Citation: 2011 NBQB 366 Date: 2011 12 21 SAINT JOHN PORT AUTHORITY, Applicant - v. -, 2011 NBQB 366

S/M/39/11 IN THE COURT OF QUEEN’S BENCH OF NEW BRUNSWICK TRIAL DIVISION JUDICIAL DISTRICT OF SAINT JOHN IN THE MATTER OF AN APPLICATION PURSUANT TO Rule 16.04(e) (

i) and (

j) OF THE RULES OF COURT BETWEEN: Citation: 2011 NBQB 366 Date: 2011 12 21 SAINT JOHN PORT AUTHORITY, Applicant - and - CANADIAN PACIFIC RAILWAY COMPANY/COMPAGNIE DE CHEMIN DE FER CANADIEN PACIFIQUE Respondent BEFORE: Justice William T. Grant HEARING HELD: Saint John DATE OF HEARING: December 16, 2011 DATE OF DECISION: December 21, 2011 COUNSEL: Douglas A. M. Evans, Q.C. and Amy L. Nugent for the Applicant Steven F. Rosenhek and Sébastien Kwidzinski for the Respondent DECISION GRANT, J

[ 1 ] In this application the Saint John Port Authority (“SJPA”) seeks an order under Rule 16 of the Rules of Court: (

a) determining the rights of the parties under an Indenture made the 30 th day of October, 1941 (the “Indenture”) between His Majesty the King, represented by the Honourable Minister of Transport (the “Crown”), National Harbours Board and Canadian Pacific Railway Company; (

b) declaring that the Respondent, Canadian Pacific Railway Company/Compagnie de Chemin de fer Canadien Pacifique, and its predecessor corporations, were and continue to be obligated to maintain all trackage located on lands under the administration of the Applicant on the west side of Saint John Harbour (the “West Side Port”) as are more particularly defined and described in the Indenture; (

c) declaring that the Respondent, Canadian Pacific Railway Company/Compagnie de Chemin de fer Canadien Pacifique, is responsible for any costs associated with maintaining and repairing the trackage in question; (

d) awarding costs of the application in favour of the Applicant; and (

e) granting such further and other relief as this Honourable Court deems just. BACKGROUND [ 2 ] This application arises out of an agreement among the predecessors of SJPA, Canadian Pacific Railway Company/Compagnie de Chemin de Fer Canadien Pacifique (“CPR”) and the federal government dated October 30, 1941. The essential terms of the agreement are summarized as follows in a letter attached as Exhibit “X” to the affidavit of Alwyn G. Soppitt sworn June 15, 2011 in support of the application: 1. CPR has the “… right and privilege… at its own cost and expense…” (

a) to maintain, use and operate all trackage on Board (West Side) property; (

b) to build and use any additional trackage on this property; 2. The Board may order CPR to remove, relocate or add new trackage as the Board wishes, all at CPR’s expense; 3. CPR will do all maintenance at its expense; 4. The trackage materials are the property of CPR; 5. The Board may terminate with six months notice, with compensation; and 6.

No provision is made for termination by CP Rail. [ 3 ] The “Board” to which the writer refers is the National Harbours Board, a predecessor of SJPA. [ 4 ] In the early 1990’s the parties negotiated the terms of a replacement for the 1941 agreement but before the document could be approved by the appropriate authorities, CPR received approval from the Canadian Transportation Agency to abandon its operation of all railway lines in New Brunswick. That approval, which SJPA opposed, took effect on January 1, 1995.

[ 5 ] On January 5, 1995 CPR assigned, inter alia , the trackage at the west side port in Saint John to NB Southern Railway Company (“NBSRC”).

SJPA was not a party to that assignment nor did it give its consent in writing. [ 6 ] As part of the assignment, NBSRC assumed all of CPR’s obligations related to the trackage on the west side port property and agreed to indemnify CPR in respect to maintenance and repair of, inter alia , the trackage at issue in this application. [ 7 ] In September 1995 NBSRC raised an issue with SJPA about responsibility for property taxes and in 1996/97 SJPA and NBSRC held discussions about and prepared drafts of a proposed agreement to replace the 1941 agreement but no such replacement agreement was ever finalized. [ 8 ] Since 1995 NBSRC has provided track maintenance at the west side port property with two exceptions.

