Determination No. R-2021-184

SUMMARY

[1] On October 15, 2021, InfraMTL applied to the Agency for a determination on whether InfraMTL must obtain a certificate of fitness to operate the Viaduc du Sud.

[2] To make this determination, the Agency must consider InfraMTL’s submissions on the following issues:

1. Did the legislative authority of Parliament continue to extend to the railway lines on the Viaduc du Sud on which VIA Rail Canada Inc. (VIA) is operating a passenger service after the lines were sold to CDPQ Infra Inc. (CDPQ Infra) and then to InfraMTL?
2. If so, were the operating interests of the Canadian National Railway Company (CN) in these railway lines transferred when the Viaduc du Sud was sold?
3. If so, is InfraMTL “operating” a railway within the meaning of subsection 90(1) of the CTA?

[3] For the reasons set out below, the Agency finds that the railway lines on the Viaduc du Sud were and have remained under federal jurisdiction because they were declared to be a work for the general advantage of Canada under subsection 144.1(2) of the CTA when they were transferred to CDPQ Infra and again when they were transferred to InfraMTL. The Agency also finds that CN’s operating interests in those lines were transferred and that InfraMTL is currently operating a railway within the meaning of subsection 90(1) of the CTA. Therefore, InfraMTL is required to apply for and hold a certificate of fitness.

FACTS

[4] The Caisse de dépôt et placement du Québec (Caisse) is a legal person and a mandatary of the Government of Quebec. On April 15, 2015, the Caisse created a subsidiary, CDPQ Infra, for purposes of planning, operating and financing infrastructure, including the Réseau express métropolitain (REM). The REM is a fully automated electric light-rail transit system in Greater Montréal. InfraMTL, a subsidiary of CDPQ Infra, was created in January 2018 to hold real estate assets for use by the REM or for related activities.

[5] On December 1, 2016, CDPQ Infra acquired by bill of sale the Viaduc du Sud and its rail infrastructure from CN in order to build REM guideways to the Montréal Central Station.

[6] Before the purchase, passenger service agreements were in force between CN and public passenger service providers, such as VIA, Amtrak and the Réseau de transport métropolitain (Exo), that included the operation of services on the Viaduc du Sud (collectively, the Service Providers and the Agreements with the Service Providers).

[7] After the purchase, CDPQ Infra entered into temporary agreements with CN regarding maintenance, running rights and rail traffic control on the Viaduc du Sud (Temporary Agreements).

[8] On April 10, 2018, the Viaduc du Sud was transferred by bill of sale to InfraMTL. InfraMTL replaced CDPQ Infra in the Temporary Agreements.

[9] The Viaduc du Sud is approximately 1.6 km long. Its infrastructure components are as follows:

• An overpass structure composed of multiple buildings in a row supporting a single upper slab that directly supports the railway lines for heavy rail transit and the loads of the REM guideways. It extends from mileage 73.99 to mileage 73.18 of the Saint-Hyacinthe Subdivision and from mileage 0.0 to mileage 0.64 of the Deux-Montagnes Subdivision. The overpass structure represents just over 1.2 km of the total 1.6 km length of the Viaduc du Sud.
• Railway lines for heavy rail transit running roughly from mileage 72.96 to mileage 73.99 of the Saint-Hyacinthe Subdivision and from mileage 1.20 to mileage 1.36 of the Montréal Subdivision, and electrified lines used by the Agence métropolitaine de transport (AMT) running from mileage 0.0 to mileage 0.64 of the Deux-Montagnes Subdivision.
• Guideways on building surfaces to be used exclusively for purposes of the REM. These guideways will run along the overpass structure, between mileage 0.0 and mileage 0.64 of the Deux-Montagnes Subdivision.

POSITION OF INFRAMTL AND ANALYSIS

1. DID THE LEGISLATIVE AUTHORITY OF PARLIAMENT CONTINUE TO EXTEND TO THE RAILWAY LINES ON THE VIADUC DU SUD ON WHICH VIA IS OPERATING A PASSENGER SERVICE AFTER THE LINES WERE SOLD TO CDPQ INFRA AND THEN TO INFRAMTL?

