A-1-79
Attorney General of Newfoundland for and on
behalf of Her Majesty the Queen in right of the
Province of Newfoundland and The Newfoundland
and Labrador Federation of Municipalities
(Appellants)
v.
Canadian National Railway Company (Respond-
ent)
Court of Appeal, Heald and Urie JJ. and Kerr
D.J.—Ottawa, January 30 and February 1, 1980.
Transportation — Appeal, pursuant to s. 64(2) of the Na
tional Transportation Act, on a question of law, from a
decision of the Motor Vehicle Transport Committee of the
Canadian Transport Commission allowing a tariff increase on
bus service provided in Newfoundland by the C.N.R. — Error
in law alleged in that the clear impact of Committee's decision
was that it had no jurisdiction to investigate the justification
for and the reasonableness of a tariff filing under s. 40 of the
Act — Appellants allege that Committee guilty of error on
face of the record in failing to complete investigation required
under it, especially as to the nature and extent of efficiencies
— Appellants allege that Committee did not give due con
sideration to evidence of inefficiency or unreasonably high
costs of the operation — Appeal dismissed.
APPEAL.
COUNSEL:
O. N. Clarke for appellants.
P. J. Lewis, Q.C. and H. J. G. Pye, Q.C. for
respondent.
M. Vary for Canadian Transport Commis
sion.
SOLICITORS:
Martin, Easton, Woolridge & Poole, Corner
Brook, for appellants.
Lewis & Sinnott, St. John's, for respondent.
Canadian Transport Commission, Ottawa,
for Canadian Transport Commission.
The following are the reasons for judgment
rendered in English by
HEALD J.: This is an appeal under section 64(2)
of the National Transportation Act, R.S.C. 1970,
c. N-17, as amended, brought with the leave of
this Court, from the decision of the Motor Vehicle
Transport Committee of the Canadian Transport
Commission, being decision MV-40-58 (MV-78-
12), dated August 11, 1978. Said section 64(2)
provides for an appeal, with leave of this Court,
upon a question of law, or a question of
jurisdiction.
The determining facts in this appeal may be
shortly stated. The Railway Transport Committee
of the Canadian Transport Commission, by its
Order R-2673 dated July 3, 1968, granted the
application of Canadian National Railways
(C.N.R.) to discontinue rail passenger service in
the Province of Newfoundland. Order R-2673 con
tained a requirement that the bus service proposed
by the C.N.R. in Newfoundland should be inaugu
rated and continued. Accordingly, the respondent's
Roadcruiser bus service commenced operation in
Newfoundland in December of 1968. On August
19, 1977, C.N.R. filed Special Local Passenger
Tariff 4-3 pursuant to the provisions of section 40
of the National Transportation Act'. Tariff 4-3
proposed increases.of 15% over Special Local Pas
senger Tariff 4-2 which was then in effect for the
aforesaid Roadcruiser bus service. At the request
of the appellants, a public hearing was held pursu-
' Said section 40 reads as follows:
40. (1) A person operating a motor vehicle undertaking to
which this Part applies shall not charge any tolls except tolls
specified in a tariff that has been filed with the Commission
and is in effect.
(2) Where the person operating a motor vehicle undertak
ing to which this Part applies is a member of an association
representing persons carrying on like operations, the associa
tion may, in accordance with such regulations as the Com
mission may make in that regard, prepare and file with the
Commission a tariff of tolls on behalf of such person.
(3) The Commission may make orders with respect to all
matters relating to traffic, tolls and tariffs of a motor vehicle
undertaking to which this Part applies, and may disallow any
tariff of tolls, or any portion thereof,
(a) that the Commission considers to be not compensatory
and not justified by the public interest; or
(Continued on next page)
ant to the provisions of the Act with the appellants
requesting the Commission to disallow Tariff 4-3
pursuant to the powers given to it under section 40
supra. The main issue at the hearing was whether
or not the Commission should disallow the 15%
tariff increase proposed by the C.N.R. In a split
decision, the majority of the three member Com
mittee found that Tariff 4-3 should not be disal
lowed. It is this decision which forms the subject
matter of this appeal.
Counsel for the appellants alleged error in law
and/or jurisdiction in the decision under appeal.
As I understood those submissions, the first
alleged error was that the clear impact of the
Committee's decision was that it had no jurisdic
tion to investigate the justification for and the
reasonableness of a tariff filing under section 40
supra. In support of this submission, counsel
referred to a statement by Commissioner March,
the dissenting Commissioner, in his reasons (A.B.
page 377) where he stated:
I then became aware that my colleagues are of the opinion
that there is no mandate under section 40 of the National
Transportation Act for us to enquire into the justification for
Roadcruiser's (supposing Dr. House's figures were accepted)
high costs or low revenues.
While this may be Commissioner March's inter
pretation of the view of the majority, it is not, in
my view, substantiated by the expressed views of
the majority in their reasons for judgment. At
page 369 of the Appeal Book, the majority reasons
read as follows:
As we have indicated above, our powers to deal with tolls and
tariffs are set out in'Section 40 of the Act.
