Kootenay & Elk Railway Co. v. Canadian Pacific Railway Co.

To engage in any and all branches of the business of transportation, whether by railroad, motor vehicle, pipe line, water, air, or any other means of conveyance whatsoever now in existence or hereafter invented or developed.

12. To enter into, make and perform contracts of every kind and description, with any person, firm, association, corporation, joint-stock company, syndicate, trust, body politic or any other entity.

16. To have one or more offices, and to carry on all or any of its operations and business in any of the states, districts, territories or possessions of the

[Page 966]

United States, and in any and all foreign countries, subject to applicable law.

There is, therefore, no doubt as to its corporate authority to enter into the traffic interchange agreement with Kootenay. The question is whether, having that power, s. 156(1) prohibits it from making such agreement. This is not the case of a railway company which, in the absence of the powers conferred by s. 156(1), would have no power to make a traffic interchange agreement. It is the case of a company which has such power, and which does not need to resort to that subsection.

Section 156 is, by its terms, not a prohibitory provision, but an enabling provision. Its original predecessor was s. 48(1) of c. 68, Statutes of Canada, 31 Victoria, 1867/8, which provided as follows:

48. The Directors of any Railway Company may, at any time, make agreements or arrangements with any other Company either in Canada or elsewhere, for the regulation and interchange of Traffic passing to and from their Railways, and for the working of the traffic over the said Railways respectively, or for either of those objects separately, and for the division and apportionment of tolls, rates and charges in respect of such traffic, and generally in relation to the management and working of the Railways, or any of them, or any part thereof, and of any Railway or Railways in connection therewith, for any term not exceeding twenty-one years, and to provide, either by proxy or otherwise, for the appointment of a Joint Committee or Committees for the better carrying into effect any such agreement or arrangement, with such powers and functions as may be considered necessary or expedient, subject to the consent of two thirds of the Stockholders voting in person or by proxy.

This subsection conferred upon the directors of a railway company the power to enter into certain kinds of agreement, as defined, but subject to their obtaining the consent of two thirds of the stockholders of the company.

This provision appeared again as s. 60(1) of c. 9, Statutes of Canada, 42 Victoria, 1879. Section 60(1) was amended in 1883, by s. 11, c. 24, Statutes of Canada, 46 Victoria, 1883/4, by

[Page 967] requiring, in addition to the consent of two thirds of the stockholders, the approval of the Governor in Council. The section, as amended, appeared as s. 56(2) of c. 109 of the Revised Statutes of Canada, 1886.

A significant change occurred when the Railway Act was revised in 1903, c. 58, s. 284. Whereas up to that time the powers of the directors to make the kinds of agreement defined in the section had required the approval of two thirds of the stockholders and, later, as noted, the consent of the Governor in Council, the powers of the directors were now defined in two subsections, and the powers granted under the first subsection were not made subject to such approval and consent. This change was carried forward into c. 37 of the Revised Statutes of Canada, 1906, in s. 364, which reads:

364. The directors may, at any time, make and enter into any agreement or arrangement, not inconsistent with the provisions of this or the Special Act, with any other company, either in Canada or elsewhere, for the interchange of traffic between their railways or vessels, and for the division and apportionment of tolls in respect of such traffic.

The directors may also make and enter into any agreement or arrangements, not inconsistent with the provisions of this or the Special Act, for any term not exceeding twenty-one years,—

(a) for the running of the trains of one company over the tracks of another company;

(b) for the division and apportionment of tolls in respect of such traffic;

(c) generally in relation to the management and working of the railways, or any of them, or any part thereof, and of any railway or railways in connection therewith; and,

(d) to provide, either by proxy or otherwise, for the appointment of a joint committee for the better carrying into effect of any such agreement or arrangement, with such powers and functions as are considered necessary or expedient;

subject to the like consent of the shareholders, the sanction of the Governor in Council upon the recommendation of the Board, application, notices and

[Page 968]

filing, as hereinbefore provided with respect to amalgamation agreements: Provided that publication of notices in the Canada Gazette shall be sufficient notice, and that the duplicate original of such agreement or arrangement shall, upon being sanctioned, be filed with the Board.

It will be noted that the exercise of the power of the directors to enter an agreement for the interchange of traffic was no longer to be subject to their obtaining the consent of a required majority of the shareholders. It was only those kinds of agreements which are described in subs. (2) which would require the same kind of shareholders’ consent as was necessary with respect to amalgamation agreements; i.e., two thirds of the votes of the shareholders at a meeting at which shareholders representing at least two thirds in value of the capital stock of the company were present or represented by proxy.

This section continued in substantially the same form in the Revised Statutes of Canada in 1927 and in 1952. In 1967 the National Transportation Act was enacted (c. 69, Statutes of Canada, 14-15-16 Elizabeth II, 1966-67). Section 1 declared, in part, that “an economic, efficient and adequate transportation system making the best use of all available modes of transportation at the lowest total cost is essential to protect the interests of the users of transportation and to maintain the economic well-being and growth of Canada.” It applies to transportation by railways subject to the Railway Act, by air, water, and by commodity pipe line or by a motor vehicle undertaking connecting a province with any other or others of the provinces or extending beyond the limits of a province.

It was in this context that s. 39 was enacted to repeal s. 156(1) of the Railway Act and to substitute the subsection as it now stands. Prior to this amendment the subsection had referred to an agreement with “any other company, either in Canada or elsewhere, for the interchange of traffic between their railways or ves-

[Page 969] sels.” The subsection now refers to an agreement “with any other transportation company operating as a common carrier either in Canada or elsewhere, for the interchange of traffic.” The effect of this change was to expand the unrestricted power of the directors of a railway company to make traffic interchange agreements by permitting their making such agreements with any transportation company, and not only with another railway company, but to provide that such transportation company must be a common carrier.

The amendment did not alter the fact that the powers conferred by s. 156(1) continued to be powers conferred upon the directors of a railway company which they could exercise without the necessity of obtaining the approval of the shareholders or the sanction of the Governor in Council. I do not accept the contention that such a provision, which, in terms, confers specific powers on the directors of a railway company, must be construed as a prohibition against the company itself, as distinct from its directors, entering into a traffic interchange agreement with another railway company, which is not a common carrier, provided that it has the necessary corporate powers to enable it to do so.

I do not think that the amendment made by s. 39 of the National Transportation Act was intended to effect such a prohibition. If it were so construed it would prevent C.P.R. or Canadian National Railways from making an agreement for the interchange of traffic with a logging or mining railway operating under the provisions of s. 202 of the British Columbia Railway Act.

It was the contention of the respondent that when s. 156(1) spoke of the directors it should be construed as meaning the company itself. I find this submission difficult to accept when considered in relation to the past history of s.

[Page 970]

156 and its predecessors. Throughout that history it is clear that reference to the directors meant precisely what it said, and was not intended to refer to the company itself.

The Railway Act, when conferring powers on a railway company, or prohibiting the doing of certain things, has clearly made specific reference to the company itself; e.g., s. 137, dealing with the power to mortgage its property, s. 147, dealing with the power to borrow, s. 150, dealing with the power to dispose of lands acquired from the Crown, s. 164, dealing with the general powers of the company, s. 149, prohibiting the purchase of railway stock, and ss. 192 and 195, prohibiting the taking of possession of Crown or Indian lands without the consent of the Governor in Council.

