“SCC Upholds Harper Cabinet Decision on Railway Regulation”: Some Thoughts on Canadian National Railway Co. v. Canada (Attorney General), 2014 SCC 40

My suggestion to headline writers is made with tongue firmly in cheek, of course. Often in public law cases, the federal government is a “winner” or “loser” only in the limited sense that a position it took as an institution was vindicated or not. That the identity of the cabinet members tends to be largely irrelevant is a nuance is lost on many lay people but not, I trust on readers of this blog, who will be very interested in the substance of Canadian National Railway Co. v. Canada (Attorney General), 2014 SCC 40. This is a very important Supreme Court of Canada decision on administrative law and, to my mind, the best we have seen for some time.

The issue is simple enough. It is a rate regulation case involving an agreement between Peace River Coal and CN, the Canadian National Railway Company. The parties had a contract into which was incorporated a fuel surcharge provision. After the contract was concluded, CN issued a new fuel surcharge provision. This provision had a higher ceiling that would have benefited Peace River, so it asked CN to implement it. CN refused.

Arguing that the provision was unreasonable, Peace River asked the Canadian Transportation Agency to get involved. It refused, on the basis that the contract between the parties was confidential and thus outside the Agency’s authority. Rather than seek judicial review of the Agency, Peace River convinced its trade association to petition the Governor in Council — the federal cabinet — to rescind the Agency’s decision. This the cabinet did. CN sought judicial review, contending that cabinet has no authority to rescind Agency decisions on questions of law.

The Supreme Court was not impressed. Here are some quick thoughts, that are still percolating. Please feel free to jump in, or jump on, in the comments.

1. Rothstein J. discussed in detail the provisions that set out the authority of the Agency (whose decisions can be challenged in the Federal Court of Appeal) and the cabinet: ss. 40 and 41 of the Canada Transport Act, concluding:

[37]                          Section 40 does not contain any express limitations on the Governor in Council’s authority. Unlike s. 41, which places a number of restrictions on the right of appeal to the Federal Court of Appeal, s. 40 states that the Governor in Council may at any time vary or rescind anydecision, order, rule or regulation of the Agency on petition of a party or an interested person, or even on the Governor in Council’s own motion. There is no language in the provision that suggests the Governor in Council’s authority is in any way circumscribed, nor is the Governor in Council’s authority restricted to answering issues of fact or policy.

[48]                          CN submits that it is rare for the Governor in Council to vary or rescind an administrative decision on a question of law. I accept that it is unusual for the Governor in Council to determine a question of law and agree that the Governor in Council is generally concerned with issues of policy and fact. Although it is rare for the Governor in Council to determine a question of law, this does not mean that the Governor in Council has no authority under the statute to do so. Indeed, parties may prefer to comply with the requirements of s. 41 and seek leave to appeal to the Federal Court of Appeal, where a traditional full hearing on the matter will be carried out. Although these may be practical or strategic considerations, they do not alter the fact that the legislation does not restrict the Governor in Council from determining a question of law.

As I will discuss below, Rothstein J.’s approach is appropriately deferential. However, this section of his decision is nothing less than correctness review of ss. 40 and 41. This is entirely appropriate, I think: there is no meaningful sense in which ss. 40 and 41 can be said to be administered by the cabinet or the Agency. Should an administrative decision-maker be entitled to deference for its view of an appellate body or reviewing court’s authority over it? Surely not!

It is not that the question of interpreting ss. 40 and 41 is one of “jurisdiction” or of “central importance to the legal system” (see 4. and 5. below), but that sound analysis results in the conclusion that it is a question for the courts, not administrative decision-makers.

2. “The precedents instruct that the Dunsmuirframework applies to administrative decision-makers generally and not just to administrative tribunals” (at para. 54). This is much-needed clarification and it is made in crisp and convincing terms (at paras. 52-53). Rothstein J. also explains that the decision in Katz, which I have criticized at length, has to be confined to its special facts:

[51]                          This case is not about whether a regulation made by the Governor in Council was intra vires its authority. Unlike cases involving challenges to the vires of regulations, such as Katz Group Canada Inc. v. Ontario (Health and Long-Term Care), 2013 SCC 64 (CanLII), 2013 SCC 64, [2013] 3 S.C.R. 810, the Governor in Council does not act in a legislative capacity when it exercises its authority under s. 40 of the CTA to deal with a decision or order of the Agency. The issue is the review framework that should apply to such a determination by the Governor in Council. I am of the view that the Dunsmuir framework is the appropriate mechanism for the court’s judicial review of a s. 40 adjudicative decision of the Governor in Council.

The reference to acting in a “legislative capacity” is unfortunate, because it will lead to discussions about what exactly is “legislative”. Regulations are the paradigm case of “legislative” activity, but what about regulations that affect only small groups, as in Catalyst Paper, or indeed statutory instruments, as in the Bank Mellat case? But the problem is Abella J.’s analysis in Katz, not Rothstein J.’s analysis here. As much as possible, Rothstein J. has put the Katz back in the bag, and confirmed that Catalyst Paper has not been pulped, which is most welcome.

