A-218-90
Minister of Transportation and Public Works of
Prince Edward Island (Appellant)
v.
Canadian National Railway Company and the Na
tional Transportation Agency (Respondents)
INDEXED AS: PRINCE EDWARD ISLAND (MINISTER OF TRANS
PORTATION AND PUBLIC WORKS) V. CANADIAN NATIONAL
RAILWAY CO. (C.A.)
Court of Appeal, Iacobucci C.J., Pratte and Stone
JJ.A.—Charlottetown, May 2; Ottawa, June 20,
1990.
Constitutional law — Prince Edward Island Terms of Union
National Transportation Agency Order abandoning entire
railway system serving P.E.I. Terms requiring Canada to
pay for "Efficient Steam Service for the conveyance of mails
and passengers" — Railways became property of Canada —
Island's argument: Terms having constitutional status; any
inconsistent law of no effect; Terms requiring rail service
maintained; Agency's order beyond jurisdiction Parliament
could confer — Wording of Terms clear — Imposing obliga
tion to furnish ferry service, not railway system in perpetuity.
Railways — Appeal from National Transportation Agency's
order abandoning entire P.E.I. railway system — Prince
Edward Island Terms of Union not requiring Canada to
operate railway on Island nor to maintain link between rail
ways in province and on mainland — Order within Agency's
jurisdiction.
This was an appeal from an order of the National Transpor
tation Agency, the effect of which is to abandon the entire
railway system serving Prince Edward Island. The Prince
Edward Island Terms of Union state that (1) the railway shall
be the property of Canada and (2) Canada will pay the cost of
an "Efficient Steam Service" for the conveyance of mails and
passengers between the Island and the mainland, "Winter and
Summer", thus placing the Island in continuous communica
tion with the railway system of the Dominion. The appellant
argued that as the Terms of Union have constitutional status,
any law inconsistent with them is of no effect. It was submitted
that the Terms required the maintenance of rail service, both
within the province and between the province and the main
land. It was further argued that the Terms of Union were
unclear so that the understanding of the parties must be
implied from the circumstances at the time and the conduct of
the parties since the Terms of Union were approved. The issue
was whether the order was contrary to the Terms of Union and
beyond the jurisdiction of the National Transportation Agency.
Held, the appeal should be dismissed.
The Terms of Union do not require Canada to operate the
railway in Prince Edward Island nor to maintain and operate a
rail link between the railway on the Island and that on the
mainland. The Terms are clear and should be taken to express
the agreement intended by the parties. There is no need to rely
on the rules of statutory construction, extrinsic evidence, or
legislative history. "Efficient Steam Service" refers to a ferry
service with the effect, but not obligation, of communicating
with the federal system. It can only mean "ship". That obliga
tion extends only to mails and passengers, and not to freight.
"Continuous" has a seasonal or temporal meaning rather than
a physical significance (i.e. continuous line of track). Although
there was an expectation that Canada would operate the rail
way system as indicated by the clause that provides that the
railways shall be the property of Canada, that does not impose
an obligation on Canada to operate the railway in perpetuity.
Canada obtained property in the railway because it assumed
the debts and liabilities of the province. Once owner of the
railways, it was legally free to do what it wished with them. If
an obligation to operate perpetually were intended, clear lan
guage to that effect would have been employed.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
An Act Respecting the Vancouver Island Railway, the
Esquimalt Graving Dock, and certain Railway Lands
of the Province of British Columbia, granted to the
Dominion, S.C. 1884, 47 Vict., c. 6, Schedule, s. 9.
British Columbia Terms of Union, R.S.C., 1985, Appen
dix II, No. 10, s. 4.
Constitution Act, 1867, 30 & 31 Vict., c. 3 (U.K.) (as
am. by Canada Act 1982, 1982, c. 11 (U.K.), Schedule
to the Constitution Act, 1982, Item 1) [R.S.C., 1985,
Appendix I1, No. 5], s. 145.
Constitution Act, 1982, Schedule B, Canada Act 1982,
1982, c. 11 (U.K.) [R.S.C., 1985, Appendix II, No.
44], s. 52(1).
National Transportation Act, 1987, R.S.C., 1985 (3rd
Supp.), c. 28, s. 65.
Prince Edward Island Terms of Union, R.S.C., 1985,
Appendix II, No. 12.
Railway Act, R.S.C. 1970, c. R-2.
Statute Law Revision Act, 1893, 56-57 Vict., c. 14
(U.K.) [R.S.C., 1985, Appendix II, No. 17].
