A-65-80
Canadian Pacific Limited and Canadian National
Railway Company (Appellants) (Respondents in
the proceedings before the CTC)
v.
British Columbia Forest Products Limited,
Canadian Cellulose Company Limited, Canadian
Forest Products Limited, Cariboo Pulp and Paper
Company, Crestbrook Forest Industries, Crown
Zellerbach Canada Limited, Eurocan Pulp and
Paper Company Ltd., Intercontinental Pulp Com
pany, MacMillan Bloedel Limited, Northwood
Pulp and Timber Limited, Prince George Pulp
and Paper Limited, Rayonier Canada (B.C.) Lim
ited, Weyerhaeuser Canada Limited, North West
ern Pulp and Power Ltd., Procter and Gamble
Company of Canada, Ltd. and Prince Albert Pulp
Company Limited (Respondents) (Applicants in
the proceedings before the CTC)
and
Canadian Transport Commission (Respondent)
and
The Akron, Canton and Youngstown Railroad
Company, The Baltimore and Ohio Railway Com
pany, Bangor and Aroostook Railroad Company,
Bessemer and Lake Erie Railroad Company,
Boston and Maine Corporation, The Chesapeake
and Ohio Railway Company, Chicago South Shore
and South Bend Railroad, Consolidated Rail Cor
poration, Delaware and Hudson Railway Com
pany, Detroit and Toledo Shore Line Railroad
Company, Detroit, Toledo and Ironton Railroad
Company, Grand Trunk Western Railroad Com
pany, The Long Island Railroad, Louisville and
Nashville Railroad Company, Maine Central Rail
road Company, Norfolk and Western Railway
Company, Pittsburgh and Lake Erie Railroad,
Richmond Fredericksburg and Potomac Railroad
Company and Western Maryland Railway, other
wise known as the Eastern Railroads (Intervenors
in the proceedings before the CTC)
Court of Appeal, Thurlow C.J., Urie and Ryan
JJ.—Ottawa, June 16, 17, 18 and 20, 1980.
Railways — Order of Railway Transport Committee
requiring appellants to negotiate with U.S. railways to restore
rate parity on woodpulp originating from Canada and the U.S.
and carried to U.S. markets by U.S. railways — Appeal under
s. 64(2) of National Transportation Act and application for
judicial review made against that order — Whether Commit
tee erred with respect to its findings — National Transporta
tion Act, R.S.C. 1970, c. N-17, ss. 3, 23, 58, 64(2) — Railway
Act, R.S.C. 1970, c. R-2, ss. 286(1), 289(1) — Federal Court
Act, R.S.C. 1970 (2nd Supp.), c. 10, s. 28.
This is an appeal from an order of the Railway Transport
Committee requiring the appellants to attempt to negotiate
with United States railways to restore rate parity, or failing
such an agreement, to take such tariff action as is necessary to
restore parity. There was evidence that the Committee's deci
sion was partially based on information about a diversion of
woodpulp shipments obtained after the close of the proceedings,
and that such information was not made available to the
appellants before the Committee made its decision. The issues
are whether it is necessary to have a finding that, within the
meaning of subparagraph 23(3)(a)(ii) the rate increases were
such as to create "an unreasonable discouragement to the
development of primary or secondary industries or to export
trade in or from any region of Canada", whether the Commis
sion failed to observe a principle of natural justice by depriving
the appellants of their right to be heard with respect to
prejudicial evidence obtained by the Commission from one of
the respondents after the close of proceedings, whether the
order exceeds the jurisdiction of the Commission by attempting
to encompass carriers in the United States and whether the
order is too vague and imprecise to constitute a valid exercise of
the Commission's discretion.
Held, the appeal fails except in respect of the failure of the
Committee to give the appellants a due hearing on the subject
of the diversion of woodpulp products. There is no requirement
that the Committee make specific findings on the matters
referred to in subparagraph 23(3)(a)(ii) or on particular mat
ters outlined in section 3. What is required by subsection 23(3)
is that in conducting its investigation the Commission have
regard for all considerations that appear to it to be relevant to
the subject-matter of the inquiry, including matters of the kind
referred to in paragraphs 23(3)(a) and (b) if they are present in
the situation. Under subsection 23(4) of the National Trans
portation Act, it is essential that there be a hearing before the
Commission may find that a rate is prejudicial to the public
interest. Such a hearing would require that at least the mini
mum elements of natural justice in respect of the right to be
heard must be observed. Because of the failure to give the
appellants an opportunity to respond to the results of the
Committee's post-hearing investigation into the diversion of
woodpulp, these minimum requirements were not observed.
