NATIONAL GYPSUM (CANADA) LTD Applicant v. CANADIAN NATIONAL RAILWAY COMPANY, 2014 FC 869

Date: 20140912 Docket: T-1323-13 Citation: 2014 FC 869 Ottawa, Ontario, September 12, 2014 PRESENT: The Honourable Madam Justice Strickland BETWEEN: NATIONAL GYPSUM (CANADA) LTD Applicant and CANADIAN NATIONAL RAILWAY COMPANY Respondent PUBLIC JUDGMENT AND REASONS [Confidential Judgment and Reasons issued on September 12, 2014] [ 1 ] This is an application for judicial review brought by National Gypsum (Canada) Ltd. (NGL) concerning the decision of an arbitrator, Murray A. Clemens, Q.C. (Arbitrator), dated July 5, 2013, made in a final offer arbitration (FOA) held pursuant to

Part IV of the Canada Transportation Act , SC 1996, c 10 (CTA), in which the Arbitrator selected the final offer of Canadian National Railway Company (CN). These public reasons are an edited form of the confidential reasons and reflect the parties’ expectation of confidentially arising from s. 167 of the CTA. Factual Background [ 2 ] NGL operates a quarry in East Milford, Nova Scotia. For sixty years it has shipped gypsum rock from there to its port facility in Wrights Cove, Dartmouth, by CN rail. [ 3 ] As defined by s. 6 of the CTA , NGL is a shipper of goods and CN is a carrier of goods.

The CTA permits a shipper who is dissatisfied with the rates charged or proposed to be charged by a carrier for the movement of goods, or with any associated conditions, to submit the matter in writing to the Canadian Transportation Agency (Agency) to be determined by a FOA. In essence, this process requires the shipper to serve its final offer, excluding any dollar amounts, on the carrier. Within ten days after service, the shipper and the carrier must submit their respective final offers to the Agency, including dollar amounts.

The Agency then provides each party with a copy of the other’s submission and refers the matter to an arbitrator who must select one of the two offers. [ 4 ] On April 29, 2013, NGL filed with the Agency and served on CN a FOA submission, comprised of its final offer without dollar amounts. This final offer was comprised of two sections, rate and conditions.

The rate (Rate) was left blank. [ 5 ] The listed “Conditions Associated with the Movement of the Goods” (Conditions) included an “Incorporation by Reference” clause which excluded any fuel surcharge. [ 6 ] On May 9, 2013, NGL submitted its final offer, which differed from its initial submission only by the addition of a specified dollar figure in the Rate space. [ 7 ] On May 9, 2013, CN also submitted its final offer. This followed the format of NGL’s final offer and also included a specified Rate.

The conditions were substantively the same as those proposed by NGL except for the wording of the Incorporation by Reference clause. There was also a further condition being a Fuel Surcharge. [ 8 ] The Agency exchanged the parties’ final offers and on May 14, 2013 it referred the matter to the Arbitrator. Pre-hearing teleconferences were held and, by letter dated May 24, 2013, the Arbitrator wrote to the parties to record the procedural matters agreed to and directed during the teleconferences.

This included that no court reporter was required for the hearing. [ 9 ] On May 29, 2013, the parties exchanged the information that they intended to submit to the Arbitrator in support of their final offers (Information).

In its Information NGL submitted, amongst other things, that CN’s inclusion of a variable fuel surcharge rendered CN’s offer uncertain and unascertainable because it was based on a formula which was dependant upon unpredictable future events and was unilaterally changeable by CN; that CN’s final offer contravened s. 161.1(1) of the CTA because it did not include a “dollar amount”; and, that CN’s final offer was unreasonable because it proposed an uncompetitive rate contrary to the National Transportation Policy.

CN’s Information, amongst other things, addressed the negotiation and FOA history between the parties; why its proposed Rate was reasonable; and, the fuel surcharge as a component of its rate. Each party made substantive submissions in support of its position by way of its Information. [ 10 ] By letter dated May 31, 2013, CN advised the Arbitrator that it sought to lead rebuttal evidence to respond to NGL’s allegation that CN’s final offer was non-compliant with the CTA as a result of its incorporation of a specified CN Fuel Surcharge Tariff.

CN submitted that this issue was not foreseeable as it was the first time NGL had raised such an argument even though the surcharge had been incorporated in prior contracts between the parties. On June 17, 2013, CN wrote to the Arbitrator formally requesting permission to file the rebuttal evidence, to which NGL objected the next day. Ultimately, by letter of June 19, 2013, the Arbitrator advised the parties that he would determine the issue at the hearing unless they required a decision in advance.

[ 11 ] The parties exchanged interrogatories on June 20, 2013. On the same day, CN advised the Arbitrator that in preparing its answers to the NGL interrogatories, CN had noticed a discrepancy in the actual distance of the movement of NGL’s traffic, 31 miles, and the distance that had been used to calculate the mileage-based fuel surcharge under a specified CN Tariff, which was 36 miles. The discrepancy resulted from an erroneous calculation of the mileage by the third party software, PC*Miler (ALK Technologies), used to calculate NGL’s fuel surcharge.

CN advised that it had received confirmation from ALK Technologies that the error would be corrected and that the next version of PC*Miler would calculate the correct mileage. Also, CN said that it would reimburse NGL for the overpayments made as a result of the error, inclusive of HST and interest at 5%.

Further, that the impact of this recalculation of the proper amount of fuel surcharge payable by NGC in previous years and on a go-forward basis impacted certain of the figures referenced in CN’s Information, although only negligibly. [ 12 ] The Arbitrator ultimately determined that CN’s June 20, 2013 letter did not form a part of the record. [ 13 ] This issue was also addressed by CN in response to NGL Interrogatory #8. [ 14 ] The hearing was held in Halifax, Nova Scotia on June 24, 25 and 26, 2013 during which time witnesses were heard. On July 5, 2013 the Arbitrator selected CN’s final offer.

Decision Under Review [ 15 ] Pursuant to s. 165(1) of the CTA , the arbitrator is required to select the final offer of either the shipper or the carrier. The decision must be in writing ( s. 165(4) ) but the arbitrator is not to give reasons unless every party requests them within 30 days of the decision ( s. 165(5) ). [ 16 ] Accordingly, the Arbitrator’s decision in this instance is brief, containing only background information, then concluding: Award Final Offer Selection 9. The final offer of the carrier, Canadian National Railway Company, is selected. Pursuant to ss.165(1)(

c) of the Canadian Transportation Act, this final offer selection is binding on the parties for a period of one year from […] [ 17 ] Neither party requested written reasons and none were given. [ 18 ] By letter of August 7, 2013, the Arbitrator confirmed that. given the expiration of the deadlines for written reasons set out in s. 165(5) of the CTA , and, pursuant to Rule 27 of the Procedures for the Conduct of Final Offer Arbitration, he had destroyed all information, notes or documents including agendas or minutes of pre-hearing conferences filed, deposited prepared or taken during the arbitration. Legislative Background [ 19 ] FOAs are addressed in

Part IV of the CTA . [ 20 ] A shipper who is dissatisfied with the rate or rates charged or proposed to be charged by a carrier for the movement of goods, or with any of the conditions associated with the movement of goods, may submit the matter in writing to the Agency for final offer arbitration to be conducted by one arbitrator, or if the shipper and carrier agree, by a panel of three arbitrators (s. 161(1)). [ 21 ] A copy of that submission must be served on the carrier by the shipper and must contain, amongst other things, the final offer of the shipper to the carrier, excluding any dollar amounts (s. 161(2)(a)).

Within ten days after service of a shipper’s submission, the shipper and the carrier must submit to the Agency their final offers, including dollar amounts ( s. 161.1(1) ). The Agency then provides each party with a copy of the other’s final offer (s. 161.1(2)). If one party does not submit a final offer in accordance with s. 161.1(1) , the final offer submitted by the other party is deemed to be the one selected by the arbitrator (s. 161.1(3)). [ 22 ] Within five days of the final offers being received, the Agency must refer the matter to arbitration (s. 162(1)).

On request by the arbitrator, the Agency may provide administrative, technical and legal assistance to the arbitrator (s. 162(2)). [ 23 ] In the absence of an agreement between the arbitrator and the parties as to the procedure to be followed, a FAO shall be governed by the rules of procedure made by the Agency (s. 163(1)).

Subject to that procedure, the arbitrator shall conduct the arbitration proceedings as expeditiously as possible and in a manner the arbitrator considers appropriate in the circumstances (s. 163(2)). [ 24 ] Within fifteen days after the Agency refers the matter for FOA, the parties are required to exchange the information that they intend to submit to the arbitrator in support of their final offers (s. 163(4)). Seven days after that information has been received, each party may direct interrogatories to the other which must be answered within fifteen days of receipt (s. 163(4)).

