A Commentary on Recent Legal Developments by the Canadian Appeals Monitor

Since our last post, most of the judgments and successful applications for leave decided by the Supreme Court have arisen from criminal cases. The most notable exception was the judgment in Canadian Imperial Bank of Commerce v. Green, 2015 SCC 60, concerning secondary market class actions, which we have already covered in detail.

This post will cover the very brief judgment in Canadian Pacific Railway Co. v. Canada (Attorney General), 2016 SCC 1 and the successful application for leave to appeal from Urban Communications Inc. v. BCNET Networking Society, 2015 BCCA 297.

The Easy Way Out? Canadian Pacific Railway Co. v. Canada (Attorney General)

This case was one of our most anticipated of 2016. We anticipated that the Supreme Court would give substantive reasons in this case, unlike the Federal Court of Appeal, which dismissed CPR’s motion for leave to appeal without reasons. In particular, we were interested in how the Supreme Court would address the requirements of independence and impartiality of administrative bodies in the context of legislative decision-making.

In August 2014, the Canadian Transport Agency (“CTA”) enacted regulations extending the distances for interswitching in the prairie provinces. Interswitching is a service where one railway company collects a shipper’s rail traffic and transports to an interchange point with a second railway company. Interswitching within 30 km of an interchange was subject to a prescribed rate under the regulations; outside the 30 km range, fees were commercially negotiated. The CTA extended the regulated interswitching distance from 30 to 160 km in Alberta, Manitoba, and Saskatchewan after the passing of Bill C-31 in May, 2014, which empowered the CTA to make regulations extending interswitching distances.

This case arose when CPR sought leave to appeal the new regulation on two bases: (1) it was enacted after improper interference and direction from the federal government; and (2) it was enacted without any independent assessment regarding extending the interswitching distance.

The Supreme Court’s reasons are sparse and do not address the substantive questions we raised in our list of Appeals to Watch. The Court framed the issue before it as “whether the appellant [had] adduced facts” rebutting the presumption that the Agency acted properly in deciding to amend the Regulations Amending the Railway Interswitching Regulations. It held that the appellant did not rebut that presumption without further explanation and dismissed the appeal.

Leave to Appeal in Urban Communications: Sattva Part 2?

The Supreme Court granted leave to appeal from the judgment in Urban Communications Inc. v. BCNET Networking Society, 2015 BCCA 297, which provides it with an opportunity to expand on its landmark decision in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (see our post on Sattva here).

The litigants in Urban Communications were parties to an option agreement. BCNET purported to exercise the option by way of a letter. Urban did not reply for over a year and then took the position that the option had not been validly exercised. Pursuant to their agreement, the parties proceeded to arbitration. The arbitrator found that BCNET had validly exercised the option and, in the alternative, Urban was estopped from relying on any defects due to its delay in responding.

In the B.C. Supreme Court, the chambers judge identified four extricable questions of law, thereby permitting Urban to appeal the arbitrator’s decision. The chambers judge ultimately ruled in favour of Urban on all four questions and allowed the appeal.

The B.C. Court of Appeal allowed BCNET’s appeal and reinstated the arbitrator’s decision. The Court of Appeal held that the case ultimately turned on the objective intentions of parties in the option agreement and BCNET’s objective intentions in its letter purporting to exercise the option. Relying on Sattva, the Court of Appeal held the interpretation of both documents involved questions of mixed fact and law, such that the arbitrator’s decision was not reviewable. The Court of Appeal found that the chambers judge had identified the four alleged errors of law as a result of an implicit presumption that the arbitrator misinterpreted both documents.

The Court of Appeal concluded its judgment by noting that the result would have been the same even if the case was decided before Sattva. Nevertheless, the case should provide the Supreme Court with an opportunity to further clarify the difference between questions of law and questions of mixed fact and law in the context of commercial arbitrations and contractual interpretation.