In my opinion, therefore, the second of the two questions on which leave to appeal was granted should be answered in the affirmative.

I turn now to the first question of law raised in this appeal, as to whether the agreement between Burlington and Kootenay is authorized or permitted under ss. 315 and 319 (now ss. 262 and 265) of the Railway Act. The contention that it was so authorized or permitted was made by the appellants in answer to the respondent’s contention that such agreement was forbidden by s. 156(1). If it was not forbidden by that forbidden subsection, as in my opinion it was not, the answer to this question is not of any real significance. If s. 156(1) were effective to prohibit the agreement, it is my view that the appellants would not be taken out of the operation of that section by the provisions of ss. 315 and 319.

The relevant portions of those sections read as follows:

315. (1) The company shall, according to its powers,

(a) furnish, at the place of starting, and at the junction of the railway with other railways, and at all stopping places established for such purpose,

[Page 971]

adequate and suitable accommodation for the receiving and loading of all traffic offered for carriage upon the railway;

…

(2) Such adequate and suitable accommodation shall include reasonable facilities for the junction of private sidings or private branch railways with any railway belonging to or worked by the company, and reasonable facilities for receiving, forwarding and delivering traffic upon and from those sidings or private branch railways, together with the placing of cars and moving them upon and from such private sidings and private branch railways.

319. (1) All railway companies shall, according to their respective powers, afford to all persons and companies all reasonable and proper facilities for the receiving, forwarding and delivering of traffic upon and from their several railways, for the interchange of traffic between their respective railways, and for the return of rolling stock.

…

(5) The reasonable facilities that every railway company is required to afford under this section, shall include reasonable facilities for the junction of private sidings or private branch railways with any railway belonging to or worked by any such company, and reasonable facilities for receiving, forwarding and delivering traffic upon and from those sidings or private branch railways.

The provisions upon which the appellants rely are those contained in s. 315(2) and s. 319(5). I do not regard the Kootenay line as being a private branch railway within the meaning of those two subsections. I agree with the view expressed in Coyne’s Railway Law in Canada, 1947, p. 400, where the author, after pointing out that there is no definition in the Act of “private sidings” or “private branch railways”, goes on to say that they no doubt mean railways constructed without legislative authority. No such authority is required to enable a person to construct a railway on his own land.

[Page 972]

This issue is dealt with in the decision of the Commission as follows:

In argument, Counsel for the applicants did not deny the fact—which is obvious enough—that an interchange of traffic would take place at the border, but argued that the applicable provisions in this case are found in ss. 315 and 319 of the Railway Act, and not s. 156. Both ss. 315 and 319 relate to the obligations of companies to accommodate traffic, and subs. (5) of s. 319 imposes upon railway companies the specific obligation to afford “reasonable facilities for the junction of private sidings or private branch railways with their own railways and for receiving, forwarding and delivering traffic upon and from those sidings or private branch railways.” The fact is that, notwithstanding Mr. Prentice’s affirmation that the K. & E. is an extension of “his” (Crow’s Nest’s) plant, K & E. is neither a private siding nor a private branch railway in any legal sense. At all events, any statutory obligation B.N. might have under s. 319 to serve a private siding or a private branch railway cannot obscure the realities of a situation whereby B.N. has been and continues to be a voluntary and active participant in the total project, and, as admitted by Mr. Downing, has an “arrangement” with K. & E. That arrangement, in my view, is clearly one for the interchange of traffic with K. & E.

I agree with this view, and would answer the first question of law in this appeal in the negative.

The three legal issues raised on the cross-appeal now have to be considered. The first of these involves the consideration of the meaning and effect of the Crow’s Nest Pass Act, 1897 (Can.), c. 5. It was enacted on June 29, 1897, and was styled as “An Act to authorize a subsidy for a Railway through the Crow’s Nest Pass.” It authorized the Governor in Council to grant a subsidy to C.P.R., towards the construction of a railway from Lethbridge, in the district

[Page 973] of Alberta, to Nelson, in the province of British Columbia, through the Crow’s Nest Pass, provided that an agreement was entered into between the Government and C.P.R. containing covenants, as specified in the Act. The covenant, relevant to the issue in this appeal, is that which is contained in s. 1(f) of the Act, which provides:

(f) That the Railway Committee of the Privy Council may grant running powers over the said line of railway and all its branches and connections, or any portions thereof, and all lines of railway now or hereafter owned or leased by or operated on account of the Company in British Columbia south of the Company’s main line of railway, and the necessary use of its tracks, stations and station grounds, to any other railway company applying for such grant upon such terms as such Committee may fix and determine, and according to the provisions of The Railway Act and of such other general Acts relating to railways as are from time to time passed by Parliament; but nothing herein shall be held to imply that such running powers might not be so granted without the special provision herein contained;

It is the contention of C.P.R. that the words “any other railway company” in this provision must be restricted to mean a railway company within the legislative authority of the Parliament of Canada, and that Kootenay, being a provincially incorporated railway company, is not within this provision.

Section 2(28) of the Railway Act defines a “Special Act”, when used with reference to a railway, as meaning any Act under which the company has authority to construct or operate a railway, or that is enacted with special reference to such railway. The Act in question was enacted with special reference to a railway to be constructed by C.P.R. from Lethbridge to Nelson.

Section 3(b) of the Railway Act provides that:

[Page 974]

(b) where the provisions of this Act and of any Special Act passed by the Parliament of Canada relate to the same subject-matter the provisions of the Special Act shall, in so far as is necessary to give effect to such Special Act, be taken to override the provisions of this Act.

The clear purpose of the Crow’s Nest Pass Act was to subsidize C.P.R. with public funds with a view to assisting in the development of the areas which the railway line to be constructed by C.P.R. would serve. There is no definition of “railway company” in this Act, but in the light of that purpose, and of the use of the words “any other” in relation to “railway company”, I cannot construe those words as excluding from s. 1(f) a railway company incorporated in British Columbia to operate in the area defined in that paragraph.

I would, therefore, answer this question in the negative.

The next question is as to whether, in determining an application under s. 255 for the junction or crossing of a railway, the Commission must take into account considerations of public policy. In essence, the respondent contends that an application under this section should be considered as though the issue is as to whether it is a matter of public convenience and necessity that such application be granted.

The answer to this question is to be found in the wording of s. 255, which has already been cited in full. Subsection (1) of that section forbids the railway lines or tracks of any railway company from crossing or joining those of any other railway company unless leave of the Commission is obtained “as hereinafter provided.” Subsection (2) stipulates the material to be submitted to the Commission by the applicant for consideration by the Commission in deciding upon such application; i.e., a plan and profile of the crossing or junction and such other plans, drawings and specifications as the Commission may, in any case, or by regulation, require.

[Page 975]

None of this material relates to the economic feasibility or desirability of the railway line of the applicant.

The powers of the Commission on such an application are set out in subs. (3). It may grant the application “on such terms as to protection and safety as it deems expedient.” It may change the plans and may fix the place of the crossing or junction. It may direct that the line or track be carried over or under the other line or track. It may direct various measures to be taken to prevent danger of accident, injury or damage. It may determine the amount of damage and compensation for land taken or injuriously affected by the construction. It can give directions as to supervision of the construction and it can require submission of detailed plans, drawings and specifications of the works, structures, equipment or appliances required, before construction or installation, to be approved by the Commission.