If a party unreasonably withholds information that the arbitrator subsequently deems to be relevant, that withholding shall be taken into account by the arbitrator in making a decision (s. 163(5)). [ 25 ] The arbitrator is required to have regard to the information so provided and, unless the parties agree to limit the amount of information to be provided, to any additional information that is provided by the parties at the arbitrator’s request (s. 164(1)).

Further, unless the parties agree otherwise, in rendering a decision the arbitrator shall have regard to whether there is available to the shipper an alternative, effective, adequate and competitive means of transporting the goods to which the matter relates and to all considerations that appear to the arbitrator to be relevant to the matter (s. 164(2)). [ 26 ] The decision of the arbitrator in conducting a FOA shall be the selection by the arbitrator of the final offer of either the shipper

or the carrier (s. 165(1)) in writing (s. 165(2)(a)) and applicable for a period of one year or less if appropriate, unless otherwise agreed by the parties (s. 165(2)(c)). As stated above, no reasons shall be included in the decision (s. 165(4)), however, if requested by all of the parties to the arbitration within thirty days of the decision, the arbitrator shall give written reason for the decision (s. 165(5)). Unless the parties both otherwise agree, the decision shall be final and binding (s. 165(6)(a)). [ 27 ] A complete copy of

Part IV of the CTA is attached as a

schedule to this decision. Issues [ 28 ] I would frame the issues in this matter as follows: 1 . What is the standard of review? 2 . Did CN amend its final offer? 3 . Was CN’s final offer compliant with s. 161.1(1) of the CTA ? 4 . Was CN’s final offer uncertain or void for uncertainty? 5 . Is this an appropriate case for a directed verdict or mandamus? [ 29 ] NGL had also originally objected to the admissibility of paragraphs 25(b), 25(

c) and 29 of the Affidavit of Lon Labrash, Director in Financial Planning for CN, dated October 2, 2013, which was filed in response to NGL’s application for judicial review (Labrash Affidavit). However, that objection was withdrawn at the hearing, it being left to the Court to determine what weight to afford that evidence. [ 30 ] In support of its judicial review application, NGL submitted the affidavit of Sharon Schmitz, legal administrative assistant with Davis LLP, dated September 3, 2013 (Schmitz Affidavit), which attached as exhibits many of the documents relevant to this application.

The Labrash Affidavit similarly attached such documentation as exhibits. ISSUE 1: What is the standard of review? NGL’s Position [ 31 ] NGL submits that the issues raise questions of law and jurisdiction and relate to the

interpretation of the CTA . An arbitrator in a FOA does not have specialized expertise nor can the CTA be considered the Arbitrator’s home statute. The decision is therefore reviewable on the standard of correctness ( Dunsmuir v New Brunswick , 2008 SCC 9 at paras 59-60 [ Dunsmuir ]). [ 32 ] NGL submits that the Arbitrator acted without jurisdiction by allowing CN to amend its final offer, which is not permitted by the CTA . Alternatively, that the Arbitrator erred in law as he acted contrary to ss. 161.1(1) and 165(1) of the CTA.

At the hearing before me, NGL elaborated on its position as to the standard of review and submitted that on a contextual analysis the correctness standard would apply: as to the expertise of the Arbitrator, regardless of s. 169(1) of the CTA, it is the Agency and not the Arbitrator who has expertise; as the issues are statutory

interpretation and jurisdiction they are more suited to be heard by the Court; while issues on the merits reside with the Arbitrator, the question of the validity of the final offer is better addressed by the Court; the scheme of the CTA does not contemplate arbitrators addressing questions of law or home statutes as demonstrated by s. 162(2) which permits the arbitrators to request the Agency to provide legal assistance; s. 165(6)(

a) is not a true privative clause; and, the issue is of central importance to the FOA scheme. CN’s Position [ 33 ] CN submits that the standard of review is reasonableness. It characterizes the nature of the questions that were before the Arbitrator as questions of fact or mixed fact and law, being whether CN’s final offer was uncertain, failed to include dollar amounts, and, was amended. Questions where the legal and factual issues are inextricably intertwined also attract a standard of reasonableness ( Dunsmuir , above, at para 59 ). [ 34 ] The existence of a privative or preclusive clause, such as s. 165(6) (

a) of the CTA , is a statutory direction from Parliament giving rise to a strong indication of a deferential standard of review ( Dunsmuir , above, at paras 52 and 55 ). Nor are any of the issues raised matters of central importance to the legal system as a whole thereby attracting a correctness standard. [ 35 ] This is not a jurisdictional issue and the Courts should not brand as jurisdictional issues that are doubtfully so.

Here the Arbitrator was not required to determine whether his grant of authority gave him the ability to decide a particular matter, and there is no question that the CTA gave him the authority to decide the FOA. NGL takes issue with the manner in which the Arbitrator exercised his authority which is not a question of jurisdiction. Analysis [ 36 ] The first step in determining the appropriate standard of review is to ascertain whether existing jurisprudence has already resolved, in a satisfactory manner, the degree of deference to be afforded a particular category of question.

If it has not, then the Court must engage the second step, which is to determine the appropriate standard having regard to the nature of the question, the expertise of the tribunal, the presence or absence of a privative clause, and the purpose of the tribunal ( Dunsmuir , above, at paras 51-64 ; Agraira v Canada (Public Safety and Emergency Preparedness), 2013 SCC 36 at para 48 [ Agraira ]). [ 37 ] In this matter the parties have not referred the Court to any cases where the standard of review has been determined in the context of FOA arbitration decisions conducted pursuant to the CTA .

Thus, the second step must be engaged.

[ 38 ] In Dunsmuir , above, the Supreme Court identified factors that will assist in determining whether the decision-maker should be given deference and a reasonableness test applied (para 55): • A privative clause: this is a statutory direction from Parliament or a legislature indicating the need for deference. • A discrete and special administrative regime in which the decision maker has special expertise (labour relations for instance). • The nature of the question of law.

A question of law that is of “central importance to the legal system . . . and outside the . . . specialized area of expertise” of the administrative decision maker will always attract a correctness standard ( Toronto (City) v. C.U.P.E. , at para. 62). On the other hand, a question of law that does not rise to this level may be compatible with a reasonableness standard where the two above factors so indicate. [ 39 ] The Court also found that there is nothing unprincipled in the fact that some questions of law will be decided on the basis of reasonableness.

It simply means giving the adjudicator’s decision appropriate deference in deciding whether a decision should be upheld, bearing in mind the factors indicated. [ 40 ] The Supreme Court of Canada restated this finding in Smith v Alliance Pipeline Ltd, 2011 SCC 7 , [2011] 1 SCR 160, as follows: [26] Under Dunsmuir , the identified categories are subject to review for either correctness or reasonableness.

The standard of correctness governs: (1) a constitutional issue; (2) a question of “general law ‘that is both of central importance to the legal system as a whole and outside the adjudicator’s specialized area of expertise’” ( Dunsmuir , at para. 60 citing Toronto (City) v. C.U.P.E., Local 79 , 2003 SCC 63 , [2003] 3 S.C.R. 77, at para. 62 ); (3) the drawing of jurisdictional lines between two or more competing specialized tribunals; and (4) a “true question of jurisdiction or vires ” (paras. 58-61). On the other hand, reasonableness is normally the governing standard where the question: (1) relates to the

interpretation of the tribunal’s enabling (or “home”) statute or “statutes closely connected to its function, with which it will have particular familiarity” (para. 54); (2) raises issues of fact, discretion or policy; or (3) involves inextricably intertwined legal and factual issues (paras. 51 and 53-54). (See also: Canada (Canadian Human Rights Commission) v Canada (Attorney General) , 2011 SCC 53 , [2011] 3 SCR 471 at para 18 ; Dunsmuir , above, at paras 58, 60-61 ). [ 41 ] And, in Alberta (Information and Privacy Commissioner) v Alberta Teachers' Association , 2011 SCC 61 , [2011] 3 SCR 654, the Supreme Court indicated that true questions of jurisdiction are exceptional.