CASES JUDICIALLY CONSIDERED
APPLIED:
R. (Prince Edward Island) v. R. (Canada), [1976] 2 F.C.
712 (C.A.); Edwards, Henrietta Muir v. Attorney-Gen
eral for Canada, [1930] A.C. 124 (P.C.).
DISTINGUISHED:
B.C. (A.G.) v. Can. (A.G.) (1989), 42 B.C.L.R. (2d) 339
(S.C.).
CONSIDERED:
The Moorcock (1889), 14 P.D. 64 (C.A.); Panagiotis Th.
Coumantaros (Steamship), The Owners of v. National
Harbours Board, [1942] S.C.R. 450.
COUNSEL:
William G. Lea, Q.C. for appellant.
Terance H. Hall and Myer Rabin for
respondent Canadian National Railway Com
pany.
Ian S. MacKay for respondent National
Transportation Agency.
Terrence Joyce, Q.C. and Lewis Levy, Q.C.
for intervenor Attorney General of Canada.
Robert Perry for intervenor Island Rail
Foundation.
SOLICITORS:
Campbell, Lea, Michael, McConnell & Pigot,
Charlottetown, for appellant.
Legal Division, Canadian National Railways,
Montréal, for respondent Canadian National
Railway Company.
Law Department, National Transportation
Agency, Hull, Qué., for respondent National
Transportation Agency.
Deputy Attorney General of Canada for inter-
venor Attorney General of Canada.
Island Rail Foundation, Vernon Bridge,
Prince Edward Island, for intervenor Island
Rail Foundation.
The following are the reasons for judgment
rendered in English by
IAcosucci C.J.: This is an appeal by the Minis
ter of Transportation and Public Works of Prince
Edward Island ("appellant") pursuant to leave
granted under section 65 of the National Trans
portation Act, 1987 ("NTA"),' from a decision
(Decision No. 348-R-1989) and order (Order No.
1989-R-180) of the National Transportation
Agency ("Agency") issued July 12, 1989, the
1 R.S.C., 1985 (3rd Supp.), c. 28.
effect of which was to order the abandonment by
Canadian National Railway Company ("CN") of
eight railway lines which constitute the entire rail
way system serving Prince Edward Island. Seven
of the eight lines are in Prince Edward Island and
one is a line in New Brunswick which connects the
main CN line from Québec to Halifax (the Inter-
colonial Railway) with the Cape Tormentine, New
Brunswick car ferry terminal. A car ferry service
operates between Cape Tormentine and Borden,
Prince Edward Island.
The Court, by order dated March 22, 1990,
granted leave to the appellant to appeal on the
following question:
Were the above decision and order contrary to the Prince
Edward Island Terms of Union and, for that reason, beyond the
jurisdiction of the National Transportation Agency?
On April 3, 1990, the Attorney General of Canada
("Attorney General") filed a Notice of Intention
to participate in the appeal. 2
The appellant's memorandum of argument con
tains a rather full background of factual and his
torical information that relates generally to the
issue before us. 3 However, in my view, it is not
necessary to refer to this background in any detail
for purposes of disposing of the question arising
from the decision and order of the Agency.
Suffice it to say, under the statutes of the colony
of Prince Edward Island, provisions were enacted
relating to the construction of a railway. Various
lines were built for which the Dominion Govern
ment took operational responsibility when the
Island Colony joined Confederation on July 1,
1873. These lines were constructed from the
1870's through to 1930. The Tormentine subdivi
sion was built by the New Brunswick and Prince
2 Mr. R. W. Perry, representing the Island Rail Foundation,
also appeared and made submissions principally on matters
unrelated to the main question before the Court but also
supported the appellant's position.
3 Part I of appellant's memorandum of argument describes
the railway lines in Prince Edward Island, the events concern
ing the building of the Prince Edward Island railway lines, and
subsequent developments concerning such lines.
Edward Island Railway Company, which was in
corporated to extend the Intercolonial Railway
from Sackville, New Brunswick to Cape Tormen-
tine, New Brunswick in 1886. An extension of the
line was built and completed in 1919 from Cape
Tormentine to the Prince Edward Island Ferry
Terminal by the Dominion Government in con
junction with the implementation of a year-round
ferry service from Cape Tormentine, across the
Northumberland Strait to Borden, Prince Edward
Island. On January 20, 1923, CN was entrusted to
manage and operate all of these lines. 4
Commencing in 1972, CN applied under the
applicable provisions of the Railway Act [R.S.C.
