A-199-77
CSP Foods Ltd. and Canbra Foods Ltd. (Appel-
lants)
v.
Canadian Transport Commission, Canadian Na
tional Railway Company, Canadian Pacific Lim
ited, Northern Alberta Railways and Canadian
Freight Association (Respondents)
and
Governments of the Provinces of Alberta, Manito-
ba, Ontario, Quebec and Saskatchewan, Canlin
Ltd., Maple Leaf Mills Ltd., Canada Packers Ltd.
and Victory Soya Mills Ltd. (Interveners)
Court of Appeal, Urie and Ryan JJ. and Kerr
D.J.—Ottawa, December 12, 1977 and January
30, 1978.
Railways — Appeal pursuant to National Transportation
Act from two orders of Canadian Transport Commission
Orders to give effect to Order in Council — Commission
interpreted "minimum compensatory levels" used in Order in
Council as referring to railway rate scales and not to individu
al rates — Whether or not Commission erred in law or
exceeded its jurisdiction — National Transportation Act,
R.S.C. 1970, c. N-17, ss. 3, 23(1),(3),(4), 64(1),(2) — Railway
Act, R.S.C. 1970, c. R-2, s. 276 — Order in Council, P.C.
1976-894 — Canadian Transport Commission Orders,
R-23976, R-24045.
This is an appeal, brought pursuant to section 64(2) of the
National Transportation Act, from two orders of the Canadian
Transport Committee made as a result of an Order in Council
that issued pursuant to section 64(1) of that Act. One order
gave effect to the Order in Council while the other gave the
Commission's reasons. The issue is whether the Commission, in
interpreting the term "minimum compensatory levels" used in
the Order in Council as referring to railway rate scales and not
to individual rates, erred in law or exceeded its jurisdiction so
that an appeal to this Court would properly lie.
Held, the appeal is dismissed. The exercise of his powers by
the Governor in Council pursuant to section 64(1) is not in the
nature of a judicial appeal, but supervisory. Although the
Governor in Council could frame his order that no decision
would be left to the Commission, he did not do so in this order,
and by using the term "minimum compensatory levels" clearly
left to the Commission the task of determining those levels. The
Governor in Council used the word "compensatory" in the
sense that it is used in the Railway Act, particularly section
276(2), because it is the only material enactment in which the
word is used and thus the key to its meaning in the circum
stances. Since the original order was made following an investi
gation under section 23 of the National Transportation Act, it
would appear logically to follow that the considerations which
the Commission must take into account by virtue of that
section, as well as section 276(2), must be relevant in the
determination of "minimum compensatory levels" of rates. The
Commission thus did not err in taking several factors into
consideration in adopting a scale of rates rather than fixing
individual rates for each movement. Failure to do so would
have resulted in a breach of its statutory duty which continued
to exist even after the issuance of the Order in Council. In
fixing the levels by reference to scales, it is wholly within the
Commission's discretion to determine the "minimum compen
satory levels" which the public interest requires. The Court, on
the evidence before it, cannot say this decision is one which
could not have been reached reasonably.
APPEAL.
COUNSEL:
J. E. Foran and M. E. Rothstein for
appellants.
G. W. Nadeau for Canadian Transport
Commission.
H. J. Pye, Q.C., for Canadian National Rail
way Company.
T. Maloney and S. Dubinsky for Canadian
Pacific Limited.
F. Lemieux for Governments of the Provinces
of Alberta, Saskatchewan and Manitoba.
T. Heintzman and L. West for Canada Pack
ers Ltd., Maple Leaf Mills Ltd. and Victory
Soya Mills Ltd.
J. Scollin, Q.C., for the Queen in right of
Canada.
SOLICITORS:
Aikins, MacAulay & Thorvaldson, Win-
nipeg, for appellants.
General Counsel, Canadian Transport Com
mission, Ottawa, for Canadian Transport
Commission.
General Solicitor, Canadian National Rail
way Company, Montreal, for Canadian Na
tional Railway Company.
Law Department, Canadian Pacific Limited,
Montreal, for Canadian Pacific Limited.
Herridge, Tolmie, Ottawa, for Governments
of the Provinces of Alberta, Saskatchewan
and Manitoba.
McCarthy & McCarthy, Toronto, for Canada
Packers Ltd., Maple Leaf Mills Ltd. and
Victory Soya Mills Ltd.
Deputy Attorney General of Canada for the
Queen in right of Canada.
The following are the reasons for judgment
rendered in English by
URIE J.: This is an appeal brought with leave of
this Court, pursuant to section 64(2) of the Na
tional Transportation Act, R.S.C. 1970, c. N-17,
from two orders of the Canadian Transport Com
mission, (hereinafter called the Commission)
namely, No. R-23976 dated November 26, 1976
and No. R-24045 dated December 16, 1976. Sec
tion 64(2) provides for an appeal on a question of
law, or a question of jurisdiction.
The aforementioned orders were made by the
Commission as a result of Order in Council P.C.
1976-894 dated April 13, 1976. That Order in
Council was issued as the result of a petition filed
by the appellants herein, or their corporate prede
cessors, to the Governor in Council pursuant to
section 64(1) of the National Transportation Act.'
The petition sought to vary tariffs of tolls filed by
the railway companies as directed by Commission
' 64. (1) The Governor in Council may at any time, in his
discretion, either upon petition of any party, person or company
interested, or of his own motion, and without any petition or
application, vary or rescind any order, decision, rule or regula
tion of the Commission, whether such order or decision is made
inter partes or otherwise, and whether such regulation is gener
al or limited in its scope and application; and any order that the
Governor in Council may make with respect thereto is binding
upon the Commission and upon all parties.
(2) An appeal lies from the Commission to the Federal
Court of Appeal upon a question of law, or a question of
jurisdiction, upon leave therefor being obtained from that
Court upon application made within one month after the
making of the order, decision, rule or regulation sought to be
appealed from or within such further time as a judge of that
Court under special circumstances allows, and upon notice to
the parties and the Commission, and upon hearing such of them
as appear and desire to be heard; and the costs of such
application are in the discretion of that Court.
Order No. R-16824 dated July 27, 1973, and as
approved by Commission Order No. R-17016
dated August 2, 1973.
Order in Council P.C. 1976-894 reads as
follows:
P.C. 1976-894
13 April, 1976
HIS EXCELLENCY THE GOVERNOR GENERAL IN COUNCIL,
on the recommendation of the Minister of Transport, pursuant
to section 64 of the National Transportation Act, is pleased
hereby to vary the following orders and decisions of the
Canadian Transport Commission:
(a) Order No. R-16824 dated June 27, 1973;
(b) Order No. R-17016 dated August 2, 1973; and
(c) any other Order or decision of the Canadian Transport
Commission that is inconsistent with paragraph (d) hereof
to provide
(d) that the following rates or portions of rates for domestic
and export movement of rapeseed meal and rapeseed oil from
the four rapeseed crushing plants at Altona, Nipawin, Sas-
katoon and Lethbridge, be established annually at minimum
compensatory levels:
(i) rates for rapeseed meal and rapeseed oil moving west;
(ii) rates for rapeseed oil moving east; and
(iii) the portions of rates pertaining to the movement of
rapeseed meal east of Thunder Bay or Armstrong,
Ontario.
It was to give effect to the Order in Council that
the Commission issued Order No. R-23976 (subse-
quently amended by Order No. R-24045) requir
ing the railway companies to file tariffs of tolls
prescribed in Schedule "A" to the Order. In
Appendix "A" the Commission gave its reasons for
Order No. R-23976. For sake of clarity all the
material portions of Appendix "A" are set out
hereunder.
The requirement of the Order-in-Council is that such rates "be
established annually at minimum compensatory levels". The
Committee considers that "minimum compensatory levels"
refers to rate scales as a whole, and not to individual rates. To
interpret "minimum compensatory levels" as having application
on a rate by rate basis would result in scales of rates which
would bring about a number of anomalies that would not be in
the best interests of the rapeseed crushing industry.
The term "compensatory" is defined in section 276(2) of the
Railway Act, as follows:
"(2) A freight rate shall be deemed to be compensatory when
it exceeds the variable cost of the movement of the traffic
concerned as determined by the Commission."
Variable costs are not uniformly related to distance. There can
be wide variations in variable costs, depending on a variety of
factors, including differing lengths of haul between competitive
railway points, differences in the switching costs for certain
movements and differences in the type of freight car used in the
movement.
If the rate for each individual movement were to be based
solely upon its associated variable cost, distortions would be
created in marketing, competitive and port relationships. The
resulting scales of rates would not be seen as equitable, in that
there would be higher rates for some shorter hauls than for
other longer hauls, and rates to the same port would differ
according to the delivering railway and the delivery dock.
There would also be adverse changes in existing market
relationships.
Therefore, as stated above, the Committee is interpreting the
terms of the Order-in-Council as applying to "levels" of rates,
so that the rate scales prescribed in Schedule "A" hereto reflect
the notion of minimum compensatory rates in the overall sense.
This means that some individual rates reflect a maximum
contribution of approximately 10% above variable costs, while
other rates reflect a much lesser percentage above variable
costs. Thus, in the aggregate, and depending upon the volume
and composition of traffic under such prescribed rates, the rate
scales reflect a margin of considerably less than 10% above
variable costs. In this connection, it must be observed that,
having regard to the necessity of avoiding rate anomalies and of
maintaining port parities and marketing relationships, an aver
age of 10% above variable costs is the absolute practical
minimum as a basis for construction of rate scales. Although
the Order-in-Council refers to "rates", the Committee is of the
opinion that its main concern is "movements". Therefore, with
the exception of rates from Sexsmith, Alberta, the rates pre
scribed in Schedule "A" hereto are those applicable to current
actual movements. The Committee has not prescribed rates for
other potential movements, or for movements that may develop
in the future, but it will prescribe rates for such movements
promptly upon specific request to do so.
Rates have been prescribed for movements from Sexsmith,
Alberta, a plant which is about to commence production. In
addition, because the route to Vancouver, B.C., from Sexsmith
via Edmonton, Alberta, is circuitous, two levels of rate have
been prescribed: one via Edmonton, Alberta, and one via Grand
Prairie, Alberta.
It is the appellants' contention that it is clear
from its reasons that the Commission did not
comply with the directive in the Order in Council
to fix rates or portions of rates for the domestic
and export movement of rapeseed meal and rape-
seed oil at minimum compensatory levels. In
appellants' view the Commission has no au
thority to interpret, as it did, "minimum compen
satory levels" as referring to rate scales as a whole
and not to individual rates. In support of this
proposition they referred to section 276 of the
Railway Act, R.S.C. 1970, c. R-2, which was
enacted in 1966 by S.C. 1966-67, c. 69, s. 53, and
which reads as follows:
276. (1) Except as otherwise provided by this Act all freight
rates shall be compensatory; and the Commission may require
the company issuing a freight tariff to furnish to the Commis
sion at the time of filing the tariff or at any time, any
information required by the Commission to establish that the
rates contained in the tariff are compensatory.
(2) A freight rate shall be deemed to be compensatory when
it exceeds the variable cost of the movement of the traffic
concerned as determined by the Commission.
(3) In determining for the purposes of this, section and
section 277 the variable cost of any movement of traffic, the
Commission shall
(a) have regard to all items and factors prescribed by regula
tions of the Commission as being relevant in the determina
tion of variable costs; and
(b) compute the costs of capital in all cases by using the
costs of capital approved by the Commission as proper for
the Canadian Pacific Railway Company.
On the basis of subsection (2) of section 276
counsel for the appellants argued that to establish
a compensatory freight rate, the Commission must
first determine the variable costs of the movement
of the traffic concerned i.e. from the four points of
origin mentioned in the Order in Council to the
various destinations in eastern and western
Canada.
After those figures have been determined the
Commission must ensure that each freight rate
provide for some return or contribution above the
variable costs. By season of the use of the word
"minimum" in the Order in Council and its dic
tionary meaning, the return or contribution above
the variable costs must be "the least attainable
amount" in order that the resultant rate is at the
minimum compensatory level. In counsel's view
the reasons for decision of the Commission show
that some rates at least contain a greater return or
contribution above variable costs than the smallest
attainable and therefore they are rates which have
not been fixed in accordance with the directions of
the Governor in Council in Order in Council No.
P.C. 1976-894.
Appellants' submission further is that the Com
mission has no discretion left to exercise after the
Governor in Council varies or rescinds one of its
orders. It must comply strictly with the precise
wording of any variance and directions given.
Counsel said that, because the Governor in Coun
cil speaks as an appellate tribunal on a petition
under section 64(1) of the National Transporta
tion Act, the Commission must do exactly what it
is told to do by the appellate tribunal—nothing
more and nothing less. The discretion with which
it is clothed by virtue of sections 3 and 23 (1) and
(3) of the National Transportation Act has been
exhausted, in counsel's view, after the Order in
Council has been issued.
The appellants were supported substantially in
these views by the Governments of the Provinces
of Alberta, Saskatchewan and Manitoba. The
Attorney General of Canada, the respondents and
the interveners Maple Leaf Mills Ltd., Canada
Packers Ltd., and Victory Soya Mills Ltd. all took
issue with the appellants' contentions.
The issue on this appeal, therefore, appears to
be whether the Commission in interpreting the
term "minimum compensatory levels" as used in
Order in Council P.C. 1976-894, in the manner in
which it did, erred in law or exceeded its jurisdic
tion so that an appeal to this Court would properly
lie pursuant to section 64(2) of the National
Transportation Act.
Before dealing with the main issue the submis
sion of the appellants that the Governor in Council
speaks as an appellate tribunal and that his order
leaves the Commission with no discretion in the
implementation of the order should be dealt with.
With respect, I do not view the exercise of his
powers by the Governor in Council pursuant to
section 64(1) as being in the nature of a judicial
appeal. It provides a means whereby the executive
branch of government may exercise some degree of
control over the Canadian Transport Commission
to ensure that the views of the government as to
the public interest in a given case, on the basis of
facts established by this tribunal, can be expressed
by the executive and such views are implemented
by means of directions which it may see fit to give
the tribunal, through the Governor in Council. It is
a supervisory role, as I see it, not an appellate role.
The Governor in Council does not concern himself
with questions of law or jurisdiction which is in the
ambit of judicial responsibility. But he has the
power to do what the Courts cannot do which is to
substitute his views as to the public interest for
that of the Commission. 2
In so far as fettering the discretion of the Com
mission is concerned, undoubtedly the Governor in
Council could so frame his order that no discretion
would be left to the Commission. For example, if
he had directed that the variable costs of the
carriers be increased by a given number of cents or
by a given percentage to determine the compensa
tory rates, perhaps no discretion would remain in
the Commission. However, he did not see fit to do
so in Order No. P.C. 1976-894 and in my view by
using the term "minimum compensatory levels",
he clearly left to the Commission the task of
determining those levels.
The question then remains as to whether or not
the overall considerations which must be taken
into account by the Commission in its investiga
tions and rate setting by reason of the imperative
directions to it by sections 23(3) and 23(4) 3 of that
Act, within the framework of the overall national
transportation policy as declared in section 3 of the
Act, apply after the Order in Council has issued.
The appellants, as above noted, answer this ques
tion in the negative basing their contention on the
2 See Re Davisville Investment Co. Ltd. v. City of Toronto
(1977) 15 O.R. (2d) 553 at 555-556.
3 23...a
(3) In conducting an investigation under this section, the
Commission shall have regard to all considerations that appear
to it to be relevant, including, without limiting the generality of
the foregoing,
(a) whether the tolls or conditions specified for the carriage
of traffic under the rate so established are such as to create
(i) an unfair disadvantage beyond any disadvantage that
may be deemed to be inherent in the location or volume of
the traffic, the scale of operation connected therewith or
the type of traffic or service involved, or
(ii) an undue obstacle to the interchange of commodities
between points in Canada or an unreasonable discourage
ment to the development of primary or secondary indus
tries or to export trade in or from any region of Canada or
to the movement of commodities through Canadian ports;
or
(b) whether control by, or the interests of a carrier in,
another form of transportation service, or control of a carrier
by, or the interest in the carrier of, a company or person
engaged in another form of transportation service may be
involved.
use of the word "minimum" in the phrase "mini-
mum compensatory levels". With respect, I think
that they are wrong in this submission.
The Order in Council directs the Commission to
vary orders issued by it pursuant to the National
Transportation Act and the Railway Act. In using
the word "compensatory" in his order, the Gover
nor in Council must, it seems to me, have used the
word in the sense that it is used in the Railway Act
and, in particular, section 276(2) thereof because
that is the only material enactment in which the
word is used and thus should provide the key to its
meaning in the circumstances. Since the original
Order R-16824 dated July 27, 1973 was made
following an investigation under section 23 of the
National Transportation Act, it would appear log
ically to follow that the considerations which the
Commission must take into account by virtue of
that section, as well as section 276(2), must be
relevant in the determination of "minimum com
pensatory levels" of rates. If this is so it was most
relevant for the Commission to consider that:
If the rate for each individual movement were to be based
solely upon its associated variable cost, distortions would be
created in marketing, competitive and port relationships. The
resulting scales of rates would not be seen as equitable, in that
there would be higher rates for some shorter hauls than for
other longer hauls, and rates to the same port would differ
according to the delivering railway and the delivery dock.
There would also be adverse changes in• existing market
relationships.
The Commission thus, in my view, did not err in
taking these factors into consideration in adopting
a scale of rates rather than fixing individual rates
for each movement. Failure to do so would have
resulted in a breach of its statutory duty which
duty continued in existence even after issuance of
the Order in Council, for the reasons above
referred to.
(4) If the Commission, after a hearing, finds that the act,
omission or rate in respect of which the appeal is made is
prejudicial to the public interest, the Commission may, not
withstanding the fixing of any rate pursuant to section 278 of
the Railway Act but having regard to sections 276 and 277 of
that Act, make an order requiring the carrier to remove the
prejudicial feature in the relevant tolls or conditions specified
for the carriage of traffic or such other order as in the
circumstances it may consider proper, or it may report thereon
to the Governor in Council for any action that is considered
appropriate. [The emphasis is mine.]
Having reached this conclusion, it is not difficult
to deal with the question of whether or not the use
of the word "minimum" in the phrase requires the
fixing of rates at the "least attainable" level. The
Commission is the body which decides what are
the minimum compensatory levels. If it had the
right to fix the levels by reference to scales, rather
than by reference to individual rates, as I have
found, then it is wholly within its discretion to
determine the minimum compensatory levels
which the public interest requires. This Court
cannot substitute its view of what those levels
should be for those of the Commission. The Court
is restricted in its right to interfere in the exercise
of a tribunal's discretion to cases where the deci
sion is one to which it could not reasonably have
come. 4 In this case we do not have a transcript of
the evidence taken at the lengthy hearing before
the Commission which led to the issuance of
Orders No. R-16824 and No. R-17016 which in
turn led to the petition to the Governor in Council.
We do know that the Railway Committee of the
Canadian Transport Commission exists because it
has expertise in the field of railway freight rates,
inter alia. It would be presumptuous indeed, as
well as contrary to the applicable jurisprudence,
for this or any other Court, in view of the paucity
of evidence available to us, to say that the body of
experts of the Canadian Transport Commission
did not fulfill its statutory obligations in its deter
mination that the scale of rates fixed by them were
at minimum compensatory levels. We cannot say
that their decision is one to which they could not
reasonably have come. Having reached that con
clusion, we have no right to substitute our view for
theirs.
I would, therefore, dismiss the appeal.
* * *
RYAN J.: I concur.
* * *
KERR D.J.: I concur.
4 See for example Union Gas Company of Canada Limited v.
Sydenham Gas and Petroleum Co. Ltd. [1957] S.C.R. 185 at
189; Minister of National Revenue v. Wright's Canadian
Ropes, Limited [1947] A.C. 109 at 123 and Esso Petroleum
Co. Ltd. v. Ministry of Labour [1969] 1 Q.B. 98 at pp. 108 and
109.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.