Letter Decision No. LET-R-113-2002

April 18, 2002

Application by Ferroequus Railway Company Limited pursuant to sections 93 and 138 of the Canada Transportation Act, S.C., 1996, c. 10, and in respect of motions filed by the Canadian Pacific Railway Company and the Canadian National Railway Company for a stay of the proceedings and proposed public hearing

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On April 9 and 11, 2002 respectively, the Canadian National Railway Company (CN) and the Canadian Pacific Railway Company (CP) applied to the Canadian Transportation Agency (the Agency) for a stay of all proceedings, including the proposed public hearing in respect of the above running rights application.

CN and CP cite as part of their grounds for the stay the pending disposition of appeals to the Federal Court of Appeal dealing with two Agency decisions issued in these proceedings. In this respect, CN indicates that it is the appellant in both cases, and CP advises that it intends to support CN.

Answers by the Ferroequus Railway Company Limited (FE) were filed with the Agency on April 10 and 15, 2002 and replies were filed by CN and CP respectively, on April 12 and 16, 2002.

While CP is an intervener in the proceedings, the Agency accepts its stay application even though such applications are generally filed by parties rather than interveners. It is also clear to the Agency that CP's interest in these proceedings is substantial and that its rights are at issue, at least indirectly, since it is traffic originating on CP's lines that FE intends to carry over the railway lines of CN. In this circumstance, and consistent with the discretion granted to the Agency pursuant to section 6 of the National Transportation Agency General Rules (General Rules), CP is granted standing to file this application.

As the relief requested by both stay applications is the same, that is, a stay of the proceedings and the hearing, and as the grounds are similar, the Agency has consolidated both and shall deal with them together in this Decision.

Agency analysis and finding

Both CN and CP argue that the expenditure of time and money in the continuation of the Agency proceedings will be significant and that they will be exposed to the disclosure of commercially-sensitive railway company information particularly at the upcoming public hearing. They state that this harm, which could be avoided by staying the proceeding pending a court decision, outweighs any harm that a stay would create for FE which is not presently operating, and will not do so in the short term given the recent closure of the Prince Rupert Grain Terminal for the season.

CP states that FE itself may be harmed if the proceedings are not stayed to the extent that any favourable Agency ruling on the running rights application may be overturned on the appeals. In such an event any commitments FE makes following the Agency ruling will be forfeited or lost after the court's decision.

CP also states that if the running right is granted it will suffer significant harm as FE's operations will impact on CP operations, revenues and financing. According to CP, this harm is difficult to calculate and it is likely non-recoverable.

The Agency has examined the arguments presented in this application, applied the principles established in Manitoba (Attorney General) v. Metropolitan Stores (MTS) Ltd., [1987] 1 S.C.R.110, and has decided to dismiss the requests for a stay.

Overall, the decision to dismiss these requests is based upon the Agency finding that many of the fears expressed by the railway companies over the potential harm they may suffer are premature at this time. The Agency is at a preliminary stage in these proceedings with any potential regulated running rights order arising in the future and then, only if the Agency concludes after a hearing that the order ought to be granted. Any apprehended harm arising from a running rights order will be more readily identifiable at that time, and it is at that time that the railway companies may reassert their request for a stay of any resulting order.

On this point, the Agency acknowledges that CN or CP can request that any potential running rights order be made conditional pursuant to sections 27 and 28 of the Canada Transportation Act (CTA), and that arguments in this respect can be filed with the Agency at the appropriate time.

Notwithstanding the Norfolk Southern case referenced by CP, the filing of an appeal against an interlocutory decision, as here, should not as a rule stay all ensuing Agency proceedings on the matter. In the ordinary course, if stays were always granted in such circumstances it would effectively prevent the Agency from carrying out the duties which Parliament has conferred to it. Thus, stays based upon the filing of an appeal should be carefully examined.

The Norfolk Southern case was an exceptional case. There, the railway company had been ordered to construct and move significant aspects of its yard and yard operations at St. Thomas, Ontario. This Order was based upon an Agency finding that the railway company was not doing as little damage as possible in operating at the St. Thomas Yard in terms of noise attenuation. The railway company appealed that order on a point of jurisdiction, and requested that the Agency stay the execution of its order pending the outcome of the appeal.

The Agency found that the costs which were likely to be suffered by the railway company were significant and offset the harm that would otherwise be suffered by the complainants in that case. Thus, the harm pleaded by the railway company was imminent and obvious. This harm convinced the Agency to grant the stay. It is not the type of harm which is presently facing CN or CP.

Regarding the resource requirements that CP and CN will expend if the Agency's present proceedings continue, the Agency acknowledges that while such costs will arise, they are not so significant in this case as to warrant a stay of these proceedings.

The Agency finds that the continuation of these proceedings is warranted so that it can come to a timely finding on whether or not this particular application is in the public interest. Industry participants and others, as well as CN, CP and FE, will benefit in that they will have the right, without undue delay, to participate in a full hearing of this application. The application of the General Rules, notably section 11, offers protection to hearing participants regarding the filing of confidential information

For all of the above reasons, the requests by CN and CP for a stay of the Agency proceeding including the public hearing into this application are denied.

The public hearing

In its reply dated April 16, 2002, CP pleaded in the alternative that the Agency should postpone the proposed hearing in order to permit a full review of all matters associated with FE's application.

In support of this request, CP states that a key CP witness, John Nash, will be unavailable to CP for the hearing which will impair its ability to evaluate the case that it has to meet. CP also argues that it received notice of the hearing on April 5, 2002, and that the amendment of FE's application requires the review of work already done in preparation for the hearing. The closure of the Prince Rupert Grain Terminal is also raised as evidence of the negligible impact a delay will have on FE.

Agency analysis and finding

In Decision No. LET-R-101-2002 dated April 5, 2002, the Agency concluded that it would accept FE's amended application as part of these ongoing proceedings. In this Decision, the Agency directed the holding of a public hearing into FE's application.

At that time, the Agency anticipated that over three weeks preparation time would be adequate for all concerned to capably respond to FE's case.

However, the Agency also acknowledged considerably before that time that, depending on the outcome of several interlocutory motions, a hearing may be required in this proceeding. Given this possibility and in order to assist CN, CP and FE in their preparation for any such hearing, the Agency instructed Agency counsel to contact each party and to indicate that a hearing was a possibility and that if such a hearing were to be called, it would take place during the last week in April, 2002. Agency counsel so advised the parties, through their counsel, on March 25, 26 and 27, 2002.

The Agency has already found by Decision No. LET-R-101-2002, that FE's amendment has not changed the essence of its application.

In these circumstances, the Agency shall not delay the hearing scheduled to commence in Winnipeg on April 29, 2002. The pre-hearing time available for preparation following the first indication of a possible hearing date, the available time following the formal announcement of the hearing on April 5th, as well as the continuing opportunities for the parties to prepare their cases at what will amount to a two week hearing militates against any delay of this hearing.

Regarding Mr. Nash's absence during the week of April 29th, the Agency acknowledges Mr. Nash's expertise. It is noted, however, that he will be absent only for the week of April 29th. The Agency's hearing will continue during the following week, until May 9th, so that Mr. Nash will be available to CP during this portion of the hearing - as well as during the pre-hearing phases. Accordingly, the delay of the hearing on this ground is also denied.

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