1970, c. R-2] for approval to abandon five of the
lines located in Prince Edward Island but was
ordered by the Railway Transport Committee of
the Canadian Transport Commission to continue
to operate each of those lines. Under the NTA,
these applications for abandonment were to be
reconsidered by the Agency in accordance with the
abandonment provisions of the NTA. 5 In addition,
in December, 1988, CN applied for the abandon
ment of the other three lines including the Tor-
mentine subdivision running from Sackville to
Cape Tormentine. The other two are the Borden
subdivision, which runs from the car ferry at
Borden to Charlottetown, and that part of the
Kensington subdivision running from Linkletter
near Summerside to Kensington, where it connects
with the Borden subdivision.
By its decision and order, the Agency ordered
the abandonment of all eight lines and in doing so
concluded that the Terms of Union did not impose
an obligation on Canada to operate the railway on
Prince Edward Island and to continue to operate
the Tormentine subdivision in order to keep the
province in continuous communication with the
railway system of Canada. Accordingly in the
°See Decision No. 348-R-1989, Tab E, Appeal Book, p. 3.
5 Id., at pp. 3-4.
Agency's view, it had jurisdiction under the NTA
to order the abandonment of the railway lines. 6
At this point, it would be appropriate to set
forth the relevant provisions of the Prince Edward
Island Terms of Union [R.S.C., 1985, Appendix
11, No. 12]:
That Canada shall be liable for the debts and liabilities of
Prince Edward Island at the time of the Union;
That the Dominion Government shall assume and defray all
the charges for the following services, viz.:—
The salary of the Lieutenant Governor;
The salaries of the Judges of the Superior Court and of the
District or County Courts when established;
The charges in respect of the Department of Customs;
The Postal Department;
The protection of the Fisheries;
The provision for the Militia;
The Lighthouses, Shipwrecked Crews, Quarantine and
Marine Hospitals;
The Geological Survey;
The Penitentiary;
Efficient Steam Service for the conveyance of mails and
passengers, to be established and maintained between the
Island and the mainland of the Dominion, Winter and Summer,
thus placing the Island in continuous communication with the
Intercolonial Railway and the railway system of the Dominion;
The maintenance of telegraphic communication between the
Island and the mainland of the Dominion;
And such other charges as may be incident to, and connected
with, the services which by the "British North America Act,
1867" (Constitution Act, 1867) appertain to the General Gov
ernment, and as are or may be allowed to the other Provinces;
That the railways under contract and in course of construc
tion for the Government of the Island, shall be the property of
Canada;
That the new building in which are held the Law Courts,
Registry Office, etc., shall be transferred to Canada, on the
payment of sixty-nine thousand dollars. The purchase to
include the land on which the building stands, and a suitable
space of ground in addition, for yard room, etc;
That the Steam Dredge Boat in course of construction shall
be taken by the Dominion, at a cost not exceeding twenty-two
thousand dollars;
That the Steam Ferry Boat owned by the Government of the
Island, and used as such, shall remain the property of the
Island;' [Emphasis added.]
6 For discussion of the constitutional issue, see Id., at pp. 5-7.
It is not disputed that the Terms of Union are part of the
Constitution pursuant to subsection 52(2) of the Constitution
which defines, as part thereof, various acts and orders referred
to in the schedule to the Constitution Act, 1982. Item 6 of the
schedule refers to the Prince Edward Island Terms of Union.
The appellant's arguments may be briefly sum
marized as follows. As the Terms of Union have
constitutional status, any law inconsistent with the
Terms of Union is of no effect pursuant to subsec
tion 52(1) of the Constitution Act, 1982 [Schedule
B, Canada Act 1982, 1982, c. 11 (U.K.) [R.S.C.,
1985, Appendix II, No. 44]]. In the view of the
appellant, the Terms require the maintenance of
rail service to Prince Edward Island, including
within the province and between the province and
the mainland railway. Because the effect of the
Agency's decision and order is that rail service for
Prince Edward Island will end, the decision and
order are beyond the jurisdiction that Parliament
could confer on the Agency.
More specifically the appellant submits that the
two railway related provisions of the Terms of
Union (emphasized in the extract above) must be
read by keeping in mind that, although they are
part of the Constitution, the Terms of Union give
effect to a deal made among different colonies.
Counsel for the appellant then goes on to say that
the Terms were not well drafted, extremely brief,'
poorly organized and appear to reflect an attempt
by the drafters to model them on the British
Columbia Terms of Union [R.S.C., 1985, Appen
dix II, No. 10] concluded two years earlier. Taking
all that into account, the appellant argues that the
language in the Terms of Union cannot be fairly
taken to express clearly their entire agreement on
the subject of the Terms of Union in question.