3. Reasonableness was the appropriate standard of review here, as the matter fell within the expertise of the cabinet (something supported by the cabinet’s historical role in regulatory matters, paras. 57-58):

[56] The issues arising under these statutes are linked by the shared economic regulatory purpose of the legislation. The cluster of economic regulatory statutes in respect of which the Governor in Council is given authority to vary or rescind decisions of the tribunals administering the legislation is an indication of a parliamentary intention to recognize that the Governor in Council has particular familiarity with such matters.

4. This was not a question of central importance to the legal system:

[60] The question at issue centres on the interpretation of s. 120.1 of the CTA. The question is particular to this specific regulatory regime as it involves confidential contracts as provided for under the CTA and the availability of a complaint-based mechanism that is limited to shippers that meet the statutory conditions under s. 120.1(1). This question does not have precedential value outside of issues arising under this statutory scheme.

This is the first clear sight since Dunsmuir of criteria for this sort of question. This is very welcome.

Although “fashionable” claims for correctness review were derided by Moldaver J. in McLean, the clear references here to “particular to [a] specific regulatory regime” and “precedential value” provide a set of criteria that will by virtue of their very existence doubtless increase the number and volume of such claims. But at least we will know what we are talking about.

5. Nor was it a jurisdictional question:

[61]                          To the extent that questions of true jurisdiction or vires have any currency, the Governor in Council’s determination of whether a party to a confidential contract can bring a complaint under s. 120.1 does not fall within that category. This is not an issue in which the Governor in Council was required to explicitly determine whether its own statutory grant of power gave it the authority to decide the matter (see Dunsmuir, at para. 59).  Rather, it is simply a question of statutory interpretation involving the issue of whether the s. 120.1 complaint mechanism is available to certain parties. This could not be a true question of jurisdiction or vires of the Governor in Council — the decision maker under review in this case. (Emphasis added.)

Again, the attempt to clarify the criteria for this category of question is very welcome.

Again, however, there is a conflict with McLean, where in a footnote Moldaver J. endorsed the SCOTUS decision in FCC v. Arlington, which also involved a case where a decision-maker was “required to explicitly determine whether its own statutory grant of power gave it the authority to decide the matter”.

I think we may be in a holding pattern until the category is abolished altogether and, until then, the criterion set out by Rothstein J. will be perfectly functional. At least now lawyers and judges will know what they are talking about when they speak of “jurisdiction”.

6. The decision was reasonable, not because it measured up well to a benchmark constructed by Rothstein J., but because, working from inside the decision out to the statutory framework, it was understandable and defensible in light of the law and facts:

[66]                          The Governor in Council’s interpretation of s. 120.1(1) is also supported by a reasonable view of the provision’s purpose. It was open to the Governor in Council to conclude that Parliament’s intention in including this complaint-based mechanism in the Act was to rebalance the legislative framework in favour of shippers in an industry where there are circumstances of railway market power.  We are not deciding in this case whether the confidential contract between PRC and CN would preclude PRC from any relief ordered by the Agency under s. 120.1 or whether a mileage-based fuel surcharge tariff is a rate for the movement of traffic under s. 120.1(7). However, there was evidence before the Governor in Council that confidential contracts are standard in the industry (CITA petition to the Governor in Council, at para. 27, found in the Federal Court of Appeal reasons, at para. 38). Accordingly, without deciding whether in any particular case a confidential contract would preclude a shipper from relief under s. 120.1, the Governor in Council’s interpretation of s. 120.1 was reasonable. Leaving access to the s. 120.1 complaint mechanism available to parties to confidential contracts can reasonably be said to be consistent with Parliament’s intention to provide a measure of protection for shippers.

This is more like what deferential review ought to look like.

7. Finally, is Inuit Taparisat (procedural fairness in cabinet decision-making) going to be reversed?

[39]                          As Estey J. explained, “[t]here can be found in s. 64 nothing to qualify the freedom of action of the Governor in Council, or indeed any guidelines, procedural or substantive, for the exercise of its functions under subs. (1)” (p. 745) (Although Estey J.’s conclusion, at p. 759, that the trappings of procedural fairness could not be implied into the provision may not represent the current view of how natural justice operates in an administrative context, the issue of procedural fairness owed by the Governor in Council is not before this Court.) Of course, the Governor in Council is “constrained by statute” and cannot, in the course of exercising its authority under s. 40, enact or change a law of Parliament (Public Mobile Inc. v. Canada (Attorney General), 2011 FCA 194 (CanLII), 2011 FCA 194, [2011] 3 F.C.R. 344, at para. 29; see Inuit Tapirisat, at p. 752). (Emphasis added.)

As Eddie Clark observed, this is about as obiter as obiter can get, but it is likely to prove influential.

My own view is that even Inuit Taparisat itself does not establish that “legislative” decisions are immune as a category from procedural fairness claims: a substantive analysis was necessary in that case and will always be necessary.

But there is a tension between the suggestion that Inuit Taparisat might be overruled and the reference to a special test for substantive review where “legislative capacity” is being exercised. Again, though, any problem here is with Katz, not with today’s case, and I would welcome Inuit Taparisat being overruled or being confined to its own special facts.

All in all, this is a good decision, which attempts to answer some questions which previous decisions have left hanging. And where it leaves questions hanging, it acknowledges the fact. As I said at the outset, the best for some time.

This content has been updated on June 11, 2014 at 09:45.