None of these matters relates to the question of public convenience or necessity. When an issue of that kind is intended to be considered by the Commission, Parliament has specifically so stated. An example of this is found in s. 185 under the heading of “Branch Lines”:

185. (1) The Commission, if satisfied that the branch line is necessary in the public interest or for the purpose of giving increased facilities to business, and if satisfied with the location of such branch line, and the grades and curves as shown on such plan, profile and book of reference, may, in writing, authorize the construction of the branch line in accordance with such plan, profile and book of reference, or subject to such changes in location, grades and curves as the Commission may direct.

A similar example is to be found in s. 188 (1).

[Page 976]

In these circumstances, I agree with the majority view expressed in the reasons of the Commission in the following passages:

S. 255 forms part of a group of sections within a division of the Railway Act entitled “Matters incidental to construction”. These matters relate to wages (247), navigable waters (248-251), bridges, tunnels and other structures (252-254), crossings and junctions with other railways (255-257), highway crossings (258-270), drainage and powers, mining and irrigation works (271-274), farm crossings (275-276), fences, gates and cattle-guards (277) and gates to be closed (278). In respect of many of these matters, the Commission is given broad discretionary powers to grant leave and to impose terms and conditions. Nowhere, however, except in s. 253 (4) is there any reference to the “public interest” as such. In most sections, as in s. 255, discretion appears to be related exclusively to safety.

…

It is clear that in the large sense in which it was said the Commission has the duty of using its powers “for the benefit of the public”. This does not and cannot mean, however, that considerations of public interest at large enter into every aspect of any matter within the jurisdiction of the Commission. Where the Commission has been given a function to ensure safety of railway construction or operation, it uses its powers “for the benefit of the public” and discharges fully its duty by issuing orders and directions that effectively ensure safety. The Commission would, however, be abusing its powers if in such matters which are related exclusively to safety principles and techniques, it were to set and take into account other criteria or canons of public interest and exercise its regulatory powers in a manner which would result in a denial or prohibition of rights.

…

Consequently, as a general proposition and subject to what I will have to say on the question of the applicability of s. 156, I am of the opinion that in considering applications under s. 255 for the junction or crossing of railways it would be improper for us to require proof that it is necessary in the public interest that there be such junction or crossing, and the

[Page 977]

position of the applicants on this point is the correct one.

I would answer this question in the negative.

The third question raised on the cross-appeal is stated, in the notice, as being:

Did the Canadian Transport Commission err in law when it failed to find that the Kootenay and Elk Railway Company was part of an extraprovincial undertaking?

The submission made by C.P.R. to the Commission is stated in the reasons of the Commission as follows:

In his submission on this issue, C.P.R. Counsel, relying on s. 92(10)(a) of the British North America Act and on the principles that “you cannot do that indirectly which you are prohibited from doing directly” (Madden v. Nelson and Fort Sheppard Railway Company, 1899 A.C. 626 at pp. 627-8) and that “a colourable device will not avail” (Ladore v. Bennett, 1939 A.C. 468 at p. 482), contends that the British Columbia Government acted beyond its power in constituting the K. & E., the proposed undertaking of that company being in pith and substance part of an undertaking extending beyond the limits of the Province.

Counsel for the respondent states the issue in the following manner:

It was submitted by Respondent to the Commission that the undertaking of the K. & E. was not a local work or undertaking, and in virtue of Section 92(10)(a) of the B.N.A. Act, the Parliament of Canada would have exclusive jurisdiction to prescribe regulations for the construction of the K. & E.’s railway and its management, and to dictate the constitution and powers of the company. This being so, it was argued that the legislature of British Columbia did not have such power. Subsidiarily, it was submitted by Respondent that, even if it could be said that the original incorporation of the company by British Columbia was not ultra vires the Province in view of the stated object of the company in the Memorandum of Association, nevertheless the nature of the undertaking as it has emerged rendered it clear that the undertaking was not local, and accordingly, it was ultra vires the province either to accord to the K. & E. the authority to construct its railway, or to operate it as planned.

[Page 978]

Section 92(10) of the British North America Act provides as follows:

92. In each Province the Legislature may exclusively make Laws in relation to Matters coming within the Classes of Subjects next hereinafter enumerated; that is to say,—

…

10. Local Works and Undertakings other than such as are of the following Classes:—

(a) Lines of Steam or other Ships, Railways, Canals, Telegraphs, and other Works and Undertakings connecting the Province with any other or others of the Provinces, or extending beyond the Limits of the Province:

(b) Lines of Steam Ships between the Province and any British or Foreign Country:

(c) Such Works as, although wholly situate within the Province, are before or after their Execution declared by the Parliament of Canada to be for the general Advantage of Canada or for the Advantage of Two or more of the Provinces.

The matters excepted by this section are the subject of federal jurisdiction by virtue of s. 91(29).

The respondent’s submission is that Kootenay was a part of an undertaking extending beyond British Columbia, and that, in consequence, its incorporation was ultra vires of the British Columbia Legislature. It made an alternative submission, which was summarized, and, I think, properly dealt with by the Commission, as follows:

It was submitted that we would not have to find expressly that the incorporation of K. & E. is ultra vires the Provincial authorities and it would suffice for us, if we are of the opinion that the undertaking is in fact of an extra-provincial character, to dismiss the application on the ground that K. & E. has no legal right or authority to construct the proposed railway. This proposition, it seems to me, begs the question; it suggests in effect that we make an implicit finding of invalidity rather than an explicit one.

[Page 979]

Kootenay was incorporated by the filing and registration of a memorandum of association with the object “to establish a railway undertaking, and to construct or acquire a railway from Natal to a point three miles west of Roosville immediately north of the Canada-United States border, in the Province of British Columbia.”

It is not a subsidiary of Burlington or subject to Burlington’s control. Its railway would not be operated by Burlington. Its proposed function is to deliver carloads of coal over its line to Burlington, north of the border, to be taken over and carried by Burlington over its lines, for ultimate delivery on the west coast of British Columbia. It is quite true, as is stressed by the respondent, that it would not have been incorporated save with the view of achieving this purpose.

The first point, which is clear, is that the Kootenay railway would not connect the Province of British Columbia with any other province, nor would it extend beyond the limits of the province. In Montreal Street Railway Company v. The City of Montreal, in the reasons for judgment delivered by Duff J., as he then was, in this Court[4], it was said, after referring to s. 92(10) and s. 91(29) of the B.N.A. Act:

The exclusive authority to legislate in respect of a railway wholly within a province is by virtue of these enactments vested in the provincial legislature, unless that work be declared to be for the general advantage of Canada; in that case, exclusive legislative authority over it is vested in the Dominion.

The respondent contends, however, that, while Kootenay’s works do not extend beyond the province, its undertaking was not local in character. But in determining the legislative power of the British Columbia Legislature to incorporate Kootenay we are concerned with the nature of the undertaking which it authorized. That undertaking is one which is to be carried on entirely within the province. I do not

[Page 980] overlook the fact that its undertaking when coupled with that of Burlington would provide a means of transport of goods from British Columbia into the United States. It may be, as is pointed out in the reasons of the Commission, that when the two lines are joined an overall undertaking of international character will emerge. But in my opinion that possibility did not preclude the British Columbia Legislature from authorizing the incorporation of a company to construct a railway line wholly situate within the borders of the province.

