Jackson v Canadian National Railway, 2012 ABQB 652

Court of Queen ’ s Bench of Alberta Citation: Jackson v Canadian National Railway, 2012 ABQB 652 Date: 20121023 Docket: 1001 05744 Registry: Calgary Between: Thomas Richard Jackson Plaintiff - and - Canadian National Railway and Canadian Pacific Railway Defendants Brought under the Class Proceedings Act _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice S.L. Martin _______________________________________________________ 1. Introduction [ 1 ] This case involves farmers, railways and freight rates for regulated grain.

The factual matrix is complex, extends over many years and involves various regulatory regimes. The Plaintiff asserts a class action on behalf of farmers alleging that the freight rates they paid unjustly enriched the Defendant railways. The Defendants say they were entitled to charge what they did and that the Plaintiff simply has no cause of action. [ 2 ] As the Case Management Justice for this action there are two distinct but related applications before me. First, Mr. Thomas Richard Jackson seeks certification of this matter as a class action.

Second, the Defendants, Canadian National Railway Company (“CN”) and Canadian Pacific Railway Company (“CP”) (collectively, “the Railways”), apply for

summary judgment dismissing the

Plaintiff’s Second Amended Statement of Claim. 2. The Putative Class Action and the Second Amended Statement of Claim [ 3 ] The Plaintiff seeks an order certifying this proceeding as a class action which would: (

a) describe the class as “all persons who delivered Grain to a Western Canadian Grain Delivery Point during the Class Period”; (

b) appoint Mr. Jackson as the representative Plaintiff; (

c) state the nature of the claims asserted as: The Plaintiff claims restitution of overstated hopper car maintenance costs on the basis that the Defendants charged rates that were unfair and unreasonable in contravention of the spirit and intent of the BIA, 1995 , CTA, 1996 , CTA, 2000 , and Railways Costing Regulations . In particular, the Defendants set tariffs and shipping rates under the Maximum Rate Scale and Maximum Revenue Entitlement without regard to actual hopper car maintenance costs; (

d) state the relief sought by the class as a personal restitutionary order and pre-judgment interest; (

e) set out the common issues for the class in a manner determined by the Court in consultation with counsel or as proposed by the Plaintiff, namely: (

i) Between August 1, 1995 and July 31, 2007, did the Defendants charge unfair and unreasonable Grain shipping rates that were based on overstated hopper car maintenance costs and which therefore contravened the intent and policy of the BIA, 1995 , CTA, 1996 , CTA, 2000 , and Railway Costing Regulations ? (ii) If so, are class members entitled to restitution of the amount by which the Defendants’ embedded hopper car maintenance costs exceeded their actual hopper car maintenance costs between August 1, 1995 and July 31, 2007?

If so, can that amount be awarded as an aggregate monetary award, including on an average or proportionate basis? (iii) Are the Defendants liable to pay pre-judgment interest with respect to overstated hopper car maintenance costs? If so, in what amount? (iv) A suitable limitation period issue; and (

f) state an appropriate manner and time within which a class member may opt out as set out in a subsequently filed litigation plan. [ 4 ] The allegations contained in the Second Amended Statement of Claim are relatively straightforward. Mr. Jackson farms and resides near Killam, Alberta. Since August 1, 1995, he has delivered the grain he grows to a Western Canadian Grain Delivery Point and, he alleges, paid tariff rates established by federal legislation to the Railways for the shipment of his grain.

[ 5 ] Mr. Jackson alleges that, at all material times, it was Parliament’s policy that railway transportation would be provided to users at the lowest total cost; that railways would bear the actual cost of services provided to them at public expenses; and that railways would receive only fair and reasonable compensation. In particular, Mr.

Jackson alleges that between August 1, 1995 and July 31, 2007, the Railways were obligated to charge fair and reasonable rates that were based on the Railways’ actual hopper car maintenance costs (“Actual HCMC”), which are the costs associated with maintaining the fleet of hopper railway cars that had been provided to the Railways at public expense. [ 6 ] Mr.

Jackson alleges that the Railways were required, but failed, to submit to the National Transportation Agency their Actual HCMC in 1994 and that, because the costs submitted by the Railways were overstated, the Railways charged unfair and unreasonable rates under two different legislative regimes from August 1, 1995 to July 31, 2007. 3. A Brief History of Regulated Grain Freight Rates [ 7 ] It is necessary to briefly discuss the complex historical relationship between the Railways and farmers in Western Canada, and the various regulatory regimes (“Regimes”) that have governed that relationship.

I am assisted in this regard by the affidavit evidence of Marian Robson, former Chairman and Chief Executive Officer for the Canadian Transportation Agency (“Agency”) and Hedley Auld, Senior Marketing Manager with CN. [ 8 ] The history of the regulation of the transportation of grain within and from Western Canada goes back well over one hundred years. Prior to 1984, the rates for the movement of western Canadian grain were governed by the Railway Act , RSC 1985, c R-3, as repealed by SC 1996, c 10 , s 185(1).

Under the Railway Act , the Railways were allowed to charge statutory maximum rates, known as Crow Rates.

By the 1960s, the Crow Rates did not come close to covering the Railways’ costs associated with the transportation of Western Canadian grain, and from the 1960s to the 1980s, the Government of Canada financed a number of measures in an effort to relieve problems caused by the Railways’ revenue shortfalls and growing production and export demand. [ 9 ] One of the measures taken by the Government of Canada during this time, and particularly relevant to these proceedings, was the creation of a program to purchase a large fleet of new grain hopper cars.

From 1972 to 1986, the Government of Canada acquired 14,000 hopper cars, the Canadian Wheat Board (“CWB”) acquired 4,000, and the Provinces of Alberta and Saskatchewan acquired 2,000. These hopper cars were supplied under various operating agreements, at no charge to the Railways, for use in the transportation of Western Canadian grain. The Railways were responsible for all costs associated with the use of the cars, including their maintenance.

Regime 1: Annual Rate Scale under the Western Grain Transportation Act . [ 10 ] The Crow Rates were eliminated with the passage of the Western Grain Transportation Act , RSC 1985, c W-8, as repealed by SC 1995, c 17 , s 26 (“ WGTA ”) which came into force on November 23, 1983. The WGTA replaced the Crow Rates with a regime whereby an Annual Rate Scale would be established by the Canadian Transportation Commission (“CTC”) for each crop year (“Regime 1”).

The method for determining the Annual Rate Scale was set out in section 36(1) of the WGTA : 36(1) The annual rate scale in respect of a crop year shall be determined by multiplying the amount per tonne for the movement of grain over each range of distance set out in the base rate scale by the quotient obtained by dividing the estimated eligible costs of the railway companies in respect of that crop year less the CN adjustment in respect of that crop year by the base year revenues within the meaning of subsection (2), as those revenues are adjusted in accordance with the grain tonnage forecast for that crop year provided by the Administrator. [ 11 ] Section 36(1) prescribes a complex formula for the determination of freight rates.

Put simply, the CTC was required to take the base rate amount, as set out in the WGTA , and adjust it annually to account for the estimated eligible costs of the Railways for the coming year, the amount of the CN adjustment (an amount the Government of Canada paid to CN to account for certain competitive disadvantages CN faced) and the figure to be used for base year revenues after making adjustments for the grain tonnage forecast for the coming year.

