“All hail the tariff writers!”1

One doesn’t hear these words spoken often or, in the shipping community, perhaps at all. In Canexus the Canadian Federal Court of Appeal was asked by both parties (in cross appeals) to exercise its supervisory role over the Canadian Transportation Agency (CTA). The context is the interaction between rail carriers and shippers and the efforts of rail carriers to limit their liability to the shippers when things go wrong.

At issue was a portion of a tariff published by the Canadian Pacific Railway (CP) (Tariff 8, Item 54) that had the look of limiting CP’s liability to its shippers. In the world of Canadian rail transportation, goods move under either a public tariff or a confidential contract between the railway and a shipper or group of shippers. S. 137(1) of the Canada Transportation Act (Act) provides that a railway can only limit its liability to shippers for the movement of traffic by way of a written agreement signed by the shipper. Of course, a published tariff is not an agreement. It is a unilateral act by a railway. Thus, if the tariff runs afoul of s. 137(1) and attempts ‘an unauthorized transfer of liability’, it is open to attack by the shippers who move traffic under that tariff. By virtue of s. 4 of the Railway Traffic Liability Regulations (Regulations) a carrier is liable for any loss or damage to goods in its possession unless liability is limited by the regulation. Those limitations identified are those which are beyond the control of the carrier (eg. act of God etc.).

The decision is marked by the

court’s reach into the deep roots of modern Canadian rail policy. As stated in the Emerson Report (Pathways: Connecting Canada’s Transportation System to the World, tabled by the Minister of Transport on February 25, 2016): “In the past 30 years, the Canadian transportation system has been transformed by a series of decisions placing competition and market forces at the hears of transportation policy”. It was a fundamental aspect of that policy that the perceived monopolistic practices of the railways, in terms of rates and terms and conditions of carriage, needed to be balanced by allowing shippers access to tools (eg. joint line rates, interswitching, final offer arbitration) which would give them leverage in their dealings with carriers. The shippers, for their part, have been constantly vocal in seeking more leverage. As an example, the court described to shippers position: “It cannot have been Parliament’s intention to leave shippers without recourse in the face of oppressive conditions imposed by near-monopolistic railway companies”.

In a nutshell, Item 54 of the tariff sought to address liability to shippers. It opened with this: “CP shall not be liable to the shipper for claims, loss or damage caused by or arising from the transportation of the [the shipper’s traffic].” It didn’t help that the Agency had issued 2 decisions which had somewhat different interpretations of the scope of s. 137(1) of the Act.

It is possible that the careful parsing, by the CTA and now the

Federal Court of Appeal, of the language of Item 54 and s. 137(1) of the Act could numb all but the extremely dedicated. The Court’s granular analysis is ultimately less interesting than its general statements which will reinforce the policy regime of the Act:• the statutory regime seeks to

encourage commercial negotiations;• railways being unable to decline

high risk traffic due to their common carrier obligations which are necessary for an efficient economic system that cannot depend on the vagaries of the good will of those who control the means of transport;

• the railways have an interest in restricting liability to shippers and one way to do it is through tariff provisions but, left unchecked, shippers could be prejudiced;

• the objective of s. 137(1) is not to inform shippers but to give them leverage in negotiating terms of liability with the railways and thus to encourage the negotiation of agreements;

• requiring a shipper’s signature (however defined)2 on contracts limiting liability is a way of forcing the railway to either negotiate limitations or draft them in such a way that they don’t need to be signed off on by the shipper to be enforceable;

Case Comment: CP v Canexus et al 2015 FCA 283

Thomas G. Keast Q.C.*

*Watson Goepel LLP (Vancouver, British Columbia, Canada)

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• if a railway narrows a limitation clause so that it is not caught by s. 137(1) then the clause is likely to be more balanced which benefits shippers

The detailed analysis of the language of Item 54, s. 137(1) of the Act and s. 4 of the Regulations is less interesting that the general statements put forward by the court. But by

unanimous decision, the Court of Appeal decided that the tariff did not violate s. 137(1) of the Act and was therefore enforceable.

In a collateral attack on the tariff, the shippers sought an order under s. 120.1 of the Act that the tariff provision was unreasonable. The court would have none of that, although its opinion on the point was somewhat

gratuitous given that it upheld Item 54 of the tariff. It simply made the point that the reasonableness provision of s. 120.1 dealt with “…charges and associated terms and conditions for the movement of traffic or for the provision of incidental services that are found in a tariff…” Item 54 was found not to relate to “charges” and therefore it was not subject to a reasonableness review.

Endnotes 1 Tom Keast Q.C. is a partner at Watson Goepel LLP and chair of the firm’s litigation group. Prior to beginning his legal studies, Tom received

undergraduate and graduate degrees focussing on transportation economics. He has been a member of the Chartered Institute of Logistics and Transport since 1992. For more information about Watson Goepel’s Transportation Law practice, see our website: http://watsongoepel.com/what-we-do/transportation-law/.

2 A nod to the decision in Mitsubishi Heavy Industries Ltd. v. Canadian National Railway Co. [2012] B.C.J. No. 1987 where the court enforced an unsigned confidential contract. The writer and Andrew N. Epstein were counsel for CN in Mitsubishi.

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