Case information

Administrative law — Standard of review — Statutory discretion — Statutory appeal on question of law — In what circumstances exercise of administrative discretion creates reviewable error — Whether appellate court’s decision will change application of Canada Transportation Act, S.C. 1996, c. 10, s. 32 — Whether appellate court applied wrong standard of appeal when assessing Agency’s interpretation of s. 32 — When exercise of administrative discretion constitutes legal error that warrants clarification — Proper framework for reviewing administrative discretionary decision for legal error.

Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

Parliament regulates the pricing for rail transportation of grain from western Canada for export (“western grain”) by way of a Maximum Revenue Entitlement (“MRE”) system. That system provides that the total revenue a prescribed railway company may earn for the movement of that grain is capped for each crop year. If the MRE is exceeded, the railway company must pay all excess revenue and any regulatory penalty to the Western Grains Research Foundation. The Canadian National Railway Company (“CN”) is one of the two prescribed railway companies. The Canadian Transportation Agency sets the prescribed railway companies’ MRE for the coming crop year by a formula prescribed in the Canada Transportation Act, S.C. 1996, c. 10 (“Act”). The formula relies on an inflation index which combines prospective and retrospective elements. The prospective element is a forecast projection, a percentage increase or decrease reflecting the year-over-year forecasted inflationary changes in the cost of railway inputs for the coming crop year. The retrospective element is a forecasting variance, an adjustment of the previous year’s forecast meant to capture any over- or under-forecasting of the previous year’s VRCPI based on actual costs. The forecasting variance is not retroactive — the adjustment is made prospectively with the aim of balancing variances from the forecast in the following year. While the Agency uses actual pricing data from the railway companies in setting the VRCPI, it is not cost-based.

For the 2021/2022 crop year, CN’s VRCPI was adjusted to account for certain cost increases. However, it refused to adjust it to account for other cost increases, and, when its actual western grain revenue for the year exceeded the MRE, the Agency ordered CN to pay excess revenue and penalties to the Foundation (Determination R-2022-183).

For the 2022/2023 crop year, the Agency increased DN’s VRCPI (Determination R-2022-50) and its MRE using the VRCPI applicable to 2022/2023, not the forecasting variance applicable to 2023/2024. When its actual western grain revenue for the year exceeded the MRE, the Agency ordered it to pay excess revenue and penalties of to the Foundation.

For the 2023/2024 crop year, the Agency increased CN’s VRCPI significantly due to the retroactive adjustment (the forecasting variation).

Section 32 of the Act allows an interested party to apply to the Agency to review, rescind or vary any of its previous decisions, and provides that the Agency “may review, rescind or vary any decision or order made by it…if, in the opinion of the Agency…there has been a change in the facts or circumstances pertaining to the decision, order or hearing”. CN applied to the Agency under s. 32 for reconsideration of all three determinations.

The Agency denied both requests on the grounds that variations between the forecast and the actual costs were not “a change in the facts or circumstances” under s. 32. The Federal Court of Appeal dismissed the appeal. It saw no reviewable error in the Agency’s interpretation of s. 32 or in its application of s. 32.

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