In determining the estimated eligible costs of the Railways, the CTC was to consider its own estimate of volume-related costs for the movement of regulated grain and line-related variable costs for dependent branch lines, and the contribution to constant costs of the railways. [ 12 ] In addition, the WGTA mandated quadrennial costing reviews. Every four years, commencing in 1986, the CTC was to

complete a review of and determine the volume-related variable costs of the Railways for the movement of regulated grain, and the line- related variable costs for grain-dependent branch lines. These reviews were to be conducted on the most recent calendar or crop year for which costing information was available. The 1994 Costing Review, which utilized information from 1992, was the last costing review under the WGTA and is of particular importance to these proceedings. [ 13 ] Pursuant to section 38(2) of the WGTA , in carrying out quadrennial costing reviews, the CTC was required to: (

a) take into account all costs actually incurred that were directly related to the provision of an adequate, reliable and efficient railway transportation system, that would meet future requirements for movement of grain; (

b) take into account costs of capital and adjustments deemed justified in light of the risks associated with the movement of grain; (

c) exclude costs of capital and depreciation in respect of branch line assets provided under the Prairie Branch Line Rehabilitation Program and railway cars not funded by the railway companies; (

d) reduce additional costs directly attributable to joint line movement by an amount equal to additional revenues derived by the Railways; and (

e) reduce additional costs directly attributable to the acquisition by the Railways of railway cars for the movement of grain other than box cars or hopper cars by an amount equal to additional revenues derived by the railways. [ 14 ] As the foregoing suggests, and Ms. Robson states in her Affidavit, the determination of costs and freight rates under the WGTA was extremely complicated.

In a report entitled, “A Report on the Movement of Western Grain: Estimates of the Railway Costs and Net Revenues Incurred between 1992 and 1998 and a Review of the Railway Assessment of the Extent of Sharing of Productivity Gains with Shippers”, the process undertaken by Agency was described, at 4: ...The WGTA, which required rates to be cost based, was an extremely complicated process and involved two major activities. The first activity involved determining total rail costs for the movement of western grain. These costs were derived through quadrennial costing reviews.

Three costing reviews were conducted, for 1984, 1988 and 1992. The costs determined through each review were finalized about 12 to 13 months after the base year for two reasons: complete data for the base year were not available until several months after the end of the year and the reviews took about a year to carry out. The second activity involved taking the most recent base year's costs and adjusting them to arrive at estimated eligible costs for the upcoming crop year.

For the most part, the major factors driving the updates were railway inflation (which takes into account price changes for labour, fuel, material and capital inputs) and projected traffic volume. From these estimated eligible costs, annual mileage-based rates were developed. Because western grain transportation was subsidized under the WGTA, the rates per tonne were divided into shipper and federal government portions.

The main purpose of the WGTA quadrennial costing review was to ensure that prescribed rates set through the updating process were aligned with as recent an actual cost base as was deemed appropriate. Otherwise, prescribed rates, which were updated for inflation and the abandonment of branch lines, could fall out of line with actual railway costs, which were also influenced by changes in productivity. In effect, the costing review was a device to ensure that cumulative changes in productivity were periodically shared with shippers. [ 15 ] According to Ms.

Robson, a high degree of scrutiny was applied by the Agency to the Railways’ operations under the WGTA , and the Agency had several branches and divisions responsible for auditing the Railways’ accounts. She points to the description of the Agency Financial Analysis Directorate in the Agency’s 1988 Annual Report:

This Directorate is responsible for the Uniform Classification of Accounts, the Railway Costing Regulations and their implementation in order to meet current information requirements. This includes insuring that the information provided by the railways is reliable, meaningful, useful for subsidy, freight rate and policy determinations, and meets the regulatory reporting requirements. The work of the Directorate involves the audit of railway records, depreciation rate determinations, the investigation of the railways’ working capital requirements, and cost of capital determinations.

The Directorate also analyses the railways’ costing methodology and computerized costing systems; and is responsible for the determination of price indices used in the WGTA annual rate scale, and the determination of western branch lines designated as grain dependant... The Directorate monitors actual and planned railway investment and maintenance expenditures for grain dependent lines, the results of which are reported to the Minister of Transport.

A major focus of activity of the Directorate is the quadrennial costing review pursuant to s.38 of the Western Grain Transportation Act . [ 16 ] Simply put, under Regime 1, the Agency established an Annual Rate Scale for the movement of regulated grain. It did so by determining, on a quadrennial basis, the Railways’ costs associated with the transportation of regulated grain, and on an annual basis making adjustments to those base costs on the basis of its own estimates.

Not all of the costs associated with the shipping of regulated grain would be borne by shippers; instead Regime 1 incorporated a direct government subsidy to the Railways known as the “Crow Benefit”. [ 17 ] Because the annual adjustments under section 36(1) of the WGTA did not account for productivity gains by the Railways, any efficiencies realized by the Railways in the four years between quadrennial costing reviews would accrue solely to the Railways, and would not be shared by shippers. [ 18 ] It must be noted that Mr. Jackson does not seek to recover any excess payments made to the Railways under Regime 1.

Nevertheless, some understanding of Regime 1 is important in these proceedings because it establishes context for the two Regimes that followed, and because it mandated the 1992 Costing Review, which Mr. Jackson alleges would play some role in those Regimes. Regime 2: Maximum Rate Scales under the Canadian Transportation Act [ 19 ] In 1995, the Government of Canada announced that it would cut transportation subsidies in its efforts to reduce the federal deficit.

Subsidies to the Railways were a significant part of Regime 1 under the WGTA , and so pursuant to the Budget Implementation Act , 1995 , SC 1995, c 17 (“ BIA, 1995 ”), the WGTA was repealed and the National Transportation Act , 1987 , RSC 1985, c 28 (3rd Supp), as repealed by SC 1996, c 10 , s 183) (“ NTA, 1987 ”) amended to add provisions related to the transportation of regulated grain.

In 1996, the National Transportation Agency (“NTA”), which was created under the NTA 1987 , was continued as the Agency and the NTA 1987 consolidated with the Railway Act to form the Canada Transportation Act , SC 1996, c 10 (“ CTA ”). A Maximum Rate Scale (“MRS”) for the 1995 - 1996 crop year was set out in the BIA, 1995. The MRS for 1996-1997 was set by the NTA, and the MRS for 1997-1998 to 2000-2001 was set by the Agency. [ 20 ] In essence, beginning in 1995, federal subsidies to the Railways were eliminated and the Annual Rate Scale system under the WGTA was replaced by the MRS.

The determination of the Maximum Rate Scale, like the determination of the Annual Rate Scale before it, was not a simple exercise. The MRS was determined by multiplying the rates for each range of distance set out in the Scale for the 1995-96 crop year by the Freight Rate Multiplier ("FRM") which effectively adjusted the rates for inflation, and reduced the maximum rates to take into account the abandonment of any grain dependent branch lines.

The FRM itself was the product of a complex formula incorporating the volume-related composite price index (“VRCPI”) for the 1994-1995 crop year and, as determined by the Agency, for the crop year in determination. The purpose of the VRCPI was to forecast changes in the Railways' expenses associated with the transportation of regulated grain including labour, fuel, materials, leased railway cars, and other capital components.

The Agency based the VRCPI for any crop year on information provided by stakeholders, private forecasters, other government departments and agencies, and the Agency's own research. [ 21 ] In January 1996, the Agency decided that it would include consultations with various stakeholders, including the Railways, grain companies and producer representatives, in the process of determining maximum freight rates.

In early March, the Agency would invite these stakeholders to review confidential forecasts for VRCPI components prepared by the Agency and the Railways and then invite them to submit their views in writing or in consultation sessions. Once this process was complete, the Agency would establish the MRS for the coming year, which was then used by the Railways in developing the rates that they would charge for the movement of

regulated grain. The Railways could and sometimes did offer incentive rates to shippers by providing discounts for large shipments. These incentive rates were not required to be approved by the Agency. [ 22 ] It is important to note that with the repeal of the WGTA , the Government of Canada eliminated quadrennial costing reviews. Under the new regime, the benefit of increased railway efficiencies would not be periodically shared with grain shippers, as it was before. [ 23 ]

Section 155 of the CTA required the Minister of Transportation to conduct a review of the effect of the CTA on the efficiency of the transportation of regulated grain and the extent of the sharing of efficiency gains between grain shippers and the Railways. In December 1997, Supreme Court Justice Willard Estey was appointed to undertake a review of the system. In December 1998, Justice Estey produced a report with 15 recommendations for the reform of the grain transport system, including a recommendation to replace the MRS with a more flexible pricing system.

Arthur Kroeger, a former Deputy Minister of Transport, was appointed in May 1999 to develop a system based on the Estey Report’s recommendations. [ 24 ] A number of parties suggested that a formal railway costing review should be conducted in connection with the Estey Report and Mr. Kroeger's work, but then Minister of Transport David Collenette did not order one, on the basis that a costing review would take too much time and that the repeal of the WGTA had eliminated statutory authority for such a review. Instead, Mr.

Kroeger asked the Agency to provide an estimate of the change in the Railways' costs since the 1992 Costing Review, and the Agency's assessment of the extent to which productivity gains had been shared with shippers in the interim. In September 1999 Mr. Kroeger recommended the replacement of the MRS with a cap on the Railways' revenues for the transport of regulated grain, and that the Railways' revenues be reduced by 12% from 1998 revenues to account for productivity gains made by the Railways since 1992. Regime 3: Maximum Revenue Entitlement [ 25 ] Following the Estey Report and Mr.

Kroeger's review and recommendations, the Government of Canada announced major changes to the CTA in May 2000. On August 1, 2000 the MRS was effectively replaced by the Maximum Revenue Entitlement (“MRE”) regime that exists to this day. Instead of the 12% reduction in railway revenues associated with the transport of regulated grain, Parliament imposed an 18% reduction. [ 26 ] Under the MRE regime, the Railways are required to publish tariffs that include a single car rate from every grain delivery point. The Railways are permitted to set the rates themselves.

Rates may vary in response to market conditions, including the length of haul, service requirements for different commodities shipped, and time of year. However, while under this regime the Railways were permitted, for the first time in Canadian history, to establish their own rates for the shipment of regulated grain, so long as each Railway’s revenues earned from the shipment of that grain do not exceed the Railway's MRE for that crop year. If a Railway’s revenues exceed the MRE, then the Railway is required to pay out the excess plus penalties. [ 27 ] The formula for determining a Railway's MRE is set out in

section 51 of the CTA : 151.

(1) A prescribed railway company's maximum revenue entitlement for the movement of grain in a crop year is the amount determined by the Agency in accordance with the formula [A/B + ((C - D) × $0.022)] × E × F where A is the company's revenues for the movement of grain in the base year; B is the number of tonnes of grain involved in the company's movement of grain in the base year; C is the number of miles of the company's average length of haul for the movement of grain in that crop year as determined by the Agency; D is the number of miles of the company's average length of haul for the movement of grain in the base year; E is the number of tonnes of grain involved in the company's movement of grain in the crop year as determined by the Agency; and

F is the volume-related composite price index as determined by the Agency. [ 28 ] Parliament sets out the base year figures for A, B, C and D in subsections 151(2) and 151(3) of the CTA . The Agency is required to determine the amount of grain the railways transport in a given year, and must also continue to conduct the complex VRCPI determination.

It is also the Agency's responsibility to assess the Railways' revenues and determine if they exceed the MRE for a given year. [ 29 ] The process for determining VRCPI remains a consultative one, as described in the Agency Decision No. 207-R-2008: The development of the volume-related composite price index for 2007-2008 required detailed submissions of historical price information of railway inputs (labour, fuel, material and capital) from the prescribed railway companies… The submitted information as reviewed and verified by Agency staff.

In addition, the railway companies and Agency staff developed forecasts for future changes in the price of railway inputs. The historical and forecasted information was summarized in an Agency report and shared with grain industry participants for consultation purposes. Consultation included participants from producer organizations, grain companies, railway companies, and federal, provincial and municipal governments. [ 30 ] Under

section 150 of the CTA , the determination of the Railways’ revenues from the transportation of regulation grain is to be made by the Agency no later than December 31 of the following crop year. The way in which the Agency does this was described in its Decision No.529-R-2009, at para 21: Railway company records relating to western grain revenue were audited by Agency staff. Initial freight revenue, including payments to other railway companies involved in the carriage of grain, were submitted by CN and CP on a per movement basis. Both were verified against company accounting records and source documents.

Numerous onsite visits were also made to CN and CP offices to ensure that all western grain revenue was captured and to determine whether revenue exclusions or reductions were appropriate and accurate. 4. Hopper Car Maintenance Costs and the Hopper Car Decision [ 31 ] As noted above, between 1972 and 1986, the Government of Canada acquired some 14,000 hopper cars and provided them, under various operating agreements, to the Railways for the transportation of regulated grain, at no charge.

The Railways were responsible for the maintenance of the hopper car fleet, and the associated costs were included in the costing process under the WGTA. [ 32 ] Along with the replacement of the Annual Rate Scale with the MRS in 1995, the Government of Canada began investigating the potential disposition of its large hopper car fleet. In the following years a number of proposals were considered, including the purchase of the hopper car fleet by the Railways and by groups representing western farmers.

It is clear that the fact that hopper car maintenance costs were effectively “embedded” in the MRS was a live issue early on in the process of determining what to do with the hopper car fleet.

In May 30, 1996 submissions to the House of Commons Standing Committee on Agriculture, Art Macklin, a member of the Advisory Committee to the Canadian Wheat Board, indicated that the Railways’ current annual maintenance costs of $4000 per car per year could probably be reduced by half. [ 33 ] Though a sale by the Government of Canada of its hopper car fleet was essentially anticipated in the BIA, 1995 , no sale proceeded and the matter was put on hold pending the outcome of the Estey Report. Meanwhile, the matter of hopper car maintenance costs embedded in the MRS remained a bone of contention.

The National Farmers Union raised the issue in its submissions to Justice Estey, citing a “$3000-per-car discrepancy” between the amounts for hopper car maintenance embedded in the MRS and the amounts spent on an annual basis by commercial leasing companies. [ 34 ] Beyond a general comment in the Estey Report to the effect that a disposal of the hopper car fleet for fair market value conditional upon the cars remaining available to the Western Canada grain industry would be in the interest of Canadian grain transportation, the Estey Report made no formal recommendation with regard to the disposal of the hopper car fleet or hopper car maintenance costs.

In the following years, Transport Canada continued to study and to explore options relating to the disposal of the hopper car fleet. In the event of a sale of the hopper cars to a third party, hopper car maintenance costs would no longer be the Railways’ responsibility and so in 2004, the Agency was asked to determine the amount embedded in the MRE for hopper car maintenance in the 2003-2004 crop year. The Agency determined that, at as of that time, the amount was some $4,329 per hopper car per year.

The Farmer Rail Car Coalition (“FRCC”), a group comprised of a number of Western Canada farm groups that were exploring the purchase of the

hopper cars itself, responded by pointing out that the $4,329 was significantly more than its own estimate of hopper car maintenance costs of $1,500 per year. An Agency study in 2005 indicated that the Agency’s estimate of actual annual maintenance costs for the hopper car fleet in 2004 was $1,873 per car. [ 35 ] By 2005, it appears that the Government of Canada was close to an agreement with the FRCC that would see the transfer of the hopper car fleet to the FRCC, with an adjustment to the Railways’ MRE to reflect the fact that they would no longer be responsible for hopper car maintenance costs.

An agreement in principle was reached and announced on November 24, 2005, but on May 4, 2006, Transport Canada announced that the Government of Canada would no longer be proceeding with the sale. At the same time, there was a recognition that without the transfer of the hopper car fleet and the corresponding adjustment to the Railways’ MRE, the disparity between “embedded” and actual hopper car maintenance costs would persist. As a result, the Government of Canada announced the introduction of

An Act to Amend the Canada Transportation Act and the Railway Safety Act and to Make Consequential Amendments to Other Acts , 1st Sess, 39th Parl, 2007, assented to 22 June 2007) (“Bill C-11"), which would make an adjustment to the VRCPI to better reflect actual hopper car maintenance costs. Clause 57 of Bill C-11 provided: 57. Despite subsection 151(5) of the Canada Transportation Act , the Canadian Transportation Agency shall, once only, on request of the Minister of Transport and on the date set by the Agency, adjust the volume-related composite price index to reflect the costs incurred by the prescribed railway companies, as defined in

section 147 of that Act, for the maintenance of hopper cars used for the movement of grain, as defined in

section 147 of that Act. [ 36 ] Once Bill C-11 received Royal Assent, the Agency was immediately tasked with determining the adjustment to the VRCPI mandated by Clause 57. The Agency released a consultation document in May 2007, setting out its proposed methodology for determining the adjustment and a number of issues for discussion with stakeholders.