Accordingly, not only was natural justice denied, but the
statutory mandate to proceed by way of hearing was not
complied with. The decision of the Committee is clearly invalid.
In ordering the appellants to seek the voluntary concurrences of
the American carriers to the restoration of parity, the Commis
sion directed its order to the Canadian carriers and not to the
American carriers. The order operates in personam. The
"reach" of the order directed as it was to carriers within the
Commission's jurisdiction does not extend to carriers over
which it had no jurisdiction. The scheme of the National
Transportation Act is not for the Commission to be a rate-fix
ing body, but rather that it ensure that the effect of any rate
established by carriers does not prejudicially affect the public
interest. Therefore, there is no obligation on the Commission to
direct the carriers as to how to remove prejudicial features.
Kane v. Board of Governors of the University of British
Columbia [1980] 1 S.C.R. 1105, referred to.
APPEAL and application for judicial review.
COUNSEL:
B. A. Crane, Q.C. for appellants (respondents
in the proceedings before the CTC).
T. J. Moloney for appellant Canadian Pacific
Limited.
S. Cantin and F. C. Hume for appellant
Canadian National Railway Company.
J. Foran, M. Rothstein, Q.C. and M. Monnin
for respondents (applicants in the proceedings
before the CTC).
G. W. Nadeau for respondent Canadian
Transport Commission.
L. H. Harnden and D. Woods for intervenors
in the proceedings before the CTC.
SOLICITORS:
Gowling & Henderson, Ottawa, for appellants
(respondents in the proceedings before the
CTC).
Canadian Pacific Limited Law Department,
Montreal, for appellant Canadian Pacific
Limited.
Canadian National Railway Company Law
Department, Montreal, for appellant Cana-
dian National Railway Company.
Aikins, McAulay & Thorvaldson, Winnipeg,
for respondents (applicants in the proceedings
before the CTC).
Canadian Transport Commission Legal Ser
vices, Hull, for respondent Canadian Trans
port Commission.
Gowling & Henderson, Ottawa, for interven-
ors in the proceedings before the CTC.
The following are the reasons for judgment of
the Court delivered orally in English by
THE COURT: This is a joint proceeding consist
ing of an appeal under subsection 64(2) of the
National Transportation Act, R.S.C. 1970, c.
N-17, as amended, from Order No. R-29767 of
the Railway Transport Committee of the Canadi-
an Transport Commission and an application
under section 28 of the Federal Court Act, R.S.C.
1970 (2nd Supp.), c. 10, to review and set aside
the same order.
The order was made following an investigation
by the Committee held as a result of an appeal by
the respondents under subsection 23(2) of the
National Transportation Act. In summary the
order requires the appellants (1) to negotiate with
United States railways engaged in carrying in the
United States through traffic in woodpulp origi
nating in Western Canadian mills to destinations
in the United States for the restoration of rate
parity with the rates charged by United States
railways carrying to like destinations woodpulp
originating in Western United States mills, and,
(2) failing an agreement to restore parity, to take
such tariff action as will restore it.
In view of the number and kind of points taken
in objection to the order, it will be expedient at
this point to read section 23 in full, together with
section 3 which is referred to in it.
23. (1) In this section
"carrier" means any person engaged for hire or reward in
transport, to which the legislative authority of the Parliament
of Canada extends, by railway, water, aircraft, motor vehicle
undertaking or commodity pipeline;
"public interest" includes, without limiting the generality
thereof, the public interest as described in section 3.
(2) Where a person has reason to believe
(a) that any act or omission of a carrier or of any two or
more carriers, or
(b) that the effect of any rate established by a carrier or
carriers pursuant to this Act or the Railway Act after the
19th day of September 1967,
may prejudicially affect the public interest in respect of tolls
for, or conditions of, the carriage of traffic within, into or from
Canada, such person may apply to the Commission for leave to
appeal the act, omission or rate, and the Commission shall, if it
is satisfied that a prima facie case has been made, make such
investigation of the act, omission or rate and the effect thereof,
as in its opinion is warranted.
(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.
(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.