Resort must then be had to ascertaining the
implied terms of the deal including any terms
necessary to give the deal the efficacy the parties
must reasonably have intended. 9 To find these
terms and the efficacy the parties intended, one
should examine what the parties did and how they
s Counsel for the appellant says the Terms are "expressed in
less language than is found in, say, a car rental agreement".
See appellant's memorandum of argument, para. 37.
9 In support of this approach, the appellant cites The Moor-
cock (1889), 14 P.D. 64 (C.A.) which dealt with a breach of an
implied warranty that the bottom of the river at a jetty was
reasonably fit for its purpose. However, see Panagiotis Th.
Coumantaros (Steamship), The Owners of v. National Har
bours Board, [1942] S.C.R. 450, at p. 458 which dealt with
Moorcock on a much narrower basis than counsel for the
appellant's argument. As a result, I have grave doubts as to the
applicability of Moorcock in the instant case.
conducted themselves. In following the approach
advocated by the appellant's counsel, the conclu
sion is that there is a constitutional obligation to
operate the railway lines within Prince Edward
Island and the Tormentine subdivision.
I do not find it necessary to deal with each of
the imaginativc steps along the interpretive jour
ney mapped out by the appellant which leads to his
constitutional destination. I say this for the reason
that the Terms of Union do not require Canada to
operate the railway in Prince Edward Island or to
maintain and operate a rail link between the rail
way within Prince Edward Island and the railway
on the mainland. This is acknowledged by counsel
for the appellant, who also recognizes that what
the Terms of Union expressly state is that the
railway on the Island shall be the property of
Canada and Canada will pay the cost of a service
that will place the Island in continuous communi
cation with the Intercolonial Railway and the rail
way system of the Dominion.
In my view, what the appellant is in effect
arguing is that the Terms of Union are not clear
on their face as shown by what he calls the poor
drafting, brevity, disorganization and the like. To
resolve the doubt one must discern an understand
ing that must be implied from the circumstances at
the time and the conduct of the parties since the
Terms of Union were approved. I find this
approach rather dangerous because it can easily
lead to a rewriting of the Terms if not a slanting of
the arrangement unjustifiably in favour of one
side. But more fundamentally I think the appel
lant's approach is misguided because what is
surely paramount is the meaning to be given to the
words chosen by the parties in the Terms of Union.
In this respect, I do not agree that the words
chosen were badly expressed or otherwise defec
tive. In fact, I believe the relevant Terms of Union
are clear in their intent and meaning and should be
taken to express the agreement that was intended
by the parties. In other words, there is no need to
rely on the rules of statutory construction, extrin
sic evidence, or legislative history when the lan
guage under consideration is clear.
The two railway related provisions of the Terms
of Union do not impose an obligation to operate
the railway system in perpetuity as argued by the
appellant. The clause commencing "Efficient
Steam Service" makes it clear that the Dominion
Government is to pay for all the expenses for an
Efficient Steam Service for the conveyance of
mails and passengers between the Island and the
mainland, Winter and Summer, thus placing the
Island in continuous communication with the
Intercolonial Railway and the railway system of
Canada. Counsel for the appellant argues this
clause makes it clear that a continuous communi
cation obligation was intended and that means
communication with the Intercolonial Railway and
the railway system of the Dominion. That can only
make sense, says the appellant, if there is a railway
system in Prince Edward Island and that the Tor-
mentine subdivision continues to operate. More
over, this obligation is not limited to what would
be viewed as "Efficient Steam Service" as of 1873
but is affected by subsequent developments that
require higher quality service to be provided. The
appellant also argues that the service is not
restricted to mails and passengers but freight is
also included.
This Court has held in R. (Prince Edward
Island) v. R. (Canada) 10 that this clause of the
Terms of Union created a legal duty in favour of
the province with respect to a ferry service to be
operated continuously—winter and summer—be-
tween Prince Edward Island and the mainland.
The decision dealt only with the ferry service and
not the railway. Under the Terms of Union, the
requirement is clearly to provide a ferry service
10 [ 1976] 2 F.C. 712 (C.A.).
with the effect but not obligation of communicat
ing with the federal railway system as shown by
the use of the words "thus placing"."
Also the ferry service, by the use of the words
"Efficient Steam Service", can only mean "ship"
according to the normal meaning to be given to
such words.' In addition, it is also clear that the
ferry obligation mentions only mails and passen
gers and not freight, and if freight were to have
been intended it would have been very easy to
include the term as was done in the British
Columbia Terms of Union." Finally, the word
"continuous" refers only to the problem of crossing
the Northumberland Strait in Winter and Summer
and does not refer to a continuous line of track
existing on the Island, on and off the ferry, and
then on the mainland. In my view, continuous has
a seasonal or temporal meaning rather than a
physical significance.