In Luscar Collieries, Limited v. McDonald[5], the question was as to the power of the federal Railway Board to make an order for running rights over the appellant’s line, which was a short line constructed for the carriage of coal in Alberta from the appellant’s mine to another line which branched from the Canadian Northern Railway. It was held that it did have such jurisdiction because the line was part of a system of railways operated together connecting one province with another. The ground of decision in that case was, however, the fact that the Luscar line was operated by C.N.R. At p. 932 the following passage appears:

In the present case, having regard to the way in which the railway is operated, their Lordships are of opinion that it is in fact a railway connecting the Province of Alberta with others of the Provinces, and therefore falls within s. 92, head 10(a), of the Act of 1867. There is a continuous connection by railway between the point of the Luscar Branch farthest from its junction with the Mountain Park Branch and parts of Canada outside the Province of Alberta. If under the agreements hereinbefore mentioned the Canadian National Railway Company should cease to operate the Luscar Branch, the question whether under such altered circumstances the railway ceases to be within s. 92, head 10(a), may have to be determined, but that question does not now arise.

[Page 981]

It is of interest to note, in that case, that the statute which authorized the construction of the Luscar line was enacted by the Alberta Legislature, and that it also provided for the Luscar company entering into an agreement with C.N.R. for the operation of its railway. It is clear that the purpose of the Luscar line was to assist in marketing its coal beyond the province. There was no suggestion in that case that the Alberta Legislature could not enact such a provision. The point of the case was that once the line, by reason of its operation, had become a part of an inter-provincial railway system it became subject to federal regulation.

The Luscar case was referred to in a judgment of this Court in British Columbia Electric Ry. Co. et al. v. Canadian National Ry. Co. et al.[6], which involved the power of the Board of Transport Commissioners in relation to a short line of railway, operated by a non-federal railway company, which connected with two lines of railway under federal jurisdiction. At p. 169 Smith J., who delivered the majority reasons, said this:

The case of Luscar Collieries v. McDonald, [1927] A.C. 925, is cited in support of the jurisdiction of the Board in the present case. There the appellant company owned a short railway line in the province of Alberta branching from a line which branched from the Canadian Northern Railway at a point within the province. Both branches were operated by the Canadian Northern Railway Company under agreements, and traffic could pass from the appellant’s line without interruption into such other provinces as were served by that company’s railway.

It was held that the Board had jurisdiction over the appellant’s lines constructed under provincial authority, because the line was part of a continuous system of railways operated together by the Canadian National Railway Company and connecting one province with another.

[Page 982]

The decision is expressly put upon the way in which the railway is operated by the Canadian National Railway Company under the agreements, and it is intimated that if that company should cease to operate the appellant’s branch, the question whether, under such altered circumstances, that branch ceases to be within s. 92, head 10(a), might have to be determined. The question thus left undetermined is the very question that arises in the present case, because the Park line is not operated by the Canadian National Railway Company, nor by the appellant, the British Columbia Electric Railway Company, as the operator of the Vancouver & Lulu Island Railway, on behalf of the Canadian Pacific Railway.

The mere fact that the Central Park line makes physical connection with two lines of railway under Dominion jurisdiction would not seem to be of itself sufficient to bring the Central Park line, or the portion of it connecting the two federal lines, within Dominion jurisdiction.

In summary, my opinion is that a provincial legislature can authorize the construction of a railway line wholly situate within its provincial boundaries. The fact that such a railway may subsequently, by reason of its interconnection with another railway and its operation, become subject to federal regulation does not affect the power of the provincial legislature to create it.

In my opinion the third question on the cross-appeal should be answered in the negative.

This completes the consideration of the questions of law raised on the appeal and on the cross-appeal. Following the arguments submitted on these matters on behalf of the appellants, the respondent and the intervenant, the Attorney-General of British Columbia, counsel appearing for the Canadian Transport Commission raised a question which had not been determined by the Commission, and on which no leave to appeal had been sought by any of the parties to the appeal. In his factum, which was subsequently filed, at the request of the Court, he points out that the appellants had sought leave from the Commission for Burlington to

[Page 983] operate its trains on Kootenay’s lines for the purpose of providing for a free interchange of the trains of the two companies. He further notes that, in the course of argument before it, the Commission had raised the question of Burlington’s authority to cross the border and to operate in Canada without reference to any special Act or statutory provision of general application.

Counsel, in the factum, then goes on to say:

Now that the Appellant Burlington Northern appeals to the Court on the question of involving the proper interpretation of section 156(1), the Commission is of the view that this Court may wish to decide whether Burlingtion Northern has the statutory power to operate trains in Canada at the border point.

In my opinion it would not be proper for the Court to deal with a question of law raised in this manner. The jurisdiction of this Court under the provisions of s. 53 of the Railway Act arises on an appeal from the Commission if leave to appeal is obtained. Such an appeal must be on a question of law or of jurisdiction. In my opinion this means a question of law on which the appellant contends that the Commission has erred. I do not construe the section as empowering this Court, of its own motion, to elect to determine a question of law on which the Commission has not expressed any opinion.

In the result, I would allow the appeal in respect of the second question of law in respect of which leave to appeal was granted, and would dismiss the cross-appeal. The appellants should be entitled to costs of the appeal and of the cross-appeal. I would certify to the Commission the opinion that the agreement or arrangement between the appellants for interchange of traffic was not prohibited by s. 156(1) of the Railway Act, and that the Commission correctly decided the other questions of law raised on the appeal and on the cross-appeal.

[Page 984]

HALL J. (dissenting)—The question of law upon which leave was given are set out in the reasons of my brother Martland. Taking, as I do, a different view on some of the basic issues involved in this complex controversy, I find it necessary to deal throughout these reasons with certain events and developments, some historical, which have an important bearing on the answers to be given to the questions asked in the appeal and in the cross-appeal.

In the early 1960’s industrial interests in Japan proposed buying great quantities of coal from mines in the Sparwood area of British Columbia. Sparwood is on the Crow’s Nest branch of the respondent, Canadian Pacific Railway Company (hereinafter referred to as “C.P.R.”). When discussions about the sale and transportation of coal from Sparwood to Japan were being initiated, the only direct rail line over which the coal could reach the Pacific Ocean was the Crow’s Nest branch of C.P.R.

Kaiser Resources Limited (hereinafter called “Kaiser”) was the first exporter to obtain firm contracts with Japanese industrialists for the sale and delivery of some 2,000,000 tons of coal per year. Kaiser and C.P.R. negotiated as to the rate structure for transporting the coal from Sparwood to the deep seaport at Roberts Bank in British Columbia then being developed at great expense by the Government of Canada. Facilities at Roberts Bank were being built to handle bulk cargo such as the coal in question from unit trains. These unit trains were being engineered and built for C.P.R. to achieve, while in motion, a continuous loading operation at the source and similarly a continuous unloading technique into the cargo vessels that would carry the coal to Japan. It was a new concept and the port facilities at Roberts Bank were adapted and structured accordingly. No other port on the Pacific Coast had similar facilities.

[Page 985]

Following lengthy discussions between Kaiser and C.P.R., a rate was agreed upon in an agreement dated October 14, 1968.