In Canadian National Railway v Canada (Canadian Transportation Agency) , 2008 FCA 363 , leave to appeal to SCC refused, [2009] SCCA No 33, (the “Hopper Car Appeal”) it was noted at para 43 that this consultation involved approximately 30 organizations. [ 37 ] On February 19, 2008, the Agency released Decision No. 67-R-2008 (the “Hopper Car Decision”). The purpose of the Hopper Car Decision was to implement the direction contained in Clause 57, which was described at paras 3-5: Clause 57 provides that the Agency must adjust the volume-related composite price index. The adjustment is not an adjustment at large.

It is specifically the adjustment that is to reflect costs incurred by the Canadian National Railway Company (CN) and the Canadian Pacific Railway Company (CP) and only for the maintenance of hopper cars used for the movement of regulated grain. This new adjustment reflects Parliament's acceptance that since 1992, and largely due to improved railway company operating efficiencies, the railway companies' costs for moving statutory grains have decreased significantly.

This downward trend was in fact first recognized in the year 2000 when the CTA was changed to reflect revenue regulation as opposed to direct rate regulation. The policy underpinning Clause 57 is that the railway companies' costs for the maintenance of hopper cars, which are a significant cost component in the movement of grain, have declined to the point that the overall integrity of the Revenue Cap Program is now in doubt. That is, as a regulatory system that is cost based, at least in part, there are historic operating costs in the system that the railway companies are no longer incurring.

There is widespread recognition that these historic costs are significant and there is a broad-based view that they ought to be removed from the Revenue Cap formula to partly restore the balance between the interests of the railway companies, and shippers and producers. [ 38 ] The scale of the discrepancy arising from actual versus embedded hopper car maintenance costs under the MRE regime was described at para 9: It is estimated that during the first seven years under the Revenue Cap Program (i.e., from crop year 2000-2001 to crop year 2006-2007) the railway companies received more than $550 million for hopper car maintenance costs while incurring less than $250 million for this maintenance.

Thus, in the period, the railway companies have received at least $300 million more than they have spent on hopper car maintenance, and this has been paid by Prairie grain producers. Moreover, the difference between the amount the railway companies receive under the Revenue Cap Program and what they incur as hopper car maintenance costs has been growing at an increasing rate.

[ 39 ] The purpose of the Clause 57 adjustment was described at paras 11-12: ...If the cap is higher than it should be, due to the overstated historical costs, Parliament has directed the Agency to reduce it to partly restore the integrity of the Revenue Cap Program. Simply put, if the historical maintenance costs are too high, producers are paying too much to shippers who are paying too much to the railway companies. Parliament has directed that this should not be the case for hopper car maintenance costs included, or embedded, in the Revenue Caps.

While Parliament has declared that a re-balancing is necessary, it has instructed the Agency to determine what re-balancing is required and how and when it is to be done. The only limit is that the adjustment must be undertaken "once only". This is to be achieved by adjusting the volume-related composite price index to better reflect costs for the maintenance of hopper cars used for the movement of grain.

This determination is separate from the yearly Revenue Cap determination exercise which includes many costs, in addition to those related to hopper cars. [ 40 ] Not surprisingly, the Agency’s task in determining the amount of hopper car maintenance costs that were embedded in the Railways’ MRE was a highly complicated one. It first had to determine the applicable 1992 total for hopper car maintenance costs, since 1992 was the last time a formal cost review had been conducted.

That figure, ultimately determined to be $140.41 million, was then adjusted to reflect the differences in the amount and distance of grain moved between 1992 and 2007-2008, and then further adjusted for inflation and productivity gains. In the end, the Agency determined the amount of embedded hopper car maintenance costs in the Railways’ MRE to be $105.1 million for the 2007-2008 crop year.

The Agency was then required to determine the actual hopper car maintenance costs for 2007-2008, which it did by relying upon costing data provided by the Railways for the period between 2004 and 2006 and adjusting for inflation and productivity gains. Ultimately, the Agency concluded that the actual hopper car maintenance cost for 2007-2008 was $32.9 million. [ 41 ] At para 177, the Agency concluded: The amount of "actual" hopper car maintenance costs relating to crop year 2007-2008 and reflecting the above Agency findings, totals $32.9 million.

It follows that the difference between the amount of "embedded" and "actual" hopper car maintenance costs for crop year 2007-2008 is $72.2 million. This conclusion, and what it represents when considered over the duration of the MRS and MRE regimes, is at the heart of this action.

Though it speaks only to the difference between embedded and actual costs in the 2007-2008 crop year, it is clear that over the years the legislative schemes had incorporated into the Railways’ costs an amount for hopper car maintenance that bore no relationship to reality. [ 42 ] To remedy the significant gulf between actual and embedded hopper car maintenance costs, the Agency was empowered only to make a one-time adjustment to the VRCPI, which it did by reducing that number to 1.0639, translating to a reduction, on average, of $2.59 per tonne of grain shipped in the 2007-2008 crop year, on the basis of a forecast of 27.85 million tonnes.

The effect was to remove $72.2 million from the Railways’ 2007-2008 MREs, and further to remove this amount, plus adjustments for inflation, from the MREs in all subsequent years. The adjustment made as a result of Clause 57 and the Hopper Car Decision does not address the imbalance between actual and embedded hopper car maintenance costs between 1992 and 2007. 5. The Sale and Shipment of Grain in Western Canada [ 43 ] It is important to understand how Western Canadian grain is brought to market and sold.

For the purpose of determining which crops would be covered by the statutory regime described above, the WGTA defined "grain" as including 56 different types of crops and products. Under the BIA, 1995 and with the creation of the NTA, the list was expanded to 58 products. These include wheat and barley, which during the relevant period were subject to the CWB’s marketing monopoly, as well as a significant number of grains such as corn, lentils, flax, oats and canola, as well as processed products like flour, animal feed, barley meal and canola oil, which were not subject to the CWB’s monopoly.

The CWB marketing monopoly covered wheat and barley grown in Western Canada, whether for human consumption or for shipment interprovincially or for export. [ 44 ] In the case of grains subject to the CWB monopoly, Western Canadian farmers were required to sell their crops to the CWB.

A number of Grain Handling Companies ("GHCs") acted as agents for the CWB in purchasing grain from producers, and then storing, handling, and blending the grain, and arranging for the shipment of the grain on the CWB’s behalf. Producers were free to sell their grain to any GHC and to negotiate the terms of sale. GHCs acting as agents for the CWB were required by law to deduct a "freight consideration rate" ("FCR fee") from the purchase price paid by the GHC for the grain. The operation of the FCR fee is set out in

section 32 of the Canadian Wheat Board Act , RSC 1985, c C-24, as repealed by SC 2011, c 25 , s 39: 32.

(1) The Corporation shall undertake the marketing of wheat produced in the designated area in interprovincial and export trade and for that purpose shall ... (

b) pay to producers selling and delivering wheat produced in the designated area to the Corporation, at the time of delivery or at any time thereafter as may be agreed on, a sum certain per tonne basis in storage at a pooling point to be fixed from time to time (

i) by regulation of the Governor in Council in respect of wheat of a base grade to be prescribed in those regulations, and (ii) by the Corporation, with the approval of the Governor in Council, in respect of each other grade of wheat; (b.1) deduct from the sum certain referred to in paragraph (

b) the amount per tonne determined under subsection (2.1) for the delivery point of the wheat to the Corporation; ...

(2.1) For the purpose of paragraph (1)(b.1), the Corporation shall, with the approval of the Governor in Council, establish for each delivery point within the designated area an amount that, in the opinion of the Corporation, fairly represents the difference in the cost of transporting wheat from that point as compared to other delivery points. [ 45 ] The FCR fee was calculated by the CWB based on the single car rate for the movement of grain from any delivery point to either Thunder Bay or Vancouver. The fee is therefore the same for all producers who deliver grain to a particular delivery point.

The FCR fee is shown on a "cash ticket" or "grain ticket" provided to the producer, but it is important to note that it does not directly reflect the actual cost of freight via the Railways. The FCR fee is the same regardless of whether the grain is ultimately transported on a regulated basis or not. [ 46 ] In the case of grain not subject to the CWB monopoly, producers have the right to sell their grain to any GHC or to any other purchaser of their choice.

The purchase price is the result of negotiation between producer and GHC and is therefore subject to a variety of factors for both the producer and the purchaser. However, as Mr. Gorst, who is a former General Manager of the GHC Agricore, indicated in his Affidavit, GHCs would not deduct anticipated transportation costs, whether for regulated rail transportation, or otherwise, from the price paid to a producer, nor would the producer make a payment to the GHC for the shipment of grain.

Instead, transportation costs, broadly speaking, would have been a factor taken into account by the GHC in determining the purchase price. Those transportation costs might be the costs the GHC could anticipate it would incur if it shipped the grain via regulated movement, or not. At the time of purchase, it is possible that the GHC would not know whether the grain would be shipped via regulated movement or not. [ 47 ] To put the matter simply, subject to one exception the carriage of grain produced in Western Canada is paid for by GHCs.

While the cost of carriage is surely a factor in determining the price paid by GHCs and the CWB to Western Canadian producers, those producers do not pay the Railways directly for the shipment of regulated grain. [ 48 ] The exception is grain shipped in producer cars. Under the Canada Grain Act , RSC 1985, c G-10, a producer or group of producers are entitled to order rail cars from the Canadian Grain Commission. The grain car is then loaded directly by the producer or group of producers for shipment to another location. However, grain shipped by producer car does not form part of Mr.

Jackson’s claim. [ 49 ] Once a GHC has purchased and obtained title to grain (whether as agents for the CWB or not), there are typically three modes of carriage a GHC might employ: transportation by truck or other non-rail mode; non-regulated rail movement (ie. into the United States or interprovincially); and regulated rail movement. A GHC opting to ship by way of regulated movement may negotiate a price for the shipment with the Railways, subject to the limits imposed upon the Railways by the statutory regime.

The rate charged by the Railways may be different from the FCR fee deducted by the CWB, or the rates set out in the MRS, or the Railways' single car tariff rates, for a

variety of reasons, but the most significant is that reduced or incentive rates may be offered by the Railways, often for large volume shipments. It is Mr. Gorst's evidence that the value of these reduced rates is significant and may apply to as much as 80% of the movements of regulated grain. [ 50 ] There are additional complexities, as described by Mr. Gorst. Once delivered to a GHC, a producer’s grain will be commingled with grain delivered by other producers.

Where it goes from there, and therefore whether the transportation of the grain is regulated or not, will depend upon a wide variety of factors, including the type of grain, the grade of the grain, the location of the producer, available space and inventory at the GHC facility, the availability of incentive or reduced shipping rates, the date of delivery, and the availability of rail cars. 6. The Certification Application [ 51 ] The relevant portions of

section 5 of the Class Proceedings Act , SA 2003, c C-16.5 (“ CPA ”) provide: 5(1) In order for a proceeding to be certified as a class proceeding on an application made under

section 2 or 3, the Court must be satisfied as to each of the following (

a) the pleadings disclose a cause of action; (

b) there is an identifiable class of 2 or more persons; (

c) the claims of the prospective class members raise a common issue, whether or not the common issue predominates over issues affecting only individual prospective class members; (

d) a class proceeding would be the preferable procedure for the fair and efficient resolution of the common issues; (

e) there is a person eligible to be appointed as a representative plaintiff who, in the opinion of the Court, (

i) will fairly and adequately represent the interests of the class, (ii) has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and (iii) does not have, in respect of the common issues, an interest that is in conflict with the interests of other prospective class members. 5(2) In determining whether a class proceeding would be the preferable procedure for the fair and efficient resolution of the common issues, the Court may consider any matter that the Court considers relevant to making that determination, but in making that determination the Court must consider at least the following: (

a) whether questions of fact or law common to the prospective class members predominate over any questions affecting only individual prospective class members; (

b) whether a significant number of the prospective class members have a valid interest in individually controlling the prosecution of separate actions; (

c) whether the class proceeding would involve claims that are or have been the subject of any other proceedings; (

d) whether other means of resolving the claims are less practical or less efficient; (

e) whether the administration of the class proceeding would create greater difficulties than those likely to be experienced if relief were sought by other means. 5(3) Where the Court is satisfied as to each of the matters referred to in subsection (1)(

a) to (e), the Court is to certify the proceeding as a class proceeding. 5(4) The Court may not certify a proceeding as a class proceeding unless the Court is satisfied as to each of the matters referred to in

subsection (1)(

a) to (e). (

a) Reasonable Cause of Action [52] Before describing the issues for trial as they are now framed in the Plaintiff's Second Amended Statement of Claim, it isworthwhile, in light of the changing allegations, to mention what is not being alleged. The Plaintiff no longer alleges that the 1994Costing Review was faulty, or that the determination of HCMC at that time was improperly inflated.

The Plaintiff does not allege that theRailways charged more than the tariffs under the MRS allowed, nor does he allege that the Railways exceeded their MREs. [53] Instead, the Plaintiff now contends that at all times during the relevant period the Railways were obligated to providetransportation to users at the lowest possible cost; that the Railways were to bear the actual cost of services provided to them at publicexpense; and that the Railways would receive only fair and reasonable compensation for shipping grain.

The crux of the Plaintiff’sallegations is contained in paragraph 7 of the Second Amended Statement of Claim, wherein the Plaintiff pleads “The policy of theLegislation (defined in the Statement of Claim as the BIA, 1995, CTA, 1996, CTA, 2000 and the Railways Costing Regulations) was thatthe MRS and MRE were to be “maximum” amounts, not amounts to which the Defendants had an “entitlement” without regard tounderlying decreased operating costs.” [54] In particular, the Plaintiff contends that, in repealing the WGTA and the requirement for quadrennial costing reviews, it wasParliament’s intention that the Railways would pass on or share HCMC reductions with producers by way of lower freight rates.

Instead,by charging rates and earning revenues at "the ceiling" of the MRS and MRE, the Railways earned more than Parliament intended. Therelief sought is restitution for unjust enrichment. [55] The test for unjust enrichment is set out in Garland v Consumers' Gas Co., 2004 SCC 25, [2004] 1 SCR. 629 at para 30: As a general matter, the test for unjust enrichment is well established in Canada. The cause of action has three elements: (1) anenrichment of the defendant; (2) a corresponding deprivation of the plaintiff; and (3) an absence of juristic reason for the enrichment ... [56] The test under section 5(1)(

a) of the CPA requires the Court to accept that the material facts pleaded in the Statement of Claimare true, and the Court may deny certification on the basis that the Statement of Claim fails to disclose a cause of action, only if it isplain, obvious and beyond a reasonable doubt that the plaintiff cannot succeed: Alberta v Elder Advocates of Alberta Society, 2011 SCC24 , [2011] 2 SCR 261 at para 20. The test is essentially the same as whether pleadings should be struck pursuant to anapplication under the former Rule 129(1)(

a) of the Alberta Rules of Court: whether it is plain and obvious that there is no cause ofaction: Alberta Municipal Retired Officer’s Mutual Benefit Society v Alberta, 2010 ABQB 458. While the Court must accept that thematerial facts pleaded are true, those facts must be clearly pleaded and a plaintiff may not rely upon mere speculation. [57]

Section 5 of the CTA is entitled “National Transportation Policy”. It is central to the Plaintiff’s argument that, in chargingmaximum rates, the Railways breached the policies underlying the specific provisions of the CTA. From 1996 though June, 2007, ie.during the course of the Class Period,

section 5 provided: 5.

It is hereby declared that a safe, economic, efficient and adequate network of viable and effective transportation services accessible topersons with disabilities and that makes the best use of all available modes of transportation at the lowest total cost is essential to servethe transportation needs of shippers and travellers, including persons with disabilities, and to maintain the economic well-being andgrowth of Canada and its regions and that those objectives are most likely to be achieved when all carriers are able to compete, bothwithin and among the various modes of transportation, under conditions ensuring that, having due regard to national policy, to theadvantages of harmonized federal and provincial regulatory approaches and to legal and constitutional requirements, (

a) the national transportation system meets the highest practicable safety standards, (

b) competition and market forces are, whenever possible, the prime agents in providing viable and effective transportation services,

(

c) economic regulation of carriers and modes of transportation occurs only in respect of those services and regions where regulation is necessary to serve the transportation needs of shippers and travellers and that such regulation will not unfairly limit the ability of any carrier or mode of transportation to compete freely with any other carrier or mode of transportation, (

d) transportation is recognized as a key to regional economic development and that commercial viability of transportation links is balanced with regional economic development objectives so that the potential economic strengths of each region may be realized, (

e) each carrier or mode of transportation, as far as is practicable, bears a fair proportion of the real costs of the resources, facilities and services provided to that carrier or mode of transportation at public expense, (

f) each carrier or mode of transportation, as far as is practicable, receives fair and reasonable compensation for the resources, facilities and services that it is required to provide as an imposed public duty, (

g) each carrier or mode of transportation, as far as is practicable, carries traffic to or from any point in Canada under fares, rates and conditions that do not constitute (

i) an unfair disadvantage in respect of any such traffic beyond the disadvantage inherent in the location or volume of the traffic, the scale of operation connected with the traffic or the type of traffic or service involved, (ii) an undue obstacle to the mobility of persons, including persons with disabilities, (iii) an undue obstacle to the interchange of commodities between points in Canada, or (iv) an unreasonable discouragement to the development of primary or secondary industries, to export trade in or from any region of Canada or to the movement of commodities through Canadian ports, and (

h) each mode of transportation is economically viable, and this Act is enacted in accordance with and for the attainment of those objectives to the extent that they fall within the purview of subject-matters under the legislative authority of Parliament relating to transportation. [ 58 ]

Section 5 of the CTA is a “purpose statement”, as described in Ruth Sullivan, Driedger on the Construction of Statutes , 3d ed (Vancouver: Butterworths Canada Ltd., 1994) at 263-264: ...A purpose statement is a provision set out in the body of legislation that declares the principles or policies the legislation is meant to implement or the objectives it is meant to achieve. Usually purpose statements are found at the beginning of

an Act or the portion of the Act to which they relate. Some are explicit and begin with the words “The purposes of this Act are...” or “It is hereby declared that...”. Others simply recite the principles or policies that the legislature wishes to declare without introductory fanfare... Like

preambles, purpose statements reveal the purpose of legislation and they are also an important source of legislative values. Unlike

preambles, they come after the enacting clause of the statute and are part of what is enacted into law. This makes them binding in the sense that they cannot be contradicted by courts; they carry the authority and the weight of duly enacted law. In the absence of specific legislative direction, however, it is still up to courts to determine what use should be made of the purposes or values set out in these statements.

...Purpose statements play an important role in modern regulatory legislation. Such legislation establishes a general framework withinwhich powers are conferred to achieve particular goals or to give effect to particular policies. Purpose statements expressly set out thesepolicies and goals... In some cases purpose statements point in a single direction and guide interpreters toward a particular outcome... ... ...[t]he declarations set out in a purpose statement may inform judicial understanding of the Act as a whole and guide

interpretation in aparticular direction. Not all purpose statements establish a unified and coherent philosophy. Sometimes a purpose statement sets out a number of competingprinciples or policies which interpreters are to weigh and balance in applying the legislation to particular cases. [59] The purpose and effect of

section 5 of the CTA was described by the Federal Court of Appeal in Ferroequus Railway Co. vCanadian National Railway Co., 2003 FCA 454 , 203 FCA 454, [2004] 2 FCR 42 at paras 21-22: Second, it is common ground that the factors to which the Agency must have regard when determining whether the grant of runningrights is in the public interest are contained in the National Transportation Policy. This Policy both informs and, because of its statutorybase, imposes a legal limitation on, the Agency's exercise of discretion.

However, since the Policy expresses the often competing considerations that the Agency must balance when making a particulardecision, it inevitably operates at a level of some generality and does no more than guide and structure the Agency's exercise ofdiscretion in any given fact situation. Thus, it imposes a relatively soft legal limit on the Agency's exercise of power, in the sense that itwill rarely dictate a particular result in any particular case. [60] Similarly, in Canadian National Railway Co. v Moffatt, 2001 FCA 327, [2002] 2 FC 249, the purpose of

section 5 wasdescribed at para 27: However,

section 5 is not a jurisdiction-conferring provision. While not minimizing its importance, I believe that

section 5 is adeclaratory provision which states the objectives of Canada's National Transportation Policy. Those objectives are implemented by theregulatory provisions of the CTA and, in the currently largely deregulated environment, by the absence of regulatory provisions. Section5 does not, itself, confer on the Agency the jurisdiction it assumed in this case. If it were construed to do so, then presumably any legalquestion could also be brought before the Agency for determination. [61] The Plaintiff, in his Brief of Law in respect of Certification, characterizes the National Transportation Policy embodied insection 5 as follows: (

a) transportation services would be provided at the lowest total cost to serve the needs of shippers; (

b) carriers “as far as is practicable” were to bear “a fair proportion of the real costs” of the resources and services provided to them atpublic expense; (

c) each carrier “as far as is practicable” was to receive only “fair and reasonable compensation” for the services it was to provide. [62] This is, at best, a gross simplification of objectives set out in the National Transportation Policy. The National TransportationPolicy does not state that any particular form of transportation must be provided at the lowest total cost, but that a safe, economic,efficient and adequate transportation network should make use of all available modes of transportation at the lowest total cost. While theNational Transportation Policy does provide that carriers “as far as practicable” are to bear a fair proportion of the real costs of resources

provided to them at public expense, and to receive fair and reasonable compensation for the services they would provide, these broadstatements of policy must be read in the context of the entire policy, which also emphasizes the importance of competition, marketforces, and the economic viability of each mode of transportation. [63] The National Transportation Policy sets out a number of competing principles and is intended to guide the decisions of theAgency. It is, per Saxton J.A. in VIA Rail Canada Inc. v.

Canadian Transportation Agency, 2005 FCA 79, [2005] 4 FCR 473 at para 39,“...polycentric, meaning that it requires the Agency to balance competing principles”. It does not establish a specific duty on the part ofthe Railways to charge rates below those mandated by the Agency to reflect decreasing HCMC. [64] Nor can the duty asserted by the Plaintiff be located in the express provisions of the CTA or its predecessor legislation. Thereis no express provision in the CTA mandating the adjustment of rates to account for decreased HCMC or indeed any other efficiencyrealized by the Railways.

The elimination of the Costing Reviews mandated under the WGTA suggests, instead, an intention to movetoward a less regulated regime and increasing freedom on the part of the Railways to establish freight rates. Indeed, the proposition thatthe Railways are obligated to charge rates based upon their own assessment of what is fair and reasonable, incorporating decreasingHCMC, and independent of the rates mandated in the legislation itself is inconsistent with both the MRS and MRE statutory regimes.

Anobligation on the part of the Railways to charge lower rates reflecting decreasing HCMC would render the MRS under Regime 2unnecessary, since the maximum rate would be determined by an ongoing assessment of costs, not the MRS itself. Similarly, if theRailways are entitled to charge rates only in accordance with an assessment of costs, the establishment of MREs becomes a pointlessexercise. There would be, as the Railways contend, no point to the Agency’s annual VRCPI determinations or to the penalties forexceeding the MRE. [65] Finally, and perhaps most compellingly, it is impossible to square the Plaintiff’s

interpretation of the National TransportationPolicy with Bill C-11 and the Hopper Car Decision itself. Had the Railways been under an obligation to charge rates based upon actualHCMC, there would have been no need for Clause 57, which directed the Agency to make a one-time only adjustment to the VRCPI toaccount for decreasing HCMC.

Parliament’s response to the proposition that the Railways’ revenue entitlements were distorted bydecreased HCMC was to mandate a one-time adjustment to the VRCPI, and it presumably would have mindful of the objectives itestablished in the National Transportation Policy when it did so. [66] In short, there is no obligation under the applicable legislation for the Railways to charge freight rates for regulated grain thatare reflective of decreases over time in HCMC.

The CTA is a comprehensive legislative regime under which the Agency is empowered tomake certain determinations in regard to freight rates in accordance with the broad objectives set out in the National TransportationPolicy. The regulatory regime effectively supplants any common law obligation on the part of Railways with regard to freight rates, andreplaces it with an arrangement whereby the determination of appropriate maximum rates and railway revenues has been made byParliament and the Agency.

It is worth reiterating that the Plaintiff no longer contends that the Railways have charged rates or earnedrevenues in excess of the maximums established by Parliament and the Agency. [67] In the absence of a violation of the statute, the decisions cited by the Plaintiff in support of the proposition that restitution liesfor benefits obtained in breach of the statutes of Canada are distinguishable.

The Plaintiff points to Elder Advocates, wherein theSupreme Court allowed certification to proceed where the plaintiff alleged that the Government of Alberta had wrongfully inflatedaccommodation charges levied to elderly patients to subsidize medical expenses.

In that case, however, the regulation under which thecharges were levied was the subject of a Charter claim and, in the view of the Alberta Court of Appeal, it was arguable that thelegislative scheme on the whole “...does not countenance the use of a charge for accommodation and meals for anything other thanaccommodation and meals.” (2009 ABCA 403 at para 63).

In the case at bar, the rates charged and revenues earned by the Railwayswere specifically allowed by Parliament and the Agency. [68] In Apotex v Abbott Laboratories Ltd., 2011 ONSC 3988, upon which the Plaintiff also relies, Swinton J. held that it was notplain and obvious that an unjust enrichment claim would fail where the defendant pharmaceutical manufacturer had initiated patentproceedings that, by virtue of the relevant legislation, prevented the plaintiff from manufacturing its own generic drug for a period of 24months.

Swinton J. concluded at para 18 that the matter could proceed because it was not plain and obvious that the legislationcomprised a complete code. Swinton J. drew a contrast with the decision of the Supreme Court of Canada in Gladstone v. Canada(Attorney General), 2005 SCC 21 , [2005] 1 SCR 325. In Gladstone, the issue was whether the Government of Canada wasobligated to pay interest after it seized fish from the plaintiffs, sold the fish, and then determined to return the proceeds of the sale to theplaintiffs.

Major J. concluded, at paras 16-18: An additional submission by the respondents was that the Crown was unjustly enriched by its retention of the proceeds during the timeof seizure. This argument also fails. The test for unjust enrichment has three elements: (1) an enrichment of the defendant; (2) acorresponding deprivation of the plaintiff; and, (3) an absence of juristic reason for the enrichment...

Assuming it can be established that there has been an enrichment of the Crown and a corresponding deprivation of the respondents, theelement of "juristic reason" poses an unsurmountable hurdle in this appeal. The seizure, sale, and payment of the proceeds were lawfullycarried out pursuant to the Act. The respondents rely upon Manitoba v. Air Canada (1978), (MB CA), 86 D.L.R. (3d)631 (Man. C.A.), aff'd (SCC), [1980] 2 S.C.R. 303, to support their claim that the Crown is not immune from theobligation to pay interest, even if the relevant legislation is silent on the matter.

However, in my opinion, Air Canada is of no assistancebecause the issue in that case turned upon whether there was a lack of constitutional authority. There, the Crown collected taxes pursuantto

an act that was ultra vires the province. This lack of legislative competence was central to that decision. This is not the case here. Theconstitutional authority of Parliament to enact the provisions of the Fisheries Act in question was not challenged. The operation of the statutory provisions provides a "juristic reason" barring recovery... [69] The CTA and its predecessor legislation comprised an extensive and complete statutory regime governing the rates charged bythe Railways in respect of the shipment of regulated grain.

The operation of the statutory provisions and the charging of the rates andearning of revenues allowed under that legislative scheme provides a juristic reason barring restitution for unjust enrichment. While Iagree with the Plaintiff that restitution is a flexible remedy and its ongoing evolution should not be unduly restrained, I cannot agree thatit should extend to recovery of profits made in compliance with the terms of a regulatory regime. (

b) Identifiable Class of 2 or More Persons [70] The Class proposed by the Plaintiff is “[a]ll persons who delivered Grain (ie. Regulated Grain) to a Western Grain DeliveryPoint (an Elevator in Canada west of Armstrong, Ontario) between August 1, 1995 and July 31, 2007.” The Railways’ objection to thisclass definition is twofold. First, the Railways submit that certification of the class on the basis of delivery would involve an examinationof each and every delivery of grain against each and every facility to which grain may be delivered, an extremely large and complexundertaking.

Second, the Railways contend that the proposed class would necessarily include persons who would have no colourableclaim against either of the Railways. This is because the proposed class would include all producers who delivered grain to an elevator,regardless of whether it was processed or moved as whole grain; moved by rail or by some other means; transported by regulatedmovement or not; and whether the rate paid by the shipper was or was not influenced by the alleged breach of the obligation to charge arate based on actual HCMC. [71] An identifiable class is one which is capable of clear definition.

The definition must state objective criteria by which classmembers can be identified, and those criteria must bear a rational relationship to the common issues asserted by the class members, butthey must not depend upon the outcome of the litigation. While it is not necessary for each class member to be known, the criteria mustnot be such that the class is unbounded. A class should not be unnecessarily broad or narrow. [72] For the purpose of determining whether the proposed class meets the required criteria, it is helpful to assume that the Plaintiffhas pleaded a valid cause of action.

The question is, if we are to assume that the Railways unjustly inflated the rates they charged for theshipment of regulated grain, would the Railways’ objections to the proposed class definition warrant a refusal to certify the claim? [73] The crux of the dispute between the parties on this point is well illustrated by their reliance upon different parts of the AlbertaCourt of Appeal decision in Windsor v Canadian Pacific Railway Ltd., 2007 ABCA 294.

The Railways point to that decision, at para 19: A class definition should not be overly broad and should not include persons who have no claim against the defendants. The plaintiffmust establish that the class could not be defined more narrowly without arbitrarily excluding persons with claims similar to thoseasserted on behalf of the proposed class. The Plaintiff relies upon para 24: While it is desirable to have as many of the potential claimants in the class as possible, the law does not require perfection, so long as theclass is identifiable.

As the Court said in Hollick, “While the appellant has not named every member of the class, it is clear that the classis bounded (that is, not unlimited).” The pursuit of a definition of the class that would include every possible claimant, but exclude everynon-claimant, is likely to result in a merit based and, therefore, inappropriate definition...

[74] A lengthy discussion of the issues that arise from attempting to ensure that a class is not overly broad without resorting tomerits-based criteria is contained in Ragoonanan v Imperial Tobacco Canada Ltd. (2005), (ON SC), 78 OR (3d) 98(Gen Div); aff’d (2008) (ON SCDC), 54 CPC. (6th) 167 (Div Ct). In that case, certification was rejected because allof the proposed

definitions were unacceptably merit-based. However, in the course of coming to that conclusion Cullity J. held, at paras11-12: It is argued that a proposed class that contains persons who will not have valid claims is unacceptably over-inclusive, while a class that"arbitrarily" excludes persons who have -- or may have -- valid claims is under-inclusive.

I adhere to the view I have expressed in othercases that neither of the suggested restrictive rules is supported by the following passage from the reasons of the Chief Justice in Hollick,at paras. 20-21, that is commonly relied on as authority for each of them: It falls to the putative representative to show the class is defined sufficiently narrowly. The requirement is not an onerous one. The representative need not show that everyone in the class shares the same interest in theresolution of the asserted common issue.

There must be some showing, however, that the class is not unnecessarily broad -- that is, thatthe class could not be defined more narrowly without arbitrarily excluding some people who share the same interest in the resolution ofthe common issue. Where the class could be defined more narrowly, the court should either disallow certification or allow certificationon condition that the definition of the class be amended... I understand that passage to accept a concept of over-inclusiveness confined to cases where more narrow class

definitions would bepossible without arbitrarily excluding persons who share the same interest in the resolution of the common issues. I do not understand itto imply that a plaintiff cannot choose -- arbitrarily or otherwise -- the persons whom he, or she, wishes to represent, or that the onlyclass proceedings permissible are those where the class contains everyone with the same interest.

Rather than supporting either of thesuggested rules of class definition, it seems to me that the Chief Justice was recognizing that an "over-inclusive" class contemplated bythe first of those rules is permitted if a more narrow definition would arbitrarily exclude persons whose claims the plaintiff wishes toenforce.

A class may be over-inclusive if necessary but not necessarily over-inclusive. [75] The Railways point to Cuff v Canadian National Railway Co., 2007 ABQB 761, wherein Belzil J. held at para 38 that “...itsurely is a requirement that all class members be able to advance at least one cause of action.” It is worth pointing out that Belzil J. madethat determination in the course of his consideration of the merits of the causes of action pleaded, and after concluding that the proposedclass definition was acceptable.

It is clear from the authorities that the possibility that some members of the class might not have a claimis not, in and of itself, a disqualifying factor. This was clearly recognized by Rooke J. (as he then was) in Windsor at para 91: “[i]n myopinion, the identifiable class requirement is a low threshold issue. Over-inclusion, under-inclusion, or both, are not fatal as long as theyare not illogical or arbitrary.” [76] Both sides acknowledge the essential impossibility of determining how every delivery of Grain to a Western Grain DeliveryPoint was ultimately shipped.

But this is not a case, such as Mouhteros v DeVry Canada Inc. (c.o.b. DeVry Institute of Technology(1998), (ON SC), 41 OR (3d) 63, wherein it is immediately clear that the proposed definition contains an identifiablegroup of people who would have no claim. In my view it is much more analogous to Pro-Sys Consultants Ltd. v. Infineon TechnologiesAG, 2009 BCCA 503, leave to appeal to SCC refused [2010] SCCA No 32. The allegation in that case was that the defendants had actedas a cartel, artificially increasing the price of a computer memory chip.

The proposed class of plaintiffs consisted of indirect purchasers,ie. individuals who bought computers containing the memory chip at issue, but who did not purchase the chips directly from thedefendants. The obviously complex and varied means by which the memory chips had been sold to manufacturers, incorporated into arange of different devices, then sold to wholesalers, to retailers, and to the public, rendered the determination of liability to individualcomputer purchasers a difficult and ultimately somewhat speculative endeavour.

Nevertheless, the Court concluded, in part on the basisof expert evidence to the effect that it would be difficult but possible through statistical analysis to establish the cost of the defendants’wrongful conduct to members of the class, that the claim should be certified. [77] The Railways distinguish Pro-Sys Consultants on the basis that there, at least, all members of the class had purchased thememory chip at issue. Here, they contend, it is not possible to determine whether any individual farmer delivering Grain to a WesternGrain Delivery Point had his or her product transported via regulated shipment.

I appreciate the distinction and the case at bar mayreflect the outer limit of what is acceptable in terms of the potential overbreadth of the class. Nevertheless, the test requires anidentifiable class and rational connection between the class and the common issues. The standard is low enough to admit of thepossibility that the class definition will encompass individuals who may not have a claim. In my view, if one is to assume that the freight

rates charged for the shipment of regulated grain were unjustly inflated by the Railways, the proposed class definition is sufficientlylimited and rationally connected to the common issues. This is not to say, however, that the issues proposed by the Plaintiff aresufficiently common to meet the next part of the test. (

c) Common Issues [78] As with the determination of the appropriate class definition, the assessment of whether the claims of the proposed classmembers raise a common issue is complicated due to the conclusion that the pleadings themselves do not raise a viable cause of action. Itis necessary to assume, in this analysis, that I am wrong in this conclusion and that the Railways could be found to have breached a dutyto charge freight rates for the transportation of regulated grain on the basis of Actual HCMC. [79] The Plaintiff proposes the following common issues: (

a) Between August 1, 1995 and July 1, 2007, did the Defendants charge grain shipping rates that were based on Overstated HCMC andwhich were therefore contrary to the intent and policy of the BIA, 1995, CTA, 1996, CTA, 2000, and Railway Costing Regulations? (

b) If so, are class members entitled to restitution of the amount by which the Defendants’ Embedded HCMC exceeded their ActualHCMC between August 1, 1995, and July 31, 2007? If so, can that amount be awarded as an aggregate monetary award, including on anaverage or proportionate basis? and (

c) Are the Defendants liable to pay pre-judgment interest with respect of Overstated HCMC? If so, in what amount? [80] The first common issue raises two questions: one is factual, the second a question of

interpretation. The latter, which iswhether grain shipping rates which did not exceed the amounts allowed under the MRS and MRE regimes were nevertheless contrary toParliament’s intent and policy, is essentially the issue that I have determined does not form the basis of a valid cause of action. [81] The factual question, which is framed as whether the Railways charged grain shipping rates based on “overstated HCMC”,must be considered in light of the changing nature of the Plaintiff’s claim. As I understand it, the Plaintiff no longer alleges that theRailways wrongfully overstated HCMC in the 1994 Costing Review.

So the factual inquiry is better framed as whether the Railwayscharged grain shipping rates based on “embedded” HCMC, which then leads to the legal inquiry into whether those rates were contraryto Parliament’s intent. [82] The common issue requirement was described by McLachlin C.J.C. in Western Canadian Shopping Centres Inc. v Dutton,2001 SCC 36. 2001 SCC 46 , [2001] 2 SCR 534 at para 39: Commonality tests have been a source of confusion in the courts. The commonality question should be approached purposively.

Theunderlying question is whether allowing the suit to proceed as a representative one will avoid duplication of fact-finding or legalanalysis. Thus an issue will be "common" only where its resolution is necessary to the resolution of each class member's claim. It is notessential that the class members be identically situated vis-à-vis the opposing party. Nor is it necessary that common issues predominateover non-common issues or that the resolution of the common issues would be determinative of each class member's claim.

However, theclass members' claims must share a substantial common ingredient to justify a class action. Determining whether the common issuesjustify a class action may require the court to examine the significance of the common issues in relation to individual issues.

In doing so,the court should remember that it may not always be possible for a representative party to plead the claims of each class member with thesame particularity as would be required in an individual suit. [83] The questions of class definition and common issues are closely connected and in the course of argument and analysis, thequestions can become confused.

To be clear, when considering whether a class action should be certified under section 5(1)(b), theessential question is whether the proposed class definition itself is objectively determinable and rationally connected to the matters atissue in the action. An affirmative answer to that question does not resolve the question of whether the issues identified by the plaintiffare sufficiently common across the class.

[84] At this stage, it is important to reiterate a number of facts concerning the sale and shipment of grain in Western Canada. Grainproducers do not pay the Railways directly for the shipment of grain. Nor do they pay grain handlers for the shipment of grain. Instead,at all relevant times, grain producers would sell their grain to either the CWB or to grain handlers, who then paid the Railways, if thegrain was shipped by rail, for shipping.

Grain sold to the CWB was subject to the FCR fee regardless of whether it was ultimatelyshipped via regulated rail movement or not, and the FCR fee itself was not determined solely on the basis of the Railways’ rates, nor onthe basis of what the CWB actually paid to ship the grain (by rail or otherwise).

Farmers who sold grain directly to grain handlers couldexpect that the grain handlers’ shipping costs would be factored into the purchase price, but again there was no way for the farmer toknow whether the grain would be shipped by rail, or if it was, by regulated movement, and if it was, whether the grain handler had thebenefit of one of the reduced rates frequently offered by the Railways. As the Railways point out, what is known is that the freight ratescharged by the Railways under the MRS and MRE regimes were not experienced by farmers in common.

Freight rates were chargedpursuant to individual contracts between the Railways and specific shippers, and varied significantly as a result of competition inparticular markets and capacity. The amount that an individual farmer may have seen notionally “deducted” by a ship

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