3. It is hereby declared that an economic, efficient and
adequate transportation system making the best use of all
available modes of transportation at the lowest total cost is
essential to protect the interests of the users of transportation
and to maintain the economic well-being and growth of
Canada, and that these objectives are most likely to be achieved
when all modes of transport are able to compete under condi
tions ensuring that having due regard to national policy and to
legal and constitutional requirements
(a) regulation of all modes of transport will not be of such a
nature as to restrict the ability of any mode of transport to
compete freely with any other modes of transport;
(b) each mode of transport, so far as practicable, bears a fair
proportion of the real costs of the resources, facilities and
services provided that mode of transport at public expense;
(c) each mode of transport, so far as practicable, receives
compensation for the resources, facilities and services that it
is required to provide as an imposed public duty; and
(d) each mode of transport, so far as practicable, carries
traffic to or from any point in Canada under tolls and
conditions that do not constitute
(i) an unfair disadvantage in respect of any such traffic
beyond that disadvantage 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 unreasonable discouragement
to the development of primary or secondary industries or
to export trade in or from any region of Canada or to the
movement of commodities through Canadian ports;
and this Act is enacted in accordance with and for the attain
ment of so much of these objectives as fall within the purview
of subject-matters under the jurisdiction of Parliament relating
to transportation.
The Railway Transport Committee, after de
scribing and discussing in 51 typewritten pages the
facts, the procedure followed and the arguments
advanced, expressed its findings as follows:
The Committee is of the opinion that a rate "parity" situa
tion, essentially as argued by the Applicants, did exist prior to
the implementation of Ex Parte Increase Tariff 318 in April,
1976. This belief is supported by pertinent correspondence,
dating back some forty years, by the evidence of senior, quali
fied railway officers as given in the 1972 Prince Albert Pulp
Co. Ltd. case, by our own statistics and data as provided herein
and, above all, by the evidence and argument we heard in
Vancouver and Ottawa during the hearing of this case.
The Committee has studied volume movements of traffic
from the Applicants' mills to principal destinations in the
United States. The freight rates applicable to these movements,
along with rates applying from competing mills in the U.S.
Pacific northwest have been verified and set down in tabular
form. These show, without question, that the "parity" argued
by the Applicants means equal or same rates at the pre Ex
Parte 318 level, before the influence of currency exchange and
freight rate surcharge.
The Committee has considered, at length, the argument of
the Respondents which compares the joint international rates
with U.S. domestic rates, particularly as that argument related
to introducing currency exchange and freight rate surcharge
into the equation. Evidence was submitted to show that the
currency exchange rate has, and does, fluctuate over time, and
it has been conceded that the movement over the longer term,
up or down, is nearly impossible to predict. In the case at hand,
at the time of the coming into effect of Ex Parte 318, Canadian
and U.S. currencies were at or within one per cent of par. At
the time that the evidence of Respondents' witness Brown was
being prepared, U.S. currency was at a premium of approxi
mately 12 per cent. By the time of the Hearing, this premium
had risen to nearly 18 per cent.
Insofar as the currency exchange surcharge on the freight
rates is concerned, this device was established by the Board of
Railway Commissioners in 1921 to enable railways operating in
Canada to receive their fair proportion of tolls and to settle
with United States connections, in American funds, in respect
of international shipments of freight. Thus, regardless of the
currency exchange situation, the rail carriers are protected
because the shipper of the goods pays the appropriate surcharge
which is added to the basic freight charges.
In all the years since 1921, we could find no previous
instance of a rate dispute wherein a similar comparison incor
porating currency exchange and currency exchange surcharge
was resorted to in the calculations. We have, in the light of the
above facts, reached the conclusion that this argument, as
presented, is not a convincing one and should not have an
influence on our final decision.
The question of whether tonnage has been lost by the
Canadian railways, as a direct result of the altered rate situa
tion, has been investigated. The traffic manager of the Crown
Zellerbach mill at Duncan Bay, B.C. has supplied detailed
written information as to tonnage diverted from Canadian
railroads at Vancouver to U.S. railroads at Seattle. He has
stated that this diversion is a direct result of the increased
Canadian rates.
Evidence submitted during the Hearing indicates that sales
of Canadian woodpulp in the regular U.S. markets have not
been affected by the rate situation. The Applicant mills are
simply absorbing the increased transportation costs. In fact, the
Applicants presented the somewhat unique argument that, in
the belief that the current rate disparity is an obvious injustice
which this Committee will order remedied, they have not yet
made any marketing changes. We think the facts that current
demand is strong, and net revenues favourable because of the
prevailing currency exchange situation, are also having some
influence on the Applicants' decision to refrain from making
changes.
Another matter of obvious concern to the Applicants is the
fact that, in the face of the disparities as they currently exist,
the carriers will give no assurance that future increases will be
applied uniformly to both Canadian joint international and
U.S. domestic rates. Such assurance, while permitting the
widening of the rate differentials over time, would at least
provide some measure of future certainty to the Canadian
producers. But the Canadian railways will not go that far.