Meanwhile, Crow’s Nest Industries Limited, a shareholder in Kaiser Steel Corporation, the parent of Kaiser, was engaging in further exploration work which led to the discovery of substantial deposits of coal at Line Creek north of Sparwood. Following this, Crow’s Nest Industries Limited and Kaiser both sought further coal contracts with Japanese industrialists, the source of supply to be from the Sparwood and Line Creek areas.

In 1965, while negotiations with C.P.R. were in progress, Crow’s Nest Industries Limited approached Great Northern Railway Company (hereinafter called “Great Northern”), a transcontinental line in the United States, which, in a general way, paralleled the International Boundary, with a scheme to establish a competitor to C.P.R. for the transportation of the coal by the construction of rail trackage from Line Creek to the Great Northern main line at or near Eureka in northern Montana. This scheme remained in the planning stage until Crow’s Nest Industries Limited achieved an assured market in Japan for an additional 3,000,000 tons of coal per year.

In May 1966 Kootenay and Elk Railway Company (hereinafter called “Kootenay”) had been incorporated under the provisions of the Railway Act of British Columbia, R.S.B.C. 1960, c. 329, as a railway within the meaning of that Act. This was the first step taken in the development of the scheme whereby an alternative route for the transportation of coal to Roberts Bank was being planned. With the more substantial annual export contracts aggregating some 5,000,000 tons assured, Kootenay continued discussions with Burlington Northern

[Page 986]

Inc. (hereinafter called “Burlington”) to further the plan of the alternate route. Kootenay had been incorporated and was being utilized as the corporate vehicle in the execution of the Canadian segment of the international scheme. The international character of the whole exercise was fixed before the application to incorporate Kootenay was made. One of the incorporators was Thomas F. Gleed, Chairman of the Board of Crow’s Nest Industries Limited and a director on the board of several Kaiser Steel Corporation subsidiaries or affiliates. The discussions just mentioned involved a plan whereby coal from the Sparwood and Line Creek mines would be transported southward across the International Boundary, thence over the lines of Burlington through the United States to a point close to Roberts Bank which is immediately north of the International Boundary. At Roberts Bank the trains were to be handled by what was described as a transfer or switching operation. The plan contemplated the creation and construction of a railway facility in British Columbia northward from the border to the mines. Kootenay was conceived to provide this facility. It was incorporated as and remains a wholly-owned subsidiary of Crow’s Nest Industries Limited. It was not to be a common carrier.

Burlington is a railway company incorporated under the laws of the State of Delaware and is the successor by a series of mergers and amalgamations of several United States railway companies including Great Northern. The mergers and amalgamations were authorized, in so far as operations in Canada were concerned, by c. 23 of the Statutes of Canada 1965. The preamble to c. 23, referring to Great Northern which was being merged with Burlington, reads in part, “and is as to its operations in Canada subject to all the obligations of a railway company which is subject to the legislative authority of Parliament;”.

[Page 987]

This was not the first time that coal had been mined and shipped into the United States from the Sparwood-Fernie area. In 1901 Great Northern, the predecessor of Burlington, had a railway line from Rexford in Montana to Newgate in British Columbia (Newgate being in the same area as Roosville West) which connected with a railway known as Crow’s Nest Southern Railway Company which ran from Newgate to Fernie. Fernie is a point on C.P.R. Crow’s Nest line between Elko and Sparwood. However, according to the evidence of R.W. Downing, as the demand for coal decreased, that company’s operations into the Sparwood-Fernie area were changed to trackage rights over C.P.R. and subsequently to a trackage right operation east of Elko and finally, in 1936, the line from Rexford to Elko was abandoned. The application to abandon had to be approved by the then Board of Railway Commissioners for Canada and the abandonment was effected by Order No. 53515 of the Board of Railway Commissioners dated October 2, 1936, reported in Judgments of Railway Commissioners Canada, vol. 26, p. 274, and reads:

Upon hearing the matter at the sittings of the Board held at Fernie, British Columbia, September 19, 1936, in the presence of counsel for the Crow’s Nest Southern Railway Company, the province of British Columbia, the city of Fernie, and the Western Pine Lumber Company, Limited, the evidence offered, and what was alleged,

IT IS ORDERED: That the Crow’s Nest Southern Railway Company (Great Northern Railway Company) be, and it is hereby, granted leave to discontinue the operation of the said line of railway between Fernie and Newgate, in the province of British Columbia, subject to and upon the conditions following, namely:

(a) That the rails, ties, buildings, bridges, and fences on the said line of railway be not removed for a period of one year from the date of this order; and

(b) That this order is based on the understanding between the parties that the Great Northern Railway Company’s line from Newgate, in the province of

[Page 988]

British Columbia, to Rexford, in the state of Montana, shall not be dismantled until after the expiration of the said one year from the date of this order.

It is significant that although Crow’s Nest Southern Railway Company had been incorporated by special act of the Province of British Columbia (1901 (B.C.), c. 73), it had to have the approval of the Board of Railway Commissioners for Canada to abandon operation.

Accordingly in substance the proposal to connect the Burlington transcontinental line with the coal fields in the Sparwood area meant resurrecting the line which had been in operation some 30 to 60 years ago but abandoned and the rails lifted when that line ceased to be a paying proposition. Now, with the advent of the Japanese coal contracts, the climate was propitious for Burlington to involve itself into what appeared to be a prosperous contract for the carriage of great quantities of coal to the West Coast. Burlington proposed to use unit train coal-carrying equipment identical to that which had been developed by C.P.R. because the unloading facilities at Roberts Bank required the coal to be unloaded in this manner.

Three applications were made to the Canadian Transport Commission (hereinafter called the “Commission”) as follows:

1. The Great Northern Railway Company (predecessor of Burlington) and the Kootenay and Elk Railway Company hereby apply to the Railway Transport Committee of the Canadian Transportation Commission for an order under Section 255 of the Railway Act and such other sections of the said Railway Act as may be relevant granting the applicants leave to join their respective railways at or near the Border between the Province of British Columbia and the State of Montana, one of the States of the United States of America, at Roosville West; and for an order that the Great Northern Railway Company be granted leave to operate its trains on the lines or tracks of the applicant Kootenay and Elk Railway Company for the purpose of providing for a free interchange of the trains of the Kootenay and Elk

[Page 989]

Railway Company with the trains of the Great Northern Railway Company. A.C. p. 1.

2. The Kootenay and Elk Railway Company hereby applies to the Railway Transport Committee of the Canadian Transportation Commission for an order under Section 255 of the Railway Act granting the applicant leave to cross the line of the Canadian Pacific Railway Company running between Michel and Elko in the Province of British Columbia at a point north of Hosmer on the line of railway of the Canadian Pacific Railway Company as shown on the plan attached hereto and marked Exhibit “A”. A.C. p. 32.

The Kootenay and Elk Railway Company hereby applies to the Railway Transport Committee of the Canadian Transportation Commission for an order under Section 1(f) of the Crows Nest Act, being Statutes of Canada 60/61 Victoria Chapter 5 that it may be granted running rights over the line of railway of the Canadian Pacific Railway Company between Natal in the Province of British Columbia to Elko in the Province of British Columbia, upon such terms and conditions as to this Honourable Committee may seem just and desirable having due regard to the public and all other proper interests. A.C. p. 36.

As will be seen, Application No. 2 is an alternative to Application No. 3 and if No. 3 was to be granted then No. 2 would not be required and would be abandoned. All three applications were opposed by C.P.R.