There Justice Rothstein stated: [39] What I propose is, I believe, a natural extension of the approach to simplification set out in Dunsmuir and follows directly from Alliance (para. 26). True questions of jurisdiction are narrow and will be exceptional. When considering a decision of an administrative tribunal interpreting or applying its home statute, it should be presumed that the appropriate standard of review is reasonableness. As long as the true question of jurisdiction category remains, the party seeking to invoke it must be required to demonstrate why the court should not review a tribunal’s

interpretation of its home statute on the deferential standard of reasonableness. [ 42 ] Recently, in McLean v British Columbia (Securities Commission) , 2013 SCC 67 , the Supreme Court of Canada addressed the standard of review on judicial review (at paras 21-27) and stated: [21] Since Dunsmuir v. New Brunswick , 2008 SCC 9 , [2008] 1 S.C.R. 190, this Court has repeatedly underscored that “[d]eference will usually result where a tribunal is interpreting its own statute or statutes closely connected to its function, with which it will have particular familiarity” (para. 54).[2] Recently, in an attempt to further simplify matters, this Court held that an administrative decision maker’s

interpretation of its home or closely-connected statutes “should be presumed to be a question of statutory

interpretation subject to deference on judicial review” ( Alberta (Information and Privacy Commissioner) v. Alberta Teachers’ Association , 2011 SCC 61 , [2011] 3 S.C.R. 654, at para. 34 ). [22] The presumption endorsed in Alberta Teachers, however, is not carved in stone. First, this Court has long recognized that certain categories of questions - even when they involve the

interpretation of a home statute - warrant review on a correctness standard ( Dunsmuir , at paras. 58-61 ). Second, we have also said that a contextual analysis may “rebut the presumption of reasonableness review for questions involving the

interpretation of the home statute” ( Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada , 2012 SCC 35 , [2012] 2 S.C.R. 283, at para. 16 ). The appellant follows both these routes in urging us to accept a correctness standard. I propose to deal with her second argument first as it can be dispensed with quickly. […] [25] Post- Dunsmuir , it has become fashionable for counsel to argue that the question before an administrative decision maker falls into one of the few recognized exceptional categories.

One wave of cases focuses on whether the question raised is a “true” question of vires or jurisdiction; see Alberta Teachers , at paras. 37-38 (citing various cases).

In that case, the Court expressed serious reservations about whether such questions can be distinguished as a separate category of questions of law, but ultimately left the door open to the possibility (para. 34).[3] [26] A second wave - the one which the appellant now rides - focuses on “general questions of law that are both of central importance to the legal system as a whole and outside the adjudicator’s specialized area of expertise” ( Canada (Canadian Human Rights Commission) v.

Canada (Attorney General) , 2011 SCC 53 , [2011] 3 S.C.R. 471 (“ Mowat ”), at para. 22 , referring to Dunsmuir , at para. 60 ); see also Nor-Man Regional Health Authority Inc. v. Manitoba Association of Health Care Professionals , 2011 SCC 59 , [2011] 3 S.C.R. 616; Communications, Energy and Paperworkers Union of Canada, Local 30 v. Irving Pulp & Paper, Ltd. , 2013 SCC 34 , [2013] 2 S.C.R. 458.

In each of these cases, this Court unanimously found that the question presented did not fall into this exceptional category - and I would do so again here. [27] The logic underlying the “general question” exception is simple. As Bastarache and LeBel JJ. explained in Dunsmuir , “[b]ecause

of their impact on the administration of justice as a whole, such questions require uniform and consistent answers” (para. 60). Or, as LeBel and Cromwell JJ. put it in Mowat , correctness review for such questions “safeguard[s] a basic consistency in the fundamental legal order of our country” (para. 22). [ 43 ] In my view this matter does not fall within either of the categories identified and described by Dunsmuir and the subsequent jurisprudence as attracting the correctness standard.

It is not a constitutional issue nor a question of general law that is both of central importance to the legal system as a whole and outside the Adjudicator’s specialized area of expertise. It does not involve the drawing of jurisdictional lines between two or more competing specialized tribunals nor is it a true question of jurisdiction or vires. [ 44 ] While NGL argued that the decision is of central importance to the FOA scheme, that is not the test to be met.

None of the issues pertaining to the Arbitrator’s decision concerning the FOA as between NGL and CN amount to a question of general law that is of central importance to the legal system as a whole and outside the Arbitrator’s specialized area of knowledge.

As Justice Kelen said in Canadian National Railway Company v Western Canadian Coal Corporation , 2007 FC 371 [ Western Canadian ], the issues to be decided do not transcend the interests of the parties involved: [49] In this case, at issue is a form of interest arbitration operating under a statutory framework that expressly states that no reasons are to be provided except where both parties consent. At stake are purely commercial interests, rather than fundamental personal liberties. There is no right of appeal from the arbitrator’s decision. It is final and binding. Moreover, time is of the essence.

The arbitrator is not bound by precedent, and accordingly the issues to be decided by the arbitrator do not transcend the interests of the parties involved… Although that decision pre-dated Dunsmuir and dealt with a different issue, the reasoning on this point is relevant. [ 45 ] As noted above, jurisdictional issues are exceptional and only arise “…where the tribunal must explicitly determine whether its statutory grant of power gives it the authority to decide a particular matter” ( Dunsmuir , above, at para 59 ). That is not the case here.

There is no doubt that the Arbitrator had the authority to select a final offer, the issues are concerned with the decision itself. [ 46 ] NGL also submits that this matter raises questions of statutory

interpretation which are best suited for determination by the Court. Further, that in this instance the Arbitrator is not a member of the Agency, lacks expertise and is not interpreting his home statute. As noted above, where the question relates to the

interpretation of the tribunal’s enabling or home statute or statutes closely connected to its function, with which it will have particular familiarity, the reasonableness standard will normally apply. [ 47 ] I do not think that the fact that an arbitrator is not an employee of the Agency precludes him from having the experience and expertise to effect his role under the CTA , including the

interpretation of the CTA as a statute closely connected to his function and with which he will have particular familiarity.

Nor do I agree that the fact that the Agency may, at the request of the arbitrator, provide administrative, technical and legal assistance to the arbitrator pursuant to s. 162(2) suggests that the FOA statutory scheme does not envision the arbitrator addressing questions of law or mixed fact and law in the execution of his role. [ 48 ] While s.169 does not explicitly require that every arbitrator have expertise that may assist them in conducting FOAs, there is no evidence that the Arbitrator who presided in this matter lacked such expertise.

In my view, if an arbitrator has been selected by the Agency and is fulfilling the role described within that scheme, then it must be assumed that he has acquired special expertise. [ 49 ] Other factors leading towards the reasonableness standard are that

Part IV of the CTA is a discrete and special administrative regime. Further, s. 165(6)(

a) states that unless the parties agree otherwise, which they did not in this case, the decision of the arbitrator on FOA will be final and binding and enforceable as if it were an order of the Agency, which provision resembles a privative clause. [ 50 ] In conclusion, the issues in this matter all raise issues of fact or mixed fact and law. Whether or not CN amended its final offer is a question of fact as is the question of whether the Arbitrator permitted CN to do so. Similarly, whether CN’s final offer was uncertain or void for uncertainty is a question of mixed fact and law.

And, to the extent that the Arbitrator may have been required to interpret provisions of the CTA , he is interpreting his home statute. As the presumption of its application has not been rebutted, the standard of review is reasonableness. ISSUE 2: Did CN amend its final offer? NGL’s Position [ 51 ] NGL submits that the CTA does not allow the parties to amend their final offers once submitted to the Agency nor does it allow an arbitrator to permit an amendment once a final offer is submitted. The Arbitrator, therefore, acted without jurisdiction in allowing CN to amend its final offer.

Alternatively, the Arbitrator erred in law by acting contrary to ss. 161.1(1) and 165(1) of the CTA. [ 52 ] Although CN may submit that it did not revise its final offer, but rather corrected the calculation of its fuel charge, this ignores the fact that CN can only correct the distance for NGL’s rail movement by calculating the fuel surcharge on something other than the specified CN Tariff, which requires calculation using PC*Miller. In the alternative, by revising its fuel surcharge, CN revised the rate payable under its final offer.

This is because the application of the fuel surcharge is a component of the rate to be charged to NGL under CN’s final offer. This was an improvement of CN’s final offer after NGL had tendered its own offer which rendered it incapable of acceptance as it was an amendment. [ 53 ] Even though the Arbitrator ruled that the June 20, 2013 letter from CN concerning the fuel surcharge error did not form a part of the record at the hearing, he accepted the evidence of CN’s witnesses regarding the error as evidenced by the fact that the decision specifically states that he “considered the evidence of the witnesses” .

He thereby allowed CN to revise its final offer. CN’s Position

[ 54 ] CN submits that at no time during the FOA process did it attempt to revise, amend or to otherwise alter or modify its final offer. The final offer, including dollar amounts, that CN initially provided to the Agency pursuant to s. 161.1 of the CTA is the exact same final offer that was considered and ultimately accepted by the Arbitrator. Nor has CN ever requested that its final offer be amended or revised.

While CN’s June 20, 2013 letter requested minor changes to CN’s Information, the wording of the final offer did not change. [ 55 ] Further, at no time did the Arbitrator permit CN to amend its final offer. Rather, the uncontradicted evidence is that the Arbitrator expressly ruled that the June 20, 2013 letter did not form a part of the record at the hearing. Nor is there any evidence to support NGL’s assertion that the Arbitrator accepted CN’s witnesses’ submissions as to the mileage error.

The decision simply states that he considered the information, evidence and related materials provided by the parties and the evidence of the witnesses. In any event, the practical effect of the mileage error was negligible in comparison to the base rate differential between the two final offers. The Arbitrator could easily have rejected the evidence of CN’s witnesses as to the mileage error yet still have accepted CN’s final offer as being the most commercially reasonable. Analysis [ 56 ] As a starting point it is useful to refer to Western Canadian , above.

That case was a judicial review of an arbitrator’s decision which required the Court to determine if procedural fairness imposed by paragraph 29(

e) of the Canadian Bill of Rights , S.C. 1960, c.44 applied to the FOA regime.

There Justice Kelen summarized prior findings of the Federal Court of Appeal concerning FOAs, described the FOA process and noted that: [8] Since FOA forecloses the option of the arbitrator choosing a compromise position between the two offers, the design of FOA encourages the parties to settle the dispute through their own negotiations. [9] The FOA process disciplines the parties to advance tempered offers because the more far reaching a party’s position, the greater likelihood that the other party’s final offer will be selected by the arbitrator… […] [35] Final offer arbitration has been described as “an intentionally high risk form of arbitration” that encourages settlement and tempers final positions.

The arbitration resolves isolated disputes over rates to be charged by a carrier for a period of one year when the parties are unable to agree. The arbitrator’s task is to select the more reasonable of the two offers submitted. As is indicated in paragraph 165(6)(

a) of the Act, the arbitrator’s decision is intended to bring finality to the dispute.

The limited duration of the decision’s binding effect on the parties is closely linked to the limited timeframe within which the arbitration process occurs… […] [ 57 ] While NGL devotes much of its effort in its submissions to establishing that final offers were intended and are to be exchanged simultaneously, in my view that is clear from the CTA provisions and is not at issue in this case. [ 58 ] The only question is whether CN amended its final offer and, in my view, it did not. [ 59 ] As indicated in the background facts, both parties were required to and did submit their final offers to the Agency on May 9, 2013.

NGL’s final offer included an Incorporation by Reference clause which excluded any fuel surcharge and proposed a specified Rate.

CN’s final offer included a different specified Rate, an Incorporation by Reference clause and a Fuel Surcharge clause that stated that the Rate was subject to a specified CN Fuel Surcharge Tariff supplements thereto and reissues thereof during the Term. [ 60 ] In the June 20, 2013 letter from CN to the Arbitrator, CN advised that in preparing its answers to the NGL interrogatories it had noticed a discrepancy in the actual distance of the movement of NGL’s traffic and the distance that had been used to calculate the mileage based fuel surcharge under the specified CN Tariff.

The discrepancy resulted from an erroneous calculation of the mileage by the third party software, PC*Miler, used to calculate NGL’s fuel surcharge. It went on to explain that the error had an impact on certain of the numbers “referenced in CN’s Information, although only negligibly” and provided an example of this. [ 61 ] It is important to note that CN’s final offer contains only one figure, the stated Rate. Further, nowhere in the June 20, 2013 letter does CN request or suggest that the stated Rate contained in its final offer is to be revised.

CN clearly stated that, although it viewed the adjustments to the comparative rates not to be material, that it sought to bring the discrepancy to the Arbitrator’s attention in advance of the hearing to avoid any confusion or inconsistency in the rate history or comparison. In that regard I would note s.163(5) of the CTA which states that if a party unreasonably withholds information that the arbitrator subsequently deems to be relevant, the withholding shall be taken into account by the arbitrator in making a decision.

Thus, in my view, once it discovered the mileage error which had an impact on the fuel surcharge, CN was obliged to disclose this. [ 62 ] It is also of note that it is only in CN’s Information, and not the final offer, that CN makes its analysis which concludes that its final offer is commercially more reasonable than that of NGL.

Thus, when CN updated those figures, in its letter of June 20, 2013, it was referring to the submissions contained in its Information, not to the final offer. [ 63 ] More significantly, the parties agree in their submissions that the June 20, 2013 letter did not form part of the record at the hearing.

Thus, even if CN’s letter was construed as an effort to improve its final offer, the letter was not evidence that was considered by the Arbitrator at the hearing and in forming his decision. [ 64 ] NGL submits that its Information raised the issue of the fuel surcharge and alleged that CN’s final offer would overcharge NGL for fuel. It is correct that NGL’s Information raised the fuel surcharge noting that its final offer excluded it while CN’s final offer was subject to a specified CN Fuel Charge Tariff.

The history of the fuel surcharge is also addressed and NGL took issue with CN’s proposal as being uncertain and unascertainable as well as contrary to s. 161.1(1) of the CTA . Further, because the base rate proposed by CN included a fuel cost component that covered CN’s full cost of diesel fuel for the movement of NGL’s traffic to Wrights Cove, that charging an additional fuel surcharge as set out in the specified Tariff would result in CN grossly over-recovering its actual fuel costs.

[ 65 ] NGL further submits that its Interrogatory #8 “clearly suggested” that CN had historically overcharged NGL for fuel based both on fuel costs and distance and, as a result of NGL’s position, CN revised its final offer to more accurately reflect the distance for Milford Quarry to Wrights Cove. However, Interrogatory #8 makes no such suggestion. Rather, it refers to CN’s Information and requests details of CN’s calculation of the specified fuel surcharge, including the distance and fuel cost associated with the calculation and the source of the numbers for both the distance and fuel cost.

There is no evidence to suggest that it was anything other than as a result of CN’s efforts to respond to Interrogatory #8, and the resultant discovery of the mileage discrepancy, that prompted CN’s June 20, 2013 letter.

This was confirmed by affidavit evidence as well as testimony to that effect at the hearing. [ 66 ] Although the answer to Interrogation #8 does refer to “[t]he fuel surcharge of […] shown in CN’s Final Offer”, there was affidavit evidence stating that this was amended, with the consent of NGL’s counsel, at the hearing when the answers were being read in the record to “… CN’s Information …”. [ 67 ] It is apparent from the affidavit evidence, reviewed in more detail in the confidential reasons, that not only did the Arbitrator refuse to accept the June 20, 2013 letter into evidence, but that he was aware of CN’s position that it was not seeking to amend its final offer.

Ultimately, the Arbitrator accepted CN’s final offer, the text of which was not amended. There is no evidence that the Rate contained in the final offer was amended. [ 68 ] NGL also submits that because the Fuel Surcharge clause in the CN final offer stated that CN’s rate was subject to the specified CN Tariff, which in turn states that the fuel surcharge is calculated on the basis of rail mileage provided by PC*Miler which had not been corrected from 36 to 31 miles at the time of the hearing, CN could only correct the mileage by revising its final offer which it did by way of the revised calculations.

The specified Tariff does not contemplate PC*Miler being manually overridden, thus by applying 31 rather than 36 miles, CN revised its offer. However, for the reasons I have set out above, this submission cannot succeed. [ 69 ] I would also note, however, that CN’s final offer stated that the Rate was subject to the specified Fuel Surcharge Tariff series, supplements thereto and reissues thereof during the Term. That CN Tariff is attached as Exhibit D of an affidavit file in support of CN’s submissions and was Appendix 3 to CN’s Information.

It states, in part: • To ensure consistency and fairness, rail mileage is calculated using the latest version of the third party software PC*Miler (ALK Technologies) on each linehaul movement. A mileage table of all Origin/Destination/Route combinations shipped in the last 12 months will be available when you login to Velocity eBusiness and select the Get Rail Miles tool. To get the mileage for any new Origin/Destination/Route combination, the customer will need to purchase the ALK Technologies software. The mileage table will be updated daily with any new moves.

NOTE: In rare cases where rail miles for an Origin/Destination/Route combination are not available through ALK Technologies’ PC*Miler software, CN will calculate and publish these miles in out Get Rail Miles mileage table. [ 70 ] Another Tariff similarly states that “Rail mileage is calculated using the latest version of the third party software PC*Miler (ALK Technologies) on each linehaul movement.

Where the rail miles are not available through PC*Miler, CN will calculate and publish the mileage independently” . [ 71 ] There is no evidence to suggest that CN intended to calculate the Fuel Surcharge on anything other than the latest version of PC*Miler. However, the specified Tariff also appears to contemplate CN calculating mileage outside the PC*Miler software when the software is unable to do so.

Therefore, it would have been reasonable for the Arbitrator to decide that the manual calculation of the variable fuel surcharge rate would be permitted under the Tariff language. [ 72 ] But what is most significant is that the Rate proposed in CN’s final offer was stated to be subject to the Fuel Surcharge. The surcharge was estimated only in CN’s Information and was based on the calculation for June 2013. This was a variable representing an estimated amount for the purposes of the arbitration. The impact on that figure as a result of the mileage discrepancy was only addressed in the letter of June 20, 2013.

The Arbitrator did not accept the June 20, 2013 letter with the revised Information calculations into evidence and there is no evidence that the Arbitrator accepted that testimony as amending CN’s final offer. [ 73 ] Having reviewed both Informations, I agree with CN that there were a number of reasons why the Arbitrator could have selected the CN final offer over the NGL final offer.

It is entirely possible that the Arbitrator could have selected the CN final offer as being the most commercially reasonable knowing that the fuel surcharge component was calculated with an erroneous mileage which would resulting a short term overcharge until PC*Miler was updated. [ 74 ] As it is not apparent on the face of the record that CN amended its final offer and that the Arbitrator accepted a revised final offer, no issue of the Arbitrator having exceeded his jurisdiction or erred by contravening ss. 161.1(1) and 165(1) of the CTA arises. [ 75 ] As stated in Western Canada , above, the arbitrator’s role in a FOA is to select the more reasonable of the two offers submitted.

There is nothing to suggest that the Arbitrator erred by selecting the CN final offer in making that determination. ISSUE 3: Was CN’s final offer compliant with

section 161.1(1) of the CTA? NGL’s Position [ 76 ] NGL submits that the CTA requires final offers to include dollar amounts. Where a party fails to submit a final offer in accordance with the CTA, the Arbitrator must select the compliant offer. CN’s final offer did not comply with s. 161.1(1) because it did not contain a dollar amount representing the total rate. The Arbitrator therefore acted without jurisdiction in selecting CN’s final offer. Alternatively, he erred in law in doing so. [ 77 ] NGL submits that because s. 161(2) (

a) of the CTA requires the shipper to initially submit its final offer “excluding any dollar amounts” , s. 161.1(1) must therefore be understood as requiring the parties to submit their final offers including all dollar amounts. The

final offers must include dollar amounts representing all charges, or the total rate, the shipper would be required to pay under the offer. Otherwise, it is impossible for an arbitrator to select the most commercially reasonable of the offers as he does not know the total ratepayable under one of them (Western Canadian, above, at paras 31, 35 and 45). [78] CN’s rate was only a base rate because it was subject to the specified CN Tariff, a variable fuel surcharge that fluctuatedmonthly. A variable fuel surcharge is not a dollar amount.

CN acknowledged in its Information that the structure of its final offer made itimpossible to determine the total rate payable for any month other than June 2013. CN’s Position [79] CN submits that the stated rate per car was clearly inserted in its final offer. Therefore, NGL cannot in good faith argue thatCN did not include “dollar amounts” as required by s. 161.1(1) simply because it includes the application of a standard fuel charge. NGLappears to be reading in the words “total price” or “total rate payable” into s 161.1(1) when those words are simply not there.

This wasnot Parliament’s intent. [80] Further, NGL itself incorporated by reference other CN Tariffs which could possibly increase the rates paid and gave anexample of this. [81]

Section 161.1(1) requires each party to submit to the Agency their final offers “including dollar amounts”, it does not requirethat the parties’ final offers include “all” potential dollar amounts that could be payable over the course of the award term. To make sucha finding requires the reading in of the word “all”. Statutory

interpretation presumes against adding words unless the addition givesvoice to Parliament’s implicit intention (Murphy v Walsh, (SCC), [1993] 2 SCR 1069 at 1078-1079, 106 DLR (4th) 404[Murphy]; Cuthbertson v Rasouli, 2013 SCC 53 at para 32, [2013] 3 SCR 341 [Cuthbertson]). Considering s. 161.1(1) in itsgrammatical and ordinary sense (Re Sound and Motion Picture Theatre Associations of Canada, 2012 SCC 38 at para 33, [2012] 2 SCR376), it is not necessary or reasonable to read in the word “all”, particularly as Parliament inserted the word “including” before thephrase “dollar amounts”.

This suggests that it was not Parliament’s intention to impose a requirement that “all” dollar amounts bestipulated in the parties’ final offers. Rather, the definition suggests that Parliament intended to simply differentiate the final offerscontemplated by s. 161.1(1), for which the parties may include dollar amounts, from the shipper’s preliminary offer which must excludedollar amounts. Analysis [82] Section 161(2), which concerns a shipper’s preliminary final offer submission, states: 161. […]

(2) A copy of a submission under subsection (1) shall be served on the carrier by the shipper and the submission shall contain (

a) the final offer of the shipper to the carrier in the matter, excluding any dollar amounts; [emphasis added] [83]

Section 161.1(1), which concerns submission of the final offers by both parties, states: 161.1(1) Within 10 days after a submission is served under subsection 161(2), the shipper and the carrier shall submit to the Agencytheir final offers, including dollar amounts. [emphasis added] [84] I do not agree with NGL’s submission that because a shipper’s s.161(2)(

a) preliminary offer excludes “any” dollar amounts,then s. 161.1(1) must be understood as requiring the parties to submit their final offers including “all” dollar amounts. NGL’s reasoningis that the word “any” is synonymous with “all” (Aerlinte Eireann Teoranta v Canada (Minister of Transport) (1990), (FCA), 68 DLR (4th) 220 at 225, 107 NR 129 (FCA)). Because s. 161(2)(

a) refers to “any” dollar amounts, this can be read as “all”dollar amounts and it therefore follows that s 161.1(1) must be read to include “all’ dollar amounts. [85] This is, at best, a tortured

interpretation and does not arise from a plain reading of either provision. The Supreme Court hassaid that it is problematic to rely on “an unnatural and strained

interpretation” of a phrase (British Columbia (Forests) v Teal CedarProducts Ltd, 2013 SCC 51 at para 26, [2013] 3 SCR 301). It also confirmed in Cuthbertson, above, at para 32 that: The basic rule of statutory

interpretation is that “the words of

an Act are to be read in their entire context, in their grammatical andordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”: R. Sullivan, Sullivan onthe Construction of Statutes (5th ed. 2008), at p. 1. [86] NGL’s

interpretation also requires reading in the word “all” when interpreting s. 161.1(1), however, “[c]ourts shouldnormally avoid an

interpretation of legislation that requires words to be read into it” (Febles v Canada (Citizenship and Immigration),2012 FCA 324 at para 51, 357 DLR (4th) 343; R v McIntosh, (SCC), [1995] 1 SCR 686 at para 26, 178 NR 161[McIntosh]). I am not convinced that to do so here would express what Parliament clearly implied (Murphy, above, at 1078-1079; R vMcIntosh). [87] Further, while NGL submits that it is impossible for an arbitrator to select the most reasonable offer when he does not knowwhat the total rate payable is under one of the offers, this would appear to overstate the situation.

As is set out in more detail below, itappears that final offers including fuel surcharges and other terms that may contain variable rates are not exceptional. Further, each partymay submit an Information which can explain such figures, including their variables, and provide an estimate of what that additional costwill be. The arbitrator can take this into consideration when comparing and selecting the final offer.

[ 88 ] In this case a related CN Tariff explains how the fuel surcharge is calculated: CN will apply a fuel surcharge to the linehaul freight charge(

s) based on the monthly average price of U.S. No. 2 Diesel Retail Sales by All Sellers (Cents per Gallon) On-Highway Diesel Fuel (HDF). The source for the price of HDF is the U.S. Department of Energy’s EIA Retail On-Highway Diesel Prices Report, whose monthly average price is available under “2-M Diesel Prices – All Types” at http://tonto.eia.doe.gov/oog/ftparea/wogirs/xls/psw18vwall.xls .

When the monthly average price of HDF equals or exceeds $1.25 in the second calendar month prior to the month in which the fuel surcharge is applied, the fuel surcharge rate per mile as shown in the HDF Fuel Surcharge Table will be applied to the linehaul freight charge. For example, the surcharge amount in December will be calculated from the monthly average HDF price during October. Rail mileage is calculated using the latest version of the third party software PC*Miler (ALK Technologies) on each linehaul movement.

When the rail miles are not available through PC*Miler, CN will calculate and publish the mileage independently. For example: When HDF rate is $2.60, the fuel surcharge for a carload linehaul movement of 1,500 miles would be $0.2760 x1500 = $414.00 [ 89 ] That Tariff then goes on to describe and give examples of how the U.S.

On-Highway Diesel surcharge will be converted to Canadian currency for customers who are invoiced in Canadian dollars, to provide a table showing how the date of surcharge will be applied and a HDF fuel surcharge table from which the HDF value can be extracted and applied. [ 90 ] Thus, while the Fuel Surcharge calculation is dependant on mileage, this is not a variable for a known route, the only variable is the HDF which is figure determined by an independent source and over which CN has no control.

While the Arbitrator could not know exactly what the fuel surcharge will be from month to month, CN estimated this at a specified dollar rate per car and provided the surcharge from prior years. In my view, the Arbitrator in determining which of the final offers was most commercially reasonable, could consider the CN Information when making an informed determination of the total amount payable under CN’s final offer. [ 91 ] NGL cites and relies on a portion of Western Canadian , above, at para 31 .

When viewed in whole this reads: [31] The applicant argues that various aspects of the FOA regime have the effect of denying it the opportunity to prepare adequately its case and to know the case it has to meet. In particular, the applicant challenges the following features of the arbitration regime, which it argues are unfairly prejudicial and constitute a violation of paragraph 2(

e) of the Canadian Bill of Rights: 1. Paragraph 161(2)(

a) excludes for 10 days from the shipper’s final offer the dollar price it is willing to pay for the rail service contained in the offer. Accordingly, the carrier must respond to the shipper’s final offer without knowing the dollar price the shipper is willing to pay; [ 92 ] NGL submits that in Western Canadian , CN equated “dollar amounts”, which is what s. 161(2)(

a) excludes, with “total price” which is what CN wanted to know before crafting its offer. I fail to see how this paragraph stands for the proposition for which it is being advanced by NGL. It is a recitation of the arguments of CN in that case, and merely states the fact that when drafting a final offer, the carrier must do so without knowing how much the shipper is willing to pay.

It makes no reference to a total price nor does it exclude the ability of a carrier to incorporate terms by reference or to use a variable rate that is able to be calculated based on objective information. [ 93 ] In conclusion, I do not agree that s. 161.1(1), and in particular the phrase “dollar amounts” must be interpreted and understood as requiring the parties to submit final offers that contain amounts in dollars which represent the total rate payable by the shipper.

I see no reason why, as in this case, a stated dollar rate cannot be stated to be made subject to another provision of the final offer, such as a fuel surplus clause or an incorporated by reference clause. Should a party choose to proceed in this manner, then it is incumbent upon them to explain in their Information the basis for the additional charge and to convince the arbitrator that enough information concerning that charge has been provided so that he or she can undertake a comparison of the two final offers and make a determination as to which of them is commercially the most reasonable.

This can include, as it did in this case, the history of the development and application of the charge, historic rates for the charge as well as the method by which it is calculated.

If the party fails to satisfy the arbitrator of the necessity and relative predictability of the additional charge, then this will be to the party’s detriment. [ 94 ] As I do not agree that CN’s final offer failed to specify a “dollar amount” nor that its stated rate was required to include the Fuel Surcharge or other tariffs incorporated by reference, I cannot conclude that CN’s final offer did not comply with s. 161.1(1) nor, therefore, that the Arbitrator was obliged by s. 161.3 to select NGL’s final offer.

And, for the reasons set out above, it was reasonable for the Arbitrator to find that CN’s final offer contained dollar amounts. ISSUE 4: Was CN’s final offer uncertain or void for uncertainty? NGL’s Position [ 95 ] NGL submits that CN’s offer was uncertain and unascertainable, or void for uncertainty, and therefore that the Arbitrator erred in jurisdiction and law by selecting CN’s final offer. This is because a reasonable comparison of the two offers is not possible when one of them incorporates a fuel surcharge dependant on uncertain future events.

Further, because CN can unilaterally alter the tariff at any time. Because the Fuel Surcharge can be revised by CN during the term of the award, the Arbitrator’s selection of CN’s final offer amounts to an impermissible sub-delegation to CN of his adjudicative powers, being the authority to determine the rate payable ( Therrien (Re), 2001 SCC 35 at para 93 , [2001] 2 SCR 3; Murphy v Canada (National Revenue), 2009 FC 1226 at paras 40-47 , 314 DLR (4th) 540). [ 96 ] The selection is also contrary to s. 165(6) (

a) of the CTA as it is not final and binding and, contrary to the scheme of the CTA,

it does not provide certainty (Western Canadian, above, at para 9). The issuance of supplements and reissuances of the specified CNTariff could materially alter the terms of the final offer within as little time as one month. Because the material terms of a contract mustbe certain, the offer is void for uncertainty (Ko v Hillview Homes Ltd, 2012 ABCA 245 at para 81, 90-91 and 103, 536 AR 93 [Ko]). CN’s Position [97] CN submits that both final offers are dependant upon what NGL describes as unpredictable future events or the parties’ futureacts or omissions.

For example, depending on how NGL handles rail cars during the FOA term, the “total rate” may fluctuate greatly inaccordance with a referenced CN Tariff. Just because the total rate payable may fluctuate does not render the final offers unascertainableor uncertain. An arbitrator can still conduct a comprehensive comparison of the reasonableness of the parties’ final offers. [98] CN suggests that it may have been the lack of variability in NGL’s offer caused it not to be selected by the Arbitrator. It is awell-established practice within the transportation industry to adjust price in line with fuel fluctuations.

This is a fair practice as itremoves the uncertainty of volatile input costs while being neutral for both shippers and carriers. Thus, NGL’s approach was out of stepwith industry practice while CN’s approach, including a Fuel Surcharge clause, was inherently more reasonable and open to acceptanceby the Arbitrator on that basis. It did not render CN’s final offer invalid for uncertainty. [99] Further, the practical consequence of NGL’s argument is that any rail shipper could avoid a fuel surcharge tariff by merelyinitiating a FOA.

Railways would then be required to submit an all inclusive rate in their final offer thereby removing what is acceptedin industry as the most efficient method of addressing fluctuations in fuel prices and leading to higher rail rates. This would defeat thepurpose of the FOA scheme.

In essence, CN submits that fuel surcharges are a commercial reality, being the economic and commercialcontext prevailing in Canada, and are required to make the transportation system more economical (Canadian National RailwayCompany v Canada (National Transportation Agency) (1995), (FCA), 129 DLR (4th) 163 at 170-171, [1996] 1 FCR355 (FCA)).

By filing an FOA, NGL should not be permitted to extricate itself from the commercial market and a fuel surcharge thatvirtually every other shipper is required to pay and that NGL has previously paid. [100] As for unilaterally changing the tariff, CN made clear at the hearing that this is standard wording used of all of its tariffs. NGLcannot point to a single instance of CN abusing this power to unilaterally change its fuel tariff to the detriment of shippers. This concernis a theoretical construct, as demonstrated by the testimony. [101] CN submits that the Arbitrator did not delegate his authority.

Further, his decision was final and binding and that, in a FOAdecision where no reasons are given, the arbitrator’s decision must stand unless it can be shown that it was patently perverse, patentlyunlawful or explicable only on the assumption of bad faith (Western Canadian, above, at paras 52, 55; Quebec North Shore & LabradorRailway Co v New Millennium Capital Corp, 2011 FC 765 at para 81, 392 FTR 167). [102] Further, even if the final offers were required to meet a contractual level of certainty, the terms of CN’s final offer weresufficiently certain.

The specified CN Tariff provided a specific means of ascertaining the Fuel Surcharge to be paid by NGL.

It is alsoclear from the authorities that neither the fact that the fuel surcharge amounts may fluctuate over time, nor the possibility that the fuelsurcharge amounts might unilaterally be changed by CN render it, and therefore CN’s final offer, uncertain (see Royal Bank of Canada vStonehocker, [1985] BCJ No 2340 (QL) at para 17 (CA), leave to appeal refused [1985] SCCA No 65 (QL); Capital City Savings andCredit Union Ltd v Elliot (1988), (AB KB), 91 AR 226 at 10 (QB, Master); Alberta Treasury Branches v Smith, (AB KB), [1989] 5 WWR 633 at para 41, 67 Alta LR (2d) 357 (QB)).

Analysis [103] In my view, CN’s final offer was not uncertain or unascertainable, nor was it void for uncertainty. [104] The Arbitrator had before him CN’s Information. This documented the fuel surcharge previously paid by NGLand alsodescribes the prior agreements between the parties. [105] The CN Information also sets out the history of industry fuel surcharges stating that traditionally fuel was included in the basetransportation rate charged for the movement of traffic as fuel prices were relatively stable and predictable.