The Committee finds that the rate situation brought about
directly by the action, or inaction as the case may be, of the
Canadian railways during 1976, disrupted a long-standing,
accepted and well-understood reciprocal rate structure that had
been established and refined over more than half a century.
This freight rate relationship with competing mills in the
Pacific northwest area of the United States was, and continues
to be, vitally important to the overall economic well-being of
the western Canadian pulp and paper industry.
The current favourable earnings situation notwithstanding,
which we understand to be due to the currency situation and
therefore of an indefinite duration, the western Canadian mills
rely on rate stability in that it influences their long-range
marketing decisions. Moreover, it has been suggested that
existing and potential rate instability is an unfavourable ele
ment which is discouraging possible new or expanded capacity
in western Canada.
The Committee has weighed all the evidence and has con
cluded that, for the Respondents to have unilaterally over
turned this structure, this competitive relationship, this parity,
either actual or relative, constituted, and still does constitute,
an act prejudicial to the public interest.
The Application is accordingly granted. It therefore becomes
necessary to adopt measures which will lead to the restoration
as quickly as possible of the parity, actual or relative, from
Canadian origins that existed in relation to U.S. northwest
origins prior to the implementation of Ex Parte Tariffs 318 and
330.
During the hearing, we were reminded more than once of the
limitations placed on our jurisdiction by the existence of the
international boundary between the origins and the destinations
of the woodpulp traffic in question. Despite that barrier, there
grew up, as has been seen, a mutually advantageous freight rate
relationship which has served well the western Canadian and
northwestern U.S. woodpulp industries and the American and
Canadian railways. This relationship was formed and developed
over the sixty years before the events of 1976, on the principle
of agreement, coupled with such approvals or sanctions as may
have appeared necessary to - the Canadian and American
regulatory authorities. That is the way to the restoration of the
status quo ante, the set of relationships that existed up to 1976.
The Respondents created the injustice for which this Deci
sion is the remedy. They will be expected to take the action
necessary to put matters right (action which their witness Mr.
Lawless said he could have taken at the time all the difficulties
first arose).
In the memorandum of argument filed on behalf
of the appellants counsel raised nine points of
objection to the Committee's order and asked that
it be set aside. They were supported by the inter-
venors who raised the same nine points of objec
tion to the order. In dealing with the first five of
these points counsel for the appellants presented
them as covering in one aspect or another a single
problem, that is to say, whether the Committee
asked itself the right questions and made the right
findings and whether the evidence supports the
findings, and, more particularly, whether the Com-
mittee applied its mind to the effect of the
increases, and to whether the particular increases
produced an unreasonable discouragement to
export trade so as to satisfy what counsel argued
were the statutory tests arising on the wording of
subparagraph 23(3)(a)(ii). His position, as we
understood it, was that to support an order under
subsection 23(4) it would be necessary to have a
finding that, within the meaning of subparagraph
23(3)(a)(ii), the rate increases implemented by
what were referred to as Ex Parte Increase Tariff
318 and Ex Parte Increase Tariff 330 were such as
to create "an unreasonable discouragement to the
development of primary or secondary industries or
to export trade in or from any region of Canada",
that the Committee had made no such finding and
that in any case there was no evidence on which
such a finding could be supported. Next he sub
mitted that the Committee had failed to consider
and have regard for the national transportation
policy expressed in section 3 and in particular to
consider whether the rate increases were required
for the revenue purposes of the appellants.
These submissions appear to be founded on a
narrow interpretation of section 23; one that in our
opinion is not warranted by the wording of the
statute. There is, in our view, no requirement that
the Committee make specific findings on the mat
ters referred to in subparagraph 23(3)(a)(ii) or on
particular matters outlined in section 3. Nor is it
necessary that there be evidence that would sup
port a finding of some one or more of the matters
referred to in subparagraph 23(3)(a)(ii).
What the Commission is directed, by subsection
23(2), to investigate is the act, omission or rate
complained of and the effect it may have in prej
udicing the public interest in respect of tolls for, or
conditions of, the carriage of traffic within, into or
from Canada. That is the definition of the investi
gation to be made and when, after a hearing, it has
been made and the Commission finds that the act,
omission or rate is prejudicial to the public inter
est, the Commission under subsection 23(4) may,
within the limits there expressed, make an order
requiring the carrier to remove the prejudicial
feature in the relevant tolls or conditions or such
other order as in the circumstances it may consider
proper. Nowhere is there any requirement that the
Commission's findings be based on or include a
finding of a matter referred to in subparagraph
23(3)(a)(ii). What is required by subsection 23(3)
is that in conducting its investigation the Commis
sion have regard for all considerations that appear
to it to be relevant to the subject-matter of the
inquiry, including matters of the kind referred to
in paragraphs 23(3)(a) and (b) if they, or any of
them, are present in the situation. The consider
ations to be taken into account are thus defined in
the widest of terms. Parliament, relying on the
ability of the Commission to recognize what may
be prejudicial to the public interest, has left it to
the Commission to consider whatever the Commis
sion may regard as relevant and so, far from
requiring the Commission to find matters of the
kind set out in paragraphs (a) and (b) has merely
directed that, along with anything else the Com
mission considers relevant, regard be had to those
aspects of the matter where they apply.
