TATC File No. H-4112-90
MoT File No. 10203093
TRANSPORTATION APPEAL TRIBUNAL OF CANADA
Canadian Pacific Railway, Applicant
- and -
Minister of Transport, Respondent
Subsection 116.2(4) of the Canada Transportation Act, S.C. 1996, c. 10
Decision: March 9, 2016
Citation: Canadian Pacific Railway v. Canada (Minister of Transport), 2016 TATCE 05 (Review)
Heard in: Calgary, Alberta, November 4-5, 2015
REVIEW DETERMINATION AND REASONS
Held: The Minister has not proven, on a balance of probabilities, that the applicant, Canadian Pacific Railway, contravened subsection 116.2(4) of the Canada Transportation Act. Consequently, the monetary penalty of $50,000 imposed by the Minister under subsection 177(3) of the Act is hereby dismissed.
 On December 12, 2014, the Minister of Transport (Minister) issued a Notice of Violation (Notice) to Canadian Pacific Railway (CP) for a contravention of subsection 116.2(4) of the Canada Transportation Act, S.C. 1996, c. 10 (Act).
 Pursuant to section 180 of the Act, the enforcement officer, as designated under paragraph 178(1)(a) of the Act, decided to assess an administrative monetary penalty on the grounds that CP committed a violation as follows:
Canadian Pacific Railway Company did not move at least 536,250 tonnes of grain during the week of September 7 to 13, 2014, thereby contravening subsection 116.2(4) of the Canada Transportation Act, S.C. 1996, c. 10 (the Act).
The contravention of subsection 116.2(4) of the Act is being proceeded with as a violation in accordance with subsection 177(3) and sections 179 and 180 of the Act.
Administrative Monetary Penalty: $50,000.00
 On January 7, 2015, CP requested a review of this decision by the Transportation Appeal Tribunal of Canada (Tribunal).
II. STATUTES AND REGULATIONS
 Section 116.2 and subsection 177(3) of the Act states, in part:
116.2 (1) Subject to volume demand and corridor capacity, the Canadian National Railway Company and the Canadian Pacific Railway Company must each move at least 500,000 tonnes of grain during each week in the period that
(a) begins on the later of April 7, 2014 and the first Monday after the day on which this section comes into force; and
(b) ends on August 3, 2014.
(2) The Governor in Council may, by order, on the recommendation of the Minister and the Minister of Agriculture and Agri-Food, specify the minimum amount of grain that each company referred to in subsection (1) must move during any period within a crop year that begins on or after August 1, 2014.
(3) The Governor in Council may, by order, on the recommendation of the Minister and the Minister of Agriculture and Agri-Food, vary the minimum amount of grain that each company referred to in subsection (1) must move during the period.
(4) Subject to volume demand and corridor capacity, each company referred to in subsection (1) must move the minimum amount of grain that the Governor in Council specifies or varies by order.
177(3) The contravention of subsection 116.2(1) or (4) may be proceeded with as a violation in accordance with sections 179 and 180. The maximum amount payable for each violation is $100,000.
III. ELEMENTS TO BE PROVEN
 On the basis of the Notice in this case, and the applicable legislation, the Minister must prove the following elements:
- CP failed to move 536,250 tonnes of grain during the week of September 7 to 13, 2014.
- There was not a volume-demand issue that justified this failure.
- There was not a corridor-capacity issue that justified this failure.
 The Minister presented two exhibits. Exhibit M-1 consisted of an agreement of facts between Transport Canada (TC) and Canadian Pacific Railway. Exhibit M-2 consisted of a binder that contained over 300 pages.
 It should be noted that not all pages from Exhibit M-2 were addressed during the hearing.
 The Minister did state that there would be documents in Exhibit M-2 that were not going to be referred to by any witnesses and were provided to theTribunal Member only for weight and reference purposes. Other documents within M-2 were the subject of much discussion.
