Docket: T-279-19
Citation: 2019 FC 1650
Ottawa, Ontario, December 23, 2019
PRESENT: Madam Justice McDonald
| BETWEEN:
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| CANADIAN NATIONAL RAILWAY COMPANY
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| Applicant
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| and
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| GIBRALTAR MINES LTD.
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| Respondent
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JUDGMENT AND REASONS
Introduction
[1]
The Respondent, Gibraltar Mines Ltd. (Gibraltar) operates a mine in South Central British Columbia and uses the Applicant’s, Canadian National Railway Company (CN), rail services to ship its copper concentrate to the Vancouver Wharves Terminal.
[2]
In late 2018, CN and Gibraltar underwent final offer arbitration (FOA) under the Canada Transportation Act, SC 1996, c 10 (CTA or the Act). On this judicial review, CN argues that it was procedurally unfair to proceed through FOA when it did not have reasons for the dismissal of a preliminary application it filed with the Canada Transport Agency (the Agency) in advance of the FOA.
[3]
For the reasons that follow, I have concluded that CN has not established a breach of procedural fairness. Further, I have found that any procedural fairness issues that CN may have with the process followed by the Agency cannot be addressed in the context of this judicial review of the FOA Adjudicator’s decision.
Background
[4]
In June 2016, Gibraltar and CN entered into a Transportation Agreement (2016 Contract) addressing shipping rates and shipping conditions. The 2016 Contract was due to expire in June 2018 and in advance, in May 2018, the parties started renewal discussions. What followed was a series of communications and offers and counter offers between Gibraltar and CN.
[5]
On September 26, 2018, as required by s. 161(3) of the Act, Gibraltar advised CN of its intention to request FOA. On October 10, 2018, Gibraltar made a request to the Agency for FOA pursuant to s. 161(1) of the CTA stating it was “dissatisfied with the conditions associated with the movement of copper concentrate by CN”
. Gibraltar advised the Agency that it was seeking FOA on “the matter of the conditions”
.
[6]
On October 12, 2018, CN filed a preliminary application pursuant to s. 162(1) of the Act to strike Gibraltar’s submission to FOA on the ground “that the matter included in the submission is governed by a confidential contract between Gibraltar and CN, and CN has not consented to the matter being submitted for FOA.”
CN argued in its preliminary application to the Agency that the matter should not proceed by way of FOA as the parties had already agreed to the terms of a renewal contract. In its submissions to the Agency, CN stated in part as follows:
[o]n July 4, 2018, CN and Gibraltar entered into the Renewed Contract. The Renewed Contract is a valid and enforceable confidential contract and the matters submitted to the Agency for FOA is governed by that contract….Mr. McManus’ subsequent refusal to sign the Renewed Contract is not relevant. There is no requirement at common law that a contract must be signed to be enforceable. Similarly, there is no requirement in the CTA that a confidential contract must be signed to be enforceable.
[emphasis in original]
[7]
CN requested that the Agency refuse to refer to the matter for FOA pursuant to sections 126(2) and 162(1) of the Act. CN also requested that their application be determined in an expedited manner.
[8]
On November 2, 2018, the Agency dismissed CN’s preliminary application stating that reasons would follow. Reasons were not provided by the Agency until March 29, 2019, which was 3 months after the FOA concluded.
[9]
In the meantime, the FOA process, with the statutorily mandated timelines, proceeded as follows:
- On October 10, 2018, Gibraltar requested FOA.
- On October 20, 2019, both CN and Gibraltar submitted their final offers to the Agency.
- On October 23, 2018, the matter was referred to FOA.
- On November 7, 2018, CN and Gibraltar exchanged information in support of their final offers.
- The FOA hearing took place on December 3-6, 2018.
[10]
During the FOA hearing, in addition to written submissions, the CN and Gibraltar relied upon evidence from various witnesses, including experts. The evidence included evidence on the costing of rail services, incentives and penalties.
[11]
On December 13, 2018, the FOA Arbitrator selected Gibraltar’s final offer. The Arbitrator’s decision was effective for one year only – October 10, 2018 to October 10, 2019. Pursuant to s. 165 of the Act, the Arbitrator did not provide any reasons in support of the final offer selected.
[12]
CN seeks judicial review of the Arbitrator’s December 13, 2018 FOA decision.