With respect to the clause of the Terms of
Union that provides that the railways under con
tract and in course of construction for the Govern
" Counsel for CN also argues to reinforce this point that s.
145 of the Constitution Act, 1867 [30 & 31 Vict., c. 3 (U.K.)
(as am. by Canada Act 1982, 1982, c. 11 (U.K.), Schedule to
the Constitution Act, 1982, Item 1) [R.S.C., 1985, Appendix
ll, No. 5]], which stated that the construction of the Inter-
colonial Railway was essential to the Union of 1867, was
repealed in 1893 by British Statute [Statute Law Revision Act,
1893, 56-57 Vict., c. 14 (U.K.) [R.S.C., 1985, Appendix Il,
No. 17]]. From this, the Federal Government has the right to
abandon the Intercolonial Railway and it must also have the
right to abandon the railway on the Island. If the Federal
government were to abandon the Intercolonial Railway, there
would be nothing left to which the Island Railway would
"communicate". Hence, CN argues the Federal oglibation in
the Terms of Union must refer only to a ferry service.
' 2 Compare British Columbia Terms of Union, R.S.C., 1985,
Appendix II, No. 10, s. 4, which provides as follows:
4. The Dominion will provide an efficient mail service,
fort-nightly, by steam communication between Victoria and
San Francisco, and twice a week between Victoria and
Olympia; the vessels to be adapted for the conveyance of
freight and passengers.
" Supra, note 12.
ment of the Island shall be the property of
Canada, the result is equally clear. The appellant
argues that this clause can only mean that Canada
was not only to be the owner of the railway lines
but also the operator. There is no doubt that it was
expected that Canada would operate the railway
system but that is a far cry from saying the
language used in the Terms of Union imposes an
obligation on Canada to operate the railway in
perpetuity. It is clear that Canada was to obtain
property in the railway presumably because of
Canada's assumption of the debts and liabilities of
Prince Edward Island at the time of Union. Once
it obtained the property, it was legally free to do
what it wished with the railway as owner thereof.
If an obligation to operate perpetually were
intended, clear language to that effect would have
been employed as was done, as Counsel for CN
pointed out, in the 1883 B.C. railway settlement. 14
I conclude therefore that the decision and order
of the Agency were not contrary to the Prince
Edward Island Terms of Union and not thereby
beyond the Agency's jurisdiction. In arriving at
this conclusion, I rely on the clear meaning of the
language employed in the Terms. I recognize that
courts have, by the decision of the Privy Council in
14 The words "continuously and in good faith operate" are
found in the 1883 B.C. railway settlement: see An Act Respect
ing the Vancouver Island Railway, the Esquimalt Graving
Dock, and certain Railway Lands of the Province of British
Columbia, granted to the Dominion, S.C. 1884 (Acts not
repealed) 47 Vict., c. 6, s. 9 of the Schedule thereto. See B.C.
(A.G.) v. Can. (A.G.) (1989), 42 B.C.L.R. (2d) 339 (S.C.), a
decision of Chief Justice Esson of the B.C. Supreme Court
which found a perpetual obligation to maintain a railway
service between Victoria and Nanaimo on Vancouver Island.
Without commenting on the correctness of that decision, I
would point out that the facts and language of the relevant
enactments are materially different from those in the case at
bar.
Edwards, Henrietta Muir v. Attorney-General for
Canada, been instructed to interpret the Constitu
tion
... in a large, liberal and comprehensive spirit, considering the
magnitude of the subjects with which it purports to deal in very
few words.' 5
However, Lord Sankey also said:
... the question is not what may be supposed to have been
intended, but what has been said.' 6
I find Lord Sankey's caveat particularly apt to
answer the arguments made by counsel for the
appellant. "
I would dismiss the appeal.
PRATTE J.A.: I agree.
STONE J.A.: I agree.
'S [1930] A.C. 124 (P.C.), at p. 137, per Lord Sankey L.C.
16 lbid.
7 I n relying on the clear meaning of the language used in the
Terms of Union, I do not wish to imply that I agree with the
arguments by counsel for the appellant relating to the rules of
construction, extrinsic evidence, and legislative history. Indeed,
counsel for CN and the Attorney General have made impres
sive arguments in response but I have not found it necessary to
deal with these arguments in detail because of the clarity of the
language in the Terms of Union.
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.