In 2006 and 2008 issues arose regarding maintenance and repairs to certain terminals on the west side port property, responsibility for which NBSRC was not willing to accept in full. Due to the urgent nature of the work SJPA contributed to the cost of those works on a “without prejudice” basis. [ 9 ] Moreover, in 2006, 2008 and 2010 SJPA contacted CPR to remind it of its obligations under the 1941 agreement. SJPA did not receive any reply from CPR to its last letter in February of 2010 and in June 2011 it filed this application. [ 10 ] CPR now brings this motion pursuant to Rule 38.09 (

b) in which it requests an order that the application be converted to an action for the following reasons: (

a) neither the 1941 agreement nor any other evidence before the Court describes the property and trackage with sufficient precision to allow the Court to grant the relief requested by SJPA without the parties marshaling expert evidence to prove what property was owned by SJPA in 1941 as well as changes in the boundaries of the property since that time and changes in the location of trackage on the property; (

b) CPR further submits that it is necessary to determine land ownership and location of trackage in order to determine what lands were acquired by SJPA after the 1941 agreement was signed and what, if any, lands and trackage are caught by the 1941 agreement; (

c) CPR adopts the position that the conduct of SJPA since CPR assigned its rights and obligations under the 1941 agreement to NBSRC evidences acquiescence equivalent to implied consent and in order to explore that position CPR needs to have discovery of documents and parties as well as cross-examination of witnesses which is not provided for in the Rules of Court when proceeding by Notice of Application; (

d) CPR also adopts the position that due to the passage of time SJPA has created a delay which makes it difficult for CPR to marshal evidence in support of its position and SJPA should therefore be estopped from asserting that it has not acquiesced or consented to the assignment by CPR of its rights and obligations under the 1941 agreement; CPR further submits that in order to fully advance this defence it will need to have discovery of documents and parties as well as cross-examination of witnesses; and (

e) a Notice of Application does not allow for the addition of third parties and CPR submits that NBSRC is a necessary third party to this application; moreover, CPR submits that the only way they can be made a third party is if the matter is converted to an action. LAW [ 11 ] The application is brought under Rules 16.04(e), (

i) and (

j) which read as follows: 16.04 By Notice of Application Where

an Act or rule authorizes an application or motion to the court without requiring the institution of an action, a Notice of Application (Form 16D) may be used and, in addition thereto, a proceeding may be so commenced where the relief claimed is …

(

e) for a determination of rights which depend upon the

interpretation of a deed, will, contract or other instrument, or upon the

interpretation of a statute, order-in-council, regulation, municipal by-law or resolution, (

i) for an injunction, mandatory order, declaration, the appointment of a receiver, or other consequential relief ancillary to relief claimed in a proceeding properly commenced by a Notice of Application, or (

j) in respect of any other matter where it is unlikely that there will be a substantial dispute of fact. [ 12 ] This motion is brought under Rule 38.09(

b) which reads: 38.09 Disposition of Application On the hearing of an application, the court may (

b) where it is satisfied that there is a substantial dispute of fact, direct that the application proceed to trial or direct the trial of a particular issue or issues and, in either case, give such directions and impose such terms as may be just, subject to which the proceeding shall thereafter be treated as an action. [ 13 ] In the case of Veno v. United General Insurance Corp. 2008 NBCA 39 Drapeau, C.J.N.B. stated at paragraph 74: 74 Rule 16.04 provides, inter alia , that a proceeding may be commenced by a Notice of Application where the relief claimed is: a determination of rights that depend upon the

interpretation of a contract, statute or regulation (sub-rule (e)); a declaration or other consequential relief ancillary to relief claimed in a proceeding properly commenced by a Notice of Application (sub-rule (i)); and in respect of any other matter where it is unlikely there will be a substantial dispute of fact (sub-rule (j)). It is axiomatic that any application falling within Rule 16.04(

i) stands to be converted into an ordinary action (see Chiasson v. Region 6 Hospital Corp. (2006), 297 N.B.R. (2d) 311 , [2006] N.B.J. No. 120 (QL) , 2006 NBCA 30 ). That is likewise the case for virtually all applications under the other sub-rules, where material facts are genuinely in dispute (see Cornerstone Baptist Church Inc. v. Peters, [2007] N.B.J. No. 504 (QL) , 2008 NBQB 69 , Glennie J.). (underlining in the original).

ANALYSIS AND DECISION [ 14 ] There appears to be no dispute that the 1941 agreement was in effect when CPR assigned its rights and obligations over the trackage on the west side port property in Saint John to NBSRC in January, 1995. [ 15 ] The relief requested by SJPA in this case seeks the determination of the rights of the parties under the 1941 agreement which would, on its face, appear to bring the Application squarely under Rule 16.04(e).