Kootenay does not exist as a railway line at the present time nor does the proposed extension of Burlington from its main line to the international boundary exist. These are projects which may or may not come into being, depending on whether approval is obtained from the Commission granting leave to join the proposed Kootenay line with that of the Burlington extension at the border. The applications to cross over and for running rights over the C.P.R. are necessarily subsidiary to the main objective, that of getting approval to joining the two lines for the interchange of traffic at the border.

[Page 990]

The key to the whole Burlington and Kootenay scheme depended on leave being granted to join Burlington and Kootenay at the border and for the interchange of the trains of the two lines north of the border. Unless leave to join the two railways and approval of the interchange agreement was to be forthcoming, it is clear that no construction would be done either north or south of the border. The plans to date are paper plans. Burlington has not as yet made a formal application to the Interstate Commerce Commission of the United States for permission to build the extension to the international boundary. Mr. Downing seemed to imply in his evidence that such approval would be forthcoming as a matter of course if the Canadian Commission approved of the interchange agreement. He said in that regard:

Q. You also said, Mr. Downing, that the Burlington Northern Board authorized the company to go to the Inter-State Commerce Commission to seek permission to build part of the route to Eureka, is that correct?

A. That is correct.

Q. At what stage are those proceedings?

A. They have not yet been started. The construction involved is approximately 9½ miles, so it is a relatively small problem from a construction standpoint, and we have been assured by Counsel that the granting of that permission would be relatively easy to accomplish, or let’s say that it can be accomplished in a relatively short time, so therefore, we have not filed the Application until the proceedings in Canada have progressed further.

All of this emphasizes the international character of the scheme to join Burlington and Kootenay and negatives any suggestion that Kootenay was ever intended even from the very beginning to be a wholly intraprovincial railway. The evidence of Leighton, a consulting engineer employed by Crow’s Nest Industries to do the engineering for Kootenay, is significant as to

[Page 991] the purpose of the Kootenay project. Leighton, testifying on behalf of the appellants, was questioned and answered as follows:

Q. From your knowledge of the project, Mr. Leighton: if by chance the Burlington Northern did not get permission from the Interstate Commerce Commission to build up to the border, would the Kootenay & Elk Railway be built anyway?

A. It could be built, but it would serve no purpose.

It is clear, therefore, that the international character of the scheme was fixed before the application to incorporate Kootenay as a provincial railway was made. The essence of what was being proposed was that the Kootenay line would be built to within one-quarter of an inch north of the border and the Burlington spur would be built to within one-quarter of an inch south of the border in such a way that trains could pass from Burlington to Kootenay and vice versa as though the lines were actually and physically connected. Kootenay was not to have any rolling stock or equipment. All that would belong to Burlington. Crews of Burlington were to bring the unit trains northward across the border and crews of Kootenay would then take the trains to the mine locations in the Sparwood area. The exchange of crews was to be made in Canada and the intent was that these Burlington unit trains which were to be almost a mile in length would be brought wholly into Canada empty, then taken to Sparwood by Kootenay crews, there loaded and returned to the exchange area north of the border. It was conceded by Mr. Robinette that the Burlington crews would be operating the Burlington trains for a distance of close to two miles in Canada over Kootenay rails. There is nothing in the record to indicate that Burlington has approval or authority so to operate in Canada. Approval or authority to operate over Kootenay rails in Canada can only come from the Commission.

[Page 992]

The Commission was disposed to grant the leave sought, but concluded:

(a) That it could not do so under ss. 315 and 319 of the Railway Act, the judgment of the Commission of this issue being as follows:

In argument, Counsel for the applicants did not deny the fact—which is obvious enough—that an interchange of traffic would take place at the border, but argued that the applicable provisions in this case are found in ss. 315 and 319 of the Railway Act, and not s. 156. Both ss. 315 and 319 relate to the obligations of companies to accommodate traffic, and subs. (5) of s. 319 imposes upon railway companies the specific obligation to afford ‘reasonable facilities for the junction of private sidings or private branch railways with their own railways and for receiving, forwarding and delivering traffic upon and from those sidings or private branch railways’. The fact is that, notwithstanding Mr. Prentice’s affirmation that the K. & E. is an extension of “his” (Crows Nest’s) plant, K. & E. is neither a private siding nor a private branch railway in any legal sense. At all events, any statutory obligation B.N. might have under s. 319 to serve a private siding or a private branch railway cannot obscure the realities of a situation whereby B.N. has been and continues to be a voluntary and active participant in the total project, and, as admitted by Mr. Downing, has an “arrangement” with K. & E. That arrangement, in my view is clearly one for the interchange of traffic with K. & E.

(b) That it did not have jurisdiction to grant the application giving leave to join Burlington and Kootenay for the interchange of traffic and for the division and apportionment of tolls in respect of such traffic, saying:

Prior to the passage of the National Transportation Act in 1967, s. 156(1) authorized the entering into of traffic interchange agreements or arrangements between railway companies only. The amendment to s. 156 brought about by the Act stems from renewed concern on the part of Parliament, apparent throughout the statute, over the multi-modal aspects of trans-

[Page 993]

portation, and it is obviously as a result of such concern that the expression “transportation company” was substituted for “railway company”. At the same time, however, as the authority was widened a restriction was inserted by the addition of the words “operating as a common carrier”. In doing so Parliament expressed its clear will to exclude non-common carriers from the operation of s. 156(1).

The applicants deny that s. 156 contains a prohibition and say that, in any event, the constitution of B.N. empowers it to enter into contracts of every kind with any person or corporation—a power which it brings with it when it comes into Canada. He relies in particular on Campbell v. Northern Railway Company (26 Grant’s Chancery Reports 522). It seems to me to be unnecessary to consider whether an agreement or arrangement between B.N. and K. & E. for the interchange of traffic would be intra vires B.N. under its constitution if in fact a Canadian statute forbids it to act. In my opinion the correct interpretation of s. 156(1) is that it prohibits any railway company which is subject to the Railway Act from entering into an agreement or arrangement with a non-common carrier for the purposes set forth in that section, and consequently B.N., being subject to the Railway Act, may not enter into any such agreement or arrangement with K. & E.

Section 156(1) referred to reads as follows:

156. (1) The directors of the company may, at any time, make and enter into any agreement or arrangement, not inconsistent with the provisions of this or the Special Act, with any other transportation company operating as a common carrier either in Canada or elsewhere, for the interchange of traffic and for the division and apportionment of tolls in respect of such traffic.

The Canadian Transport Commission is a body established under the National Transportation Act, 1966-67, c. 69 [R.S.C. 1970, c. N-17], and by s. 6(2) the Commission is a court of record and its powers and duties are set out in s. 21 which reads as follows:

21. It is the duty of the Commission to perform the functions vested in the Commission by this Act, the

[Page 994]

Railway Act, the Aeronautics Act and the Transport Act with the object of coordinating and harmonizing the operations of all carriers engaged in transport by railways, water, aircraft, extraprovincial motor vehicle transport and commodity pipelines; and the Commission shall give to this Act, the Railway Act, the Aeronautics Act and the Transport Act such fair interpretation as will best attain that object.