We think therefore, that there is no substance or
merit in the appellants' submissions based on their
interpretation of subsection 23(3).
With respect to the submission that the Com
mittee did not take into account the revenue needs
of the appellants there was some uncontradicted,
though general, evidence that the increased rates
were required for the revenue purposes of the
railways and the matter was discussed in argument
before the Committee. It is referred to in the
decision at page 19 (Case Book, Vol. 5, p. 714) in
the following sentence from the review of the
argument of counsel for Canadian National:
It was suggested that the Canadian lines did not also flag out of
the Ex Parte 318 increase, and thus maintain the existing
parity, because they considered that the additional revenue was
justified and very much needed.
The matter is referred to as well at page 21
(Case Book, Vol. 5, page 716) of the decision in
the following passage:
The Chairman then asked Counsel to explain the position of
CN and CP if, in the face of these facts, this practice reflected
nothing more than a theory. Counsel replied that the Canadian
carriers had assessed their revenue needs, at the time of the
unusual situation as it related to Ex Parte Increase Tariff No.
318, and decided that their revenue needs justified retention of
the full increase as originally implemented.
The Chairman proceeded to ask why, if the Canadian rail
ways took the action as outlined because of greater revenue
needs, they were content to take the same increase as the
American carriers in the subsequent four ex parte increases.
The Chairman remarked that the Canadian carriers had,
insofar as Ex Parte 318 was concerned, demonstrated some
degree of independence. It might have been reasonable to
expect that they would continue to exercise this independence
with respect to the four subsequent ex parte increases, but they
did not do so. Instead, they returned to the pattern that had
been established over nearly sixty years leading up to 1976. In
this context, it seems to the Committee somewhat difficult to
understand how it could be that pressing greater revenue needs
would necessitate only one deviation from a long-standing and
accepted procedure. Counsel promised to provide an answer to
this question as quickly as possible.
No specific mention of this matter is made in
the findings of the Committee but in view of the
statement that "The Committee has weighed all
the evidence and has concluded" that the conduct
of the appellants in overturning the rate parity
structure "constituted, and still does constitute, an
act prejudicial to the public interest", it cannot be
affirmed that the Committee failed to consider the
matter and to give it the weight that in the opinion
of the Committee it deserved. It was plainly open
to the Committee to consider that not only over a
long period of years prior to 1967 had the Canadi-
an railways engaged in arranging for parity rates
and in carrying woodpulp at such rates but had
continued to do so for some nine years thereafter
until Ex Parte 318 came into effect, and indeed
since then have on several occasions participated in
uniform rates increases resulting from the same
sort of arrangements, and to conclude that no need
at all for additional revenues or no need serious
enough to justify putting Western Canadian mills
at a serious disadvantage in competing with West
ern United States mills existed.
The remaining two points of the first five in the
appellants' memorandum were not argued and we
see no merit in them.
The sixth objection raised was that the Commit
tee erred in law or jurisdiction in disregarding a
necessary and relevant consideration, namely, the
effect of foreign exchange rate differentials in
determining the degree of competitiveness of
Canadian mills relative to their competitors in the
United States. The Committee dealt with this
question in the third, fourth and fifth paragraphs
of the findings which have been cited earlier in
these reasons.
In our opinion, the weight or influence to be
given to the fact that currency exchange rates
favoured the Canadian mills at the time of the
hearing and perhaps even more than offset the
disadvantage which the freight rate increases in
question created was a matter that lay well within
the authority of the Committee and we see no
error of law or of jurisdiction in its having con
cluded that it should have no influence on its
decision.
