow an application to be automatically defeated because of time extensions directed by the Agency that prolong the regulatory proceedings beyond the statutory deadline established under subsection 29(1) of the CTA. This is particularly the case when, as here, an Agency order to extend has been necessary in order to permit the Agency to hear and determine numerous preliminary motions raised by CN and CP.

Second, it would be improper in these circumstances to dismiss FE's present application subject to it filing any new application that would basically restart the clock. Such a dismissal would lend itself to iterations of applications, preliminary motions and the refiling of applications when decisions on the motions, regardless of their outcome, take the Agency beyond the 120 day deadline established under the law.

For the above reasons CN's request is denied.

CN shall file any answer to the amended application by April 11, 2002 and FE shall file any reply by April 15, 2002. The hearing notice, including the procedural direction and terms of reference, is attached and forms part of this decision.