The Act establishing the National Transportation Commission declares the national transportation policy to be as set out in s. 3 as follows:

3. It is hereby declared that an economic, efficient and adequate transportation system making the best use of all available modes of transportation at the lowest total cost is essential to protect the interests of the users of transportation and to maintain the economic well-being and growth of Canada, and that these objectives are most likely to be achieved when all modes of transport are able to compete under conditions ensuring that having due regard to national policy and to legal and constitutional requirements

(a) regulation of all modes of transport will not be of such a nature as to restrict the ability of any mode of transport to compete freely with any other modes of transport;

(b) each mode of transport, so far as practicable, bears a fair proportion of the real costs of the resources, facilities and services provided that mode of transport at public expense;

(c) each mode of transport, so far as practicable, receives compensation for the resources, facilities and services that it is required to provide as an imposed public duty; and

(d) each mode of transport, so far as practicable, carries traffic to or from any point in Canada under tolls and conditions that do not constitute

(i) an unfair disadvantage in respect of any such traffic beyond that disadvantage inherent in the location or volume of the traffic, the scale of operation connected therewith or the type of traffic or service involved, or

(ii) an undue obstacle to the interchange of commodities between points in Canada or unreasonable discouragement to the development of primary or secondary industries or to export trade

[Page 995]

in or from any region of Canada or to the movement of commodities through Canadian ports;

and this Act is enacted in accordance with and for the attainment of so much of these objectives as fall within the purview of subject-matters under the jurisdiction of Parliament relating to transportation.

By s. 4 of the Act it is stated to apply to transport by railways to which the Railway Act applies. By s. 53 of the Railway Act an appeal lies from the Commission to the Supreme Court of Canada upon a question of law or on a question of jurisdiction upon leave therefor being obtained from a judge of the Supreme Court.

Being a statutory court of record and being required by the National Transportation Act to give to the Railway Act such fair interpretation as will best attain the national transportation policy set out in s. 3 (supra), the Commission possesses only the powers which the Act gives it and it cannot exercise a jurisdiction in excess of those powers. Accordingly, it seems to me that this appeal falls to be determined not on an analysis and determination of the corporate powers of either Burlington or Kootenay but on the jurisdiction of the Commission to grant approval of the proposed interchange.

On the assumption that both Burlington and Kootenay possess all the corporate powers to enter into an agreement for the interchange of traffic and for the division and apportionment of tolls in respect of such traffic, the decisive issue in respect of application no. 1 is whether the Commission possessed or possesses the authority to approve of any such agreement.

It is common ground that any such agreement must have the approval of the Commission and it follows, I think, that any approval sought or obtained must be an approval of an agreement that the Commission has the jurisdiction and authority to give. The approval cannot be given as a matter of course. Approval by the Commis-

[Page 996] sion in respect of a matter that it has not been given the authority to approve would be a nullity.

Accordingly, when s. 156(1) says that any agreement for the interchange of traffic and for the division and apportionment of tolls is to be between two common carriers, the first question the Commission, on being asked to approve of such an agreement, must ask itself is, “Is this an agreement between two common carriers?” and if the answer to that question is “No” as it must be in this case, then how can the Commission signify its approval? It would be unlawful for it to do so and would be an error in law for which an appeal would lie to this Court.

It amounts, accordingly, to the Court deciding what can only, in effect, be an academic question for the Court to found its judgment on a review and determination of the corporate powers of the two companies or on a historical review of s. 156(1) when the section, as amended in 1967, plainly says that the agreement is to be one between two transportation companies operating as common carriers. The real question is, was it within the power of the Commission to give approval when it was conceded that Kootenay was not a common carrier nor intended to be one and that Burlington, in operating north of the border, came squarely within the provisions of the Railway Act and the control of the Commission?

I would accordingly answer both Questions No. 1 and No. 2 in the main appeal in the negative.

That would dispose of the appeal but as a contrary opinion is being asserted I must now turn to the questions raised in the cross-appeal as set out in the reasons of my brother Martland. I agree with him that Questions 1 and 2 should be answered in the negative. I hold that Question No. 3 should be answered in the affirmative for the following reasons:

[Page 997]

There is no question but that Burlington is proposing to operate into Canada for a distance of approximately two miles and this is made very clear in ex. 20 which shows a double track commencing at a switch 700 feet north of the international boundary and extending northward some 8,000 feet. The purpose of the double track arrangement is so that the empty unit train proceeding northward can meet a loaded train proceeding southward when it is said the crews from Kootenay hand over the loaded train to Burlington crews and take over from Burlington crews the empty train.

It is plain beyond argument that this was the concept of what was being proposed when the idea of incorporating a railway line under British Columbia legislation was conceived. There never was the slightest intention on the part of those furthering the project that Kootenay would be a wholly contained provincial undertaking with an operation beginning and ending within British Columbia. It was conceived and intended as part and parcel of an international undertaking whereby coal from the Sparwood area could proceed without interruption across the international boundary for it was never even imagined that the coal would be carried only as far as the boundary and dumped there.

No one disputes the jurisdiction of the Province of British Columbia to incorporate a railway to operate wholly within its boundaries but it is equally clear that the Province has no jursidiction to incorporate a railway that is, in its inception and concept, international in character.

So, when the application to incorporate Kootenay was made as a wholly-owned subsidiary of Crow’s Nest Industries, the incorporators knew that they were asking for incorporation of an international undertaking but that is not what was represented to the British Columbia Registrar of Companies. It is significant that in the

[Page 998] memorandum of association of “The Kootenay and Elk Railway Company” dated April 26, 1966, the only stated object is contained in para. 3 which reads:

The object for which the Company is incorporated is to establish a railway undertaking, and to construct or acquire a railway from Natal to a point three miles west of Roosville immediately north of the Canada United States border, in the Province of British Columbia.

So stated, the real object of the company was concealed from and misrepresented to the Registrar when he issued his Certificate of Incorporation under the Railway Act of British Columbia dated May 4, 1966. This is not the case of a provincial railway having been incorporated bona fide for an intraprovincial purpose, but incorporation was attained solely to bring into being a railway intended from its inception to be an integral part of the international undertaking above mentioned. It differs in this respect from the cases which were in their origin genuine provincial undertakings such as Luscar Collieries, Limited v. McDonald[7].

Throughout the argument the unreality of the whole situation became crystal clear that the Court was being called upon to deal with a wholy fictitious situation dressed up in legalistic terminology and argument involving corporate powers to obscure the realities of what was being proposed. In these circumstances I cannot bring myself to a discussion of the legal propositions and distinctions which were advanced to support as a provincial undertaking something which was and is a subterfuge to enable Burlington to participate in what appears to be a lucrative endeavour while the coal export contract lasts with limited (in railway terms) capital outlay for if, as asked, Kootenay can obtain

[Page 999] running rights over C.P.R.’s Crow’s Nest line it will save approximately $15,000,000 in capital expense. Nor would Kootenay be required to spend a dollar for rolling stock. Much of the roadbed abandoned in the 1930’s could be re-established to carry the rails over those parts that do not parallel the C.P. line.

The project contemplated, according to the evidence, that the coal delivered to Burlington north of the border would be carried through the United States until delivered to what is known as the transfer utility at the border at Robert Bank for unloading through the facilities of the newly created port there. I do not find any provision or undertaking that if the applications now being sought are granted that Burlington will necessarily continue to use the Roberts Bank facility. I see nothing in the record to prevent Burlington from using or creating another port in the State of Washington for the loading of this Canadian product destined for Japan. As a matter of fact, in the evidence of R.W. Downing, Executive Vice-President of Burlington, it is said that “the first discussions were directed towards moving the coal through a United States port”, but later it was decided to use Roberts Bank as the only port with facilities to handle unit trains.