We are of the opinion that the appellants' most
serious allegation of error was that the Commis
sion had failed to observe a principle of natural
justice by depriving the appellants of their right to
be heard with respect to prejudicial evidence
obtained by the Commission from one of the
respondents after the close of the proceedings. The
allegation was based on these circumstances:
During the proceedings before the Commission
testimony had been given of a diversion of wood-
pulp shipments from Canadian to United States
railways subsequent to the change of rates in issue,
and that the diversion had been caused by the
change. The particular evidence was that some
traffic, originating in Duncan Bay, British
Columbia, was being diverted from Vancouver to
Seattle. If it had gone to Vancouver, it would have
been tendered to a Canadian railway, but at Seat-
tle it would be tendered to an American railway
for eastward carriage. In his closing submission to
the Commission, counsel for the railways argued
that the cause of the diversion had not been satis
factorily established. It might, he submitted, have
been occasioned by circumstances other than dif
ferent rates of carriage.
It clearly appears in the decision of the Commis
sion that the Commission did conduct its own
investigation of the Duncan Bay diversion ". .. by
contacting the Traffic Manager of the Crown Zel-
lerbach mill at Duncan Bay, B.C." The result of
its investigation is described at pages 47 and 48 of
the decision. A Commission file memorandum,
dated December 28, 1978, and a letter, dated
December 14, 1978 signed by the Traffic Manager
of Crown Zellerbach also give details of the inves
tigation. It is not disputed that the information
was obtained after the close of the proceedings and
that it was not made available to the appellants
before the Commission made its decision.
The findings of the Commission, as set out in its
decision and as quoted above, contain a direct
reference to its Duncan Bay investigation. Its ref
erence includes the statement that the Traffic
Manager of the Crown Zellerbach mill at Duncan
Bay "has stated that this diversion is a direct
result of the increased Canadian rates".
Under subsection 23(4) of the National Trans
portation Act, it is essential that there be a hearing
before the Commission may find that a "rate" is
prejudicial to the public interest. Such a hearing,
in our view, would require that at least the mini
mum elements of natural justice in respect of the
right to be heard must be observed. Because of the
failure to give the appellants an opportunity to
respond to the results of the Commission's post-
hearing investigation into the Duncan Bay diver
sion, these minimum requirements were not
observed. Accordingly, not only was natural justice
denied, but the statutory mandate to proceed by
way of a hearing was not complied with. The
consequence is that the decision of the Commission
is invalid.' We would note that the decision clearly
indicates that the Commission placed at least some
reliance on the information it obtained. The result
of the invalidity of the decision and the order is
that the appeal of the respondents to the Commis
sion, pursuant to section 23 of the National
Transportation Act, must be redetermined after a
hearing in respect of the Duncan Bay diversion.
The remaining issues raised by the appellants
related to the form of the Commission's formal
order. The appellants submitted that the Commis
sion had "exceeded its jurisdiction by making an
order requiring the appellants immediately to seek
the voluntary concurrences of participating carri
ers to international through rates that would
restore parity on woodpulp from Western Cana-
dian and United States Pacific Northwest produc
ing origins, or failing which to take such other
' See Kane v. Board of Governors of the University of British
Columbia [1980] 1 S.C.R. 1105.
action as would implement the decision of the
Committee."
The portions of the order to which the appel
lants take objection read as follows:
1. That the Respondents immediately seek the voluntary con
currences of participating carriers to tariff action in respect of
joint international through rates that will restore rate parity on
woodpulp from Western Canadian producing origins and
United States Pacific Northwest producing origins to United
States markets in Official Western Trunk Line and Southern
Freight Association Territories which existed prior to the im
plementation of Ex Parte Increase Tariff 318 in April, 1976,
applying subsequent Ex Parte Increases from Western Canadi-
an origins and incorporating incentives and exceptions, if any,
granted to United States Pacific Northwest origins, and within
5 days of receipt of said voluntary concurrences, take the said
tariff action in respect of said joint international through rates.
2. That the Respondents report to the Committee on a continu
ing basis and not later than 30 days from the date of this
Order, their progress with respect to obtaining the voluntary
concurrences referred to in paragraph 1 and should the said
voluntary concurrences not be obtained within 30 days of the
date of this Order, the Committee may grant such further
extensions of time as appear to it to be reasonable, should it
determine that voluntary concurrences may be forthcoming.
3. That in the event the Respondents ascertain that voluntary
concurrences referred to in paragraph 1 will not be forthcoming
to enable tariff action referred to in said paragraph 1 to be
taken, they shall immediately notify the Committee and within
15 days thereafter, take such other tariff action as will imple
ment the Decision of the Committee.