Examination-in-chief of Ms. Lenore Duff
 The Minister introduced his first witness, Ms. Lenore Duff, Director General, Surface Transportation Policy, at Transport Canada. Ms. Duff has 27 years with the Canadian federal government. Her work is primarily in the area of policy on both the economic and social sides. Ms. Duff has a bachelor's and a master's degree in sociology.
 Ms. Duff confirmed that her position in December of 2014 was Director General, Surface Transportation Policy. She indicated that she was responsible for all aspects of policy development of the surface mode of transport, and that it includes rail, roads, and bridges, etc.
 The Minister introduced documents entitled “Designation”(Exhibit M-2, page 109) and “Authorization” (Exhibit M-2, page 110) signed by Mr. Louis Lévesque, Deputy Minister of Transport, designating Ms. Duff as an enforcement officer authorized to issue notices of violation in respect of a violation referred to in subsection 177(2) or (3) of the Act.
 The Minister presented page 71 of Exhibit M-2, a grain shipping calendar that is produced by the Canadian Grain Commission and used widely in the industry to define the actual shipping week. The industry does not use the calendar dates but refers to each week as Grain Week 1, 2, 3, 4, etc.
 Ms. Duff explained that initially the legislation specified 500,000 tonnes of grain must be moved, but there was a provision under subsection 116.2(2) of the Act where the Governor in Council may, by order, on the recommendation of the Minister, vary the amount of grain for any period within a crop year that began on or after August 1, 2014.
 Ms. Duff confirmed that the Order in Council presented by the Minister (page 226 of Exhibit M-2) required CN and CP to move 536,250 tonnes of grain for the period that began on August 3, 2014, and ended on November 29, 2014. She also confirmed that August 3, 2014 was the first day of the first grain week of that year.
 Ms. Duff explained why there was an increase in grain volume in the legislation. The volume requirement was moved to 536,250 from 500,000 because the 2013-2014 crop year produced a much larger than average crop, and winter conditions that year limited the amount that could be moved. There was a significant carryover of grain moving from the former crop year into the new crop year. It was felt that in order to move the grain and return to normal operating conditions, the amount that the railways would have to move would need to be higher to bring the system back to balance. Likewise, through this period, from August to November, the assumption was that the weather would be favourable and that they could move the maximum amount of grain.
 Ms. Duff explained that if the rail companies did not meet their target, TC would send them a notice letter asking for an explanation as to why they did not meet the target and provide a list of items they (TC) wanted explained.
 Ms. Duff sent several letters to CP requesting the factors that contributed to, or had an impact on, the failure to meet the minimum grain volume requirements and how, and by how much, those factors contributed; the actions taken by CP across their network to mitigate any of those factors to ensure that the target was met; and any other pertinent information that they wanted to provide to her.
 The Minister went through a series of letters sent to CP, and replies from CP to the Minister providing explanations as requested. Ms. Duff indicated that TC was not satisfied with CP's replies, as they had hoped to receive more details as to why CP had not achieved the mandated tonnage of grain. For example, their explanations included a line outage, which delayed several grain trains for a cumulative total of 80 hours. However, according to Ms. Duff, CP's reply did not refer to how much grain, or how many trains were involved or for how long.
 Ms. Duff referred to a letter from CP in regard to less than consistent unloading in port terminals during Week 6, and in Week 5 in particular. The beginning of Week 5 was Labour Day, and there was a reduction in unloads on that day. Ms. Duff stated that Labour Day occurs every year and suggested that this should not have had an impact on targets.
 Ms. Duff went through a series of tables and analyses that were developed by her staff at TC, and provided explanations for each item (Exhibit M-2). She explained how TC analyzed available wheat for pick-up by rail, comparison charts from one grain week to another, and the volume of grain available for the industry to fill rail cars. She went on to explain how it was assessed if there was sufficient demand in the system as per the requirements of the legislation.
