Letter Decision No. LET-R-99-2013

August 21, 2013

Application by Montreal, Maine & Atlantic Canada Co. and Montreal, Maine & Atlantic Railway, Ltd. (MMA) the Canadian Transportation Agency (Agency) to order the immediate lifting of the embargo issued by the Canadian Pacific Railway Company (CP) against MMA traffic and resume the CP level of service prior to the imposition by CP of the embargo and to order that this request be expedited given the urgent circumstances.

File No.: 

On August 20, 2013, MMA filed the above application and requested expedited interim relief.


According to MMA, CP issued Embargo Number CPRS002913 (Embargo) against any traffic moving to MMA over the Saint-Jean-sur-Richelieu Interchange. The specific reason listed in the Embargo was the Agency’s ruling in Order No. 2013-R-266, issued August 13, 2013, requiring MMA/MMAC to cease operations by 23:59 hours on August 19, 2013, unless it could establish the adequacy of its insurance. MMA points out that the Agency subsequently modified the Order and extended the cessation date, with conditions, until October 1, 2013, by Decision No. LET-R-98-2013 dated August 16, 2013. MMA advises that it sent CP a copy of Decision No. LET-R-98-2013 by e-mail at 9:01 p.m. on Friday, August 16, 2013 and it requested CP to lift its Embargo. CP responded by e-mail sent 9:04 a.m. on Sunday, August 18, 2013 that it refused to lift the Embargo against MMA traffic.

MMA explains that despite efforts to resolve the matter between counsel between Sunday and Tuesday, August 20, CP persists in its Embargo of MMA traffic. MMA also provided a copy of a letter it received from CP on August 20, 2013 and points out that CP now refers to a permitting system. MMA maintains that this has never been communicated to MMA until now. MMA also points out that the letter’s last paragraph confirms that the CP Embargo in fact continues in place, and will remain until the MMA secures its self-retention on or before August 23, 2013.

MMA submits that CP now asserts that it is embargoing the transport of all hazardous commodities on its network. MMA argues that this is completely unjustified and also is in breach of CP’s level of service obligations. MMA maintains that CP cannot dictate what traffic it delivers or receives from MMA.

MMA points out that no one on the service list for the motion to the Companies’ Creditors Arrangement Act (CCAA) served last Friday, August 16, 2013, has opposed MMA’s request to secure the self-retention amount by a charge on MMA’s property. According to MMA, it also has confirmation that the Province of Quebec and the Municipality of Lac-Mégantic will not oppose securing self-retention by a CCAA-ordered charge on MMA property. MMA submits that the charge is relatively small in terms of the overall values.

MMA asserts that it is of very great importance to note also that while the Canadian National Railway Company (CN) embargoed MMA cars on August 14, 2013, CN immediately lifted its Embargo upon receipt of a copy of the Agency’s Decision No. LET-R-98-2013, on August 17, 2013.

MMA submits that the matter has since become even more serious. According to MMA, CP has escalated its Embargo and specifically refuses to allow MMA to access the CN tracks at Saint-Jean-sur-Richelieu, Quebec.

MMA is of the view that, for practical purposes, these actions by CP completely frustrate the fact that CN lifted its Embargo, and more fundamentally, frustrates the Agency’s Decision No. LET-R-98-2013 of August 16, 2013. Without access to CN via Saint-Jean-sur Richelieu, MMA is not able to access most, if not all customers using CN. MMA indicates that a small interchange exists at Lennoxville which is not material in terms of customer access.

MMA asserts that the Embargo issued by CP effectively undoes the Agency’s Decision No. LET-R-98-2013 of August 16, 2013, and is causing immediate, serious and irreparable harm to MMA, leading MMA to seek an immediate and interim Order requiring CP to grant MMA access to CN’s lines and facilities, and to immediately lift the CP Embargo against MMA traffic. MMA submits that CPR is in breach of its level of service obligations under the CTA, in particular by sections 113 and 114.

MMA states that it has met the three tests for interim relief as set out below.

  1. A deliberate denial of level of service is a serious breach of a clear and positive statutory duty placed directly upon CP. CP does not dispute it is deliberately denying service. Therefore, MMA is clearly suffering actions by CP that are on their face contrary to the CTA.  This is a serious dispute.
  2. MMA is undeniably suffering irreparable harm in that CP is preventing MMA from accessing virtually its entire customer base: either by the Embargo against traffic imposed by CP or by CP’s refusal to allow MMA to access CN’s lines at Saint-Jean-sur-Richelieu.
  3. The balance of convenience favours MMA which is operating under the protection of the federal CCAA for the benefit of its customers, the economies of affected communities in Quebec and of Quebec itself. As just determined, MMA has adequate insurance and has a current Certificate of Fitness extended by the Agency’s August 16, 2013 decision.

Monitor appointed by the Court in the matter of the CCAA proceedings

The Monitor filed a submission in support of MMA on August 21, 2013.

The Monitor states that the inability to maintain an appropriate going-concern level of operations will cause serious prejudice to the reorganization efforts of both MMAC and MMA and may result in them ceasing operations. The Monitor points out that the impact of this was more fully detailed in its letter of August 15 as follows.

  • Termination of some or all of the remaining employees of MMAC and potential inability to pay the employees amounts due;
  • Sale of assets will yield lower values than on a going-concern basis;
  • Potential bankruptcy filing under the Bankruptcy and Insolvency Act, therefore terminating the stay of proceedings that extended to the insurers and officers of MMAC. The lack of a stay may impact the proceeds available to all stakeholders and create significant delays before anyone benefits from these proceeds;
  • Limit the flexibility that would have otherwise been afforded to MMAC in dealing efficiently with the numerous and varied stakeholders claims;
  • Negatively affect, economically and operationally, the numerous direct and indirect customers that depend on MMAC for the transportation of their products to market and the transportation of products from their suppliers and, more generally, the economies of several towns and municipalities in the province of Quebec. This has been reported in the press and has been confirmed to MMAC by way of affidavits to be filed in support of the charge that MMAC is seeking to put in place by August 23, 2013.


CP filed an answer to MMA’s application on August 21, 2013.

CP submits that the Embargo it issued with respect to MMA on August 13, 2013 and CP’s subsequent position to lift the Embargo save and except with respect to hazardous substances are reasonable, diligent and justified in the present exceptional circumstances.

CP asserts that the decision was made to ensure the safety and welfare of the public and CP’s employees as well as to avoid undue potential risk and exposure. CP submits that the Embargo on Hazardous Substances should be maintained up and until the Agency, the Transportation Safety Board of Canada (TSB) and Transport Canada determine: 1) that MMA is fit to operate its business and transport hazardous substances, and 2) that MMA has adequate insurance coverage in this regard.

CP acknowledges meetings with MMA between August 17 and 20 in an effort to resolve the issues arising from the Embargo. CP states that on August 20, 2013, in an effort to find a solution to MMA’s request for the lifting of the Embargo, CP informed MMA that the Embargo would be maintained with a “permitting system”, allowing for the interchange of goods other than Hazardous Substances, provided MMA obtained the required charge by August 23, 2013.

CP contends that the Embargo must be maintained until the Agency has: “(a) reviewed the adequacy of third party liability coverage requirements for the issuance of certificate of fitness ... (b) reviewed the risk profile of MMA following the Derailment and its aftermath; (c) Verified that the current insurance coverage of MMA is adequate in the circumstances;”

CP objects to MMA's contention that it is suffering irreparable harm by CP's conduct and that the balance of inconvenience favours its position. CP submits the following:

  • That if irreparable harm has been caused in this matter, it has been by MMA only, and the safety issues outlined above indicate that this could still be a risk;
  • That should the consequence of CP's position represent the termination of MMA's restructuring process under the CCAA, and provided that this is a consideration that the Agency took into consideration in its change of position on August 16, 2013, (i) such consideration is the jurisdiction of the Superior Court of Québec, (ii) that notwithstanding the jurisdiction issue, the real value of the assets of MMA resides in the revenues that said assets could generate, and not with the current going concern operation, which serves only to finance the CCAA process.
  • That MMA is not suffering irreparable harm in that CP is not preventing MMA from accessing “virtually its entire customer base”.

CP maintains that MMA continues to exist solely for the purpose of finding a potential buyer and MMA will soon cease to exist. By requesting a review of the Agency's suspension of its Certificate of Fitness, MMA is simply seeking to operate on an interim basis prior to its sale. Any revenues generated on an interim basis will simply be to the benefit of the secured creditors, notably the Quebec Government and/or the U.S. government and will have a negligible, if any, impact on the overall value of MMA's assets.

CP contends that MMA's value and its capacity to generate revenues lies rather in the fact that it is a railway and its customer base is situated in close proximity to the physical tracks owned and controlled exclusively by MMA. CP states that “No one can seriously contend that clients are doing business with MMA for the quality of its service and that if MMA stops carrying Hazardous Substances, all the clients will be lost.”

MMA reply

MMA filed a reply to CP’s answer on August 21, 2013.

MMA refers to CP’s statement that Transport Canada should determine whether MMA is fit to carry hazardous materials. MMA points out that Transport Canada has been fully engaged with MMA on multiple fronts since July 6, 2013, and has placed no restriction on MMA.  With respect to CP’s suggestion that this is a matter for the TSB, MMA states that the TSB has no jurisdiction to make any such order; its primary duty is to investigate and make recommendations.  MMA also submits that the Agency is not mandated to determine fitness to carry hazardous goods; the Agency’s jurisdiction involves adequacy of insurance which MMA maintains the Agency has quite thoroughly and most recently assessed. 

MMA asserts that although CP is clearly unhappy with the Agency decision, it is not relevant. MMA refers to CP’s collateral and irrelevant attacks on the Agency's decision and concludes that it is not for CP to rely on unlawful self-help activities which it is engaging in now. 

MMA states that none of the news stories and other statements relied upon by CP contest the facts. MMA is operating with a Certificate of Fitness issued by the Agency, and otherwise is under the supervision of a Monitor appointed under the CCAA, a Federal statute, and is under no restriction by Transport Canada.

MMA submits that CP admits the Embargo and the denial of access and it advised late on August 20 that it has assumed the power to dictate and itself regulate all traffic MMA may receive from and deliver to customers served both by CP and CN.  MMA asserts that neither the CTA nor practice supports such high-handed and unilateral actions.


Level of service obligations

CP’s level of service obligations in this matter are clearly defined in section 114 of the CTA which states, in part:

114(1) A railway company shall, according to its powers, afford to all persons and other companies all adequate and suitable accommodation for receiving, carrying and delivering traffic on and from its railway, for the transfer of traffic between its railway and other railways and for the return of rolling stock.

(2) For the purposes of subsection (1), adequate and suitable accommodation includes reasonable facilities for the receiving, carriage and delivery by the company

(a) at the request of any other company, of through traffic and, in the case of goods shipped by carload, of the car with the goods shipped in it, to and from the railway of the other company, at a through rate; and

(b) at the request of any person interested in through traffic, of such traffic at through rates.

(3) Every railway company that has or operates a railway forming part of a continuous line of railway with or that intersects any other railway, or that has any terminus, station or wharf near to any terminus, station or wharf of another railway, shall afford all reasonable facilities for delivering to that other railway, or for receiving from or carrying by its railway, all the traffic arriving by that other railway without any unreasonable delay, so that

(a) no obstruction is offered to the public desirous of using those railways as a continuous line of communication; and

(b) all reasonable accommodation, by means of the railways of those companies, is at all times afforded to the public for that purpose.

Pursuant to section 116 of the CTA, the Agency shall investigate a complaint made by any person that a railway company is not fulfilling any of its service obligations and may, pursuant to paragraph 116(4)(c) of the CTA, order the company to fulfil that obligation in any manner and within any time or during any period that the Agency deems expedient, having regard to all proper interests, and specify the particulars of the obligation to be fulfilled.

The Agency has considered the submissions and for the following reasons finds that CP is in breach of its level of service obligations.

CP asserts that the “issue before the Agency is not one that is rooted in contractual or commercial law, but is instead one that is hearted in the protection of the safety and well-being of all Canadians.” CP also contends that the Agency has two choices, only one of which will protect the safety and well being of all Canadians. However, as CP is well aware the Agency’s mandate is limited to determining the adequacy of insurance when issuing certificates of fitness under section 92 of the CTA and ensuring that railway companies meet their statutory level of service obligations when considering complaints under section 116 of the CTA.

While CP asserts that “it should be confirmed that issues regarding public safety have been thoroughly considered,” these issues fall outside of the Agency’s mandate. The Agency is unaware, however, of any action taken by those federal bodies responsible for safety that would for safety reasons restrict MMA’s operations.

CP makes reference to a number of ongoing investigations and enquiries conducted by a number of bodies as a result of the accident. CP identifies these as “serious and alarming risks associated with MMA’s ongoing operations”. However, as set out above, this is outside the Agency’s mandate. In any event, the conduct of investigations is not evidence of fault and has no bearing on this matter.

CP appears to have assumed the power to dictate and self-regulate all traffic MMA may receive from and deliver to customers served both by CP and CN.  As correctly pointed out by MMA neither the CTA nor practice supports such unilaterally imposed restrictions.

The Agency found in Decision No. LET-R-98-2013 that MMA has adequate third party liability insurance coverage for the period to October 1, 2013, subject to MMA filing with the Agency confirmation that it has secured funds for the self-insured retention portion of the policy. Therefore, MMA continues to hold a valid certificate of fitness. Therefore, CP must furnish adequate and suitable accommodation to MMA, as provided for in the CTA.

The Agency also notes that upon receipt of the Agency’s Decision No. LET-R-98-2013, CN lifted its embargo without any conditions or restrictions.

The Agency notes that CP questions on what basis the Agency made its decision on August 16, 2013 to vary the suspension order by amending the date to October 1, 2013, subject to the condition that MMA secure funds for the self-insured retention portion of the policy. CP, as a participant in the motion before the Court, has received the material filed by MMA in its Petition of August 16, 2013 to the Superior Court of Québec. It is clearly identified in the filing the information that the Agency based its decision on. Further, at the time the Agency made the decision this material was being maintained confidential, which is a common practice for some commercially-sensitive information filed by railway companies.

Interim relief

The authority of the Agency to issue interim relief is provided for in subsection 28(2) of the CTA:

The Agency may, instead of making an order final in the first instance, make an interim order and reserve further directions either for an adjourned hearing of the matter or for further application.

In Decision No. LET-AT-R-356-2001, the Agency confirmed that the three-part test applicable to applications for interlocutory injunctions as well as for stays applies to an application for an interim order under subsection 28(2) of the CTA.

This three-part test has been adopted and applied in Canada by the Supreme Court in Manitoba (Attorney General) v. Metropolitain Stores (MTS) Ltd., [1987] 1 R.C.S. 110 and RJR MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 312.

The Agency, in Decision No. LET-AT-R-356-2001 summarized the three-part test as follows:

The onus to show that an interim order should be granted rests on the applicant. Briefly stated, at the first stage, the applicant must demonstrate that there is a serious question to be tried. At the second stage, the applicant is required to demonstrate that irreparable harm will result if the relief is not granted. The third part of the test requires an assessment of the balance of inconvenience to the parties; in other words, which of the two parties will suffer the greater harm from the granting or refusal of an interlocutory injunction.

Serious issue to be tried

As stated by the Agency in Decision No. LET-AT-R-356-2001, there are no specific requirements which must be met in order to satisfy this test. A preliminary assessment of the merits of the case is sufficient. The threshold is a low one.

In light of the foregoing, the Agency finds that the service failure of CP and the resultant substantial commercial harm alleged by MMA meets the threshold of a serious question to be tried.

The irreparable harm and the balance of inconvenience

As the two latter parts of the three-part test are closely related, the Agency is of the opinion that they should be examined together.

In Decision No. LET-AT-R-356-2001, the Agency briefly summarized what these two tests entail:

At the stage of the irreparable harm test, the issue to be decided is whether a refusal to grant relief could so adversely affect the applicant’s own interests that the harm could not be remedied if the eventual decision on the merits does not accord with the result of the interlocutory application (RJR MacDonald, supra, at p. 341) The word “irreparable” refers to the nature of the harm suffered rather than its magnitude.

[...]As stated in RJR MacDonald, supra, at page 341, irreparable harm is “harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other”. As examples of the former, the Supreme Court refers to instances where one party will be put out of business by the court’s decision, where one party will suffer permanent market loss or irrevocable damage to its business reputation.

As for the balance of inconvenience, this entails a determination of which of the two parties will suffer the greater harm from the granting or refusal of the interim order pending a decision on the merits.

While CP states that the real value of the assets of MMA resides in the revenues that said assets could generate, and not with the current going concern operation, the Agency notes that the Monitor provided a submission in support of MMA’s application. In that submission, the Monitor stressed the importance of the ongoing operations to the economies of several towns and municipalities in the province of Quebec as well as to direct and indirect customers that depend on MMA for the transportation of their products to market. The Monitor expressed the view that the granting of this application is important to “enable MMAC and MMA to implement their restructuring plans for the benefit of all stakeholders, including the families of the victims”.

In light of the foregoing, the Agency finds that, on balance, MMA will suffer irreparable harm as a result of CP’s Embargo. The Agency also finds that the balance of inconvenience clearly favours MMA as the refusal to grant the interim order would result in the virtual cessation of MMA’s operations.


In light of the above, the Agency, pursuant to subsection 28(2) and 116(4) of the CTA, orders CP to immediately lift the Embargo and to resume providing to MMA the same level of service MMA received from CP prior to August 13, 2013, including access to CP’s and CN’s rail networks.


Geoffrey C. Hare
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