It was argued that the Commission has no juris
diction to make an order which has extraterritorial
effect. By requiring the appellants to seek the
voluntary concurrences of the participating Ameri-
can carriers to tariff action in respect of the inter
national through rates, it was said that the Com
mission was doing indirectly what it acknowledged
it could not do directly, viz., set international joint
rates. In appellants' view the Commission's juris
diction under the National Transportation Act,
when read together with subsections 286(1) 2 and
289(1) 3 of the Railway Act, R.S.C. 1970, c. R-2,
extends only to the disallowance of the rates vis -Ã -
2 286. (1) When traffic is to pass over any continuous route
from a point in Canada through a foreign country into Canada,
or from any point in Canada to a foreign country, and such
route is operated by two or more companies, whether Canadian
or foreign, the several companies shall file with the Commission
a joint tariff for such continuous route.
3 289. (1) Joint tariffs are, as to the filing and publication
thereof, subject to the same provisions in this Act as are
vis the Canadian carriers. These subsections must,
counsel submitted, be read with subsection 23(4)
supra, and section 58 4 of the National Transpor
tation Act. Read together, the legislation does not
operate to authorize the Commission to attempt to
obtain the voluntary concurrences of the American
carriers to set rates that will restore rate parity for
the carriage of the woodpulp in issue. The effect of
the Commission's order, it was said, necessarily
involves the extension of the "reach" of the order
to encompass carriers operating in the United
States over which the Commission has, as it
acknowledged in its decision, no jurisdiction. The
intervenors supported the appellants in these
contentions.
We cannot agree with the submissions so
advanced. In our view, section 23 constitutes some
thing in the nature of a code whereby the Commis
sion may act in the circumstances described in
subsection (2). By subsection (3), as previously
indicated, the matters to be considered by the
Commission, are prescribed. Subsection (4) con
templates a hearing and prescribes what the Com
mission may do if, after such hearing, the Com
mission finds that "the act, omission or rate in
respect of which the appeal is made is prejudicial
to the public interest". It directs the Commission
to have regard to sections 276 and 277 of the
Railway Act which require that freight rates be
applicable to the filing and publication of local tariffs of a
similar description, except that joint tariffs may be filed by one
agent or company, duly authorized by power of attorney of the
initial company; upon any such joint tariff being so duly filed
with the Commission, the company or companies shall, until
such tariff is superseded by another tariff or disallowed by the
Commission, charge the toll or tolls as specified therein; the
Commission may except from the provisions of this section the
filing and publication of any or all passenger tariffs of foreign
railway companies. [Underlining added.]
4 58. Upon any application made to the Commission, the
Commission may make an order granting the whole or part
only of such application, or may grant such further or other
relief, in addition to or in substitution for that applied for, as to
the Commission may seem just and proper, as fully in all
respects as if such application had been for such partial, other,
or further relief.
compensatory. It is common ground that that is
not an issue in these proceedings.
The Commission then may make an order
"requiring the carrier to remove the prejudicial
feature in the relevant tolls ... or such other order
as in the circumstances it may consider proper
...." Having found, as it did in the preamble to
the order, the act of overturning parity "constitut-
ed and continues to constitute an act prejudicial to
the public interest", it ordered the appellants to
seek the voluntary concurrences of the American
carriers to the restoration of parity. In so doing it
directed its order to the Canadian carriers and not
to the American carriers. The order operates in
personam. It does not purport to set rates either in
Canada or the United States. It merely directed
the appellants to seek the assistance of the Ameri-
can carriers participating in the international
through rates in returning to the situation which
previously subsisted, namely parity in rates for the
producers of woodpulp in Western Canada and
Northwestern United States. The "reach" of the
order directed as it was to carriers within the
Commission's jurisdiction did not, nor did it pur
port to, extend to carriers over which it had no
jurisdiction. The appellants' argument on this
branch of their objections to the form of the
Commission's order must, therefore, fail.
The second branch of that objection relates to
paragraph 3 of the order. It was said by counsel
that the order to the appellants, that failing agree
ment with their American counterparts, to "take
such other tariff action as will implement the
Decision of the Committee", was too vague and
imprecise to constitute a valid exercise of its dis
cretion under either subsection 23(4) or section 58
of the Act. He argued that it is the duty of the
Commission to specify the requirements of the
order with certainty, to enable those bound by it to
implement its terms.
It should first be noted that the Commission is
authorized by subsection 23(4) to make "such
other order as in the circumstances [of the case] it
may consider proper" and that the action proposed
by the Commission in paragraph 3 need not affect
the joint international rates contemplated by sec-
tions 286 and 289 of the Railway Act (supra). All
that the order says, in effect, is that if agreement
with the American carriers on the restoration of
parity cannot be attained then the appellants must,
by appropriate action on their own part, remove
the prejudicial features of the tariff and achieve
such parity. Subsections 286(1) and 289(1) must,
of course, then be complied with.
Secondly, it should be observed that the appel
lants, by application dated October 23, 1979,
requested the Commission to reconsider the order
herein in issue, No. R-29767. Paragraph 2 of their
application reads as follows:
2. Paragraph 3 of the Order is too vague and, as such, is a
matter not adequately addressed in terms of subparagraph 4(b)
of the Order. The expression "such other tariff action as will
implement the Decision of the Committee" could comprehend
several courses yet it does not specify, the which it ought, what
action is required of the Respondents. The Respondents should
not have to guess at the action required; the action should be
specified in such detail as leaves no doubt, otherwise it is
incapable of implementation.
Counsel for the respondents argued that the
admission that several courses of action are open
to the appellants is inconsistent with their submis
sion that the order is vague and imprecise. Counsel
then directed the Court's attention to the decision
of the Commission on the application for reconsid
eration and adopted what it said in response to
appellants' contentions in this regard. The Com
mission's reasons state:
We do not however agree that the said paragraph 3 is too
vague and incapable of implementation. In our view, paragraph
3 is very clear: in the event that the Respondents are unable to
get voluntary concurrences from the American Railroads, they
are still faced with the Committee's finding that their overturn
ing of parity constituted and continues to constitute an act
prejudicial to the public interest. Also, whatever other tariff
action the Respondents take must in any case be notified to the
Committee, so that they can always find out from the Commit
tee if their actions are adequate and in accordance with the
Order.
We agree with the Commission's response to the
allegations that the order is too vague and impre
cise. The scheme of the National Transportation
Act is not for the Commission to be a rate-fixing
body but rather that it ensure, inter alia, that the
effect of any rate established by carriers pursuant
to the Act or the Railway Act, does not prejudi-
cially affect the public interest. Therefore, there is
no obligation on the Commission, in our view, to
direct the carriers as to how to remove prejudicial
features. It is the carriers' right and their obliga
tion to do so and they must be taken to know how
that can best be achieved, not only from the point
of view of shippers but also from their own view
point. For those reasons, therefore, we are of the
opinion that the appellants fail on the second
branch of their argument with respect to the form
of the order.
The final submission with respect to the order is
that the Commission exceeded its jurisdiction by
dealing in its order with so-called "incentive rates"
in circumstances where those rates were subject of
a separate application to the Commission. The
incentive rates in question relate to reduced rates
for car loadings exceeding 150,000 lbs. In para
graph 1 of the order it will be noted that in seeking
concurrences for the purpose of restoring rate
parity the Commission made specific reference to
incorporating incentives. In addition, a footnote to
the order reads:
i.e. Such as incentives granted to Pacific Northwest origins
on carload (sic) of woodpulp of 150,000 lbs. or more to
destinations in Official Territory.
While conceding that there is a separate
application at present before the Commission in
respect of incentive rates, respondents' counsel
stated that the parties were not identical to those
in this proceeding and the nature of that case
extends beyond incentive rates for car loadings
exceeding 150,000 lbs. However, the matter of
incentive rates was pleaded and raised in the
respondents' appeal under subsection 23(2) and
evidence was adduced in respect thereto, both
documentary and oral. Hence, the problem was
properly before the Commission and, quite obvi
ously, since the evidence disclosed that United
States shippers are the recipients of incentive rates
under Ex Parte Increase Tariff 330, it was open to
the Committee to deal with the issue and to con
clude that, in the context of rate parity, Canadian
shippers should receive similar benefits. The find
ings we have cited do not expressly refer to the
incentive rates but we do not doubt that the Com
mittee considered the matter and concluded that
they were a feature of the rate parity which the
Committee considered should be restored.
The appeal accordingly succeeds only in respect
of the failure of the Committee to give the appel
lants a due hearing on the subject of the diversion
of Duncan Bay, B.C. shipments of woodpulp from
Canadian railways at Vancouver to United States
railways at Seattle. In other respects the appeal
fails. Accordingly it will be certified to the
Canadian Transport Commission that in the opin
ion of the Court Order No. R-29767 is invalid and
ought to be set aside and that the matter in respect
of which the order was made ought to be reconsid
ered and redetermined by the Commission after
affording the appellants an opportunity to be
heard at a hearing within the meaning of subsec
tion 24(4) of the National Transportation Act on
the aforesaid subject of the diversion of Duncan
Bay woodpulp shipments.
Having regard to Rules 1312 and 1408 no costs
are awarded to any party.
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.