 Ms. Duff referred to the Exhibit M-2 charts, which included data as reported by the railways, and which were provided by the grain monitoring program that TC has had in place for the last dozen years. She referred to the number of backlogged car orders, the weekly orders that come in each week, and the unfulfilled orders from all the other weeks where there was grain to move and cars on order, but the railways were unable to supply. Ms. Duff explained how the numbers were added together to arrive at the total car demand, and how she assessed the resulting figure as being sufficient demand within the system for the railways to be able to meet the volume requirements vis-a-vis demand. There were no specifics with respect to demand provided by the railways for Week 6.
 Ms. Duff also explained the analysis process in which they contacted grain shippers to determine if the “misses” (missed loading opportunities) were “valid misses” or not. She concluded that there were three invalid misses and six valid misses.
 In her testimony, Ms. Duff also explained how TC had reached the administrative monetary penalty (AMP) of 50K.
Cross-examination of Ms. Duff
 Ms. Duff confirmed that in the event that CP could not move 536,250 metric tonnes because of volume demand issues, then CP would be excused and would not be breaching the Act.
 Ms. Duff confirmed that the federal government only mandated the railway companies to move minimum amounts of grain. They did not mandate any shippers or grain companies to ship minimum amounts, nor did the government mandate any of the terminals or ports to unload and load, or move a minimum amount of grain.
 Ms. Duff confirmed that if in the event there was not sufficient grain ready to be moved (536,250 metric tonnes), the railway would not be held accountable for not moving grain in accordance with the legislation.
 Ms. Duff suggested that in the event that grain could not be moved on one particular corridor, it could be moved on another corridor owned by CP. She provided the example that if the Vancouver port could not receive grain, it could be channelled through the US, Thunder Bay or other corridors.
 In response to questions about who decides where the grain should be moved, Ms. Duff agreed that typically the grain shipper is the authority that dictates to the railway the location they want the grain to be shipped. The decision is based on the grain customer who is purchasing the grain.
 There was discussion pertaining to Exhibit A-1, a document showing calculations of grain volumes shipped by CP, entitled “CP Compliance with Legislated Minimum Volume Requirements”. The table for the 2013-14 Crop Year – Weeks 32-52, demonstrated a difference of 1,484,359 tonnes. The table for the 2014-15 Crop Year – Weeks 1-9, demonstrated a difference of 32,885 tonnes, and included Week 6 with a shortfall of 33,377 tonnes. Ms. Duff acknowledged that these figures were accurate.
 Ms. Duff made reference to Exhibit M-2, page 62, a briefing note to Minister Lisa Raitt, regarding CP's failing to meet minimum grain volume requirements. The applicant drew attention to the second page of the briefing note, which stated:
The CTA states that the obligation to move minimum grain volumes is subject to volume demand and corridor capacity. Consequently, force majeure events (e.g., flooding, avalanches, forest fires, extreme winter conditions) and disruptions in the grain transportation and handling system (e.g., closure of a port terminal, work stoppage at grain elevators) that can be attributed to third parties could be taken into account, and serve as factors that would militate against the justification for an AMP.
Ms. Duff confirmed that if the failure to meet minimum grain volume requirements was not the railway's fault and had they taken all remedial measures possible in compliance with grain shippers' requirements, they would not receive an AMP.
 Several questions were raised as to how TC arrived at the AMP amounts that it issued to the railways. This part of the cross-examination involved discussion of the information contained on page 66 of Exhibit M-2 (one of three tables of an Annex entitled “Examples of AMP Scenarios for Railway Failure to Move Grain Minimum Requirements”) and also Exhibit A-2, a document entitled “Four-Week Average Grain Movements (tonnes) – 2014-15 Crop Year”. Ms. Duff explained that TC could base the severity of an AMP on a one-week average amount of grain moved, as specified in the legislation, or on a four-week average amount, if the latter amount was to the benefit of the railway company. Ms. Duff stated that the four-week average methodology was not specified in the legislation but seemed like a reasonable period of time to provide some flexibility to the railways for operational circumstances that could happen from week to week. She also stated that this approach to the AMP calculation was not conveyed to the rail industry and that it was an internal policy at TC.