Beginning around 2001, fuelsurcharges in all modes of the transportation industry were implemented in response to the increasing volatility in fuel prices which werefluctuating significantly on a week by week basis. As it was not commercially reasonable for carriers to re-price their contract on suchshort term intervals, fuel surcharges were implemented. These are an amount added to the freight invoice to reflect the variability in fuelcosts above the starting point of the freight base rate. [106] CN’s Information further states that CN implemented its first fuel surcharge tariff, CN 7400, in 2001.

A new tariff, CN 7401,was introduced in 2005. In 2006, the shipper community expressed concerns to the U.S. regulator of the rail transportation industry, theSurface Transportation Board (STB), about the application of fuel surcharges. At issue was the methodology of applying the fuelsurcharges. Ultimately, the STB determined that computing rail fuel surcharges as a percentage of a shipper’s base rate was anunreasonable practice. Consistent with this finding CN and all major railways in North America implemented mileage based fuelsurcharges. CN did so by way of CN Tariff 7402 in April 2007.

The use of the HDF index, also endorsed by the STB decision, meantthat the fuel surcharges more closely tracked fluctuations in the actual prices being paid by railways for their locomotive fuel. And, as aresult of the STB decision, railways began to submit quarterly reports to “better enable the STB to monitor industry-wide fuel surchargepractices” and to provide a “useful and reliable regulatory tool for monitoring the relationship between changes in revenue and costs”. [107] More detailed information pertaining to the fuel surcharge is found in the attachments to CN’s Information.

This includesaffidavit evidence which provides a detailed history of rate based and mileage based fuel surcharges as well as

summary of theapplication of each to NGL. [108] The affidavit evidence also states that following submissions from counsel for CN and NGL, the Arbitrator ruled that he wouldadmit of CN’s rebuttal evidence in its entirety, subject to NGL’s ability to object to specific elements of the rebuttal evidence as it was

being introduced by CN’s witnesses at the hearing. CN’s rebuttal evidence describes the past application of the fuel surcharge between the parties and notes that there have only been adjustments a total of three times, all to the benefit of shippers. [ 109 ] What is clear from this evidence is that fuel surcharges have been a part of the arrangements between CN and NGL for an extended period.

This is set out in detail in the NGL Information. [ 110 ] NGL’s Information also confirmed that it has been charged a fuel surcharge on its shipments, originally rate based but subsequently mileage based, as a result of the STB decision. NGL estimated the prior rate based surcharge, the prior mileage based surcharge and estimated that if CN’s final offer was accepted what it would pay in fuel surcharges.

However, it still took the position that that CN’s rate was uncertain and unascertainable, contrary to s. 161.1(1) and permitted a gross over recovery by CN. [ 111 ] In my view, based on the record before him, the Arbitrator could ascertain with reasonable certainty the amount of the Fuel Surcharge based on the formula set out in the specified CN Tariff. Further, an estimated dollar amount per rail car was provided by CN in its Information which was based on distance of 36 miles and a monthly calculation for June.

The Arbitrator also had before him the past history of the fuel surcharge as between the parties including actual cost per car. Accordingly, CN’s final offer was not uncertain or unascertainable nor void for uncertainty, the Arbitrator did not err in law or jurisdiction by selecting CN’s final offer. [ 112 ] Further, the surcharge will rise or fall based on the cost of diesel, making it fair to both parties. The HDF is an objective standard and mileage, despite the discrepancy discovered in this instance, is not a true variable when calculating the surcharge.

I can see nothing unreasonable in accepting the Fuel Surcharge clause as a term of the final offer to which CN’s stated rate was subject. This was, in fact, consistent with past practice between the parties. [ 113 ] As to the contractual argument, even if valid, any uncertainty would be cured as there is a specific means of ascertaining the value in the contract ( Ko , above, at para 120 ; Mitsui & Co (Point Aconi) Ltd v Jones Power Co , 2000 NSCA 95 at para 52 , 74).

ISSUE 5: Is this an appropriate case for a directed verdict or mandamus? [ 114 ] For the reasons above I have determined that the Arbitrator committed no error of law, did not act outside his jurisdiction, and could reasonably have come to the decision that he did based on the record before him. As the application will be dismissed, there is no need to decide whether this would have been an appropriate case for a directed verdict or mandamus. JUDGMENT THIS COURT’S JUDGMENT is that 1. This application for judicial review is dismissed; and 2. CN shall have its costs. "Cecily Y. Strickland" Judge

SCHEDULE “A” Canada Transportation Act, SC 1996, c 10

PART IV ARBITRATIONS Division I Final Offer Arbitration Application of sections 161 to 169 159.

(1) Sections 161 to 169 apply only in respect of matters arising between shippers and carriers that involve (

a) the carriage of goods by air to which

Part II applies, other than their carriage internationally; (

b) the carriage of goods by railways to which this Act applies, other than the carriage of goods in trailers or containers on flat cars unless the containers arrive by water at a port in Canada, served by only one railway company, for further movement by rail or arrive by rail at such a port in Canada for further movement by water; or (

c) the carriage by water, for hire or reward, of goods required for the maintenance or development of a municipality or any permanent settlement for northern marine resupply purposes, other than goods required in relation to national defence or in relation to the exploration for or the development, extraction or processing of oil, gas or any mineral. Scope of paragraph (1)(c) (2) Paragraph (1)(

c) applies only to resupply services on (

a) the rivers, streams, lakes and other waters within the watershed of the Mackenzie River; (

b) the territorial sea and internal waters of Canada that are adjacent to the coast of the mainland and islands of the Canadian Arctic and situated within the area bounded by the meridians of longitude 95° West and 141° West and the parallels of latitude 66° 00′30″ North and 74°00′20″ North; and (

c) the internal waters of Canada comprised in Spence Bay and Shepherd Bay and situated east of the meridian of longitude 95° West. Application (3) Paragraph (1)(

c) applies only if (

a) the total register tonnage of all ships used to provide the resupply service exceeds fifty register tons; or (

b) the resupply service originates from a point situated on the waters described in subsection (2).

PARTIE IV ARBITRAGES

Section I Arbitrage sur l’offre finale Application des articles 161 à 169 159.

(1) Les articles 161 à 169 s’appliquent exclusivement aux différends survenant entre expéditeurs et transporteurs dans les domaines suivants :

a) le transport des marchandises sous le régime de la

partie II, à l’exception du transport international de marchandises par air;

b) le transport des marchandises par chemin de fer sous le régime de la présente loi, à l’exception de leur transport par remorques ou conteneurs posés sur wagons plats, sauf si les conteneurs arrivent par eau à un port du Canada desservi par une seule compagnie de chemin de fer en vue du transport ultérieur par rail ou arrivent par rail à ce port du Canada en vue du transport ultérieur par eau;

c) le transport par eau, à

titre onéreux, de marchandises nécessaires à l’entretien ou au développement d’une municipalité ou d’un établissement humain permanent aux fins de l’approvisionnement par eau dans le nord, à l’exclusion de celles destinées à la défense nationale ou à la recherche, l’exploitation, l’extraction ou la transformation du pétrole, du gaz ou de minéraux. Application de l’alinéa (1)c)

(2) L’alinéa (1)

c) ne s’applique qu’aux services d’approvisionnement assurés dans :

a) les eaux du bassin hydrographique du fleuve Mackenzie;

b) la mer territoriale et les eaux intérieures du Canada contiguës à la côte du continent et aux îles de l’Arctique canadien, situées à l’intérieur de la région bornée par 95° et 141° de longitude ouest et 66°00′30″ et 74°00′20″ de latitude nord;

c) les eaux intérieures du Canada comprises entre Spence Bay et la baie Shepherd et situées à l’est de 95° de longitude ouest. Non-application de l’alinéa (1)c)

(3) L’alinéa (1)

c) ne s’applique :

a) à l’exploitation d’un service d’approvisionnement que si le tonnage au registre total des navires utilisés pour celui-ci dépasse cinquante tonneaux;

b) qu’aux services d’approvisionnement assurés en provenance d’un lieu situé dans les eaux visées au paragraphe (2). Rail passenger services 160. Sections 161 to 169 also apply, with any modifications that the circumstances require, in respect of the rates charged or proposed to be charged by, and in respect of any of the conditions associated with the provision of services by, a railway company to any other railway company engaged in passenger rail services, except a public passenger service provider as defined in

section 87. Compagnies de chemin de fer 160. Les articles 161 à 169 s’appliquent également, avec les adaptations nécessaires, aux prix appliqués ou proposés par une compagnie de chemin de fer et aux conditions qu’elle impose pour la fourniture de services à une autre compagnie de chemin de fer se livrant au transport de passagers qui n’est pas une société de transport publique au sens de l’article 87.

Submission for final offer arbitration 161.

(1) A shipper who is dissatisfied with the rate or rates charged or proposed to be charged by a carrier for the movement of goods, or with any of the conditions associated with the movement of goods, may, if the matter cannot be resolved between the shipper and the carrier, submit the matter in writing to the Agency for a final offer arbitration to be conducted by one arbitrator or, if the shipper and the carrier agree, by a panel of three arbitrators. Contents of submission

(2) A copy of a submission under subsection (1) shall be served on the carrier by the shipper and the submission shall contain (

a) the final offer of the shipper to the carrier in the matter, excluding any dollar amounts; (b) [Repealed, 2000, c. 16, s. 11] (

c) an undertaking by the shipper to ship the goods to which the arbitration relates in accordance with the decision of the arbitrator; (

d) an undertaking by the shipper to the Agency whereby the shipper agrees to pay to the arbitrator the fee for which the shipper is liable under

section 166 as a party to the arbitration; and (

e) the name of the arbitrator, if any, that the shipper and the carrier agreed should conduct the arbitration or, if they agreed that the arbitration should be conducted by a panel of three arbitrators, the name of an arbitrator chosen by the shipper and the name of an arbitrator chosen by the carrier. Arbitration precluded in certain cases

(3) The Agency shall not have any matter submitted to it by a shipper under subsection (1) arbitrated if the shipper has not, at least five days before making the submission, served on the carrier a written notice indicating that the shipper intends to submit the matter to the Agency for a final offer arbitration. Final offer arbitration not a proceeding

(4) A final offer arbitration is not a proceeding before the Agency. Recours à l’arbitrage 161.

(1) L’expéditeur insatisfait des prix appliqués ou proposés par un transporteur pour le transport de marchandises ou des conditions imposées à cet égard peut, lorsque le transporteur et lui ne sont pas en mesure de régler eux-mêmes la question, la soumettre par écrit à l’Office pour arbitrage soit par un arbitre seul soit, si le transporteur et lui y consentent, par une formation de trois arbitres. Contenu de la demande

(2) Un exemplaire de la demande d’arbitrage est signifié au transporteur par l’expéditeur; la demande contient :

a) la dernière offre faite par l’expéditeur au transporteur, sans mention de sommes d’argent; b) [Abrogé, 2000, ch. 16, art. 11]

c) l’engagement par l’expéditeur d’expédier les marchandises visées par l’arbitrage selon les termes de la décision de l’arbitre;

d) l’engagement par l’expéditeur envers l’Office de payer à l’arbitre les honoraires auxquels il est tenu en application de l’article 166 à

titre de

partie à l’arbitrage;

e) le cas échéant, le nom de l’arbitre sur lequel l’expéditeur et le transporteur se sont entendus ou, s’ils ont convenu que la question soit soumise à une formation de trois arbitres, le nom de l’arbitre choisi par l’expéditeur et le nom de celui choisi par le transporteur. Arbitrage écarté

(3) L’arbitrage prévu au paragraphe (1) est écarté en cas de défaut par l’expéditeur de signifier, dans les cinq jours précédant la demande, un avis écrit au transporteur annonçant son intention de soumettre la question à l’Office pour arbitrage. Soumission d’une question pour arbitrage

(4) La soumission d’une question à l’Office pour arbitrage ne constitue pas une procédure devant l’Office. Submission of final offers 161.1

(1) Within 10 days after a submission is served under subsection 161(2), the shipper and the carrier shall submit to the Agency their final offers, including dollar amounts. Copies to the parties

(2) Without delay after final offers are submitted under subsection (1) by both the shipper and the carrier, the Agency shall provide the shipper and the carrier with copies of each other’s final offer. If no final offer from a party

(3) If one party does not submit a final offer in accordance with subsection (1), the final offer submitted by the other party is deemed to be the final offer selected by the arbitrator under subsection 165(1) . Délai de présentation 161.1

(1) L’expéditeur et le transporteur, dans les dix jours suivant la signification de la demande au

titre du paragraphe 161(2), présentent chacun à l’Office leur dernière offre, en y incluant la mention de sommes d’argent. Communication des offres

(2) Dès réception des offres présentées par l’expéditeur et le transporteur conformément au paragraphe (1), l’Office communique à chacun l’offre de la

partie adverse. Non-observation du paragraphe (1)

(3) Si une

partie ne se conforme pas au paragraphe (1), la dernière offre de l’autre

partie est réputée celle que l’arbitre choisit au

titre du paragraphe 165(1).

Arbitration 162.

(1) Notwithstanding any application filed with the Agency by a carrier in respect of a matter, within five days after final offers are received under subsection 161.1(1), the Agency shall refer the matter for arbitration (

a) if the parties did not agree that the arbitration should be conducted by a panel of three arbitrators, to the arbitrator, if any, named under paragraph 161(2)(

e) or, if that arbitrator is not, in the opinion of the Agency, available to conduct the arbitration or no arbitrator is named, to an arbitrator on the list of arbitrators referred to in

section 169 who the Agency chooses and determines is appropriate and available to conduct the arbitration; and (

b) if the parties agreed that the arbitration should be conducted by a panel of three arbitrators, (

i) to the arbitrators named by the parties under paragraph 161(2) (

e) and to any arbitrator who those arbitrators have, within 10 days after the submission was served under subsection 161(2), notified the Agency that they have agreed on, or if those arbitrators did not so notify the Agency, to an arbitrator on the list of arbitrators referred to in

section 169 who the Agency chooses and determines is appropriate and available to conduct the arbitration, or (ii) if an arbitrator referred to in subparagraph (

i) is not, in the opinion of the Agency, available to conduct the arbitration, to the arbitrators named in that subparagraph who are available and to an arbitrator chosen by the Agency from the list of arbitrators referred to in

section 169 who the Agency determines is appropriate and available to conduct the arbitration.

Interpretation

(1.1) If a matter was referred to a panel of arbitrators, every reference in subsections (1.2) and (2) and sections 163 to 169 to an arbitrator or the arbitrator shall be construed as a reference to a panel of arbitrators or the panel of arbitrators, as the case may be. Delay in referral

(1.2) If the shipper consents to an application referred to in subsection (1) being heard before the matter is referred to an arbitrator, the Agency shall defer referring the matter until the application is dealt with. Assistance by Agency

(2) The Agency may, at the request of the arbitrator, provide administrative, technical and legal assistance to the arbitrator on a cost recovery basis. Arbitrage 162.

(1) Malgré la présentation par le transporteur de toute demande relative à la question, l’Office, dans les cinq jours suivant la réception des deux offres présentées conformément au paragraphe 161.1(1), renvoie la question :

a) à défaut de choix par les parties de soumettre la question à une formation de trois arbitres, à l’arbitre unique visé à l’alinéa 161(2)e), s’il est disponible pour mener l’arbitrage ou, en l’absence de choix d’arbitre ou cas de non-disponibilité, selon l’Office, de l’arbitre choisi, à un arbitre que l’Office estime disponible et compétent et qui est inscrit sur la liste établie en vertu de l’article 169;

b) en cas de choix par les parties de soumettre la question à une formation de trois arbitres : (

i) aux arbitres visés à l’alinéa 161(2)

e) et, soit à celui dont ils ont conjointement soumis le nom à l’Office dans les dix jours suivant la signification de la demande visée au paragraphe 161(2), soit, dans le cas où ils ne soumettent aucun nom à l’Office dans ce délai, à l’arbitre que l’Office estime disponible et compétent et qui est inscrit sur la liste établie en vertu de l’article 169, (ii) si l’un des arbitres visés au sous-alinéa (

i) n’est pas, selon l’Office, disponible, à ceux qui le sont et à celui que l’Office estime disponible et compétent et qui est inscrit sur la liste établie en vertu de l’article 169. Assimilation

(1.1) Aux paragraphes (1.2) et (2) et aux articles 163 à 169, la mention de l’arbitre vaut mention, le cas échéant, de la formation de trois arbitres. Différé du renvoi à l’arbitrage

(1.2) Si l’expéditeur consent à ce que la demande visée au paragraphe (1) soit entendue avant le renvoi de l’affaire à l’arbitre, l’Office diffère le renvoi jusqu’au prononcé de la décision sur la demande. Soutien

(2) À la demande de l’arbitre, l’Office lui offre, moyennant remboursement des frais, le soutien administratif, technique et juridique voulu. Decision or order affecting a matter being arbitrated 162.1 The Agency may, in addition to any other decision or order it may make, order that an arbitration be discontinued, that it be continued subject to the terms and conditions that the Agency may fix or that the decision of the arbitrator be set aside if (

a) the Agency makes a decision or an order arising out of an application that is in respect of a matter submitted to the Agency for a

[…]