However, SJPA further requests an order declaring that CPR continues to be responsible for maintaining and repairing the trackage and paying the costs of doing so and the answer to those questions will depend not just on an

interpretation of the agreement but on a finding of whether or not SJPA has acquiesced in and thereby implicitly consented to the assignment to NBSRC. Thus, the status of the agreement since January, 1995 is clearly an issue which needs to be determined in this application. [ 16 ] With respect to the issues of acquiescence, delay and estoppel, CPR has explained that it has very little evidence concerning these matters largely due to the fact that it saw no need to maintain its files with respect to this agreement once it had assigned its rights and obligations to NBSRC.

SJPA submits that without its consent CPR should have known that its obligations were not fulfilled under the 1941 agreement and while that argument has some merit, it doesn’t mean that CPR has forfeited its right to raise these issues in defending the application. [ 17 ] CPR asserts as a fact that SJPA, by dealing with NBSRC on the issues covered by the 1941 agreement, has acquiesced in the 1995 assignment between it and NBSRC and thereby impliedly consented to the assignment. SJPA disputes that this is the case.

In my view those positions represent a clear dispute of a critical fact, the resolution of which needs to be determined before the Court can decide whether or not to grant the relief requested by SJPA.

[ 18 ] While there was communication between the parties to this application in the years shortly after the assignment and in more recent years, there was a period of almost a decade where little happened according to the record before the Court at this time. In my view, it is likely there is more evidence than is currently before the Court bearing on these issues and if CPR wishes to pursue these defences to the application then it should be entitled to do so.

Moreover, in my opinion, to resolve the dispute of this critical fact the parties need to have both oral discovery and discovery of documents as well as the right to cross-examine witnesses. [ 19 ] The answers to the questions raised by SJPA in this application will also depend upon findings as to whether or not SJPA has delayed in bringing this Application such that they are now estopped from asserting their rights under the 1941 agreement.

In my view the issue of whether or not the 1941 agreement is still in effect involves substantial disputes of fact which are most appropriately dealt with in an action. [ 20 ] Furthermore, NBSRC is a party with an obvious interest in the outcome of this application. SJPA had no privity of contract with them and could therefore not make them a respondent to the application. Moreover, Rule 16 does not provide a mechanism for adding third parties so CPR can not make them a party to this application.

It was suggested that CPR could start a second application and apply to have the two applications consolidated and while that is possible, in my opinion, there are other reasons which militate in favour of converting this into an action, the most compelling one being that a third party claim allows for oral discovery and discovery of documents which in this case may further explain what has occurred among the parties with respect to the issues of maintenance and repair of trackage over the last seventeen years. [ 21 ] I am also concerned that if this application proceeds without the involvement of NBSRC it is conceivable that they could be before the Court at some later time in an application concerning the maintenance of this trackage and if they are not involved in this proceeding, they will not be bound by the determination of the questions raised herein concerning the 1941 agreement.

In my opinion, because they are an interested party they should be bound by those determinations in this proceeding and that can only occur if they are a party to the proceeding. [ 22 ] Looking at the relief requested I considered directing that this application continue dealing with paragraph “(a)” separately and leaving paragraphs “(b)” and “(c)” to be resolved in an action. However, because these prayers for relief are directly related I do not believe that any efficiencies would be achieved by severing paragraph (

a) from paragraphs (

b) and (c). Pursuant to Rule 38.09(

b) I therefore direct that the whole of this application proceed to trial. [ 23 ] SJPA is not claiming any damages in this application; it is not asking the Court to deal with any occurrences in the past only to declare what the rights of the parties are under the 1941 agreement and that the agreement is still in effect.

I am not therefore persuaded that there is any need at this time to hire experts to search titles and survey property in order to marshal evidence as to where the boundaries of the port property were in 1941, how they have changed and where the trackage was that CPR was responsible to maintain in 1941 and where it is now. On the basis of the record before me and the submissions of counsel, I am satisfied that there are no currently outstanding issues between the parties in respect to maintenance, construction and repair of trackage arising under the 1941 agreement.

In the absence of any live dispute as to land ownership, property boundaries or the location of trackage I see no need for this action, as it is presently framed, to explore those issues. DISPOSITION [ 24 ] In

summary the motion is granted and the application is converted to an action provided that the issues of ownership and boundaries of the west side port property as well as the location of trackage will not be raised by either party. Moreover, these issues can only be raised in any third party claim with leave of the court. SJPA’s notice of application will serve as its statement of claim and CPR will have until Friday, January 20, 2012 to file a statement of defence and third party claim. Thereafter the action will proceed in accordance with the Rules of Court.

Costs of this motion will be costs in the cause. ___________________________________________ William T Grant Judge of the Court of Queen’s Bench of New Brunswick