And, on page 370 of the Appeal Book, in discuss
ing the provisions of section 40(3)(b), the majority
stated as follows:
(Continued from previous page)
(b) where there is no alternative, effective and competitive
service by a common carrier other than another motor
vehicle carrier or a combination of motor vehicle carriers,
that the Commission considers to be a tariff that unduly
takes advantage of a monopoly situation favouring motor
vehicle carriers;
and may require the person operating the motor vehicle
undertaking to substitute a tariff of tolls satisfactory to the
Commission in lieu thereof, or the Commission may pre
scribe other tariffs in lieu of the tariff or portion thereof so
disallowed.
Subsection (3)(b) of section 40 is directly relevant to the
Roadcruiser service, in that there is clearly "no alternative,
effective and competitive service". That being so, we are
required to make a determination whether or not Special Local
Passenger Tariff No. 4-3 "unduly takes advantage of a
monopoly situation favouring motor vehicle carriers". In
making such a determination, we consider we may have regard
to all facts and circumstances that appear to us to be relevant.
And also on page 370, there appears the following
paragraph:
We consider we have power in a monopoly situation to disallow,
for ratemaking purposes, any unreasonable or imprudent item
of expense, but this does not mean that we can direct the
Company as to the nature or level of the expenditures it should
make.
In my opinion, the above excerpts taken from the
reasons for judgment of the majority of the Com
mittee make it perfectly clear that the majority, in
interpreting section 40(3) had concluded that they
had jurisdiction to disallow for ratemaking pur
poses, any "unreasonable or imprudent" expense
item and that in exercising its powers under sec
tion 40(3)(b), they "may have regard to all facts
and circumstances that appear to us to be rele
vant". I have accordingly concluded that the
majority judgment discloses no error in law or
jurisdiction in respect of this submission by coun
sel for the appellants.
The next alleged error is that the Committee
majority was guilty of an error on the face of the
record in failing to complete the investigation
required of it under section 40(3) supra. Specifi
cally, the appellants allege that the Committee did
not carry out sufficient investigation as to the
nature or extent of efficiencies or cost reductions
obtainable in the operation of the Roadcruiser
service. Additionally, the appellants submitted that
the Committee failed to give due consideration to
the evidence adduced by the appellants indicating
inefficiency or unreasonably high costs in the
Roadcruiser operation. In my view, this submission
is without merit. The majority reasons are some 58
pages in length. In the course of those reasons, the
majority summarizes, extensively, the evidence of
the witnesses appearing before the Committee.
The respondent's witnesses were Mr. Fabian Ken-
nedy, the manager of the Roadcruiser service and
Mr. Raymond Noseworthy, a chartered account
ant, with a firm of auditors retained by the
respondent. The appellants called as a witness, Dr.
R. K. House, a professor of economics at York
University. After a careful review of the evidence,
the majority reached the following conclusions
(A.B. page 373):
While we found the statistical comparisons made to us
during the Hearing were of interest, we consider our duty is to
reach a determination of the matter on the basis of facts rather
than hypotheses. We recognize that the Roadcruiser service is
capable of some further improvements in efficiency of opera
tions but, as we have said before, the reduction in costs which
might result would still not be of sufficient magnitude to
eliminate the considerable margin of costs above revenues.
In this regard, we do not agree that a monopoly situation
requires us to fix a level of fares that would barely cover the
costs of operation, whether they be actual costs or imputed
costs on the basis of disallowances for unreasonable or impru
dent expenditures. Before we can fix a level of fares in a
monopoly situation, it must be demonstrated the tariff which is
assailed "unduly takes advantage" of that monopoly situation.
We do not consider, for example, that a modest return on the
useful capital employed in providing the Roadcruiser service
would constitute the taking of such an undue advantage.
Where, as in the present case, the revenues to be derived from
the tolls in Special Local Passenger Tariff No. 4-3 do not cover
the costs of the Roadcruiser operation, it is self-evident that
such tariff is not one that takes undue advantage of a monopoly
situation.
In my view, the majority of the Committee had
ample evidence before it upon which to reach the
conclusions which it did in fact reach. We have not
been shown that it disregarded or ignored any of
the evidence before it. While the majority
acknowledged that the service "is capable of some
further improvements in efficiency of operations",
they clearly were satisfied that correction thereof
would not eliminate the deficit in operating net
revenues, a conclusion they were entitled to reach
on the evidence before them. Therefore, there was
no requirement for the Committee to make any
further investigations before reaching that conclu
sion. After a perusal of the record, I am satisfied
that the investigations made and the evidence
adduced were detailed indeed and in weighing and
assessing that evidence, the majority of the Com
mittee were not guilty of any reviewable error.
Accordingly and for the foregoing reasons, I
would dismiss the appeal.
* * *
URIE J.: I agree.
* * *
KERR D.J.: I agree.
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