 Ms. Duff confirmed that after her team analyzed the amounts of grain CP moved during the weeks in question, TC determined that enforcement action was appropriate and issued the AMP based on Week 6 alone, where CP had a shortfall of 33,377 tonnes and thus did not meet its obligations to move the minimum amount of grain.
(1) Mr. Jason Berry
 The applicant had only one witness. Mr. Jason Berry resides in Calgary and is employed by the Canadian Pacific Railway. He has over 17 years of experience with CP. His résumé was entered into evidence as Exhibit A-3.
 The applicant asked Mr. Berry to specify his position and provide a general overview of his work at CP. Mr. Berry's position title is Director of Car Management, Bulk. He specified that “bulk” covers the distribution and demand or management of the bulk business of CP, which includes grain, potash, coal, ethanol, crude, and sulfur, among others. This includes the supply chain management and logistics to answer CP's customer requirements, and putting a plan together to ensure the management of all types of cars to specific destinations as requested by their customers.
 Mr. Berry explained briefly CP's railway network and in general terms how it functions. He also spoke about how CP interchanges with other railways such as CN, BN, and UP etc. Mr. Berry explained some of the complexities of his work in dealing with various customers and partners in the transportation of grain; customers/partners that include port terminals, flour mills, and stuffing facilities at various points on the network, which are basically putting grain into containers from a railcar. He said that everyone has different requirements and demands on the system. He also spoke about port terminals which unload the grain, vessels involved and receivers overseas. Mr. Berry confirmed that every element of the supply chain needs to work together to ensure that goods get from point A to point B.
 The applicant provided CP's network map as Exhibit A-4.
 Exhibit A-5 consisted of grain producers on CP's network.
 Mr. Berry explained the number of shippers CP served in western Canada (approximately 50 shippers and about 500 shipping points) He described how they “spotted cars” for grain operations, by explaining that when a customer requests rail cars, CP fills the order by placing equipment against it(in reference to Exhibit A-9, a document entitled “The following cars were spotted in week 6 but not billed because shipper did not notify CP”). During testimony, this exhibit was also described as a “list of customers and siding locations where empty equipment was placed against railcar requests”.
 Mr. Berry indicated that grain transportation is CP's largest bulk commodity and source of transportation revenue. It represents approximately 25 per cent of CP's revenue. Mr. Berry continued to explain in more detail the classification of specific commodity-type trains. He explained that CP was continuing to improve their network and the technology so they could increase volume of units to haul up to 130 to 134 carloads of grain per train.
 When asked who decides to which port or where grain goes on CP lines, Mr. Berry replied that generally the customer makes the decision. The customer orders the cars and they tell CP at which port the grain is to be delivered. He continued to explain that the majority of the grain is shipped to one of five terminals. The terminals are shared with CN which also uses Vancouver for their major grain shipments.
 The witness provided information on terminal capacity (in reference to Exhibit A-7, a document with a table for “Daily Unload Average of CP Total”). In general, the Vancouver terminals would unload between 700 and 800 cars daily from Monday through Friday, with a reduction in capacity on the weekends, as the terminals generally work fewer shifts. The capacity is shared between CP and CN. Mr. Berry continued to explain that on occasions when the terminals are full of grain, they cannot unload additional grain. The back-up can be for various reasons, such as vessels that do not arrive on time in the port, long rain spells in Vancouver, and other uncontrollable circumstances that are beyond the railways' responsibility.
 Mr. Berry continued to explain the complexity of the types of grain, the way they cannot be mixed together, the quality of certain grain that are for specific use and countries, and shippers' instructions for targeted markets etc.
 When questioned, Mr. Berry explained that the Vancouver terminals do not work 24/7, and they reduce hours during weekends and statutory holidays. Although the reasoning behind the reduced hours is outside the responsibility of the rail industry, Mr. Berry did make the assumption that it is due to union and labour agreements. Mr. Berry did confirm that CP trains run 24/7 with the exception of Christmas day, and that in August/September 2014, CP trains were running 24/7. He also confirmed that September 1, 2014 (Labour Day) was a black day at the Vancouver port, meaning the terminals were closed.
 Mr. Berry indicated that CP did not operate differently in Week 6 than it did in other weeks. They had the same number of employees, and locomotive and grain cars were available. Mr. Berry also mentioned that CP was proud of exceeding their targets in other weeks and wanted to move more. Issues did arise, such as shippers having problems getting the grain into the system because the harvest was delayed. He also mentioned that the reduced unloading in Week 5 at the Vancouver port had a direct impact on Week 6, as the grain cars were at the port and were not returned inland to be unloaded at grain shippers. Testimony centered around discussions of Exhibit A-6, a document entitled “CP – Volumes moved to Vancouver – 2014-15 Crop Year”, and Exhibit A-8, a document with tables showing “Customer Load Time”.
 Mr. Berry indicated that had he known that TC was using four-week average to determine if CP had reached their target, additional efforts would have been made to try to achieve the target. He also mentioned that he could not confirm with 100 per cent certainty that the target would have been met, but he could have added two to three additional trains to transport grain to the Vancouver port.
Cross-examination of M. Jason Berry
 In reply to Mr. Benkendorf's question pertaining to CP not being able to meet customer demands for transport of any type of goods,Mr. Berry replied that he was not aware of CP having turned down business in September 2014, in particular grain transportation, as CP had an obligation to handle traffic as required by the federal government.
 When asked by the Minister to confirm the impact of the Labour Day shutdown at the port of Vancouver on CP's ability to move grain, Mr. Berry responded that they would have loaded more grain in Weeks 5, 6 and 7 to compensate for the closure, because the entire supply chain would have been going faster. He believed that they would have had the opportunity to load 400 more rail cars in Week 6 and approximately the same amount of cars in Week 7.
 The Minister submits that the letter from Mike Foran, vice-president of network transportation at CP, fell short of establishing the defence of due diligence. It provided little in the way of measurable data, and it appears to do little, other than report that CP did not meet the mandated volume requirements.
 TC did investigate the information given to them in relation to Week 6. The net result is that CP was found to have valid misses for six events totalling 45,090 tonnes of grain; however, they also had three instances of invalid misses totalling 25,929 tonnes. Subtracting the valid misses from the deficiency of 78,467 tonnes leaves an overall deficiency of 33,377 tonnes, which is 6.2 per cent of the requirement of 536,250 tonnes.
 CP needs to prove due diligence in order to have a defence. They need to bring forward positive and convincing evidence to make this due diligence defence. It was evident from the direct examination of Mr. Berry that they produced a limited amount of evidence and no raw data that would allow the respondent or the adjudicator to assess whether they did all they could to avoid missing the target.
 CP provided no evidence of how they attempted to mitigate the issues they faced, including the foreseeable closure on Labour Day, September 1, 2014.
 Ms. Duff's evidence was clear that TC looked at the four-week averages in order to determine if an AMP was appropriate. Once they determined that the AMP was appropriate, they then looked only at the one week where shipments did not meet the weekly target to determine the extent of the AMP.
 The applicant submits that the Minister has to prove not only that CP did not move the minimum amount of grain, but also that it was not due to volume demand and corridor capacity issues. Subsection 116.2 (4) of the Act does not specify “subject to force majeure events”, nor does it specify “subject to extraordinary events” or “subject to anticipated events”. The words Parliament chose are “volume demand and corridor capacity”.
 The reason the Minister and Parliament chose “volume demand and corridor capacity” is because, as Mr. Berry testified to, there is a supply chain, there is demand, and there is corridor capacity and someone to unload.
 The Minister had the power to gather the evidence to prove that volume demand and corridor capacity was not an issue. Under subsections 178(2), (4), and (5) of the Act, Ms. Duff, as the enforcement officer, had the power to compel information, assistance, and documentation from anyone; from CP, from terminals, and from grain companies, in the event she did not believe CP had answered her queries.
 TC's investigation and the evidence from the grain monitoring report, revealed that there was a lot of grain and car order requests. However, there was no investigation and no evidence as to whether in Week 6 the grain companies actually had grain on hand to be shipped that wasn't shipped. There was no evidence and it is the Minister's burden to produce it.
 Grain companies actually decide which grain to sell when the prices are right. The railways simply respond to their request. They move the grain that the grain companies ask them to move, and they move it to where the grain companies want it moved. Ms. Duff, when asked about the Labour Day Vancouver closure, suggested that CP could just move more grain to Thunder Bay or elsewhere, as if to assume that CP could decide where the grain goes.
 As per the evidence, grain is not homogenous and that grain companies will only ship it if they have an exit strategy. In other words, they are not going to ship grain to Vancouver and have it sit there unless they have a sale.
 Shippers want to ship to Vancouver because they have a vessel picking it up. CP can't send it to Thunder Bay. The applicant reiterated there was no evidence from the Minister, who bears the burden, that the corridor-capacity issue created by the closure of Labour Day did not affect CP's ability to move grain.
 It was submitted that there were corridor-capacity and shipper-demand issues which hampered CP's ability to move the minimum grain, and that the closure of the Vancouver terminals on Labour Day affected the volume of grain CP could move in Week 6. Mr. Berry said that CP could have moved four more trains in Week 6, or 400 to 450 cars, certainly well over the 33,000 tonnage that they were short due mostly to the Labour Day shutdown.
 Referring to the evidence, the applicant reiterated that they made reasonable efforts to try and get the terminals to open. The Vancouver terminals would not open. The grain companies wanted the grain to go to Vancouver but it was shut down for 24 hours. Short of that, CP did everything it could.
 As stated by the parties, this is a strict liability contravention and the Minister had the burden to prove all three elements of the violation.
 The first element was not in dispute; the applicant failed to move 536,250 tonnes of grain during the week of September 7 to 13, 2014.
 Although the Minister proved that CP did not transport at least 536,250 tonnes of grain during the week of September 7 to 13, 2014, the Minister did not prove the remaining two elements of the violation: that the failure to move 536,250 tonnes of grain that week was not due to volume demand; and that it was not due to corridor capacity.
 There was no evidence that the Minister investigated further to confirm if there was demand for shippable grain to be moved in Week 6. It was established at the hearing that the failure to move 536,250 tonnes of grain in Week 6 was in part due to a volume-demand issue. The evidence demonstrated that:
(a) it is not the decision of the applicant where to move the grain, when to move it and what grain to move; it is the shipper's decision;
(b) CP had not only reached but surpassed their targets in other weeks;
(c) it was in the best interest of CP to move as many cars as possible to increase profit while meeting their targets;
 It was also established at the hearing that the failure to move 536,250 tonnes of grain in Week 6 was in part due to a corridor-capacity issue. The evidence demonstrated that:
(d) CP made every effort to mitigate the Port of Vancouver Labour Day shutdown but it was out of their control;
(e) TC's method of calculation of carloads did not take into account the reduced capacity of the Port of Vancouver during weekends;
(f) TC's method of calculation of carloads did not take into account the Labour Day shutdown of the Port of Vancouver;
 The Minister did not take into account factors that were out of CP's control that prevented the railway from moving grain at the Port of Vancouver. CP did not reach their targets on Week 6 for other reasons or situations beyond their control such as port closure.
 Furthermore, it was put into evidence that TC's method of calculation of an average over a four-week period to determine if CP had met their target was not conveyed to CP, which could have allowed the applicant to know they had the possibility to compensate for Week 6.
 The Minister has not proven, on a balance of probabilities, that the applicant, Canadian Pacific Railway, contravened subsection 116.2(4) of the Canada Transportation Act. Consequently, the monetary penalty of $50,000 imposed by the Minister under subsection 177(3) of the Act is hereby dismissed.
March 9, 2016
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