Position of InfraMTL

[10] InfraMTL submits that the lines were not declared to be works for the advantage of Canada under section 144.1 of the CTA because none of the agreements between CN and the Service Providers, including the agreement with VIA, were transferred to CDPQ Infra at the time of the sale by CN. The bill of sale between CN and CDPQ Infra states that the Agreements with the Service Providers have not been transferred and that they will continue to be executed by CN until their termination. Moreover, the bill of sale states that CN sold, assigned and transferred to CDPQ Infra all its rights, titles and interests in the contracts or licences described in Schedule B, which does not refer to the agreement between CN and VIA. InfraMTL therefore believes that there can be no “vesting” of the rights and obligations under the agreement with VIA within the meaning of subsection 144.1(1) of the CTA.

[11] Alternatively, InfraMTL submits that VIA prevented the vesting of rights under subsection 144.1(1) of the CTA by failing to object to the fact that the operating agreement was not vested to CDPQ Infra.

[12] InfraMTL therefore claims that the railway lines covered by the agreement with VIA could not have been declared to be a work for the general advantage of Canada under subsection 144.1(2) of the CTA when they were transferred to CDPQ Infra and then to InfraMTL.

Analysis

[13] Subsection 144.1(1) of the CTA states that, if a railway line, or a railway company’s operating interest in a railway line, is sold, leased or otherwise transferred under subsection 141(3) and an agreement was in force between the railway company and a public passenger service provider in respect of the operation of a passenger rail service on the railway line, the rights and obligations of the railway company under the agreement in respect of the operation of that service on that line vest, as of the day the transfer takes place, in the person or entity to which the railway line, or the operating interest, is transferred, unless the public passenger service provider indicates otherwise before that day.

[14] The legislative summary of Bill C-11, Transportation Amendment Act, 39-1-LS-527-E, states that section 144.1 of the CTA was added to ensure the continuity of passenger service agreements. Specifically, the legislative summary states that this provision ensures that VIA will continue to have access to transferred railway lines over which its services are operated and will have access to recourses (dispute resolution) available to public passenger service providers under proposed sections 152.1 to 152.3.

[15] The Agency is of the view that all rights and obligations under the Agreements with the Service Providers were transferred by virtue of the CTA, even though this was not specifically provided for in the bill of sale. The Agency cannot find that the railway company and the person or entity to which the railway line, or the operating interest, is transferred may override the vesting provided for in the CTA through a contract to which the public passenger service provider is not a party, such as a bill of sale. Only an express waiver by the public passenger service provider can prevent the vesting.

[16] In this case, there is no evidence on the record to show that VIA expressly indicated otherwise with respect to the vesting of the rights and obligations under its agreement with CN. Moreover, the Agency is of the view that VIA’s silence and conduct in response to the public advertisement of the sale in August 2016 and subsequently in April 2018 cannot be interpreted as an “indicat[ion] otherwise” within the meaning of subsection 144.1(1) of the CTA. VIA’s rights to operate a passenger service on a line are preserved by the application of the CTA unless VIA expressly waives them. Under the CTA, VIA could have indicated otherwise if it had not wanted the rights and obligations under its agreement with CN to be vested in CDPQ Infra and then in InfraMTL.

[17] In light of the above, the Agency finds that the rights and obligations under the Agreements with the Service Providers that apply to the Viaduc du Sud were vested in CDPQ Infra and then in InfraMTL at the time of the transfers. Under subsection 144.1(2) of the CTA, the portion of the railway lines to which the agreement between CN and VIA applies was declared to be a work for the general advantage of Canada as of December 1, 2016. Therefore, the legislative authority of Parliament continued to extend to this portion of the railway lines after the transfers to CDPQ Infra and InfraMTL.

2. WERE THE OPERATING INTERESTS OF CN IN THESE RAILWAY LINES TRANSFERRED WHEN THE VIADUC DU SUD WAS SOLD?

Position of InfraMTL

[18] InfraMTL submits that CN transferred its ownership rights in the Viaduc du Sud to InfraMTL without transferring its operating interests in the Viaduc du Sud.

[19] InfraMTL states that a railway company may transfer its ownership rights in a railway line without transferring its operating interests in the line, since the CTA distinguishes between the owner and the operator of a line. In particular, InfraMTL points out that, under subsection 141(3) of the CTA, a railway company may transfer “its railway lines, or its operating interests in its lines”, and under subsection 144.1(1), “a railway line, or a railway company’s operating interest in a railway line” may be transferred [emphasis added].

[20] InfraMTL states that CN retains its operating interests in the Viaduc du Sud railway lines until the Temporary Agreements and Agreements with the Service Providers expire. It added that the Agreements with the Service Providers have remained in force and continue to be fully executed by CN, on its own behalf and not as an agent or mandatary, contractor, or intermediary.

Analysis

[21] Subsection 141(3) of the CTA provides that a railway line or operating interest in a railway line may be transferred at any time only if it is transferred “for continued operation”. Otherwise, a railway company must comply with the process set out in Division V of Part III of the CTA to discontinue operating a line.

[22] Under subsection 146(2) of the CTA, if there is a transfer by an agreement entered into through the process set out in sections 143 to 145 or otherwise, the railway company has no obligations under the CTA in respect of the operation of the railway line and has no obligations with respect to any operations by any public passenger service provider. Thus, when CN transferred its ownership rights in the railway line on the Viaduc du Sud in 2016, it had no further obligations in respect of the line’s operation or use for passenger services under the CTA.

[23] The combined application of subsections 141(3) and 146(2) defeats InfraMTL’s argument that it acquired only the railway infrastructure and not the rights and obligations in respect of its operation. The Agency is of the view that, under the CTA, the rights and obligations in respect of the operation of the railway line were vested in CDPQ Infra when the line was sold to CDPQ Infra and subsequently to InfraMTL.

[24] Moreover, although agreements between CN and InfraMTL exist and are in force, the Agency is of the view, as discussed below, that all the rights and obligations in respect of the operation that CDPQ Infra (and subsequently InfraMTL) acquired through the sale did not revert to CN under those agreements. Therefore, CN is acting merely as a contractor for a fixed term under the Temporary Agreements on behalf of InfraMTL as set out in those agreements with respect to maintenance and traffic control on the Viaduc du Sud railway lines.

3. IS INFRAMTL “OPERATING” A RAILWAY WITHIN THE MEANING OF SUBSECTION 90(1) OF THE CTA?

Position of InfraMTL

[25] InfraMTL argues that it is not a work or railway company and that it is not operating a railway within the meaning of subsection 90(1) of the CTA.

[26] InfraMTL submits that, to determine whether it must obtain a certificate of fitness, the Agency must first determine whether the operation proposed in the application is a “railway” as set out in Decision No. 273-R-2001 (Agence métropolitaine de transport). In this respect, InfraMTL states that it is merely the landowner of the Viaduc du Sud and that its business is limited to holding real estate.

[27] InfraMTL relies on Agency Decision No. 213-R-2001 (Ferroequus Railway Company), submitting that “operation” in section 87 of the CTA should be interpreted narrowly to mean the physical operation of a railway.

[28] InfraMTL believes that operation is a matter of fact that relates to implementing, performing and controlling operating activities, including repairing tracks, installing signals, managing rail traffic, operating locomotives and transporting goods or passengers. It argues that “operation” refers to a positive, concrete action and that the legal responsibility for an operation is borne by the person or entity controlling the performance of those actions.

[29] InfraMTL claims that it is not implementing or performing any operating activities in relation to the railway tracks on the Viaduc du Sud and that the legal responsibility for the operation of the Viaduc du Sud is borne entirely by CN under the Temporary Agreements. In particular, InfraMTL relies on the following facts:

• InfraMTL does not offer passenger or freight transport and does not offer any routes. The Service Providers offer passenger service on the Viaduc du Sud.
• InfraMTL does not offer any operating or construction activities, whether related or unrelated to the activities of CN or the Service Providers.
• It does not own any rolling stock, such as railway cars or locomotives. The Service Providers own this equipment.
• It also does not own any of the equipment or materials required for track maintenance. CN owns this equipment.
• It has no operational control over the commercial activities of the Service Providers.
• It does not perform any activities on the railway tracks of the Viaduc du Sud.

[30] Nevertheless, InfraMTL acknowledges that it is responsible for maintaining, repairing and replacing all supporting infrastructure beneath the railway lines. However, InfraMTL asserts that it is not operating a railway within the meaning of section 87 of the CTA and therefore does not contravene subsection 90(1) of the CTA.

Analysis

[31] The Agency agrees that merely owning railway infrastructure is not enough to make a person or entity a railway operator and a “railway company” within the meaning of the CTA. Under subsection 141(3) of the CTA, a railway owner may effectively transfer, for example through a lease, all its rights and obligations in respect of the operation of its railway lines, for their continued operation. As discussed below, the Agency is of the view that not all the rights and obligations were transferred to CN through the Temporary Agreements. Although InfraMTL has contracted some aspects of the operation to CN through the agreements, it remains responsible for all rights and obligations in respect of the operation, as set out in parts III and IV of the CTA, that were transferred to InfraMTL at the time of the sale, for continued operation.

[32] The definition of “operate” in section 87 of the CTA must be interpreted in accordance with the principles of statutory interpretation, as set out in the Supreme Court of Canada’s decision in Rizzo & Rizzo Shoes Ltd (Re), [1998] 1 SCR 27, citing Elmer A. Driedger in Construction of Statutes (2nd ed, 1983):

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.

[33] The Agency points out that the definition of “operate” in section 87 is not restrictive. The word “includes” makes it clear that the maintenance of a railway and the operation of trains are also part of the obligations of operating a railway. A reading of the CTA as a whole leads to the conclusion that all the rights and obligations of operating a railway can be found in parts III and IV of the CTA, including the process for transferring or discontinuing the operation of railway lines.

[34] For example, subsection 141(3) states that a railway line or operating interest in a railway line may be transferred at any time, provided that the transfer is “for continued operation” of the line. Otherwise, the transfer must be made in accordance with the discontinuance process set out in Division V of Part III of the CTA. Subsection 146(2) specifically states that, when a railway company transfers a railway line or its interest in it, including under the process set out in subsection 141(3), the railway company has no further obligations in respect of the operation of the line. Therefore, “operate” is not restricted to “physical” operations, as InfraMTL claims. Were that the case, a railway company that transfers a line would no longer be responsible for the physical operations of the railway, such as the maintenance and operation of trains, but would remain responsible for all the rights and obligations in respect of the operation of a railway as set out in parts III and IV of the CTA, contrary to subsection 146(2) of the CTA.

[35] In Decision No. 213-R-2001 (Ferroequus Railway Company), the Agency interpreted “operate” in the context of section 138 of the CTA to mean operating trains on a railway [emphasis added]. The Agency interpreted “operate” narrowly as not including the right to solicit traffic on the lines of another railway company. It was in this context that the Agency stated that “operate” in section 87 does not refer to the “commercial or business undertaking of the railway company as they relate to matters of serving shippers and traffic solicitation rights.”

[36] In this case, the Agency must not determine whether InfraMTL is physically operating trains on the Viaduc du Sud, but rather whether it operates a railway. In reading the CTA as a whole, a distinction should be made between operating trains on a railway line and operating a railway. Operating trains is only one part of operating a railway.

[37] Although the evidence shows that InfraMTL contracted some aspects of the operation to CN through the Temporary Agreements, the Agency is of the view that InfraMTL remains responsible for all rights and obligations in respect of the operation, as set out in parts III and IV of the CTA, that vested in InfraMTL at the time of sale, for continued operation.

CONCLUSION

[38] The Agency finds that the railway lines on the Viaduc du Sud have remained under federal jurisdiction because they were declared to be a work for the general advantage of Canada under subsection 144.1(2) of the CTA when they were transferred to CDPQ Infra and again when they were transferred to InfraMTL. The Agency also finds that CN’s operating interests in those lines were transferred and that InfraMTL is currently operating a railway within the meaning of subsection 90(1) of the CTA. Therefore, InfraMTL must apply for and hold a certificate of fitness to meet the requirements of the CTA.

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APPENDIX TO DETERMINATION NO. R-2021-184

Canada Transportation Act, SC 1996, c 10

87 In this Part,

….

railway means a railway within the legislative authority of Parliament and includes

a) branches, extensions, sidings, railway bridges, tunnels, stations, depots, wharfs, rolling stock, equipment, stores, or other things connected with the railway, and

b) communications or signalling systems and related facilities and equipment used for railway purposes; (chemin de fer)

railway company means a person who holds a certificate of fitness under section 92, a partnership of such persons or a person who is mentioned in subsection 90(2); (compagnie de chemin de fer)

operate includes, with respect to a railway, any act necessary for the maintenance of the railway or the operation of a train; (exploitation)

Part III

Railway Transportation

Special cases

88(2)Without limiting the effect of subsection (1), this Part applies to

….

b) a railway, or a portion of a railway, whether or not constructed under the authority of an Act of Parliament, that is owned, controlled, leased or operated by a person who operates a railway within the legislative authority of Parliament.

Works for the general advantage of Canada

88(3) A railway or a portion of a railway mentioned in paragraph (2)(b) is declared to be a work for the general advantage of Canada.

Certificate required

90 (1) No person shall

a) construct a railway without being the holder of a certificate of fitness that is issued under paragraph 92(1)(a); or

b) operate a railway without being the holder of a certificate of fitness that is

(i) issued under paragraph 92(1)(a) for the portion of the operation that relates to a passenger rail service, or

(ii) issued under paragraph 92(1)(b) for the portion of the operation that does not relate to a passenger rail service.

With respect to rights and obligations for operating a railway, the CTA sets out the following:

When sale, etc., permitted

141(3) Subject to section 144.1, a railway company may sell, lease or otherwise transfer its railway lines, or its operating interest in its lines, for continued operation.

Rights and obligations under passenger service agreements continued

144.1(1) If a railway line, or a railway company’s operating interest in a railway line, is sold, leased or otherwise transferred under subsection 141(3) or as the result of an advertisement under subsection 143(1) and, before the day such advertisement was made, an agreement was in force between the railway company and a public passenger service provider in respect of the operation of a passenger rail service on the railway line, the rights and obligations of the railway company under the agreement in respect of the operation of that service on that line vest, as of the day the transfer takes place, in the person or entity to which the railway line, or the operating interest, is transferred, unless the public passenger service provider indicates otherwise before that day.

Declaration that line is for general advantage of Canada

144.1(2) Whenever a railway company’s rights and obligations under an agreement with VIA Rail Canada Inc. are vested in another person or entity by subsection (1), the portion of the railway line to which the agreement relates is hereby declared, as of the day the transfer takes place, to be a work for the general advantage of Canada.

Duration of declaration

144.1(3) The declaration referred to in subsection (2) ceases to have effect if

a) VIA Rail Canada Inc. ceases to operate a passenger rail service on the portion of railway line to which the declaration relates; or

b) the operation of the railway line is discontinued.

No obligation

146(2) If the railway line, or any interest of the railway company in it, is sold, leased or otherwise transferred by an agreement entered into through the process set out in sections 143 to 145 or otherwise, the railway company that conveyed the railway line has no obligations under this Act in respect of the operation of the railway line as and from the date the sale, lease or other transfer was completed and has no obligations with respect to any operations by any public passenger service provider over the railway line as and from that date.

With respect to the considerations cited in this note regarding the Viaduc du Sud study:

Dispute Resolution with Public Passenger Service Providers

152.1(1) Whenever a public passenger service provider and a railway company are unable to agree in respect of any matter raised in the context of the negotiation of any agreement concerning the use of the railway company’s railway, land, equipment, facilities or services by the public passenger service provider or concerning the conditions, or the amount to be paid, for that use, the public passenger service provider may, after reasonable efforts to resolve the matter have been made, apply to the Agency to decide the matter.

152.1(2) Whenever a public passenger service provider and a railway company are unable to agree in respect of any matter raised in the context of the implementation of any matter previously decided by the Agency, either the public passenger service provider or the railway company may, after reasonable efforts to resolve the matter have been made, apply to the Agency to decide the matter.

Amount to be fixed

152.2 (1) If, pursuant to an application made under subsection 152.1(1), the Agency fixes the amount to be paid by the public passenger service provider for the use of any of the railway company’s railway, land, equipment, facilities or services, that amount must reflect the cost associated with the public passenger service provider’s use of that railway, land or equipment or those facilities or services.

Factors

(2) In determining that amount, the Agency must take into consideration, among other things,

a) the variable costs incurred by the railway company as a result of the public passenger service provider’s use of the railway company’s railway, land, equipment, facilities or services, including, but not limited to, its variable costs incurred to maintain safe operations and to avoid congestion and undue delay;

b) the railway company’s cost of capital, based on a rate set by the Agency, applied to the net book value of the assets to be used by the public passenger service provider, less any amount to be paid by the public passenger service provider in respect of those assets;

c) the cost of any improvements made by the railway company in relation to the public passenger service provider’s use of the railway company’s railway, land, equipment, facilities or services;

d) a reasonable contribution towards the railway company’s constant costs; and

e) the value of any benefits that would accrue to the railway company from any investment made by the public passenger service provider.

Duration of decision

152.3 Any decision of the Agency in respect of an application made under subsection 152.1(1) is binding on the parties for a period of five years after the day on which the decision is made, or for any other period agreed to by the parties that is specified in the decision.