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Case Comment: Canadian National v. Canadian Transportation Agency
Published in the June 2008 issue of Transportation Notes - View Article
Rail companies within the legislative jurisdiction of Parliament are subject to Part III of the Canada Transportation Act, of which Division V specifies the rules and procedures governing the abandonment of railway lines. The policy behind the legislation requires the railway to take two basic steps before abandonment: it must first attempt to locate a buyer for the line and, failing to secure a sale, must notify certain governmental entities of the availability of the line. The question which arose in a recent appeal from a decision of the Canadian Transportation Agency was whether a time limit set out in Division V is subject to extension by either the parties or the Agency. The Federl Court of Appeal held the time limit was absolute and reversed the Agency decision.
A railway company which wishes to discontinue a rail line must first advertise the availability of the line for sale, lease or transfer. It must allow at least 60 days for response and must specify the last date on which expressions of interest will be received. This last date is of crucial importance as it marks the beginning of a six month period within which the parties will have an opportunity to come to terms. The question in the recent appeal was whether this period can be extended.
Before discussing the facts, it is important to review the balance of the statutory scheme. During the six month period set aside for negotiations, the parties can request the intervention of the Agency for either (or both) of two reasons. A party can ask the Agency to determine the net salvage value of the line and can, as well, ask the Agency to determine whether the other party is negotiating in good faith.
If the six month period passes without agreement, the rail company has an option. It can decide to continue to operate the line after all or it can offer to sell to a government body for net salvage value. The Act defines a hierarchy of government bodies, each of which may have a right to consider whether it wishes to acquire the line.
It is only after this entire process has been exhausted and no agreement reached at any stage that the rail company can discontinue the line.
In the recent case, CNR and CPR negotiated with an association which wished to acquire the line in question and operate a tourist train. No agreement was reached within six months and the parties agreed to an extension of approximately one month. On the last day of the extended period, the association applied to the Agency for a determination of net salvage value and also asked for a declaration that the rail carriers were not negotiating in good faith. The carriers then offered the line to the provincial and municipal governments involved and asked the Agency not to address the application before it as it lacked jurisdiction. In particular the carriers stated that the six month period for negotiation had expired and with it the Agency’s jurisdiction. The Agency disagreed and the question went up to the Federal Court of Appeal. That Court found in favour of the carriers, noting that Division V is a complete code which specifies a procedure which neither the parties nor the Agency can amend. The rights of the governments involved accrued after the expiry of six months and could not be revoked by action of the parties. The Court did note that the association could have suspended the running of time by asking for a declaration of bad faith within the six month period, but this it failed to do. The Agency had no jurisdiction to intervene.
Canadian National v. Canada Transportation Agency
2008 FCA 199