Legislation
[13]
The relevant provisions of the CTA are reproduced at Appendix A.
Issues
[14]
In oral submissions on this judicial review, CN confirmed that procedural fairness was the only issue being pursued. Based upon the submissions of the parties, I would frame the issues as follows:
Can CN raise a procedural fairness issue?
Was the FOA hearing procedurally unfair to CN?
Should documents filed continue to be confidential?
Standard of Review
[15]
The parties agree that the standard of review for procedural fairness issues is correctness (Canadian Pacific Railway Company v Canada (Attorney General), 2018 FCA 69 at para 34 (CPR)).
Analysis
Can CN raise a procedural fairness issue?
[16]
Gibraltar argues that CN’s failure to raise a procedural fairness issue regarding receipt of reasons from the Agency during the FOA process means it cannot now raise procedural fairness issues. It is a well-established principle that a party must raise an issue of procedural fairness at the first opportunity (Muskego v Norway House Cree Nation Appeal Committee, 2011 FC 732 at para 42).
[17]
CN argues that it did not waive its right to raise procedural fairness issues, and points to references in the transcript where it raised this issue during the FOA hearing, but acknowledged that the FOA process had to proceed. Further as CN points out, the FOA Arbitrator had no authority to provide a remedy or delay the Arbitration.
[18]
CN argues that it had no opportunity to raise the procedural fairness issue in the context of the FOA, as it did not know the reasons for the dismissal of its preliminary application at the time of the FOA proceeding.
[19]
Considering the FOA statutory scheme, and the fact that CN did not have reasons from the Agency at the time of the FOA proceeding, I agree that CN did not realistically have an opportunity to raise this issue within the FOA process. Accordingly, in my view, CN is not now precluded from raising procedural fairness arguments.
[20]
I now turn to consideration of the procedural fairness issue raised by CN.
Was the FOA hearing procedurally unfair to CN?
[21]
CN argues that without the benefit of the Agency’s reasons for dismissing its preliminary application it did not know the case it had to meet within the FOA process. CN also argues that Gibraltar took different positions in the submissions it made in response to the preliminary application to the Agency and within the FOA process.
[22]
CN notes that there were three possible outcomes of their preliminary application, namely: (1) dismissal on procedural grounds; (2) a finding of an agreement on rates only; or, (3) a finding of no agreement on any terms. CN says it would have proceeded differently with the FOA had it known the reasons for the dismissal of its preliminary application.
[23]
CN argues that the importance of knowing the case to meet was confirmed in Ruby v Canada (Solicitor General), 2002 SCC 75, at para 40 (Ruby), where the Supreme Court of Canada notes that:
[a]s a general rule, a fair hearing must include an opportunity for
the parties to know the opposing party's case so that they may address evidence prejudicial to their case and bring evidence to prove their position.
[24]
The rule referenced in Ruby speaks to a “fair hearing”
. Here however, the parties were engaged in two “hearings”
or two processes under the CTA – one being the referral to FOA and the second being the preliminary application filed by CN. Section 161(4) of the Act specifically states that “final offer arbitration is not a proceeding before the Agency.”
Accordingly to the Act then there were two processes, albeit, arguably relating to the same issues. The question is was CN disadvantaged in having to go through the FOA process without knowing why its preliminary application to the Agency was dismissed.
[25]
Despite the arguments of CN that it was disadvantaged in the FOA process for not having reasons from the Agency, CN knew the arguments being put forward by Gibraltar, as both parties exchanged documents on November 7, 2018 in advance of the FOA. As well, I would note that there is no suggestion that the Arbitrator had access to the reasons for the Agency’s decision. In fact, no one involved in the FOA had the Agency’s reasons. Therefore, all parties were working from what CN calls an “incomplete record.”
[26]
The fairness requirements in any particular circumstance are “highly variable and contextual”
(CPR at para 40). Here, the context is particularly important because of the nature of the highly circumscribed FOA process.
[27]
The comments of Justice Kellan in Canadian National Railway Company v Western Canadian Coal Corporation, 2007 FC 371 (CNRC) are helpful in assessing context:
[27]… My view is that the unique nature of the FOA scheme imposed by law distinguishes it from ordinary commercial arbitration. This is not a situation in which the parties freely consent to settling their dispute by arbitration or to have the terms of their contract determined by the arbitrator. Instead, I would characterize the process as one in which a contract is, in effect, formed as soon as the matter is submitted by the shipper to the Agency for referral to FOA. At that point, the carrier is bound to the terms of whichever offer is selected by the arbitrator — an obligation imposed on it by statute.
…
[35] Final offer arbitration has been described as "an intentionally high risk form of arbitration" that encourages settlement and tempers final positions. The arbitration resolves isolated disputes over rates to be charged by a carrier… when the parties are unable to agree. The arbitrator's task is to select the more reasonable of the two offers submitted. As is indicated in paragraph 165(6)(a) of the Act, the arbitrator's decision is intended to bring finality to the dispute. The limited duration of the decision's binding effect on the parties is closely linked to the limited timeframe within which the arbitration process occurs.
[emphasis added]
[28]
Prior to the FOA process unfolding, CN knew its preliminary application was dismissed. The narrow issue is was it procedurally unfair for CN to be required to proceed with FOA without knowing why its application to the Agency was dismissed.
[29]
In CPR, the Federal Court of Appeal held, at para 40, that the content and degree of fairness required is informed by the five non-exhaustive contextual factors identified in Baker v Canada (Minister of Citizenship and Immigration), [1999] 2 SCR 817 (Baker). In Baker, at paras 23-26 the factors include: (1) the nature of the decision being made, (2) the nature of the statutory scheme, (3) the importance of the decision to the individuals affected, (4) the legitimate expectations of the parties, and, (5) the choice of procedures.
[30]
In considering the Baker factors in the FOA context and considering the mandated statutory scheme, it is clear that the Arbitrator is acting in a judicial-like role. The Arbitrator is making a determination about which contract will be binding between the parties. As noted by Justice Kellan at para 35 of CNRC, FOA is intended to bring finality to disputes. These factors weigh in favour of a heightened level of procedural fairness.
[31]
However, in my view, the second Baker factor, the statutory scheme, is a full answer to the procedural fairness issues raised by CN. The Act does not require the Agency to give reasons for dismissing a preliminary application in advance of the FOA process. In fact, the Act states:
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[32]
Considering the use of the phrase “notwithstanding any application filed with the Agency”
and mandatory language used in s. 162(1), it appears that Parliament contemplated that applications might be filed but that the FOA process would continue regardless. This demonstrates that is was Parliament’s specific intention that any preliminary applications to the Agency would not otherwise affect the FOA process. Further, I note section 162.1 gives the Agency the power to order “that an arbitration be discontinued”
or “continue subject to terms and conditions.”
The Agency did not do so in this case.
[33]
In light of the clear wording of the legislation, and in spite of the preliminary application by CN, the FOA had to proceed. Knowing this, CN could not have had a legitimate expectation that the Agency would provide reasons in advance of the FOA given the short time frames dictated by the Act.
[34]
Although CN argues that it was not fair for them to have been required to proceed with the FOA in the absence of reasons from the Agency, this argument needs to be considered in the fuller context of the purpose and intent of the FOA process. In its preliminary application, CN’s argument was that the FOA process was not appropriate as the parties had reached an agreement. However, given the dismissal of its application, the Agency obviously did not agree with the position taken by CN.
[35]
Although CN invites the court to speculate about what impact the Agency’s reasons would have had on the FOA, in my view, that is an irrelevant consideration. Despite its preliminary application, CN knew that the FOA, which has been described as "an intentionally high risk form of arbitration"
(CNRC at para 35), was proceeding. Considering this, and the Baker factors, I am not convinced any unfairness ensued. CN knew the case it had to meet even in the absence of the Agency’s reasons for dismissing its preliminary application.
[36]
The other important contextual factor in assessing fairness is that the outcome of the FOA process has a relatively short-term impact on the parties. This tempers the otherwise “high risk”
nature of FOA, (CNRC at para 9). Here, the contract chosen by the FOA Arbitrator was for a one-year term only.
[37]
Overall, I do not find that CN had established any procedural unfairness with the FOA process despite not having the reasons for the dismissal of its preliminary application to the Agency.
[38]
Additionally, I would highlight that CN’s application to the Agency and the FOA process are two separate processes that are distinct. Parliament saw fit to create a tightly controlled legislative scheme for the FOA. Had it been Parliament’s intention to allow a preliminary application to delay the FOA, the legislation would have provided this option. The absence of such provisions in an Act that is otherwise fully prescriptive is telling.
[39]
Finally, on this judicial review, CN seeks review of the FOA Arbitration decision only. In that context, it is my view that it is not appropriate for the Court to also consider the impact of the failure of the Agency to provide its reasons under a separate process under the Act.
[40]
Overall, I am not satisfied that there has been a breach of CN’s procedural fairness rights in the FOA process.
Should documents filed continue to be kept confidential?
[41]
By Order dated July 22, 2019, Justice Fothergill ordered that certain documents filed by the parties be kept confidential until the hearing. Following the hearing, the parties provided submissions on continuing to maintain the confidentiality of these documents.
[42]
Section 167 of the Act states that when the Agency is advised that a party to an FOA wishes to keep matters relating to the arbitration confidential, the Agency and Arbitrator “shall take all reasonably necessary measures to ensure that the matters are not disclosed”
. CN made such a request prior to the FOA and clearly marked the information it wishes to remain confidential when it filed its materials with this Court. This complies with Rule 152(1) of the Federal Courts Rules SOR/98-106. CN’s intention to keep the information confidential has been clear since the beginning.
[43]
CN argues that its request meets the two-part test for confidentially orders as outlined in Sierra Club of Canada v Canada (Minister of Finance), 2002 SCC 41 at para 53 (Sierra Club).
[44]
The first part of the Sierra Club test is whether the confidentiality order is “necessary in order to prevent a serious risk to an important interest”
(Sierra Club at para 53). CN argues that its competitors, Gibraltar’s competitors, and other interested third parties could use this information to their detriment. I am satisfied that CN has met the first branch of the test.
[45]
CN also argues that its request satisfies the balancing part of the test (Sierra Club at para 69) between the benefit of open court proceedings against the harm of disclosure. CN argues that disclosure would put their commercial interests at risk. Additionally, the FOA provides that information disclosed during the process will remain confidential if requested. In my view, it is appropriate that this confidentiality be maintained in the judicial review process.
[46]
In the circumstances, I agree that it is appropriate to keep the documents confidential. Accordingly, the documents listed at para 20 of Justice Fothergill’s July 22, 2019 Confidentiality Order shall remain confidential.
Costs
[47]
In post-hearing submissions, the parties agreed on the amount of damages to be awarded to the successful party. Accordingly, Gibraltar is entitled to costs in the fixed amount of $8,000.00.
JUDGMENT in T-279-19
THIS COURT’S JUDGMENT is that:
The judicial review is dismissed;
The following documents will remain confidential:
(a) Hearing Transcript;
(b) CN’s Summary of Information and Argument;
(c) Gibraltar’s Summary of Information and Argument;
(d) CN’s Final Argument;
(e) CN’s Application to Strike;
(f) Gibraltar’s Answer to Application to Strike;
(g) CN’s Reply to Gibraltar’s Answer to Application to Strike;
(h) CN’s Memorandum of Fact and Law Re: Judicial Review; and
(i) All remaining documents withheld from CN’s public application record that are not specifically listed in these Reasons; and
The Applicant will pay the Respondent $8,000.00 in costs.
"Ann Marie McDonald"
Judge
Appendix A
Canada Transportation Act (S.C. 1996, c. 10)
Loi sur les transports au Canada (L.C. 1996, ch. 10)
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FEDERAL COURT
SOLICITORS OF RECORD
| DOCKET:
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T-279-19
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| STYLE OF CAUSE:
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CANADIAN NATIONAL RAILWAY COMPANY v GIBRALTAR MINES LTD
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| PLACE OF HEARING:
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Vancouver, British Columbia
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| DATE OF HEARING:
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September 30, 2019
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| JUDGMENT AND REASONS:
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MCDONALD J.
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| DATED:
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December 23, 2019
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APPEARANCES:
| Douglas C. Hodson, Q.C.
Jocelyn Sirois
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For The Applicant
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| Louis J. Zivot
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For The Respondent
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SOLICITORS OF RECORD:
| MLT Aikins
Barristers & Solicitors
Saskatoon, Saskatchewan
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For The Applicant
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| McMillan LLP
Barristers & Solicitors
Vancouver, British Columbia
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For The Respondent
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