I think the Commission had a duty apart from s. 156(1) to consider policy and the validity of Kootenay as a railway company in granting or rejecting the application under s. 255. The obligation of the Commission as contained in the National Transportation Act requires consideration by the Commission of all that was involved in the application. The bona fides of the whole proposition should have been of paramount importance to the Commission. It cannot be blind to the history of the prior line Burlington’s predecessor had into Elk Valley and its abandonment when the coal export to the United States in that area dried up. The Com-

[Page 1000] mission, being a court of record, was not established to rubber stamp agreements between companies one of which, like Kootenay, was illegally incorporated as a provincial railway company. The right to construct and operate an international railway undertaking can come only from the federal authorities.

The legislative authority to incorporate a railway which is international in character rests with Parliament. Head 10(a) of s. 92 of the British North America Act provides that local works and undertakings other than:

a. Lines of Steam or other Ships, Railways, Canals, Telegraphs, and other Works and Undertakings connecting the Province with any other or others of the Provinces, or extending beyond the Limits of the Province; (Emphasis added.)

shall be within provincial jurisdiction. The corollary to that is that lines of railways and undertakings extending beyond the limits of the Province must be within the legislative jurisdiction of Parliament; in other words, the matters listed in subhead (a) above are to be read as if they were enumerated heads under s. 91 and within the exclusive federal jurisdiction. In this regard Lord Porter in Attorney General of Ontario v. Winner[8], said at p. 568:

It is now authoritatively recognized that the result of these provisions is to leave local works and undertakings within the jurisdiction of the province but to give to the Dominion the same jurisdiction over the excepted matters specified in (a), (b), and (c) as they would have enjoyed if the exceptions were in terms inserted as one of the classes of subjects assigned to it under section 91.

and at p. 582 he said:

In coming to this conclusion their Lordships must not be supposed to lend any countenance to the suggestion that a carrier who is substantially an internal carrier can put himself outside provincial jurisdic-

[Page 1001]

tion by starting his activities a few miles over the border. Such a subterfuge would not avail him. The question is whether in truth and in fact there is an internal activity prolonged over the border in order to enable the owner to evade provincial jurisdiction or whether in substance it is interprovincial. Just as the question of whether there is an interconnecting undertaking is one depending on all the circumstances of the case, so the question of whether it is a camouflaged local undertaking masquerading as an interconnecting one must also depend on the facts of each case, and on a determination of what is the pith and substance of an Act or regulation. (Emphasis added.)

Referring to attempts to designate a federal undertaking as a provincial one, Lord Atkin had reason to say at p. 482 in Ladore v. Bennett[9]:

It is unnecessary to repeat what has been said many times by the Courts in Canada and by the Board, that the Courts will be careful to detect and invalidate any actual violation of constitutional restrictions under pretence of keeping within the statutory field.

Kootenay as a railway undertaking being part of an international project is an excepted “matter” and attracts full federal regulation and jurisdiction.

Dealing with the same subject, Lord Watson said in Canadian Pacific Railway v. Corporation of Parish of Notre Dame de Bonsecours[10], at p.372:

…the Parliament of Canada has, in the opinion of their Lordships, exclusive right to prescribe regulations for the construction, repair, and alteration of the railway, and for its management, and to dictate the constitution and powers of the company; (Emphasis added.)

Any doubt remaining on this subject was decisively resolved by Duff J. (as he then was) in

[Page 1002]

Reference re Waters and Water-Powers[11], at p. 213:

In legislating for railways extending beyond provincial limits, it has been held, that it is of the essence of the Dominion authority to define the course of the railway, and to authorize the construction and working of the railway along that course…

It follows that no provincial authority can authorize the physical location of an interprovincial or international railway or the construction thereof. The result is that Kootenay is not a railway company (even on paper) within the meaning of s. 2(3)(a) of the Railway Act nor a company within the meaning of s. 156(1) of the Railway Act because it does not have the authority to construct or operate a railway from the only legislative source that could have given it such authority namely, the Parliament of Canada. Such authority could not emanate from the legislature of the Province of British Columbia.

It follows, accordingly, that the Orders of the Minister of Commercial Transport of British Columbia:

1. Approving the projected location of the proposed Kootenay and Elk Railway Company dated June 15, 1967;

2. Approving the extension of Kootenay from Sparwood to Line Creek dated November 6, 1969;

3. Approving of the Kootenay connection with Great Northern Railway at the International Boundary near West Roosville, British Columbia

are null and void.

The whole scheme would appear to me to be the classic case of a foreign conglomerate in concert with related Canadian companies so manipulating the enterprise that the export of Canadian jobs would be the result. That surely was a proper matter for the Commission to consider and weigh. There is nothing in the record to indicate that C.P.R. is unable for lack of equipment or personnel to carry all the coal going from the Sparwood area to Roberts Bank

[Page 1003] to fulfil present or future Japanese contracts and it is significant to observe that Burlington proposes to charge the same rate as C.P.R.

One more matter calls for consideration. Counsel for the Commission was present throughout the hearing of this appeal and at the conclusion of the arguments on behalf of the parties and of the intervenants addressed the Court on a matter which had not been dealt with in the argument. He had not filed a factum but was given leave to file one, outlining the points the Commission wished to draw to the attention of the Court. The other parties to the appeal and the intervenants were given leave to reply to any factum that would be filed on behalf of the Commission. The appellants and respondent have done so.

The factum so filed on behalf of the Commission states in part:

2. My submission, on behalf of the Commission, concerns Application No. 1, being the joint Application for

“(a) an order under Section 255 of the Railway Act (1952, RSC c 234) granting leave to Burlington Northern Inc. and Kootenay and Elk Railway to join their proposed lines of railway at a point on the Canada-United States border near Roosville West in the Province of British Columbia, and

(b) an order granting leave to Burlington Northern Inc. to operate its trains on the lines of Kootenay and Elk Company for a distance of 9,905 feet in the Province of British Columbia for the purpose of providing a free interchange of trains.”

The facts presented to the Court by the parties are not questioned by the Commission.

…

When the application just mentioned was heard, the Commission raised with Counsel for Appellant Burlington Northern Inc. a question relating to the authority of Burlington Northern to operate its trains into Canada at the border point in question (Vol. 5, p. 1169, line 37 to p. 1170, line 27). (Emphasis added.)

The decision of the Commission on this point speaks for itself. It denied the application on other

[Page 1004]

grounds, namely that Burlington Northern could not enter into the agreement with Kootenay and Elk, which is not a common carrier, in accordance with section 156(1) of the Railway Act.

Now that the Appellant Burlington Northern appeals to the Court on the question of involving the proper interpretation of section 156(1), the Commission is of the view that this Court may wish to decide whether Burlington Northern has the statutory power to operate trains in Canada at the border point. (Emphasis added.)

In this regard, I have been instructed to draw the attention of the Court to the following provisions of the Railway Act, as well as to section 3 of the Special Act of Burlington Northern Inc., 1965 Statutes of Canada, c. 23: